Avoiding real trade issues means missing opportunities to enhance American and global competitiveness.
A respectable pro-trade proclamation would talk about market access, tariff reduction, and liberalized markets.
T he White House proclaimed that May 19–25 is “World Trade Week.” Ironically, the administration’s announcement does not focus on trade, but rather on currying favor with labor unions, progressives, populist conservatives, and voters in manufacturing swing states such as Pennsylvania, Michigan, and Wisconsin.
A respectable pro-trade proclamation would talk about market access, tariff reduction, and liberalized markets. Instead, the Biden administration’s announcement mentions the word “worker” in almost every paragraph, with phrases such as “workers’ rights” and “promote workers’ empowerment.”
The Obama and Bush administrations, by contrast, pursued genuine free-trade agendas. In his proclamation during trade week in 2015, Obama stated that Americans prosper when foreign markets are open and noted that his efforts were focused on opening markets to American products. Similarly, in a 2008 proclamation, Bush emphasized his commitment to expanding economic freedom worldwide through open and free trade. This involved reducing and eliminating tariffs and other barriers on goods, as well as opening new markets.
The Biden proclamation speaks of ensuring that American workers and businesses have a fair shot abroad, starting in Asia with 13 partnering countries under the Indo-Pacific Economic Framework for Prosperity (IPEF). That may sound promising. Highlighting trade-related issues, such as strengthening supply chains and combating corruption, can be beneficial. However, in substance, it has little to do with actual trade (i.e., market access, tariff reduction, liberalized markets), given that the U.S. withdrew from its trade pillar last November. (The framework focuses on four main pillars: connected economy, resilient economy, clean economy, and fair economy.)
A more accurate read on the administration’s trade-policy agenda was its recent decision to quadruple U.S. tariffs on Chinese electric vehicles to an astonishing 100 percent. In fact, Biden has retained many of Trump’s policies, such as tariffs on steel and aluminum, and has gone further by increasing tariffs and restrictions on trade involving semiconductors and solar panels — rules that are clearly aimed at China.
While many believe that China’s economy is no longer growing since its retreat into neo-Maoism, the U.S. publicly fears China’s “overcapacity” and potential surge of exports here. The real issue appears to be that the administration is trying to prevent increased competition, fearing it might lag behind China in semiconductors, electric vehicles, and production of other advanced technologies.
This is not to say that China should be given a pass; its non-market policies, practices, and structural overcapacity distort global markets and create unfair competitive advantages. Similarly, the United States is engaging in practices that create unfair competitive advantages, particularly regarding electric vehicles, through its industrial policies like the Inflation Reduction Act (IRA), which many of its partners (like South Korea) have criticized. These actions can lead to dependencies that make the U.S. and its partners vulnerable to coercion, prompting concerns about national security rather than trade. However, the better way to deal with China is to work with our partners in alliances such as the Trans-Pacific Partnership (TPP) and similar coalitions. The U.S. had signed the TPP but never ratified its own membership. The TPP then became the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which the U.S. should join. Doing so would give us much more leverage over China than current policies.
A recent paper by the National Bureau of Economic Research (NBER) concluded that Trump’s import taxes failed to return jobs to the American heartland. Moreover, the paper reports that tariffs neither raised nor lowered U.S. employment, despite protecting strategic manufacturing sectors from low-cost competition that aims to increase jobs. Obama and Bush got it right; Biden and Trump did not.
As the U.S. becomes more selective in its trade policy, U.S. Trade Representative Tai’s statement that “our power is in our consumption” may be true insofar as it concerns our negotiating strength, but it also suggests that the administration has not thought its strategy through. Biden’s trade policy is aimed at bringing back jobs to turn the U.S. into a producer economy from one focused on consumption — which is to say, meeting our needs. But the shift hurts U.S. consumers. Avoiding real trade issues means missing opportunities to enhance American and global competitiveness.
Iain Murray is a senior fellow and Narupat Rattanakit is a research associate at the Competitive Enterprise Institute.