Katherine Tai

U.S. trade policy under a Biden Administration and a Democratically-controlled Congress — how will a search for social justice and more equitable distribution of benefits affect trade laws and negotiations?

President-elect Biden’s pick for U.S. Trade Representative, Katherine Tai, spoke at a National Foreign Trade Council virtual conference yesterday and various press reports indicate that she identified two primary areas of focus of the incoming Administration in trade as being China and the USMCA. Ms. Tai is quoted as stating that the Biden Administration “will pursue trade policies that place the humanity and dignity of every American and all people at the heart of our approach” and will use trade policy “to create a more inclusive prosperity for Americans”. Inside U.S. Trade’s World Trade Online, Tai calls for more trade collaboration ‘across the entire spectrum,’ January 12, 2021,https://insidetrade.com/daily-news/tai-calls-more-trade-collaboration-%E2%80%98across-entire-spectrum%E2%80%99. See also Financial Times, What maiden speech of USTR-elect says about Biden’s trade policy, January 13, 2021, https://www.ft.com/content/f57fc73f-276f-470f-bffe-ab348fb13f16; Washington Trade Daily, January 13, 2021, Biden’s Worker-Centered Trade Policy, https://files.constantcontact.com/ef5f8ffe501/cfb23ebb-cdc6-4b55-adb5-3a5cbd7cfce6.pdf, (“’The President-Elect’s vision is to implement a worker-centered trade policy,’ Ms. Tai continued. ‘What this means in practice is that US trade policy must benefit regular Americans, communities, and workers. And that starts with recognizing that people are not just consumers – they are also workers, and wage earners.’”).

In an earlier post, I had reviewed the range of issues that an incoming U.S. Trade Representative will be facing. See December 12, 2020, The Incoming Biden Administration and International Trade – Katherine Tai, nominee for U.S. Trade Representative, https://currentthoughtsontrade.com/2020/12/12/the-incoming-biden-administration-and-international-trade-katherine-tai-nominee-for-u-s-trade-representative/.

In the area of trade negotiations, the USMCA reflects a greater focus on workers and has been cited by Democrats as having moved in the right direction to address the needs of working families. Enforcement is a major element of the new agreement on labor rights and how well the new agreement works in the labor enforcement area will be tested shortly after President-elect Biden is sworn is as the AFL-CIO will be filing a complaint on Mexico’s implementation then. Inside U.S. Trade’s World Trade Online, Trumka: AFL-CIO to launch labor case against Mexico soon after Biden takes office, January 12, 2021, https://insidetrade.com/daily-news/trumka-afl-cio-launch-labor-case-against-mexico-soon-after-biden-takes-office.

But there are many areas of trade law where a more worker-inclusive approach to trade policy could lead to significant changes in the approach pursued. For example, on the pending issue of renewal of the Generalized system of preferences (GSP expired on Dec. 31, 2020), Democrats in 2020 were looking for modifications to eligibility criteria to address issues like human rights, anti-corruption and the environment. See Inside U.S. Trade’s World Trade Online, Wyden: GSP changes needed to ‘raise the bar’ for U.S. trading partners, December 2, 2020, https://insidetrade.com/daily-news/wyden-gsp-changes-needed-%E2%80%98raise-bar%E2%80%99-us-trading-partners. These types of changes are likely to be pursued in 2021. But there are others that may be equally important to working men and women in the manufacturing sector. For many products produced in various GSP countries, the primary beneficiary is a local subsidiary of a major multinational company — companies that very likely don’t need the tariff advantage to be competitive against imports from other countries. Congress and a Biden Administration could examine whether eligibility within an eligible country would not apply to goods from subsidiaries of multinational companies. Such an approach would reduce the likely loss of jobs in the United States or encourage reshoring where the advantage is a tariff-based incentive.

Similarly, Congress has often considered miscellaneous tariff bills (MTBs) to provide waiver of duties on imports reportedly not produced in the United States. Many businesses are pushing for adoption of MTBs early in the Biden Administration. There can be literally thousands of such requests received and handled. There is no present process to review which products are simply inputs being shipped between subsidiaries of the same company, for which products maintaining the duty could lead to production starting in the United States, etc. A Biden Administration, if interested in ensuring that trade policy works for all Americans might view changes to the MTB process to be relevant.

In trade remedies, while U.S. law has permitted workers to bring petitions, the Biden Administration and Congress could look at self-initiation of cases of interest to workers where major producers in the U.S. are conflicted because of foreign operations and could seek funding (based on use of a small portion of trade remedy duties collected from other cases) for workers to be able to hire private counsel to pursue cases.

While the Trump Administration has bolstered action on imports made from forced labor, the Biden Administration has the ability to significantly increase the use of existing U.S. law against such imports and should explore additional documentation required for any goods from an area where forced labor is suspected to be used.

While one is not expecting significant new FTA negotiations by the Biden team in 2021, there are negotiations underway where labor, environment and other priorities for the Biden team could be addressed. The U.S.-U.K. negotiations would be one obvious one. If there is to be a comprehensive U.S.-Japan agreement, that would be a second one where achieving meaningful results on labor and environment should be doable. U.S.-Kenya would be more challenging but would be important. While a significant part of the business community is hopeful that the U.S. will reengage with the now CPTPP countries, it is unlikely that such an undertaking will be pushed in 2021.

