On October 4, 2021, Ambassador Katherine Tai, the United States Trade Representative, addressed the state of U.S.- China trade relations and the upcoming plans for the Biden Administration to improve foreign trade policy. Since taking office in January, the Administration has spent time reviewing the trade policies put in place under the Trump Administration. There has been little movement until now as to the stance the Biden Administration would take, which created uncertainty regarding U.S. trade policy with China. Speculation grew as many questioned what would happen with the tariffs imposed on Chinese imports (under Section 301), how the administration would address the shortcomings of the “Phase 1” deal, and whether the product exclusion process would be re-instated.
Ambassador Tai’s announcement confirmed that the Biden administration plans to have direct communication with China to re-enforce the Phase 1 deal.
In her announcement, Ambassador Tai explained the history of failed attempts at a bilateral agreement with China and explained that this ultimately led to the U.S. taking a unilateral approach to trade with China by instituting the Section 301 tariffs in 2018. She emphasized that the U.S. is open to exploring all options and tools to enforce meaningful trade reform moving forward, but that a first step would be to hold China accountable for the commitments that it made to settle the Section 301 trade dispute. It is important to note that negotiations have just now re-commenced and that there is no concrete action that the U.S. has said it will take; therefore, any speculation in the media about increases in tariffs, any retaliatory action, etc. are just that – speculation. Husch Blackwell is monitoring these events and will provide regular updates.
The Administration plans to explore a targeted Section 301 exclusion process to provide tariff relief.
Ambassador Tai indicated that part of the next steps would be to consider new exclusion processes and other trade remedies to strengthen American competitiveness. In particular, USTR announced on October 5, 2021, that it is opening up an opportunity to comment on new exclusions for previously excluded items where the exclusions had expired. Comments can be filed between October 12, 2021 and December 1, 2021. Certain factors will be considered by USTR in deciding whether to reinstate the exclusion, such as:
-The product’s availability from other sources in the United States or other countries.
-Supply chain changes that have impacted certain products or industries since 2018.
-What efforts have been made by the importer since 2018 to obtain the product from the U.S. or other third countries.
-Capacity to produce the product domestically in the U.S.
-Whether any economic harm may result from reinstating the exclusion either directly to businesses, employers, or supply chains, and the impact of the exclusion overall.
There are ongoing discussions on opening the exclusion process to additional products, but any process for such exclusions has not yet been announced.
The Administration intends to address broader policy concerns.
A source of concern among American workers for years has been China’s use of subsidies and other non-market trade practices that create unfair competitive advantages. Ambassador Tai pointed out the impact of China’s harmful practices in the steel, agriculture, solar, and semiconductor industries, to name a few. Within the steel industry in particular, it was noted that China’s monthly production of steel exceeds the amount of steel produced in the U.S. for an entire year. In the solar supply chain industry, the Ambassador noted that China’s practices have led to it dominating 80% of global production in that arena. To address this, the Biden Administration plans to address issues such as overcapacity and create additional opportunities to discuss issues that were not included in the previous agreement. If the U.S. and China cannot reach some resolution, it could mean new trade measures to address these concerns in the future. For now, the Administration is focused on working with its allies and collaborating with the G7, G20, and the WTO.
Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.
Jeffrey Neeley is a Washington-based partner with the law firm Husch Blackwell. He leads the firm’s International Trade Remedies team.
Jasmine Martel is an attorney in Husch Blackwell’s Houston office.
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