Biden’s trade policy is shrouded in domestic and Trumpian politics

Author: Gary Clyde Hufbauer, Peterson Institute for International Economics

Former US President Donald Trump weighs heavily on the US political landscape. Its celebrity candidates, JD Vance in Ohio and Dr. Mehmet Oz in Pennsylvania, won their respective primary battles to become Republican candidates for the Senate in November 2022. Both are likely to win seats.

Resentful Trump candidate David Perdue lost in the primary to Georgia Governor Brian Kemp. But overall, Trump’s endorsements, along with the retirement of several Republican officials who disagreed with his policies, have tightened his control over the party.

Record inflation, spurred by massive stimulus in 2020 and 2021 and extremely loose monetary policy through February 2022, has all but wiped out the Democratic Party’s hopes of retaining control of Congress in the November 2022 election.

Biden’s valiant support for Ukraine goes beyond memories of the humiliating withdrawal from Afghanistan. An exceptionally tight job market means anyone who can get out of bed can find a job. But in today’s political landscape, the pain of inflation is greater. Deserved or not, Biden is blamed and his party will suffer electorally as a result.

Political arithmetic apparently compels Biden to follow Trump’s international policies, even if he follows a different domestic path. Trump set the stage for the US withdrawal from Afghanistan and Biden implemented the disgraceful departure. Trump and his trade ambassador, Robert Lighthizer, have discarded decades of orthodox Republican adherence to free trade and multilateralism.

Under pressure from progressive Democrats, such as Sen. Elizabeth Warren and Congresswoman Alexandria Ocasio-Cortez, Biden and his trade ambassador, Katherine Tai, are avoiding any suggestion that opening markets could be good for America. Instead, their trade policy claims to be “worker-centric,” improving labor rights, promoting gender equality, increasing minorities, and improving the environment. A set of almost impossible missions.

In practice, “worker-centric” means protecting manufacturing jobs, even as manufacturing vacancies skyrocket. Ambassador Tai can persuade other countries to adopt the fundamental rights of the International Labor Organization and endorse the Paris Club’s carbon emissions targets, but it is fanciful to imagine that the U.S. partners will implement tougher rules than their domestic constituents already accept. Meanwhile, the World Trade Organization remains condemned to monumental US indifference.

Biden’s real adherence to the Trumpian doctrine is his pursuit, if not escalation, of the Cold War with China. Since Thucydides, scholars have observed the cycle of action and reaction that characterizes major power relations.

China-US relations might be different today if Trump had launched a charm offensive with Beijing in 2018 rather than a trade war. The same could be said of US-Russian relations if George HW Bush had kept his promise, after the fall of the Berlin Wall, not to expand NATO. Biden’s challenge is to ensure that fierce competition with China does not end in fatal disaster.

Biden’s amplified hostility to China, drawn from Trumpian writings, now encompasses exports, imports, investment, technology and scientific exchange. Faced with a conflict between hostility and a policy of limited international economic engagement, Biden has rediscovered a forgotten feature of geopolitics – that economic engagement is vital for cementing alliances.

Unwilling to embrace bilateral market access in trade in goods and services and concerned that bilateral foreign direct investment will enrich businesses but not workers, Biden and his team concocted frameworks of engagement that have the feel but not the substance of past initiatives like the Free Trade Agreement of the Americas (FTAA), the Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) – now transformed into the comprehensive Trans-Pacific Partnership and progressive (CPTPP) without the United States.

Along with the EU, Biden’s alternative framework is called the US-EU Trade and Technology Council (TTC). The TTC creates several working groups and working groups to address artificial intelligence, product standards, semiconductor supply chains, digital platforms, labor rights and more. But the heart of the cooperation is the sanctions against Russia and possibly China. In short, the overriding mandate of the TTC is safety, masked by the language of economic engagement.

The recently announced Indo-Pacific Economic Framework for Prosperity (IPEF) between the United States and 13 Asian partners is much the same. The four pillars – connected economy, resilient economy, clean economy and fair economy – seem like something out of a public relations textbook. IPEF members can choose which pillars to join. Not named in the IPEF statement, but by far the most important are the implicit US security guarantees to Asian partners who find themselves at odds with China.

The even more recent Partnership of the Americas for Economic Prosperity (APEP), unveiled by Biden at the Summit of the Americas on June 8, is just as long in rhetoric and short in substance, but security does not feature in hemispheric relations. .

Can Europe or Asia expect major changes to Biden’s current strategy — security cooperation shrouded in hazy economic frameworks — when the president faces a Republican Congress in 2023 and 2024? If Biden makes an early, secret decision not to seek a second term, he will free himself from the shackles of progressive Democrats and Trumpian Republicans.

In this scenario, the Biden administration could engage in significant efforts to revive the WTO and give economic substance to the TTC and the IPEF, and even to the APEP. Biden could even offer olive branches to Beijing. But if Biden harbors hopes of a second term, the next two years will look a lot like the last — puns but little substance in international economic engagement.

Gary Clyde Hufbauer is a Nonresident Senior Fellow at the Peterson Institute for International Economics.

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