In One Sentence

• U.S. Trade Representative Katherine Tai defended the Biden administration’s economic policies by listing out new challenges to be tackled and highlighting the need to reshape trade policies to bolster U.S. manufacturing and exports.
• Facing criticism from high-ranking members of Congress, Tai and Secretary of Commerce Gina Raimondo insisted that the Biden administration has been in consistent engagement with Congress during its negotiation of the Indo-Pacific Economic Framework for Prosperity (IPEF).
• Meanwhile, the State Department cited trade policy as a key tool in the Biden administration’s efforts, in concert with the European Union, to end and reverse deforestation.
• Commerce Secretary Raimondo plans to use the recently revitalized President’s Export Council to support the administration’s efforts with regard to IPEF’s supply chain pillar.

Mark the Essentials

• USTR Tai listed out the pandemic, Russia’s invasion of Ukraine, the climate crisis, and the “digital transformation” inspired by technological development as the major challenges the administration currently seeks to address.
• At the same time, Katherine Tai prioritized the imperative for investment in U.S. domestic manufacturing, and suggested that it is a prerequisite for policies to bolster U.S. exports—a goal previously advocated by many critics on Capitol Hill.
• While both Tai and Raimondo repeatedly assured lawmakers that the administration is in constant engagement with Capitol Hill on the IPEF negotiations, Senate Finance Committee Chair Ron Wyden and other members of the panel felt that the administration was failing to achieve sufficient congressional engagement and therefore had not addressed their concerns about how “agreements like the IPEF will be approved”. Further, Chair Wyden expressed his frustration that the administration was moving ahead on the IPEF negotiations without seeking Congressional approval.
• Commerce Secretary Gina Raimondo said that she will join the President’s Export Council on a “fact-finding mission to select IPEF markets” to boost U.S. exports and investment overseas.

Keeping an Eye On…

• For all its vaunted talk of ‘modern trade agreements’, the Biden administration seems to be satisfying no one with its novel approach to trade and economic engagement; not Congress, not business, not allies and partners or, for that matter, the letter and spirit of multilateral trade law. As best as one can understand, the new approach to trade and economic engagement aims to flip the existing policy dynamic inside-out. Rather than reinforce existing supply chains and their cost efficiencies, ‘modern trade agreements’ intend to diversify them and make them more resilient—even at the expense of undermining their underlying cost structures. Rather than perpetuate a supposed race-to-the-bottom dynamic, ‘modern trade agreements’ intend to create a race to the top. Exactly how this happens is a mystery. But it cannot be disputed that ‘building from the bottom up and from the middle out’ sounds at least eye-catching. The problem with this novel approach to trade and economic engagement is two-fold. First, it runs counter to Congress’ constitutional prerogative to regulate trade. It didn’t have to be this way; modern trade agreements don’t have to run against the will of Congress. But embarrassed by these agreements’ lack of substantive content—they don’t contemplate economic incentives and lack third party enforcement mechanisms in most cases—the Biden administration has chosen to bypass Congress. Second, this new approach to trade and economic engagement engages multilateral trade law from an a la carte perspective. It would be nice if global trade rules can be accommodated within the approach; if they cannot be accommodated, then those rules be damned. It is as if the international trading order is not part of the ‘rules-based order’ but instead centered on America’s rules and America’s version of order. At the end of the day, the crux of the Biden administration’s trade policy dilemma is this: as a trading superpower, the American government needs to be doing ‘something’ on trade; given the rise of economic nationalism domestically, it cannot continue to do the same thing that it used to do; so, it is attempting to do something else—anything else—which is not quite adding up; it is having difficulty explaining what exactly this ‘something’ is (it’s easy to explain what it isn’t), hence the trundling out of worker and labor-centered narratives; and all along it is hoping that whatever the ‘something’ it is attempting to do will somehow restore long-term wage growth and build out the middle class. Note to the Biden administration: building out the middle class is a task for budget and tax policy. Let trade policy focus on opening markets overseas and polishing economic competitiveness at home. USTR’s “unapologetically positive vision” on trade is in fact an “unapologetically empty vision.”

Expanded Reading

• Ambassador Katherine Tai’s Remarks at the National Press Club on Supply Chain Resilience | United States Trade Representative (ustr.gov), Office of the United States Trade Representative, June 15, 2023
• Bipartisan resentment grows as Biden pursues new trade talks, Politico, June 13, 2023
• 2023 Leadership Summit, Foreign Policy for America, June 11-13, 2023
• Tai’s Friendshoring Field Trip to Latvia, Politico, June 12, 2023
• Bidenomics and Its Contradictions, The Wall Street Journal, June 8, 2023 [Paywall]
• Wyden Dissatisfied with Admin Response, Politico, June 5, 2023
• Detroit, recent Apec host, embodies Joe Biden’s trade policy goal of renewal, South China Morning Post, June 5, 2023 [Paywall]
• Ambassador Tai Tackles Trade: A Conversation With United States Trade Representative Katherine Tai, Forbes, May 31, 2023 [Paywall]
• Reporting on Whole-of-Government Approaches to Stopping International Deforestation, U.S. Department of State, May 31, 2023
• Letter from USTR Tai and Commerce Secretary Raimondo to Sen. Wyden, Chair of the Senate Finance Committee, Office of the USTR and Department of Commerce, May 30, 2023
• Substantial Conclusion of Negotiations on Landmark IPEF Supply Chain Agreement, Department of Commerce, May 27, 2023
• The Biden Administration Is Right on China and Trade, but Must Aim Higher, National Interest, May 21, 2023 [Paywall]