In a wide-ranging discussion with Agriculture Secretary Tom Vilsack today at the USDA Agricultural Outlook Forum, U.S. Trade Representative Katherine Tai said that conversations with China have become “more difficult over time.”
Tai noted that “China is, at the same time, many things to all of us.”
“It’s a rival, it’s a competitor, but it also is a partner in areas where we can establish that kind of trust,” she said, but added that the trade data shows that China’s performance in the phase one trade agreement “has been uneven.”
To contend with the “shortfalls” in China’s purchases under the phase one agreement, Tai said, “We’ve had very direct, honest, respectful conversations with the Chinese since the beginning of October around how can we hold China accountable for these commitments? How do we make good on this agreement? These haven’t been easy conversations, they’ve gotten more difficult over time.”
She added, “That doesn’t change the overall aspects of this trade relationship, which is profoundly consequential, but extremely difficult and getting more difficult.”
Tai, who is a former chief trade counsel for the House Ways and Means Committee and USTR chief counsel for China trade enforcement, said USTR will “continue our work to press China on the impacts of its policies, on our producers and increasingly focus our conversation around how we can adapt to a world where we, very much, would like for China to play by our rules. But we cannot make decisions for China and what do we need to do on our own behalf to defend the interest of our economy, and very much agricultural stakeholders.”
UKRAINE AND THE GLOBAL ECONOMY
Both Tai and Vilsack said it is too early to predict the impact of Russia’s war on Ukraine on international trade, but that because Ukraine is such an important agricultural producer the situation must be watched carefully.
“We know Ukraine is an agricultural powerhouse,” Tai said, adding that the United States needs to coordinate with its allies to figure out how to respond appropriately in trade policy, foreign policy and U.S. domestic economic needs.
Vilsack noted that Ukraine is the fourth largest exporter of agricultural products in the world and exports “quite a bit” to China, the Middle East, North Africa and Europe.
The war “will have an impact,” he said. “It’s something we’re going to keep an eye on.”
Speaking broadly, Tai said “We have been quite spoiled in recent history” by relying “on the global economy working kind of like a big clock. All the pieces inside have been running smoothly for quite a long time. I think in the most-recent years, we have started to experience events, phenomena that have shown that the clock is discombobulated. The gears aren’t always attaching. Pieces are coming a bit undone.”
“There are supply chain problems, near term, bottlenecks, the physical, logistics of trade, but there are also much-bigger questions around a lack of resilience in this version of globalization that we have. That has made it fragile confronted with all kinds of shocks,” Tai explained.
The global COVID-19 pandemic and the situation in Ukraine are examples of the shocks, she said, adding “None of these are new. We’ve experienced pandemics before, we have experienced natural disasters that tend to have these effects, extreme climate incidents going back through history. We’ve also experienced wars before, too.”
What this situation “brings us back to is the need for innovation,” Tai said.
“There’s a need for innovation amongst our stakeholders and economy in the ag economy. The need to adapt in times of hardship to figure out how to be lighter on our feet. How to take the know-how that’s available to us and just be smarter about how to engage with the changes in our world. But there’s also a need for innovation in our policies.”
Tai said she believes there is “huge potential for USTR and USDA collaboration with our stakeholders.”
In what may be a veiled message to farmers who have become dependent on China being the No. 1 purchaser of U.S. agricultural products, Tai asked, “How do we shake out of a certain kind of complacency over the last-many years?”
Tai said the Indo-Pacific countries are important “as markets to partner with, as markets with demand” but she noted that these countries and economies “are strategically important.”
When it comes to domestic policy and foreign policy interests, she said, “It’s important to maintain appropriate balance between the two. In history, whenever our trade policies have gone too far in one direction at the expense of the other, we’ve really paid a very dear cost for it.”
Tai said the Biden administration is working on an economic framework with the Indo-Pacific nations, but to build resilience, trust and confidence with these countries, “part of that means that we have to bring something new to the conversation.”