While the U.S. will be reengaging with the EU and while the U.S. and EU should have broad areas of common interest on labor and environment in a Biden Administration, the immediate issues before both the U.S. and EU are resolution of the Airbus/Boeing disputes and retaliations, what path forward there is on global excess capacity in various sectors (including steel and aluminum where the U.S. has 232 tariffs in place and the EU has retaliated and also has safeguard duties in place on steel), the 301 investigations into the EU and various EU Members on digital service taxes and the ongoing OECD/G20 efforts to adopt broadbased agreed rules for taxation of the digital economy, and collaboration on efforts to deal with distortions caused by China’s policies.

On the important U.S.-China relationship, the U.S. should start a phase 2 negotiations with China. In addition to the remaining issues from the U.S. 301 investigation of China that remain unresolved, successes in the EU-China Comprehensive Agreement on Investments on services and selected goods areas where various issues were addressed on sustainability, transparency, subsidies, etc. could be useful as precedents for any phase 2 talks on similar issues.

On the WTO, reform is a key priority for the Members and may provide the U.S. with an opportunity to make trade rules work better for working men and women. There is considerable interest among many WTO Members on the effects of climate change and what role the WTO can play to address. Indeed, there is generally reasonable interest in a range of the UN Sustainable Development Goals, a number of which should be of interest to the Biden team and the Democratically led Congress. Historically, labor issues have been unwelcome by many developing and least developed countries at the WTo, and it is unclear that there has been any significant change, meaning such issues will likely be more fruitfully addressed in FTAs or in other venues (e.g., GSP legislation).

House Ways and Means Committee Democratic Policy Pillars and Priorities on Health and Economic Equity while generally not trade focused are consistent with likely direction of the Biden Administration

A recent document released by the House Ways and Means Committee Chairman Richard Neal entitled Policy Pillars and Priorities: A Bold Vision for a Legislative Pathway Toward Health and Economic Equity deals with the broad issue of changes needed to laws that are within the Ways and Means jurisdiction to address the challenges of unequal access to health care and economic opportunities experienced by many members of minority groups in the United States. The document is embedded below. Generally trade is not the primary focus of the different topics although there is reference to trade in a number of the sections.

HWMC-Pillars-and-Priorities-Pathway-toward-Health-and-Economic-Equity

Specifically, the paper identifies nine policy pillars, four that are part of the section on health equity pillars and five that are part of the economic equity pillars. Trade is not addressed in any of the health pillars as policy approaches but is included as one of the policy approaches for each of the economic equity pillars. Below is the pillar and the listed trade policy approach cited for each.

“ECONOMIC EQUITY POLICY PRIORITIES

“Economic Justice for Workers

“Ensure trade policies support and do not undermine economic justice for workers in the
United States and in trading partner countries

“Economic Justice for Children and Families

“Assess the impacts that trade policies have on the ability of families from marginalized
communities and children of color to access needed resources

“Retirement Security

“Assess the impacts that trade policies have on the ability of American families to plan for and
enjoy a secure and dignified retirement

“Investment in Communities from the Ground Up

“Assess the impacts trade policies have on communities and their access to economic
opportunity and justice

“Environmental Justice

“Promote environmental justice through U.S. trade policies, including trade agreements and
programs”.

The paper from Chairman Neal was accompanied by a majority staff report which is embedded below and from which the section on trade (pages 20-24) is copied after. What is clear from the report and the economic equity pillars is that Democrats will be looking for trade policies to support efforts to make global trade more beneficial to working people and less discriminatory in effect on minorities. While the bulk of the tools to achieve greater equity will be domestic laws and policies (e.g., substantial infrastructure projects could be of significant help both short-term and longer-term), trade policy that includes the concerns of labor and the environment will likely differ significantly from policy that is simply business-owner focused.

HWMC-Majority-Staff-Report

“Access to the Benefits of Trade for Individuals and Communities

“Commonplace discussions about the objectives of international trade policy generally identify and promote the interests of economic sectors – industrial, agricultural, and services, for example. Seldom have trade’s effects on individuals or communities been considered, much less prioritized as such, beyond in any but the most abstract terms. When trade policymakers have taken the time to make the interests of individuals and communities a priority, however, their efforts have generated substantial political support for those policies. 106 Consequential developments in recent years – and in 2020 in particular – are challenging policymakers to
investigate further the role that trade policy has played in either perpetuating or exacerbating unequal access to the benefits of trade for certain individuals and communities – both in the U.S. and worldwide. In 2020, the COVID-19 pandemic has highlighted the fact that these disparities in outcomes among different communities result from structural and systemic inequities U.S. laws and policies create – inequities that emerged as far back as some of the first U.S. international economic policies involving the exchange of goods and people.107

