Corporate America welcomed Katherine Tai’s appointment as US trade representative in the early months of the Biden administration, seeing her selection as a signal that the president wanted to get serious about addressing the country’s broken trade relationship with China. . But months later, with no signal from the government about reopening talks with China, patience is running out among some.
“There is clearly frustration at the inability to restore a more stable, more normal trade relationship with China,” said Jake Colvin, vice president for global trade issues at the National Foreign Trade Council in Washington.
What started as an exercise in “strategic patience” as business waited for the White House and various agencies to come together on a strategy to approach China has become a state of annoyance at the lack of communication, he said.
“I think the biggest frustration for business is that we don’t see a roadmap that leads to a more stable economic relationship,” he said.
‘Phase 1’ implementation
The Biden administration took power just over a year after the Trump administration signed what it called “Phase 1” of a trade deal aimed at easing tension between the US and China — tension that had led to the imposition of punitive measures. tariffs on a wide variety of goods typically carried between the two countries.
The Phase 1 agreement had several key components, including a commitment from China to increase its annual imports from the US by $200 billion. While sales of US goods to China have increased, pandemic lockdowns in 2020 and extensive disruption to global trade routes in 2021 have made it difficult to get a clear measure of China’s compliance with that part of the bargain.
The deal forced China to better enforce intellectual property laws in several sectors and to abandon policies that forced companies wishing to do business in China to transfer proprietary technologies to Chinese partners. It also negotiated removing barriers that prevented U.S. agricultural and financial services firms from fully competing in the Chinese market, and created rules against currency manipulation that would give Chinese manufacturers an unfair price advantage over foreign competitors.
More work to do
Business in the United States was generally satisfied with the Phase 1 agreement, but saw it as just the beginning of a process to align China’s trade practices with most Western countries.
In early August, the US-China Business Council organized a letter from some of the largest business associations in the United States, including the US Chamber of Commerce, the Business Roundtable and the National Retail Federation, urging the Biden administration to step up its efforts. to ensure China’s compliance with Phase 1 commitments and explore future discussions.
Long-standing issues remain unresolved, including state subsidies; government and state-owned procurement; cybersecurity, digital commerce and data management; service issues; competition policy; legal data protection for new drugs, biological products and other items; setting China’s domestic standards, outstanding agricultural policy issues and ongoing barriers to market access for US-made goods,” the letter said.
Rate exclusions wanted
The letter also asked that the Biden administration reinstate the exclusions from the tariff regime that the Trump administration had introduced but allowed to lapse.
Many US companies have complained that the tariffs force them to pay higher prices for key equipment and materials than competitors in other countries. They often claim that certain key production resources are only available in China, meaning they are unable to source suppliers who are not subject to sanctions.
“(W)e urges the government to retroactively reinstate product exclusions that expired in 2020, implement a new fair and transparent tariff exclusion process, and continue negotiations with China to remove counterproductive tariffs from both countries as soon as possible,” said the minister. trade groups wrote. “These steps are desperately needed to mitigate the significant and ongoing damage the tariffs do to the U.S. economy, U.S. workers and U.S. national competitiveness.”
But it remains unclear how much progress US companies can expect in the near term.
USTR updates trade groups
On Tuesday, USTR Tai met virtually with the US Chamber China Center Advisory Board and the leadership of the US-China Business Council to discuss the government’s progress in developing a strategy for answering questions about future US trade with China.
According to a readout from the meeting released late Tuesday by the USTR office, “Ambassador Tai recognized the importance of US trade relations with China and emphasized the importance of a thorough strategic assessment to develop a resilient trade policy.” that the government’s efforts to create jobs, raise wages and strengthen our communities… The ambassador also reiterated the USTR’s commitment to address China’s unfair trade policies and non-market practices that undermine American companies and workers. ”
Myron Brilliant, Executive Vice President and Head of International at the US Chamber of Commerce, said in a statement also released Tuesday: “The Advisory Council noted that China is and will remain a critical market for US business.” positive and candid talk with Ambassador Tai, reiterating the business community’s commitment to work with the government to achieve a trade policy with China that elevates all stakeholders, is based on a desire for market-driven results and takes into account the unique aspects of US-China relations.”
Neither readout indicated when the administration expects to complete its strategic review. It remains unclear how much progress US companies can expect in the near term.
“While Afghanistan will dominate policymaking for weeks, if not longer, the Biden administration is under increasing pressure to present some sort of China policy framework,” Derek Scissors, a senior fellow at the American Enterprise Institute, told VOA . “They would face a lot of criticism if they started meaningful negotiations with China without such a framework.”
But, he said, there isn’t much political benefit to the government from speeding up negotiations with Beijing.
“The main obstacle for the US to talk to China about economic issues is that no conversation with China on economic issues has ever benefited the country,” Scissors said. “Some companies, yes; the US as a whole, no.”
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, told VOA he agrees that internal politics — in both countries — are the biggest obstacle to resuming trade talks.
“If President Biden decides to restart trade talks, he will be accused by his Republican opponents in Congress of appeasing China and being weak towards China. So, looking ahead to the November 2022 election, he doesn’t want political burden,” he said.
Meanwhile, in China, President Xi Jinping recently emphasized the need to achieve “common prosperity,” a term widely understood to denote some degree of income redistribution. This could lead to lower demand for imported luxury goods as Chinese who have benefited most from the country’s strong growth in recent years are becoming more cautious about showing off their wealth.
At the same time, Xi’s government is indicating that it may not be very interested in being drawn further into the Western way of doing business. For example, regulators have cracked down on Chinese companies seeking to list their shares on Western exchanges, which require far more transparency than Beijing is willing to grant to companies often closely associated with the government.
“In China,” Hufbauer added, “what seems to be happening is President Xi taking advantage of a nationalist response, and he’s taking full advantage of a sort of return to the Mao era of a pretty sharp response against the United States.”
Yinan Wang of VOA’s Mandarin Service contributed to this story.