U.S. trade chief Tai to defend pursuit of non-traditional trade deals

By David Lawder

WASHINGTON (Reuters) – U.S. Trade Representative Katherine Tai on Wednesday will defend the Biden administration’s decision not to pursue traditional free trade deals and argue her approach of working to ease non-tariff barriers is better for workers and supply chain resilience.

Ahead of a policy speech at American University, Tai said she is starting to change minds in Washington and in other capitals that the traditional approach of cutting tariffs no longer works in the highly competitive global economy of the 21st century.

“We are writing a new story on trade, one that makes us more resilient, our economy more sustainable, and our results more inclusive,” Tai said in excerpts of her remarks.

Trade needs to work hand-in-hand with industrial policy, Tai said, which the U.S. is employing to invest in infrastructure, semiconductors and clean energy technology. These incentives are resulting in good paying jobs, including for those without a college degree, Tai said.

“That is the key theme of the Biden Administration’s new story on trade — strengthening our cooperation with like-minded economies to forge a fairer and more sustainable future for our people,” Tai said in her remarks.

That approach, she said, is the foundation for trade engagements such as the Indo-Pacific Economic Framework (IPEF) and the U.S.-EU Trade and Technology Council. They will focus not on tariffs but on regulatory, environmental, food safety, labor and digital economy issues that have proven to be formidable trade barriers.

FALLING BEHIND?

Her remarks come amid growing calls from U.S. business and agricultural trade groups for Congress to approve new “fast track” negotiating authority for USTR to pursue traditional free trade deals.

These groups argue the U.S. is falling behind the growing network of free trade deals forged by China and the European Union in recent years, putting U.S. farmers and food companies at a disadvantage against many foreign competitors in key markets.

Republicans in the U.S. Senate and House of Representatives also pelted Tai with complaints about the lack of new tariff-reducing trade deals during hearings last month.

“We lose ground every day that we remain on the sidelines in real trade negotiations,” Republican Senator Mike Crapo of Idaho said during a Senate Finance Committee hearing, urging the administration to reconsider decisions not to pursue market access in IPEF or other trade arrangements.

Tai told reporters it has been difficult to explain the need to break away from the traditional vision of ever-liberalizing trade deals.

But message was starting to sink in, partly due to widespread recognition that supply chains need to be made more resilient after the COVID-19 pandemic, and to the desire to reduce U.S. dependence on China for critical materials, she said.

“We are nearing a consensus on the need to do things differently.”

She highlighted the new U.S. trade agreement with Japan on electric vehicle battery minerals as embodying many of the Biden administration’s goals on trade. Those included strong provisions on labor and environmental standards and strengthening U.S. EV supply chains through “friend-shoring,” or boosting sourcing from trusted allies.

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