Tai Defends Trade Approach over Free Trade Agreements

US Trade Representative Katherine Tai defended the Administration trade policy yesterday against criticisms that the White House is failing to open new markets by eschewing traditional comprehensive free trade agreements.

Instead, the Administration’s focus on a worker-centered trade policy and investment in advanced manufacturing and infrastructure to create new jobs is a better fit for today’s world, Ms. Tai told the audience at the American University Washington College of Law.

“We are investing in American communities,” she said. “We are writing a new story on trade, one that makes us more resilient, our economy more sustainable, and our results more inclusive.”

“Whether you have a college degree or not, whether you have five employees or five hundred, whether you are a small dairy farmer in Wisconsin or a steelworker in Pennsylvania – trade should work for more Americans and help build the economy from the bottom up and the middle out,” she continued. “This is our worker-centered approach to trade, and it is at the heart of everything we are doing.”

Costs of Traditional Trade
The traditional approach to trade, which prioritized aggressive liberalization and tariff

elimination, had significant benefits in terms of increased economic activity and reduced poverty in some regions, she said.

“But we must also acknowledge that the focus on maximum efficiency above all else had significant costs and side effects. Prosperity without inclusiveness contributed to rising inequality and wealth concentration.” Meanwhile, the richest got even richer while jobs moved overseas.

“All of this has fueled resentment and mistrust in global institutions and the international economic system here in the United States and elsewhere,” Ms. Tai said. “And this version of globalization – focused on low costs and weak regulation – is responsible for how economies like the People’s Republic of China came to control a number of key industries.”

The China Problem
Even after 20 years of World Trade Organization members, Beijing has embraced a state-led, non-market economic model and “continues to use unfair, distortive trade policies and practices in pursuit of harmful and anticompetitive industrial policy objectives.”

“It is clear today – even to many who are accustomed to a more traditional approach to trade policy – that we must adapt to the realities of today’s global economy,” she said. “And in this new phase, we must address the PRC’s economic mercantilism – to ensure, as the President said in the State of the Union, that the United States is in the strongest position to compete with the PRC, or anyone else in the world.”

A key part of the Administration’s new trade policy is strengthening cooperation with like-minded economies, according to the Ambassador.

“With that goal in mind, we are pursuing new and innovative initiatives with key partners around the world,” she said. She cited the Global Arrangement on Sustainable Steel and Aluminum and the Trade and Technology Council agreement with the European Union as examples of these initiatives.

In place of focusing on tariff cuts, the Administration sees greater benefit in tacking technical barrier to trade that keep US products out of foreign markets. the Indo-Pacific Economic Framework is doing away with these kinds of barriers. “The IPEF is not just any traditional trade deal – it is our vision for how countries can collaborate to deliver real opportunities for our people,” she said.

“We’re looking at building on outcomes,” Ms. Tai commented in response to a question aboutthe IPEF.