Meeting

C. Peter McColough Series on International Economics With Katherine Tai

Monday, December 19, 2022
Speaker

U.S. Trade Representative, Office of the U.S. Trade Representative

Presider

Founder and Chief Executive Officer, RockCreek; Member, Board of Directors, Council on Foreign Relations

Ambassador Katherine Tai discusses the role of trade policy in the global economy, current U.S. trade strategy, and the Biden administration’s trade agenda for the year ahead.

The C. Peter McColough Series on International Economics brings the world’s foremost economic policymakers and scholars to address members on current topics in international economics and U.S. monetary policy. This meeting series is presented by the Maurice R. Greenberg Center for Geoeconomic Studies.

 

BESCHLOSS: Good afternoon. Welcome to today’s Council on Foreign Relations meeting with Ambassador Katherine Tai. I’m Afsaneh Mashayekhi Beschloss, CEO of RockCreek, and a CFR board member. And I’ll be presiding over today’s discussions. This meeting is part of the C. Peter McColough Series on International Economics.

It’s my great pleasure to welcome Ambassador Tai to CFR today to be here with us in person. And she didn’t have to come very far, by the way. (Laughter.) Ambassador Tai is the principal trade advisor, negotiator, and spokesperson on U.S. trade policy for the Biden administration. Before joining that administration, Ambassador Tai spent most of her career in public service focusing on international economic diplomacy, monitoring, and enforcement. She’s the former chief trade counsel and trade subcommittee staff director for the House Ways and Means Committee, where she played a pivotal role in shaping U.S. trade law, negotiation strategies, and bilateral and multilateral agreements, including the recently renegotiated United States, Mexico, Canada Agreement, that she’ll tell us about. Ambassador Tai, welcome to CFR. (Applause.)

TAI: Well, hello, everyone. It’s wonderful to see all of you. And thank you so much, Afsaneh, for that very kind introduction. For over a century, this Council has been one of the most important venues for discussing the critical foreign policy issues facing our nation and the world. And it is a pleasure and an honor to be here with you today.

When I was sworn in as the United States trade representative, 641 days—who’s counting? We are. (Laughter.) We faced several profound questions. Why the world economy has proven so fragile in the midst of a global public health crisis. Whether the United States was withdrawing from the rest of the world. And whether the international trade and economic system is fundamentally fair. Two years later, our answers are clear. First, world economic governance must reform and realign to incentivize and foster resilience. Second, as President Biden has instructed, America is back to lead and to partner across the board, including on trade. And finally, trade must become a force for good for ordinary Americans and people around the world.

The preceding decades gave us cheap goods, but growing inequality. More production, but sprawling, vulnerable supply chains, and workers in communities displaced and left behind. The pandemic and Russia’s brutal war against Ukraine have only highlighted these shortcomings and consequences, as they have wreaked further havoc on supply chains and intensified inflationary pressures around the world. And that is why we are placing workers and everyday people at the center of our trade policy, to craft a durable and fair tomorrow by pursuing resilience, sustainability, and inclusive prosperity.

President Biden has been clear that success abroad and success at home are inextricably linked. And his vision is already bringing tangible results to American communities and workplaces. The bipartisan infrastructure law is the largest investment in our infrastructure since the creation of the interstate highway system under the Eisenhower Administration. The CHIPS and Science Act will bolster our national security by making more semiconductors here in America and create thousands of jobs. We are already seeing substantial investments in places like Ohio, Idaho, and Arizona by companies like Intel, Micron, and TSMC. Lastly, the Inflation Reduction Act is the largest investment in American history to address the climate crisis. It will create good-paying jobs in wind, solar, and electric vehicle manufacturing, and will fortify and diversify the critical supply chains for clean energy products.

Our closest partners have applauded the Biden administration’s commitment to engagement and bold action to reinvigorate U.S. economic capabilities and to tackle the climate crisis. But some with longstanding relationships with the United States have also expressed concerns about the potential impacts on their producers and industries. As we all take new steps to transition to a clean energy economy, many governments will likely advance policies that raise questions. But that also opens the door for us to work together, coordinating our

actions to make them more effective. We have been engaged in a deepening dialogue with these partners and look forward to continuing it.

