“It’s unfortunate to feel like you’ve wrapped something in wrapping paper, in a box, and we have something hidden in there,” said Katherine Tai, the states trade representative. -United. âIt’s really complicated at the moment.
Tai was discussing with me a long overdue comprehensive review of U.S. trade policy toward Beijing, something she began to formally unveil in a major speech at the Center for Strategic and International Studies yesterday and which she gave. said she had repeated her political decisions until now. But the need to rethink and the imperative of caution came up time and time again in our discussion of how the new progressive administration approaches trade. Trade policy is changing. It is complicated.
What does it change of is pretty clear: For decades, the Democratic White Houses were more pro-trade than the Democratic base, arguing that the benefits of trade without barriers – cheap imports, a large market for exports, and economic integration as a ballast against geopolitical conflicts – far outweighed the costs. Armed with these arguments, Bill Clinton signed NAFTA and Barack Obama negotiated the Trans-Pacific Partnership, among others, despite objections from unions and other trade skeptics.
But over time, it became evident that many elite Democrats had played down the costs of free trade. The “China shock” cut wages, reduced employment and widened the rust belt. Offshoring has sapped the US economy with some of the innovation âfalloutâ from manufacturing. Elite Dems also failed to understand the political risk of allowing such deindustrialization and how devastating the loss of manufacturing jobs would be for a large cohort of workers without a college degree.
The concerns weren’t just internal either. Critics have argued that the country’s trade deals have failed to prevent environmental degradation, human rights violations and a race to the bottom of labor standards in other countries. And both Democrats and Republicans have come to view China as a threat, given its crackdown in Xinjiang and Hong Kong, its support for commercial espionage and technology theft, its reluctance to comply with trade protocols. and many other problems. We are now at “an inflection point, in terms of what version of globalization” we have now and will have in the future, Tai told me.
Or maybe we just passed it. Four years ago, Donald Trump burst into the White House, invoking all these arguments and a number of racist, chauvinist, mercantilist and absurd arguments. He postulated that trade was zero-sum, draining America of dollars, jobs, and innovation. He bragged about getting rid of the trade deficit entirely by withdrawing from the TPP and NAFTA. He promised to decouple the US economy from the rest of the world and relocate manufacturing. And he continued a trade war with Beijing, imposing billions of dollars in tariffs on imported goods. This trade war became all the more difficult during the coronavirus pandemic, when disruptions and supply chain shortages made it clear how dependent the United States is on other countries for vital goods.
Whether it was a draw or a loss is debatable, but we certainly did not win the trade war. The United States has not unraveled the omelet of globalization and brought supply chains back to the shores of this country, at least not in any meaningful way. The trade deficit has not disappeared. Tariffs increased the costs of imported products for American consumers, rather than punishing foreign producers of those products, as economists had predicted. Yet it is one of the few policy areas where the Trump and Biden administrations overlap in any significant way. Biden may not want a trade war, but his administration has taken an openly hawkish stance towards Beijing.
The administration is just beginning to clarify its policy towards its most complex international trading partner and rival. In her speech to CSIS, Tai said she would meet with her Chinese counterpart, criticizing Beijing for failing to honor all of the commitments it made under the Trump administration while indicating that the Biden administration would relax some prices. “The Chinese government continues to pour billions of dollars into targeted industries and continues to shape its economy according to the will of the state, harming the interests of workers here in the United States and around the world,” she said. declared.
Yet what democratic trade policy is transforming in is a much harder thing to describe, and Tai described administration as being in a cautious and transformative space. âWe have lost the confidence of important parts of our economy that we need to win back,â she told me. âOur trade policies must be sustainable. And what we have seen is that where we have taken our policies on a foot, where we have overthrown too many stakeholders, our policies have become so fragile that they have gone up in smoke, âhe said. she said, referring to Obama’s TPP.
The administration speaks of its vision of a “worker-centered trade policy”, which gives primacy to individuals rather than companies or industries. âWe have a chance to create a different version of globalization because we are engaging from a different place, thinking early on about the impacts of our trade policies on human beings,â Tai told me. But would the implementation of such trade policies now undo the damage caused by the trade policies of 20, 30 or 50 years ago? Maybe not. Moreover, it is difficult to say how such worker-centered policies can be put into practice, given the trade agreements in which the country remains stuck and the international institutions to which it belongs.
But trade policy is shifting from a policy focused on opening markets and lowering the cost of imports to a policy focused on American workers. It is a long and complicated project.