Alina Polyakova: Hello, I’m Alina Polyakova, President and CEO of the Center for European Policy Analysis. Welcome to this fireside conversation happening as part of the 2023 CEPA Forum, Winning the War, Winning the Peace. I am absolutely delighted and honored to have the opportunity to speak with Ambassador Katherine Tai, US Trade Representative about the role of international trade as we can harness it for global growth and prosperity. Ambassador Tai, it’s so wonderful to see you, welcome to CEPA.
Katherine Tai: Thank you so much for having me.
Polyakova: So let’s get into it. We were just talking about how you’ve been on the road a lot recently. The G20 just took place a little bit ago, you were also in Indonesia as well. You know, all these multilateral institutions, USTR of course, and you play a critical role. These conversations are really happening in the context of trade becoming a contentious issue again, not just with our competitors in the United States, but also often with allies. How do you see the role of these multilateral bodies in really playing a critical function for the United States in particular?
Tai: Well, trade is always a contentious issue. And I think that every trade representative who has sat in the seat has been pulled in different directions. You know, we sit at the intersection of foreign policy with domestic economics between the congressional and the executive branches. So I think that challenges are not new to trade and US trade representatives. But to your point on the multilateral institutions, and whether that’s our participation in forums like the G20, or APEC, or, you know, the most multilateral of them, the World Trade Organization, which has 164 members; I think that the task that we have at hand is to work within those organizations to help adapt them, to adapt their practices, to adapt attitudes to the realities that we’re facing. The fact of the matter is that something like the WTO was formed in 1995. And so it’s well beyond being able to drive and being able to vote as if it were a human being. It is on the cusp of turning 30 years old. If you think about how much has changed in the world economy, how many of those economies have changed over this 30-year period of time, you start to appreciate what the challenges are for keeping up with the times and keeping up with reality.
Then you compound that with the experience that we’ve collectively gone through these last five to seven years, you started to see significant backlashes against this version of globalization six, seven years ago; the pandemics certainly woke a lot of us up to the challenges with a supply chain world built on efficiency only, that didn’t take into account the need for resilience, increasingly extreme climate events that are disrupting the world, public health and also the economy. And then, of course, something you think a lot about is Russia’s invasion of Ukraine, which I think has really woken people up to the fact that this increasing level of interconnectedness between our economies isn’t enough to guarantee peace. That peace is, I think, a necessary precursor to prosperity. But prosperity itself doesn’t overcome whatever it is that could cause someone like Vladimir Putin to design to invade Ukraine and have all of us holding the pieces. So in a lot of these institutions, I think that it is not very comfortable right now. But I think that is also part of the program, which is through that discomfort, to have us grapple with how to adapt and change.
Polyakova: Well, you’ve just laid out a very, very wide set of issues. And I’m going to pick up on a couple of them. But I think to the things you mentioned were the shocks we’ve seen over the last years to global trade and supply chains in particular, of course, the pandemic, I think woke all of us up to the reality of the deep, deep interconnections that we have across the globe. And then, of course, Russia’s invasion of Ukraine last year, which again, still continues to undermine global trade, especially when it comes to key resources like grain and oil, all of those different issues in which Russia and Ukraine both have played a critical part on the global stage. But given the shocks that have taken place. How do you see the current situation that comes to supply chain resilience in particular? You know, we can talk even about more shocks, right that have taken place since 1995, since the WTO; the tech revolution, digitalization of our societies, all these different issues. But do you feel like we have come out on the other side yet, from the kinds of shocks that we’ve seen because of the pandemic, because of Russia’s invasion?
Tai: No, I don’t think we’re out on the other side yet. And I just come back to something that President Biden says often, and I think about him saying it often because it is so true: we really are at an inflection point. And not just one inflection point, there’s multiple inflection points. So what we do now is at this point in time is going to have implications for the next decade or two, if not more, on the supply chains. And I’m glad that you have really touched on our experience with a pandemic, which I think really exposed the degree to which concentrations in where things are made and where our supplies come from, really, ensnarled our ability to respond. Just basic manufacturing on things like gloves and masks, and PPE. If you just think back about three and a half years ago, we were all desperate for the same basic materials at the same time. And the place where we have relied on getting it was the first place to go into a lockdown. So that’s one example. But you know, the Russian invasion of Ukraine, I think that Europe certainly has had to contend with its overreliant reliance on Russia as a source for energy. And then I think that the world is contending with having Ukraine knocked out as a reliable source of grains.
