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Tai Expresses Support for GSP, Interest in Reopening CAFTA

In more than four hours of questioning during a hearing March 24 before the House Ways and Means Committee, no member of Congress advocated for lessening tariffs on Chinese goods under Section 301, or for reopening exclusions applications.

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In fact, committee Chairman Jason Smith, R-Mo., suggested that the 25% tariffs on billions in Chinese imports is not enough, and that China does not deserve most favored nation tariff treatment. While U.S. Trade Representative Katherine Tai did not endorse that idea, she did say that she would like Congress to pass new tools or update enforcement tools "to ensure this toolbox of enforcement in trade can keep pace with the times."

For the second day in a row of questions on the administration's trade agenda, Tai faced complaints from both sides of the aisle that frameworks such as those being discussed in the Indo-Pacific Economic Framework and the 21st Century Trade Initiative with Taiwan do not do enough to increase agricultural products' market access, and that the countries in these negotiations are not satisfied with what's on offer -- they want lower tariffs on their exports to the U.S.

While appearing in the Senate the day before (see 2303230030), Tai expressed her open-mindedness to negotiating traditional trade liberalizing deals with the right partner at the right time, but in the House, she vigorously defended the administration's view that while free trade has been a boon for agriculture, it has devastated manufacturers.

When Rep. Carol Miller, R-W.Va., argued that IPEF is far less effective than the Trans-Pacific Partnership, Tai replied that tariff cuts have favored U.S. agriculture producers, but she added, "Across the industrial areas, what we have seen is the combination of the tariff cuts and those rules of origin have led to a deindustrialization and an erosion of our capabilities."

To Rep. Darin LaHood, R-Ill., she said: "Yes, we are not pursuing traditional fully liberalizing trade agreements, because we see those as part of the problem we are correcting for."

Several members from both parties told Tai they wanted the Taiwan trade initiative to just be the first step on a path to a comprehensive free trade agreement. Tai told Rep. Nicole Malliotakis, R-N.Y., that the problem with negotiating an FTA with Taiwan or anywhere in East Asia is that in any agreement, rules of origin allow some proportion of a good's inputs to be from outside the partner countries. She said countries in that region have supply chains that "are concentrated in one particular economy," a reference to China.

"We are trying to take very strategic steps to make sure when we do engage … we are building resilience for each other and we are not further entangling ourselves in dangerous supply chains," she said. "In terms of trying to bring this advanced, more strategic thinking, especially to this tariff liberalization, this is a very scary, lonely place to be."

Chairman Smith recently traveled with members of the committee to Mexico, Ecuador and Guyana, and he told Tai that he told the Mexican president that blocking genetically modified corn from the U.S. is not following USMCA obligations. "I will insist on moving forward with dispute settlement if your concerns are not addressed" during technical consultations, he told her.

Several other members who went on the trip asked about the Generalized System of Preferences benefits program, as Ecuador is a member, and wants the program restored.

Separately, several Republicans asked Tai what is the hold-up with getting GSP renewed. She tended to point out this is in Congress's hands. When Rep. Blake Moore, R-Utah, specifically tried to find out what the administration would oppose in a GSP rewrite, Tai said her team would work with the committee. She said there is a very strong case for GSP. She said an update to GSP needs to have planks that support labor rights and the environment. "Trade is about more than goods crossing the border," she said. "And, yes, it should be usable."

Reps. Dan Kildee, D-Mich., and Linda Sanchez, D-Calif., asked if the USTR would reopen the Dominican Republic-Central America Free Trade Agreement, as the previous administration did with NAFTA, because labor rights are not being honored. Kildee said that violence against union organizers continues in Guatemala and Honduras. Tai told Sanchez that "the opportunity for leveling up the DR-CAFTA is something we think about in a number of different ways."

Rep. Mike Carey, R-Ohio, brought up de minimis, and said it's a balancing act in trying to value the savings it offers to businesses and consumers and the fact that Chinese exports avoid tariffs through the provision.

He asked if the U.S. should allow shipments from foreign-trade zones to take advantage of de minimis. The FTZs have argued that Canadian and Mexican warehouses are receiving Chinese goods in bulk and then sending small packages into the U.S. under de minimis.

Tai said she would follow up. She said the way de minimis has worked since 2015 has "raised interesting questions," and she said one of those is whether the pattern of use now is what Congress intended.