The May 10th to May 16th, 2021 roundup of major trade developments, with L.C.
US Trade Representative Katherine Tai testified in Congress this week on President Biden’s Trade Policy Agenda. This is the document that the USTR produces early each year laying out the administration’s trade plans. During her solo appearance to explain and defend administration trade policies, she faced bipartisan criticism on policies regarding US non-participation in the Trans-Pacific Partnership and the administration’s vaccine intellectual property-rights giveaway — among many other topics, including self-punishing US tariffs on Canadian lumber and the Jones Act.
Taking up in this week’s column just the first two of these issues: bipartisan support is growing for the US to re-enter the Trans-Pacific Partnership (TPP) – as underlined by the letter of Finance Committee Trade Subcommittee chairman Tom Carper (D-DE) and ranking member John Cornyn (R-TX) two week’s ago and last week’s grilling of Tai in committee. This centers about the China issue: the perception that the TPP would enable the US to enlist regional allies in containing China. That was one of the original motivations for the Partnership. Cornyn told Tai, “A number of us have talked about the TPP, whether in some revised and updated form, but the geopolitics of that seem very obvious as well as the economic benefits…. The one thing that we have in the US that China does not have is friends, and I think it will do nothing but enhance our national security and our economic security by banding together with like-minded countries in the region.” In an important, widely-read column in the Wall Street Journal, Walter Russell Mead wrote of the importance of “strengthening Asia to weaken Beijing.”
Leading from way behind
Forced to explain how the administration plans to engage with the region on trade, Tai told the senators that, regarding entering the TPP, the US would require that the other TPP members support a “worker-centered” policy and that in Washington there would have to be strong support from both parties that could overcome the sort of domestic opposition that emerged when the TPP was first negotiated. “There are,” she said, “a lot of good partners” who are “very interested in engaging with US leadership again,” but the administration must “ensure that… we are effective, and that we are pursuing a vision that is well supported, here at home, on a very strong and robust bipartisan basis.”
Translation: Don’t expect any leadership on the issue from President Biden, USTR Tai, and Commerce Secretary Raimondo. The administration will “lead” from behind — way behind.
Another prominent Republican, Sen. Mike Crapo (R-ID), pointed to China’s success with the RCEP and warned, “If the US has to pursue a worker-centered trade policy we need to be mindful that American workers lose when China writes the rules.”
A “worker-centered trade policy” is Tai’s euphemism for a protectionist trade policy dictated to the Biden administration by its most important trade union allies.
Maryland Democrat Sen. Ben Cardin added: “It’s important that we expand our trading opportunities with countries in the region. We’re not a member of the TPP… so what is our strategy to deal with China’s influence?”
Section 232
Tai said that the administration will seek some changes to US trade laws, something several senators endorsed — all of them suggesting that the main motivation was to be able to deal more effectively with China. She admitted that changes to Section 232 must be part of any modernization but didn’t indicate any plans to remove the current Section 232 tariffs. The Section 232 tariffs were imposed by former President Donald Trump on the pretext that steel and aluminum tariffs on China and allies alike were needed for national defense, despite the fact that the Pentagon denied that there was any such need for such measures.
At the Finance Committee hearing, Chairman Ron Wyden (D-OR), also endorsed the idea of updating US trade laws: “Not a day goes by when I don’t have a senator talk to me about 232, particularly this idea of modernizing the statute. That’s what it’s all about – having a toolbox that we can use to deal with our challenges,” in particular those from China.
Brady: US needs foreign marketrs
Tai responded by noting that the tariffs “have really roiled our economy” but “were necessary to address a global overcapacity problem driven largely but not solely by China.” She acknowledged nonetheless that the tariffs have “heightened tensions with trading partners.”
Ways & Means ranking Republican Kevin Brady (R-TX) said the administration’s trade agreement moratorium “needs to cease” because the US needs expanded foreign markets. “And we have the right bipartisan dynamics to move these agreements forward,” he said. But first, Trade Promotion Authority (TPA) should be renewed to assure there is a strong partnership between Congress and the administration on trade. Brady asked her when the administration will be prepared to work with Congress on TPA renewal, but she wouldn’t give a timeline. Tai also noted, in discussing trade agreements, that the talks for a US-UK FTA still need considerable work.
TRIPS waiver
In the questioning of USTR Tai, Democrats largely supported the US “engagement” (capitulation) on a TRIPS waiver at the WTO. Republicans raised the familiar objections that the waiver would discourage future innovation and wouldn’t deal with what is really holding back vaccine production globally. Sen. Pat Toomey (R-PA), saying he was “shocked and disturbed” by the administration’s policy reversal, said: “I am aware of no evidence whatsoever that this step is going to enhance vaccine availability in developing countries. It could quite possibly be the contrary… there are many safety concerns” and facilities around the world… just don’t have the technology to make this properly.” Moreover, “I think it undermines our ability to deal with the next crisis, including the possibility of the next iteration of this crisis.”
On the issue, raised by Sen. Crapo, of whether USTR has the legal authority to waive IP rights without Congress agreeing, Tai said she does because “I have the authority to negotiate at the WTO.”
Sen. Chuck Grassley (R-IA) also expressed unease over the TRIPS waiver, noting that “Congress was not consulted” when the administration “agreed to give up the intellectual property” for the vaccines — even though it appears that won’t be necessary since Pfizer says it will be producing seven billion doses by year-end. And this is going on, he added, while “we try to keep countries from stealing our intellectual property.” Hence, “this movement toward giving some of it away bothers me.”
China will benefit
The waiver was also a major issue at the House hearing. Rep. Devin Nunes (R-CA) raised the concern that a TRIPS waiver would mainly benefit China, in particular giving it access to the Pfizer and Moderna vaccine technology, saying, “it really seems like they want to steal this very new technology.”
Tai’s reply was evasive. She claimed that what the US is committing to is just starting a process at the WTO. Rep. Brad Wenstrup (R-OH) pushed hard on the danger of a waiver leading to foreign production of unsafe vaccines, sparking more vaccine hesitancy, and leading to “innovators being less likely to engage in public private partnerships” like Operation Warp Speed in the future. Tai acknowledged these as valid concerns and said that having the US as part of the process of developing a waiver proposal at the WTO makes the US “part of the solution.” But then why did the US already commit itself to giving away the US pharmaceutical companies intellectual property? Giving away the store as one’s opening negotiating move is the most foolish possible negotiating strategy, although it does mirror the way the Obama administration also negotiated with Iran.
Slow-walking trade
US competition with China and its unfair trade practices were understandably the backdrop to the discussion of trade policy. China came up directly in some of the questions and answers. Tai was rather evasive here, not saying much that was explicit regarding policy toward China other than the now-standard “work with allies” and seek to reform the WTO, though she reconfirmed that the Phase One agreement will remain in place while the administration figures out its China strategy. The excuse that the administration is still “figuring out its China [trade] strategy” lacks credibility given its lack of precipitancy in proposing six trillion dollars of ill-conceived domestic expenditures.
L.C. reports on trade matters for business as well as Founders Broadsheet.
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