Tai Suggests Section 301 Tariffs Needed to Counter SOEs, Other Market Distortions

When asked what the U.S. wants from China in economic terms, U.S. Trade Representative Katherine Tai borrowed a metaphor from a former assistant U.S. trade representative responsible for trade negotiations between the U.S. and China. She said that he said the trade relationship with China is like two teams showing up to play football, but one is playing American football, and the other is playing what the rest of the world calls football that the U.S. calls soccer.

"Competing against each other doesn't feel fair," she said during an interview conducted by a senior fellow at the Carnegie Endowment for International Peace. She said the U.S. wants the Chinese economy to be open, market-based, with a pretty clean separation between the government and the market, and there has been an awakening that China is not going to move in that direction.

"I think we see that we need to have more effective tools to make sure we can continue to compete," she said. "That is a combination of the tariffs that are in place" and investments in American competitiveness.

Carnegie Endowment Senior Fellow Aaron David Miller asked how the U.S. can avoid being excluded in trade in Asia, given that many countries there are joining large multilateral free trade agreements. Tai responded that the U.S. should not focus on what everyone else is doing, and said that Brexit and President Donald Trump's messages on trade represent another trend. "I don’t have anything really smart to say about all of these disruptions and how they related to each other," she said. "It does feel like the global economy is fraught today in a way it didn’t feel five, seven years ago."

She said that trade liberalization, which she said is something many U.S. institutions are based on, has grown the pie and increased global economic prosperity.

"Where we are today, we see some limits of the program," she said. "Inequality feels like it’s on the rise today. Not just in the United States."

She said she doesn't think the U.S. is being left out, because she believes many countries are trying to figure out how to get to Globalization 2.0, which would factor in supply chain resilience and fighting climate change, not just low-cost imports.

"Efficiency alone has created this quite fragile economy we are grappling with right now," she said. She said today's trade policy "is about figuring out with our partners and our allies how to pursue a set of goals that will result in a more resilient version of globalization.

"And the reason I don’t feel left out is I don’ t feel anyone’s cracked that nut yet."