U.S. wants to de-risk not decouple from China: Jake Sullivan

Sullivan stresses shift in global trading paradigm , away from tariff reduction

Updated - April 28, 2023 05:31 am IST

Published - April 28, 2023 05:10 am IST

U.S. National Security Advisor Jake Sullivan said the U.S. was not looking to decouple from China, but to de-risk from it. File.

U.S. National Security Advisor Jake Sullivan said the U.S. was not looking to decouple from China, but to de-risk from it. File. | Photo Credit: AP

In a speech that outlined the Biden administration’s international economic policy, U.S. National Security Advisor Jake Sullivan said the U.S. was not looking to decouple from China, but to de-risk from it. Mr. Sullivan also highlighted the need for World Trade Organisation (WTO) reform and said the primacy of tariff reduction as the driving force of the global trade agenda was over. He emphasized instead a paradigm where the U.S. was working with its allies to building manufacturing capacity in key sectors and the resiliance , via supply chains, to withstand shocks such as climate change, wars and pandemics.

Speaking at the Brookings Institution, a Washington DC-based think tank, on Thursday, Mr. Sullivan echoed European Commission President Ursula Von der Leyen’s March 30 message on China, by saying, “We are for de-risking and diversifying, not decoupling”. He said export controls would remain narrowly focused on technologies that could tilt the military balance.

“We are not cutting off trade,” Mr. Sullivan said, adding that there was a record level of trade between the U.S. and China last year. Beyond the economic relationship, Mr. Sullivan repeated the Biden administration’s position on it’s China policy of managed competition.

 “We are not looking for confrontation or conflict,” he said.

“We’re looking to manage competition responsibly and seeking to work together with China where we can,” Mr. Sullivan said, adding that managing competition requires two willing parties and the “maturity” to keep communication lines open.

During his speech, Mr. Sullivan cited examples to show the U.S. was not only working with other advanced economies but also emerging ones - such as India , with which the U.S. was working “on everything from hydrogen to semiconductors”, or Indonesia, Angola, and Brazil.

He quoted his counterpart, U.S. Trade Representative Katherine Tai and said the U.S. had not “sworn off trade liberalisation” but suggested that tariff reduction, which he called the main economic project of the 1990s , was over, and that the U.S. was looking at how its trade policy fits with its international economic policy, answering current challenges.

These challenges, according to Mr. Sullivan, included creating diversified and resilient supply chains, mobilizing investment for a “just” clean energy transition and sustainable economic growth, an agreement on corporate taxation, labour and environmental standards and supporting jobs that supported the middle class. His speech made several references to policies whose objective it was to support the U.S. middle class and “working people” in other countries.

In his speech, Mr. Sullivan tried to cast some of more internationally controversial parts of the Biden administration’s recent economic policy - such as the Inflation Reduction Act (IRA) - in a better light. He described cooperation with Canada, Japan and said that U.S. President Joe Biden and Ms. Van der Leyen had launched talks on supply chains for critical minerals and batteries.

“So we are leveraging the Inflation Reduction Act to build a clean energy manufacturing ecosystem rooted in supply chains here in North America, extending to Europe, Japan and elsewhere. This is how we will turn the IRA from a source of friction into a source of strength and reliability,” Mr. Sullvan said.

The Biden administration “is still committed to the WTO” , Mr. Sullivan said, adding that its underlying values were threatened by non-market economic practices. He said the U.S. was therefore working with other countries to reform the trading system.

Biden administration’s global strategy to advance workers’ rights is coming

Mr. Sullivan said that in “the weeks ahead”, the Biden administration would be unveiling a new global strategy that advances workers’ rights through diplomacy. He said the negotiations with the E.U. on steel and aluminium could be the first major trade deal to tackle both emissions intensity and overcapacity. The E.U. and U.S. are working on an agreement to impose tariffs on steel. More than half the world’s steel is produced by China, although a negligible amount is shipped to the U.S., owing to existing duties and tariffs.

Reform of MDBs

Mr. Sullivan reiterated the administration’s position that the operating model of multilateral development banks (MDBs) , especially the World Bank, needed to be reformed to address climate change, conflict and fragility.

“And we’re very excited for [ incoming World Bank President] Ajay Banga’s new leadership at the World Bank to make this vision a reality,” he said.

Mr. Sullivan called for debt relief for vulnerable countries, many of which are in debt distress, following the pandemic. He called on China - the world’s largest official creditor - to “step up” and play a constructive role in relief for debt-distressed countries. Addressing the debt distress of vulnerable countries was a theme of the international finance community as it met in Washington earlier this month for the World Bank IMF Spring Meetings. It is also on the agenda of the G20 talks headed by India this year.

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