Ambassador Katherine Tai's Remarks at the National Press Club on Supply Chain Resilience

WASHINGTON – At 2:00 PM, United States Trade Representative Katherine Tai today will deliver a major speech at the National Press Club.  Her speech is part of an event hosted by the Open Markets Institute: "The Next World System: Can US Trade Policy Make Us More Secure, Democratic, & Prosperous?"

In her speech, Ambassador Tai will highlight how the U.S. trade agenda is prioritizing resilience in the global economy. Building on National Security Advisor Jake Sullivan's recent speech on renewing American economic leadership, Ambassador Tai will detail how the pursuit of efficiency and low costs in trade policy led to vulnerable and high-risk supply chains -- and how the Biden-Harris Administration is reversing this trend by raising standards, driving sustainability, and prioritizing the needs of our workers and producers.

Ambassador Tai will also share how the U.S. trade agenda is advancing the Biden-Harris Administration's industrial and competition policy goals. 

Ambassador Tai's remarks as delivered:

Thank you, Barry.  It is a pleasure to be here with you today, and thank you to the Open Markets Institute and the National Press Club for hosting me.
I do not know if you remember, but you and I first met almost ten years go.  I was working on the Hill, and you had come in for a meeting to talk about supply chains.
Supply chains were not yet the topic of kitchen table conversations back then, but they were an area of intense focus for trade policy, especially after the 2011 earthquake in Fukushima, Japan.  That earthquake and its aftermath disrupted the famous “just-in-time” supply chains that Japan’s automakers had pioneered, with significant negative impacts for Detroit.
Barry, you were the first to see the connection between supply chains and competition policy.  In fact, your work on supply chains is what led you to competition policy.
When we first met, you brought one of your articles about the dangers that offshoring and the concentration of production outside our borders—and in the People’s Republic of China in particular—present to U.S. national security.
You had an excellent point at the time, and in fact, we were witnessing the first instances of what we now identify as a pattern of economic coercion by the PRC.
I have to admit though, that back then, I thought your article would be persuasive mainly as a theoretical matter.  We had just won a WTO dispute against the PRC on its rare earth export restraints, and we continued to hope that the multilateral system would help solve the challenges we were seeing.
Fast forward to these last few years, you can imagine how I have had many occasions to think back on that first meeting with Barry.
Our world is different now. 
A war in Europe, with drastic economic consequences.  A worsening climate crisis.  A digital transformation that continues to accelerate and transform our world, creating economic opportunities, powerful industry giants, as well as threats and harms to democracy and humanity all at the same time.
And of course, fragile supply chains and an unsustainable version of globalization demanding reform and improvements.  It is abundantly clear that these challenges have implications for competition policy, as well as trade policy.  So, all of us working in these spaces must row in the same direction.  In fact, we already are doing so—and I am delighted to be here with all of you today to begin connecting these conversations.
After the pain and fear of the supply chain disruptions we all experienced during the pandemic—including the panicked race to secure masks, hand sanitizer, ventilators, and semiconductors—Barry’s insight is no longer theoretical. 
Today, labor leaders, CEOs, foreign leaders, and the President’s National Security Advisor all agree: our global supply chains, which have been created to maximize short-term efficiency and minimize costs, need to be redesigned for resilience.  
Because resilient supply chains are vital for greater national and economic security.
By this, we mean production that can more easily and quickly adapt to and recover from crises and disruptions.  It means having more options that run through different regions.
But getting there requires a fundamental shift.  A shift in the way we incentivize decisions about what, where, and how we produce goods and supply services.
That shift, in trade as in antitrust, moves away from a narrow focus on benefits for consumers.  Our trade policy places workers at its center to reflect the reality that the consumer who enjoys the low prices of imported goods is also a worker who must withstand the downward pressures that come from competing with workers in other parts of the world toiling under exploitative conditions.
Similarly, prioritizing and pursuing the consumer welfare standard in competition policy has led to consolidation and unchecked dominance in our domestic market, which has stifled competition and diminished economic liberty for our citizens and workers. 
