No relief: How Biden’s new trade chief will keep the pressure on China
Joe Biden’s choice of a new US trade representative encapsulates the ways in which America’s trade strategies, and its approach to China in particular, will differ from those of the Trump administration. The objectives won’t change but the approach will be very different.
On Friday in the US, Biden announced that Chinese-American trade lawyer Katherine Tai would be his nominee for US Trade Representative, a cabinet-level position in the new administration.
Tai is vastly experienced in international trade issues, having served in the office of the US Trade Representative during the Obama administration and having been deeply involved, as chief counsel for Congress’ Ways and Means Committee, in the final shape of the reworked North American Free Trade Agreement.
Most notably, Tai has a record of successful prosecutions of Chinese trade practices at the World Trade Organisation and a history of being able to organise America’s allies in support of those actions.
She has been credited with creating the coalition of countries that challenged China’s restrictions on exports of rare earths in 2012.
Rare earths are a commodity that China dominates and one vital to production of smartphones, electric vehicles, aircraft, military equipment and other 21st century technologies.
Tai was able to convince 18 other countries to join the suit against China – including Australia – which eventually ended with China removing the export quotas in 2015.
Tai, like Biden and unlike Trump and his trade representative, Robert Lighthizer, is a multilateralist who will seek to enlist allies, and revive multilateral institutions, to prosecute America’s trade policies.
The Trump administration’s preferred bilateral and heavy-handed approach to trade and its indiscriminate use of tariffs as its weapon of choice has been less-than-successful – America’s trade deficit has swollen, not shrunk – and has alienated its traditional allies, which have been on the receiving end of Trumps trade wars.
While Trump’s tariffs have reduced the deficit with China, imports from other parts of Asia and from Mexico and Canada have more than replaced them and in the meantime US companies and households have effectively paid the tariffs, rather than Chinese exporters.
While her methods might be different, the Democrats share the same underlying suspicion and hostility towards China as the Republicans.
Biden and Tai are likely to be more sophisticated, but no less hawkish towards China, sharing the Trump administration’s hostility to China’s trade practices and its concerns about China’s overt efforts to challenge America’s economic and geopolitical leadership.
Biden has said the Trump tariffs on China’s exports will remain, at least initially, but Tai is expected to try to create a partnership of western economies and to use the WTO to try to change the way China does business with the rest of the world.
For China, a coalition of the larger part of the global economy would be far more threatening to its ambitions that Trump’s unilateralist approach and would make it more difficult for it to isolate and target individual economies – as it has done with its trade sanctions on Australian exports – than is now the case.
One of the issues that led to those sanctions (along with Scott Morrison’s call for an international investigation of the origins of the coronavirus) was Australia’s criticism of China’s treatment of the Uighur ethnic minorities in its Xinjiang province.
Tai worked on China-related issues during her period advising the Ways and Means committee, including legislation that barred imports made with forced labour by the Uighurs.
China might expect a Mandarin-speaking Asian-American with experience of working in China to be more understanding of China’s complexities and less aggressive than the China hawks in the Trump administration but, while her methods might be different, the Democrats share the same underlying suspicion and hostility towards China as the Republicans.
Tai has said that the current trade strategy is too defensive – she believes that while America needs to confront China’s unfair trade practices like forced technology and state subsidies, with its allies, it also to focus on improving America’s domestic productivity and competitiveness.
Trump’s crude approach to trade has been less than successful – even the great trade agreement he struck with China at the start of this year has failed, badly, to live up to expectations. China isn’t buying anything like the amounts of US goods, energy and agricultural products it pledged to buy.
China is having a similar experience with its bans on Australian products ranging from barley, lobsters, wine and coal.
China has imported Australian metallurgical coal for its steel and power generation industries because it is high-quality and relatively low-cost, allowing for greater efficiency and less carbon-intensive emissions.
The ban on Australian coal is forcing the Chinese mills and power companies to use much higher-cost and lower quality domestic coal and import more expensive coal from elsewhere – even as their competitors in Japan and South Korea enjoy lower prices.
In the meantime, the escalation in the trade aggression towards Australia – and the extent of the infrastructure-led, steel-intensive resurgence in China’s economy – has seen the price of iron ore rocket from around $US80 a tonne during the height of the pandemic to nearly $US160 a tonne.
The steel mills are panicking, calling in Australia iron ore suppliers to question them about the prices, suspecting manipulation even though the Pilbara producers haven’t reduced their production. Potential disruption to future volumes generated by the fallout from Rio Tinto’s destruction of the Junken Gorge caves might also be playing a role in the price spike.
In any event, the combination of the soaring prices of both iron ore and coal are threatening to throttle the profitability of China’s steel and energy industries. Efforts being attempted to get the power companies to cap the price of the coal they buy, or trying to revisit the way in which iron ore is priced, are fruitless.
China is experiencing a similar blowback from its trade policies as America experienced from Trump’s. The tariff and non-tariff sanctions China has imposed on Australian exports are not without significant costs to its own economy.
The likelihood is that a Biden administration will re-examine the $US360 billion ($478 billion) of tariffs Trump imposed on China’s exports and eventually be somewhat more selective and strategic about the imports from China that it targets to ensure that they impose a greater weight on China than on US companies and consumers.
It would be reasonable to assume that when it calls on its allies, including Australia, for help in dealing with China’s trade practices and human rights violations, it will also recognise the need to ensure the alliance protects its own from the kinds of bilateral Chinese retaliation Australia is experiencing.
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Source: Thanks smh.com