This commitment to partnership and engagement animates all of our work. Just this year I have visited twelve countries, thirteen states, and many more cities advocating for a new approach to trade. From the G7 to APEC, Brussels to Bangkok, and Des Moines to Detroit. With steelworkers, and farmers, and textile innovators our ideals are transforming into tangible models for others to follow and to build on. In the last year and a half, we have developed a robust cooperation with the European Union through the Trade and Technology Council.

We are working together on supply chains, export controls, and foreign investment screening to safeguard our collective national security. And we will build on this work with the EU next year, including through the first-ever carbon-based arrangement on steel and aluminum that we are negotiating. This will be a paradigm-shifting model that drives decarbonization, while limiting anti-competitive and non-market practices. And we are already hearing interest from other trading partners, eager to join us.

In the Indo-Pacific region, we are crafting an economic framework to tackle individual and collective challenges, like supply chain breakdowns, the digital transformation of our economies, and the climate crisis. Building for resilience means facilitating a race to the top. And that is why the Indo-Pacific Economic Framework is not a traditional trade deal anchored on tariff reduction and elimination. It is not the TPP.

Instead, the IPEF aims to deliver real opportunities for our people now by focusing on worker standards, the environment, science-based and transparent regulatory systems, and an inclusive digital economy. After concluding a first negotiating round in Brisbane, Australia just last week, we are looking forward to being very busy in 2023 negotiating with our thirteen country partners and consulting with our stakeholders and partners here at home.

We are also claiming new frontiers on trade with our most motivated partners in Taipei and Nairobi. And speaking of motivated partners, we just wrapped up the Africa Leaders Summit, and the AGOA ministerial last week. The future is Africa. We have the opportunity now to partner with the continent to drive a human-centric, pro-resilience trade agenda for this future.

Not only that, the Biden administration continues to lead in international institutions, including at the World Trade Organization. Despite dire predictions we worked very hard, together with 163 other members, to deliver a package of outcomes at the twelfth ministerial conference, including the first multilateral agreement on fishery subsidies. We also agreed to modifications to intellectual property rules for COVID vaccines for a more equitable recovery, especially for people in developing economies. But we must do more to make the WTO relevant. The organization must keep pace with the changing world economy and address widening inequality, workers’ rights, the climate crisis, and other fragilities and vulnerabilities.

We will show our commitment to the Asia-Pacific when we host APEC in 2023. I hope that many of you will join us in Detroit in May for the trade ministers meeting. I cannot wait to share Detroit’s story, America’s story, of innovation, resilience, and perseverance, and show our dedication to carrying the torch forward. That includes lifting up our workers, women entrepreneurs, and empowering small businesses to enter the market, grow, and compete. We must unlock economic opportunities for those who have been underrepresented in all of our populations. And in our own hemisphere, we are pursuing the America’s partnership for economic prosperity to enhance our already strong bonds in line with a shared vision for inclusive, people-centered prosperity. Our partners are enthusiastic, and we are eager to start writing this new chapter together.

Speaking of the workers at the center of our trade policy, just two weeks ago, in College Park, Maryland, European Executive Vice President Valdis Dombrovskis and I launched the U.S.-EU Trade and Labor Dialogue. We convened labor, business, and government representatives from both sides of the Atlantic to focus on eliminating forced labor in global supply chains and better incorporating key stakeholder insights into our

work. Next year, our goal is to expand this work to address the needs of workers and employers in navigating the digital transformation of our economies and workplaces.

Doing trade the right way means standing up to the forces that have harmed and undermined workers, producers, and communities to not just thrive, but sometimes also to survive. We are doing that through our unflinching utilization of the USMCA’s facility-specific rapid response mechanism, one of our key tools for driving a race to the top in North America. This sustains high American labor standards by strengthening the ability of Mexico’s workers to withstand exploitation.

An important part of realizing our vision for human-centric trade is realigning our trade policies toward China to defend the interests of America’s workers, businesses, farmers, and producers. The loss of jobs, income, and manufacturing capabilities that accompanied a surge in low-priced imports from China has been real and devastating. For too long, the PRC’s unfair policies and practices have undercut American prosperity, suppressed labor rights, and weakened environmental standards. To vigorously defend our values and economic interests, we need a new playbook on China that serves our interests. And we will continue to press the PRC on its state-centered and non-market trade practices.

