USTR Concedes China Tariffs Haven't Curbed Beijing's Bad Behavior

Four rounds of Section 301 tariffs imposed by President Donald Trump on more than $400 billion worth of Chinese imports have “not incentivized China to change” its unfair trade practices as the former president intended, U.S. Trade Representative Katherine Tai told a House Ways and Means Committee hearing Wednesday on the Biden administration's 2022 trade policy agenda. Rep. Tom Rice, R-S.C., had asked Tai what her plan was to “bring China to the table” and hold it accountable for the commitments it made under the February 2020 phase one trade agreement.

The tariffs the Trump administration “raised to create leverage as part of the phase one agreement, those tariffs also affect peoples’ everyday experiences,” said Tai, answering Rice's questions about high prices at the supermarket. In the global economy, “it is very clear to us, collectively, that we can’t keep doing what we have been doing” to curb China’s allegedly bad trade behavior, she said.

The U.S. “cannot stop pushing China for change,” nor can it "just wait for China to change," said Tai. While the U.S. continues its efforts “to create pressure for China to change, we need to start doing things on our side,” including "reshoring" domestic tech production and promoting “the rebuilding of our manufacturing base,” she said. “That is the plan that we need to pursue going forward.”

USTR is “realigning the U.S.-China trade relationship,” said Tai in her prepared testimony. Her agency “launched a conversation” with Beijing in the fall “about its phase one purchase commitment shortfalls and other nonmarket policies” (see 2110080036), she said. “Those discussions have been unduly difficult, and we need to turn the page on the old playbook. That starts with developing new domestic tools and strategic investments to maintain our global competitiveness.”

The China threat “is one of the most important issues that we face as an economy,” Tai told Ways and Means Chairman Richard Neal, D-Mass. “It has become increasingly clear over recent years and in the past few months that China continues to double down on a state-centric economic system,” she said. Beijing's plans “do not include meaningful reforms that address our concerns or those of our allies,” she said.

Rep. Darin LaHood, R-Ill., probed Tai for her thoughts on what the U.S. economic and trade "consequences" will be for China "if they up their engagement in supporting Russia" in its invasion of Ukraine. "Looking at China through the lens of this conflict," responded Tai, "what becomes very, very clear is that China is in charge of the decisions that China is going to make." The U.S. is "absolutely paying attention to see what choices China makes" during the Ukraine crisis, she said. Asked by LaHood if the Chinese are aware of the U.S. "repercussions" if they were to help the Russians evade the sanctions, Tai said: "In all of my interactions with my counterparts in Beijing, I have every reason to believe that they are very sophisticated thinkers. They are strategic thinkers there."

Several committee members pressed Tai to explain why USTR reinstated expired tariff exclusions last week (see 2203240014), and made the exemptions retroactive only to Oct. 12 -- the opening date for comments -- and not to a point much earlier in the tariffs’ lifecycle. USTR’s aim was to reinstate the exclusions in a “process” that was “fair and transparent,” Tai told Rep. Jackie Walorski, R-Ind. “That was the outcome of our deliberation.”

Tai’s full written testimony was emailed to reporters at 7:30 p.m. EDT Tuesday, coinciding with the start of Beijing’s business day Wednesday. A Chinese Foreign Affairs Ministry spokesperson, borrowing Tai's words, responded at his regular Wednesday news conference that the U.S. should “turn the page on the old playbook," and stop "abusing its technological strengths and global financial hegemony to oppress companies in other countries.” U.S. trade actions “seriously violate the principles of market economy and international economic and trade rules, harm the interests of other countries, undermine the security and stability of the global industrial and supply chains, and will only hurt others,” he said.