Katherine Tai's struggles over the USTR trade agenda

US Trade Representative Katherine Tai has had a rough few weeks in Washington. After three years of largely pro forma hearings and otherwise limited interaction between Congress and the agency, rising discontent with President Joe Biden’s trade agenda erupted during a pair of legislative meetings. Tai was called to the carpet to account for a wide range of issues by members of both parties:

• USTR’s turnaround from longstanding US policy supporting digital trade, which has jeopardized talks at the World Trade Organization (WTO) to advance digital trade governance;
• Disclosures under the Freedom of Information Act that showed USTR’s voluminous communications with antitrade special interest groups;
• USTR’s lack of interest in seeking more market access abroad for US trade;
• USTR’s lack of progress in fleshing out its “worker-centered trade policy.”

Biden catapulted Tai into the role as US Trade Representative in March 2021. Tai was at the time Chief Trade Counsel and Trade Subcommittee Staff Director for the House Ways and Means Committee. She was mostly known for her ability to shepherd the revised North American Free Trade Agreement (NAFTA), which became the United States-Mexico-Canada Agreement, through a reluctant Congress. As a reflection of her support from the Hill at the time, Tai’s nomination to serve as USTR sailed through unanimously.

Although Tai had previous experience at USTR, eventually serving as Chief Counsel for China Trade Enforcement, prior to her selection by Biden, she was not widely seen as a leading candidate for the role of USTR. She did not have strong personal connections to the President, but her ability to get things done with Congress was seen as an important qualification.

Under her predecessor, Robert Lighthizer marginalized Congress’ traditional purview over US commerce, running trade policy largely directly from the White House. Tai’s arrival was therefore seen as an opportunity to reconnect with the legislative branch.

On taking up her post, Tai stressed the importance of Biden’s newly emerging “worker-centered” trade policy. This new approach, she argued, was a repudiation of everything that had gone before, particularly the quest to negotiate and sign comprehensive free trade agreements (FTAs).

Even so, Congress and the business community were largely willing to let USTR be. However, a policy decision taken by Tai in October 2023 sharply changed the calculus in Washington. USTR suddenly announced that month, with almost no warning and apparently no interagency process or meaningful consultation with affected businesses, that it would withdraw US support for key data-related provisions of the WTO’s ongoing Joint Statement Initiative (JSI) talks on e-commerce, a key group at the multilateral body working to advance digital trade governance.

Tai’s three-sentence statement in October read: “Many countries, including the United States, are examining their approaches to data and source code, and the impact of trade rules in these areas. In order to provide enough policy space for those debates to unfold, the United States has removed its support for proposals that might prejudice or hinder those domestic policy considerations. The JSI continues to be an important initiative and the United States intends to remain an active participant in those talks.”³

But it was too late to stem the tide of congressional discontent. By 4 March 2024, the Committee on Oversight and Accountability wrote to Tai to ask for her explanation for the information obtained from the FOIA disclosures and written answers to a series of questions they raised over the released documents.⁷

Support for Tai was already eroding on the Hill before Tai’s next debacle: the USTR’s March release of the 2024 National Trade Estimate Report on Foreign Trade Barriers (NTE Report).⁸ This document, required annually by Congress, typically runs to hundreds of pages and provides a comprehensive list of trade barriers identified for US trade partners by the American business community as well as through an interagency process of soliciting feedback.

The 2024 edition of NTE, however, was quickly identified as missing at least two key types of information compared to past publications. First, as the team at the Washington think tank Center for Strategic and International Studies (CSIS) quickly noted, while previous NTE reports consistently included foreign digital trade rules, especially data localization mandates and ex ante competition regulations, the 2024 edition either removed these points entirely or significantly restructured the language that highlighted such barriers.⁹ Second, the NTE also reduced its opposition to import substitution policies.

While Tai claimed that her office was merely returning the NTE to its congressionally mandated roots, the response across Washington was harsh. Once again, members of Congress began exchanging letters with Tai and USTR on the content of NTE.¹⁰ The business community was equally vocal in protesting Tai’s NTE revisions.

USTR released a statement highlighting the work done across three years of promoting a worker-centered trade policy.¹¹ However, last week’s hearings in the House and Senate on the US trade agenda clearly indicated that the USTR’s efforts to smooth over relations has not resolved rising discontent.

After more than three years in office, patience with Tai has worn thin. William Reinsch, Scholl Chair in International Business at CSIS, summed it up: “Our policy is best when it focuses on how to grow the benefits of trade. Instead, we seem to be spending time rearranging the deck chairs, hopefully not on the Titanic.”¹²

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[1] Tensions flare between Tai, GOP at Ways & Means trade hearing | InsideTrade.com
[2] See an early Tai speech at an AFL-CIO event in June 2021, at https://ustr.gov/about-us/policy-offices/press-office/speeches-and-remarks/2021/june/remarks-ambassador-katherine-tai-outlining-biden-harris-administrations-worker-centered-trade-policy
[3] https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/october/ustr-statement-wto-e-commerce-negotiations
[4] The requests were filed on 11 December 2023. Details can be found at: https://www.uschamber.com/international/trade-agreements/u-s-chamber-foia-requests-on-u-s-digital-trade-policy Lori Wallach, a key figure in the FOIA document releases, was featured in an earlier Hinrich Foundation article, Lori Wallach speaks up
[5] https://jeffduncan.house.gov/sites/evo-subsites/jeffduncan.house.gov/files/evo-media-document/duncan-joyce-letter-to-biden-admin-on-wto-digital-trade-principles.pdf
[6] https://ustr.gov/about-us/policy-offices/press-office/press-releases/2024/february/icymi-88-house-members-applaud-administrations-approach-digital-trade-policy
[7] https://www.politico.com/f/?id=0000018e-0b89-d469-afbe-db8f16570000
[8] https://ustr.gov/about-us/policy-offices/press-office/press-releases/2024/march/ustr-releases-2024-national-trade-estimate-report-foreign-trade-barriers
[9] https://www.csis.org/analysis/trade-winds-are-turning-insights-2024-national-trade-estimate
[10] See, for example, 12 Republican complaints at https://drive.google.com/file/d/1IDJrHtHz-JSB2qWw7UJrCNPryDOG0yAp/view
[11] https://ustr.gov/about-us/policy-offices/press-office/press-releases/2024/april/fact-sheet-third-year-ambassador-katherine-tai-delivers-biden-harris-administrations-worker-centered and https://insidetrade.com/sites/insidetrade.com/files/documents/2024/apr/wto2024_0442a.pdf
[12] https://www.csis.org/analysis/finding-trade-policy

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