“We have to acknowledge the experiences we’ve had in the last five to seven years that require us to adapt,” Tai said. “We can’t just revert back to the way we were thinking and plans we were making five to seven years ago. So, that resilience is really important and is something that is really resonating in our conversations with our trading partners, especially in this region.”
As policies to promote sustainability are established, Tai said it’s important to empower people to be able to consume U.S. products and that economic policymakers must not leave out “those who are most vulnerable and who are already disadvantaged further behind” both in the United States and in developing countries that are trying to “grow their consumer classes.”
In building the Indo-Pacific framework, Tai said, “We are looking to set standards that promote fair and open competition — and with respect to our farmers, ranchers, agricultural stakeholders, looking for ways of engaging with our partners that are focused on inclusive growth.”
That includes accessing markets and regulatory and standards approaches, she said, adding that recent breakthroughs in India, the Philippines and Thailand for U.S. pork provide “inspiration” for what can be achieved in agricultural trade negotiations.
On Mexico, Tai said Vilsack’s relationship with Mexican Agriculture and Rural Development Secretary Víctor Manuel Villalobos Arámbula has created a bond for “more frank and serious discussions” about biotechnology issues.
“We’re looking at those very closely,” Tai said. “We know how important having clear regulatory signals are to our producers, especially when it comes to biotechnology products.”
Tai said she knows that Vilsack knows “this has been a very difficult issue area, and I know our teams that have been working very closely together, including with our industry stakeholders, to examine our options.”
Urged by Vilsack to talk about trade with Africa, Tai said that whatever trade approach the United States takes, it should reinforce, rather than undermine, the African countries’ attempts to develop the continent and integrate it economically.
On relations with the European Union and the United Kingdom, Tai said there have been certain “brick walls” between them and the United States but that there should be “engagement” to “think outside the box” for opportunities as the economy recovers from the pandemic. On the UK, she said she has had “a pretty intensive clip of engagement and we intend to keep that up and to further enhance it in order to explore these opportunities.”
When Vilsack asked, Tai said the United States “needs” to pay attention to South America.
“These are, these are our neighbors and they are our family … when one region sneezes, the rest of the continent catches the cold. I’m really, really struck, especially in recent days, by how much of our world and our world economy, even as we venture off into cyberspace, into outer space, how much of what we do is still bound by geography. And land. I think that is something that’s definitely not lost on our farmers and agricultural stakeholders. It’s just to reinforce that South America is very important to us.”
When Vilsack asked Tai what concerns she has about the impact of climate change on trade, she said people have concerns for different reasons, but that “Because we’re an economic agency, it is very, very clear to me and all the work that we’re doing, that climate change is an economic force that unless we grapple with it, we’re condemning ourselves to challenges and lack of resilience.”
She added that she sees the private sector as being “more forward-leaning on some climate issues and climate initiatives and climate urgency than we see some governments.”
“I think that reinforces the notion that, for anyone out there, who is in the business of planning for the livelihoods of their company, for their families, that this is something that we cannot afford to ignore,” Tai said.
Perhaps responding to criticism that the Biden administration has not launched negotiations on new trade agreements, Vilsack asked whether there are “other mechanisms, other steps that are equally important, that can advance opportunity.”
Tai said that Trade and Investment Framework Agreements are “not bright, shiny objects,” but provide an “opportunity for innovation in terms of how we bring different ideas and different initiatives to our trading partners, invite their responses. We’re all looking for economic recoveries for our stakeholders.”
At the beginning of the discussion, Tai told Vilsack, “I consider you one of my most important partners in the administration and also one of my best friends.”
At the end, she noted that when the Olympics were being held last summer, she thought of her “partnership” with Vilsack as “a beach volleyball team” and that now, just after the winter Olympics were held, “I like to think about the two of us as being a curling team, too.”
Vilsack replied, I hope you can jump. I can’t jump very well. I’m not sure how successful we’d be in volleyball.”
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