Biden’s Economic Concerns on China Go Beyond Trade Promises, Tai Says

(Bloomberg) -- The U.S. is raising concerns with China that go beyond the nation’s purchasing commitments under their existing trade deal, including Beijing’s state-centered industrial policy, President Joe Biden’s chief trade negotiator said.

U.S. Trade Representative Katherine Tai said that the administration “sooner rather than later” will finish its current first step of engagement with China, which includes discussion of the so-called phase-one deal from January 2020. Some parts of the agreement are set to expire at the end of this year.

China is far behind its purchasing targets, in which it pledged to buy an extra $200 billion in U.S. agriculture, energy and manufactured products over the 2017 level in the two years through the end of 2021.

“We’re raising with China our continuous concerns about the impacts of its extremely robust and very effective industrial policies on our ability to grow, on our ability to compete, on our ability to thrive,” Tai told reporters in Washington Wednesday. “That is a larger conversation that we feel very strongly that we have to have. It’s not necessarily reflected in the phase-one agreement.”

Washington and Beijing are at odds on economic, military and political fronts. Flashpoints include billions of dollars in tariffs on each other’s goods, U.S. concerns about China using American technology know-how to beef up its military, abuse of state-owned enterprises, subsidies, forced-labor allegations in the Xinjiang region, and conflict over supplying next-generation telecommunications equipment to other nations.  

President Xi Jinping and his lieutenants have elevated the role of technology and high-value-added manufacturing and technology in China’s economic policy making, directing resources to areas including artificial intelligence and semiconductors. Beijing is also pursuing “civil-military fusion,” or the innovation of dual-use products that can help China’s military and its corporate champions to surpass overseas rivals. 

Tai met with virtually with Chinese Vice Premier Liu He in early October to kick off discussion of the trade relationship between the world’s two biggest economies and the 2020 trade deal, officially known as the U.S.-China Economic and Trade Agreement.

The pact called for Beijing to make changes to regulations on intellectual property and other areas, and had specific targets for Chinese purchases of U.S. goods. Bloomberg calculations show that China has only bought half of the goods it promised to purchase so far.  

U.S. consumer prices rose 6.2% in October, the fastest annual pace since 1990. When asked whether faster U.S. inflation would be an impetus for rebalancing or removing some of the so-called section 301 tariffs on more than $300 billion of annual imports from China, Tai said that the administration is “looking at the big picture.”

“All of that is about the U.S. positioning itself in this relationship with China in the global economy to seek out the most advantageous position for us to remain competitive and to be able to thrive,” Tai said.

China’s performance under its trade agreement with the U.S. “hasn’t been perfect,” Tai said. “So what do we do about it? That’s the million-dollar question,” she said. “It’s something we’re working on,” she added. “We’re optimistic in our work.”

Asked if the U.S. is pushing to spur more Chinese goods purchases by getting the nation to lift its flight ban on Boeing Co.’s 737 Max aircraft, Tai said: “If you’re looking at where the weaknesses might be in terms of phase one, you should expect that we were talking through and exploring all of it.”

Tai is set to travel to Japan, South Korea and India starting next week as the Biden administration looks to strengthen trade and economic relationships in the Indo-Pacific region.

Biden and Xi also are scheduled to hold a virtual summit next week, although no specific date has been set, according to people familiar with the matter.

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