President Biden recognized this when he issued an executive order on promoting competition policy in the American economy, just six months into the Administration, in which he said: 
“[T]he United States faces new challenges to its economic standing in the world, including unfair competitive pressures from foreign monopolies and firms that are state-owned or state-sponsored, or whose market power is directly supported by foreign governments.  We must act now to reverse these dangerous trends, which constrain the growth and dynamism of our economy, impair the creation of high-quality jobs, and threaten America’s economic standing in the world.”
In trade, as Jake said so aptly in his speech last month, the pursuit of efficiency and low costs above all else has led to vulnerable and high-risk supply chains.  
Let me take a moment to explain how designing a system around efficiency and low costs got us here.
Trusting markets to allocate capital efficiently, we designed trade rules to liberalize as much as possible, under the theory that we were facilitating the creation of a free global marketplace.  We thought a rising tide would lift all boats, believing that this approach could lead to a gradual improvement in labor standards and environmental protection as countries grew wealthier from increased trade flows.
We did not include guardrails to ensure that it would be the case.  The system itself, then, created an incentive for countries to compete by maintaining lower standards, or by lowering their standards even further, as companies sought to minimize costs in pursuit of maximizing efficiency.  This is the race to the bottom, where exploitation is rewarded and high standards are abandoned in order to compete and survive.
When efficiency and low cost are the only motivators, production moves outside our borders.  It becomes increasingly consolidated in one economy—such as the PRC—which manipulates cost structures, controls key industries, and became a dominant supplier for many important goods and technologies.
I recently had an important conversation with UAW President Shawn Fain and AFL-CIO Secretary-Treasurer Frederick Redmond in Detroit, during the APEC Ministers Responsible for Trade Labor Dialogue.  Shawn shared how the closure of the General Motors plant in his hometown in Indiana was a vivid illustration of why we must do things differently.
When the plant shut down, people lost their jobs.  They lost their healthcare.  The small businesses that sustain the community closed down, and people started moving away in search of other opportunities. 
Those who lost their jobs, if they were fortunate to find new ones, often had to settle for lower wages and worse benefits.
Their children faced an uncertain future. 
This is what a race to the bottom looks like.  
You can see how the decision to allow artificially low costs and low prices to lead U.S. economic policymaking has made us less secure, less free, and less prosperous.
That is why President Biden’s vision for our future is to build the economy from the bottom up and the middle out, not from the top down.
So, the President’s plan started with jump-starting a historic, equitable recovery from the pandemic through the American Rescue Plan.
The next step was rebuilding our country by investing in our infrastructure, manufacturing capacity, and technological strength.
Today, we are upgrading our roads, bridges, and airports.  Expanding manufacturing here in the United States.  Creating good-paying jobs, including 800,000 manufacturing jobs, many that do not require a college degree.  
These are groundbreaking down payments on our nation’s future and our people, and our new story on trade also plays an important part in this effort.  That is why we are focusing on workers, the communities they live in, and the small businesses that sustain them and are sustained by them.
Our new approach to trade recognizes people as more than just consumers, but also producers—the workers, wage-earners, providers, and community members that comprise a vibrant middle class. 
Our focus has shifted from liberalization and the pursuit of efficiency and low costs—at any cost—to raising standards, building resiliency, driving sustainability, and fostering more inclusive prosperity at home and abroad.  Like other aspects of the Administration’s economic policies, we are using trade to create a race to the top.
I hear all the time that because we are not doing traditional trade agreements, we are not doing trade at all.  But if we look at what those agreements did, we see the ways in which they contributed to the very problems we are now trying to address. 
The industrial supply chain rules in our traditional free trade agreements were based on that same premise of efficiency and low cost.  
Because of it, they allow significant content to come from countries that are not even parties to the agreement—free riders, who have not signed up to any of the other obligations in the agreement, such as labor and environmental standards.  That means these rules benefit the very countries that have used unfair competition to become production hubs.  
