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This Week In Trade

China tariffs here to stay, for now, and so is the threat of DST retaliation

Posted: March 29, 2021

Section 301 tariffs on $370 billion worth of Chinese goods are here to stay, at least for now, U.S. Trade Representative Katherine Tai told the Wall Street Journal, dashing the hopes of a new coalition of business groups clamoring for their removal.

Tai cited two reasons for not wanting to immediately lift the tariffs: She does not want to give away the negotiating leverage the tariffs provide for nothing, and she does not want to lift duties too hastily out of fear it could roil supply chains.

Tai didn’t tell the Journal when she might meet first with her Chinese counterpart, saying only that talks would be held “when the time is right.” USTR has not responded to questions about when and if the U.S. and China will hold a one-year check-in required under the phase-one deal, which is now more than a month overdue.

The National Foreign Trade Council last week spearheaded the launch of the Tariff Reform Coalition aimed at convincing the Biden administration to “reconsider the high tariff policies” put in place by the Trump administration.

USTR last week also made clear it wouldn’t give up negotiating leverage in trying to counteract digital services taxes. The Trump administration threatened to hit countries with tariffs if they imposed such taxes, which it has deemed discriminatory against major U.S. companies. Tai’s team on Friday gave that threat a number by telling the six countries that have adopted DSTs they soon could face tariffs of up to 25 percent on nearly $900 million worth of goods, in total.

According to USTR, the $880 million is about what those countries -- Austria, India, Italy, Spain, Turkey and the United Kingdom -- would collect from U.S. companies in DSTs. USTR also terminated four other Section 301 investigations into DSTs that were being considered by Brazil, the Czech Republic, the European Union and Indonesia, but left open the possibility those investigations could be launched anew if the jurisdictions were to impose taxes.

In the announcement, Tai said the U.S. remained “committed to working” toward a multilateral solution on digital services taxes at the Organization for Economic Cooperation and Development. Those talks include more 130 countries. G20 finance ministers in October called for the OECD to reach a solution on a new international tax framework by mid-2021. The Treasury Department leads the U.S. in the OECD talks.

According to her office, Tai on Monday will continue to “hold meetings with her international counterparts.” Tai last week spoke with 14 of her international counterparts.

While Tai has yet to talk to Chinese officials, Agriculture Secretary Tom Vilsack has met with his Chinese counterpart, he said last week, raising market-access issues. In a virtual event hosted by the National Press Club, Vilsack said “the overall market share that we currently have in the Chinese market and agricultural products has suffered as a result of the trade and tariff war.”

Before “the tariffs assessed by the Trump administration,” he added, “we had about 25 percent of their market. Today, it's about 15 percent. I raised that issue with the minister.”

The agriculture secretary urged China to meet its phase-one purchasing commitments, noting the country had significantly increased purchases of key commodities like corn and soybeans but adding “they could be doing more” in other areas like biofuels and dairy.

Vilsack added that “we acknowledged the need to cooperate on climate. There are things we can learn from them, they can learn from us, and that we can generally benefit agriculture writ large, that will be beneficial to making sure we have adequate resources to feed a hungry world. We clearly have a trading relationship that's important to U.S. agriculture. We obviously want to maintain that relationship.”

“The fact is, they need us,” he continued. “They may not like that, they may not want to have to acknowledge that. But at the end of the day, they can't grow enough, unlike the United States, to feed their own people, they need the import of food, and they can't necessarily import it from other sources without including the U.S. I think there's still work to be done on the relationship.”

Vilsack also said that because “commodity prices are better than they have been for quite some time,” additional trade assistance to farmers to offset the effects of retaliatory tariffs likely would not be needed.

Events

The World Trade Organization will release an updated 2021 trade forecast on Wednesday. In conjunction with the update, Ngozi Okonjo-Iweala will hold her first press conference as WTO director-general.

Wednesday also marks the deadline for USTR to send its annual National Trade Estimate on Foreign Trade Barriers to Congress. The NTE is a compendium of trade barriers U.S. companies face in foreign markets.

More events:

  • The Hudson Institute on Tuesday hosts Jingo Kikukawa, the director of the Japanese Ministry of Economy, Trade and Industry's policy planning and coordination division, for a discussion on how to secure post-pandemic U.S.-Japanese supply chains. Also set to participate: Shihoko Goto, the deputy director for geoeconomics at the Woodrow Wilson Center; Hudson senior fellows Thomas Duesterberg and John Lee; and Hudson’s Japan chair Riley Walters.
  • Assistant USTR for Agricultural Affairs and Commodity Policy Julie Callahan will give a speech on trade policy priorities for U.S. agriculture on Tuesday at the virtual 2021 Virginia Governor’s Conference on Agricultural Trade. Vilsack will also give a speech on USDA’s trade priorities and British Ambassador to the U.S. Karen Pierce will offer her insights on U.S.-UK agricultural trade.
  • The Atlantic Council on Wednesday will host a webinar on “Trade Disrupted: Global Shipping and the Future of International Commerce,” featuring Penny Naas, president for international public affairs and sustainability at UPS; Chris Rogers, trade and supply chains contributor at S&P Global Market Intelligence; Megan Greene, senior fellow at the Harvard Kennedy School; and Barbara Matthews, CEO of BCM Strategy.
  • The Washington International Trade Association and Association of Women in International Trade on Thursday will host a discussion on COVID-19 and the medical supply chain with Catherine Mellor, vice president of UPS; Meredith Broadbent, senior adviser at the Center for Strategic and International Studies; and Maddison Abboud, manager for global health at the U.S. Chamber of Commerce.
  • Peterson Institute for International Economics President Adam Posen on Thursday will discuss 2021’s global economic prospects with former Assistant Treasury Secretary for Economic Policy Karen Dynan.
  • The American Bar Association on Friday hosts a virtual discussion on the WTO Agreement on Trade-related Aspects of Intellectual Property waivers and access to COVID vaccines. Participants include Daniel McGlynn, corporate intellectual property counsel at SolAero Technologies Corp.; Gustavo de Freitas Morais, partner at Dannemann Siemsen; Archana Shanker, senior partner and lead of the Anand and Anand patent and design practice; Frederick Abbott, international law professor at the Florida State University College of Law; Ton Zuijdwijk, on the faculty of law at the University of Ottawa; and Peter Maybarduk, director of the Public Citizen's Global Access to Medicines Program. -- Brett Fortnam (bfortnam@iwpnews.com) with Dan Dupont (ddupont@iwpnews.com)

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