Amb. Tai: “We’ve Got to Change Our Approach” to Trade

CHRISTIANE AMANPOUR, CHIEF INTERNATIONAL ANCHOR: Now, China’s new foreign minister has called for stabilizing relations with the United States, it comes amid the possibility of a meeting to reset economic ties between the two countries later this month. Ambassador Katherine Tai serves as the U.S. trade representative, a child of Chinese immigrants, she’s breaking barriers in that role and she’s joining Walter Isaacson to discuss the Biden Administration’s approach to trade, and how her heritage influences her work.

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WALTER ISAACSON, HOST: Thank you, Christiane. And Ambassador Katherine Tai, welcome to the show.

AMBASSADOR KATHERINE TAI, U.S. TRADE REPRESENTATIVE: Thank you so much.

ISAACSON: The big news this week is reports that you will be meeting in Detroit with the Chinese commerce minister. It would be, if that happens, the highest-ranking meeting for the U.S. in about a year with Chinese counterparts. I know that’s not been confirmed, but what would be the significance of that meeting, if it happens?

TAI: Well, I am hosting the AIPAC ministers responsible for trade meeting at the end of this month. And as you may know, the United States is one of the 21 member economies of AIPAC, and we are the host for this year, 2023. I’m really looking forward to hosting this meeting in Detroit to show off the history of Detroit as a center of American innovation. I think probably the most significant aspect of a meeting, should it happen, is to provide us with an opportunity to reconnect with one of my interlocutors in Beijing, to check in since the administration transition in Beijing as President Xi Jinping has taken his unprecedented third term there. So, I think in my expectation, it will be an important reconnection, a bit of a level sets in terms of reestablish communication channels and relationships.

ISAACSON: Do you think that it’s time for a reset or a leveling of this relationship? It’s been very confrontational. And you said in one of your talks that we don’t really want to decouple from China, we can’t do that.

TAI: We have a lot of challenges with China. As someone on the economic team, let me just focus on the economic relationship. The U.S.-China relationship is one of profound consequence in the global economy. We are the world’s two largest economies. How we relate to each other has grave implications, serious implications, not just for us, the U.S. economy, our workers and our businesses, the Chinese economy, it’s workers and businesses, but for the entire world. And that is the reason why it is so important for us to take an extremely responsible, deliberative approach that is focused on being strategic, being effective in addressing the significant challenges that we do have in this relationship. So, I think that it’s not confrontational that we are looking for. However, many of the conversations that we need to have are going to be difficult.

ISAACSON: Which ones are going to be the most difficult?

TAI: I think that fundamentally, in terms of the U.S. approach to trade. We are working on rebalancing in many different ways. When I took on this job and President Biden asked me to join his cabinet, he asked me to bring a new approach to trade that the Biden administration would advance what he specifically asked for to be a worker centered trade policy. And that reflects a recognition that the trade policies that we have pursued across administrations over the past decades, the trade policies that have been prioritized worldwide have really hit some significant limits. We are seeing for ourselves what happens when you prioritize trade liberalization, the maximization of efficiency at the expense of investing in your workers.

ISAACSON: Wait, wait. So, you’re saying the past 20 years of trade liberalization have actually been bad for the American worker and we have to change that, you, Jake Sullivan, President Biden, are changing our trade policy?

TAI: Well, we’ve got to change our approach and we are looking for different trade outcomes. We are looking for outcomes that are more inclusive. We are advancing approaches and processes that are more inclusive also. And when we say we’re going to put workers at the center, that is a recognition that U.S. trade policy has, for too long, not had workers at its center and had placed workers at the periphery. This is needed, not just for us, but I think that it is a globalization trend that we are trying to advance with our partners, which is to say that, in a world where you have maximized and you have incentivized cost efficiency at the expense of everything else, we see for ourselves widening inequality, economically, not just here in the United States, but in economies around the world. So, we need more inclusive outcomes. At the same time, we’ve all just gone through, and we’re still going through, economic disruptions that have come from the pandemic and demonstrated how fragile our global supply chains are. We’ve done a lot of diagnoses in terms of the vulnerabilities in our supply chains, but for those of us working new trade, it is very, very clear that the incentives that we have put into the global trading system have failed to provide for resilience in the global economy, and that is something we badly need.

ISAACSON: You talk about COVID disrupting the supply chains. Well, today is the day that they lift the federal emergency on COVID. How will that change trade and what type of snarling of trade was caused by COVID? What are you going to do about that?

TAI: Sure. So, in the early days of COVID, if it isn’t too painful to think back to March of 2020, when we and a lot of the other economies around the world went into lockdown. At that time, the entire world needed the same things at the same time. We did not have enough supply for the demand. So, make more supply. But what we discovered was so much of what we needed has been concentrated in one economy, and that is the Chinese economy. And the Chinese economy was the first one to lockdown because of COVID. So, they were not going to the factories to manufacture, and very little was coming in — coming out of — or being produced there. I was working for the U.S. Congress at the time. Members of Congress and their staffs went from being the representatives in Washington to being their supply chain representatives to try to find whatever supply there might be around the world and to procure it and obtained it for their constituents back at home. I think for us, those painful lessons have to inform how we approach trade policy going forward, to ensure that the next crisis that we encounter, whether it’s an extreme climate event, whether it’s another epidemic or a pandemic, or a natural disaster or increasingly because the geopolitical tensions, that we have built into the global economic system shock absorption. And alternative pathways, plans B and C, to allow us to pivot and to adapt to the crisis situation.