That is how the supply chain rules in these FTAs tend to reinforce existing supply chains that are fragile and make us vulnerable.  This does not make sense at a moment in history when we are trying to diversify and make them more resilient.
What we need is a trade policy that fosters and creates opportunities for good and diversified jobs here in our communities, revitalizes U.S.-based production at high, middle, and low ends, and puts workers back at the center because they are the foundation for resilience.  
That is exactly what we have been doing through the U.S. – Mexico – Canada Agreement. 
The USMCA has a mechanism that allows us to bring cases against specific facilities that do not respect the rights of workers to freedom of association and collective bargaining. 
Over the last two years, we have been securing wins for workers at several facilities.  We are seeing real change and success for workers and independent unions in Mexico.  New collective bargaining agreements.  Major salary increases.  Safer working conditions.  Backpay.
In short, we are using a trade agreement to bring real and tangible improvements to people’s lives. 
And this is not just about Mexican workers.  It helps American workers too, because raising labor standards reduces the incentive to ship jobs overseas by removing the artificial advantages created through exploitation and abuse. 
Placing the success of workers, communities, and small businesses at the center of our focus is important to democratizing opportunity for Americans across our economy.
The traditional trade policy approach historically focused on providing benefits for our biggest companies, on the theory that those benefits would necessarily trickle down to our workers, small businesses, and communities.  But over time, what we have seen is that these benefits do not trickle very far down.
That is why a key part of my approach is to put the U.S. back into USTR—traveling throughout the country, meeting with smaller companies and entrepreneurs, and diversifying our advisory system.
We have put out an open call for participants to join our industry trade advisory committees.  The Labor Advisory Committee has never before played such an important role in shaping our trade policies, so that they can be more responsive to the interests of working people.
The people I meet on my domestic travels—civil society, Labor, and businesses, too—their aspirations and challenges provide the basis of all of our new trade engagements.  That is what you see in the Indo-Pacific Economic Framework discussions, where a lot of what we are trying to do is orient the rules toward working people, the environment, and small businesses.
Having placed a traditional priority on promoting the interest of the “bigs” and seeing the limitations created by the outcomes of that policy approach, we are now focusing on folding in the interests of small businesses.  
We want to make it easier for our smaller companies to thrive, to grow into medium businesses, and to get started in the first place.  Our administration has placed an enormous emphasis on creating opportunities in our domestic market through a clear and focused competition policy agenda.  Healthy competition is key not only to maintaining vibrancy and innovation in our economy but also to promoting democracy.  Trade policy has an important role to play in this regard.
For example, this is helpful for small farmers and ranchers in America.  They have told us that their biggest challenge is not necessarily tariffs—but whether they can access a foreign market at all, often because of a lack of transparency in how rules are administered.  So, we are focused on making it easier for small businesses to participate in trade.
Resilient supply chains must include a diverse and healthy ecosystem of suppliers, and I am working closely with my good friend, SBA Administrator Isabel Guzman.  We have been able to do joint events around the country where we share this vision with local communities.
Empowering SMEs is also an important part of the new trade agreement we just concluded with Taiwan.  It encourages training programs and trade missions and creates SME Dialogues for businesses owned by underserved and underrepresented groups.  It also includes provisions on “Good Regulatory Practices” that recognize and respect the important role of regulators and transparency in promoting sustainable and inclusive economic outcomes.
You also see that a common theme for our Administration is that we are leaning in on our strong relationships with allies and partners who share our values.
We have seen many instances of economic coercion where, for example, the PRC uses trade and economic measures in an abusive or arbitrary way to achieve a strategic political objective or interfere with foreign governments’ exercise of their legitimate sovereign rights. 
That is why, just last week, we issued a joint declaration with Australia, Canada, Japan, New Zealand, and the United Kingdom to send a clear message that we stand together against the use of non-market economic policies to build global market dominance that can be abused.
We are working with our closest neighbors, too. 
