Who’s afraid of comprehensive trade deals? Washington, apparently

The idea of joining a comprehensive trade deal is almost taboo in Washington these days. Listening to a recent Senate Finance Committee hearing on the president’s 2021 trade policy agenda, it’s obvious lawmakers now prefer sectoral agreements, or “mini-deals,” which are less work and politically easier for Congress to stomach. As for the Biden administration, the desire to remain focused on its “Build Back Better” agenda, such as focusing on labor standards, makes it less likely to take the initiative on new, comprehensive deals right now — and Congress won’t take trade seriously until the White House does.

This is a problem. No one is expecting the U.S. to negotiate a new trade deal anytime soon. Meanwhile, other countries are negotiating their own arrangements and America is set to be left out in the cold. This means that as much as the Biden administration would like to invest in rebuilding America, outside of the U.S. the trade environment will become harder for the U.S. to compete in the global economy and America will lose an important counterweight against Chinese influence in the Indo-Pacific. 

If the Biden administration wants a trade agenda that prioritizes American workers, supports labor interests and tackles climate change, it’ll be slow advancing these interests from the outside of today’s modern trading blocks, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP).

If Congress has any interest in competing with China’s economic and political influence, particularly in Asia, it’s going to have to be more open to engaging with our trading partners such as those in Taiwan and Vietnam. This means being proactive on negotiating trade agreements with these countries or seriously considering joining the CPTPP.

Despite the fact that Americans are now more supportive of trade than they were 20 years ago,  there is still an aversion to trade in Washington. Historically, politicians on both sides of the aisle have been fixated on the idea that America’s growing trade deficit, and buying foreign products, hurts American industry. Others point to the so-called “China Shock” and the effect that trade competition can have on U.S. employment, even though trade competition can support American job growth. Still worrying about the China shock is like worrying about what’s being posted on Myspace. The shock, much like Myspace, ended over a decade ago and it’s time to move on.  

For all its anti-trade rhetoric, the Trump administration didn’t give up on trade entirely — though it was more focused on renegotiating old deals with Canada, Mexico and South Korea. The administration did manage to sign a partial deal with Japan and a questionable deal with China, while moving the ball forward on trade negotiations with the United Kingdom and others.

One of the Trump administration’s biggest mistakes, besides withdrawing from TPP negotiations, was not moving on a free-trade agreement with Taiwan, even after President Tsai Ing-wen stuck her neck out by removing longtime hurdles to negotiations. But that mistake may have more to do with bureaucratic stubbornness within our Trade Representative’s office than politics.

Ironically, Washington is now more interested in Taiwan than ever, specifically semiconductor manufacturing on the island and the implications if the island were to come under attack by China. Of course, if Taiwan were attacked by China, we would have bigger problems than a shortage of these microchips. Yet the most pressing problem Taiwan has right now isn’t invasion from China but the fact that no country is willing to negotiate a free-trade agreement with it out of fear of retaliation from China.

In an ideal world, there would be a serious discussion between the administration and Congress right now about joining the two-year-old CPTPP. These negotiations could be used to finish our partial deal with Japan — a legal requirement under existing U.S. trade law. It could connect us with Vietnam, an increasingly important partner in the technology supply chain and the next “Asian Tiger.” And the U.S. would be able to bring Taiwan into the trading block, helping it to lessen its economic reliance on China.

If the Biden administration and Congress want to get serious about competing with China, they’re going to have to overcome their fear of comprehensive trade deals.

Riley Walters is deputy director of the Japan Chair at Hudson Institute.