U.S. Faces Trade Barriers from Allies and Rivals

The 2021 National Trade Estimate Report on Foreign Trade Barriers (NTE) released by the U.S. Trade Representative (USTR) Katherine Tai on Wednesday indicates that the United States still faces significant trade barriers from its close allies as well as its geopolitical rivals.

The 2021 NTE is the 36th annual report of its kind, which provides detailed information on major barriers to American trade and foreign direct investment enacted by foreign nations. The trade barriers analyzed include those which are legally sanctioned as well as those which violate international law. This year, the report covered 61 individual formally recognized countries as well as the European Union, the Arab League, Hong Kong, and Taiwan.

Unsurprisingly, due to their status in the top three largest economies in the world alongside the United States, a large amount of the report focused on the European Union and China. According to the 2019 International Trade Barrier Index published by Property Rights Alliance, China scores the second worst in the world for trade barriers. The European Union member states range from the fourth-best-scoring country in the world (Netherlands) to the 37th-best-scoring country (Italy).

Several categories of trade barriers are highlighted for the European Union. On the digital front, the report called out various European countries for “[singling] out digital companies.” USTR gave special focus to the Digital Services Act, Digital Markets Act, and various digital services tax proposals that they say unfairly target U.S. tech companies with extra costs and regulation.

The report also gave significant attention to European barriers to agricultural and biotechnical trade. USTR notes that various fruit and vegetable producers in Europe still receive subsidies that lack transparency and distort free trade. Further, they assert that many EU import barriers regarding animal welfare and sanitary conditions “do not appear to advance any food safety or animal health objectives” and often “are not based on scientific principles.” USTR takes a similar position on genetically modified crops, noting that new crops which are already proven to be safe in the United States take on average six years to be approved for import into the EU.

Many of the concerns about Chinese trade barriers highlighted in the report focus on more nefarious and extralegal practices. One major area of concern is a lack of intellectual property protection. Despite the lengthy U.S.-China trade war that sought to reduce intellectual property violations and coerced transfers in China, these practices have continued and, in some cases, worsened. USTR observes that “online piracy continues on a large scale in China” and that “counterfeiting in China remains widespread and affects a wide range of goods.”

These observations align closely with those presented by former U.S. Trade Representative Robert Lighthizer in the 2020 Review of Notorious Markets for Counterfeiting and Privacy. Lighthizer found that seized counterfeit goods from China actually increased between 2018 and 2019 and named several Chinese online markets as “notorious” for intellectual property theft. Many companies and industry groups also named China as a significant source of intellectual property theft during the public comment period for the 2021 Special 301 Report on IP protection. The violations highlighted by both the current and former USTRs range from bad faith trademark registration to theft of trade secrets to the production and distribution of counterfeit goods.

In USTR Katherine Tai’s confirmation hearing, she claimed that the U.S. is ready to “walk, chew gum, and play chess at the same time.” Indeed, earlier Tai reserved the right to impose tariffs on several countries including European Union member states for their discriminatory digital services taxes, and has proposed $1 billion in tariffs to remedy the discrimination. At the same time, Biden has tasked her to work with those allies to confront China’s trade and intellectual property violations. Tai has yet to clearly outline how the U.S. will work with these allies while simultaneously confronting them for their own unfair practices.

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