Biden administration pushes China to abide by Trump-era trade deal

WASHINGTON —  The Biden administration, breaking its silence on America’s tense economic relations with China, indicated that it is prepared to take a new and potentially more forceful approach with Beijing on trade and on ensuring that China lives up to its commitments, starting with the agreement reached with former President Trump.

The strategy was outlined in broad terms Monday by U.S. Trade Representative Katherine Tai. Analysts described it as an opening salvo in Biden’s efforts to combat an increasingly difficult economic and political landscape as China has become more assertive globally and attitudes have hardened on both sides.

“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 U.S.-China relations by administration officials. “It is increasingly clear that China’s plans do not include meaningful reforms to address the concerns that have been shared by the United States and many other countries,” she added. Among those concerns are China’s practices such as propping up state-owned firms and maintaining other barriers that undercut foreign rivals and distort markets.

Tai, who took office in March, said she was not looking to “inflame trade tensions with China” and would begin by dialoguing with Beijing. But she made clear that a new, pragmatic, worker-centered approach was needed. She was open to employing all tools at her disposal, including creating new ones, to get better outcomes that have eluded past administrations. Tai left open the possibility that the U.S. government may utilize Trump’s preferred weapon in trade disputes with Beijing: tariffs.

A senior Biden administration official, in a briefing with reporters before Tai’s speech, said, “We will see how China responds to what Ambassador Tai details, and we will adjust accordingly.”

Tai laid out in some detail how China’s trade and economic policies have hurt American workers and industries, including steel, solar and semiconductor, as the Asian country has risen to become the world’s second-largest economy after the United States.

Tai did not provide a timetable for when she would start engaging with her counterpart in China, but beyond diplomacy, it wasn’t clear what additional measures the administration can leverage. Tai said a core part of the Biden strategy is to work with allies — a contrast to the Trump administration’s unilateral approach and its frequent trade skirmishes with longtime friendly trading partners such as Canada.

Last week, Tai and Commerce Secretary Gina Raimondo held two days of talks on trade and technology with European officials in Pittsburgh, issuing a lengthy statement afterward about key concerns clearly involving China, without mentioning the country by name.

Tai and other Biden officials have sought to differentiate the president’s approach from what they described as Trump’s chaotic and poorly targeted handling of China. That policy included two years of a tit-for-tat trade war that left higher tariffs on about $350 billion worth of Chinese imported goods, with the impact mostly borne by American consumers and businesses.

Biden, however, has not lifted Trump’s tariffs on China-made goods, although Tai said that the administration would restart a process in which targeted goods could be excluded from the higher duties. That could provide some relief to American manufacturers that have become dependent on China for parts and supplies not readily available in the U.S.

Biden has cast the challenge from China in stark terms, calling it a battle between autocracy and democracy. Tai reiterated Biden’s oft-stated belief that the competition begins with the U.S. shoring up its weaknesses at home in manufacturing, infrastructure and research.

But the president faces heavy political pressure to act forcefully in dealing with China, whether it’s about Beijing’s crackdown in Hong Kong, human rights abuses in Xinjiang, assertive actions in the region, including toward Taiwan, or its various industrial policies aimed at strengthening the Chinese Communist Party’s hand and achieving its goals.

“Everything Biden is getting from the Congress, from both parties, is be tough, take a hardline approach,” said William Reinsch, a trade expert at the Center for Strategic and International Studies, the Washington think tank where Tai made her remarks.

Scott Paul, president of the advocacy group Alliance for American Manufacturing, said he was encouraged by what he heard from Tai.
“It means they are not afraid to depart from what administrations have done with respect to China,” Paul said. “They understand that no administration has gotten it exactly right.” President Obama, he added, relied too much on diplomacy, while Trump took a sledgehammer and transactional approach.

“For a first entry, I thought it was very lucid, very sensible and something to build on,” he said.

For Tai, the immediate issue is the Phase 1 trade deal, which Trump announced in January 2020. The agreement calls for China to increase its purchases of U.S. goods and services by about $200 billion over two years. China also pledged to open up markets and improve protection of intellectual property.

But China was running more than 30% short of its promised purchases through August, said Chad Bown, an economist at the Peterson Institute for International Economics who has been tracking the trade flows. China is doing relatively well in terms of imports of U.S. farm goods, Bown said, and Beijing could make big purchases of U.S. aircraft and other manufactured goods to close the gap. But even if such large deals occur, analysts doubt China can meet its commitments by the end of the year.

China has made good on some pledges related to market access including removing barriers for financial services and some U.S. fruits and meat products.

The Phase 1 trade agreement includes an enforcement mechanism, but it also has a provision that might allow China to claim that it could not meet its obligations due to the unforeseen circumstances caused by the COVID-19 pandemic.

“It you’re the Biden folks, it’s not a great deal to inherit,” said Bown. “You don’t want to be seen signing trade agreements with countries that then don’t get enforced. But they’re basically stuck without much leverage.”

The Phase 1 deal was meant as an initial agreement that would lead to talks involving more substantive economic and trade issues, but senior Biden officials said Sunday that they don’t foresee negotiating a Phase 2 deal.