Hawkish USTR Won’t Rule Out New Section 301 Probe Into China

Holding China accountable for its commitments under the January 2020 phase one trade deal (see 2001160022) will be the “starting point” of “realigning” U.S. trade policies toward China, U.S. Trade Representative Katherine Tai told a Center for Strategic and International Studies conference Monday. “We will discuss with China its performance” under the phase one deal, she said. Her prepared remarks and the Q&A that followed were peppered with strong talk toward Beijing.

China made commitments “that we must enforce,” said Tai. “But the reality is, this agreement did not meaningfully address the fundamental concerns that we have with China’s trade practices and their harmful impacts on the U.S. economy,” she said. Even with phase one in place, Beijing “continues to pour billions of dollars into targeted industries and continues to shape its economy to the will of the state -- hurting the interests of workers here in the U.S and around the world,” she said.

The U.S. continues to have “serious concerns with China’s state-centered and nonmarket trade practices that were not addressed in the phase one deal,” said Tai. “As we work to enforce the terms of phase one, we will raise these broader policy concerns with Beijing, and we will use the full range of tools we have and develop new tools as needed to defend American economic interests from harmful policies and practices.” The Chinese Foreign Affairs Ministry didn't comment.

Tai wouldn’t be pinned down when a questioner asked if she was weighing launching a new Trade Act Section 301 investigation into China’s allegedly unfair trade practices. “It depends,” said Tai. “I have all kinds of tools available.” Section 301 is “a very, very important tool” for trade enforcement, she said. “We will look at all available tools in addressing our concerns.”

Tai will “defer” to her lawyers “on the ins and outs of Section 301,” she said, when asked whether imposing additional tariffs on Chinese goods would require a new Section 301 investigation. Plaintiffs in the massive Section 301 litigation inundating the U.S. Court of International Trade allege Tai's predecessor, Robert Lighthizer, lacked the Trade Act authority to impose the Lists 3 and 4A tariffs on China without launching a new investigation.

USTR will start a "targeted" tariff exclusion process for the existing Section 301 duties on China to replace the one that expired for most goods in January, said Tai. "We will ensure that the existing enforcement structure optimally serves our economic interests. We will keep open the potential for additional exclusion processes, as warranted." She gave no timetables.

The U.S. will "directly engage with China on its industrial policies," said Tai. "Our objective is not to inflame trade tensions with China," but "durable coexistence requires accountability and respect for the enormous consequences of our actions," she said. "Above all else, we must defend to the hilt our economic interests."

That means the U.S. must take "all steps necessary to protect ourselves against the waves of damage inflicted over the years through unfair competition," said Tai. "We need to be prepared to deploy all tools and explore the development of new ones, including through collaboration with other economies and countries. And we must chart a new course to change the trajectory of our bilateral trade dynamic."

The "structure, the architecture" of the phase one deal "is where we have to start" reengaging with China, said Tai. "How we proceed from here" will depend on "how much traction we get with China and to what degree we have to take our own measures to defend our interests," she said. "Further conversations have to happen between the two sides to provide for care and maintenance for this relatioonship." Plans are underway to convene high-level talks with the Chinese, she said.

There are "sectors" of the U.S. economy "that have done quite well" under the U.S.-China trade relationship, said Tai. "If there are things that are working, they should continue to work." But with the speed and scale of China's industrial policy deployments, "there are a number of sectors and areas in our economy where we can no longer just wish for the best," she said. "We've actually got to do something and address it."

The Information Technology Industry Council welcomes the Biden administration's plan "to pursue a comprehensive strategy that prioritizes active engagement" with China, plus "collaboration with key U.S. partners around the world," said CEO Jason Oxman. "Such efforts should be taken with a view to phasing out remaining tariffs in order to better support innovation and the economic recovery." China's unfair trade practices "have undermined and disrupted competitive markets, placing U.S. and multinational companies at a disadvantage," he said.