Background

U.S. trade representative nominee Katherine Tai gave some further indications of the direction of trade policy under President Biden in written responses to questions from members of the Senate Finance Committee following her recent confirmation hearing. Highlights of her comments include the following.

Tariffs. Despite repeated questions, Tai gave no significant clues about the fate of the Section 301 tariffs on imports from China or exclusions from those tariffs. Instead, she said only that she would (1) work with Congress to ensure that the tariffs are “appropriately responsive to China’s practices” and to consider their impact on U.S. businesses, supply chains, workers, and consumers, (2) assess the tariff exclusion process “as part of President Biden’s whole-of-government approach to confronting the China challenge,” and (3) ensure that any such process is “transparent, fair, and objective.”

On the other hand, Tai suggested that tariffs on European Union and United Kingdom goods in a long-running aircraft subsidy dispute could see changes, noting that “tariffs may be a tool” to ensure compliance in this dispute but “are not the goal.” She said she would “make it a priority” to resolve this dispute in a manner that “takes into account all affected stakeholders.”

WTO. The World Trade Organization’s negotiating function “has failed to keep pace with changes in the global economy,” Tai said, and WTO rules need to be updated to reflect (1) “developments that have unfolded over the past quarter-century, particularly in the digital economy, and (2) the values of the Biden administration’s Build Back Better agenda. Tai pledged to explore plurilateral agreements as “a possible path forward” on further trade liberalization but noted that this “will not be easy” because “developing countries are hesitant to accept them.”

Tai added that over the years the WTO’s Appellate Body has overstepped its authority, erred in interpreting WTO agreements in a number of cases, and failed to follow existing rules created to ensure that disputes are resolved in a timely manner. As a result, she said, a “comprehensive range of reforms” is needed to “ensure that the underlying causes of such problems do not resurface.” She acknowledged that “this will be difficult work that may take some time” but expressed hope that “with proper U.S. leadership” the necessary reforms can be achieved.

Finally, Tai said it is “critical” for the WTO to “rethink the ability of countries to self-select developing country status,” arguing that rules for special and differential treatment “should be reserved for those countries whose development indicators and global competitiveness actually warrant such flexibilities” and “should not be abused by countries that are already major trading powers,” such as China.

Trade Agreements. Tai was noncommittal on the future of U.S. trade negotiations with the United Kingdom and Kenya and gave no indication as to other countries with which the U.S. might pursue trade agreements. She did say she would prioritize negotiations with “partners that are willing to sign trade agreements that benefit all Americans” and that in such talks she would “work to ensure that Americans are not unfairly disadvantaged by trade barriers, actionable subsidies, lax enforcement of labor rights, poor environmental regulations, failure to enforce intellectual property rights, or other unfair trade practices.”

Regarding the possibility of the U.S. joining a multilateral trade agreement framework such as the Trans-Pacific Partnership, Tai acknowledged that the U.S. “is stronger when it works together with its allies.” However, she added that “cooperation can take many different forms” and that whether such a framework would be effective would depend on the precise details of that agreement.

Priorities. “Starting on day one” of her anticipated tenure as USTR Tai said she would “engage our trading partners in pursuit of a trade agenda that will restore U.S. global leadership on critical matters like combatting forced labor and exploitative labor conditions, corruption, and discrimination against women and minorities around the world.” She added that within her first 100 days in office she would “engage with our trading partners on ways to address the climate crisis, bolster sustainable renewable energy supply chains, and end unfair trade practices” as well as “review existing trade policies and agreements and pursue enforcement actions when warranted.”

Other. Tai also pledged action on the following issues.

- addressing market distortions caused by state-owned enterprises, subsidies, and other unfair trade practices in the steel sector

- pursuing trade enforcement actions against trading partners that use SOEs and unfair trade practices to disadvantage U.S. businesses and their workers

- renewing the miscellaneous tariff bill

- balancing trade policy toward India between enhancing commercial ties and addressing Indian policies that discriminate against U.S. exports and digital services firms

- using “a wide range of available trade policy tools” to act against any country that cuts the U.S. off from supplies of critical raw materials

- working with like-minded allies to ensure stronger ties and more resilient linkages in supply chains and trade patterns to minimize dependence or susceptibility to technology overseen by authoritarian regimes

- engaging in a comprehensive review of the U.S. trade relationship with Taiwan to determine how to address remaining trade issues and the best path forward

Copyright © 2021 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

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