So the focus, I think, is starting to really coalesce around the need for diversification, that resilience requires more cushioning, more options. And I think that really dovetails also with a focus. It’s the third pillar of Bidenomics, which is on competition, promoting competition. There’s a resilience argument for it just from a supply chain standpoint. But there’s also an economic security element of it, both writ large at the macro level, security of economies, but also, at the more micro level, the economic security of ordinary working people, the opportunity to join the middle class and to grow our middle class. So I think that the inflection points that we find ourselves contending with also bring with them enormous opportunities to articulate an unapologetically positive vision for where we want to go. And I think certainly from the Biden administration, what you see from us is wanting to travel that path with other countries and economies.
Polyakova: So diversification, you put that front and center and I was writing it down, as you’re speaking, as I think the big motto of the day after the pandemic shock in particular, but of course, we’ve also learned that a lot of things like critical minerals, natural resources; they’re not as fungible because there’s only sometimes a handful of countries that control the global market just because of deposits, right. And there’s been an increasing race towards identifying new critical mineral deposits in other countries. But that’s going to be a very long-term trajectory because these nonfungible resources are going to take a long time to diversify across all of our economic societies. But I think one of the key pillars of your agenda as USTR has been to work with allies in really significant ways. And I think one of the areas in which I really want to congratulate you and USTR is of course in the Indo-Pacific Economic Framework, which I know has been a high priority to ensure that we as the United States are engaging our allies in the Indo-Pacific, not just from a security perspective, which is, of course, linked to trade and economics. So congratulations on this tremendous effort and your leadership in this economic agreement, which you just marked one year this last May. So a big deal there. But for our audience that may not be as familiar with what IPEF is, can you talk a little bit about what your vision, the Biden administration’s vision, has been for this economic framework?
Tai: Absolutely. So it has been one year, just at the end of May, since our leaders got together to formally launch this initiative. We had another one-year anniversary at the beginning of September, which is September of 2022, was when Secretary Raimondo and I hosted the trade ministers in Los Angeles to formally kick off the work. And so we’ve really been doing work at the technical level, for just over a year, a year and two weeks, I think. In that amount of time, we’ve already produced an agreement under pillar two, which is on supply chains, supply chain cooperation certainly, and how to basically, un-discombobulate supply chains when those bottlenecks happen. And by November, I am very hopeful that we will have more announcements to make in the other three pillars. There are four pillars overall if you think about, and if you’ve been around trade negotiators and trade negotiations, the fact that we are moving at this fast of a pace is in and of itself a tremendous accomplishment.
And I think that I’m glad we covered the ground in your previous questions because at a time of so much uncertainty and change, we’re bringing a very pragmatic approach to our collaboration with our partners, which is that you’ve got to innovate by doing. And you’ve got to be producing results because I don’t think any of us can afford to say hold on, let’s take seven years to negotiate this thing which might feel like it makes sense today, but won’t be responsive to how things continue to play out at a time of shifting inflection points on the Indo-Pacific Economic Framework. We’re trying to do something new. And so it makes it a little hard to explain because it’s not the same old thing we’ve been doing before. But that’s really the point. So the Indo-Pacific Economic Framework, it includes trade, but it’s not limited to trade. So that’s one innovation. The other piece of it is, we want for this to be a negotiating forum. So I want to be able to point to, here’s the supply chain agreement that we’ve got, that we’ve already concluded, here are the components of the trade pillar that we’ve already agreed because they were common sense, you know, obvious things that we should be doing together. But at the same time, we want for this to be an enduring framework and enduring forum.
And so we are borrowing from the tradition of trade negotiations, but doing things differently. We’re also borrowing from the tradition of APEC. And APEC holds itself up as a laboratory of ideas, a place where you can test and incubate new initiatives, new thematic policy discussions. We also want to bring that into the Indo-Pacific Economic Framework and actually have these two streams of negotiating work, but also collaboration and experimentation, to feed into each other in a kind of virtuous cycle. So not something that we’ve done before. But you know, I’ll just highlight, similar also to the spirit that we’re bringing to the US-EU Trade and Technology Council. There, I think we are also doing something that is largely collaborative on the confidence that at a time of inflection, that the path forward is really based on cooperation and communication.