Overlaying all these elements is President Biden’s unwavering commitment to grow America from the bottom up and the middle out, and to lead and cooperate on the world stage. We, at USTR and across the administration, have been working hard this past year to carry out this commitment. And we are gratified to see that our work is already bringing results. Here at home, our economy added 263,000 jobs in November alone. And we created 10.5 million jobs since President Biden took office, including 750,000 manufacturing jobs. Unemployment remains near record lows, household income is up, and inflation is coming down. Abroad, our partners and allies are coming alongside us and echoing the themes we have been voicing.

And we are just getting started. From the Americas to Asia to Africa, from the TTC to the WTO, and Detroit to Atlanta, we will continue to build a more resilient, engaged, and people-focused global economy. And I am proud and truly honored to be a part of President Biden’s team to lead this work. I look forward to delivering more on this agenda in partnership with many of you in the year ahead. Thank you, and I wish you a joyous and peaceful holiday season. And you can rest assured that you will see a lot of me and my team in 2023. Thank you very much. (Applause.)

BESCHLOSS: Ambassador Tai, thank you for those great remarks. You covered a lot of ground, and I have a few questions before we talk amongst all of us. I don’t think there’s been a trade representative as incredible as you in terms of your background. You’ve been both on Capitol Hill and USTR. And I’ve admired your career for a long time, since I taught international trade a long time ago. And I’m just curious, in your case, how did your previous experience prepare you to lead U.S. trade policy? And what is different about your approach right now as you’re moving from the vision that you described to the launch and the implementation of what you planned?

TAI: Well, thank you so much for those very kind words. I think that there have been U.S. trade representatives from a lot of different walks of life, with a lot of different stripes. And you’re right, I might be—I might be among the nerdiest of all of them, especially when it comes to trade. (Laughter.) But, you know, it’s interesting, the question you’ve posed. I think when I look back on my own experience, mainly what I would say is the key to my approach in general is that I came up through the trenches. And I think that that is—that is important in many ways. You focused on getting the thing done. You’re focused on how effective can you be. And I think that, most importantly, you’re focused on learning lessons.

And so I think, you know, I spent seven years at USTR as a litigating attorney at the WTO, representing the United States. I went to the Hill for another seven years. It was a deeply powerful political education on trade. And then now, coming back to USTR, at a time of significant economic disruption, but also significant opportunity—every challenge brings with it an opportunity—it’s an incredible honor to, in a way, come back

home and to be able to continue to work with partners in the private sector, in academia, in labor, in civil society, and in Congress to continue to move forward to try to seize the opportunities we have today.

BESCHLOSS: You know, as an example of what you just said, in terms of implementation, you played a very important role in negotiating the U.S., Mexico, Canada Agreement, to secure support from all sides of the aisle. You spoke earlier also, just now, about USMCA’s rapid response mechanism. What is the significance of that mechanism to the Biden administration’s approach to trade policy?

TAI: Certainly. I could go on for hours on the USMCA, just like I can go on for hours for the WTO. But, you know, let me say this. The USMCA stands for many things. One of the most important things it stands for is a commitment on the part of the United States to trying to get trade right, to bringing innovations into what had been the NAFTA that would be appropriate for the reality that we live in now. And one of the most important elements to the support for the USMCA was to try to go back and learn from—again, learn the lessons from the tensions we’ve had around maintaining our environmental and worker standards through the course of the first twenty-odd years of the NAFTA.

And the rapid response mechanism is a key part of the support that Democrats gave to the USMCA, and workers and worker organizations gave. It is facility specific. For the first time, it really shines the light not just on the actual governments but also on the stakeholders in the economy who are responsible for following the law. And it is focused on unlocking the potential of Mexico’s workers to rise into the middle class, to advocate for themselves, knowing that the more rights that Mexico’s workers have, the more rights our workers will have, because we are so integrated and we are such close partners, geographic neighbors. And that is never going to change.

So I think that we are particularly proud of the creation of this mechanism and the fact that we are working in partnership with Mexico, working in partnership with our worker stakeholders to ensure that the labor reform that Mexico has brought into place will actually take root in this incredibly important economy.

BESCHLOSS: I think your emphasis on labor is not going to be—you know, is something that I think everyone’s hearing very carefully. And so it takes us to the next set of things that you just referred to in terms of the Indo-Pacific Economic Framework and the Trans-Pacific Partnership. Why is the IPEF the important one to pursue at this time? And why is the United States pursuing the IPEF, instead of joining the Comprehensive and Progressive agreement for Trans-Pacific Partnership, which has many of the same signatories right now?

