Her alternative, however, is one that will be unpopular with much of the world. “When efficiency and low cost are the only motivators, production moves outside our borders,” she said, calling it a “race to the bottom, where exploitation is rewarded and high standards are abandoned in order to compete and survive.” But she went well beyond this critique into a full-throated denunciation of the Reagan free-market model. trade policies, which focused more on efficiency than equity, have merit, especially in the long failure by previous administrations to counter China’s aggressive mercantilism. The confusion over trade will continue unless Biden himself clarifies the new U.S. The United States, she said, should pursue a trade policy that “revitalizes U.S.-based production at high, middle, and low ends, and puts workers back at the center because they are the foundation for resilience.” back into USTR ,” she said, a line that will reinforce trading partners’ fears about their place in the new order. “A key part of my approach is to put the U.S. Trade Representative Katherine Tai did not help last week in what was billed as a major speech on U.S. Devising a trade policy that addresses both goals has so far been elusive. The administration is pursuing two goals that, while not mutually exclusive, are in tension: Biden wants to build more resilient global supply chains to reduce dependence on China-which requires diversified trade-while also trying to lure investment and manufacturing jobs back to the United States. In championing a different model, the Biden team has struggled to address the concerns of trading partners who fear private investment will now flow away from their economies to the United States as companies around the world chase the enormous new subsidies on offer. These countries, not surprisingly, mostly liked the trade regime originally pushed by Washington-according to a poll conducted by IPSOS, more than 80 percent of people surveyed in major developing economies say trade expansion has been beneficial. Developing countries saw their share of global manufacturing rise sharply over the past three decades as China, Mexico, Vietnam, Poland, and other countries became vital to global supply chains. Countries could compete for investment not only by offering a better workforce or more efficient infrastructure, but also by holding down wages, cutting taxes, and weakening regulations. The Reagan model of cutting tariffs and reducing regulatory obstacles had the virtue of letting the chips fall where they may. infrastructure, subsidize domestic production of semiconductors, incentivize new manufacturing jobs in left-behind communities, and turbo-charge the United States’ transition to cleaner energy sources.īut the administration has struggled to figure out how the rest of the world fits in. Congress to pass legislation to rebuild U.S. Biden can rightly claim historic accomplishments in bringing government back into the economy, working with a divided U.S. President Ronald Reagan declared government to be the problem, slashed taxes, and launched the most comprehensive free trade negotiations in U.S. economic policy since the 1980s, when then-U.S. President Joe Biden’s first term, he is well along in carrying out the most dramatic revolution in U.S. In particular, by rejecting the model of trade negotiations that the United States championed for decades, the administration risks adopting an approach that excludes much of the world. The Biden administration is in danger of doing just that with its ambitious new industrial policy. The danger of a major policy change is that, in correcting for past errors, governments commit the opposite ones.
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