USTR Says Supply Chains in Western Hemisphere Better for Resiliency

Speaking at the Washington Conference on the Americas in Washington, D.C., May 2, Tai said, as she has many times, that lowering tariffs is no longer the primary objective of U.S. trade policy. "This is different from the liberalization for liberalization’s sake version of global trade that we have had for the last several decades," she said. Rather, the U.S. is focused on coordinating with businesses to build supply chains in the Western Hemisphere.

"Ensuring that there are more complete supply chains within regions is one way to build in that cushion or shock absorption for when we inevitably come upon the next big crisis or shock, whether it’s climate change, whether it's a natural disaster; whether because of a flare up in geopolitical tensions," she said.

Council of the Americas Vice President Eric Farnsworth asked Tai if she would be open to adding Costa Rica to USMCA, as that country has said it would like. Costa Rica is in CAFTA-DR, the Dominican Republic-Central America Free Trade Agreement, a trade pact that has not spurred as much investment and export growth as NAFTA did for Mexico.

Tai said that "the task I look at most: what are the innovations in the USMCA that we can carry forward in looking at our other partnerships in the region, and look at the regional potential, and focus less on the format of the FTA itself."

She added, "the traditional trade agreement was something we built out for our aspirations that predate the challenges that we're facing today." Today's challenges, she said again, are environmental sustainability, supply chain resilience and spreading the benefits of trade across all societal groups.

As she discussed her trip to Brazil, she said that country's president is facing a lot of the same challenges as President Joe Biden, when it comes to protecting the environment while also advancing manufacturing growth.

"Democracies are hard, but I think that we understand each other," she said. She said both the U.S. and its partners are working to "make the case, demonstrate to our people, to our electorates, that we are working on their behalf."

She linked that idea to the renegotiation of NAFTA, which she said happened because of a backlash against free trade. It was really important to "remediate some parts of the NAFTA that had really come under criticism over time," such as allowing free trade in goods with Mexico putting downward pressure on U.S. workers' job protections, and downward pressure on environmental standards, she said. She said the Democrats who pushed for changes to USMCA in 2019 were "trying to raise standards across the board."

She said their ambition -- Tai was the lead staffer during these negotiations, first during the Donald Trump administration, and then with Mexico and Canada -- was to more tightly integrate already integrated sectors. "How do we address leakage? You see a lot of that in the auto rules of origin," she said. She did not mention a USMCA panel said the U.S. was wrong to impose a stricter interpretation of those rules of origin that is not in the plain text of the autos chapter.

Tai said strengthening enforcement, whether through the rapid response mechanism aimed at reinforcing Mexican labor reforms or traditional dispute settlement, is paramount.

She also mentioned that "the case we brought against Canada now in its second iteration," about U.S. dairy exporters' access to Canada, has been "a source of friction for a very, very long time."

She also said her office is addressing tensions with Mexico over its biotechnology trade policies and energy investment policies.