US to outline new strategy, restart trade negotiations with China

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WASHINGTON – The United States will restart trade negotiations with China very soon, senior administration officials said on Sunday (Oct 3), ahead of a much-anticipated speech by US Trade Representative Katherine Tai.

Ms Tai’s speech is expected to outline the US’ goals and strategy in a new phase of negotiations meant to force China into making structural changes to its economy.

It follows the 2020 phase one trade agreement that emerged on the heels of a tariff war started in 2016 by the Donald Trump administration.

The phase one economic and trade agreement with China went into effect in February 2020. China agreed to expand purchases of certain US goods and services by a combined US$200 billion (S$271.5 billion) for a two-year period – from Jan 1, 2020, to Dec 31, 2021 – above the 2017 baseline levels.

China has fallen short of its commitments, senior US administration officials said.

According to an analysis by the Peterson Institute of International Economics (PIIE) for the period up till August this year, China’s total imports of US products covered under the agreement amounted to US$89.4 billion, compared with a target of US$129.9 billion.

“We will revisit the phase one agreement and emphasise that China must follow through on the commitment it has made,” a senior official told journalists. 

The official added: “Second, we will start a targeted tariff exclusion process. We’ll also keep open the potential for additional exclusion processes in the future.

“Third, in the coming days, Ambassador Tai will resume direct engagement with her counterpart in China.

“This will include discussions with China regarding its commitment under phase one, but it will also be a chance for Ambassador Tai to reiterate that the United States will defend itself using all available tools from state-directed industrial policies that harm our workers, producers and overall economic interests.

“Finally, we will work with our allies and like-minded partners towards building an international trading system that is fair and allows for healthy competition.”

The officials who spoke to journalists in the Sunday afternoon call said: “We recognise that Beijing is doubling down on its authoritarian state-centric approach and is resistant to addressing our structural concerns.”

They added: “When President (Joe) Biden got into office, he made clear that the phase one agreement did not resolve our core concerns with China, which were structural and characterised by a state-directed approach to the economy and trade that distorts competition by propping up state-owned enterprises, limiting market access, and other coercive and predatory practices in trade and technology.

“The harm to American workers and American firms from these practices has been well documented.”

The idea, however, is not to escalate trade tensions, the officials said.

“While we would welcome China changing the practices that do harm to American firms and workers, we recognise that China simply may not change and that we have to have a strategy that deals with China as it is rather than as we might wish it to be,” they added.

“From the outset, we wanted to stabilise this relationship,” an official explained.

“The decision to be more deliberative and to bring long-term thinking into our approach was critical and a sharp departure from the last administration. Here’s what is clear: The current state of this trade relationship does not meet the needs of American workers, businesses, farmers and producers.”

In her speech, Ms Tai is expected to highlight some examples of what the US sees as China’s unfair trade practices hurting US workers and industries and giving Beijing an unfair advantage in the global trading system.

She is also expected to point to China’s failure to reform its non-market policies or follow through on the commitments it made during high-level dialogues with US officials over the last 15 years, the officials said.

“She will acknowledge that we need a new strategy, one that aligns with the priorities of our workers and businesses.”