More Generous Section 301 Exclusions Possible, End of Tariffs Unlikely, Analysts Say
President Donald Trump didn't get China to agree to much in the way of structural changes, panelists said, but Asia Society Policy Institute Vice President Wendy Cutler said he put China front and center on the agenda, which was good. “He was really willing to take on the business community when it came to China,” she said. Cutler, who worked at the Office of the U.S. Trade Representative for more than 25 years, said that when she was at USTR, one of her frustrations in trying to negotiate with China was that U.S. “companies were pretty conflicted. They liked the … money they were making. They wanted us to be quote, unquote tough with China, but they didn’t want to be part of the get-tough strategy. Our hands were tied in a way.”
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Cutler said that the Trump administration made a “severe miscalculation” that threatening China with lots of tariffs would convince China to “come to the table and make concessions in all these areas. They weren’t prepared for counter-retaliation.”
Cutler and a former State Department and Treasury Department official were speaking on a virtual webinar Feb. 10 hosted by the central banking think tank Official Monetary and Financial Institutions Forum.
Robert Dohner, a former deputy assistant secretary at Treasury, said Trump had “a huge opportunity that was squandered.” He said the administration “never developed off-ramps for the tariffs they imposed,” and that made it harder for China to agree to concessions. He said now there's “a hardening of positions on both sides that’s very difficult to reverse, and creates a difficult position for the Biden administration.”
Cutler said it's possible that if the Biden administration could get China to move on some key issues, at least some tariffs could be lifted, or the rates could be reduced. But she said that members of Congress are likely “to pounce on Biden if there’s any whiff of weakness” on China. Dohner agreed.
Anna Ashton, senior director of government affairs at the U.S.-China Business Council, speaking at a Feb. 10 National Association of Foreign-Trade Zones virtual summit, also said that wholesale removal of the tariffs is unlikely, and that Congress may say that Biden is weak on China if he either delays on pursuing telecom and IT policies the previous administration began, or changes direction in trade. “Certainly some of the late actions by the Trump administration were worrisome,” she said. She said they were “very ambiguous on what they actually meant, how they would be implemented.”
Dohner referred to one of those last-minute regulations, saying businesses should watch the Commerce Department closely, particularly the final rule on the process for examining information technology and telecom transactions. He said the interim final rule on that “is potentially extremely wide in its scope and could do a great deal to harm U.S. interests, U.S. companies, disrupt U.S. supply chains and do a considerable amount of damage.”
Cutler said it's more likely that rather than changing tariffs, the Biden administration will improve the exclusion process, making it more transparent and granting exclusions that last longer. She said the new administration might be more receptive to businesses' concerns. She said the exclusion process so far has been very biased against providing exclusions, and against extending those that were granted.
Dohner also criticized the Trump administration's actions on Huawei. “The approach to Huawei, it became a jihad. It convinced China to double down on its technology policy ... and convinced it to double down on the very things we complained about.”
We asked Cutler how a deal on overcapacity could be reached, since the previous efforts in the Organization for Economic Cooperation and Development failed, and if it can't be done, how the Section 232 tariffs on allies could be lifted. “Look, a lot of people were hoping the Biden administration would come in and lift these steel and aluminum tariffs right away,” she said, but were not thinking about domestic political pressure to keep them. “If you want to lift them, you need to show the world and your domestic stakeholders what are you doing” to address overcapacity. “We tried to deal with this multilaterally in the OECD. It did not work,” she said.
She said that if the U.S. can show that other countries are serious about fighting circumvention of U.S. trade remedies on these metals, that could pave the way for lifting the Section 232 tariffs and quotas.