US trade representative says efforts on a phase-two deal with China have faltered

  • ‘We need to turn the page on the old playbook,’ Katherine Tai tells Congress, saying talks to build on the phase-one deal ‘have been unduly difficult’
  • ‘China continues to double down on … plans that do not include meaningful reforms that address our concerns, or those of our allies,’ she adds

Washington’s top trade official said on Wednesday that negotiations with Beijing are not progressing and that the US must deepen economic relations both with traditional allies and countries beyond that sphere, particularly in Asia and Africa.

Speaking before the House Ways and Means Committee, US Trade Representative Katherine Tai said that talks with China intended to forge an agreement on issues beyond the phase-one deal reached more than two years ago “have been unduly difficult and we need to turn the page on the old playbook”.

“That starts with developing new domestic tools and making strategic investments to maintain our global competitive edge,” she added, urging lawmakers to pass a final version of legislation aimed at giving the US a boost over China.

The House and Senate began the formal process last week of reconciling the two versions of the bill.

Under the trade deal reached with the Trump administration in 2020, China committed to buying US$200 billion of US goods and services above 2017 levels over a two-year period.

That agreement expired at the end of December, with Beijing missing that goal and with both sides failing to agree on a new round of talks.

“It has become increasingly clear over recent years and in the past few months that China continues to double down on a state-centred economic system and plans that do not include meaningful reforms that address our concerns, or those of our allies,” Tai testified.

From its earliest days in 2021, the Biden administration has sought to bolster trade and economic ties with allies and partners, largely as a result of tensions with Beijing.

That includes new or relaunched initiatives, among them the US-EU Trade and Technology Council; the India-United States Trade Policy Forum; and the US/UK Dialogues on the Future of Atlantic Trade – the first of which was held in the US port city of Baltimore last week.

Discussing Tai’s remarks, Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said that China had made some advances, citing its efforts on intellectual property protections and liberalising foreign direct investment in its financial sector.

But she noted difficult areas, including China’s use of non-tariff barriers to slow down US exports during the trade war.

“I don’t know if there’s much basis for easing [tensions in] the relationship at this point,” Lovely said.

Tai also touted the administration’s diplomatic outreach during the hearing.

“We’ve … demonstrated in our conversations with India, with Vietnam, with the Philippines, that there are ways to secure market access without a really large, comprehensive, traditional type of free-trade agreement,” she said.

With Britain, the European Union and Kenya, Tai noted, “I have spent a lot of time in the last year continuing to build our relationship on trade bilaterally, but also in multilateral forums, where we overlap, whether it’s the G7, the G20, the OECD, the WTO.

“I think that really the sky’s the limit in terms of the opportunities that are before us.”

The Biden administration’s “vigorous pursuit for better relations, particularly with Europe, has already borne significant fruit,” said Lovely.

“The view from Europe is that there’s been a sea change, and that they really see a partnership developing very rapidly with the Biden administration.”

Representative Adrian Smith, Republican of Nebraska, during the committee hearing


At the hearing committee members also pressed Tai about how tough she would get on Chinese barriers to market access. But many, including Representative Adrian Smith, Republican of Nebraska, also urged setting up an easier process for US companies to win exemptions from tariffs that have been placed on Chinese goods.

“While I’m glad to see a few hundred exclusions were issued last week, the view of our conference is that all Americans affected by the tariffs should have an opportunity to apply for exclusions,” Smith said.

Asked by Representative Vern Buchanan, Republican of Florida, whether the Biden administration is inclined to open the tariff exclusions further, Tai said that these concerns were “of utmost importance” and pledged to discuss the issue with Buchanan and other lawmakers weighing in on it.

According to Lovely, making the tariff exemption process easier and more transparent would benefit small- and medium-sized companies.

But, she said, “I think the US needs to really think about whether these tariffs serve its own strategic interests”.

Tai is to testify before the Senate Finance Committee on Thursday.

Authors: Joshua Cartwright, Robert Delaney, SCMP

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