On February 25, the Senate Finance Committee held a confirmation hearing for the nominee for the U.S. Trade Representative (USTR), Katherine Tai. Tai’s strong performance in the hearing demonstrated her poise and a depth of knowledge on the issues. She was well-prepared for Senators’ questions and is likely to receive a swift confirmation in the Senate within the next couple weeks.

In her remarks, Tai spoke of the worker-centric trade policy of the Biden Administration, and emphasized that U.S. trade policy going forward would go beyond tariff reduction and removal of trade barriers. She said trade policy had fallen into a pattern where manufacturers or farmers felt they were being sacrificed for the good of another group. Tai said she would endeavor to get out of this pattern to a place where stakeholders were not pit against one another. Rather than rising standards for workers and the environment, we were witnessing a race to the bottom. The forced labor issue was the crudest example of the race to the bottom. All of this would inform the United States’ re-think of trade policy strategy, and how it could be conducted in a way that lifted all boats, not just increasing the size of the pie.

Tai was not specific about the details of initiatives she would pursue as USTR aside from the high-level Biden administration priorities of resiliency in supply chains for critical and essential goods, multilateral engagement, reform at the World Trade Organization, and climate and environmental policy. However Tai and the committee senators were all in agreements that enforcement of USMCA should be a top priority for USTR.

Chairman Ron Wyden (D-OR) said in his opening remarks that the United States “need[ed] a full blockade against other nations’ discriminatory policies aimed at knifing industries with taxes where America leads” referencing digital goods and services and illicit timber trade, and that implementation and enforcement of the USMCA would be critical to its success.

Ranking Member Mike Crapo (R-ID) focused his opening remarks on market access for agricultural goods and IP protection. Crapo said he was concerned that the Biden administration had suggested that the President would not sign any new trade agreements until he saw his domestic priorities achieved. He conveyed to Tai that trade policy was a domestic priority for American workers, and that the UK and China were moving forward with their own trade agreements. Crapo stated, “If the Biden Administration wants a ‘worker-centered’ trade policy as it claims it does, then our USTR should ensure that the international trading regime strongly reflects American values rather than those of China’s government.”

Tai will likely need further consultation with President Biden and other senior White House officials before she is able to elaborate on a clear and detailed vision for U.S. trade policy. Given her previous role working in Congress for the House Ways and Means Committee and her demonstrably strong relationships with Senators and Members of Congress, Congressional consultation and outreach on trade appears likely to be a major part of her role within the Administration.

Issue Areas

Tariffs

  • Tai did not face pressure from the senators for the Biden administration to lift tariffs imposed by the Trump administration. She did affirm that Trump-era tariffs (Section 232, 301, Boeing/Airbus) would remain tools in the U.S. government’s trade policy toolbox. Tai said she was aware of the disruptions tariffs had caused and would address them as appropriate after a review. She stated the need for an effective solution that took into consideration the whole slew of policy tools.
  • On the tariff exclusion process, Tai said she was aware of the many concerns that had arisen with the process. She would seek to address transparency, fairness, and speed in the tariff exclusion determination process.

China

  • Tai said the Biden Administration was still in the process of developing a new strategy, which would incorporate economic, trade, environmental and national security elements. She did maintain that China would be held to its commitments under the Phase One trade agreement.
  • Tai said she would seek to hold China accountable where China had clearly agreed to certain rules (such as WTO rules). In grey areas where there are no rules yet, she said the United States could create new rules, and/or consider other opportunities to think strategically on how to address the issues through working with allies.
  • Addressing China’s theft of intellectual property would require working with others by reaching out and having sometimes difficult conversations on how to capitalize on shared interests to make more effective policies together.
  • In his remarks, Sen. Mark Warner (D-VA) said trade negotiations had to protect the security of digital infrastructure, and that the United States should consider asking trading partners to prohibit certain Chinese technologies. “If we keep Huawei out of American domestic markets but it gets the rest of the world, we’re not going to be successful.” Tai agreed that the U.S. government should be “laser-focused” on this issue.
  • Rob Portman (R-OH) asked if Tai would commit to a top-to-bottom review of China policy at USTR as the agency did sixteen years ago when he was the USTR, and to provide the report to the committee. Tai responded that Biden was committed to an overall review of China, and USTR would be part of that review.

