Whatâs driving Americaâs new approach to international trade? Katheryn Russ on jobs, national security, and climate change. Tariff Men Whatâs driving Americaâs new approach to international trade? Katheryn Russ on jobs, national security, and climate change. Markus Spiske Against the grain of decades of U.S. government policy, President Joe Biden appears to be on a historically unusual course with domestic and international trade. Since the Reagan era of the 1980s, the leaders of both of Americaâs major political parties had embraced a kind of global liberalization based on deregulation, privatization, and a rejection of any idea that governments should actively shape markets at all. That was until Bidenâs predecessor Donald Trump, referring to himself as âTariff Man,â started dropping import duties on a whole array of product categories. Now, Biden hasnât just left these protections mostly in place; heâs issuing more than US$200 billion in subsidies, grants, and loans to boost domestic manufacturingâincluding of semiconductors, electric vehicles, and batteries. Internationally, his administration is offering billions more to lure foreign investment to the U.S., as well as to direct supply chains away from China and toward U.S. allies. Itâs also enacting a ban on exports of cutting-edge semiconductors to the Peopleâs Republic. And itâs done all of this while abandoning most of Americaâs standing efforts to push for trade liberalization worldwide. âThis vision is a fundamental break from the economic theory thatâs failed Americaâs middle class for decades now,â Biden said in a recent speech in Chicago. What is all this? Katheryn Russ is the chair of the economics department at the University of California, Davis, and was the senior economist for international trade and finance for the White House Council of Economic Advisors in 2015-16. Russ sees the Biden administration both as building on Trumpâs trade policies and as developing new onesâdesigned to combine its economic, climate, and geopolitical goals. One key shift from Trump to Biden, Russ says, is a new way of using trade policy to advance national security. For example, security imperatives are behind the White Houseâs recent efforts to reduce Americaâs reliance on supply chains originating in Chinaâas well as to deny Beijing and its military access to the worldâs most advanced semiconductor chips. The new U.S. trade model, Russ says, is also a response to growing income inequality and the damage the Biden administration sees the free-trade regime as having done to local communities, as entire American industries were wiped out by the globalization of production. Still, Russ says, itâs an open question whether workers and the middle class or the wealthy will ultimately benefit more from these new policiesâand so, what political gains they might end up meaning for Biden and his party. Michael Bluhm: Just how much of a change do you see Joe Bidenâs approach to global trade representing? Katheryn Russ: Itâs important to understand the extent to which a lot of the Biden administrationâs approach is continuous with a shift that started seven years ago during the Trump administration. Since then, thereâs been a historically unusual willingness, in the White House and throughout the U.S. government, to use subsidiesâeven when they may be in violation of World Trade Organization rules. The U.S. is now using tariffs much more aggressively than it used to, including as a tool for global strategy. In fact, more and more, you can see political leaders in the U.S. being inclined to think about trade agreements almost exclusively in terms of global strategyâparticularly when it comes to digital goods and services, where the U.S. tends to have a big comparative advantage. Today, Washington isnât really pursuing any broad, rules-based trade liberalizationâwhich was the prevailing U.S. approach until the Trump presidency. Bluhm: If thereâs been a fundamental continuity on trade and globalization through the Trump and Biden years, to what extent, if any, has the Biden administration broken from the Trump administration here? Advertisement Russ: You can see a lot of specifics about the current administrationâs thinking in a supply-chain report issued by a White House task force after Bidenâs first 100 days in officeâand I think you can see three new organizing ideas in it. One is a focus on creating jobs in a range of key sectors. That may involve protecting them with tariffs or other measures the Trump administration initially put in place, even if with some modifications. But under the Biden administration, it now also involves enacting industrial policyâusing the federal budget to support these jobs. The second new organizing idea is a broader, more nebulous notion about national security. During the Trump administration, the U.S. government put out another report, headed up by the Department of Defense, looking at national-security risks in the context of global supply chains. This was the first attempt at articulating these ideas, mostly at a general levelâbut you can see the beginnings of an argument for putting tariffs on virtually anything that connects with national-security interests. There are clear parallels between that report and the Biden administrationâs supply-chain report. Since Trump, national security and geopolitical rivalries have come heavily to shape the U.S. governmentâs approach to trade in a way we hadnât seen before. The Biden administration has started to turn these ideas into policy and put them into practice. The third new ideaâand the clearest departure from the Trump yearsâhas to do with the environment. Bidenâs people are trying to promote industries that will reduce the countryâs carbon footprint. They seem very serious about addressing thisâand global warming generally. Chuttersnap More from Katheryn Russ at The Signal: âThe measures the Biden administration is advancing may or may not actually increase, or even protect, American jobs. But their purpose is to address public concerns about the negative impact of trade and globalization on American workers. Thereâs still a lot of controversy among economists over whether thereâs been any net U.S. employment loss on account of increased tradeâespecially increased trade with Chinaâbut thereâs also a lot of research indicating very serious local disruptions in U.S. labor markets. Some places experienced major adverse impacts on employment from import surgesâagain, particularly import surges coming out of China. Economists call it the China shock. I donât think U.S. public policy really addressed these disruptions as they were happening. Not only did American workers lose their jobs, but there were increases in student-teacher ratios in U.S. public schools, reductions in policing and other public services, and negative effects on U.S. home values. Wherever these things happened, the China shock was massive.â âIâm not sure itâs ultimately so radical, what Bidenâs doing. Circumstances have been changing. China has become more of a geopolitical rival; itâs become more assertive, militarily and politically, on the world stage. Itâs not unreasonable to address that in the field of trade, especially since this assertiveness from China has been accompanied by massive industrial policy to support certain companies and sectors. In a country as big as China, industrial policy can potentially shift the spatial distribution of entire global industries. At times, what the Biden administration is doing sounds extreme, and itâs not always supported by clear economic logic. But I donât itâs incoherent; they have these three defined pillars, and theyâre trying to think about themâand public opinionâin practical terms. And in its current state, economic theory doesnât always provide practical answers.â âNegative public feeling about trade policy has been collateral political damage from neglecting the problem of inequality for decades. Some communities are increasingly hollowed out; some workers are increasingly left behind; and thereâs solid research showing that these developments have fueled a lot of anti-trade sentiment. Itâs unclear whether people will judge new U.S. trade policies by the number of jobs that come out of themâor by how they address inequality. The Biden administration talks about their trade policy as worker-centered, but theyâve been focused on industriesâindustrial policy and protection for industries. We donât know whether the benefits are really going to transfer to workers. And if these policies end up disproportionately benefiting people with higher incomesâor groups with active, highly funded lobbyistsâthen theyâre not likely going to create much political benefit for Biden.â [Continue reading ...]( [The Signal]( explores urgent questions in current events around the worldâto support it and for full access: [Subscribe now]( The Signal | 1717 N St. NW, Washington, DC 20011 [Unsubscribe {EMAIL}](
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