“Globally, the pandemic has also revealed the fragility of our international supply chains and the inequity in the treatment of workers in low-cost labor countries where manufacturing has become concentrated. Predominantly non-White workers from developing countries and former colonies across the world suffer compromised labor conditions while producing goods for U.S. and global consumers. Unequal contracting and employer relationships that have developed from the arbitrage that conventional trade policies enable have encouraged a spectrum of exploitative practices, including the prevalence of forced labor in certain regions.108 In their attempts to minimize financial losses related to COVID-19, U.S.- and European-based multinational companies have left already low-wage workers in developing countries – also struggling to survive the pandemic – without pay.109 In this way, COVID-19 revealed how globalization has incentivized supply chain models that depend on finding the lowest cost workforce for production, regardless of living or working conditions, with dire consequences for public health, supply chain resilience, and a disparate impact on those already bearing the heaviest burdens in the existing global economic order.110 Indeed, some have called on brands and global retailers to remedy inequitable purchasing practices and commit to support millions of garment workers of color around the world who have enabled substantial industry profits, particularly in light of recent corporate public actions to promote racial justice.111

“For the last 50 years, the U.S. has pursued a policy of aggressive trade liberalization and experienced
a painful decline in manufacturing and redistribution of jobs to the services sector. The loss of manufacturing jobs and the increase in service sector work has exacerbated income inequality more broadly because those manufacturing jobs often had union benefits and wages that supported middle- and working-class families, whereas service sector jobs generally did not.112 In recent years, U.S. service sector jobs have also faced the
pressures of globalization and losses to lower-labor-cost countries.113 Trade policies favoring financial and corporate interests over those of individuals and their communities have yielded lowered labor conditions and standards for American workers in the form of decades-long wage stagnation, weaker labor protections, limited options for quality jobs, and increased unemployment.114

“Black workers have faced even harsher obstacles to recover from globalization-related job losses due to systemic and pervasive racial disparities across the labor market and in accessing public services.115 The loss in manufacturing jobs disproportionately impacted Black workers in a multitude of ways, including negatively affecting their wages, employment, marriage rates, house values, poverty rates, death rates, single parenthood, teen motherhood, child poverty, and child mortality.116 In addition to increases in precarious work, the decline in union jobs has also been cited as a contributing factor to growing inequality. In fact, union jobs help reduce disparities Black workers suffer by enabling more equitable labor conditions that
help protect them from discriminatory practices.117 At the same time, trade liberalization has impacted immigrant and Latino workers in the U.S. who have also suffered job losses and wage stagnation.118, 119

“An examination of U.S. policies affecting agricultural production and trade, as well as the historical realities that helped shape them, reveals racial inequities in both their development and impacts. The production of
certain commodities in the U.S. can be traced back to the founding of the original colonies as part of trans-Atlantic trade when forced labor powered production and comprised a key element of the triangular trade flow. Those commodities continue to enjoy robust support through U.S. government policies – support that is often strategically sheltered from strict multilateral trade disciplines. U.S. policies and systemic inequities have over time restricted the rights and ability of Black Americans to acquire or retain land for farming; Black farmers currently make up less than two percent of all U.S. farmers.120 Furthermore, policies and practices have been documented that further restricted the ability of Black farmers to access the government support that other farmers receive.121 Taken together, it appears that benefits and prosperity that U.S. farmers and agricultural producers enjoy from trade and attendant policies lack inclusivity and reflect significant disparities between communities. Thus, such factors must be revisited to promote economic equity.

“Some have criticized the globalization resulting in large part from U.S. trade policies of the past decades for a redistribution of wealth that places costs disproportionately on those that are socially and economically disadvantaged in other countries as well.122 The current application of U.S. trade policies has contributed to imbalanced economic benefits in developing countries and broader unrealized development goals. The disproportionate benefits for corporate entities over individuals and local communities have dramatically impacted the economies and demographics of some developing countries. The resulting job losses in those foreign nations have in many cases spurred mass forced migration.123 Similarly, U.S. preference programs have historically benefitted a small set of developing countries and have largely left the least developed countries behind.124 A thoughtful, probing re-examination of the modes and objectives of U.S. trade policy in light of their domestic and international effects is necessary now more than ever before. Only then can reforms and new approaches be adopted to produce a sustainable and inclusive prosperity that prioritizes meaningful economic benefits for individuals and communities, and others who have been left out, overlooked, and exploited. also

“106 Guided by a focus on the effect of the trade agreement on individuals, in 2019, House Democrats engaged in a direct negotiation with the Trump Administration to correct serious deficiencies in the Administration’s attempted renegotiation of the North American Free Trade Agreement (NAFTA). House Democrats required significant changes to strengthen the standards and enforceability of worker rights and environmental protections, and to ensure people’s timely access to affordable medicines. The changes secured a level of bipartisan, bicameral support that U.S. trade policy had not seen in nearly 40 years.

“107 Danyelle Solomon et al., Systematic Inequality and Economic Opportunity, CTR. FOR AM. PROGRESS (Aug. 7, 2019), https://www.americanprogress.org/issues/race/reports/2019/08/07/472910/systematic-inequality-economicopportunity/.

“108 Elizabeth Paton and Austin Ramzy, Coalition Brings Pressure to End Forced Uighur Labor, N.Y TIMES (July 23, 2020), https://www.nytimes.com/2020/07/23/fashion/uighur-forced-labor-cotton-fashion.html; see also Vicky Xiuzhong Xu et al, Uyghurs for Sale, AUSTRALIAN STRATEGIC POLICY INST. (Mar. 1, 2020),
https://www.aspi.org.au/report/uyghurs-sale.

