Analysis by Energy Workforce SVP Government Affairs & Counsel Tim Tarpley
Ambassador Katherine Tai, U.S. Trade Representative, described the Biden Administration’s approach to trade with China during remarks this week at the Center for Strategic & International Studies in Washington. The speech offered the first real look at the Administration’s strategy for trade policy and relations with China. Relations with China are strained, and the Chinese continue to take aggressive actions with Taiwan and in the South China Sea.
Tai articulated four major policy positions that are noteworthy. First, the United States will use all resources to require China to honor the terms of the phase one agreement.
Tai said the U.S. will engage with China on economic issues that were not included in the original phase one agreement, such as Chinese government subsidies and other state centered non-market practices.
In addition, Tai said the U.S. would continue to work with allies to shape fair international trade rules for the 21st century and pressure those who do not play by the rules. China is a major target of this effort.
Following Tai’s speech on Tuesday, USTR announced addition details regarding the resumption of the 301 exclusion process. Specifically, a process was announced to consider whether to renew 549 previously granted 301 exclusions extensions. These are exclusions that were previously granted by the Trump Administration and include 137 exclusions from List 1, 59 exclusions from List 2, 266 exclusions from List 3 and 87 from List 4.
The majority of these exclusions expire on December 31, 2021, with a few expiring earlier in 2021. There are a number of exclusions in this group that may be used by our sector.
USTR will open a public docket to accept comments on whether or not these exclusions should be extended on October 12, 2021 and will close on December 1, 2021. Please review this list and if your company is using any of these exclusions, I strongly recommending filing comments individually through your company or jointly through the Council. Please reach out to me should you wish to discuss the possibility of filing joint comments.
Another takeaway from Tai speech is that it’s unlikely China will agree to make all of the Administration’s desired reforms, which means that future section 301 initiatives could be imposed, including additional penalties for Chinese industrial subsidies and other things not fully covered in the phase one agreement.
Additionally, should China continue its aggressive behavior with Taiwan, the prospect for conflict in the South Pacific will grow. A military incident between the two countries could lead to harsh economic sanctions by the United States and our allies. The U.S. is likely to use economic penalties and tariffs before military action. This is a situation that should be monitored by companies in our sector with special attention paid from those that rely heavily on a supply chain from China.
Bipartisan Infrastructure Bill, Reconciliation Stall in House
Negotiations continue in the House and Senate on passage of both the bipartisan infrastructure package and the larger reconciliation bill. The stumbling block continues to be progressives pushing for a $3.5 trillion reconciliation package that would be coupled and voted on together with the bipartisan infrastructure package, while moderates such as Senators Joe Manchin and Kyrsten Sinema want a much smaller $1.5 trillion bill.
Conversations are continuing, and many analysts believe Democrats will compromise on a $2 trillion reconciliation bill. The new deadline may end up being the expiration of the highway bill extension at the end of October.
While a smaller package is good news for our sector generally because it reduces the likelihood of “pay-fors” being imposed on the industry, vigilance is warranted until the final package receives final vote. It’s possible that onerous provisions could be added back into legislation during the chaotic process.
The Energy Workforce Government Affairs staff will continue to work with members of both the House and Senate and will keep membership up-to-date as negotiations continue.
For more information on the Council’s advocacy efforts or to get involved, contact SVP Government Affairs & Counsel Tim Tarpley.
Tim Tarpley, SVP Government Affairs & Counsel, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Council’s newsletter, which highlights sector-specific issues, best practices, Council activities and more.