Polyakova: I’m glad you brought up the conversations that have been happening in the context of the TTC between the EU and Washington. I want to get to that in just a moment. But to stick with the Indo-Pacific for a second. We’ve been dancing around one particular country and that’s of course China, which we haven’t actually mentioned yet. But of course, the agreements that you just described with IPEF contexts, also some of the security agreements that the Biden administration has pursued with our allies, you know, are all speaking to the common agenda that exists across the US government and with our allies that we are concerned about competition with China and, of course, the kind of authoritarian model that Beijing has been developing that goes very much against our democratic values and principles. So sticking with the question of China, right, you’re pursuing all these creative and innovative ways to work with our allies in the Indo-Pacific to work with our European allies on all kinds of trade issues as well as tech. But our relations with China are, no secret, are not good. And I know there’s been a huge diplomatic effort recently to try to improve the relationship, I think to separate some questions around national security from questions around economic trade partnerships. But how do you think about the China problem? You know, as you’re having all of these negotiations, establishing these new formats. How do you think about that challenge from where you said, in the Biden administration?
Tai: We think about it a lot. Going back to your point on critical minerals, one tweak I would make is you’re right, we don’t have control. It’s sort of what the planet has in its crust, in terms of the distribution of mineral deposits. But the fact of the matter is that we see China playing an extremely dominant role in the international economy, in terms of production, thanks to its natural advantages of what is its geology, but also in processing. In both cases, I’ll just take the example of rare earths, which are a critical component to a lot of the technologies that have become very strategic for all of us, especially in renewable energy. Rare earths are actually not rare at all. It’s a funny conundrum of its name. But we have rare earths here in the United States, and we used to produce quite a lot of it. There has been a very strategic and systematic path that China has taken to become the dominant supplier. And I think that that informs how we think about China in terms of trade, which is, the competition has not been on a level playing field.
Then in addition to incredibly significant natural advantages that the Chinese economy has, it has also created for itself artificial advantages. And so the playing field has not been even for a very long time. So a lot of what you see us doing on supply chains, and diversification, and conversations, even around the WTO, are all about correcting for the distortions and trying to even out the playing field, playing a stronger defense. It is true that we are the two largest economies in the world. And so how we relate to each other has implications for the entire world economy and the hopes and dreams of all workers and people in the world, not just ours, and not just China’s. And I think that is part of the reason why. And it’s really an animating aspect of the Biden administration’s approach to China, which is to be very clear-eyed about it but to bring a serious sense of responsibility to it.
Polyakova: So staying with China, we’re moving to Europe, because we did talk about the EU-US Trade and Technology Council, and the set of meetings that have been taking place and another one coming up, hopefully before the end of 2023. You know, in the policy world, often it feels like this is really a cooperative agreement, where China’s often the elephant in the room. Because of course, a lot of the competition at the intersection of technology and trade in particular, has to do with our concerns about China outpacing and competing through not necessarily fair practices that we’ve seen a long record in China of IP theft and things like that, that many private sector firms have complained about for a very long time. But on the TTC I mean, there’s so many frameworks. And we started the conversation on multilaterals and the WTO and the G20. Then went to IPEF and the Indo-Pacific, and now there’s another framework. How do you see all these fitting together as part of a bigger strategic vision? Especially when it comes to technology competition, because you talked about rare earths, some of these components are key for chip manufacturing, that is a huge issue. How do we think about all of these different frameworks in positioning, not just the United States, but we could say the West if you want to use that use that term, in this broader global long-term competition with China?
Tai: Certainly. So I’m always very admiring of those of you in the foreign policy and national security world where, you know, you have grand strategies. I think, from where I sit, dealing with trade and the more, I don’t know, ordinary and common elements of the economy; the strategy in my mind is actually pretty basic, which is because of these inflection points that we are contending with. We know that we need to bring a new game and a new approach, but we’re not quite there yet. So I think that there is actually a coalescing consensus that we got to do things differently. And the question is, well, what are the models that we’re going to pursue now? What, you know, diversification? That seems like another area where we have agreement. But how do you accomplish that? You know, a cleaner energy future. All right. That’s where we want to be. But how do you get there? How do we make this transition? And so what I see is, I don’t know what the answer is. But we need to be really leaning into the process of searching for that answer and experimenting.
