USTR Katherine Tai Calls for the U.S. to “Turn the Page on the Old Playbook”

As China doubles down on market manipulation, the United States must use “new domestic tools” to push back, Tai told lawmakers.

United States Trade Representative (USTR) Katherine Tai underlined the Chinese government’s intransigence in addressing its unfair trade practices and the value of Section 232 and other trade remedies in supporting America’s critical industries in testimony before the House Ways and Means Committee on Wednesday.

During the four-hour hearing, Tai summarized President Biden’s trade priorities, delving into how she has aimed to establish “worker-centered” trade policy. But, of particular note was the trade ambassador’s insight into America’s current trade relationship with China — a relationship that has come under more pressure as Beijing’s alliance with Russia highlights just how diametrically opposed its objectives are to that of the United States.

It’s time for the United States to play offense by deploying new, modern trade tools and making strategic investments in key industries. Tai explained:

“We cannot stop pushing China for change… we can’t just wait for China to change. We have right now tariffs on over $300 or $400 billion worth of Chinese imports that has not incentivized China to change. And so what we need to do is continuing our efforts to create pressure for China to change. We need to start to change things on our side, and that’s the development of tools; that’s the investments; that’s the reshoring and the rebuilding of our manufacturing base. That is the plan that we need to pursue going forward.”

Tai recounted that her office launched conversations with China regarding its “Phase 1” trade deal commitment shortfalls this past fall, but said that “those discussions have been unduly difficult.”

The Phase 1 agreement wasn’t all that great to begin with — it largely focused on increasing China’s purchasing of American goods and services rather than forcing China to make meaningful changes to its unfair trade practices — but China still didn’t keep its word. Recent data from the Peterson Institute for International Economics shows that China bought 57% of the American exports it promised to purchase by the end of 2021.

Meanwhile, China’s global dominance of critical industries continues to be a threat to U.S. national and economic security.

During the hearing, Rep. Mike Kelly (R-Pa.), who lives “about a mile” from the Cleveland-Cliffs facility that is America’s last remaining electrical steel producer, spoke to the damage America’s steel industry has undergone thanks to bad trade actors like China. Kelly said:

“We have lost so much market share in this country over the years because of foreign competition that refuse to play on a level playing field. And yet we watch it, and we watch not only the loss of product that we make, but it’s a loss of jobs. And the bigger issue is national security. … We’ve allowed them to go overseas because it was a little bit cheaper. Maybe cheaper at the time you bought them, but not cheaper when you give up market share. … We have a real and present danger right now, globally, because we keep losing market share.”

For decades, China has weaponized its severe excess capacity in steel and aluminum to dominate the global market and eliminate its foreign competitors. This over-production has decimated America’s steel and aluminum industries, among others, and led to the loss of millions of jobs.

“The fact of the matter is that I think our chase for efficiency over the past several decades has really compromised our security and our sense of security. As much as we are innovating and moving our economies into cyberspace, into outer space, we still live in a brick-and-mortar world,” Tai said.

“We need to turn the page on the old playbook,” Tai said. “That starts with developing new domestic tools and making strategic investments to maintain our global competitive edge. We have made progress on this effort through the American Rescue Plan, the administration’s focus on supply chain resilience, and the Bipartisan Infrastructure Law. Passing the Bipartisan Innovation Act will build on this significant progress.”

This past February, USTR also called for this new approach to trade tools in its annual Congressional report on China’s compliance with World Trade Organization rules. In her hearing testimony Wednesday, Tai offered more detail on what that approach might be.

“Among the tools that are going to be critical for us are tools that are frankly maybe formally outside of the trade lane, but nevertheless are intricately linked to our trade interests,” Tai said. “And that is rebuilding our industrial manufacturing base. It has eroded to a point where we are now fighting ourselves and fighting our allies as we try to build this back. And this goes to [Section] 232 as an example where in industries where we have lost, and we have seen this also in solar, it is so difficult to rebuild. We end up fighting each other through stakeholders regionally in the U.S. And we end up fighting our allies over the scraps in the global marketplace.”

Tai specifically highlighted the value of the Leveling the Playing Field Act 2.0 that was part of the House’s version of the Bipartisan Innovation Act. The Senate is currently considering the legislation, which aims to revitalize America’s semiconductor industry, secure critical supply chains, and reshore manufacturing jobs. As we’ve written, it is essential that Congress not only invest in America’s manufacturing base but also equip U.S. manufacturers and workers with the trade tools they need to fight unfair trade.

Tai will testify before the Senate Finance Committee Thursday and is expected to further address the Bipartisan Innovation Act that the Senate is currently considering. Check the blog for coverage of this testimony as well.

And in the meantime, be sure to take action! Tell your lawmakers to include the Leveling the Playing Field Act 2.0 in the final version of the Bipartisan Innovation Act.