A Touch of Trade Irony

The commentariat is busy these days debating the future of the Biden administration’s trade policy in the wake of its effective abandonment of the trade pillar in the Indo-Pacific Economic Framework (IPEF) negotiations. (The administration says the talks will continue, and I imagine they will, but I don’t see a conclusion, at least before the election.) The policy is clearly a failure at this point, but I want to focus on why it failed rather than on whether it was a good idea in the first place. If you read this column regularly, you know I’ve been skeptical on that question.

I have to say, though, that I cannot join the chorus of “I told you so” on this one. Those are my four favorite words, but in this case I didn’t see the breakdown coming. I thought the November meeting would yield a partially completed pillar with agreement on many of the issues and a few difficult ones reserved for later, which is what the administration was predicting less than a week earlier. The reason that did not happen, it appears, was last minute opposition from the left wing of the Democratic Party, most notably in public by Senator Sherrod Brown (D-OH), although he was not the only one.

Regardless of one’s feelings about Pillar One, failure is a depressing development. The administration made an early decision to create a trade policy that would not reprise the bitter 2016 intraparty battle over the Trans-Pacific Partnership (TPP). They developed a narrative, designed to justify what was basically a political decision, that laid out a new paradigm—a trade policy for the workers rather than one that only benefitted large companies; one that was a “race to the top” rather than to the bottom; a trade policy for the twenty-first century. As it turned out, however, they have been unable to sell it to the very group they were trying to appease: workers. Those of us who were skeptics from the beginning were dismissed as lost in the old-think of the last century, so it is not hard for us to view what has happened with a bit of schadenfreude.

There are two ironies here. First, it is ironic that the policy was rejected by the very people it was designed to benefit, even though, looking objectively at what was on the table, there was little there that would harm workers’ interests. Indeed, the more vocal, long-standing opposition to the policy came from the other side—the business community which criticized it, correctly, for not providing enough benefits to them. This is another example of the perfect being the enemy of the good—people objecting to a policy because it does not give them everything they want. This attitude, which seems to be growing in popularity, undermines our political system, which requires compromise in order to function.

The second irony is that the new paradigm touting a trade policy for the twenty-first century comes from an administration led by a president clearly anchored in the last one. Biden doesn’t talk about trade often, but when he does it is usually about manufacturing, and particularly traditional manufacturing —steel, autos, and other things made out of metal. He grew up in northeastern Pennsylvania, at the time an area dominated by coal and steel. The politics of defending old manufacturing are obvious—they account for a lot of voters in the states instrumental in his winning the last election and which will be critical in his next one.

Defending them through the narrative of a “new paradigm,” however, is trying to put a square peg in a round hole. The United States remains in many ways a manufacturing powerhouse, but we have been shedding jobs in that sector for 50 years, largely through technological improvements. In the process, like other developed countries, we have transitioned to a largely services economy—more than 75 percent of GDP is attributable to that sector. Digitization and artificial intelligence will accelerate that process. A trade policy for the twenty-first century should take that into account and pay more attention to ensuring the United States leads in services and the digital economy. Instead, the new paradigm seems more interested in putting its finger in the dike and trying to stop the further erosion of old manufacturing jobs.

Another irony, of course, is that that is not a new policy—it’s the same old one of using protection to preserve old jobs but dressed up in new rhetoric. As the saying goes, you can put lipstick on the pig, but at the end of the day, it’s still a pig.

I don’t want to go overboard on barnyard metaphors, but it appears the chickens are coming home to roost. Neither business nor labor is buying the new paradigm, which leaves only the think tank people (not CSIS, I want to make clear) who thought it up, and they don’t constitute a critical mass. It would be better if the administration put aside its own political old-think and instead spent more time trying to grow the part of the U.S. economy that actually does represent the twenty-first century, although that is probably too much to hope for in an election year.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.