USTR Official Says Section 301 Tariffs Support Supply Chain Revisions

A senior adviser to the U.S. trade representative said that Section 301 tariffs are no longer in place to try to change Chinese economic behavior but suggested they can't be modified unless trade policymakers understand how removing them would influence the administration's desire "to move to a resilience economy away from an efficient economy."

Beth Baltzan, speaking at the Atlantic Council's Frankfurt Forum on U.S.-European Geoeconomics Sept. 28, noted that early in the COVID-19 pandemic, front-line workers could not buy masks to protect themselves.

"It goes back to just making sure we’re extremely thoughtful as we move into uncharted waters how we engage so we achieve the goals we all want to achieve, which is a resilient economy where people aren’t deprived of access to fairly basic goods, pandemic or otherwise," she said.

She also said USTR has to think about how to move to a resilient economy in the face of unfair competition.

Clete Willems, moderator of the panel Baltzan was speaking on, was a senior trade adviser during the Trump administration, and he also responded to the audience question about why the tariffs are there if they're not productive.

He said the hiking of tariffs "was clearly to try to get China to change its behavior," something he said achieved mixed success. "We did get at least some reforms in the Chinese economy," he said.

Willems said he's "very frustrated" by the debate about the tariffs in Washington, which he sees as all or nothing. Some players say all the tariffs should be rolled back, and others say that China isn't changing its behavior or say it's not politically viable to change the policy.

Willems said he doesn't agree that all the tariffs should be lifted, but he suggested that only lists 1 and 2 should remain, since they were designed strategically. "I think we need to recalibrate the entire list so they're much more strategic," he said.

Willems praised the administration, however, for improving trade relations with Europe. "This was something we didn't prioritize enough," he said.

He said the U.S.-EU Trade and Technology Council has proved to be very useful in creating a united front on sanctions and export controls for Russia, after the invasion of Ukraine. He said he has hopes for the Indo-Pacific Economic Framework, as well.

But he asked, "How do we create these fora so they're a stepping stone" to reaching a true trade deal?

Baltzan said it is really time-consuming to reevaluate every single rule of origin in sectors the U.S. cares about through the prism of resilience.

Rupert Schlegelmilch, acting deputy director-general in trade at the European Commission, said the EU shares the U.S. analysis that Chinese state-led capitalism is hazardous to European companies. He said the EU is working on ways to shield its economy from unfair competition, such as some kind of instrument to counter foreign subsidies.

But he cautioned that resilience does not mean protectionism. He pointed to the infant formula crisis in the U.S., which is a sector that is entirely domestic. He said the U.S. has "impossible regulatory hurdles to get your stuff approved," as well as high tariffs on formula. So when a major company had production problems, there were huge shortages.

"That also is not resilient," he said.