Yesterday, President Biden’s nominee for U.S. Trade Representative, Katherine Tai, testified at a confirmation hearing before the Senate Finance Committee. (Tai is very likely to be confirmed, and the hearing was not particularly contentious). Many of the questions she was asked were about the specific trade interests of the Senators’ constituents, but there were also some broader systemic questions, including a couple on China. In this post, I’ll mention two questions on China trade issues where I found Tai’s answers interesting (once in a good way, once in a bad way).
First, Senator Bennet of Colorado asked the following (starts at 2:34:43)
President Trump had a go it alone approach … , launching trade wars around the world that alienated our allies and undermined an effective global response to China.
At the same time, China was strategically investing in the Mediterranean and African countries, expanding its reach in the South China Sea region, and the One Belt, One Road initiative. While China is an important market for agricultural products …, they failed to live up to their agreements.
How will you work with partners and allies, and the broader administration, to hold China accountable for its mercantilist and predatory practices. I should say the Chinese Communist Party, not the Chinese people, but the Chinese government. You mentioned earlier in an answer to one of my colleagues that there had been a well worn path trod by former trade ambassadors, sort of expecting China to somehow adopt our economic system. That’s clearly not going to happen. What tools are available to us, and maybe even beyond the trade tools, to be able to push back and ensure that we continue to lead?
Here was Tai’s answer:
Again, I feel like this is part of the most consequential questions that we collectively as servants in the US government will need to figure out. …
I guess there are a couple ways that I would think about it. One is, rules that China has clearly signed up for, and agreed to. Those may be agreements that it has struck with trading partners. They may be the WTO rules. So rules that they have taken on as a member of a larger organization. And when we are in that area, we have designed for use enforcement tools to engage with the Chinese and hold them accountable. You promised to do X, you need to deliver on X.
There are also a lot of areas that are gray areas, where the rules are not clear or where we don’t have rules yet. And I think that in that area, in terms of working with others, we have a couple options. One is, we create and we craft new rules, to address the gray areas. Separately, I think that that provides us with a lot of opportunity as well to think strategically about how to respond to the strategies that China is pursuing.
This combination of enforcing existing rules and negotiating new rules is pretty close to what I argued for with my colleagues Jim Bacchus and Huan Zhu in this paper. It may not be attention-getting like former President Trump’s tariffs and tariff threats, but it could actually work to prod China to liberalize a bit more than it did as part of its accession to the World Trade Organization. (Trump’s tariffs, by contrast, haven’t had much impact on Chinese trade practices).
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