Trade Agenda Talks of Confronting China's Distortions

China's lack of worker rights, weak environmental standards "and anticompetitive subsidies are the hallmarks of China’s artificial comparative advantage. It is an advantage that puts others out of business and violates any notion of fair competition," the annual trade policy agenda from the Office of the U.S. Trade Representative said, and the administration is looking to advance fair competition "through all available avenues," including coordinating with other countries, using existing trade agreements, or new tools, it said.

"We are clear-eyed about China’s doubling down on its harmful trade and economic abuses. We are also mindful that rash response measures can create vulnerabilities of their own. The Biden Administration’s approach to China is and will continue to be deliberative, with a focus on the long term," the document said.

While the "rash response measures" could refer to the Section 301 tariffs on Chinese goods that weren't originally conceived in the USTR report, or Section 232 tariffs aimed at Chinese overcapacity, the agenda does not identify what the administration saw as rash. But the agenda says that as the administration implements the Uyghur Forced Labor Prevention Act "we are mindful of the effects that trade actions can have on American businesses and workers. USTR has restarted a targeted tariff exclusions process to ensure that our economic interests are being served, and we will keep open the option of further tariff exclusions processes as warranted. The Biden Administration understands that durable coexistence requires engagement as well as accountability."

It did say that reaching the agreement with Europe to replace Section 232 tariffs with TRQs created momentum to advance fair competition.

The agenda said that the domestic investments enacted in the first year of the administration "allow the United States to engage and compete with China from a position of strength. In addition, we are taking steps to build supply chain resilience that will protect American workers and consumers from the harms wrought by China’s trade and economic abuses. We are also considering all existing tools -- and will potentially seek new ones as needed -- to combat the harms of China’s state-led, non-market practices." It said that when a too-high percentage of certain products is made in China as a result of China's subsidization, it undermines supply chain resilience and reduces "innovation and choice that fair competition would produce."

While the China challenge is prominent in the report, the agenda did talk about tariff reductions and trade facilitation it has pursued in other arenas.

It said that on March 17, 2021, the amount of U.S. beef imported into Japan surpassed the annual safeguard volume established in the Japan mini trade deal, and there was a tariff of 38.5% on U.S. beef for a month as a result. The report said that the U.S. and Japan tried throughout 2021 "to reach agreement on a higher safeguard trigger quantity."

It noted that the U.S. has been working to improve the transparency and effectiveness of regulatory and customs practices at its CAFTA trading partners, "which has resulted in facilitating customs procedures and trade as well as Guatemala’s publication in January 2021 of a single Customs schedule, resolving a longstanding tariff classification challenge and removing an obstacle to U.S. preferential access in Guatemala."

The agenda said that the USTR will lead efforts to craft a trade arrangement under the Indo-Pacific Economic framework "that includes provisions on: high-standard labor commitments; environmental sustainability; cooperation in the digital economy; sustainable food systems and science-based agricultural regulation; transparency and good regulatory practices; competition policy; and, trade facilitation. The specific content of the trade arrangement will be developed through extensive consultation with trading partners, a broad base of stakeholders, and Congress."

The agenda noted that reviews of countries' eligibility under the Generalized System of Preferences were paused since the program lapsed at the end of 2020, but since imports still identified GSP goods in the hopes of refunds, it saw that the imports claimed under GSP reached $18.7 billion in 2021, up 10% from 2020, but still more than $2 billion less than was claimed in 2019. Imports under GSP were less than 0.7% of imports. The top categories under GSP last year were bags, rubber gloves, gold necklaces, mattresses and precious metal jewelry, and the top five source countries were, in order, Indonesia, Thailand, Cambodia, Brazil and the Philippines.