WASHINGTON/NEW YORK -- The Biden administration is set to resume negotiations with Beijing as part of its long-awaited strategy for handling trade with China.
"In the coming days, I intend to have frank conversations with my counterpart in China," U.S. Trade Representative Katherine Tai said Monday at the Washington-based think tank Center for Strategic and International Studies.
She is expected to speak to Chinese Vice Premier Liu He, calling on China to respect the "phase one" trade agreement it signed with Washington under former President Donald Trump.
The U.S. also plans to resurrect partial exemptions on punitive tariffs to help curb the impact of trade tensions on its domestic industry.
In Monday's speech, Tai outlined the Biden administration's trade policy, underscoring the U.S. intention to "use the full range of tools we have and develop new tools as needed to defend American economic interests from harmful policies and practices."
"We need to take a new, holistic, and pragmatic approach in our relationship with China that can actually further our strategic and economic objectives -- for the near-term and the long-term" she said.
The U.S. aims to persuade China to correct unfair trade practices through dialogue, without setting a specific deadline for talks. This dialogue includes China's progress -- or lack thereof -- in its commitments under the phase one agreement.
Under the phase one deal, China promised to increase U.S. imports by $200 billion in a period from 2020 to 2021, from the pre-trade war level in 2017. China's total imports from the U.S. in January to August this year remained just 62% of the target, according to the Peterson Institute for International Economics.
Tai said that the U.S. will also focus on issues not covered by the phase one agreement.
"We continue to have serious concerns with China's state-centered and non-market trade practices that were not addressed in the phase one deal. As we work to enforce the terms of phase one, we will raise these broader policy concerns with Beijing," she said.
In the trade talks, Tai is also expected to demand China corrects what the U.S. sees as violations of intellectual property rights.
Chinese and U.S. flags are displayed at the U.S. Soybean Export Council booth during the 2021 China International Fair for Trade in Services (CIFTIS) in Beijing, China September 4, 2021. © Reuters But Tai also noted "Our objective is not to inflame trade tensions with China," taking a different approach from the Trump administration.
The U.S. plans to reinstate tariff exemptions, which expired at the end of 2020 apart from on pharmaceutical products. While the administration has yet to decide exactly which items may qualify for exemptions, such decisions will be made in line with policy priorities.
It is possible that imports related to climate change and infrastructure, including renewable energy-related items, may be spared from the tariffs. The previous administration exempted products that were difficult to import from countries other than China, including machine tools.
The Trump administration slapped tariffs on Chinese products in phases, starting in July 2018. China retaliated and the two countries entered a trade war. The U.S. has so far imposed an additional 25% of duties on imports worth a total of about $370 billion.
In her remarks, Tai highlighted the dual-track approach the U.S. has taken toward China since it joined the World Trade Organization in 2001 and the ways in which the strategy has failed.
The first track has been consistent high-level dialogues meant to push China toward greater compliance with WTO rules and norms and toward a more typical market-oriented economy.
"But those commitments became more difficult to secure over the years, and China's follow-through was inconsistent and impossible to enforce," Tai said.
The second track focused on taking up disputes through the WTO, where the U.S. has won each of the 27 cases it brought against China.
"Even when China changed the specific practices we challenged, it did not change the underlying policies, and meaningful reforms by China remained elusive," Tai said.
Then, the Trump administration tried a new strategy of "unilateral U.S. pressure," leading to a trade war and ultimately culminating in the phase one agreement. That deal "did not meaningfully address the fundamental concerns that we have with China's trade practices and their harmful impacts on the U.S. economy," Tai said.
In outlining its new strategic vision for America's trade policy towards China, Tai routinely highlighted the failure of institutional attempts to reform China away from policies the U.S. finds harmful.
"The speech was remarkable in terms of its pessimism about the existing toolkit that the US has, in terms of dealing with some of the Chinese distorted trade practices," said Emily Kilcrease, a senior fellow focusing on the U.S.-China economic relationship at the Center for a New American Security.
Tai did not offer much in the way of concrete solutions to address these institutional failures, but said that unlike in the past, the Biden administration's focus on domestic investment puts it in a position of strength.
In the short-term, it is hard to see where there is much leverage for the Biden administration to rely on. Any gains from its massive infrastructure bill, should it pass, will not be felt for some time.
Kilcrease says the most promising area to exert real pressure on China may come through working with allies. Something like a unified approach with the European Union and/or Japan on industrial subsidies could put pressure on China in a meaningful way. But such negotiations do not come together quickly.
"That is a long, difficult, multi-year process. We're getting these hints that that is what the administration would like to do, but no specifics yet," she said.