TAI: That’s a great question. I get this one a lot, which is unsurprising because we—this is—this is the engagement that the Biden administration is bringing to the Indo-Pacific. You know, I think that one key aspect of the Indo-Pacific Economic Framework, the IPEF, is that it reflects the engagement that is responsive to the challenges that we are facing today and that we are hearing from our trading partners. Today, in 2022, the global economic reality, the regional economic reality, is different from the way it was five or seven years ago, when the TPP was being negotiated. Right now, the consistent themes that you will hear from me are around building out our economy, building economic engagement that is geared towards creating resilience, sustainability, and inclusiveness.

That is what we are hearing from our partners. And we know that we have tools to promote these goals. But we also know that over the course of the past many years, we’ve seen the supply chain fragilities. We’ve seen an increase in geopolitical tensions. I mentioned this to you earlier, I don’t know if I’m properly giving the credit to Tony Blinken, but I’m always happy to give him credit for this. When asked about our overall Indo-Pacific strategy, he’s been very clear to say: We are not coming with an economic engagement or with just a general engagement strategy that is requiring our partners to choose. What we are doing is bringing our partners a choice.

And of course, the question that I then have been asking myself is: As we design this economic framework, what is it that the United States wants to get out of this? And I think it’s quite similar. We are also looking for more choices. And so, you know, I think that in a region where the supply chains are so integrated with the Chinese economy, it is particularly important for us to focus on the resilience aspects, the sustainability aspects, and the inclusiveness aspects of how we can design an economic engagement that gives all of us more choices and creates more resilience for all of our economies, with a focus on our people?

So as you know, the Indo-Pacific Economic Framework is more than trade. It’s across four pillars that include supply chains, decarbonization, tax, and anticorruption. Even within trade, we have very carefully scoped it for those elements of our trade practice that are promoting of resilience, sustainability, and inclusiveness. And we are intent on this exercise delivering results as we go. Because of the volatility and the changeability of the global economy right now, we know we can’t afford to wait five, seven years for, you know, one single undertaking. We’ve got to be—we’ve got to be pivoting and responding to the needs of our economies and our people right now.

BESCHLOSS: I think what you talked about, which is the interconnection between trade, industrial policy, across all countries, I think is really important. But that takes us, of course, to one of the challenging tradeoffs that you’re looking at in terms of the relationship in U.S.-China trade. And obviously, the past year has been very busy for you with the CHIPS Act and the announcement of the TSMC plant in Arizona, and a lot of other things that you referred to in Detroit. So what’s ahead? And what remains to be the really important part of your negotiations looking forward to the U.S.-China trade?

TAI: Oh, with respect to U.S.-China trade? So this really is so critical to getting trade right. The U.S.-China trade and economic relationship is profoundly consequential. We are the two largest economies in the world. The way we interact with each other impacts not just our own economies, our people, our workers, and businesses, but impacts the entire world. For us, I think it is about absolutely turning the page on the playbook, continuing to press China on the impacts of its policies, the externalities of its growth and economic model on our ability to continue to compete and to thrive. And working together with our partners.

Again, I get into a lot of debates with people on the trade and economic theory. I think that one of the most important things to keep in mind when looking at how we engage economically to achieve the results that we want, is recognizing that we are not working on a tabula rasa. That China’s growth and development of the past twenty years, in particular, has profoundly changed the global economy and created pressures and distortions that we need to correct for. And I think that that frame guides how we know we must responsibly manage this economic relationship.

BESCHLOSS: And as you talked, obviously all of these issues with the supply chain have been important. And you saw with the COVID policy in China, that was—you know, putting aside even trade issues—how relying on one supply chain has created so many issues for the private sector. Moving on straight to Russia, we saw how being reliant on Europe for just, you know, its natural gas from one source created similar problems. So trade, you know, is something that everybody’s concentrated on. And particularly with the Russia invasion of Europe, how can the U.S. and the European Union now use this—your trade policy? You talked a little bit about both trade and climate. But could you elaborate a little bit more how you can use trade policy to respond to the threat, but also use it as an opportunity for trade?