So what you see from us at USTR right now is that we’re not negotiating that traditional all-encompassing, free trade agreement right now. And it’s because we know we need new tools for new times. So we’re doing a lot of different things. And we’re going to see what works and with which partners. We’re trying to really tailor our engagements to the partner, and to the particular challenges and values that we share. With respect to the EU, I just want to reflect; I think that we have known for a very long time that there should be more that we can do with each other. Historical, philosophical, cultural ties that we have with each other. And yet, when I look back at the history of these big trade initiatives that we’ve tried to do with each other, including just 5, 6, 7 years ago, the T-TIP right, what we see is that we just were like starcrossed lovers, we just can’t manage to get the deal across the finish line. And so we think that in this moment, we want to be focusing on collaboration. And this has informed the way we’ve approached our partnership with the EU on large civil aircraft, the big Boeing Airbus dispute, that lasted almost 20 years long. We have called a truce and given ourselves five years to figure out, hey, we want there to be a healthy competition in this area.
We want to be able not to cannibalize each other, we also want to be able not to be cannibalized by new entrants in the market. So how do we do this responsibly on steel and aluminum? Similarly, we called a truce for two years. And we’re in the process of getting to the finish line, by the end of this fall on how we’re going to work together cooperatively to take on challenges that we’re both facing. And in the TTC as well. Here I think it is really about exploring. How do we channel those challenges that we share? And how do we figure out in all the ways that we’re different how we can nevertheless work together constructively? And in this area, I think I really want to highlight that if you feel like, you know, China is the elephant or the panda in the room, that one of the really interesting aspects of setting up the TTC is that when Russia invaded Ukraine, that it became actually a ready-made forum for collaboration and cooperation, on trade and technology, on sanctions and on coordinated efforts. And I think that it has already proven concept on a challenge that maybe we didn’t really have in our minds when we declared that we were going to start the TTC.
Polyakova: Well, to wrap us up, I like to have a wish list because we’ll be watching here at CEPA the fifth meeting of the TTC very, very closely as we usually do. And we have some things in our wish list. I think, you know, from our side one of those is of course, as you said, that this forum really becomes a place to reach greater EU-US alignment, especially vis-à-vis our common vision for how we want to compete with China in particular, especially having a level playing field, as you mentioned. And you know, we’ve been watching with some concerns. Such as the independent analyst side of the house, how the EU has also pursued some policies outside of TTC contexts that have been discriminatory against some US companies. And you know, talking about setting a level playing field, this is a big, big area that we also need to align on is; how do we actually work together to support our industry, which drives our trade and our very deep partnership with Europe, rather than being a wedge in that partnership? But I wanted to ask you what your wish list would be for the next TTC that you would like to see accomplished now that we’ve had a few years of this format and this framework that has already had some successes, of course, what would you like to see in the next meeting?
Tai: Well, that is a great question. Most of the time in this job, you’re just trying to survive. And then you look back and you think, “Oh, actually, we did a pretty good job there.” But you know, if I’m going to anticipate, I think what I want to see is that we continue to grow this collaboration. And we really recognize the success of the TTC. I know, especially as trade negotiators, but you know, we’re always very hard on ourselves and each other, like, “Well, you know, there’s more that we could do.” I think the TTC is not meant to be and we haven’t used it as a negotiating forum, right? We have negotiated, we are negotiating a lot of things with the EU, right: large civil aircraft, steel and aluminum, critical minerals. But those negotiations have been formally outside of the TTC. The TTC rhythm has helped to keep us on track and to drive our pace. But the TTC itself, I think we should really embrace the space that we have created to, as you say, better align. Because I watched and read President von der Leyen’s speech, her State of the European Union speech very, very closely. And I see in that speech an increasingly clear alignment, that I know is there when you see President Biden and President von der Leyen in the same room, but now you see it also in policy, and in rhetoric. And I think that this is a moment of alignment that we really need to seize and continue to build on. So that’s my hope for the TTC, that we continue to do the good work that we’ve been doing and take this partnership to new heights.
Polyakova: Well, Ambassador Tai I think it’s a very positive note to end on. Thank you so much for joining us at CEPA for this fireside chat as part of the CEPA Forum. Really appreciate everything you’re doing and you certainly don’t have a shortage of responsibilities and tasks, and congratulations on everything you’ve already accomplished in USTR. Thank you for joining us as part of this conversation with US Trade Representative Ambassador Katherine Tai. This conversation is part of the 2023 CEPA Forum, Winning the War, Winning the Peace. Please follow us for more content on our website cepa.org and on all the social media channels #CEPAForum. And stay tuned. Thank you.