Supply Chains

  • Several senators raised the semiconductor supply chain issue, and Chairman Wyden said it would be a top issue for the committee.
  • Tai said that the assumptions supply chains were based on sought to maximize efficiency without regard for resiliency. Trade policy needed to be re-thought with resiliency issues in mind.
  • Tai would look to bring USTR’s talents and expertise to bear to review and craft a strategy on supply chains and supply chain resilience, referring to the Biden Administration executive order on supply chains from the previous day.
  • She said the Chinese were not shy about their ambitions, and that the United States could not compete with China by acting like China. The United States needed to conduct trade policy which was “true to ourselves and our traditions” and “more strategic, knowing the quantity and the strategy and ambition that we are up against.”

Bilateral and Multilateral Trade Agreements

  • Tai said implementation and enforcement of USMCA and all other existing U.S. trade agreements would be her priority. The US-UK FTA and other trade negotiations launched under the Trump Administration would need to be reviewed and objectives potentially updated. The negotiating objectives from the US-UK agreement, for example, were over two years old now, did not take into consideration the completion of Brexit or lessons learned from the pandemic.
  • Tai said the formula for TPP—the United States engaging robustly with economies with whom the United States had shared economic and strategic interests in Asia—remained a “solid equation.” But in 2021, Tai said the world looked very different from how it did in 2015 and 2016. She would have to review the CPTPP and work with the administration and Congress before considering any efforts to join the agreement.
  • Neither Tai not the Senators directly raised the issue of the lapsing of Trade Promotion Authority on July 1, 2021.

Environment

  • Tai believes trade policy has a lot to contribute to the climate effort. It would entail working with other countries, in cooperative and sometimes contentious ways. She said the rest of the world was coming up with its own climate solutions, and as other countries begin to regulate in this area, climate and trade policy would become a part of our competitive trade landscape.

Digital Services Tax

  • Tai said the Biden administration was committed to cooperative efforts at the OECD and G20 to address this issue. Tai acknowledged this issue would require close coordination between USTR and the Treasury Department.

World Trade Organization (WTO)

  • Tai stated that WTO reform is needed, and tough and constructive conversations needed to happen in Geneva. What is the value of the WTO is to its members? Is it accomplishing the goals that its founders and members expect of it? How does the WTO rise to the challenges of today’s world?

General System of Preferences (GSP)

  • When asked about India and GSP/market access, Tai said she would work with Congress on GSP renewal and welcome dialogue with the Indians but did not commit to any specific action or timeline.

Investor-State Dispute Settlement (ISDS)

  • Sheldon Whitehouse (D-RI) said the United States had “bullied” smaller countries like Togo through the ISDS process, calling actions by the tobacco industry there through ISDS as “disgraceful.” Tai said President Biden had articulated his opposition to ISDS because of its chilling effects for policymaking.

USTR Process

  • Elizabeth Warren (D-MA) said U.S. trade negotiations were a “rigged process” that produced “rigged outcomes” that stacked the deck against the interests of American families. Warren sought to have more representatives from labor on USTR trade advisory committees.
  • Warren was also concerned about transparency in the negotiation process and asked for trade agreement draft text to be shared with the public as least two months before Congress was asked to fast-track approval.
  • Tai was unable to agree to commit to these asks, but said she would review the advisory committee composition, and seek to bring transparency and connecting with the American people on trade to her work on the daily basis.
  • Tai committed to Sen. Pat Toomey (R-PA) she would follow the procedures and timelines under Trade Promotion Authority, and appear for a mock mark-up should a trade agreement need to be reviewed by Congress. However, she could not commit to Sen. Toomey that her aim in trade negotiations with other developed nations would be “zero tariffs, zero quotas, zero obstacles” to the exchange of goods. Tai said she may have agreed with that five or ten years ago, but that trade policies today needed to have a more nuanced outlook that considered lessons learned over the past few years.
  • Bob Menendez (D-NJ) said USTR was an agency that did not have an inspector general (IG). Tai said she was unaware of the legalities around having an IG in an agency under the Executive Office of the President, but that she was committed to accountability at USTR.
  • Tai committed to working with Ranking Member Crapo on the issue of filling the Chief Innovation IP Coordinator position at USTR.