From the start, the Biden administration has portrayed itself as following a worker-centric trade policy, and from the start, Eakinomics has been unable to figure out exactly what that means. Especially in the wake of the Russian invasion of Ukraine and the use of economic sanctions as a political response, there is increased interest in our economic relations with our allies and trading partners. US Trade Representative Katherine Tai’s recent congressional testimony on President Biden’s 2022 trade agenda seemed like a good opportunity to settle everything.
Tom Lee has a more detailed review. But the short version is that Tai laid out the main elements of the administration’s approach:
- Advance a worker-centred trade policy;
- Realign the U.S.-China trade relationship;
- Engage with key trading partners and multilateral institutions;
- Promote confidence in trade policy through law enforcement; and
- Promote fair, inclusive and sustainable trade policy and broaden stakeholder engagement.
The first bullet point is both self-explanatory and a salad of stop words. Bullet 4 is a real consideration, but not new and revolutionary. Chip 5 is a standard progressive master key. The real action is in bullet points 2 and 3.
Regarding China, Lee notes that “the Biden administration’s trade policy has so far kept in place the majority of the tariffs initially imposed by former President Trump. As part of his protectionist trade agenda, President Trump has imposed tariffs on nearly $350 billion in imports from US rivals and strategic allies. The main purpose of these tariffs was to increase the competitiveness of American manufacturing and industry by limiting imports, especially those from China.
Ambassador Tai has publicly stated that the Chinese tariffs, in fact the whole deal with China, is a failure. The idea that the United States will fully decouple from China and replace domestic production is naive and empirically unrealistic. But there is apparently no other view of the role of trade in future relations with China.
But perhaps the most shocking element of the testimony was the absence of any plan to negotiate trade deals, typically the meat and potatoes of a USTR agenda. Does a worker-centric trade policy mean no new trade deals? How does it serve the interests of American workers to give up the opportunity to sell their products around the world and obtain higher real wages in the United States?
New trade agreements could also have strategic value. Per Lee: “The United States initially led the negotiations for the Trans-Pacific Partnership (TPP) trade deal, which included strategic Asian allies, including Japan, Malaysia, Singapore and Vietnam, as well as Australia. The TPP would have been the largest trade deal ever, covering 40% of the global economy. The deal was expected to increase real US income by $131 billion a year from 2030.” But now there doesn’t appear to be a follow-up strategy for new US trade deals, while China continues to join regional trade alliances such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) trade agreement.
As Lee summarizes: “Right now, the Biden administration’s ‘worker-centric’ trade agenda raises more questions than it answers. Specifically: what precisely is the role of trade deals and how exactly will the administration compete with China? The concrete actions the administration has taken to date mean in practice the continuation of the Trump administration’s costly and ineffective protectionist trade agenda…. China is actively signing real trade deals…and usurping the role of the United States as the de facto economic leader in the Asia-Pacific region.