The US business community cheered on the appointment of Katherine Tai as the US Trade Representative in the first months of the Biden administration and saw her election as a signal that the president wanted to take seriously the country’s broken trade relations with China. But months later, with no signal from the administration to reopen talks with China, patience among some is dwindling.
“There is clearly frustration over the inability to return to having a more stable, more normal trade relationship with China,” said Jake Colvin, vice president of global trade affairs at the National Foreign Trade Council in Washington.
What began 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 irritation over the lack of communication, he said.
“I think the biggest frustration for business is that we are not seeing a roadmap that reaches the more stable economic situation,” he said.
‘Phase 1’ implementation
The Biden administration took power a little more than a year after the Trump administration signed what it called “Phase 1” of a trade deal to reduce tensions between the United States and China – tensions that had led to the imposition of punitive tariffs on a broad range of goods typically moving between the two countries.
The Phase 1 agreement had a number of key components, one of which was a commitment by China to increase its annual imports from the United States by $ 200 billion. While sales of U.S. goods to China have increased, pandemic lockdowns throughout 2020 and widespread disruption of global trade routes by 2021 have made it difficult to obtain a clear measure of China’s compliance with that part of the deal.
The agreement obliged China to better enforce intellectual property laws across different industries and to abandon policies that forced companies wishing to do business in China to hand over proprietary technologies to Chinese partners. It also negotiated the removal of barriers that had prevented US agricultural and financial services companies from fully competing in the Chinese market, and it created rules against currency manipulation that would give Chinese producers an unfair price advantage over foreign competitors.
More work to do
Business in the United States, although generally satisfied with the Phase 1 agreement, saw it only as the beginning of a process of bringing China’s trade practices in line with most Western countries.
In early August, the US-China Business Council organized a letter from some of the largest business associations in the US, 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 Phase 1 commitments and explore future negotiations.
“Long-standing problems remain unresolved, including state subsidies; procurement by state and state-owned enterprises; cybersecurity, digital commerce and data management; service issues; competition policy; regulatory data protection for new drugs, biological products and other goods; Chinese domestic standards; outstanding agricultural policy issues; and continued market access barriers for U.S.-manufactured goods, “the letter said.
Requested duty exemptions
The letter also called for the Biden administration to reintroduce exemptions from the tariff regime introduced by the Trump administration, but was allowed to expire.
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 important production inputs are only available in China, which means that they are powerless to seek suppliers who are not subject to sanctions.
“(W) e also urges the administration to retroactively restore product exclusions that expired in 2020; re-establish a new, fair and transparent customs exclusion process; and continue negotiations with China to eliminate both nations’ counterproductive tariffs as soon as possible,” he wrote. trade groups. “These steps are badly needed to mitigate the significant and lasting damage to tariffs on the U.S. economy, American workers and the national competitiveness of the United States.”
But it is still unclear how much progress U.S. companies can expect in the short term.
USTR updates trading 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 administration’s progress in developing a strategy to address issues of future US trade with China.
According to a reading of the meeting released by the USTR’s office late Tuesday night, “Ambassador Tai acknowledged the importance of the US trade relationship with China and stressed the importance of a thorough strategic assessment to formulate a robust trade policy that supports the administration’s job creation efforts. “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.”
In a statement issued late Tuesday, Myron Brilliant, executive vice president and chief international officer of the U.S. Chamber of Commerce, said, “The Advisory Board noted that China is and will remain a critical market for U.S. business.” had a positive and honest conversation with Ambassador Tai, who reiterates the business community’s commitment to work with the administration to achieve a trade policy with China that lifts all stakeholders, is grounded in a desire for market-driven results and takes into account the unique aspects of the Relationship between the United States and China. “
None of the readings gave any indication of when the administration expects to complete its strategic assessment. It is still unclear how much progress US companies can expect in the short term.
“While Afghanistan will dominate policy-making for weeks, if not longer, the Biden administration is facing increasing pressure to present some form of China policy framework,” Derek Scissors, a senior fellow at the American Enterprise Institute, told VOA. “They would face some criticism if they started meaningful negotiations with China without such a framework.”
But, he said, there is not much political upside for the administration to speed up talks with Beijing.
“The biggest obstacle to the US talking to China on economic issues is that no talks with China on economic issues have ever benefited the country,” Scissors said. “Some companies, yes; the United States as a whole, no.”
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, told the VOA that he agrees that domestic politics – in both countries – is the biggest obstacle to restarting trade negotiations.
“Should President Biden decide to restart trade talks, he will be accused by his Republican opponents in Congress of appeasing China and being weak towards China. So he is looking forward to the November 2022 election and he does not want to have the political burden ,” he said.
In China, meanwhile, President Xi Jinping has recently stressed the need to achieve “common prosperity,” a term commonly understood to signal a degree of income redistribution. This could lead to lower demand for luxury imports as Chinese, who have enjoyed most of the country’s strong growth in recent years, become more cautious about boasting about their wealth.
At the same time, Xi’s government is signaling that it may not be particularly interested in being drawn further into Western ways of doing business. For example, regulators have sharply slammed Chinese companies wishing to list their shares on Western exchanges, demanding far more transparency than Beijing is willing to give to companies often closely linked to the government.
“In China,” Hufbauer added, “what seems to be happening is that President Xi is enjoying a nationalist response, and he is making the most of a very kind of return to the Mao era with a rather harsh response. against the United States. ”
Yinan Wang of VOA’s Mandarin Service contributed reporting to this story.