Published 28 May 2024
The USTR has come under unrelenting pressure in recent months amid revelations of Katherine Tai’s extensive dealings with antitrade groups. Senior USTR officials have resigned or left. Businesses big and small have directed their fury at USTR in and outside congressional hearings. What went wrong on 17th Street?
On October 11, 1962, President John F. Kennedy signed into law the most significant trade law in nearly three decades. President Kennedy saw in the Trade Expansion Act a way to support US farmers, workers, and businesses by strengthening the country’s commercial policy. But he saw something more. He saw a path to shore up alliances and curb the territorial ambitions, economic or otherwise, of countries that posed a threat to the United States.
He did not know at that time that the Cuban Missile Crisis, when the world teetered on the precipice of nuclear conflict, was only days away.1
The nascent six-nation European Economic Community was rapidly advancing as an economic power as it tore down internal trade barriers and established a Common Agriculture Policy to ensure the welfare of its farmers.
President Kennedy grasped what others did not which was that the EEC (today the 27-nation European Union) would soon emerge as a formidable economic ally and competitor. He knew that the US approach to trade needed to change, and that the country needed to be more agile in its trade negotiations. He also knew that trade could be a powerful contributor to the pursuit of foreign policy objectives and a bulwark against Soviet efforts to expand their influence over an ever-widening circle of countries.
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When the President sent this legislation to Congress on January 25, 1962, he spelled out with his usual eloquence just why the Trade Expansion Act was so important.
"We will prove to the world that we believe in peacefully ’tearing down walls’ instead of arbitrarily building them. We will be opening new vistas of choice and opportunity to the producers and consumers of the free world. In answer to those who say to the world's poorer countries that economic progress and freedom are no longer compatible, we – who have long boasted about the virtues of the market place and of free competitive enterprise, about our ability to compete and sell in any market, and about our willingness to keep abreast of the times – will have our greatest opportunity since the Marshall Plan to demonstrate the vitality of free choice," he wrote. 2
As part of this new law, the president proposed the establishment of the Special Representative for Trade Negotiations which was to direct US trade negotiations. Subsequent legislation in 1974, 1988, and 2000 enhanced the office, and changed its name to the US Trade Representative. President Gerald Ford conferred cabinet-level status on the USTR in 1975.
A very different vision
But the USTR of 2024 sees things very differently. Under the leadership of Katherine Tai and the trade skeptics who advise her, USTR sees trade as something to be avoided, ignored, or fashioned into an adjunct useful only as a means of advancing other policy objectives.
The embattled Tai has been the target of harsh criticism from US exporters – who charge that she cares little for market opening or the enforcement of US trade laws – and from members of Congress who echo those complaints and add that USTR keeps congressional leaders in the dark on trade policy.
US trade partners are not fans either. Europeans bristle at Tai’s disdainful approach in discussions over steel, green trade policy, and strategic raw materials. Asian officials have thrown up their hands in dismay at the position taken by USTR in the Indo-Pacific Economic Framework for Prosperity, the Biden administration’s tepid attempt to build an Asian economic network.
Those IPEF discussions overseen by the Commerce Department pertaining to supply chains, clean energy, and combating corruption have progressed relatively well. The trade discussions, largely free of substance, have foundered. The skittish Tai pulled the plug on these discussions last year, yielding to protectionist pressure from Sen. Sherrod Brown of Ohio who didn’t understand why Indonesia and Malaysia couldn’t just adopt US labor and environment standards and accept nothing in return in terms of access to the US market. One senior Asian official said others found it "very strange" that Tai seems to consistently relegate positions promoted by US exporters.
At the World Trade Organization, members have taken note of Tai’s commitment to reforming the organization but point out that in her two appearances at WTO Ministerial Conferences, she departed early, leaving the field to ministers from other countries. It’s very hard to imagine Charlene Barshefsky, Susan Schwab, Robert Zoellick, or Michael Froman – to name just four of her distinguished USTR predecessors – leaving the game before the clock expired.
