U.S. President Joe Biden’s term in office has come at a time when trade agreements have fallen out of fashion in the United States. Both the Republican and Democratic parties interpreted former President Donald Trump’s victory in 2016 as powered in part by his critical stance toward Washington’s trading relationships. As a result, new free trade deals are now seen as toxic across the political spectrum.
For Biden, this has presented a challenge. On the one hand, he campaigned on the promise of restoring internationalism and multilateralism to the heart of U.S. foreign policy. On the other hand, Biden and his team understood that many U.S. voters felt they had been victimized by the impersonal forces of economic globalization and that a trade policy based on neoliberal principles would win them little support in key swing states of the industrial Midwest.
The administration’s solution was to promise what it has variously called a “foreign policy for the middle class” and a “worker-centered trade policy.” The premise of this new approach is that trade policy ought to serve U.S. citizens not primarily in their role as consumers, but instead in their role as producers. The administration argues that the free trade deals of the past flooded the U.S. with cheap consumer goods, while paying no heed to the millions of workers who lost their jobs because U.S. factories couldn’t compete with the tide of imports. A worker-centered policy, by contrast, aims to use trade policy to create jobs in the U.S. and improve the resilience of the U.S. economy.
From the beginning, the administration’s approach has been met with a great deal of skepticism both from domestic critics and U.S. trade partners. The traditional U.S. approach to trade policy was to promise a negotiating partner greater access to the U.S. domestic market in exchange for greater access to theirs. But with the administration rejecting the notion of opening up the U.S. market further, it is difficult to convince foreign countries to make concessions that will boost the U.S. economy or help U.S. workers.
The problems with the administration’s approach have been apparent in the fate of the Indo-Pacific Economic Framework, or IPEF, its flagship trade initiative. The IPEF was conceived in response to a very real problem. Ever since Trump withdrew the U.S. from the Trans-Pacific Partnership, or TPP, in 2017, Washington has been reduced to watching from the sidelines as economic integration has marched ahead in the Indo-Pacific. Two regional agreements have lowered tariffs and knitted the economies of their members together: a TPP reboot without the U.S. known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP; and a China-centered bloc called the Regional Comprehensive Economic Partnership, or RCEP. Washington is party to neither of them.
The Biden administration saw the IPEF both as an attempt to reinvolve itself in shaping the economic order of this critical region and also as a way of demonstrating that its worker-centered policy could deliver results. Involving 13 countries alongside the U.S.—among them India, Japan, Australia, Vietnam and Indonesia—the IPEF aimed to enhance economic cooperation in key areas such as the green transition, anti-corruption and supply chain resilience.
More ambitiously, the Biden administration also hoped to use it as a vehicle to spur a region-wide increase in environmental and labor standards, a “race to the top” rather than the “race to the bottom” that it argued has been the result of traditional trade deals. The goal is to bring regulations in developing countries more in line with U.S. standards, reducing the competitive advantage that such countries derive from low costs and hence boosting the competitiveness of U.S. businesses. Rather than offering increased market access in return, the administration has held out a somewhat vague promise that raising their standards will make participating states eligible to receive climate and infrastructure financing from the West.
Although many countries in the Indo-Pacific are friendly to Washington and want to signal openness to its initiatives, the IPEF has still been a hard sell in the region. Some observers have questioned the sincerity of the Biden administration, which seems to want to use the IPEF to construct an anti-China economic bloc but without offering the members of the bloc much in return. Writing in this vein, one prominent former Indian diplomat referred to the IPEF as “a desperate move by the Biden administration to burnish its economic profile in Asia as a credible counterbalance to China.” Critics have also noted that the IPEF is not likely to be submitted to Congress for ratification, meaning that it could easily be revoked by the next president—an ominous sign in a region still reeling from Trump’s sudden withdrawal from the TPP in 2017.
The Biden administration has grand plans to reform the global economy but is offering little incentive for other countries to go along with them.
Matters came to a head last November, when participating states gathered for a summit in San Francisco to try to reach agreement on the IPEF’s four pillars. They managed to do so for cooperation on boosting supply chain resilience, and they also notched minor wins on clean energy investment and anti-corruption. But in the end, U.S. negotiators ended up walking away from the trade portion of the talks, vindicating many of the fears that Indo-Pacific states had about the Biden administration’s willingness and ability to deliver a deal.
Ultimately, the trade portion of the IPEF fell victim to U.S. domestic political considerations. According to media reports, the Biden administration decided to walk away when prominent Democratic lawmakers from Midwestern swing states turned against it. Sens. Sherrod Brown and Tammy Baldwin—Democrats from Ohio and Wisconsin respectively, both of whom face tough reelection battles this year—balked when the Biden administration’s approach failed to secure strong commitments by other IPEF states to raise environmental and labor standards. Just how toxic the word “trade” has become in the U.S. became apparent when Baldwin cited the possible “perception” that the IPEF would harm U.S. workers as her reason for ultimately opposing the deal.
The collapse of the IPEF’s trade component leaves Washington in a bind. The Biden administration has grand plans to reform the global economy but is offering little incentive for other countries to go along with them. U.S. policymakers fear that many countries in the Indo-Pacific region are becoming economically dependent on China and that this will affect their behavior in a future international crisis, for instance over Taiwan. At the same time, the domestic politics of trade prevents the administration from making the significant commitments that would be necessary to change this dynamic.
There is ultimately no way out of this impasse that does not involve trying to change the current domestic political dynamic concerning trade. By implicitly accepting the critique by economic nationalists that open trade harms U.S. workers, the administration has given itself little room to achieve its goals of reforming the global economy and containing China’s economic rise. The problems facing the IPEF show that there are stark limits to what can be accomplished by such a defensive posture.
If the administration is serious about its broader goals, it ultimately needs to go back on the offensive and try to convince U.S. voters of the benefits of globalization once more. Only on that basis can it convince states in the Indo-Pacific and beyond that it retains a serious interest in setting the rules of the international economy.
Andrew Gawthorpe is an expert on U.S. foreign relations at Leiden University. He writes a newsletter called America Explained.