USTR Nominee Says Solving Airbus Dispute, Enforcing Labor in USMCA Top Priorities

U.S. trade representative nominee Katherine Tai said that despite the president's prioritizing of the domestic economy, “I don't expect, if confirmed, to be put on the back burner at all.” Tai, a veteran of the House Ways and Means Committee trade staff, faced largely friendly questioning over a more-than-three-hour hearing in the Senate Finance Committee on Feb. 25.

As is common with executive branch nominees, she more often promised to cooperate with senators on their concerns than she took specific positions. But she did say that using the rapid response mechanism of USMCA over Mexican labor issues would be a top priority, in response to a question from Committee Chairman Ron Wyden, D-Ore., the co-author of the mechanism. The other co-author, Sen. Sherrod Brown, D-Ohio, asked her if she would use the mechanism to the maximum extent possible, and she said yes.

Tai also committed to making negotiations to solve the Airbus-Boeing dispute a top priority. Responding to Sen. Maria Cantwell, D-Wash., she said, “It is arguably one of the disputes that started to break the WTO dispute settlement system. If confirmed, I would very much be interested in figuring out, pardon the pun, how to land this particular plane because it has been going on for a very long time.”

Sen. Bob Menendez, D-N.J., also asked about the dispute, because, he told Tai, he's hearing a lot from food importers and restaurants who are being hurt by 25% tariffs on wines, cheeses and other foodstuffs, which he noted have nothing to do with airplanes. “I know the disruption and the pain that these particular tariffs are imposing on the affected stakeholders,” Tai said. “I also want to acknowledge that this is part and parcel of the long-standing aircraft dispute between the U.S. and [European Union] and, in some ways, this is the way the WTO system is supposed to work, you inflict pain on each other stakeholders to try to motivate each other to come to a resolution.” She said she'd like to find ways to figure out that resolution, so the tariffs can be lifted.

No senator asked if the administration wants to revise or remove the most significant tariffs of the last few years, the Section 301 tariffs on China. But Sen. James Lankford, R-Okla., asked her how she would treat the Section 301 exclusion process. “I know the 301 tariffs have touched directly a lot of people, and have disrupted a lot of people’s lives and livelihoods,” she said, and she said she's also aware that companies have many concerns with the exclusion process. She said it's very high on her list, to assess the process in place for the exclusions, and to make sure it's transparent, predictable, and offers due process.

Lankford urged her to improve the speed of decisions, and not to let exclusions expire after one year. He said companies can't plan that way.

She was also asked about Section 232 tariffs on steel and aluminum, which fall under Commerce's purview, but she said she would hope to work closely with the department on what to do about these tariffs.

“I also want to say that with respect to tariffs that the tariffs are a legitimate tool in the trade toolbox,” particularly for trade remedies. “Having said that, I think that with respect to the 232 tariffs on steel and aluminum that you mentioned, we have to acknowledge that we have, overall, very significant global marketplace problem in the steel and aluminum markets that are driven primarily by China's overcapacity that it's built in production of these materials, but it's not, it's not just a Chinese problem.” She said there may need to be a slew of tools to solve that problem.

Sen. Todd Young, R-Ind., asked her directly if former USTR Robert Lighthizer had the right approach in his efforts to get more companies to set up manufacturing in the U.S.

“There’s been a lot of disruption and consternation that have accompanied some of those policies,” she said diplomatically, as she praised the hard work that went into the Section 301 report laying out the scope of the problems with China's trade abuses. “I want to accomplish similar goals in a more effective process-driven manner.” Tai, a fluent Mandarin speaker, and former career USTR staffer who prosecuted China cases, was asked repeatedly about how to deal with the challenge of China's distortions in trade, whether through industrial subsidies, intellectual property theft or forced technology transfer, and a number of other concerns.

