The Biden administration has been increasingly transparent about its goal of fundamentally shifting U.S. trade policy but is now starting to see some pushback to that approach from prominent voices on both sides of the aisle.

Administration officials have stepped up their efforts this year to establish that the foundational principles of U.S. trade policy for the past several decades are no longer applicable in today’s global environment, which therefore demands a new approach that views trade largely through the lens of national security. That point could hardly be missed in the administration’s recent choice of National Security Advisor Jake Sullivan to give the most comprehensive overview to date of why a change is needed and what it will look like.

Sullivan asserted that “decades of liberalization” have yielded a number of negative consequences, from fragile global supply chains that are overly reliant on autocratic regimes for strategic goods to domestic income inequality to the Russia-Ukraine war. In response, Sullivan said, the Biden administration is replacing tariff liberalization as the focus of U.S. trade policy with efforts to create diversified and resilient supply chains, enhance protections for labor and the environment, tackle corruption, and reform corporate taxation, among other goals.

However, a number of observers have taken issue with Sullivan’s speech and the assertions and principles on which it relies. Their comments come amid an increasing opposition to the White House’s approach based on everything from the way it minimizes the influence of Congress, which is constitutionally empowered to regulate foreign trade, to assertions that it will disadvantage the U.S. as competitors continue to negotiate preferential trade deals.

One of the points of contention is Sullivan’s characterization of U.S. trade policy as historically focused on reducing tariffs and his blaming of that pursuit for a host of modern ills. Ed Gresser, vice president and director for trade and global markets at the Progressive Policy Institute and a former assistant U.S. trade representative for trade policy and economics, called Sullivan’s argument a “study in breezy mis-summarization of history.” William Reinsch, who headed the National Foreign Trade Council for 15 years after overseeing export administration issues in the Department of Commerce, said that the argument that past policy was just about tariffs “is simply wrong” and that blaming open trade “for everything bad that happened economically in the past 50 years is a gross oversimplification.”

Gresser explained that previous administrations have also utilized trade policy to pursue aims that strengthen national security and that this approach has a notable track record over the past several decades, including creating stronger multilateral rules and institutions, integrating more countries into the global economic order, responding to the emergence of digital trade, and elevating labor and environmental concerns. Reinsch added trade facilitation, intellectual property protection, and government procurement reform to that list of achievements and said that, more broadly, trade liberalization “has lifted more than a billion people out of poverty and made the world a better place.”

In the U.S., said John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce, more than 45 million net jobs have been generated over the past 30 years, and those that depend on trade pay 15-20 percent more than those that don’t. Sen. Mike Crapo, R-Idaho, added that since 1950 trade expansion has increased U.S. GDP by more than $18,000 per household.

Another issue is the argument (made by Sullivan but a common refrain among other senior administration officials as well) that further tariff liberalization is an outdated tool. Gresser asserted that lower tariffs could be a useful contributor to goals Sullivan identified, from securing labor, environmental, and anti-corruption commitments from “skeptical foreign partners,” to cutting the prices of products that would help speed the transition to clean energy, to addressing income inequality by reducing costs for low-income families. Murphy and Crapo added that lowering high foreign tariffs (along with removing other trade barriers) could further expand U.S. exports, but Reinsch said the U.S. should expect “to give something to get something.”

Finally, both Gresser and Reinsch assert that there are more important issues that trade policy could be used to address than those Sullivan prescribes. Gresser said these include not only defining the economic policy order in Asia, where “in the absence of American market access engagement … the Chinese project looks to be succeeding” (with all the potential problems that may entail), but more importantly countering a worrying movement within the U.S. itself toward a more isolationist stance that includes “closing the U.S. economy as much as possible to trade, ending foreign aid programs, and probably withdrawing from international institutions and alliances with the democracies of Europe and Asia.” Achieving these goals will require give and take with trading partners, Reinsch said, but so far the Biden administration “has been clear that it does not intend to make concessions” and “is only offering words.”

Copyright © 2024 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

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