“109 Mark Anner, Abandoned? The Impact of Covid-19 on Workers and Businesses at the Bottom of Global Garment Supply Chains, PENNSTATE CENTER FOR GLOBAL WORKERS’ RIGHTS (Mar. 27, 2020),
https://www.workersrights.org/wp-content/uploads/2020/03/Abandoned-Penn-State-WRC-Report-March-27-
2020.pdf; see also Who Will Bail Out the Workers That Make Our Clothes?, WORKER RIGHTS CONSORTIUM (Mar. 2020), https://www.workersrights.org/wp-content/uploads/2020/03/Who-Will-Bail-Out-the-Workers-March-2020.pdf.

“110 Traditional payment structures for apparel orders heavily favor global brands and retailers over suppliers and workers in developing countries. See, Garment Workers on Poverty Pay are left without Billions of Their Wages During Pandemic, CLEAN CLOTHES CAMPAIGN (Aug. 8, 2020), https://cleanclothes.org/news/2020/garmentworkers-on-poverty-pay-are-left-without-billions-of-their-wages-during-pandemic; My Children Don’t Have Food: What the Crisis Means for the People Who Make Collegiate Apparel , WORKER RIGHTS CONSORTIUM (June, 2020), https://www.workersrights.org/wp-content/uploads/2020/06/My-children-dont-have-food_June-2020.pdf.

“111 Kalkidan Legesse, Racism is at the Heart of Fast Fashion—It’s Time for Change, THE GUARDIAN (June 11,
2020), https://www.theguardian.com/global-development/2020/jun/11/racism-is-at-the-heart-of-fast-fashion-itstime-for-change.

“112 Robert E. Scott, Trading Away the Manufacturing Advantage, ECONOMIC POLICY INST. (Sep. 30, 2013),
https://files.epi.org/2013/trading-manufacturing-advantage-china-trade.pdf; Daniella Zessoules, Trade and Race: Effects of NAFTA 2.0 and Other Low-Road Approaches to Trade on Black Communities, CTR. FOR AM. PROGRESS (June 18, 2019), https://www.americanprogress.org/issues/economy/reports/2019/07/18/471198/trade-and-race/;
Gerald D. Taylor, Unmade In America: Industrial Flight and the Decline of Black Communities, ALLIANCE FOR AM. MANUFACTURING (October 2016), https://s3-us-west-2.amazonaws.com/aamweb/uploads/researchpdf/
UnmadeInAmerica.pdf.

“113 Offshoring Security: How Overseas Call Centers Threaten U.S. Jobs, Consumer Privacy, and Data Security,
COMMUNICATIONS WORKERS OF AM. (Oct. 2013), https://files.cwa-union.org/national/offshoring-security.pdf.

“114 Sandra Polaski et al., How Trade Policy Failed U.S. Workers—and How to Fix It, BOSTON UNIV. GLOBAL
DEVELOPMENT POLICY CTR. (Sep. 14, 2020), http://www.bu.edu/gdp/files/2020/09/How-Trade-Policy-Failed-USWorkers-and-How-to-Fix-it-FIN.pdf; David H. Autor, The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade, NAT’L BUREAU OF ECONOMIC RESEARCH (2016), https://www.nber.org/papers/w21906.pdf.

“115 Robert E. Scott, Trading Away the Manufacturing Advantage, ECONOMIC POLICY INST. (Sep. 30, 2013),
https://files.epi.org/2013/trading-manufacturing-advantage-china-trade.pdf; Daniella Zessoules, Trade and Race: Effects of NAFTA 2.0 and Other Low-Road Approaches to Trade on Black Communities, CTR. FOR AM. PROGRESS (June 18, 2019), https://www.americanprogress.org/issues/economy/reports/2019/07/18/471198/trade-and-race/.

“116 Eric D. Gould, Torn Apart? The Impact of Manufacturing Employment Decline on Black and White Americans, THE MIT PRESS J. (Mar. 6, 2020), https://www.mitpressjournals.org/doi/pdf/10.1162/rest_a_00918. See also Sandra Polaski et al., How Trade Policy Failed U.S. Workers—and How to Fix It, BOSTON UNIV. GLOBAL DEVELOPMENT POLICY CTR. (Sep. 14, 2020), http://www.bu.edu/gdp/files/2020/09/How-Trade-Policy-Failed-US-Workers-and-How-to-Fix-it-FIN.pdf.

“117 Id.; see also Andrea Flynn et al, Rewrite the Racial Rules: Building an Inclusive American Economy, ROOSEVELT INST. (June 2016), https://rooseveltinstitute.org/wp-content/uploads/2016/06/RI-RRT-Race-201606.pdf; Natalie Spievack, Can labor unions help close the black-white wage gap?, URBAN INST. (Feb. 1, 2019), https://www.urban.org/urban-wire/can-labor-unions-help-close-black-white-wage-gap.

“118 Fracaso: NAFTA’s Disproportionate Damage to U.S. Latino and Mexican Working People , PUBLIC CITIZEN
(Dec. 3, 2018), https://www.citizen.org/article/fracaso-naftas-disproportionate-damage-to-u-s-latino-and-mexicanworking-people/.