She seemed to caution Sen. Chuck Grassley, R-Iowa, that he may need to moderate his expectations for structural reform in China, even those it promised to do under the phase one agreement. “I think that we would all be delighted to have those structural changes in China to have our economies maybe more compatible,” she said. “I think it is absolutely worth exploring with China, but I also want to note that those are conversations, those are roads that have been well-worn by U.S. trade representatives before me, and so on this issue of the U.S.-China trade relationship, I would like to say that we need to be exploring all of our options.”

In response to another senator's question, she said one way to press China to reform its distorting practices could be by enforcing agreements it struck with trading partners, or by the rules of the World Trade Organization it agreed to when it joined the body. “There are also a lot of areas that are gray areas where the rules are not clear, or where we don't have rules yet,” she said, and said that maybe allies could work together to write more rules.

Several senators suggested that returning to the Trans-Pacific Partnership would be an effective way to join with allies to constrain China, but she said that while the concept was good, “a lot has changed in terms of our own awareness about some of the pitfalls of the trade policies that we've pursued.” She also said that globalization has often led to a race to the bottom, in terms of both environmental and labor standards, and the U.S. has to rethink its strategies on trade policy to prevent that from happening.

She also was asked about smaller tariff issues. Sen. Catherine Cortez Masto, D-Nev., asked Tai to endorse her idea of adding gender equity provisions to the Generalized System of Preferences eligibility requirements, but Tai just said she would engage, and that she wants the GSP program to continue.

Cantwell asked if India could come back into the GSP program, which she thinks could help lower tariffs on Washington's apple exports. Tai said she hadn't been briefed on India and GSP, but said that renewing the program is “very high on my radar.”

Ways and Means ranking member Kevin Brady, a Texas Republican who praised the choice of Tai as he helped introduce her to the panel, said he hopes Tai will engage with Congress to get unfinished business done, renewing both GSP and the Miscellaneous Tariff Bill.

Cortez Masto also complained to Tai that the safeguard tariffs against imported solar panels was supposed to step down to 15% in 2021, but instead the tariff is 18%, and said that she's concerned the tariffs will go beyond the four-year schedule. She said there were fewer solar installation jobs as a result.

“I think that one of the challenging aspects of a case like this one is that you have petitioners here in the United States who sought the review and won the remedy. Because it has impacts on different sides of the industry in the United States, where we find ourselves really challenged to figure out how to thread the needle in a situation where an industry is trying to stay afloat in the face of China cornering the market on solar panels, so I wanted to start by acknowledging that this is a really tough issue,” Tai said. She said her office would engage with the Section 201 case, and she'd keep the senator apprised. Cortez Masto was pleased, saying, “I think that's so helpful.”

Several senators asked her if she would restart the United Kingdom trade negotiations, but she said she needed to find out how much progress they've made, and she also said negotiating priorities could have changed over the two years since negotiations began.

Several Democrats complained about how President Donald Trump had isolated the U.S. from its allies by sparking trade wars with friend and foe alike, and suggested that China could be more effectively contained if Japan, South Korea, Europe and the U.S. joined forces.

“I want to acknowledge right up front that working with others is hard work,” Tai said. “And I think that that hard work begins by engaging, reaching out and having the conversations which will sometimes be quite difficult about how we can work together, and how we can capitalize on our shared interests to make more effective policy together.”

Some of the toughest questioning came from Sen. Elizabeth Warren, D-Mass., who pressed Tai to change the composition of trade advisory committees and to provide draft negotiating text at least two months ahead of a request for Congress to begin the fast-track process of ratifying a free trade deal.

On the former, Tai said there's a statute that governs the makeup of the committees, and on the latter, she said she was committed to transparency broadly.

“If the administration won’t promise [this], we’re never going to get beyond a trade policy that leaves American families on the losing side. This needs to happen,” Warren replied.

Sen. Pat Toomey, R-Pa., also expressed sharp disappointment with Tai's refusal to say that when trying to reach a deal with another advanced economy, the goal should be no tariffs, no non-tariff barriers and no quotas. “Maybe if you had put this question to me five or 10 years ago, my answer would have been yes,” Tai said. “I think our trade policies need to be nuanced and need to take into account all of the lessons that we have learned, many very painful, from our most recent history.”