In its 2024 budget request to Congress, the agency spelled out its objectives in this way:
"Trade must be grounded in fair competition, and workers should not have to compete against artificially low wages or unsafe working conditions. Trade negotiations will be used to boost partners’ climate commitments. Close working relationships with labor, civil, and human rights stakeholders will guide the approach to trade enforcement and level the playing field for American workers," says the agency.3
Nowhere does USTR spell out the importance of a close working relationship with business. The stakeholders listed above are all important contributors to the fabric of American society. But they do not trade. Workers are vitally important to production, trade, and the overall economy. But they engage in these activities in their capacity as employees for businesses.
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Biden has rightfully made improving wages and working conditions for US labor a top priority. Seeking labor and environmental standards in trade agreements is a worthwhile objective. But Tai doesn’t want trade agreements – not with close allies, not with developing countries, and not with countries with which the United States should be pursuing closer relations.
A Capitol Hill grilling
The beleaguered USTR took yet another grilling on Capitol Hill in mid-April and advocated an anti-trade tack that startled some observers. "Our goal is to stop pitting Americans against each other in our trade policy and this is why we are taking unprecedented steps to incorporate more voices into trade policymaking," Tai said.
But on both sides of the partisan aisle, lawmakers essentially said that that talk was cheap. Senators and Representatives pointed to Indian wheat subsidies, Mexican fishing and energy policies, and just about all of China’s policies, as pernicious obstacles to US exporters that must be dismantled.
Senate Finance Committee Chair Ron Wyden, Democrat from Oregon, encouraged Tai to "play offense" and work to open markets to create opportunities for US workers and businesses alike. On enforcement, he said, "Without enforcement, our trade laws aren't worth the paper they are written on," he said. "There is a lot more USTR can be doing with the tools it has." He chastised Tai for a lack of transparency suggesting that Americans had been "kept in the dark" and that the country "needs more light shed on trade policy."4
Sen. Mike Crapo, the ranking Republican on the Senate Finance Committee, was equally scathing. When it came to creating trade-related opportunities for Americans, he said, USTR’s approach was "profoundly misguided" and US trade enforcement efforts were "the weakest of any administration in 25 years."5
House Ways and Means Committee Chair Republican Jason Smith of Missouri said any optimism he harbored about USTR’s ability to "deliver results" had faded. "Unfortunately, today I’m less optimistic as the administration has continued to pursue a trade agenda that ignores Congress to the detriment of the American worker and American leadership on trade."
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A bashing from business
Congress is not the only audience Tai has failed to impress. Businesses not only do not approve of her positions – they do not trust her. Think about that for a minute.
USTR’s unique approach to trade policy has business leaders wringing their hands in frustration. The criticisms encompass USTR’s abhorrence of "traditional" trade agreements that include improving access to foreign markets for US companies or bringing down trade barriers domestically. In almost four years in office, US trade officials have struck exactly zero trade agreements of this nature.
But the concerns of the US business sector are far broader than this. USTR has not been as active in enforcing US trade laws as many businesses would like. The 2024 National Trade Estimate report that was issued in March did not go down well.6
The tone of the report was one that many thought offered justification for foreign practices that discriminate against US exporters. "We respect that each government — including our own — has the sovereign right to govern in the public interest and to regulate for legitimate public policy reasons." Businesses charge that issues like domestic content requirements or skewed competition regulations that had been highlighted as problematic to US interests were overlooked in this report.
But the issue that exasperated business more than any other has been USTR’s seemingly unilateral decision to abandon long-held US positions on digital trade. Specifically, USTR says it will no longer advocate in the World Trade Organization in favor of the free flow of data across borders, nor will it oppose positions that require the localization of data or the forced transfer of source code.
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In an April 15 letter to National Security Council Director Jake Sullivan and National Economic Council Director Lael Brainard, some 41 business groups representing manufacturing, services, and agriculture made clear their displeasure with USTR’s digital stance. The letter refers to USTR’s "harmful approach to digital trade", rebuts USTR rhetoric that these positions have been of benefit only to Big Tech companies and urges the Biden administration to redress the USTR’s position.
