Confirmation hearing will provide new clues on Biden’s trade agenda

Katherine Tai, President Biden’s nominee for U.S. trade representative, is set to give insight into how the Biden administration will handle politically hot trade issues at a Thursday confirmation hearing before the Senate Finance Committee.

Former President Trump upended decades of trade policy after proving the issue was a political winner in the 2016 presidential campaign. Tai’s hearing is expected to reveal what parts of Trump’s agenda have legs and which will be quickly pulled back.

The issue likely to feature front and center is tariffs.

During his four years in office, Trump imposed tariffs on billions of dollars of imports from China, the European Union and a slew of key trade partners.

While the Biden administration has already indicated that it will likely leave many of the tariffs in place at least temporarily, industries hit by the import taxes are pushing for efforts to scale them back quickly.

“The hearing should really illuminate the administration’s strategy [for] trade policy on several fronts,” said Alex Russ, senior adviser of global public policy for the Association of Equipment Manufacturers, an industry group.

“Do they have an offramp for the China tariffs? Is there a strategy in place for initiating negotiations?”

Trump scaled back some China tariffs as part of the “phase one” deal in early 2020, but the pandemic threw a wrench into some of China’s key promises, including substantial agricultural purchases from the U.S.

Tai, the daughter of Chinese immigrants who engaged extensively on Chinese trade issues as general counsel to the trade representative, is expected to face questions about the phase one deal’s fate, as well as the potential for future negotiations to ramp down the remaining tariffs, a process that is unlikely to happen quickly.

Other industries are concerned about more immediate action linked to a long-standing dispute with the EU on subsidies to Boeing and Airbus, as well as steel and aluminum tariffs imposed.

“We hope that the Biden administration will prioritize working with our two closest allies to suspend the tariffs that are not related as they negotiate the underlying disputes,” said Rob Maron, vice president for international trade for the Distilled Spirits Council.

The EU has imposed tariffs of 25 percent on whiskey, rum, brandy and vodka, which Maron says has not only hit producers hard but also exacerbated the troubles of hospitality businesses struggling during the pandemic.

Whiskey exports to the EU have fallen 37 percent since 2018.

Maron says he hopes Tai will indicate a plan to reduce the counter-tariffs in place on European alcohol as a sign of deescalation, as the broader issues of steel, aluminum and aerospace are worked out. EU tariffs on American whiskey are set to double in June.

But industry groups are clear that some of the issues will take longer to resolve, leaving a difficult road ahead for Tai and the Biden trade team as they work to leave behind many of Trump’s trade policies.

“It’s certainly going to take some time to unwind some of the policies from the previous administration,” Maron said.

Jeffrey Schott, a trade expert at the Peterson Institute for International Economics, agrees.

“It’s hard to see how there’s going to be the removal of all the tariffs any time soon,” he said.

But Tai will face a much broader array of matters beyond unwinding tariffs.

One of them is enforcing the U.S.-Mexico-Canada Agreement, which included a series of new enforcement mechanisms at the behest of Democrats and labor groups.

“The overriding focus will be on enforcement, and that’s where she has great expertise and a very good track record,” Schott said of Tai, who helped negotiate many of the enforcement mechanisms as counsel to the House Ways and Means Committee.

Already, Mexico has pushed the boundaries with a series of energy policies that will test the new enforcement regime.

Tai will also have to work with Congress on renewing fast-track trade authorities that are set to expire this summer and handle thorny issues related to Hong Kong and Taiwan.

She’ll have to consider whether to support calls to clamp down on the national security excuses Trump used to impose quick tariffs under Section 232 of the trade code and consider whether to advance trade deals begun under Trump with countries such as Kenya.

Perhaps most importantly will be the question of how to engage with China, which Biden has pegged as the main U.S. economic competitor and which senators from both parties have brought up in questions to other members of Biden’s economic team in previous confirmation hearings.

One major question hanging over the Biden administration is the Trans-Pacific Partnership, a 12-country Obama-era trade deal Trump scrapped upon entering office. Though the country’s appetite for enormous trade deals dropped in the Trump years, advocates say it may be one of the best ways to get major countries on the same page to set rules of the road for China, which in November embarked on its own regional trade deal, Regional Comprehensive Economic Partnership.

Biden has indicated that he may try to renegotiate the deal and picked its chief negotiator, Wally Adeyemo, as deputy Treasury secretary.

How to get China to step back from intellectual property abuses, forced technology transfer and other behaviors that unfairly tilt the playing field in their favor will be a monumental task that touches issues of national security, diplomacy, multilateralism and trade.

“The question is how are you going to change those behaviors?” said Russ. “We’ve seen that tariffs don’t work.”