Many of the countries that are a part of the Americas Partnership for Economic Prosperity already have FTAs with us.  But many partners, especially governments like Chile and Colombia, want something that reflects not just the supply chain concerns but the values our governments share.
Our focus through initiatives like the IPEF and the APEP is on developing additional supply chains to de-risk us from overreliance. 
Let me unpack this a bit more. 
I want to start with critical minerals.  The underlying problem is clear—we are dependent on a range of critical minerals and materials for products we use every day, everything from engines to airplanes to defense equipment.
Demand for many of these metals is projected to surge over the next two decades, especially as we work to achieve net-zero greenhouse gas emissions by 2050; but the PRC already controls more than half of global mining capacity and 85 percent of refining.  
Those are vulnerabilities—or in the terminology of competition policy, “chokepoints”—that we need to address and break.  And we are working with Congress, stakeholders, and partners to develop responses that help foster the kinds of supply chains we want to see for clean energy products—like commitments on export duties, non-market policies, best practices on investment screening, and labor rights.
Another example of a chokepoint is how Russia’s invasion of Ukraine triggered global disruptions in markets for key food crops and fertilizers, threatening food security worldwide.
This has interrupted shipments around the globe, and growers are scrambling to adjust.
Whether it is through working with us on the Critical Minerals Agreement, the IPEF, or the APEP, more and more countries are realizing that we need a new model for doing trade to adapt to the challenges presented by the world we are living in.  And we are doing this in cooperation with our allies and partners, not at their expense.
We are turning the colonial mindset on its head.  Instead of supply chains designed to extract from developing economies, our approach is to partner together, where we are all co-owners of different parts of supply chains. 
This makes perfect sense in terms of de-risking and building resilience.  The key is to offer economies a spot in vertical integration so that developing countries are not perpetually trapped in an exploitative cycle.
In my discussions with foreign counterparts, I have found that, as it turns out, we all aspire to build our economies from the bottom up and the middle out—to provide those at the bottom with a path to the middle, and to build a broad middle class.  We do this by collaborating in ways that allow us to create opportunities and build our middle classes together, rather than pitting them against each other.
Pursuing this kind of de-risking and resilience in supply chains is about improving our national security and economic security for working people.  These are critical to taking down tensions in the world as well as anxieties at home, and also reducing opportunities for economic coercion. 
In this vein, I want to close by highlighting the Global Steel and Aluminum Arrangement negotiations with the European Union as an example.
We are pursuing an ambitious, high-standard agreement that will address our shared commitment to a just green transition.  It will also tackle the particular challenge to our workers posed by countries that have deliberately produced more steel than they can consume, depressing world prices and devastating our steel workers and communities. 
The vision is to combine the U.S. and EU markets to create the leverage for trading partners to meet high standards for fair, market-based, and clean production at the same time.
By flipping race-to-the-bottom dynamics on their head to create a race to the top, we are working toward a world with a more diverse set of economies producing steel and aluminum, a world where democracies and open markets can flourish and drive standards that improve over time.
As President Biden says, we truly are at an inflection point.  We are facing multiple challenges at the same time, so our trade policy cannot remain in a silo. 
We must be agile in making connections between our work in trade policy and what is happening in domestic policy.  That includes digital and technology policy, which I would be remiss in failing to mention. 
At a time of rapid change and constant developments, trade policy must respect the space for our domestic policymakers, regulators, enforcement officials, and legislators to debate and determine appropriate frameworks governing the relationship between government, technology, business, and the public interest.
What is at stake is the ability of Americans—as workers, consumers, innovators, inventors, content creators, entrepreneurs, and community members—to enjoy their rights to privacy and liberty, and their access to democracy and opportunity. 
Through all of the uncertainty that we face today, our mandate is clear.  Complacency is not an option.  We must adapt and pursue an unapologetically positive vision for building a tomorrow where all of us—including the most underserved and vulnerable—are more secure, more prosperous, and more equal.
Thank you.