During Vilsack’s House Ag Committee appearance, Republicans insisted on this point. As DTN Ag Policy Editor Chris Clayton reported, Kansas Rep. Tracey Mann said, “Looks like China sold America a bill of goods and the Biden administration didn’t made no effort to rectify the situation. (https://www.dtnpf.com/ …)
In response, Vilsack said Tai was leading administration efforts to figure out how to “walk the fine line with China” in recognition of China’s resumption of role as the top export market for agriculture. American.
“It is not correct to suggest that we did nothing. It is indeed correct to suggest that we asked the Chinese to increase more,” Vilsack said.
Beyond these generalities, however, administration officials have yet to go. Are they working on another round of formal talks? New tariffs on Chinese products, in addition to those the Trump administration imposed before reaching the agreement, which the two administrations left in place? Invoke the agreement’s dispute settlement mechanism?
As Brookings Institution fellow David Dollar sees it, the administration is at an impasse. “US exports and strong and different sectors of the US economy thrive on selling to China. Reigniting the trade war in this environment would be bad for the US economy. On the other hand, China has not reached the goals of the phase one deal and Biden will likely be criticized for being soft on China if he gives them a pass.” (https://www.chinabusinessreview.com/…)
Dollar thinks the administration will “likely leave the trade picture in limbo for 2022.” It wouldn’t be shocking. It was implicit in Tai’s October policy speech that the administration would focus as much on U.S. export competitiveness as trade talks. In other words, trade policy would rely heavily on industrial policy – measures such as the so-called Chip Act, which would provide $52 billion for domestic semiconductor manufacturing.
If the administration decides on new talks, however, China is unlikely to turn around and play dead. His arguments could include:
— Don’t blame us for the shortfalls; blame COVID-19.
— The agreement stipulated that the purchases would be made “at market prices on the basis of commercial considerations”. We didn’t have enough commercial demand to buy more.
— We are progressing towards the prescribed levels. After dropping $13 billion from the $40 billion in agricultural purchases for 2020, the 2021 shortfall was just $3 billion.
— We have delivered on all but seven of our 57 promises to remove agricultural non-tariff barriers.
— We would be able to buy more from you if you removed these 25% customs duties on your imports.
Note that many of these arguments focus on agriculture, which has historically been the sector where the Chinese have yielded the most. For Biden’s trade team, the bigger issue is the much larger lack of manufacturing and energy purchases.
Meanwhile, US importers of goods from China are complaining about these high tariffs, which they and ultimately US consumers are paying.
Maybe Dollar is right and the administration will stall. But the pressure to do something is likely to build. Stay tuned.
Urban Lehner can be contacted at [email protected]
(c) Copyright 2022 DTN, LLC. All rights reserved.