"Our concerns regarding USTR’s retreat from digital trade protections underscores the critical need for a return to policies that safeguard cross-border data flows and prevent discrimination against American companies," the organizations wrote.7
Infuriated over USTR’s abandonment of traditional US positions on digital trade, Ed Brzytwa, Vice President of International Trade at the Consumer Technology Association, set as his organization’s main theme of US trade advocacy "Put the US Back in USTR!"
"Sitting back, pausing, ignoring barriers, or pretending they don’t exist, and doing nothing are not postures that Congress should accept for USTR. But perhaps other USG agencies can pick up the USTR slack," he wrote.8
On December 11, the US Chamber of Commerce filed a series of Freedom of Information Act requests to USTR to better understand how and why the agency reversed its position on digital trade. According to the Chamber the FOIA documents they received indicated that certain activist groups, specifically, Rethink Trade, the Open Markets Institute, and Public Citizen benefited from a "privileged relationship" with senior USTR officials.
Discussions with these progressive groups shaped the shift in the US position at the WTO on the protection of patents for vaccines, trade policy with Africa, and Biden’s flagship Inflation Reduction Act program. But, according to the Chamber, it is on the issue of digital trade that the influence of these groups has been most profound. According to the Chamber, USTR’s then-Chief of Staff Heather Hurlburt and Senior Advisor Elizabeth Baltzan were the principal points of contact with these NGOs. The Chamber drew particular attention to the relationship between Hurlburt and Lori Wallach, the highly influential director of the Rethink Trade program at the American Economic Liberties Project. Ms. Wallach’s long-held positions on digital trade closely mirror those now espoused by USTR.
"USTR may have broken the law. Heather Hurlburt, Tai’s recently departed chief of staff, is identified as having a communications channel with Lori Wallach over Signal, a platform for ephemeral, cryptic communications that she nonetheless appears to have used to conduct official USTR activities … The use of Signal and other non-official channels for communications runs afoul of the Presidential Records Act unless those communications are copied or forwarded to an official electronic messaging account," the Chamber wrote.9
Hurlburt resigned from her position at USTR on 26 January.
Seeing the light?
The fury directed at USTR over the agency’s decision to change course on digital trade policy at the behest of a handful of anti-trade activists has not gone unnoticed in other corners of the Biden administration.
Can it be a coincidence that it was Treasury Secretary Janet Yellen rather than Tai who delivered the blunt message to Beijing earlier this month that Chinese overproduction of electric vehicles and solar panels and the threat this poses to US businesses are unacceptable?
The White House seems to have sympathy with European exasperation over Tai’s condescending dismissal of the European Union’s Carbon Border Adjustment Mechanism (CBAM). US efforts to strike a deal on steel trade which would have promoted cleaner production globally while curbing exports from non-market economies – notably China – have foundered. The principal reason is that Tai does not want CBAM’s emissions-linked import duties to apply to US steel producers. Brussels believes extending such special treatment to US producers would violate WTO rules –an argument about which Tai could care less. EU officials believe that Tai’s disdain for CBAM also lies at the root of the US refusal to extend to the EU a trade agreement which could give tax breaks to EU electric vehicle producers and facilitate the acquisition and processing of the critical raw materials needed to produce EVs and more specifically EV batteries.
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In April, the Biden administration announced that the nation’s green trade policy will be overseen by the president’s special climate envoy, John Podesta, and not the once-again sidelined Tai. Podesta’s speech at Columbia University could hardly be labeled pro-trade – he condemned global trade as "a huge contributor to the climate problem."
But rather than airily dismissing CBAM as Tai has consistently done, Mr. Podesta said it was the Biden administration’s intention to "deepen dialogue with our partners and allies around the world, from the UK to Australia to the EU as it pursues its Carbon Border Adjustment Mechanism."10 For many EU officials, this was music to their ears.
Even in the corridors of the Winder Building headquarters of USTR, there is disenchantment with Tai. According to Politico, Tai was responsible for "pushing more than a half-dozen senior trade officials out the door."11
Some USTR officials defend Tai and say that, while there has been extensive turnover at the agency, it was not necessarily the case that career officials would depart over a conflict with the boss. "Maybe people were ready for a change. Washington can be a grind," said one official.
