The Big Hole in the Biden Administration’s Economic Diplomacy

On April 27, US National Security Adviser Jake Sullivan gave a political speech on the “renewal of American economic leadership”. It was, in Sullivan’s words, an attempt to explain the Biden government “broader international economic policy, particularly as it relates to President Biden’s core commitment… to more deeply integrate domestic and foreign policy.”

States always have the right and the need to prioritize their internal economies. Providing well-being to its citizens is one of the essential roles that states assume, and no country has the obligation to prioritize the health of the international economy, allies or trading partners over that of its own citizens. In formulating economic policy, the Biden administration wants to put its citizens first, and it is within their rights and responsibilities to do so.

That said, Sullivan’s speech was framed as a speech about America’s role in the international economy, so those are the merits by which it should be judged. In that sense, the speech represents a step toward economic unilateralism, like the Bush Doctrine applied to the international economy in effect, if not intent: the United States will do what it wants, and international cooperation is welcome, but only if the partners do so on US terms. .

The problem is that the logic that informs the approach doesn’t work and the shape of what comes next is not clear even to its designers. This is not the strategy of an administration with the full set of political tools available, but it is also the strategy that the Biden administration hopes the rest of the world will accommodate.

Some of the specific problems with speech have been unpacked elsewhereBut more importantly, Sullivan’s speech seems to have thrown out all the logic of the post-World War II economic order. In doing so, he overlooked the reason the order was so successful: it leveraged self-interest in the direction of the collective good.

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The order that the United States defended after the end of World War II through the creation of the Bretton Woods Agreements and international institutions such as the International Monetary Fund and the General Agreement on Tariffs and Trade (now the World Trade Organization) it was never completely altruistic. The institutional web codified US geopolitical primacy and the reconstruction of Europe and Asia provided a boost to US economic interests while helping to contain a potential threat from the Soviet Union. At the same time, this system brought real and significant benefits to countries within the system, giving them a stake in a US-led order while expanding their welfare and providing them with information about international governance in ways that others international systems had not been able to. provide.

Like Mona Paulsen, a law professor at the London School of Economics, he pointed, the system never dealt with free trade as a good in itself; it was about reciprocity. The well-being of all was linked to that of all others.

Sullivan’s speech paid close attention to describing how that system no longer worked. But it is not clear what the new logic is. On the surface, what Sullivan is calling for in the future isn’t all that radical. Even if the merits of industrial policy can be debated, it is neither novel nor without precedent. Partner economies would understand if the US wants to prioritize its own workers, most economies do. Partner economies would also understand if the United States has concerns about economic security, and so would they. Everyone knows that trade policy in the 2020s and 2030s will be different than it was in the 1990s.

“Modern Trade Deals,” the new direction that is supposed to replace the old, is the Biden administration’s MacGuffin economic policy, something the Biden administration seems very serious about, but no one can clearly define or understand why it is. there or why is it important. to the plot Despite all the altruistic and positive ambitions, it is not clear how this new approach can achieve what the old one cannot. How can reciprocity be achieved without tangible concessions on the table?

It is also unclear how the United States remains “committed to the WTO” and its values ​​if it does not support the organization’s dispute resolution process and reject its rulings on steel tariffs. It is unclear how the United States will reach agreements on sensitive but important issues like labor and the environment without the leverage that market access offers can provide.

The United States is not alone in terms of its lack of enthusiasm for adhering to the rules and practices, but it is much more complicated when Washington has made maintaining that system a centerpiece of its case for global leadership. The Biden administration needs to explain how its strategy is multilateral and cooperative without tangible support for the institutions that govern international trade and without a clear framework to induce meaningful cooperation with partner economies. Until then, the accusations that the Biden administration’s international economic strategy is “America First” will stick, and with some justification.

The Biden administration may have decided to avoid “traditional” trade deals because it might think such deals are not politically viable. But what makes traditional trade agreements politically difficult is the same thing that gives them value: they are legally binding. If an agreement is not ratified by Congress, there is no guarantee that it will last beyond the next administration. Without it being signed into law, whatever the Biden administration is trying to do, no matter how well-intentioned and how confident it is that the world has changed, might not last past the end of the administration, whenever that may be. .

Apparently, the United States is “going beyond traditional trade agreements” in favor of “innovative new international economic partnerships.” But the only alternatives to a legally binding trade agreement are narrow agreements that are either nonbinding or in conflict with Congress, and possibly in violation of the Constitution. For example, it’s not even clear that the recent agreement between Japan and the United States to cooperate on critical minerals is completely legal without the involvement of Congress.

Put more bluntly, even in the best of cases where the Indo-Pacific Economic Framework (IPEF) negotiating partners reach an agreement that achieves all ambitions, there is no reason to assume that their provisions will survive the next administration if Biden’s successors decide to go in a different direction. It is difficult to change business patterns and shape economic behavior when the time horizon is the next presidential election. It’s hard to get concessions if negotiating partners may think they can get a better deal with someone else in the White House.

This dynamic is not entirely the fault of the Biden administration: The polarizing issues that have made Congress an unreliable partner go back decades. But it makes ambitious efforts to reshape the international economy that much more challenging if policymakers attempt to do so with one hand tied behind their back; in this case, eliminating tariffs and market access.

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On the one hand, ruling out future trade deals on the grounds that tariffs are already low borders on falsehood. Trade agreements have discussed issues beyond tariff rates for decades, covering topics like intellectual property, procurement, sanitary standards, and more. For her part, Deborah Elms, executive director of the Asia Trade Center in Singapore, suggested a pragmatic motive for Sullivan’s discussion of tariffs:: “Declaring that tariffs are the root of all evil is a practical way of doing nothing about it.”

However, marrying ambition with practical limitations could be disastrous. Erik Levitz, writer for New York Magazine, he inadvertently gave a perfect summary of the state of US international economic policy. when he lamented the challenge of achieving a bipartisan consensus for the new Biden program: “Reduce Global Bidenism to those provisions for which there is a genuine ‘Washington consensus’, and what is left are proposals to reduce economic dependence on the US. of China and restrict that nation’s economic development.” Basically, that’s where we are right now and it’s not a good place to be if the Biden administration wants the partner economies to join its program or is sincere about avoiding all-out conflict with China.

In fairness to the Biden administration, they seem genuine in avoiding all-out confrontation and are taking certain steps to avoid that, but it’s unclear whether that balance can be sustainable.

Many of the challenges that the Biden administration identified are real problems and will need to be addressed for years to come. Reconciling the need for domestic economic revitalization, the US role as the world’s largest economy, and the fact that polarization has limited what can be accomplished through Congress is a real dilemma. But what is needed is a strategy that combines tools with ambitions and can attract international support. Until then, any vision of the United States’ international economic strategy will be incomplete.

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