U.S. Isn’t Seeking a ‘Divorce’ From China, Trade Chief Says

(Bloomberg) -- The U.S. is seeking to realign its commercial ties with China rather than seek a “divorce” between the world’s biggest economies, trade chief Katherine Tai said.

Asked whether U.S.-China tensions could lead to decoupling, Tai said the Biden administration’s policy was focused instead on “realignment in the global economy.” That includes addressing the lack of visibility, accountability and diversity in supply chains that has led to disruptions in recent years, she told Bloomberg Television’s Haslinda Amin in Singapore in an interview on Tuesday.

“I would focus really on the kinds of changes that we’re trying to bring, which are really not about stopping trade or trade divorce,” Tai said. “They’re really about bringing reform and a more strategic approach to trade.”

Tai’s remarks follow a congressional hearing last week where she said discussions with China have become “unduly difficult” and the U.S. needs new tools to stand against anti-competitive behavior by the world’s second-largest economy. She told lawmakers it was time to forget about changing China’s behavior and instead focus on rebuilding the U.S. industrial manufacturing base and making domestic investments to counter the Asian nation.

In the interview, Tai gave few details about specifics on dealing with China, simply saying her office was seeking to “create incentives for our economic actors to ensure that this relationship is one that feels balanced, that is fair.”

Tai also said that she would reserve judgment when asked whether China’s actions to remove a key sticking point in its dispute with the U.S. over audit reports for companies listed on U.S. stock exchanges is a positive sign for the nation’s flexibility with regard to negotiations.

“As a trade negotiator I know that the devil’s always in the details,” she said, while adding that she has been watching the issue very closely.

In early 2020, after a two-year tariff war, the U.S. and China agreed to the so-called phase one deal, with the U.S. reducing some duties in exchange for Beijing pledging to address intellectual-property theft and buy $200 billion in energy, farm and manufactured goods along with services through last December. China fell more than one third short of those commitments.

Tai’s office is now facing a review of the first group of tariffs on more than $300 billion in Chinese imports needed to prevent their expiration.

A U.S. federal trade court last week also ruled that the Trump administration failed to adequately justify its decision to expand tariffs on hundreds of billions of dollars worth of Chinese goods, and the Biden administration must present a fuller explanation to keep them.

Tai said she couldn’t comment on the court case but noted the China tariffs were having an impact, particularly regarding trade flows in Southeast Asia. Still, she added that it was an open question on whether the tariffs are effective “with respect to how we intend to realign our relationship with China on trade and economic matters.”

Tai is on a three-day trip to Singapore focused on strengthening the U.S. relationship and identifying areas of cooperation through the Indo-Pacific Economic Framework, which is part of President Joe Biden’s strategy to play a bigger role in Asia to counter China. The Biden administration has made clear that it doesn’t plan to rejoin the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which was abandoned under Donald Trump. That’s left an opening for Beijing, which is vying to join it.

Countries like Singapore have urged Washington to focus on trade with Asian nations wary of being forced to pick sides in the broader competition with China, which has accused the U.S. of seeking to divide the region into blocs and create what it calls an “Indo-Pacific NATO.”

Tai said that isn’t the message being sent by the administration, but rather that the U.S. wants to use the economic framework with its partners “to collaborate on key economic issues and emerging global challenges.”

The Biden administration has said talks on the framework are focused on supply-chain resilience, including for semiconductors and technology, as well as fair trade, clean energy, taxation and anti-corruption measures. They’re also expected to include digital issues like data localization and cross-border data flows.

Asked about U.S. attention on making sure that China and other countries are not violating U.S. sanctions to provide aid to Russia over the nation’s invasion of Ukraine, Tai said that countries are “all watching each other very, very closely.”

“These decisions are going to be consequential, not just with respect to the conflict in Ukraine, but we are going to be impacting each other in terms of the values that we express through our actions,” Tai said.

U.S. lawmakers have criticized the administration for failing to include negotiations on lowering tariffs, a traditional goal of trade deals, in its plans for the framework. In the interview, Tai dismissed critics who say that U.S. policy lacks ambition.

“For the people who are criticizing our trade policy, it is either because they are not hearing us when we describe what our objectives are, which is to bring a new approach to trade that ensures that trade policy can be and is a force for good,” she said. “And I think that some of the other critics are impatient.”

The Biden administration is focused on “ensuring that trade is a tool for moving us into a better world,” Tai said.

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