Over the weekend, The Wall Street Journal interviewed Katherine Tai, the new United States Trade Representative. She has a lot of work ahead of her to undo the damage from the Trump administration’s protectionist turn. But she made two disappointing remarks about the approach she plans to take on the tariffs Trump placed on Chinese goods worth $377 billion per year. These can be undone at any time by either Congress or the stroke of President Biden’s pen.
First, as she told the Journal:
“I have heard people say, ‘Please just take these tariffs off,’” Ms. Tai said. But “yanking off tariffs,” she warned, could harm the economy unless the change is “communicated in a way so that the actors in the economy can make adjustments.”
The top trade policy priority right now should be to prevent normalizing President Trump’s trade policies. He doubled U.S. tariffs in one term, in unpredictable fashion. That was the radical change that made planning difficult. Restoring tariffs to where they already were for a long time would be far better for giving businesses something to plan around.
Tai has this argument backwards, and with poor timing. Businesses are struggling to recover from the COVID slowdown. Lowering tariffs would provide an economic stimulus that requires no new spending. Economics aside, the politics of undoing Trump’s China tariff are also positive. It sends a message of moving on, and a responsiveness to consumers, businesses, and economic realities.
Her second disappointing remark is about leverage:
The negotiator also cited tactical reasons for her reluctance.
“No negotiator walks away from leverage, right?” she said.
Tariffs do not give the U.S. any leverage, so there is none to walk away from by repealing them. Their purpose was to get China to reform its unfair trade policies, which is the right goal, but tariffs never had a chance of achieving it. The first round sparked no reforms, only retaliation. Trump enacted a second round and got the same result. On it went, and now three quarters of China’s exports to America are tariffed, there are retaliatory tariffs on the same proportion of American exports to China, and Beijing has not made a single notable reform.
True, withdrawing tariffs would also fail to convince China to reform, but that does not justify keeping them or trying to use them as leverage. Tariffs simply do not work with Beijing as a negotiating tactic. They are like trying to use a hammer as scissors. They are the wrong tool for the job. When a strategy fails, the right thing to do is admit it and try something else.
There is a lot the U.S. can do to help along Chinese reform. We now know tariffs are not part of the list. There is also no silver bullet. Pundits and voters hate hearing this, but it’s true. Pretending that there is a silver bullet in order to appeal to them will do no good. Change in China must ultimately come from within, but there is still a lot the U.S. can do to help. It takes a multifaceted strategy that is more subtle than tariffs, and gets less media coverage than summits or negotiations.
Continued economic, intellectual, and cultural engagement with China will let ordinary Chinese people see how much richer and freer liberal policies are. Walls don’t work, but bridges, windows, and conversations do. This is a slow, bottom-up process that is difficult to measure with statistics.
But just as blue jeans, underground rock music, and American movies helped to win the Cold War, today’s equivalents can help ordinary Chinese people see the connection between liberalism, markets, and prosperity—and work toward moving their own country in that direction.
That is a long-term process, but there is important work right now that Tai, President Biden, and Congress can do to help get it started. First on the agenda should be getting rid of the Trump tariffs. Neither Tai’s “companies will have problems adjusting” argument nor her leverage argument hold water. The right thing to do is to rip off the Trump-era band-aid and move on to policies that at least have a chance of working. Congress or President Biden could do this tomorrow.
Repealing these bad policies is not enough, though. The larger system that makes tariff abuse possible needs reform. As we recommend in the new CEI Agenda for Congress, this would mean repealing Section 232 of the Trade Expansion Act of 1962 and Sections 201 and 301 of the Trade Act of 1974.
These provisions allow the president to enact tariffs without congressional approval. The China tariffs were enacted under Section 301. The steel and aluminum tariffs—against allies we’ll need as counterweights to China—were enacted under Section 232, allegedly for national security reasons. It’s time for them to go, and Tai can play a role in making that happen.
The Trans-Pacific Partnership is an important diplomatic counterweight to China; the U.S. should rejoin it. Tai and President Biden should work to rebuild the World Trade Organization’s dispute resolution process, where the U.S. wins more than 85 percent of the cases it brings. Renewing Trade Promotion Authority (TPA) would speed up negotiations for a trade agreement with China, if the president chooses that route. At the very least, TPA would help with upcoming agreements with the United Kingdom and the European Union, whose help we’ll need to counter Chinese influence. Tai can play an important role working with Congress to renew TPA before it expires in July.
This is a somewhat slow period in China-U.S. relations. The tariff back-and-forth is likely over with Trump out of office. The Phase One agreement, which was unrealistic to begin with, was made completely unworkable by COVID, and is essentially dead.
But over the medium to long term, working to liberalize China will be a top economic, diplomatic, and humanitarian priority for the United States. Tai stumbled out of the gates in her first interview, but it’s a long race. With the right policies, she can help make historic positive changes that will benefit both the American and Chinese people.
For more on those policies, see the trade chapter in CEI’s new Agenda for Congress, my paper on COVID-related trade reforms, and Iain Murray’s and my paper “Traders of the Lost Ark.”