USTR Tai says Biden administration not swapping trade deals for industrial policy

FILE PHOTO: U.S. Trade Representative Katherine Tai takes part in a news conference in Ottawa

By David Lawder

WASHINGTON (Reuters) - U.S. Trade Representative Katherine Tai on Friday said the Biden administration has not "sworn off" efforts to liberalize trade and open markets, but such policies can no longer weaken supply chains and harm U.S. workers and the environment.

Tai, speaking at a Roosevelt Institute conference on industrial policy, said that government efforts to rebuild U.S. industries must complement trade policies and rejected criticism of the Biden administration's lack of appetite for traditional free-trade deals.

"We have not sworn off market opening, liberalization and efficiency," Tai said in prepared remarks. "But it cannot come at the cost of further weakening our supply chains, decimating our manufacturing communities, and destroying our planet."

Tai said that traditional trade deals of the past that eliminated tariffs led to offshoring, de-industrialization and weakening of supply chains that were exposed during the COVID-19 pandemic.

But she added that the new U.S. focus on industrial policy -- through investments in semiconductors, research, infrastructure and clean energy -- will not devolve the global economy into a "state of nature" where countries look only after their own interests and the strongest thrive.

"That is not the Biden administration’s vision," Tai said, adding that there was a need for trade rules that recognize key domestic economic priorities as well as for cooperation with other countries to improve prospects for their citizens.

"We believe industrial policy and trade policy must complement each other if we are going to realize this goal," Tai said.

The Biden administration is pursuing a number of trade-related negotiations that stop well short of reducing tariffs, with the European Union, Britain, Indo-Pacific countries and others. But these are focused on subjects including harmonizing regulations, digital trade flows, labor rights and environmental standards.

Tai said traditional trade tools and institutions have failed to address distortions from China's "non-transparent, non-market, state-directed industrial dominance policies," she said, limiting the ability of workers in free-market countries to compete.

She also said that the United States needs to invest more in its infrastructure to compete with China and other countries that have been making such investments for decades.

(Reporting by David Lawder; Editing by Mark Porter)