U.S. Trade Representative Katherine Tai held her ground on Thursday when repeatedly confronted on opening markets for American products abroad, and in pushing for new free trade agreements.
“With respect to each individual partner and with respect to the U.S. economic situation, we have to make sure that our trade policies are tailored to the needs of our economy,” she told Senator Charles Grassley (R-IA) who pressed her on why ‘free trade’ was such a dirty word these days, and demanded more market access for American agriculture. Tai said this is not what other countries were asking for. “At this time, we do not have trade liberation in any of these discussions. But when it is something our partners want and something that we want, then we will discuss it.”
Tai was the sole witness Thursday at the Senate Finance Committee hearing to discuss the Biden administration’s 2023 trade policy agenda.
From Grassley to Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID), Tai was repeatedly asked to focus on opening markets for agriculture commodities, primarily. The main concerns were increasing market access for potatoes for both Wyden and Crapo, turkey and chicken for Sen. Mark Warner (D-VA), shrimp from Sen. Bill Cassidy (R-LA), and beef from Sen. John Thune (R-SD). The U.S. is a net importer of seafood and is often a net importer of beef.
Cassidy said India-sourced shrimp was being banned by Europe after failing phytosanitary inspections there and the banned product was then diverted to the U.S. market. In two of the more interesting quips that summed up the hearing, Cassidy said the U.S. needs to impose tariffs on shrimp imports from India, while Thune said that China was a bigger free trader than the U.S.
Sen. Crapo got the ball rolling instantly, framing the debate on market access and pushing the USTR to do so in trade talks with Indo-Pacific nations (via the Indo-Pacific Economic Framework talks, aka IPEF) and the U.K.
“American workers are skilled at manufacturing and we are drawing investments from outside. We should be an export powerhouse, but we are not in many markets and IPEF has no trade chapters to open markets,” Sen. Crapo said, arguing for agriculture exports to Asia.
Tai said American agriculture was doing just fine.
Despite retaliatory tariffs from China in 2018-19, China has returned to the U.S. soy market. And the U.S. has recorded a record $2.2 billion in agriculture exports last year. “We are opening markets for seafood and beef in the EU,” she told farm-state Senators.
The biggest takeaway was that Tai, gracious under fire and often pushing back when Committee members were not hearing her out, held her ground on tariffs. She continues to say that globalization has changed. The old globalization of laissez-faire free market economies is largely dead. China has a lot to do with this, as it has become the single largest vacuum cleaner sucking industry out of the U.S.
As much as these Senators may want access to India’s poultry market, for example, India is not interested in lowering its triple-digit tariffs (upwards of 150%) on food imports. And Europe is not interested in allowing Big Tech companies like Facebook and Google to dominate the data landscape there any more than it already does.
Here are some noteworthy exchanges between Tai and Senate Finance Committee members:
Sen. Crapo: Can we have assurances that trade barriers will be fixed before IPEF is reached?
Tai: We have to acknowledge and recognize where the world economy is today. You are right, tariff reduction is not a part of this negotiation. But we are bringing together critical partners in the region to improve compatibility throughout our economies. The agriculture barriers are a topline priority for our trade agenda. I will try to fix those problems in any way that I can.
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In this sample exchange below, Sen. Bob Menendez (D-NJ) wants Nicaragua kicked out of the Central-American Free Trade Agreement (CAFTA). He did not mention China here, though there are clear similarities in the concerns he raised.
Sen. Menendez: There is a long list of governments who want a free trade agreement with the United States. Yet we offer this benefit to a limited number of countries that meet our standards.
Tai: When regimes turn we have to reconsider how we treat them across the board. It has been a question for us as to how to respond.
Sen. Menendez: I can’t think of a reason to allow that treatment to one that is creating crimes against humanity. It is outrageous.
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Sen. Michael Bennet (D-CO): We need to strengthen our domestic solar manufacturing and I am pleased that this administration is bringing solar back to the United States. A lot of this market happens on the backs of the Uyghurs working in forced labor in polysilicon facilities in Xinjiang. There are many American companies operating in the region. I remain concerned about American supply chains running through there. What do you tell U.S. companies working in China about their exposure to Xinjiang?
Tai: We have had a lot of conversations with American businesses about this. For a long time, we did not pay attention to our supply chains. But today in 2023, given all the challenges our world economy is facing, these are critical questions especially if you want to build a world economy that is not premised on the exploitation of our fellow human beings. Companies have the responsibility to know where they are sourcing from. But eliminating forced labor is not something we can do alone. I have been getting good collaboration with the EU, Japan, Canada, and Mexico. We are galvanizing efforts to make progress in this area and our partners are working on putting the burden on companies to do the due diligence on this.
The value of shipments seized by CBP exploded from $7.57 million in Q3 2022 to $464.9 million in Q4 2022, triggered by the June 2022 effective date of the Uyghur Forced Labor Prevention Act passed in December 2021. The cost of goods seized is expected to double to $1 billion in 2023.
