U.S. Trade Representative Katherine Tai speaks to Nikkei Asia about the Biden administration’s trade relationship with China on May 27 in Washington. (Photo by Kevin Wolf)
By TAISEI HOYAMA, Nikkei staff writer
WASHINGTON — The Biden administration is seeking ways to enforce the rules in the new Indo-Pacific Economic Framework, U.S. Trade Representative Katherine Tai said, describing the initiative as “not a traditional trade agreement.”
Trade is one pillar of the IPEF, which U.S. President Joe Biden kicked off on his recent trip to Asia. Strengthening supply chains, promoting infrastructure and clean energy, and fighting tax evasion and corruption will also be areas of cooperation for the U.S. and its Asian partners, according to the White House.
On enforcement, the U.S. is “pushing the envelope, beyond the traditional dispute settlement, to thinking about mechanisms for verifying that the rules are being followed,” Tai said.
Edited excerpts from the interview follow.
Q: Do your discussions so far offer you a sense of whether all member countries have an interest in participating in the trade pillar?
A: In terms of joining IPEF at the launch, really all that was required was for a participant to know that they will want to be involved in one of the four. Obviously, they can engage in up to all four. We don’t know yet, and we are creating room, in these next couple weeks, to further brief the group, to provide them with more information, and give them a sense for their comfort level, their assessment of which pillars they are ready to join now, which ones they may want to hold off and hold open the opportunity join later. So, that’s something that will be worked out over the next couple weeks.
Q: Do you expect India to join the trade pillar?
A: I don’t know. But I have built a very strong relationship with [Indian Commerce] Minister [Piyush] Goyal, and so I’m looking forward to this next phase of deepening these conversations with all 13 of the other economies, and answering the questions that they have, and working out some more of the details.
Q: Are you seeking to sign multiple trade agreements in each area in the trade pillar, or a comprehensive agreement that includes digital, labor and the environment?
A: We’ve got to get the conversation started and the engagement started. This is really intended to be a collaboration. Obviously, we have a vision for the kinds of standards that we want to set, that this needs to be a meaningful interaction. But, in terms of the formatting, I think we really want to let the substance drive the process and also to let the substance drive the format as well. So, leaving those questions open right now. But I also just want to remind you and your readers that the global economic situation we are in right now, and that we have been in for these past couple years, is really different from what we’ve experienced in our recent history. These are nontraditional times.
And that is why this engagement is around a nontraditional format. We’ve said this is not a traditional trade agreement.
One of the challenges of the traditional model is, when you have to do something fully comprehensive, it takes years. In terms of the global economic situation we are in right now, it is so dynamic I think that speed and agility are going to be premiums that we place on our engagement, which is a critical part of breaking from tradition here.
Q: Enforcement is important when creating high standards. Is the creation of a dispute settlement mechanism on the agenda?
A: You’re absolutely right, enforcement is critical, because whatever you agree to, whether they are principles or rules — standards, they need to be meaningful. You need to know that it is more than just the words on the page, that you will deliver. And if you don’t deliver, you have a way of keeping each other honest. Our traditional way of approaching this has been a dispute settlement system. And so, that is very much on our minds. But, over time, our dispute settlement mechanisms have also evolved.
So, I’ll just raise for you, as an example, in the U.S.-Mexico-Canada agreement, there are a lot of different tools. One of the ones that we have been the most proud of is that rapid response mechanism. It’s not exactly dispute settlement, but it is a mechanism for ensuring that countries, and also companies, are delivering on what they have committed to deliver on, whether it’s through the agreement, or complying with the laws where they are operating.
So, here we are also advancing an evolution and innovation in these mechanisms, whether they are dispute settlement or they are accountability mechanisms. And that’s why, when we talked about what we were looking at in the trade pillar, we also described corporate accountability. It is part of our thinking around developing mechanisms, to ensure that there is adherence to rules and laws.
But we also are pushing the envelope, beyond the traditional dispute settlement, to thinking about mechanisms for verifying that the rules are being followed.
Q: If the IPEF succeeds, do you think it will create an environment that will lead to the return to the Trans-Pacific Partnership (TPP) trade agreement?
A: The IPEF is valuable in and of itself. We come to this engagement with a sincerity in building and enhancing our economic relationships with the countries and the economies who have come to us through the IPEF. So, we are committed to the IPEF, as the IPEF. I think that part of the reason why we’re setting the TPP to the side right now is because, again, coming back to the reality that the global economic situation we are in is a very different one today than it was five, seven years ago, and so, in order to be really responsible economic policymakers, we have to engage with our important partners today on these immediate challenges which are not going to be solved easily. That’s why the IPEF is so important.
Q: Does the U.S. have a plan to start a new bilateral consultation with Taiwan beyond the Trade and Investment Framework Agreement (TIFA), including talks on supply chain issues?
A: I think we already have. We are carrying out conversations on how to deepen and expand, and those explorations. And obviously we do have the TIFA. We have been working through the TIFA framework with Taiwan. But that is absolutely what we are doing right now, which is taking the relationship that we have and exploring all the ways where we can meaningfully deepen and expand — again, given the challenges that we’re all facing right now.
Q: Do you expect the IPEF negotiations to begin by midsummer?
A: I think that’s very much the plan.
We’ve mapped out a plan for the next couple weeks, for our senior officials, to continue to engage, to engage in a scoping exercise, to provide more information, to collect more feedback.
Q: Is the Asia-Pacific Economic Cooperation summit one of your targets to finish the negotiations?
A: No. Again, I go back to my earlier comment around we need to be pragmatic and we need to be really flexible. We have to deliver. So, those inflection points are important, around APEC, but I think that if we are able to move certain pieces faster and certainly, if you look at the different pillars, there are very different approaches in each of the pillars. [U.S. Commerce] Secretary [Gina] Raimondo and I, from the very beginning, have really been on the same page around, you convene everyone together, and don’t create false deadlines; you just push everyone to produce.
And I think that the need is really great. We are all under pressure to deliver economic solutions, and the more our solutions can be created, in collaboration with our partners and our friends, I think the stronger our program will be for economic recovery, for building resilience and sustainability and inclusion.
Q: Should tariffs on China remain in place, and for how long?
A: I don’t think I have anything new to say on this other than what we want to do and what we really need to do is ensure that we look at all of the tools that we have to address the current near-term challenges that we have.
We should make sure that those tools that we choose to use are going to be effective in addressing those challenges, and then, as we are doing that, we need to also be looking at the medium and the long term, and making sure that what we do now allows us all of the tools and flexibilities to do the realignment that we know we need to have, in the medium to long term.
And frankly, on this, I think that we are not the only ones looking at the medium- to long-term realignment. I think that these couple years of disruption and challenge have really emphasized for so many of us, economic policymakers especially, opened our eyes to the vulnerabilities in our supply chains, in our trade patterns, right now, and the need for us to build resilience. And that is part of the reason why IPEF and our work through this engagement is so important.
Q: Do you believe that the IPEF will have power to increase the pressure on China to change its behavior and make it compete more fairly?
A: I think our approach to China — and I’ve mentioned this before in questions around China — is that we need to change the old playbook. But you will see that, with respect to China, we have a direct bilateral engagement with China. I really want to reinforce that in terms of the program that we are bringing to our partners, to our other partners, in the Indo-Pacific. First and foremost, the IPEF is about our relationship with these economies.
Those relationships are important in and of themselves. To the extent that we have a shared vision, shared interests, and shared challenges, the IPEF will be the forum through which we work out how we collaborate on those challenges.
