The United States is trying to be strategic about how it “realigns” its trade relationship with China, but is not interested in a large-scale “decoupling” or a trade “divorce,” U.S. Trade Representative Katherine Tai said in an interview this week.
Tai made the remarks in Singapore, where she had traveled to discuss the Biden administration’s Indo-Pacific Economic Framework. The purpose of the framework, she said, “is to allow for the United States and our most like-minded partners in this region to be able to collaborate on key economic issues and emerging global challenges. And those include working together to promote resilience and sustainability for our own economies, and also through partnership with each other’s economies.”
Tai made her comments in an interview with Bloomberg Television.
Tai’s trip to Singapore came just days after she told Congress, in testimony before the House Ways and Means Committee, that it is time for the United States to reassess how it deals with China as a trading partner.
Measures undertaken in the past, including the regime of tariffs imposed by the Trump administration, have failed to get China to open its markets to U.S. goods and to avoid anti-competitive behavior, she told lawmakers.
In the interview Tuesday, Tai said the United States may need to use “other tools” in order to adjust its relationship with China.
Pressed on what those other tools might look like, she said, “I think that it’s less about what more we can do to China. I think it is more about how we can shape the U.S.-China trade relationship and again, to realign it to create incentives for our economic actors to ensure that this relationship is one that feels balanced, that is fair, and also, importantly, that is contributing to a sense of security and resilience for not just our economies, but for the global economy.”
Tai’s explicit ruling out of a trade divorce between the U.S. and China may reflect the simple reality on the ground in the Indo-Pacific region, said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.
“All these countries have more trade with China than they have with the U.S.,” he told VOA. “And further, the trade with China is growing faster than with the U.S. So, they don’t have any real commercial interest in any kind of decoupling or divorce.”
Leaders in the region have repeatedly expressed concern about being put in a position in which they are forced to choose between partnering with the U.S. and partnering with China. Their concern has been sharpened by rhetoric coming from U.S. lawmakers, some of whom have pressed for trade arrangements that isolate China.
“That notion faded in her rhetoric,” Hufbauer said, placing Tai and the Biden administration closer to what he called the “realist camp.”
“Trade flows, the magnitude of them, and also now, investment flows — they do not favor a division into two camps,” he said. “Because too many countries have very strong interests in maintaining good commercial relations and good diplomatic relations with both China and the U.S.”
End to tariffs
“It’s encouraging that a senior member of the administration is stating that economic decoupling is not a goal of the administration,” Doug Barry, a senior director at the U.S.-China Business Council, told VOA in an email exchange.
“Whatever Ambassador Tai has in mind in terms of a new trade policy toward China must include preserving and increasing the benefits of the current relationship,” Barry said. “This would include ditching the Trump-era tariffs, which have not changed China’s behavior and have instead hurt American workers, farmers and families.”
Barry said his organization would like to see more high-level trade discussion between U.S. and Chinese leaders, but said, “due to internal politics in both countries, such talks seem unrealistic until late this year at the earliest.”
Reestablishing a U.S. presence
Tai’s trip to Singapore is, in part, an effort to reestablish a U.S. presence in the region on trade issues.
In 2017, then-President Donald Trump withdrew the United States from the Trans-Pacific Partnership, a massive regional trade agreement that had taken years to negotiate. The agreement was resurrected without U.S. participation as the 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPATPP), one of the largest free trade organizations in the world.
Some of the CPATPP participants have expressed hope that the U.S. would rejoin the trade bloc, but the Biden administration has said it will not, preferring to work within the Indo-Pacific Economic Framework. China has said it would be interested in joining CPATPP. However, existing members, including Japan and Australia, have said they believe Beijing’s extensive interference in free markets disqualifies China from membership.
Singapore as key partner
Experts say Tai’s trip to Singapore highlighted the role the city-state might play in the Biden administration’s proposed future.
“Singapore is a natural Southeast Asian partner for developing an Indo-Pacific Economic Framework,” Brian Harding, a senior expert on Southeast Asia at the U.S. Institute of Peace, told VOA.
“Singapore welcomes Chinese economic activity in Southeast Asia but is clear-eyed about China’s strategic intentions,” Harding said. “While Singapore can be a staunch defender of the United States’ importance to regional stability, it is also concerned that U.S.-China competition can be destabilizing in and of itself.”
VOA Mandarin Service reporter Jessie Jiang contributed to this story.