Trade Takes Center Stage with Hill Hearings

In March, USTR Katherine Tai testified on the Biden-Harris Administration's 2023 Trade Policy Agenda before the Senate Finance and House Ways and Means committees. Ambassador Tai touted USTR’s “worker-centered trade policy” and was forced to defend the administration’s decision not to pursue “traditional” free trade agreements that include market access provisions. The hearing displayed frustration from Republicans and Democrats with the lack of a proactive trade agenda to open new markets to U.S. goods and services and to ensure that the U.S. is deepening ties with allies as it seeks to counteract China’s influence around the globe.
In advance of the hearing, Rep. Adrian Smith (R-NE), chair of the House Ways and Means Trade Subcommittee, along with Rep. Darin LaHood (R-IL), member of the Select Committee on the CCP and co-chair of the U.S.-China Working Group, and Rep. Ron Estes (R-KS), chair of the House Aerospace Caucus, sent a letter to President Biden expressing concerns about the Administration’s lack of a clear and comprehensive trade agenda.

Below are some items of interest that Tai was pressed on:
Indo-Pacific Economic Framework (IPEF): During the hearings, there was bipartisan disappointment that the administration is not pursuing market access provisions in IPEF. House Members and Senators complained that the current IPEF strategy is not ambitious enough to counter China’s influence in the region; that market access should be included; and that even without market access provisions, the agreement must come to Congress for approval. In the face of pushback during both hearings about the lack of FTA negotiations, Ambassador Tai defended the administration’s decision not to seek market access provisions in IPEF and its other negotiating initiatives.

We are not pursuing traditional fully-liberalizing trade agreements, because we see those as part of the problem that we are trying to correct for,” she said.

Ambassador Tai also said that while IPEF won’t have market access in the traditional sense (i.e., tariff liberalization), it will provide economically meaningful outcomes that improve access to markets. But she did not elaborate on what those economically meaningful outcomes would be. Ambassador Tai faced the most criticism from both sides of the aisle regarding the Administration’s decision to bypass Congress in negotiating the IPEF.

“The executive branch, in my view, has begun to embrace a go-it-alone trade policy,” Senate Finance Chair Ron Wyden (D-OR) said at the beginning of the hearing. Wyden stated that Congress’s role in approving trade deals is “black-letter law”, and it was “unacceptable” for the administration to pursue trade initiatives that circumvent Congressional approval.

Senate Finance Ranking Member Sen. Mike Crapo (R-ID) said USTR has withheld information about its ongoing negotiations with foreign countries from lawmakers and the American public, making it impossible to determine whether such initiatives will benefit Americans.

“This attempt to bypass Congress is unnecessary. Our trade policy is strongest when the administration and Congress work together,” Crapo said.

House Ways and Means Chairman Jason Smith (R-MO) said in his opening statement that “so-called ‘trade frameworks’ that sidestep Congress and fail to establish durable agreements” are “fueling the supply chain crisis and plunging American workers, farmers, and manufacturers into prolonged uncertainty. Endless dialogues and frameworks are no substitute for exercising Congress’s constitutional authority – and giving the American people a voice – over trade. In order to succeed, this Administration must recognize that Congress is in the driver’s seat in setting priorities and deciding whether to approve any trade agreements.”

Rep. Adrian Smith (R-NE) stated that if the nation wants a stable environment to encourage investment and economic prosperity, a Congressionally approved trade agreement is necessary.

Free Trade Agreements (FTAs): During the hearings, Senators and Members on both sides of the aisle criticized Ambassador Tai for not initiating free trade agreements with foreign partners, opting instead for frameworks that lack the same market access provisions and enforcement mechanisms as traditional pacts.

Crapo said the U.S. is falling behind other countries that aren’t as skittish about market access. Sen. Thom Tillis (R-NC) suggested a future administration could simply abandon Biden’s frameworks or that the agreements could be struck down in court for overstepping the president’s authority.

In response, Ambassador Tai said “I'd like to take this opportunity to say that I remain and we remain open minded with respect to the more traditional approach to trade agreements.” Ambassador Tai later told Sen. John Thune (R-SD) that she is “open minded” about a trade agreement with the United Kingdom.

GSP Renewal: There was bipartisan support for the renewal of the Generalized System of Preferences (GSP) as a means to counter China during the hearings. Ambassador Tai stated that she supports the renewal of GSP with updated labor criteria.

China Tariff Exclusions: Notably, Members and Senators largely avoided pressing Ambassador Tai on the Section 301 tariffs on products from China, although she did note that USTR was undergoing a review of the tariffs which could last some additional “weeks” or “months.”

With the 2023 Trade Policy Agenda now in full view, the administration and Congress have an opportunity pursue trade policies that position American businesses for long-term success at home and give them a competitive edge abroad. RILA will continue to work with lawmakers and policymakers to advance policies that reduce trade barriers and promote open markets, develop new sourcing opportunities, strategically realign the section 301 tariffs, and work with key trading partners to address our shared concerns with unfair trade practices.

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