The Biden administration, breaking its silence over America’s strained economic relations with China, indicated that it is ready to take a new and potentially more decisive approach with Beijing on trade and China’s compliance with its commitments, starting with an agreement reached with former President Trump.
The strategy was outlined on Monday by US Trade Representative Catherine Tai. Analysts described it as the first salvo in Biden’s efforts to tackle an increasingly difficult economic and political situation as China became more assertive around the world and relations on both sides became tighter.
“In recent years, Beijing has doubled down on its state-centered economic system,” Tai said in her first trade policy speech on China after a months-long review of US-China relations by officials. “It is becoming increasingly clear that China’s plans do not include meaningful reforms to address the problems that the United States and many other countries share,” she added. Among these concerns are China’s practices such as supporting state-owned companies and maintaining other barriers that undermine foreign competitors and distort markets.
Tai, who took office in March, said she was not seeking “to rekindle trade tensions with China” and would begin dialogue with Beijing. But she made it clear that a new, pragmatic, worker-centered approach was needed. It was open to using all the tools at its disposal, including creating new ones, to get better results that were not available to previous administrations. Tai left open the possibility that the US government could use Trump’s favorite weapon in trade disputes with Beijing: tariffs.
A senior Biden administration official told reporters ahead of Tai’s speech, “We will see how China responds to what Ambassador Tai describes in detail, and we will respond accordingly.”
Tai detailed how China’s trade and economic policies hurt American workers and industries, including steel, solar, and semiconductor, as the Asian country became the world’s second largest economy after the United States.
Tai did not provide a timetable for when she would start interacting with her counterpart in China, but beyond diplomacy, it was unclear what additional measures the administration might use. Ty said a central part of Biden’s strategy is to work with allies – as opposed to the Trump administration’s one-sided approach and its frequent trade skirmishes with long-standing friendly trading partners like Canada.
Last week, Thai Affairs and Trade Minister Gina Raimondo held two days of trade and technology talks with European officials in Pittsburgh, followed by a lengthy statement on key issues clearly related to China, without mentioning the country by name.
Tai and other Biden officials have sought to distinguish the president’s approach from what they described as Trump’s chaotic and lack of focus on China. This policy included a two-year tit-for-tat trade war that raised tariffs on imported Chinese goods worth about $ 350 billion, with the influence mainly borne by American consumers and businesses.
Biden, however, did not raise Trump’s tariffs on Chinese-made goods, although Tai said the administration would resume a process in which targeted goods could be removed from higher tariffs. This could make it easier for American manufacturers who have become dependent on China for parts and consumables not available in the United States.
Biden sharply challenged China, calling it a battle between autocracy and democracy. Ty reiterated Biden’s often-expressed view that competition begins with the United States reinforcing its weaknesses in manufacturing, infrastructure and research.
But the president faces strong political pressure to act decisively with China, be it Beijing’s crackdown in Hong Kong, human rights abuses in Xinjiang, regional aggression, including against Taiwan, or his various industrial policies aimed at strengthening China. The hand of the communist party and the achievement of its goals.
“Everything Biden gets from Congress on both sides has to be tough, take a tough approach,” said William Reinsch, a trade expert at the Center for Strategic and International Studies, a Washington think tank, where Ty made his remarks.
Scott Paul, president of the Alliance for American Manufacturing support group, said he was encouraged by what he heard from Ty.
“This means they are not afraid to move away from what the administrations have done about China,” Paul said. “They understand that no administration has understood this for sure.” President Obama, he added, relied too much on diplomacy, while Trump used a sledgehammer and a transactional approach.
“As for the first recording, I thought it was very clear, very intelligent, and could be developed on it,” he said.
For Ty, the immediate problem is the Phase 1 trade deal that Trump announced in January 2020. The agreement calls on China to increase its purchases of American goods and services by about $ 200 billion over two years. China has also pledged to open up markets and improve intellectual property protection.
But in August, China was unable to meet its promised purchases more than 30%, said Chad Bone, an economist at the Peterson Institute for International Economics that monitors trade flows. Bone said China imports American agricultural goods relatively well, and Beijing could buy large American planes and other manufactured goods to close the gap. But even if such big deals happen, analysts doubt China will be able to meet its commitments by the end of the year.
China has fulfilled some of its market access obligations, including removing barriers to financial services and some US fruits and meat products.
The Phase 1 trade agreement includes a compliance mechanism, but it also has a clause that could allow China to claim that it is unable to meet its obligations due to contingencies caused by the COVID-19 pandemic.
“If you’re Biden’s people, there’s not much to inherit,” Bown said. “You don’t want to be seen signing trade agreements with countries that will not be enforced. But they are mostly stuck without much leverage. “
The Phase 1 deal was intended as an initial agreement that would lead to negotiations involving more substantive economic and trade issues, but senior Biden officials said Sunday they did not foresee negotiations for a Phase 2 deal.