But others say the sharp turn in policy with a focus on social, environmental, and antitrust issues has been a source of frustration. Much of this seems to flow from a lack of clarity of what precisely the administration’s "worker-centric" trade policy is designed to do.
Conclusion
Clearly the Biden administration and USTR seek stronger labor and environmental standards globally and including from countries with which it engages commercially. But how does the administration influence others to adopt policies in concert with their own? Persuasion, coercion, carrots, or sticks. At present, US trade policy offers no carrots and, while still the world’s most powerful nation, the United States no longer possesses the power to prod countries to adopt policies they believe contrary to their commercial interests simply because Washington wishes it so.
USTR no longer negotiates trade agreements. It holds seminars.
With the United States having disabled the WTO’s dispute settlement system, USTR no longer engages in meaningful litigation in Geneva.
It has proven incapable of delivering results with Europe or Asia. Its relations with Latin America are ambivalent. Its dealings with China are fraught. Its relationship with business is in shambles. Congressional leaders believe USTR’s performance is disappointing. The agency’s closest allies tend to be NGOs and members of Congress who despise trade.
This is not a scoresheet that impresses.
In early April, University College London and Hertford College at the University of Oxford issued a pamphlet in which a group of former diplomats and development experts called for the scrapping of that most exalted British Ministry, the Foreign Office. Its argument was that times have changed but the Foreign Office has not.12
The same argument can be made for USTR. If the path that Tai and her allies have staked out represents the long-term policy direction, then the agency must be reformed. It is simply not cut out for overseeing the implementation of labor and environment policies in other countries. It possesses no special expertise in human or civil rights. President Kennedy, his successors, and Congress had all mandated a role for USTR as the spearhead on trade. Yet the current USTR leadership has little interest in trade or those who engage in it.
Should the agency be abolished? Should it be broken up and its staff distributed to the departments of Commerce, Treasury, and State? Should its mission be radically redefined? What is clear is that USTR is an agency which has lost its way.
***
[1] https://www.jfklibrary.org/learn/about-jfk/jfk-in-history/cuban-missile-crisis#:~:text=For%20thirteen%20days%20in%20October,on%20the%20island%20of%20Cuba
[2] https://www.presidency.ucsb.edu/documents/special-message-the-congress-foreign-trade-policy
[3] https://ustr.gov/sites/default/files/foia/USTRFY2025CongressionalBudget.pdf
[4] https://www.youtube.com/watch?v=AoVAVyBr5U0
[5] https://www.crapo.senate.gov/media/newsreleases/crapo-president-bidens-trade-agenda-lacks-ambition-enforcement
[6] https://ustr.gov/about-us/policy-offices/press-office/press-releases/2024/march/ustr-releases-2024-national-trade-estimate-report-foreign-trade-barriers
[7] https://www.nftc.org/wp-content/uploads/2024/04/2024-04-15-Association-Letter-on-Digital-Trade.pdf
[8] https://www.linkedin.com/posts/thebrza_putusbackinustr-ustr-digitaltrade-activity-7187196454308859904-3lqU/?utm_source=share&utm_medium=member_ios
[9] https://www.uschamber.com/international/trade-agreements/u-s-chamber-foia-requests-on-u-s-digital-trade-policy
[10] https://www.whitehouse.gov/briefing-room/speeches-remarks/2024/04/16/remarks-as-prepared-for-john-podesta-columbia-global-energy-summit/
[11] https://www.politico.com/news/2024/01/28/biden-trade-officials-jump-ship-00138117
[12] https://www.ucl.ac.uk/policy-lab/news/2024/apr/world-2040-renewing-uks-approach-international-affairs
© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).
Author
Keith M. Rockwell
Keith M. Rockwell is a Senior Research Fellow at the Hinrich Foundation. Prior to his retirement in June 2022, Keith served as a Director at the World Trade Organization (WTO) and spokesperson for the organization for more than 25 years. He also is Global Fellow at the Wilson Center.
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