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Tai questioned on vaccine IP waiver, Section 232 tariffs, 'Rapid Response' on workers' rights

The Senate Finance Committee on May 12 held a hearing on "The President's 2021 Trade Policy Agenda." The only witness was U.S. Trade Representative Katherine Tai. Materials from the hearing are available here.

In his opening statement, Chairman Ron Wyden (D-OR) said that in 2021, "just about every major trade policy needs to be based on a straightforward agenda: outcompeting China for jobs and economic growth" because "the Chinese government has feasted on weaknesses in the global trading system to the disadvantage of American workers." Wyden said U.S. factories and plants have shut down because of unfair subsidies and overproduction in China, while U.S. websites and digital service providers "are blocked by the Great Firewall, and they watch as homegrown Chinese firms rip off their ideas and grow into tech giants intolerant of free speech … It's going to take higher standards and stronger enforcement policies that move faster to protect American jobs and businesses." He said the committee is working on bipartisan legislation addressing these challenges directly, and "there will be progress on that bill to announce in the days ahead." In negotiations regarding intellectual property and the Covid-19 vaccines, Wyden said "new coronavirus variants will still pose a danger to Americans as long as there are terrible outbreaks around the world … Our system ought to include IP protections and exceptions that promote the common good, and it's unquestionably in the common good to squash this virus as quickly as possible all around the world." But he said that conquering the virus would also require building manufacturing capacity and supply chains, and "helping to make sure other countries can afford the vaccine."

In his statement, Ranking Member Mike Crapo (R-ID) said the administration's progress on improving the U.S. economy has been disappointing, pointing to the jobs report released last Friday. Crapo said exports facilitate greater productivity and wages, and if the Biden Administration wants a worker-centered trade policy, "then the logical, and only sensible course, is to adopt a trade policy that creates as many high-paying jobs as possible." That in turn would require making enforcement a priority, pursuing the USMCA's new market access commitments, which he said are particularly important to U.S. farmers. Crapo said an important U.S. tariff-rate quotas case against Canada "remains stalled in the USMCA process. It is time to see progress on it, or the United States must proceed with a dispute settlement panel." He said Mexico is adopting a host of measures that undermine U.S. agricultural rights, including restrictions on biotech crops, glyphosate and unreasonable food packaging labels, and he pressed Tai for action on those barriers.

Another component of enforcement, Crapo said, is "negotiating new rules and market access opportunities," but he said the Biden administration "is silent on whether we will continue to negotiate with the United Kingdom and Kenya." He said the administration must also "start thinking about how to modernize [the Trans-Pacific Partnership], or what other structures we can use for U.S. engagement in the Asia-Pacific. We cannot simply take a 'timeout' from the region." The final component is forming a close partnership between Congress and the USTR, Crapo said, but last week the administration announced via a tweet that it unilaterally supports waiving the patent obligations of the TRIPS Agreement, which was approved by Congress "and can only be withdrawn 'if, and only if' Congress enacts a joint resolution to that effect." Crapo cited objection to this decision from Germany, Pfizer and philanthropist Bill Gates. "You may, of course, have your own good reasons. But to date, you have not offered an adequate explanation," Crapo said.

In her prepared statement, U.S. Trade Representative Katherine Tai thanked Congress for passing the American Rescue Plan and called for passage of the American Jobs Plan and the American Families Plan. On last week's announcement that the U.S. "will not let intellectual property rights get in the way of saving lives," Tai said, "We will pursue text-based negotiations at the WTO, which may take time. But I am encouraged that other countries have already announced that they will roll up their sleeves and join us," adding that the U.S. will also boost efforts to expand vaccine manufacturing and distribution around the world, including access to raw materials for vaccines. On fairness in the global trading system, Tai said that "for too long, we have overlooked the effect of our trade policies on individual workers, who are human beings, living in a community trying to survive and thrive … Our goal is to foster broad-based, equitable growth, increase innovation, and give workers a seat at the table." Tai said the Transparency Principles she announced last week "reflect the administration's commitment to comprehensive public involvement in developing trade policy" and are only a starting point. She said the president's trade agenda includes the goal of racial equity for the first time, and that trade policy must also help protect the environment and fight climate change.

Tai said the U.S. will work with the WTO's new Director-General, Dr. Ngozi Okonjo-Iweala, "and like-minded countries to reform the WTO's rules and procedures, so it can be a relevant force for good in the 21st century global economy." She said the U.S. is also working with the European Union and the UK to resolve the ongoing Boeing-Airbus dispute, and is "having constructive discussions to address the real problem of overcapacity in the steel and aluminum sectors coming primarily from China … We will not hesitate to call out China's coercive and unfair trade practices that harm American workers, undermine the multilateral system, or violate basic human rights … If China cannot or will not adapt to international rules and norms, we must be bold and creative in taking steps to level the playing field and enhance our own capabilities and partnerships." On USMCA, Tai said the update agreement "now includes the most comprehensive, enforceable labor and environmental standards of any U.S. trade agreement — and, I would argue, any trade agreement. And this week, you've seen that we're committed to using the tools." As Chairman Wyden had said, Tai announced "the inaugural use of this [rapid response] mechanism in our request that Mexico review whether workers at a General Motors facility in … the state of Guanajuato, are being denied the right of free association and collective bargaining … This use of the rapid response mechanism demonstrates that we will act when workers in certain facilities are denied their rights under laws necessary to fulfill Mexico's labor obligations."

Additional details are available in the attached Tax Alert.

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USTR oversight hearing