In March, I published an article with the International Trade Club of Chicago (ITCC) blog on President Biden’s 2021 Trade Agenda and 2020 Annual Report that was released by the USTR on March 1, 2021.
This article supplements that article, and focuses on the recently released 2021 National Trade Estimate Report on Foreign Trade Barriers (NTE) published by the United States Trade Representative (USTR) on March 31, 2021.
The National Trade Estimate Report on Foreign Trade Barriers
The NTE report reveals many potentially important insights regarding U.S. trade policy focus under the new Biden Administration, and why U.S. companies, large or small, with footprints in China should be on alert.
As explained in the ITCC article, the U.S. government, through the USTR, typically publishes two seminal reports detailing its trade policy focus for the coming year: its Trade Policy Agenda (TPA) report and the NTE report.
Ngosong Fonkem, West Virginia University College of Law 2011 (JD, MBA) and Tulane Law School 2012 (LLM), is an attorney with at Page•Fura, P.C., Chicago, where he assists companies of all sizes with business-practical representation on all aspects of customs and international trade law.
Whereas the TPA reports on progress and problems from the previous year, and lays out U.S. policy focus and agenda for the coming year, the NTE addresses the status of foreign trade and investment barriers to U.S. exports around the world. These two reports provide a window into the U.S. government’s views and priorities with respect to its trade policies moving forward, its trade relationship with its major trading partners, and further sheds light on the U.S. government’s potential trade actions against them.
In the 2021 NTE report, USTR discussed the largest export markets for the U.S., including: the European Union, Taiwan, Hong Kong, and the Arab League. With regard to China, the NTE report spells out in 28-pages the Biden Administration’s grievances against China’s trade barriers, including:
import policies such as tariffs, import licensing and customs barriers;
technical barriers to trade;
sanitary and phytosanitary measures;
intellectual property protection;
barriers to digital trade and electronic commerce;
The release of the 2021 NTE comes under the backdrop of the ongoing trade tensions between the U.S. and China, which reached new heights under the Trump Administration. Despite the signing of the “phase one” trade deal in January 2020, the two countries continue to maintain hundreds of billions of dollars’ worth of tariff on each other’s goods.
Broadly read, the report shows that the U.S. government under a Biden Administration intends to continue a tough approach in handling foreign trade issues with China.
Specifically, as the NTE states:
China continues to pursue a wide array of industrial policies that seek to limit market access for imported goods, foreign manufacturers, and foreign services suppliers, while offering substantial government guidance, resources, and regulatory support to Chinese industries … the beneficiaries of these constantly evolving policies are not only state-owned enterprises, but also other domestic companies attempting to move up the economic value chain.
The NTE goes on to say that “in manufacturing industries such as steel and aluminum, China’s economic planners have contributed to massive excess capacity in China through various government support measures.”
With regard to steel, the NTE states:
For steel, the resulting overproduction has distorted global markets, harming U.S. manufacturers and workers in both the U.S. market and third country markets, where U.S. exports compete with Chinese exports. While China has publicly acknowledged excess capacity in these industries, among others, it has yet to take meaningful steps to address the root causes of this problem in a sustainable way.
In summarizing the administration’s plan for China going forward, the NTE states:
USTR [will] continue to vigorously scrutinize foreign labor practices and to address substandard practices that impinge on labor obligations in U.S. free trade agreements (FTAs) and deny foreign workers their internationally recognized labor rights.
In another provision, the report notes the USTR is “scrutinizing foreign labor practices” that may impact labor obligations in FTAs and that the USTR is enhancing its monitoring and enforcement of environmental commitments under those agreements.
Conclusion: ‘Tough on China’ Policy Continues
An analysis of 2021 NTE report regarding U.S. engagement with China makes one key issue certain: the Biden Administration appears to be intent on maintaining a tough on China policy.
As a result, U.S. companies with footprints in China will have to remain vigilant, and follow USTR’s policy toward China closely – likely closer than they did previously under the Trump Administration.
One such area that could see increased scrutiny under the Biden Administration is transactions that could be deemed to have utilized forced labor in their supply chains. Such increased scrutiny will likely be carried out through the use of tools of trade such as U.S. Custom and Border Protection’s issued withhold release orders and economic sanctions issued by the U.S. Treasury Department Office of Asset Control.
This article was originally published on the State Bar of Wisconsin’s International Practice Section Blog. Visit the State Bar sections or the Business Law Section web pages to learn more about the benefits of section membership.