Tai Has 'Immense Confidence' EU Will Be Satisfied With IRA

U.S. Trade Representative Katherine Tai, in a Q&A with members of the Council on Foreign Relations, said the U.S. needs the EU to succeed in developing its green transition technologies, just as the EU needs the U.S. to succeed in that arena.

"I have immense confidence," she said, that both the EU and U.S. recognize that, and so that will guide "us through the myriad of -- and serious -- squabbles that we have with each other."

Tai said she'd like to describe the U.S. and the EU as like siblings. "It's really meant to demonstrate the closeness of the relationship and also the history of driving each other crazy. And it does go both ways."

She said the IRA task force on the Inflation Reduction Act, which includes members of the White House National Security Council and the EU cabinet, is trying to find creative ways to address each other's concerns. "The concerns that our partners have raised with us, we take extremely seriously," she said, and said that the conversations the task force has had are "helping us understand each other's ambitions and each other's anxieties." She said they're looking for tools that will help the U.S. and the EU to achieve a green energy transition "together and effectively."

The EU argues that subsidies in the bill that are limited to production in North America violate the World Trade Organization principle of non-discrimination. Tai defended the U.S. decision to ignore a recent WTO ruling that its Section 232 tariffs on steel and aluminum are not legitimate national security responses. "The panel report ... gets deep into creating requirements and parameters for what is, or is not, a legitimate national security decision. I think that the WTO is getting itself on very, very thin ice," she said Dec. 19.

She also said that multilateral institutions like the WTO -- where she worked as a litigating attorney early in her career -- are "starting to show their age." She said that if the WTO doesn't do what it could do to raise standards of living in its member countries, then it may not "stay relevant."

Tai was asked by a member of the audience if there is a more nuanced way than tariffs to respond to China's anti-competitive practices. She said there may need to be new tools created, but the tools she mentioned seemed to still be tariff-based.

"We need to do things differently. We need to look at our traditional tools and think about how we can use them more effectively," she said.

She also said that existing antidumping and countervailing duty laws "are not able to make a difference." She said AD/CVD remedies are supposed to address "dumping and illegal subsidies that undercut the ability of your own producers to produce and survive." She said they're very focused remedies. "But what we've seen over time with many, many industries here, is the scale of the challenge we’re facing with respect to China and China's ability to impact the global market means that these narrowly tailored defensive tools that we have haven't been able to prevent the hollowing out of entire industries here."

So, she said, the administration is asking, "Are there new tools we can develop? In partnership with other economies that are structured like ours, founded on similar principles of open societies and ... the desire to have open markets? And how do we develop those tools so that we can find our way in coexistence" with China?

She also said that when it comes to China, "I get into a lot of debates with people on the trade and economic theory. We are not working on tabula rasa. China’s growth and development over the last 20 years … has created pressures and distortions we need to correct for."

Tai was also asked about discussions with African trade ministers who were in Washington last week. She said that as they talked about the African Growth and Opportunity Act, they discussed how middle income countries that might graduate from this program might continue their economic relationship with the United States.

The previous administration opened free trade negotiations with Kenya, which Tai called one of the most "motivated partners" in negotiations. But the Biden administration says it is not pursuing mutual tariff reductions in its negotiations with Kenya.