A Trade Policy Begins to Take Shape, but Not the One the Country Needs

Last week featured Ambassador Katherine Tai’s semi-annual appearance before the two trade committees in Congress—House Ways and Means and Senate Finance. As usual, major news was not committed, but, also as usual, there were lots of questions, and both their and Tai’s answers were occasionally enlightening.

The main point of many of the questions, which came from both parties, was that the administration’s policy is not sufficiently ambitious, and as a result, important opportunities are being missed. The most succinct comment came from Senator Maria Cantwell (D-WA), who picked up on Tai’s explanation of U.S. policy goals but said it wasn’t enough: “I’m for the labor rights. I’m for enforcement. I’m for capacity building. But why can’t we be for opening market access right now and getting rid of tariffs?” Others pointed out the administration’s reluctance to continue free trade agreement negotiations with the United Kingdom and Kenya, its refusal to start them with anybody else, and the weakness of the proposed Indo-Pacific Economic Framework (IPEF), where the administration has ruled out discussions of market access, leaving potential Asian partners asking, “What’s in it for us?” (The answer, so far, is not much.)

In response, Ambassador Tai gave no ground. Responding to a question about IPEF, she said, “I disagree with the sense that it is not sufficiently ambitious. In a lot of our interactions and conversations with our trading partners in the Indo-Pacific, we have been making the case that what we are trying to do in the economic framework for the Indo-Pacific is new. It will include innovative elements—some innovative for the region, some innovative for the trade policy conversation overall because of the evolving challenges that we are facing.”

Her statements are not new, but the back-and-forth framed the policy issue more sharply. The administration is trying to develop a new approach that emphasizes labor and the environment and is not focused on market access. Ambassador Tai’s comment that tariffs were a twentieth-century tool, implying they were old and outdated, elicited the response that our trading partners clearly view them as a twenty-first-century issue.

The two sides in that debate are talking past each other. When members of Congress talk about market access, they mean U.S. access to other countries’ markets, not the reverse. When Ambassador Tai says we shouldn’t focus on that, she is thinking about other countries’ access to our market and the political waves that would create rather than any economic benefits.

Unfortunately, that debate has more to do with politics than economics. To put it simply, the administration is afraid of its own left wing and is unwilling to take any trade actions that might restart the intra-party fights that previous free trade agreements launched, particularly the Trans-Pacific Partnership (TPP). In contrast, legislators remain focused on market access and lament the opportunities they see being missed.

The result, in addition to cranky members of Congress, is the most risk-averse trade policy we have seen in decades. It is dressed up in discussions about “new tools” and a trade policy for workers and the middle class, but the administration has yet to put much meat on those bones. Even discussions of new tools—a good idea, by the way, if anybody can find some—end up being largely about sharpening the old tools, as in the trade law amendments now incorporated in the House COMPETES Act, which Ambassador Tai more or less endorsed last week. They are good proposals, but they are, as Ambassador Tai pointed out in one of her more quotable comments, surgical tools, and not everyone needs surgery.

This debate is likely to come to a head over the IPEF because the Asian countries are already telling the administration what CSIS’s Matthew P. Goodman, Emily Benson, and I said in our January paper— that they need to see tangible benefits, and that a framework which consists entirely of U.S. requests is not going to get very far. That means the administration is either going to have to take some risks and propose things that might be unpopular with progressives. or continue along a track that will either fail, or at best, produce a small agreement among the usual suspects.

Even that, however, will leave unresolved the internal debate on trade policy in the Democratic Party. The administration has kept peace so far through sustained risk-avoidance, despite public opinion polls that show strong support for trade, even more from Democrats than Republicans. By catering to its left wing, it flies in the face of what the majority of its party wants and what will provide more jobs and growth, not only for Americans, but for our trading partners. I have said before that trade agreements have taught us that a rising tide doesn’t lift all boats; it leaves some, usually the workers’ boats, stuck in the mud. It is fine to try to float those boats, but that will not mean much if you are not simultaneously creating new tangible benefits for them. That requires risks, which the administration has thus far refused to take, but, as Senator Cantwell suggested, we ought to be able to be for labor rights, enforcement and capacity building, and also for more market access.

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

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