TAI: Absolutely. So this is—a lot of the work that has grown up out of the TTC. The working groups, there are ten working groups. There is one devoted to export controls that was set up in—late last fall, before the Russian invasion. And because of the building up of this partnership, when Putin decided to invade Ukraine, the ability of the United States and the European Union to come together to coordinate and to take effective action was greatly facilitated by the TTC. And since then, of course, we’ve formally expanded TTC cooperation to include the Russia challenges.

So there are the national security challenges that are, you know, front and center, and very, very urgent. But I think just as urgent from my perspective, in terms of trade, is working with the European Union on resilient trade, in particular. I’ve had a lot of very candid conversations with my counterpart in Brussels, Valdis Dombrovskis, but also the trade ministers from the different member states. And all of them know that this is a hard winter for Europe, because of that energy dependence that they have had. But that the further out we get from this winter, the more resilience they gain. That they have been doing a lot to diversify, to generate more options for themselves. And that is an area of incredible opportunity for us.

And I think on this one as well, what we are doing with respect to the global steel—sustainable steel and aluminum arrangement, is also about looking at crafting, with Europe, a set of trade parameters that will be designed to improve standards. Again, working with Europe to create the kind of global economy that we feel will be more resilient, and sustainable, and inclusive.

BESCHLOSS: So both on the labor side, but also on the environment side those are big changes. The Europeans and President Macron, when he was here, was trying to sort of figure out—I’m sure you spent a lot of time with them—on how you could specifically get some of the IRA also, that they criticized as potentially protectionist in the U.S., to start moving in the direction of helping Europe, as trading partners, as well. Can you talk a little bit about that?

TAI: Yes. You know, first, let me start with the concerns that our partners have raised with us we take extremely seriously. And I also think that, you know, the forthrightness of the conversations that we’re having are really a reflection of the strength of the relationship. Unless you have that trust, I think that you don’t have the depth of the conversation, and you can’t push each other as hard in terms of thinking creatively about how to address each other’s concerns. First, you’ve got to understand each other’s concerns.

So I think that the taskforce that President Biden, President von der Leyen, have established between the NSC and President von der Leyen’s Cabinet, are doing really important work in connecting us, in helping us understand each other’s ambitions and each other’s anxieties, so that we can get to the place where we are taking the tools that we have to address climate, to facilitate this clean energy transition, so that we can do it together, and effectively.

BESCHLOSS: Wonderful. We can’t not ask you about what happened last week on the Africa Growth and Opportunity ministerial meetings that you referred to in your remarks earlier. And you said, “The future is Africa.” And we see that in our work last year, along with partners, a lot of these—both the private sector, the public sector, and many are seeing the future in Africa being really, really important. How is the administration’s worker-centered trade policy reflected in this?

TAI: Well, it’s wonderful. I think it’s so energizing to have leaders, and the trade ministers, from over forty countries on the continent come here to Washington, D.C.

BESCHLOSS: We noticed with the traffic jams.

TAI: I know. I know it. I know it. They noticed it too. (Laughter.) Yes. You know, the—part of—part of what I think is so exciting is the reminder that the population on the continent is the youngest population in the world. And also, the recognition of African leaders, whether, you know, the African Union, the AfCFTA, that’s the Continental Free Trade Area, the individual countries, the regional groupings, the recognition on their part that their greatest asset, their greatest resource, is their people. And their particular focus on their women and their youth. And knowing that in order to unlock the potential for African in driving global economic prosperity, they have got to figure out how to unlock that potential. And I think that that is a natural segue for our conversation on worker-centrism.

In the AGOA ministerial, that is really the core of what we talked about. Whether it’s respect to the existing preference program, you know, thinking about how middle-income countries that might graduate from this preference program—how they might continue their economic partnership with the United States. And also, thinking about more than just trade, but what are the things that we can do to attract investment from the private sector—and we talked about this—to Africa are going to be critical.

But I also—I think that was that—all the days are blurring together. I think it was Thursday afternoon, or maybe even Friday afternoon, the Solidarity Center brought a very large group of trade union members from a lot of different countries in Africa to USTR. And we sat down—my team, I came and sat down as well, to talk through their aspirations and their challenges. And I think that between, you know, sitting around a very large table with the African trade ministers and also our members of Congress, but then also meeting the people who do the work of organizing and advocating on the ground, have really unlocked, for me, a desire to deepen our engagement.

