USTR Says De-Risking, Not Decoupling, Is China Policy
U.S. Trade Representative Katherine Tai said the future economic relationship with China has to be navigated in the context of the U.S. needing "a thriving economy that is based on market competition principles. How do we accomplish this, given that the second-largest economy in the world operates on a very, very different system ... and makes its own decisions?"
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She pushed back on a question from Foreign Policy Editor-in-Chief Ravi Agrawal, who asked if the U.S. and China are decoupling -- saying the word is too vague to be useful. "If you mean by decoupling, that we're trying to completely divorce our economies -- even if that was the desired goal -- I think it would be extremely difficult to make happen, given reality."
She said Europeans call it "de-risking," rather than "decoupling," and that's a better framing. "We see global supply chains that were designed for efficiency, chasing the lowest cost, without recognition that concentrations of supply and production create significant risks and vulnerabilities," she said.
Tai, who was speaking to the Foreign Policy magazine editor in a conversation March 1, downplayed the frustration of European countries regarding the Inflation Reduction Act, saying the press portrays that more starkly than what she hears in the room.
She said the incentives in the IRA are meant "to influence firm behavior," contrasting that with Chinese industrial policy. "The types of subsidies and state support that we see powering the PRC [People's Republic of China] economy are of a completely different scale."
Asked how the U.S. economy could be better integrated with other Western Hemisphere economies, Tai disagreed with the question's premise. "I think that we are actually quite integrated, the United States economy and the economies of the Western Hemisphere." She noted there are more comprehensive free trade agreements between the U.S. and North, Central and South American countries than between the U.S. and Asian, Middle Eastern or African countries. (The U.S. has no FTAs in Europe.)
"There always is more that we can do and should do in our own neighborhood, with our closest neighbors," she said.