Two days after Prime Minister Justin Trudeau and U.S. President Joe Biden met to set a new tone for Canada-U.S. relations, the Biden administration official whose decisions may affect Canada’s economy the most sat for three hours of questioning at her confirmation hearing before the Senate finance committee Thursday.
Some cabinet confirmations become partisan wrestling matches. By the end of her appearance, the confirmation of Katherine Tai as the next United States Trade Representative felt more like a collective laying on of hands.
The chair, Oregon Democrat Ron Wyden, called her a “superb choice.” All ranking Democrats and Republicans from not only the Senate but also the House of Representatives Ways and Means committee applauded the depth of her skills and experience with a long list of complimentary adjectives.
Representative Richard Neal from Massachusetts, appearing as a guest Democratic chair of the House committee, told senators he considers Tai to be like family after her seven years as legal counsel for his committee. Tai played a critical role in crafting and negotiating bipartisan support for endgame revisions that ensured Congressional approval of the revised North American trade agreement by delivering more environmental and labour protections.
“There is one issue that all of us in this room agree upon: enforcement, enforcement, enforcement of these trade agreements,” Neal said, praising Tai’s “understated grit.” Biden’s pick was endorsed by leaders from the environmental, business and labour communities, Neal said.
Tai accompanied Neal on a critical trip to Ottawa in November 2019 to persuade Canada to agree to amend the new NAFTA so it could get through Congress. The Trudeau government had thought its negotiations with the Trump administration were over.
Canada’s ambassador in Washington, Kirsten Hillman, came to know Tai well as Canada’s lead negotiator for the Trans-Pacific Partnership agreement. She said she remembers having lunch with her that day and their “vibrant conversation” with the assembled politicians about how international trade can benefit domestic workers — a focus the Biden administration now embraces.
“I think that’s just telling on where some of the priorities may well lie,” Hillman told CBC News earlier this winter. “She has specific expertise in that area.”
Fortunately for the Trudeau government, Tai’s vision for “expanding the winner’s circle” of beneficiaries of international trade lines up with the beliefs of Canadian Liberals like Chrystia Freeland who have spoken about making deals work for small businesses and middle class workers — not just corporations.
Winning with win-wins
During Thursday’s hearing, Tai said she wants to move away from negotiations that pit one sector’s workers against another.
It’s a sharp contrast with the zero-sum style of the Trump administration, which was more focused on scoring targeted political wins than mutually-beneficial gains.
We must remember how to walk, chew gum and play chess at the same time.– USTR nominee Katherine Tai
While that could come as a relief for trading partners like Canada, Tai’s hearing also revealed several priorities to watch carefully.
For example, will Tai continue Robert Lighthizer’s push to “re-shore” as many commodities in as many supply chains as possible, to repatriate jobs for American workers?
“There’s been a lot of disruption and consternation that have accompanied some of those policies,” she said — without specifically calling out Trump administration tactics like using national security grounds to slap tariffs on foreign steel. “I’d want to accomplish similar goals in a more effective, process-driven manner.”
And what about the critical product shortages the U.S. is facing, especially during the pandemic?
President Biden signed an executive order this week to strengthen U.S. supply chains for advanced batteries, pharmaceuticals, critical minerals and semiconductors.
“A lot of the assumptions that we have based our trade programs on [have] maximized efficiency without regard for the requirement for resilience,” Tai said.
Rethinking the China strategy
Between 2011-14, Tai was the USTR’s chief counsel for trade enforcement with China.
On Thursday, she told senators the U.S. needs a “strategic and coherent plan for holding China accountable to its promises and effectively competing with its state-directed economics.” The government must have “a united front of U.S. allies,” she added.
“China is simultaneously a rival, a partner and an outsized player whose cooperation we’ll also need to address certain global challenges,” she said. “We must remember how to walk, chew gum and play chess at the same time.”