And I’ll just share with all of you, I very shamelessly went fishing for invitations to the continent next year. And I’ve told my—I’ve told my team just this morning that I hope they get their running shoes ready because, you know, we’re going to be hitting the road quite a bit in 2023.

BESCHLOSS: Wonderful. That’s great.

At this time, I’m going to invite members to join in our conversation with their questions. And just reminding everyone this is a hybrid meeting. So we’ve got people both on virtual as well as in the room. And the meeting is on the record. So we’ll take our first question from here in Washington.

Q: Thanks. Steve Charnovitz at George Washington University.

Thank you, Ambassador, for your remarks. You mentioned—and for your leadership. You mentioned that you wanted to try to achieve more on worker rights in the World Trade Organization. And I wonder if you could elaborate on what you think the WTO should do? And I recall that you’ve met with the director-general of the ILO in recent days. And what your thinking is with regard to the United States being a larger player in the ILO on these issues, and how the—what the ILO’s role is, versus the WTO, on worker rights.

TAI: Certainly. Thank you for that question. That’s great. It really gets to—we feel seen, I feel seen. For the United States in our trade practice, it has become a fully accepted, incorporated, bipartisan, longstanding principle that our trade practice includes disciplines that address worker rights and protections and environmental protections. That’s not reflected in the multilateral architecture. But you see these multilateral institutions starting to show their age. I think that in today’s economy, an organization like the WTO doesn’t stay relevant, doesn’t do what it could do for the betterment of people’s lives and raising standards of living, if it cannot have the conversations around how trade policies are impacted by and impact the rights of workers and protections for the environment.

So, you know, that’s one piece of it. I think the other thing, from my engagement with the ILO, is taking a lot of inspiration from not just the ILO but a lot of our trading partners who have this tradition of tripartism. Which is to bring together governments, employers, and workers to address economic policy issues. That is an area where I think that, you know, whether it’s the Trade and Labor Dialogue with the Europeans or, you know, what we’re building out in the Indo-Pacific Economic Framework, I think that is a practice that I think that the WTO should consider again in leaning into remaining relevant and being that force for good, which I know Dr. Ngozi has embraced as a vision for the WTO. To be relevant and to be that force for good in people’s lives.

BESCHLOSS: Wonderful. I think we also have a question here.

Q: Alan Raul from the law firm Sidley Austin.

Ambassador Tai, you mentioned the Trade and Technology Council a number of times, and our relationship with the European Union in the TTC, where it’s not all been roses and light. There’s been some conflict. It’s been ameliorating on data privacy transfers recently, at least there’s some hope. But the European Union has proposed a lot of technology regulation—Digital Markets Act, Digital Services Act, AI Act—a lot of which is going to have a primary impact on U.S. technology companies. What’s the role of USTR in addressing those issues?

TAI: Well, thank you for the question. When you say not everything is roses, trust me, in trade it’s seldom ever roses or, you know, we’re comfortable with being uncomfortable. On your specific question, with respect to the Europeans, this has been a topic that we have engaged quite a bit on with not just Valdis Dombrovskis, but with the Executive Vice President Margrethe Vestager. And one of the—one of the really important themes that I hear from the European side around their regulatory efforts is the desire to safeguard competition, to create the room for new businesses to enter the market in the digital economy, to allow for them to grow, to allow for them to continue to compete.

On that front, I think that those are principles that I see very robustly embraced by our own policymakers and legislators. And so I think that on our engagement with the European on these digital, economic, regulatory efforts, there are two things. One is to articulate concerns around the impacts of what they’ve put together. The second one is to engage on legitimate policy objectives, that we may very well share, to figure out how we can collaborate better and how we can make our partnership work more effectively for those goals that we agree on.

BESCHLOSS: I think we’ve got a virtual question.

OPERATOR: We will take our next question from Christina Davis.

Q: Hello. I’m Christina Davis, professor of government at Harvard University. Thank you for your fascinating remarks. I’ve learned so much from your work for the U.S. trade policy.

I’d like to ask about your response to the WTO panel ruling last week that overturned the United States trade protection for steel and aluminum. And the U.S. has responded that the WTO does not have the jurisdiction to judge on national security, that every member should respond to its national security on its own decision. How will the United States deal with trade partners mimicking the United States, where an industry is protected for national security? Will you have a response when they follow the same policy we have adopted?

