U.S. trade chief Tai says getting ‘traction’ with China in ‘Phase 1’ deal talks

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FILE PHOTO: U.S. Senate Finance Committee conducts hearing on nomination of Katherine Tai to be U.S. Trade Representative.

By David Lawder

WASHINGTON -The Biden administration is getting traction with China in talks over Beijing’s compliance with a Trump-era trade deal, U.S. Trade Representative Katherine Tai said on Wednesday, but she declined to predict an outcome while discussions continue.

Tai told reporters in Washington the administration aims to hold China accountable to the two-year “Phase 1” trade deal signed in January 2020 and is exploring all weaknesses in China’s performance, including its lack of purchases of commercial aircraft.

She said the talks with Beijing on the Phase 1 deal are being twinned with discussions on larger issues, including China’s “extremely robust” state-driven industrial policies that are making it difficult for U.S. companies to compete.

“I think that we consider this Phase 1 engagement to be the first step,” Tai said. “And it’s not in my interest for this first step to take a very, very long time.”

China is running far behind in its promises in the deal to boost purchases of U.S. goods by $200 billion during 2020 and 2021, compared to 2017 levels, reaching only 60% of the target through Sept. 30 https://www.piie.com/research/piie-charts/us-china-phase-one-tracker-chinas-purchases-us-goods, according to data compiled by trade economist Chad Bown of the Peterson Institute for International Economics.

The deal also includes promised steps by China to improve protections for U.S. intellectual property, and increase market access for U.S. agriculture biotechnology products and financial services.

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Asked if she was pushing in the talks for China to take steps to allow for purchases of Boeing commercial aircraft – a purchase category identified in the Phase 1 agreement https://ustr.gov/sites/default/files/files/agreements/phase%20one%20agreement/Economic_And_Trade_Agreement_Between_The_United_States_And_China_Text.pdf – Tai said: “If you’re looking at where the weaknesses might be, in terms of Phase 1, you should expect that we are talking through it and exploring all of it.”

U.S. President Joe Biden and Chinese President Xi Jinping have a virtual meeting scheduled as early as next week amid rising tension between the world’s two largest economies.

Tai said the meeting would be helpful and their understanding of each other would benefit a complex relationship. But she said the leaders’ engagement was not necessary to facilitate the trade discussions.

“I don’t want any of you in this room thinking that we are not getting traction with our Chinese counterparts,” Tai said. “We’re talking and we’re working. So we don’t need, you know, Dads to come in,” she added, referring to Biden and Xi.

Asked if the administration was considering easing tariffs on Chinese goods as a way to reduce inflationary pressures on the U.S. economy, Tai said USTR was viewing the “Section 301” tariffs on Chinese goods as part of a strategy to seek an advantageous position to more effectively compete with China.

(Reporting by David Lawder; Editing by Howard Goller and Richard Pullin)