White House calls for ‘new course’ on China trade ties
WASHINGTON — President Joe Biden’s top trade negotiator said China was failing to live up to its commitments under an agreement signed last year and was ignoring U.S. objections to its use of state power to dominate global markets at the expense of American workers.
In a speech to a Washington think tank, Katherine Tai, the U.S. trade representative, laid out a road map for reengaging with Beijing after a months-long internal policy review..
Tai said she plans to hold “frank” conversations with Chinese officials and warned that the U.S. would take “all steps necessary” to defend U.S. workers against fallout from Beijing’s mercantilism. But after years of ignoring similar complaints from Washington, the administration sees little chance that Beijing will change its ways, according to three senior administration officials, who insisted upon anonymity to brief reporters..
“For too long, China’s lack of adherence to global trading norms has undercut the prosperity of Americans and others around the world. In recent years, Beijing has doubled down on its state-centered economic system,” Tai said. “It is increasingly clear that China’s plans do not include meaningful reforms to address the concerns that have been shared by the U.S. and many other countries.”
While insisting that China comply with the “phase one” trade deal it signed at a lavish White House ceremony in early 2020, the administration has scrapped former president Donald Trump’s plan to seek a second agreement, designed to limit Beijing’s use of state resources for economic advantage, the officials said.
Instead, the administration is emphasizing domestic investments in infrastructure, education and worker training to boost U.S. prospects for competing with China, Tai said.
Appearing at the Center for Strategic and International Studies, Tai said China’s growth was coming “at the expense of workers and economic opportunity here in the U.S. and other market-based, democratic economies.” She sketched a pattern of Chinese market-distorting behavior, beginning with China’s 2001 entry into the WTO, which enabled it to dominate global markets in steel and solar panels and threaten to do the same in advanced technology industries such as semiconductors.
The administration’s plan to renew trade talks with China comes after its earlier outreach efforts produced little progress toward the U.S. aim of an understanding over how to balance cooperation and competition. Chinese and U.S. diplomats openly clashed during an initial meeting in Alaska. Subsequent visits to China by John Kerry, Biden’s climate envoy, and Deputy Secretary of State Wendy Sherman also were unproductive.
Biden and Chinese President Xi Jinping spoke by phone in September — the first time since February.
The administration officials took pains to contrast Biden’s approach to that of his predecessor, which they called chaotic and ineffective. Biden seeks to shore up U.S. supply lines and promote domestic manufacturing while enlisting U.S. allies in a campaign to press China to drop the subsidies that distort global markets, the officials said.
But it remains unclear what the U.S. will do if Chinese reluctance to modify its state-centric policies continues, as most analysts expert. And Tai provided no details of what new tools the administration plans to deploy.
“We must chart a new course to change the trajectory of our bilateral trade dynamic,” she said.
Administration officials have discussed using Section 301 of a 1974 trade law to mobilize European and Asian allies for a WTO trade complaint over structural elements of the Chinese economy they say disadvantage its trading partners.
Still, at least for now, Biden is maintaining the tariffs of up to 25% on roughly $360 billion in U.S. imports from China that Trump imposed beginning in 2018. Answering pleas from the business community, Tai will reinstate a process for U.S. companies to seek an exclusion from paying the tariffs if there is no domestic alternative to the goods they want to import.
Under the phase one trade deal signed last year, China promised to buy an additional $200 billion in U.S. farm, energy and manufactured goods by the end of this year.
“China’s purchases are not close to those legal commitments,” economist Chad Bown, of the Peterson Institute for International Economics, said in a recent Twitter post.
Through August, China had placed 89% of the required purchases of farm goods, but only 42% of stipulated energy buys, said Bown, who has tracked the deal’s progress from its inception.
Xi has moved away from the economic reform and market-opening policies that China adopted in 1978. He has promoted greater Chinese self-reliance in key technologies, including computer chips, and has waged an aggressive campaign to bring major Chinese businesses under greater political control.
The administration has made several moves that have upset the Chinese, including labeling its treatment of Muslims in the Xinjiang region genocide. On Sunday, the State Department blasted China for “provocative military activity” after a record number of fighter jets and bombers in recent days probed Taiwan’s air defense zone.
Chinese officials frequently lash out in response to criticism from abroad. Administration officials and business leaders are uncertain what to expect in the aftermath.
“This isn’t going to be an olive branch to China,” said one business executive, who spoke on the condition of anonymity to preserve relationships with administration officials. “If it signals a tougher line, I can only imagine how Beijing will receive this.”