TAI: So let me get to the core of your question, and what we said last week in response to the panel report. On national security. Our position has long been that—just look at the text of the agreement—that national security decisions that are made by governments are a source of incredible responsibility. They should not be made willy-nilly. But for the integrity of a multilateral institution like the WTO, that it should not get into the business of second-guessing the national security decisions that are made by sovereign governments. And I think that our response is very much focused on the reasoning that is in that panel report, which gets deep into creating requirements and parameters for what is or is not a legitimate national security decision.

I think that the WTO is getting itself on very, very thin ice. And I think that it really challenges the integrity of the system. So that’s my answer for you, which is it is the responsibility of governments to bring integrity to their decisions on national security. But it is a very challenging place to be to have an unelected, not really accountable, decisionmakers in Geneva second-guess processes that are run through a government like ours, which is democratic. And also for a country like ours, that many others look to, to defend on national security not just for ourselves but for others.

BESCHLOSS: Absolutely. I got a question here.

Q: Thanks very much. Shanker Singham. I’m the CEO of Competere and an academic fellow at the Institute of Economic Affairs.

So I want to talk a little bit about—or ask you a question about your comments on fairness, and particularly thank you for your comments about anti-competitive, non-market practices. It seems like the pendulum swings from sort of doing nothing about them to sort of reacting with national security tariffs, or 301 tariffs, or whatever. Is there a more nuanced way of dealing with anti-competitive distortions? And what’s your reaction to the global market distortions language of something like the Portman-Coons bill in the Senate? Do you think there’s a pathway there to manage the China relationship in that way?

TAI: There’s a lot in your question. I’m trying to kind of tease out the gist of it. I think that in this area we need—we need to do things differently. We need to work at our traditional tools and think about how we can use them more effectively. We need to look at the creation of new tools, where our traditional tools are not able to make a difference. I’ll give one example, which I’ve pointed to quite often, which is our anti-dumping/countervailing duties. Those are about fairness. Those are about leveling the playing field. Those are about addressing dumping and illegal subsidies that undercut the ability of your own producers to produce and to survive.

Those are very, what I would call, scalpel-like. They’re very focused remedies. But what we’ve seen over time with many, many industries here, is that the scale of the challenge that we’re facing with respect to China, and China’s ability to impact the global market, means that these narrowly tailored, defensive tools that we have haven’t been able to prevent the hollowing out of entire industries here. Critical industries, whether for our national security defense or, frankly, for our communities and our social fabric, even.

So, you know, one of the questions that I have raised is what are the new tools that we can develop? And are there new tools that we can develop in partnership with other economies that are structured like ours, and founded on similar principles of open societies and, you know, desire to have open markets? And how do we develop those tools so that we can find our way to a coexistence where we can continue to run our economies the way that we want to, and to safeguard the opportunity for our producers and our workers to compete?

BESCHLOSS: I think we’ve got a virtual question.

OPERATOR: We will take the next question from Bryce Barros.

Q: Hi. Good afternoon. My name is Bryce Barros and I’m the China affairs analyst at the German Marshall Fund of the United States.

My question for you, Trade Representative Tai, is, building on the back of a previous question about some of the data trade protectionism issues with the European Union, have you found that some of the recent trade protection policies that have come out of Brussels and other European capitals might be an impediment to finding closer policy overlaps on issues related to trade in China? And do you think that there’s a role for your office to fight economic coercion done by large states, say, like the PRC? Thank you.

TAI: Can I ask a clarifying question? What specifically—are there specific issues or challenges that you were pointing to, or just sort of in general describing the landscape of partnering with the EU?

Q: So some of the work that I’ve come across, there’s been a lot of complaints about the IRA, specifically, in terms of trade subsidies for technology and manufacturing. And sort of related within that broader realm, as well as data protection for, like, say, what’s going on with Facebook. And then potentially some of the issues tha

TAI: OK. Got it. I haven’t heard any complaints about the IRA, so—the Inflation Reduction—(laughter)—so just have to trust you. No, I’m just kidding. I’m kidding. (Laughter.) No. I mean, you know, I guess the way we’ve often described the U.S.-EU relationship is, like, the closest of siblings. And, I don’t know, I don’t know of that offends anybody. It’s really meant to demonstrate the closeness of the relationship, and also the history of driving each other crazy. And it goes go both ways, I know.