“119 Trade Discrimination: The Disproportionate, Underreported Damage to U.S. Black and Latino Workers from U.S. Trade Policies, PUBLIC CITIZEN (Jan. 7, 2021), https://www.citizen.org/wp-content/uploads/PC_Trade-
Discrimination-Report_1124.pdf.

“120 Khalil G. Muhammad, The Sugar that Saturates the American Diet has a barbaric history and as the White Gold that Fueled Slavery, NY. TIMES (Aug. 14, 2019), https://www.nytimes.com/interactive/2019/08/14/magazine/sugarslave-trade-slavery.html.

“121 Nathan Rosenberg, USDA Gave Almost 100 Perfect of Trump’s Trade War Bailout to White Farmers, THE
COUNTER (July 29, 2019), https://thecounter.org/usda-trump-trade-war-bailout-white-farmers-race/ ; Paola Rosa-Aquino, Nearly 100 Percent of Trump Funds Designed to Help Farmers Went to White Farmers, GRIST (Aug. 1, 2019), https://grist.org/article/trump-trade-war-usda-farmer-subsidy-race-disparity/; and Chantal Thomas, Income Inequality and International Economic Law: From Flint, Michigan to the Doha Round, and Back, CORNELL LEGAL STUDIES RESEARCH (2019).

“122 Chantal Thomas, Income Inequality and International Economic Law: From Flint, Michigan to the Doha Round, and Back, CORNELL LEGAL STUDIES RESEARCH (2019).

“123 Both NAFTA and the U.S. Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) have
been criticized for contributing to increased migration of Mexican and Central American workers, respectively, into the U.S. See Andrew Chatzky, et. al., NAFTA and the USCMA: Weighing the Impact of North American Trade, COUNCIL ON FOREIGN RELATIONS (July 1, 2020), https://www.cfr.org/backgrounder/naftas-economic-impact; see also Mark Weisbrot et. al., Did NAFTA Help Mexico? An Assessment After 20 Years, CTR. FOR ECONOMIC & POLICY RESEARCH (Feb. 2014), https://cepr.net/report/nafta-20-years/; NAFTA at 20, AFL-CIO (Mar. 27, 2014), https://aflcio.org/reports/nafta-20.

“124 Generalized System of Preferences (GSP): Overview and Issues for Congress RL33663, CONG. RESEARCH SERV. (2019).”

Inserted material in boxes in report:

“We should be asking: why are Black and Latino people less likely to be working from home; less likely to be insured; less likely to live in unpolluted neighborhoods? The answer is racist policy… Will policymakers turn away as people of color suffer in their bedrooms, suffer on their hospital beds, suffer watching their loved ones lowered into their graves –all the while blaming them for their own suffering –all the while adding to the racist history of their suffering? Or will policymakers be antiracist? Meaning no longer blaming people of color for disparities. And focused on pushing policy that leads to equity and justice for all. Testimony of Dr. Ibram X Kendi, Hearing on The Disproportionate Impact of COVID-19 on Communities of Color, May 2020.”

“So climate change will lead to increased droughts, more frequent droughts. But, at the same time, it will also change precipitation patterns and lead to heavier downpours. The Great Plains, which are the breadbasket of America, are projected to experience drought conditions unprecedented in the last millennium. We expect to see the ranges of certain pests expanding, and changes in the growing seasons. And all of these things could have implications for agriculture and our food security. Testimony of Dr. Katherine Marvel, Hearing on The Economic and Health Consequences of Climate Change, May 2019.”

Conclusion

The United States is eight days from a new Administration. While trade is not the topic of first importance to the incoming Biden team, the desire to build back better and more equitably will have effects on Executive actions in all areas, including trade, and will over the next two years at least with the Democrats in charge of both the House and the Senate include legislative discussions of issues of health and economic equity that may have important trade policy implications as well.


The Incoming Biden Administration and International Trade — Katherine Tai, nominee for U.S. Trade Representative

With the Trump Administration’s term down to less than 40 days, many trading partners are understandably wondering how the incoming Biden Administration will handle the many international trade issues that are pending at the moment. President-elect Biden has indicated his Administration will reengage with allies to address many issues, rejoin the Paris climate agreement and the WHO. On trade, President-elect Biden has indicated the need to work to get past the COVID-19 pandemic and the need to ensure fair trade, noting challenges with China in particular.

On December 10, President-elect Biden announced that he was nominating Katherine Tai to be U.S. Trade Representative. Ms. Tai has a distinguished career, including time at USTR as Chief Counsel for China Trade Enforcement and more recently as Chief Trade Counsel to the U.S. House Ways and Means Committee. President-elect Biden indicated that Ms. Tai was a “trusted trade expert” and had spent her career “leveling the playing field” for business and labor. Ms. Tai has received strong support from both business and labor. President-elect Biden indicated that a key priority in his Administration would be China enforcement and noted Ms. Tai’s deep experience in pursuing enforcement actions against China. President-elect Biden stated that trade is a critical pillar in building the economy back better. And he noted that Ms. Tai would be able to help ensure that trade helped address the challenges from climate change. The information on Ms. Tai from the President-elect’s website is embedded below.