ISAACSON: When you were testifying in front of a House Committee a few weeks ago you got into a conversation with Congresswoman Steel, a Republican of California who is a Korean-American heritage. And in some ways, it was Republican versus a Democrat, but two Asian-American women debating how trade policies could be. But I was also struck that there were some consensuses that’s being formed on trade policy between Democrats and Republicans, unlike on other issues.

TAI: That’s right. Although, you know, in trade policy, something very interesting, and I’ve seen this happen in the competition policy where the anti-monopoly folks, the antitrust people are working. We see both of these areas two centers that are forming. So, you know, in our politics, usually, there’s a center and then there are the fringes. And in trade, for instance, something that you followed, the traditional center has been, you know, free trade Republicans and the pro-business, you know, new Democrats. What we see is that the progressives on the left and the populist on the rights are meeting in a new center. One that is pro-worker and pro-competition that is trying to take on the oversized corporate power, looking to rebalance, right, the equities within our system, and that gives me a huge amount of room to move on a bipartisan basis. So, on this too, I have a lot of hope that there is a way for us to advance trade policy that is well supported here at home that allows us to lead with confidence around the world but also allows us to show to the American people that we are investing in them and we are not selling out their futures through our trade policy.

ISAACSON: The Biden administration hasn’t really pursued a comprehensive free trade agreement that would help us on things like batteries, supply parts, and we’re very dependent, not just on batteries, but the enhanced lithium and — that’s been refined in China. How come we don’t have a broader free trade agreement on things like that? And is it going to hurt our EV, our electric vehicle industry?

TAI: I think the reason why we’re not doing free trade agreements the way that we’ve traditionally done them right now, those types of negotiations, is precisely because when you leave an agency like the U.S. Trade Representative’s Office, and you are working with all of the experts and all of the specific areas and the engineers around all the cogs and the wheels inside of a trade agreement, you recognize that a traditional free trade agreement that is broadly liberalizing, like we have negotiated in the past, is not actually a very good supply chain creating framework.

ISAACSON: Wait, wait. Why is that?

TAI: Yes. Because more often than not, they are designed to be leaky. Free trade agreements between countries, between two countries or three or more, are meant to facilitates integration between those countries. And there are areas where you see very successful examples. However, the preferences that are created through those agreements are not airtight. They are designed to be weighted in favor of overall liberalization. So, every single one of our free trade agreements does create benefits for what we would call free riders, other countries not a part of that agreement. And the concern that we have right now is that part of that aggressively liberalizing weighted in favor of liberalization type of framework has led us to the point where when you are chasing the lowest cost, that production has shown that it ends up cooling in only certain places around the world, and sometimes only one place.

ISAACSON: But during this period, when we’re walking away from what you call broad base, free trade agreements, China is doing the opposite. China has created major alliances and free trade agreements and — throughout the Pacific region, and actually, throughout the world. And you talked about the Indo-Pacific economic framework that we’re still talking about, we’re not even close, we’re not even — there’s not even much of a substance there. We’re not near signing an agreement. Are we going to lose out to China if we let them do major free trade agreements and we don’t?

TAI: No. And we can’t and we won’t. And I think that your characterization of the Indo-Pacific economic framework, while I hear it quite often, reflects a major misunderstanding of what it is that we’re doing. Our vision for the Indo-Pacific economic framework is that it is a negotiating form. We are negotiating important types of rules and important approaches. At the same time, we see this as a framework that is going to endure overtime. This is not a one and done. If you look at a lot of the trade agreements that have been done, certainly ones we’ve done, and have been done around the world, you invest all of this political capital to get this one agreement done and then you move on, and you don’t look back. Trade agreements take too long to negotiate. They are not participatory enough. And right now, what we need are agile systems, agile approaches to cooperating with our partners and our allies to adapt to all of the changes that are happening in the global economy. And I would argue that our failure to innovate the way that we trade and the way the negotiate is more dangerous to our ability to survive and to thrive than the web of what they call the noodle bowl of trade agreements that have been existing in the Asia-Pacific for a very long time.

ISAACSON: Florida governor, Ron DeSantis, just signed legislation saying that the Chinese could not buy land in Florida, unless they were U.S. citizens or permanent residents. Let me read you something he said. He said, “we don’t want the Chinese communist party in the Sunshine State. We want to maintain this as a free state of Florida”. There’s been similar legislation in Texas, and even something introduced in the U.S. House of Representatives. What do you say to that?

TAI: So, I was aware of the legislation pending and introduces in Texas, but not in Florida, which sounds like it’s gotten much further along. What I would say to this is, like so many of our challenges with China, our challenges with the governments and its policies. The challenge is not with the Chinese people, it is not a problem with Chineseness (ph) or people of Chinese heritage. And so, here in the United States, because I am a member of the Asian American, Native Hawaiian Pacific Islander community, it’s something that I think about quite a lot, but certainly, because our AA and NHPI communities are an integral part of the American economy, the American polity of America, it is even more incumbent on us to ensure that when we take on the challenges that we see from our relating to the Chinese government that we exercise a very high degree of discipline into finding what the challenge is that we’re facing. Only by exercising that discipline do we have the opportunity to fashion policy solutions that will be tailored to addressing that challenge. If we are lazy or sloppy in identifying the problem, the harm that we stand to do to America and our fellow Americans is significant and unacceptable.

ISAACSON: Ambassador Katherine Tai, thanks so much for joining us.

TAI: Thank you very much for having me.

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