Valedictory—or Obituary?

Valedictory—or Obituary? https://www.csis.org/analysis/valedictory-or-obituary Valedictory—or Obituary? Photo: ROBERTO SCHMIDT/AFP via Getty Images Photo: ROBERTO SCHMIDT/AFP via Getty Images Commentary by William Alan Reinsch Published January 6, 2025 As the Biden administration comes to an end, it is time for a closing comment on its trade policy. I’ve struggled as to whether to call it a valedictory or an obituary, the latter a much less positive term, but in the end, I decided to call it both. Looking at the bigger picture, I believe that when future historians look back on the Biden era, they will regard him as a transformative president with an impressive record of legislative accomplishments reminiscent of Lyndon Johnson’s. His three signature pieces—the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act—set the nation on a new course, pushing U.S. companies to become more competitive in order to respond to looming challenges like climate change and growing Chinese aggressiveness, both economic and military. While the incoming administration will attempt to repeal some parts of these initiatives, much will remain intact, in large part because the private sector recognizes their importance and is simultaneously moving in the same direction on climate change and adjusting supply chains to insulate them from Chinese economic coercion. Biden’s trade policy, however, tells a different story. While I still think the policy began as a matter of political expedience to paper over a perennial dispute between the left and center wings of the Democratic Party (the right wing is long gone, which may be why the party has so much difficulty flying in a straight line), the cover narrative of a “trade policy for the workers” or a “trade policy for the middle class” has taken over the public debate, and it no longer matters much whether its creators believe it or are simply using it to justify what they believe is politically prudent. Thus, we should take it at face value and judge it on two levels—whether it is sound policy, and whether it achieved its objectives. I will also, reluctantly, put aside my irritation at the administration’s condescension toward the stewards of past trade policy. The idea that we have gotten it wrong for 75 years and that they have now figured out the right answer is offensive on its face and is refuted by the accomplishments of that period—sustained economic growth in the United States and the rest of the developed world and more than a billion people lifted out of poverty in the developing world. The fact that most of those were not Americans does not diminish the magnitude of the accomplishment, but the fact that we are no longer proud of it illustrates the turn toward selfishness the American people have taken—the “Make America Great Again” movement appears to be only about us, not about people worse off than us. So, first, is a trade policy for workers the right policy? That is a difficult question to answer because it has never been clear exactly what it means. Observation over the past four years suggests it means: (1) enforcement of obligations our trading partners have undertaken, the Rapid Response Mechanism with Mexico being the most-cited example; (2) redistribution of the benefits of trade to workers and away from large corporations and their executives; (3) using trade as a tool to achieve national security objectives; and (4) promoting reshoring of manufacturing. Nobody is against enforcement (except the miscreants), and it is hard to object to that goal. Redistribution, in my opinion, misses the point. Trade creates benefits, it does not “decide” how they are distributed. Other government actions, like tax policy or adjustment programs, redistribute them. Trade has inevitably become conflated with security, largely because of the challenge China presents; however, the administration has not done a very good job of distinguishing between real national security issues like semiconductors and economic security issues like autos and steel. The result will be a lengthening line of industries insisting that they too are essential to national security. Finally, reshoring is largely a fantasy aside from a few sectors with a real national security nexus where the government is willing to provide subsidies. The biggest limitation is that we don’t have workers to fill the jobs the administration wants to create. See the Scholl Chair’s recent immigration brief that demonstrates that. Some reshoring is happening as companies derisk from China, but for the most part, they are creating or tapping into suppliers in third countries. The inspiration for this policy is the belief that globalization has not worked for the middle class. That will be debated for at least the next decade, but the reality is that globalization is not going away. Its enabling tools—digitization and huge cost reductions in transportation and communication—are not going to be uninvented. Policies that attempt to reverse it and push the nation in the direction of autarky are doomed to failure. Which brings us to . . . How is that policy working out for us? Here the answer is clearer—not very well, aside from the enforcement part. Early in the administration, I told Ambassador Katherine Tai that U.S. Trade Representatives are judged by what they finish, not by what they start. By that standard, the administration has little to brag about. On the two most immediate U.S.-EU issues—the Boeing-Airbus dispute and the steel and aluminum tariffs—we kicked the can, negotiating ceasefires that postponed resolving the issues into the next term. Instead of free trade agreements, the administration began two plurilateral agreements—the Indo-Pacific Economic Framework for Prosperity and the Americas Partnership for Economic Prosperity. Neither of them addressed market access issues, and neither of them was completed. Efforts to continue negotiations with the United Kingdom and Kenya begun in the first Trump administration produced nothing. One critical mineral agreement was negotiated with Japan while other requests have either been ignored or not completed. Despite lip service support, the administration has done more to undermine the World Trade Organization than any of its predecessors. On digital trade issues, the administration has pulled back from the U.S. government’s traditional support for the free flow of data but has not replaced it with a new policy. The result has been a classic case of failure to launch along with a boatload of missed opportunities to expand market access for U.S. exports, notably in agriculture, where we are now in our fourth year of trade deficits after nearly a half-century of surpluses. While the motivation may have been noble—although that is also debatable—the results have been minimal. In a recent statement, Ambassador Tai noted, correctly, that trickle-down economics is a failed policy, but the administration has not replaced it with anything concrete. Finally, the most disappointing part of our trade policy is its selfishness and failure to recognize the consequences. For nearly 75 years the United States has championed a system designed to bring growth and prosperity to all. It didn’t always work, but it succeeded more than it failed. Now, in the last two administrations and the incoming one, we have turned inward, abandoning our concerns about others and focusing only on ourselves. This demeans us as a people, but it is also shortsighted. We are rapidly moving into an era where the United States is no longer the paramount economic power it once was. We are going to discover that we need other countries as markets for our products as much or more than they need us. By failing to develop stronger trading relationships and by using trade barriers to protect our industries, we compromise our own economic future. William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.