Ohio Sen. Rob Portman, himself a former USTR during the George W. Bush administration, pushed her to explain how the U.S. could compete with the “techno-nationalist” approach China takes on semiconductors — which he said are subsidized by up to 40 per cent, allowing the Communist regime to dominate the global market.
“We can’t compete by doing the things China does, so we have to figure out how we can compete by marshalling all the tools and resources that we have in the U.S. government,” Tai said.
Later she described how the Chinese state is able to conduct its economy “almost like a conductor with an orchestra,” while Americans trust the “invisible hand” of the free market. The U.S. government may need to revisit this, she said, “knowing the strategy and the ambition that we are up against.”
Fellow Ohio Sen. Sherrod Brown asked Tai whether she’d make it a top priority to crack down on imports that trace back to China’s forced labour program, which human rights investigators believe abuses potentially millions from China’s minority Uighur and Turkic Muslim population to pick crops like cotton.
“Yes,” she said. “I think the use of forced labour is probably the crudest example of the race to the bottom.”
‘Laser-focused’ on Huawei
Virginia Sen. Mark Warner, who also sits on the Senate intelligence committee, urged Tai to form a “coalition of the willing” to compete with the Chinese “authoritarian capitalism” model that’s enabled the rise of tech giants like Huawei.
Trade negotiations have to protect the security of digital infrastructure, he said, and the U.S. should consider asking trading partners to prohibit certain Chinese technologies.
“If we keep Huawei out of American domestic markets but it gets the rest of the world, we’re not going to be successful,” Warner said.
Tai agreed with him, and said the U.S. government should be “laser-focused” on this, and not just in trade negotiations.
To counter China’s influence, Delaware Sen. Tom Carper asked whether it would be a “fool’s errand” to rejoin partners like Canada in the Pacific Rim trading bloc — which was renamed the Comprehensive and Progressive Trans-Pacific Partnership after the U.S. left it in 2017.
Tai said the thinking behind the CPTPP remains a “solid equation” but the world in 2021 is “very different in important ways” to the climate in 2016, when Congress failed to approve the TPP.
Carper also asked how trade policy is affected by the Biden administration’s renewed multilateral approach to climate change.
“The rest of the world is coming up with its own climate solutions, and that means that as other countries and economies begin to regulate in this area, climate and trade policies become a part of our competitive landscape,” she said.
‘Digging in’ on dairy
Tai also promised to work closely with senators who raised issues about commodities important to their states — and Canada. But the veteran trade diplomat didn’t tip her hand too much on what Canada should expect.
Idaho’s Mike Crapo was assured she’ll work on “longstanding issues” in softwood lumber.
She told Iowa’s Chuck Grassley she’s aware of the “very clear promises” Canada made on dairy as part of concluding the NAFTA negotiations, and how important they were to win the support of some senators.
Some of these Canada-U.S. issues “date back to the beginning of time,” she said, adding she was looking forward to “digging in” on the enforcement process her predecessor began in December.
Several senators pushed for more attention to America’s beef, of which Tai said she was a “very happy consumer.”
South Dakota Sen. John Thune expressed frustration with the World Trade Organization’s ruling against the cattle industry’s protectionist country-of-origin labelling (COOL) rules, prompting a commitment from Tai to work with livestock producers on a new labelling system that could survive a WTO challenge.
One of the toughest questioners Thursday proved to be former presidential candidate Elizabeth Warren, who slammed the lack of transparency in past trade negotiations and told Tai her administration needs to “take a hard line.” Warren called for limiting the influence of corporations and industries on advisory committees and releasing more negotiating drafts so the public understands what’s being done on their behalf.
At the conclusion of the hearing, Chairman Wyden asked Tai to send her ideas for improving the transparency of trade processes to the committee’s bipartisan leadership within 30 days.
Throughout the hearing, senators described Tai’s confirmation as “historic.” She’s the first woman of colour and first Asian-American (her parents emigrated from Taiwan) to serve as USTR.
Pennsylvania’s Bob Casey asked if she’d commit to working on women’s economic empowerment and participation in trade laws.
She answered with just one word: “Yes.”