Katherine-Tai-United-States-Trade-Representative-_-President-Elect-Joe-Biden

Ms. Tai’s comments after being introduced by President-elect Biden included a review of her heritage and the following statement about the role of trade in an economy:

“Trade is like any other tool in our domestic or foreign policies. It is not an end in itself. It is a means to create new hope and opportunity for people. And it only succeeds when the humanity and dignity of every American, and of all people, lie at the heart of our approach.”

As noted by the Chairman of the U.S. House and Ways Committee Richard E. Neal (D-MA) in his press release on Ms. Tai’s nomination,

“The U.S.-Mexico-Canada Agreement (USMCA) was a tremendous bipartisan accomplishment that has set a new standard for all future trade deals our nation pursues. That landmark agreement includes strengthened worker and environmental protections, rules to promote Americans’ access to life-saving medicines, and new and enhanced enforcement mechanisms.

“As House Democrats undertook negotiations with the Trump Administration regarding the deal’s implementing legislation last year ,unbeknownst to us, the future USTR nominee was serving at the heart of the process. With smarts, skill, and perseverance, Katherine Tai demonstrated how trade can be used as a force for good that uplifts people and creates opportunity.”

HWMC Press Release, Dec. 11, 2020, FOLLOWING PRESIDENT-ELECT BIDEN’S INTRODUCTION OF KATHERINE TAI AS USTR NOMINEE, NEAL EMPHASIZES OPPORTUNITY TO BUILD ONSUCCESS OF THE USMCA, https://waysandmeans.house.gov/media-center/press-releases/following-president-elect-biden-s-introduction-katherine-tai-ustr.

There have been many press releases from groups supporting Katherine Tai’s nomination from business, labor, environmental groups and others. See, e.g., American Farm Bureau Federation news, December 10, 2020, AFBF Welcomes Nomination of Katherine Tai for U.S. Trade Representative, https://www.fb.org/newsroom/afbf-welcomes-nomination-of-katherine-tai-for-u.s.-trade-representative; Aluminum Association, December 11, 2020, Aluminum Association Congratulates USTR Nominee Katherine Tai, https://www.aluminum.org/news/aluminum-association-congratulates-ustr-nominee-katherine-tai; American Apparel & Footwear Association, December 10, 2020, AAFA Welcomes Nomination of Katherine Tai for USTR, https://www.aafaglobal.org/AAFA/AAFA_News/2020_Press_Releases/AAFA_Welcomes_Nomination_Katherine_Tai_USTR.aspx; Sierra Club, December 10, 2020, Sierra Club Applauds Katherine Tai’s Nomination as U.S. Trade Representative, https://www.sierraclub.org/press-releases/2020/12/sierra-club-applauds-katherine-tai-s-nomination-us-trade-representative; AFL-CIO, December 10, 2020, Biden’s USTR Pick Shows Commitment to America’s Working Families, https://aflcio.org/press/releases/bidens-ustr-pick-shows-commitment-americas-working-families.

Some of the trade issues that will confront the next USTR

The U.S. always has a full trade agenda facing it. That includes ongoing negotiations such as the U.S.-U.K. FTA, U.S.=Kenya FTA, whether negotiations will proceed on other FTAs or talks where there has been a Phase 1 (U.S.-Japan Phase 1) or limited initial agreements (U.S.-Ecuador Agreement, U.S.-Brazil Agreement) and remaining issues with China following the 301 investigation, imposition of tariffs and U.S.-China Phase 1 Agreement. With Trade Promotion Authority (TPA) terminating at the end of June, the Biden Administration will need to decide whether to seek renewed Trade Promotion Authority. If not, focus at USTR will likely be on concluding the U.S.-U.K. agreement by the end of April, the only FTA likely to be concluded within the current TPA’s timeline.

Other negotiating issues include the pending multilateral and plurilateral issues at the WTO (fisheries subsidies and Joint Statement Initiatives like digital trade, MSMEs, etc., and the broader WTO reform needs (Appellate Body, industrial subsidies, improved transparency, trade and environment, and more). The Biden Administration may also want a broader outreach to Pacific Ocean countries (CPTPP countries and others) and could have an interest in achieving the vision of George W.H. Bush’s FTA of the Americas (although Democratic focus on human rights would make such an effort unlikely based on HWMC Democratic response to the initial U.S.-Brazil agreement earlier this year).

On enforcement, the Administration will have work on enforcement issues with major trading partners in the new USMCA (particularly on labor with Mexico but also dairy with Canada).

The China relationship is obviously an important one for the U.S., and there remain a host of concerns and unfinished business in negotiating resolution of the intellectual property issues with China flowing from the 301 investigation, as well as whether to maintain, reduce or eliminate tariffs on Chinese imports imposed after the 301 investigation. One can expect a new Administration will engage on many levels with China. While it is unlikely that the 301 tariffs will be lifted quickly, there could be more robust exclusion procedures at USTR and renewed interest by the U.S. in doing a phase 2 negotiation to resolve the other IP issues. One can expect the reestablishment of more formal high level periodic engagement, and possible pursuit of new disputes at the WTO on issues of concern. As President-elect Biden has said, China enforcement actions are a key priority for his Administration.

