Background

U.S. Trade Representative Katherine Tai said Oct. 4 that USTR will restart a process for requesting exclusions from the Section 301 tariffs on imports from China but offered no further details. Tai gave no indication that the existing tariffs will be lifted and in fact suggested that more tariffs could be imposed if China does not take sufficient actions to address U.S. concerns.

Tai made the remarks in a speech that she said outlined “the initial steps” of the Biden administration’s trade policy toward China. The White House has come under increasing pressure to define that policy, largely to resolve uncertainty about the status of the Section 301 tariffs. However, Tai gave few indications of what that policy will be, saying only that further developments will depend largely on the outcome of discussions she intends to have “in the coming days” with her Chinese counterparts.

Tai said the Biden administration is “clear-eyed that Beijing is resistant to making meaningful reforms to address concerns shared by the U.S. and many other countries about the distortions to the global market from its state-centered economic system.” Those concerns were behind the Trump administration’s decision to impose additional tariffs of up to 25 percent on more than $350 billion worth of goods imported from China and to negotiate a Phase One trade agreement that eased some of those tariffs in return for Beijing’s commitments to make certain policy changes and increase purchases of U.S. goods.

Tai asserted that the Phase One agreement “did not meaningfully address our fundamental concerns” about China’s trade practices but said that for the time being the only thing the Biden administration intends to do in response is hold more talks with Beijing. Those talks will first seek “to hold Beijing accountable for the Phase One commitments that are in our interests,” including those relating to purchases of agricultural products. Tai said there is “real world evidence that businesses covered by the Phase 1 trade deal have done better” in the Chinese market but also pointed out that “China’s regulatory authorities continue to deploy measures that limit or threaten the market access for our producers.”

The U.S. will also “raise our broader concerns” about Chinese trade policies, including “abuse of state-owned enterprises, anti-competitive behavior and subsidies, the theft of American intellectual property, … limiting market access, and other coercive and predatory practices in trade and technology,” Tai said. This will take place both in direct talks with China and “in coordination with our allies and partners.” Tai said that what measures the U.S. takes after that will depend on what kind of traction Washington gets on issues of concern in these talks and what is deemed to be in the interests of the U.S. economy.

In the meantime, the U.S. will maintain the existing Section 301 tariffs. Tai said the Biden administration’s objective “is not to escalate trade tensions with China or double down on the previous administration’s flawed strategy,” but she also vowed to defend U.S. interests against Chinese practices “using the full range of tools we have and by developing new tools as needed.” Existing tools include Section 301 and other tariffs, and while Tai did not mention them directly a rumored new investigation centered on China’s industrial subsidies could give the administration justification for imposing new tariffs or revising those already in place. Tai also did not provide further details on what “new tools” might be under consideration.

However, Tai did offer the trade community some relief by announcing that USTR will restart (though it is unclear when) a “targeted” Section 301 tariff exclusion process “to mitigate the effects of certain Section 301 tariffs that have not generated any strategic benefits and raised costs on Americans.” Through this process USTR will seek to “ensure current Section 301 tariffs align appropriately with our economic priorities like boosting American workers’ wages and job opportunities, securing the resilience of critical supply chains, sustaining our technological edge, and protecting our national security interests.” Tai said that in evaluating exclusion requests USTR will put “a lot of weight” on what U.S. businesses say about their ability to source goods from countries other than China. She also mentioned the possibility of “additional exclusion processes” but offered no further details.

For more information on the emerging U.S. trade policy toward China, please contact Nicole Bivens Collinson at (202) 730-4956 or via email for assistance.

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

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