CRS Report on China Phase One Says Little Discussion on How to Enforce

A recent Congressional Research Service report on the phase one deal with China notes that there has been little discussion about how to enforce what China agreed to, and how to address issues that phase one didn't touch but were highlighted in the Section 301 report.

"Congress might assess the U.S. experience with the Phase One process as it debates the merits of the deal and how to leverage it, the effects of the tariffs, and options to advance U.S. economic interests and counter China’s persistent statist economic practices that the USTR raised in its 2018 report," the author wrote. It asked: "Should Congress require the USTR to enforce the Phase One provisions and actively use the Phase One dispute process?"

The report said that some domestic business groups, members of Congress and Chinese diplomats are pressuring the Office of the U.S. Trade Representative to lift or mitigate Section 301 tariffs, and that parts of the Biden administration "are also pressing for the elimination, reduction, or exclusion of certain tariffs, to provide relief for U.S. consumers and firms and address inflation."

"Others in Congress and the Administration argue that the tariffs provide a point of U.S. leverage and should be sustained, some noting that lifting tariffs could signal a lack of U.S. resolve and unwillingness to bear costs associated with actions that address U.S. priorities," the report said (see 2205260014).

In thinking about the effect of tariffs on the U.S. economy, the report posed these questions:

• How might Congress weigh the tariffs’ effects on U.S. firms and consumers against issues of economic competitiveness?
• To what extent are tariffs inflationary compared to drivers such as food, energy, housing, labor and supply chain shortages, and monetary policy? Could tariffs help diversify China-based supply chains and counter China’s subsidies by raising costs vis-a-vis U.S. and third-market products?
• Could tariffs on goods tied to China’s industrial policies (e.g., solar panels, electric vehicles, semiconductors, and batteries) help level the playing field, or would this violate U.S. trade commitments and encourage others to follow suit?
• USTR proposed but never enacted tariffs on consumer electronics. Could these tariffs counter China’s efforts to deepen technology supply chains in China?

The report suggested that members of Congress think about "how difficult it was to secure China’s acknowledgement of its practices of concern and limited commitments in these areas, [so] to what extent may the U.S. reasonably expect talks with Beijing to achieve outcomes that further U.S. policy objectives, when measured against the U.S. resources and efforts required? Does focusing on talks with China take U.S. focus and resources away from efforts to deploy or develop U.S. trade tools and joint approaches with other countries that might be required to protect and advance U.S. economic interests?"

It also suggested they think about whether the USTR should make a push in the trilateral negotiations to confront non-market economic distortions.