USTR testimony signals more tensions ahead for US-China trade

April 5, 2022

If one could invest in a futures market for trade relations, now would be a good time to bet on a more confrontational US-China relationship. In her testimony before the House Ways and Means Committee, US Trade Representative Katherine Tai underscored mounting frustration and diminishing patience with China. Tai told committee members that the Biden administration is shifting its policy and would focus on “vigorously defending” US economic interests through new trade tools designed to tackle China’s non-market activities.

Previously, Tai had stressed dialogue and consultation with China. More recently, she has acknowledged that talks with China are “extremely difficult and getting more difficult”.[i] The administration will now, in Tai’s words, “turn the page on the old playbook with China, which focused on changing its behavior.”[ii] While engagement will not be abandoned, domestic investments in competitiveness and sharper trade remedy laws will help the US defend “our values and economic interests from the negative impacts of China’s economic policies and practices.” Tai’s testimony marked a notable shift in tone.

For years, US trade policy was predicated on the assumption that US negotiators could coax or cajole China into being less like China – that is to say, less mercantilist and less statist. This was especially true during the 16 years of the Bush and Obama administrations, in which so-called strategic and economic dialogues were front and center. Round after round of consultations were convened and US officials painstakingly laid out their case. The hope was that this approach would ultimately produce the desired policy changes in China. That strategy was ill-fated from the start. Ambassador Tai is now plainly stating as much.