With the EU, there are existing major irritants, including the Boeing-Airbus dispute and WTO authorized retaliations, the widespread move in Europe to taxing digital services, and the Section 232 tariffs on steel and aluminum to name just three. While the Trump Administration has started negotiations with the EU on resolving the aircraft dispute, it will remain as an item for hopefully early resolution in the Biden presidency. Similarly, the digital services tax issue has been subject to one 301 investigation (France) with many others ongoing and with OECD talks continuing to find agreement on such taxes. One can expect likely fireworks in 2021 as taxes on digital services start to be imposed at least in one country. Similarly, it is unlikely that the U.S. will dismantle the 232 tariffs on steel and aluminum prior to panel reports on both cases challenging the 232 actions and the U.S. cases challenging the response by a number of trading partners. While there are irritants that need to be addressed, there are also areas of potential opportunity whether bilaterally or multilaterally. Presumably, the U.S. will be looking at steps it can take to advance the objectives of the Paris climate agreement and may find common cause with the EU on various issues. Similarly, the U.S. and EU have many of the same concerns about the ineffectiveness of existing WTO rules to address the distortions flowing from the Chinese system. Greater cooperation there is also needed and likely. While the EU and the Trump Administration had agreed early on to a trade agreement on industrial goods (excluding agriculture and other issues), such an agreement was never going to be acceptable to the U.S. Congress. It is unclear if the Biden Administration will pursue a trade agreement with the EU in the coming years or limit engagement to finding areas of cooperation on new rules and resolving existing friction issues.

Other enforcement issues will center of issues from existing FTAs, from WTO agreements and the ongoing 301 investigations on taxes on digital services other than EU countries (EU addressed above). How much activity will be placed on WTO disputes will depend on whether the U.S. pursues restoration of the Appellate Body (albeit limiting the AB’s role and correcting the problems identified by the U.S. over the last twenty-years and documented by the Trump Administration). There are, of course, a number of pending disputes that the U.S. is a party to at the WTO, including the cases filed by trading partners against the U.S.’s use of Section 232 of the Trade Expansion Act of 1962, as amended to impose tariffs on steel and aluminum imports for national security reasons and the cases brought by the United States against many of those countries who imposed tariffs on U.S. exports usually on the theory that 232 tariffs were safeguard tariffs. Panel resolution of all of these cases is expected in the first quarter of 2021.

While Congress is considering extending and/or modifying the Generalized System of Preference program which expires this month, the Biden Administration is likely to use the GSP eligibility for major participants to ensure statutory criteria for eligibility are met. Thus, the Trump Administration approach will likely be continued but refocused on Democratic concerns particularly if the GSP law is modified as proposed by House Democrats. The U.S. has been pursuing improved bilateral trade relations with India, as an example, and has used GSP eligibility as a lever for engagement. India is unlikely to do a broad trade agreement with the U.S., and it is not expected that the Biden Administration will pursue piecemeal agreements as was done with Japan.

On the World Trade Organization, the Biden Administration will have a potentially full docket but some important issues for early consideration. The first issue where an early action is important is who should be the next Director-General. The Trump Administration has indicated it did not agree to join a consensus on the candidate for the Director-General position who is the candidate with broadest and deepest support, Dr. Ngozi Okonjo-Iweala of Nigeria. Procedures adopted by the General Council in 2002 for selecting Directors-General was followed this year. The Chair of the General Council indicated he was prepared to recommend Dr. Okonjo to the General Council back in early November but has not done so in light of the U.S. position. Both Dr. Okonjo and Minister Yoo of Korea are well qualified candidates. While the Trump Administration may prefer Minister Yoo, in this writer’s view, either candidate will do an excellent job. U.S. refusal to join a consensus is contrary to procedures the U.S. and others agreed to. Because of the U.S. position and the failure of the Korean candidate to withdraw from the process, the WTO continues to operate without a new Director-General. The incoming Biden Administration should communicate with Korea that it intends to indicate the U.S. will join the consensus and then notify the Chair of the General Council. This can and should be done as quickly as possible by the Biden Administration to permit the WTO to get a new Director-General in place early in 2021.