Look, I think that in terms of the opportunity to work together with the European Union on shared challenges, that is the entire Working Group Ten in the Trade and Technology Council, which is on global trade challenges. And the work that we are doing goes beyond what we’re doing in the TTC on large civil aircraft. We’ve created a framework founded on our calling a truce on the Boeing and Airbus WTO disputes that went on for nearly twenty years and resulted in a whole bunch of tariffs that we put on each other, to find the space where we can manage our differences but keep our eye on the ball in terms of really significantly anticompetitive practices that are going to squeeze the players in this industry soon.

I think that I have deep confidence, immense confidence, however you measure confidence, that we will be able to convert on these opportunities to cooperate with the European Union. Not just because we feel like siblings, but also because we have to. We have to, in order to be successful. And we need for Europe to succeed. And they need for us to succeed. And I think that basic calculus is going to be what guides us through the myriad and serious squabbles that we have with each other.

BESCHLOSS: As you said, they’re serious but there’s communication. And I think it has been really interesting, for those of us who are observing, looking at the back and forth on this very topic. And green climate is something that you’re leading, but Europe is leading too. And I think hopefully we’ll end up in a much better place, thanks to this.

I think there’s a question at the back.

Q: Matthew Goodman with CSIS.

Ambassador Tai, you mentioned the interest in the Indo-Pacific region in the digital transformation. It’s reported that you tabled texts in some parts of the trade pillar of the Indo-Pacific framework last week at Brisbane, but not on digital economy issues. I wonder if you could say, you know, when you might be considering tabling such texts, and what your approach, more broadly, is to negotiated trade, digital trade, outcomes in the Indo-Pacific.

TAI: Sure. Sure, happy to address that. So in the first round of negotiations the first set of proposals we put on the table in the trade pillar are on trade facilitation. So for those of you who don’t live and breathe the terminology—which, the boring terminology of trade—trade facilitation is about those processes and practices and policies which are at the—moving goods across borders. What we call good regulatory practices, which is essentially transparency and regulation, notice and comment disciplines, whether it covers regulation for goods or services. And then a third area that gets to agricultural policymaking, a conversation around and engagement on science and risk-based approaches to the regulation of agricultural trade, as well as the sustainability in agricultural practices.

These are the first three proposals that we’ve put down, because in some ways they are the most obvious, and with respect to the promotion of resilience and sustainability. Looking ahead to the next round of negotiations, it is our intention to put on the table proposals that really get to the core of the Indo-Pacific economic engagement, which will be on workers, on the environment, and on digital. And each one of these will take us more time, which is why we’re doing it in the second tranche, because it’s really important for us to consolidate our thinking, to push ourselves on innovation.

On the digital piece, which is the focus of your question in particular, what I want to reflect is it is really important for us to engage in a digital economy negotiation and collaboration with these partners that is comprehensive and holistic. It has to be something that reflects the interests and aspirations and anxieties of our big tech companies, our small tech companies, our workers, those who are focused on our clean energy future and our environmental protection, and also those who are experts and who are working on issues around our freedoms and our democratic norms.

So in terms of the engagement on the digital economy, it’s new. We’re bringing a new approach. But also, there is a particular attention that we are paying to our partners in the Congress around all of those areas that are subject to active work, debate, legislative effort. In what I do in trade, I need to make sure that I don’t get out ahead of where our policymakers are. And in this area, whether it’s in the United States or in other countries, we see our regulators grappling with similar issues, maybe in different ways. And I think that one of the things that we’re looking very carefully at in some of these areas, whether it has to do with online liability, with privacy, is that the more work that our Congress can do to legislate, the more tools we have to work with and the more specificity we can bring to the negotiation.

So this is an area that is really important. And this is really important for us to get right. And I think that it is also an area where our partners know it is important for us to be engaging. So I appreciate that you are focused on it, that you’re paying attention. And it is—it is one of the concepts that we are most eager to make progress in improving.

BESCHLOSS: Thank you, Ambassador Tai, for this incredible conversation. There are many more questions, so I think you could spend at least another hour here today. But I just wanted to take this time, on behalf of our members, to thank you. And thank you, everyone, for joining us for the conversation. And there will be a video and transcript of today’s meeting posted on CFR’s website shortly.

TAI: Thank you so much, Afsaneh. It’s so nice to see so many friends here. Thanks. (Applause.)

(END)

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