USTR Stands Ground as Senators Complain About Lack of FTA Negotiations, Solar Trade Remedies

Senators on the committee that oversees trade pressed U.S. Trade Representative Katherine Tai repeatedly on why the administration isn't engaged in negotiations with other countries to get them to lower their tariffs, so that U.S. exporters, particularly agricultural producers, can gain more market share. Both Democrats and Republicans questioned the decision to pursue the Indo-Pacific Economic Framework as something other than a traditional free trade agreement,

Sen. Pat Toomey, R-Pa., told Tai during a March 31 hearing: "Aside from dialing back some of the previous administration’s most counterproductive trade wars, ... you really haven’t been pursuing tariff reductions." He asked her whether she thinks "it’s in America’s best interest to pursue free trade agreements with other countries."

Tai responded, "We are interested in pursuing trade agreements with our partners. But we are committed that our trade agreements practice evolves with time."

Toomey referred to comments Tai made at a press conference with the United Kingdom trade minister. "You recently seemed to be suggesting that you think FTAs are a 20th-century tool, but the fact is, China has eight currently being negotiated; the EU has 14 in the process of being negotiated. You may think this is a 20th-century tool -- looks like the rest of the world thinks this is a 21st-century tool."

He said that as a result, those countries will get market share through those FTAs that "we're going to miss out on."

"Trade agreements lead to more jobs, higher pay, more economic growth, more options and lower costs for consumers," he argued. But Tai was not moved by Toomey or by senators from her own party who argued that the USTR's role is to expand access for exports."I take very seriously the lessons that we have learned in the last five [to] seven years," Tai told Sen. Maria Cantwell, D-Wash., who also argued that FTAs are not outmoded. Tai said when the administration negotiates free trade agreements that are "so big and so uneven in the terms of the wins and losses they are going to deliver for our economy that they have collapsed under their own weight," that is not useful.

Tai received fewer questions about how to ease tariffs on imports, but Sen. Tom Carper, D-Del., asked why there can't be a broader Section 301 tariff exclusion process.

"We need realignment in our trade relationship with China. We need our relationship to be more strategic, and more in favor of our ability to compete," she replied. "Tariffs do have a role. Nonetheless, in this realignment, we need to take a strategic look at our tariffs. We need to recognize realignment, that requires a transition, and cannot be accomplished overnight."

She gave Carper the same response she gave House members at a similar hearing the day before (see 2203300003), that she said last October, "We would consider additional tariff exclusions as warranted. That continues to be true today."

She told Sen. Rob Portman, R-Ohio, that she thinks his bill to make bringing antidumping duty and countervailing duty cases easier, and increasing the government's authority to go after antidumping duty and countervailing duty circumvention is "exactly in the spirit of what we need right now." But she also told Level the Playing Field Act 2.0 co-sponsor Sen. Sherrod Brown, D-Ohio, that passing that bill, implementing the Uyghur Forced Labor Prevention Act and spending billions to support domestic semiconductor production, and creating trade barriers to dirty steel imports, are all critically important, they are "necessary, but also not sufficient."

Portman, a former USTR, questioned Tai's comments from the previous day, that the administration is turning away from trying to convince China to change and instead is working on bolstering its own economic competitiveness through investments and through trade remedies.

Portman asked, "Are you willing to move forward with dispute resolution? Possibly culminating with restrictions on trade with China in order to enforce the agreement?"

Tai said that the administration is not "giving up on pressing China on compliance, or pressing China to change its ways," it's just not making that its primary focus. She said that all tools are on the table to get China to follow through on the promises it made in the phase one deal.

Trade remedies were also on the mind of Sen. Catherine Cortez-Masto, D-Nev., who criticized the Commerce Department's recent decision to begin an anti-circumvention inquiry on AD/CVD for makers of solar panels in Asia that use Chinese inputs (see 2203280059). She told Tai that she also has spoken with Commerce Secretary Gina Raimondo about what she called "aggressive tariffs," and said that even an investigation puts a chill on large-scale installations. She said, "At the end of the day, I absolutely understand the need to grow solar manufacturing in this country, but we can’t do it overnight." She asked Tai, "Is there a path forward for resolving this issue?"

Cantwell also criticized the use of trade remedies in the solar panel sector, saying they had been in place for 10 years and had not accomplished a revival of solar cell panel manufacturing.

Tai responded, "I think that we do have the tools to thread this needle, where we are able to rebuild our manufacturing capacity here at home but also be able to deploy this available technology and support jobs in both parts of this sector.

"I will be the first one to admit trade tools are powerful, but they have their limitations in bringing about the policy changes that we need, and need to be deployed in combination with other policies."

In a hallway interview after the hearing, Tai told International Trade Today that there is another solution besides piling on more trade remedy cases. "I think trade remedies are critical and we cannot abandon them," she added. "But I think ... they are a more surgical type of tool. They address an industry, a product, and they look at it country by country and then company by company. That is a really important tool when your problem can be solved by surgery. But increasingly, we are seeing ... that some of our challenges are systemic, and not the types of things that you can solve by surgery. That's why we are placing such an emphasis on bringing creative thinking."

Tai used a creative approach to get two South Korean companies to reach a settlement in their Section 337 conflict on electric batteries, and she said that because in the solar space, "segments of our own economy are fighting each other, where we are fighting our allies and partners, we need to get out ahead of this curve. Because it's going to keep happening unless we do something different."

"In the economy we are living in and competing in today, we are in desperate need of innovation, not just among our industries but among our trade policy makers."