As a senator, Joe Biden voted for NAFTA in 1993. As Barack Obama’s Vice President, he enthusiastically campaigned for the then Trans-Pacific Partnership (TPP). Now president, Biden has tragically reversed course — choosing politics over comparative advantage and competitiveness. For evidence, look no further than to the administration’s recent string of unimaginative “trade deals.”
The Indo-Pacific Economic Framework (IPEF), the Atlantic Declaration with the UK, and the first deal under the U.S.-Taiwan Initiative on 21st Century Trade are not normal trade agreements. Instead of removing tariffs or finding other areas of liberalization, the agreements include a potpourri of immaterial political pledges that cover topics ranging from the environment to gender parity without addressing the critical issue of market access.
Take the IPEF, for example, which creates an international Supply Chain Council, a Labor Rights Advisory Board, and an Upskilling Initiative which promises to increase the digital literacy of women across the fourteen-nation bloc without a single word on tariff reduction. Regardless of their merits, even these developments prove hollow. Every one of the IPEF’s four pillars are entirely non-binding. As Alan Beattie, senior trade columnist at the Financial Times, explains, “without substantial new access to the U.S. market or other trade privileges on offer, there’s little incentive for partner countries to make big commitments themselves.” In other words, the deal is empty — appealing to all through offending none.
Upon scrutiny, Biden’s other deals do not fare much better. The Atlantic Declaration which promises to herald a framework for a “twenty-first century of U.S.-UK partnership” is remarkable for its unambition. The non-binding declaration represents a deeply underwhelming comedown from a proposed free trade agreement (FTA) that was once being negotiated during the Trump administration. That now appears dead in the water. Its only accomplishment is to streamline defense trade through designating the UK as a “domestic source” while simultaneously enabling British enterprises to qualify for tax credits in Biden’s “Inflation Reduction Act” (IRA) — an attempt to resolve another unforced error by the Biden administration for refusing to negotiate FTAs. The IRA, signed into law last year, limited electric vehicle tax subsidies to only manufacturers that built in the United States and satisfied the government’s heavy sourcing requirements for critical minerals in the vehicle’s battery. This meant that most batteries and cars from America’s largest trading partners, including the UK, did not qualify.
The new trade deal signed with Taiwan also lacks economic heft. Although this is merely the first round of U.S.-Taiwan trade deals through their bilateral Initiative on 21st Century Trade launched last year, the current state of the agreement leaves much to be desired. In 75 pages of text, the only trade gain of note was a paltry amendment that allows for the electronic transaction of customs paperwork which would theoretically cut administrative red tape. Even this, however, proves banal.
It is a minor expansion of the WTO Trade Facilitation Agreement which came into effect in 2017 that already forced customs officials to accept electronic payments of trade duties. The agreement with Taiwan may technically extend that to other customs paperwork as well, but a loophole enables the trade representative of either respective country to designate an uncapped list of forms that must be submitted in paper.
Riley Walters, Deputy Director of the Japan Chair at the Hudson Institute, explained the deal’s impact to France 24. “I would definitely say this deal is more symbolic than anything else,” he said. “While the new deal could help ease some of the regulatory barriers to trade between the U.S. and Taiwan, I don’t see this as having a significant impact on trade flows.” In an announcement commemorating the agreement, outgoing Taiwanese President Tsai Ing-wen opined her faith in the possibility of a future FTA with the United States claiming that the deal set a “… firm foundation for a future Taiwan-U.S. free trade agreement.” Based on the current trend of this administration, she may have to wait a long time.
One silver lining is that in Congress’ bipartisan approval of the deal it explicitly reinforced the White House’s constitutional responsibility to both consult and seek approval from lawmakers when attempting to enact major changes to the country’s trade policy. Congress should do the same regarding other “economic partnerships” the administration is perusing to keep Americans in the loop.
Unfortunately, the tragedy of Biden’s free trade betrayal is that it can be measured in lost jobs and value removed from the economy. It was estimated in 2016 that the TPP, which once enjoyed the support of the current president, would increase real incomes in the United States annually by $131 billion and raise exports $357 billion by 2030, according to a study by the Peterson Institute for International Economics. Since then, the United Kingdom has joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the TPP’s spiritual successor, with other countries such as Ecuador and Taiwan potentially on the way, increasing the opportunity cost.
American lawmakers would be unwise to abandon a system of free trade that has raised millions out of poverty while keeping prices low worldwide. In the middle of a cost-of-living crisis, it is time for the White House to put economic efficiency over political expediency.