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In this exchange with Thune, among others, Tai has to re-inforce what she has said many times over the course of this hearing – and that is that thoughts on trade liberalization and market access have changed.
Sen. Thune: The UK is our fifth largest export market; we are each other’s largest foreign investor, and we have room to strengthen those ties with a free trade agreement (FTA). Will you undertake an FTA with the UK?
Tai: I commit to strengthen this relationship as I have for the last two years. But in terms of an FTA, I remain open minded and will reinforce what I said earlier: we look at the overall situation in the global economy and what our economy needs are at the moment.
Sen. Thune: I strongly recommend making a UK FTA a top priority. It really needs to be done. The USTR keeps pushing the IPEF deal, which is presumably about offering an alternative to China influence in Asia, but…there is no market access. This hurts American farmers and ranchers.
Tai: The traditional approach of tariff liberalization has led to winners and losers. It has been good for our ag producers, but other swaths of our economy very much feel like the playing field is not level. We are keenly aware of the need for us to bring a more resilient approach to our trade talks. I have to let you know that we are not driven by an ideology on this, we are being deeply practical.
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Sen. Maggie Hassan (D-NH): How can our trade policy help rebuild American manufacturing capacity?
Tai: A lot of what we are doing is making sure our trade policy is not bleeding out the benefits of domestic producers, and designed to increase investments – whether it is in respect to the CHIPS Act or clean energy in the Inflation Reduction Act. That’s one way. On trade policy matters, we have to work with what the needs are for our national economy and that is something that has been lost on a lot of people.
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Here, Sen. Catherine Cortez-Masto calls for an extension of the White House decree to pause any anti-dumping duties on Chinese solar manufacturers in Southeast Asia. Commerce has ruled in a preliminary judgment that four Chinese manufacturers were evading tariffs by using SE Asia facilities and should be tariffed. She sets up the crux of the debate facing U.S. trade negotiators: which is the battle between solar installation companies, namely construction firms and solar project designers, and importers, including the Chinese multinationals and U.S. utility companies. One note, tariffs on solar are still in place though uncertainty over two-sided solar panels used for utility projects was lifted in Biden’s first two months in office.
Sen. Cortez Masto: This two-year pause allows our industry to ramp up. It is extremely important. We have the capacity to manufacture only about a third of our domestic solar panel demand. We need to support domestic industry, I agree with that. But our demand outpaces our ability to manufacture it. When tariffs were in place in my home state, solar projects were stopped and I am concerned about this two-year waiver being removed. I am concerned about the effects to undo the president’s actions on this issue today, and all the needless turmoil it will reinject into the solar marketplace.
Tai: I take note of your observations of the solar industry and our needs. I know you have asked about the White House position on the two-year pause, but from where I sit at USTR, if I look at the big picture, the challenges around solar, which is one of these situations where you look back 20 years ago when we had a growing solar industry. We lost it. Well, now we find ourselves fighting each other around (installation) jobs and tariffs in ways that are really heartbreaking. But we have to consider trade that prevents these industry losses from happening again.
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Sen. Bob Casey (D-PA): The president’s trade agenda says that manufacturing is about 11% of our GDP and it employs millions of Americans. But now you have China which dominates manufacturing and seeks to dominate it even more through unfair trade practices. How are current trade deals being negotiated now going to benefit Americans?
Tai: Depending on which part of the economy you are in, you don’t often see the impacts of trade. We are operating in a world economy that has changed a lot in the last few decades and it has led to deindustrialization. We are not the only ones who have experienced this. In terms of worker center trade, we have to look at all the things we need to do to rebalance our economy, and that does mean invest in ourselves, our infrastructure, and our people, and most of all make sure that our trade policies don’t override those things.
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Sen. Sherrod Brown (D-OH): For years I have heard from companies like Cleveland Cliffs about steel companies breaking trade rules, and circumventing tariffs. I now hear from Ohio steel companies telling me they are seeing a surge in Mexico steel which breaks the USMCA trade agreement. Last month, ten of us in the Senate talked about the surge of steel conduit, wire, wire rod and we sent a letter on this to you. Can you raise this issue with Mexico?
Tai: I received that letter and read it with concern. I will absolutely raise this next time I meet with them.
Sen. Brown: Section 232 tariffs should be reimposed on them.
***See the CPA report on Mexico steel conduit import surge by senior economist Andrew Heritage.***
Katherine Tai also mentioned a recent International Trade Commission report on the impacts of the kind of sweeping trade deals many on the Committee were advocating for. That report found that blue-collar workers, led by women and minorities, suffered the most from FTAs while big multinational corporations benefited most as they were able to shift supply chains to low-cost, low-regulatory markets.
“Non-college educated white men have not benefited from trade, nor have women and minorities,” Tai told them. “Trade has to be a positive force in the economic toolbox at USTR.”