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U.S. Trade Chief to engage with China on trade-deal shortfalls

Sarah Silbiger/Getty Images Katherine-Tai-GettyImages-1232576391.jpg
U.S. officials say Beijing hasn’t lived up to its commitments made under the so-called phase-one agreement of January 2020.

By Jenny Leonard

The Biden administration will directly engage with Beijing in the coming days to enforce commitments in their trade deal and start a new process to exclude certain products from U.S. tariffs in an effort to help American workers and businesses, senior administration officials said.

U.S. Trade Representative Katherine Tai is set to speak to Chinese Vice Premier Liu He soon, in what will be the first meeting where she will mainly stress China’s shortfalls in the agreement struck under former President Donald Trump. Tai is scheduled to lay out the issues Monday morning in remarks at the Center for Strategic and International Studies in Washington.

“I am committed to working through the many challenges ahead of us in this bilateral process in order to deliver meaningful results,” Tai will say, according to excerpts from her speech. “But above all else, we must defend – to the hilt – our economic interests.”

While the Biden administration won’t take any tools off the table when dealing with Beijing, a senior administration official stressed that the U.S. doesn’t intend to escalate the trade tensions. The official acknowledged that China may not change its practices and therefore the U.S. needs a strategy that takes that into account.

Tai’s speech will focus on the Biden administration’s approach to the U.S.-China trade relationship and comes after months of internal reviews and deliberations on how to deal with Beijing’s economic practices. 

The world’s two largest economies share the biggest bilateral trade relationship but are at odds on economic, military and political fronts. Flashpoints include billions of dollars in tariffs on each other’s goods, U.S. concerns about China using American technology know-how to beef up its military, forced-labor allegations in the Xinjiang region, and conflict over supplying next-generation telecommunications equipment to other nations.

U.S. officials say Beijing hasn’t lived up to its commitments made under the so-called phase-one agreement of January 2020. Certain parts of the deal are set to expire at the end of this year. China is far behind its purchasing targets, in which it pledged to buy an extra $200 billion in U.S. agriculture, energy and manufactured products over the 2017 level in the two years through the end of 2021.

Administration officials wouldn’t comment on a timeline by which they want to see meaningful progress on Beijing’s commitments before the White House considers taking additional steps.

An official said any actions the U.S. may take depend on how China responds to Tai’s announcement and request to comply with the deal.

Tai and Liu will engage under the agreement’s enforcement mechanism and the U.S. trade chief will also raise U.S. concerns with China’s industrial policies that are harming American workers and businesses, the official noted.

Exclusion process

The USTR will also be reinstating a targeted exclusion process for certain products and does not rule out further exclusions in the future, an official said. It’s not clear what products would qualify for exemption under the new process or when the application deadline starts. 

The business community and many lawmakers have asked the administration to allow for such exemptions from the duties.

The Biden administration has been weighing a new investigation into Chinese subsidies and their damage to the U.S. economy as a way to increase pressure on Beijing.

Most Biden officials believe the duties imposed under Trump have not led to the desired changes in China’s behavior and over time have lost their ability to serve as leverage to get China back to the negotiating table or to fulfill its phase one commitments.

National Security

The White House is also concerned about protecting U.S. intellectual property that could be stolen or used to advance Chinese companies in strategic industries. The Biden administration has added a number of Chinese companies to a list of entities that U.S. businesses can’t sell to without a government license.

President Joe Biden’s team has been reviewing U.S. policy on China since taking office and inherited duties Trump imposed on about $300 billion of imports from the Asian nation in the hope of taming the goods-trade deficit. More than two years since the duties took effect, the countries are shipping merchandise to each other at the strongest pace on record, making it look as if the protracted tariff war and pandemic never happened.

Commerce Secretary Gina Raimondo, who has said Beijing doesn’t play by the rules and needs to be held accountable, wants to increase market access for American companies in China and once Covid-19 restrictions ease up, she’ll travel there with U.S. CEOs.

“There’s no point in talking about decoupling,” she said in late September. “We have to figure out how to have serious, continuous commercial activity between our two countries that doesn’t undermine our national security.”

--With assistance from Eric Martin and James Mayger.
© 2021 Bloomberg L.P
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