Rather than pressuring China to change its “unfair” trade practices, US Trade Representative (USTR) Katherine Tai on March 30 said the economy would better served by policies to encourage domestic manufacturing.
In a four-hour hearing before the House Ways and Means Committee, US President Joe Biden’s trade chief acknowledged that Washington’s strategy of imposing massive tariffs on Beijing – which began under former president Donald Trump – has had little to no effect on its policies.
“That has not incentivised China to change,” she said. “It is very clear to us, I think, collectively, that we can’t keep doing what we have been doing.”
Washington has accused Beijing of subsidising its exports and wiping out industries both in the US and Europe, forcing companies to transfer technology in exchange for doing business in China, and stealing intellectual property.
In 2020, the countries signed the “phase one” trade agreement under which Washington agreed to ease off tariffs the Trump administration imposed two years earlier, in exchange for China buying $200 billion in US exports through 2021.
However Beijing fell short of those targets when the Covid-19 pandemic struck, and Tai told lawmakers: “While we continue to keep the door open to conversations with China … we also need to acknowledge the agreement’s limitations, and turn the page on the old playbook with China, which focused on changing its behaviour.”
Since taking office in January 2021, Biden has resolved a number of trade disputes with US allies, including a deal announced last week to lift tariffs on British steel and aluminium that Trump imposed.
However there’s been no similar breakthrough with China, despite Tai’s renewed negotiations with its officials.
Last week, Washington agreed to extend tariff exemptions on 352 products imported from the Asian country after businesses complained the levies were driving up costs as the US grapples with high inflation.
In her appearance before Congress, Tai stressed that the US strategy must now “expand beyond only pressing China” into abandoning trade practices Washington views as unfair.
The new approach must “include vigorously defending our values and economic interests from the negative impacts of the PRC’s unfair economic policies and practices”, she said, using the abbreviation for the country’s official name, the People’s Republic of China.
“We can’t just wait for China to change,” she said, calling for “the reshoring and the rebuilding of our manufacturing base”.
“That is the plan that we need to pursue going forward,” Tai said.
China is aiming to grow its industries making products like electric cars and semiconductors, and Tai said the US should make “strategic investments” to match them.
“We have seen what happened in the steel and solar industries when existing mechanisms were too slow or ill-suited to effectively address the distortions wrought by China’s targeting of those sectors,” she said.
The trade chief called on lawmakers to approve the Bipartisan Innovation Act, which has been approved by the House and Senate and is now in conference committee.
The measure would spend $52 billion on domestic semiconductor production and research as well as spurring manufacturing and strengthening supply chains.
Tai also credited the American Rescue Plan stimulus measure passed shortly after Biden took office last year with making “significant progress” in helping businesses grappling with the pandemic.