The U.S. has also blocked the start of the process for selecting new Appellate Body members over the last several years because of serious concerns about the operation of the Appellate Body. The Appellate Body currently has no members and ceased being able to hear new appeals after December 10, 2019. During the Trump Administration, the U.S. laid out in great detail the problems of concern and earlier this year released a report on the Appellate Body that summarizes the concerns. While trading partners have been told about U.S. concerns over the last twenty years, there was no serious effort to address U.S. concerns until the operation of the Appellate Body was at risk. The process that was undertaken last year to look at U.S. concerns addressed some but not all issues raised by the U.S. The draft General Council decision prepared by the facilitator, Amb. David Walker of New Zealand,. was found inadequate by the U.S. Restoration of a two stage dispute settlement system remains of key importance to most Members, though not of great concern to the Trump Administration based on recent comments by USTR Robert Lighthizer (reported to have said that nobody cares about the demise of the Appellate Body). See Inside U.S. Trade’s World Trade Online, December 10, 2020, Lighthizer: ‘No one’s really missed’ the Appellate Body, https://insidetrade.com/trade/lighthizer-%E2%80%98no-one%E2%80%99s-really-missed%E2%80%99-appellate-body. The U.S. has been correct in my view in insisting that the problems flagged with the WTO Appellate Body’s operation need to be fixed before the U.S. releases its blockage of appointment of new members. What has been lacking to date has been a specific set of proposals from the U.S. that would address their concerns and rebalance rights and obligations. While it will likely take the Biden Administration time to determine how to proceed on the Appellate Body issue, the U.S. can and should indicate that it will be providing its proposals for reform of the Appellate Body hopefully during the first half of 2020. Key among the needed changes are clarifications of Articles 3.2 and 19.2 of the DSU to make clear that (1) filling gaps, (2) construing silence and (3) selecting one meaning from ambiguous provisions constitutes the creation of rights or obligations contrary to the limits imposed by Art. 3.2 and 19.2 There will also be a need to address past “overreach” situations either by declaring the challenged decisions not valid or by having the issues reexamined by a reconstituted Appellate Body under the clarified provisions of Article 3.2 and 19.2 or through changes to a range of Agreements. In a WITA webinar on Dec. 11, five Geneva-based Ambassadors for Ottawa Group WTO Members addressed a range of issues. WITA, Dec. 11, 2020, Ottawa Group Ambassadors on the WTO, https://www.wita.org/event-videos/ottawa-group-ambassadors-wto/. Canada’s Ambassador to the WTO, H.E. Stephen de Boer, indicated that it would be helpful if the incoming Biden Administration would signal its intent to engage on the Appellate Body issue, realizing that it would take time before the Administration had its team in place, etc.

Other early issues include the modification to the U.S. Annex 1 commitments to the Government Procurement Agreement to address essential medicines and other medical goods and the need for compensation or likely retaliation if the modifications as proposed last month by the Trump Administration go forward.

There are a host of disputes that will be coming out of the panel stage in the first quarter of 2021 in all likelihood that will also require attention. And, of course, the U.S. could work to bring new disputes or be subject to new requests for consultations.

An additional issue needing early attention is the proposed waiver of TRIPS obligations to address the COVID-19 pandemic put forward by India, South Africa and others that the U.S. has opposed on the basis of existing flexibilities within the TRIPS Agreement. But activities will be going on within the TRIPS Council in the first quarter.

The negotiating agenda at the WTO was summarized above. Besides fisheries subsidies (multilateral) and the Joint Statement Initiatives (plurilateral), there are a number of issues from earlier Ministerials that are still looking for resolution. The 12th Ministerial is likely to be held in the summer of 2021 in Kazakhstan and there are hopes for deliverables by then. This will require continued U.S. active engagement in the various fora.

Reform of the WTO (besides the Appellate Body) is an important objective with no clearly defined areas at this point but with many ideas floated by the U.S. and other delegations. The Trump Administration did an effective job of identifying what it considered to be fundamental problems or failures of the existing system including the U.S. view that WTO rules which are premised on market economies don’t adequately address the distortions created by nonmarket economies like China. The Trump Administration believes convergence of economic systems to market oriented ones is the key to a viable WTO. By contrast, China’s desire and belief is that the WTO has no role in addressing different economic systems, such that coexistence of systems is all that is required under a common set of rules. The Trump Administration also has flagged the failure of many Members to provide complete and timely notifications, particularly in areas like subsidies. The U.S. has similarly challenged the notion that special and differential treatment should be available to any Member based on self-selection as a developing country. The U.S. has pointed to the dramatic economic changes for many countries over the 25 years of the WTO’s existence and believes Members should be disqualified from special and differential treatment if they fit certain factual criteria. The U.S. has also raised the problem of tariff bindings not reflecting current economic conditions for many countries and with no tariff reductions occurring by countries with higher tariff rates.

For the Biden Administration, the challenge will be whether it works with other Members to develop additional rules that can address identifiable distortions (e.g., the effort underway with Japan and the EU on reviewing possible changes to the disciplines on industrial subsidies) and find practical solutions to other identified problems or chooses to pursue the larger-picture issues on which movement will be more challenging or impossible.

Not included in the above but obviously of importance to the Biden Administration will be how to advance trade and environment issues of importance to the U.S. and others. The environmental goods agreement discussions which broke down in 2016 is but one example. Fisheries subsidies is a negotiation that has gone on for nineteen years and should have been completed this year. Other environmental issues are being explored. Over the last 25 years, there is a great deal more interest among WTO Members of different economic levels to address the intersection of trade and environment to achieve sustainable development and for some island nations to survive at all. As reviewed in a prior post, the Biden Administration will likely be looking at ways to work with others to advance environmental objectives at the WTO. See November 17, 2020, WTO initiatives on trade and the environment — likely to receive a warm welcome under a Biden Administration, https://currentthoughtsontrade.com/2020/11/17/wto-initiatives-on-trade-and-the-environment-likely-to-receive-a-warm-welcome-under-a-biden-administration/. Short term, just the fishery subsidies negotiations are key to conclude.

While there is certainly more on the USTR plate than what is reviewed above, it should be clear that the incoming Biden Administration and the likely new USTR, Katherine Tai, will have some early important issues confronting them as they look to get past the pandemic and build back better. Here is wishing them well.