That Was the Year That Was
As the end of the year approaches, it’s time to take a look backward at the year that was. In a future column, I’ll take a look ahead at 2022.
In one important, but unfortunate, respect, it was a year where the president kept one big promise—to give top priority to the domestic economy and dealing with the pandemic. He did that at the expense of dealing with trade, but it is hard to fault his priorities. Covid-19 and the economy would be at the top of anybody’s list. The consequence, however, was a missed opportunity—increased trade can make an important contribution to economic growth. The administration compounded that omission with a surprising lack of interest in increasing market access generally, so that even when they did talk about trade, it was not usually about improving market access and increasing exports.
Instead, they talked about labor and the environment and a trade policy for the middle class. In the past, I’ve written about what I think of that (not much), but for a wrap-up column, the administration should be measured by its own standards, not mine. Even there, however, they fall short. It is fair to say that the labor provisions of the United States-Mexico-Canada Agreement (USMCA) have been successful thus far, although it is too early for a definitive judgment. But those provisions were negotiated by the previous administration, albeit with a heavy assist from Katherine Tai, the current U.S. trade representative, and the administration so far has done little to propagate the same ideas elsewhere, either in new trade agreements or in revisions to old ones.
In fact, until the Indo-Pacific Economic Framework (IPEF) was announced in the fall, the administration has put forward few if any other new initiatives—bilateral, plurilateral, or multilateral. It has, however, made efforts to clean up some of the messes left by the Trump administration, although even there the solutions sometimes kicked the can rather than permanently resolved the problem.
The Boeing-Airbus dispute, now in its 17th year, has been temporarily set aside, with mutual retaliation abandoned, but the fundamental differences on subsidies still remain to be resolved. Steel and aluminum tariffs have been worked out with the European Union, and it is safe to assume the administration will be open to similar arrangements with other countries to which the tariffs were applied. But the promised broader agreement taking on Chinese steel remains to be seen. Treasury Secretary Janet Yellen did a superb job of moving the digital tax negotiations in the Organization for Economic Cooperation and Development (OECD) forward, and she settled the dispute with Vietnam over its currency. These are all good things, but they are clean-up, not new initiatives.
Two commendable areas of initiative are the aforementioned IPEF and the Trade and Technology Council (TTC) with the European Union, which was their idea, not ours. The two are similar in that they are both pale imitations of the Obama-era proposals of a Transpacific Partnership (TPP) and a Transatlantic Trade and Investment Partnership (TTIP). It seems clear that on trade policy, the Biden folks are not of the “go big or go home” school, although, to be fair, TTIP was more a victim of the European Union’s reluctance than the United States. The modesty of IPEF, however, is clearly on us. The widely held view in Asia is that the right move for the United States would be to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the administration’s refusal to see that remains baffling.
Even so, these are noteworthy initiatives intended to better position the United States vis-à-vis its two major trading partner regions. In both cases, it is too soon to see results, but the challenge for the administration in both will be to take the discussions beyond vague agreements to “cooperate” and turn them into actual binding commitments and new obligations.
The administration’s China trade policy has gotten off to a slow start. Ambassador Tai’s main speech on the subject did not occur until October. At that time, she laid out a short-term policy of pressing China to meet its phase one commitments, which nobody can object to, except maybe the Chinese. Eventually, she will have to move beyond that, and with Republicans eager to criticize anything the administration does as too weak and undermining our security, she has very little room to maneuver. Given the politics of the issue, and the many non-trade issues that poison the bilateral relationship, expectations of progress have been very low, and the administration has met them.
So, overall, some useful initiatives have begun, and many opportunities have been missed, but the biggest disappointment is how long it has taken to produce very little. By September, the administration’s response to virtually every question about trade—that it is “under review”—had become a standing joke. The problem has not been the review—that is routine in every new administration. It is the time it has taken. As many people have noted, the rest of the world is moving on, signing trade agreements, and forming new economic relationships, and they are doing it without us. Becoming irrelevant is a new experience for the United States, and it will not be a pleasant one. The year that was was a year of modest beginnings. We shall see if the year to come will be a year of meaningful conclusions.
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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