Democrats signal growing frustration with globalization

Democrats are sounding increasingly fed up with free trade agreements and some of the basic tenets of globalization that have defined the last several decades of U.S. trade policy, echoing some of the “America First” sentiments that put former President Trump at odds with the economic orthodoxies of his party and a longstanding policy consensus about the good of trade liberalization.

As major trade initiatives have largely fallen to the wayside while world governments have been dealing with the coronavirus pandemic and the war in Ukraine, top officials in the Biden administration — along with top Democrats in Congress — have sounded notes of economic nationalism and domestic renewal ahead of the 2024 election.

“Trade was always a hot-button issue in the Democratic caucus,” trade expert and veteran trade journalist Jutta Hennig told The Hill.

“But it’s not a surprise that the Biden administration is reacting like this to world events and the reelection challenge with potentially Trump in the way.”

Rep. Richard Neal (D-Mass.), top Democrat on the House Ways and Means Committee, this week questioned the effect of imports on U.S. businesses while trumpeting reforms made to the North American Free Trade Agreement (NAFTA), one of the foundational trade deals of the 1990s that moved many U.S. jobs abroad.

“Opening the U.S. market to imports from other countries can and has disrupted domestic industries,” he said during a field hearing of the Ways and Means Committee on Tuesday.

Neal touted Democratic efforts to reinstate policies that protect workers from import competition and outsourcing. He also argued for better pay for foreign workers, whose typically lower levels of compensation allowed non-U.S. companies to flood American markets with cheaper goods.

“U.S. trade policies should not come at the expense of American jobs or the rights of workers at home or abroad,” he said, describing the most recent update to NAFTA, known as the U.S.-Mexico-Canada Agreement, as “the most pro-worker trade agreement ever.”

Neal also praised its labor enforcement mechanism as capable of addressing “violations of worker rights in Mexico.”

Neal’s remarks come after White House National Security Adviser Jake Sullivan delivered an economic address in April that took swings at the World Trade Organization (WTO) and questioned basic assumptions about the role of markets in the global economy.

“In the name of oversimplified market efficiency, entire supply chains of strategic goods, along with the industries and jobs that made them, moved overseas,” Sullivan said.

“And the postulate that deep trade liberalization would help America export goods — not jobs and capacity — was a promise made, but not kept,” Sullivan said at the Brookings Institution at the end of April.

Following policymakers and economists of various ideological stripes who have grown critical of the WTO in recent years, Sullivan pointed to China and the close relationship between the governmental and commercial institutions of its economy as a reason the U.S. should keep pulling back from the WTO.

“We’re not walking away from the WTO, but the WTO needs fundamental reform to account for … the presence of this massive, nonmarket economy that just has a different structure to it,” Sullivan said.

Last year, the U.S. launched the Indo-Pacific Economic Framework for Prosperity, meant to replace long-stalled initiatives at the WTO. The framework aims to push an agenda similar in many ways to the Trans-Pacific Partnership, which the U.S. withdrew from during the Trump administration.

“We can’t wait for WTO reform,” Sullivan added. “We have to be pursuing a range of other strategies to deal with the fact of China as it is.”

Sullivan’s themes of economic nationalism and industrial renewal aren’t just a rejection of past policies; they reflect changing realities in the world economy, analysts note.

Those include thinned-out, “just-in-time” supply chains that were thrown into chaos and ushered in 40-year-high inflation following the pandemic.

Threats to industrial self-sufficiency also loom in key sectors like semiconductors, made all the more appreciable by the first ground war in Europe since the Balkan conflict of the late 1990s.

“The world has — for real — changed. This talk of a new policy is not just driven by a reelection, but by very real changes,” Hennig said.

While most Beltway insiders stop well short of arguing the U.S. is or should be breaking away from China and the East Asian manufacturing centers, the consensus out of which those trade and industrial relations were born is showing signs of stress.

“I don’t think there’s a consensus [anymore]. There’s a lot of unhappiness in the business community on trade,” Bill Reinsch, chairman of international business at the Center for Strategic and International Studies, a Washington think tank, told The Hill.

“This is really a turning inwards,” Reinsch said of Sullivan’s speech. “That’s what industrial policy is: We’re going to become more competitive, we’re going to reshore jobs, we’re going to restore manufacturing here. And what they don’t say is, ‘We’re going to break a bunch of trade rules to do it.'”

The U.S. business lobby, as well as many politicians of both parties, still stands by the WTO while arguing for change.

“Leaving the WTO would be a lonely course: Leaders of the world’s largest economies have reaffirmed their commitment to the organization — and to its reform,” the U.S. Chamber of Commerce wrote in 2020. “If the United States left the WTO, its members would be free to raise tariffs and other trade barriers against U.S. exports.”

Still, with the spate of new domestic industrial policies included in the CHIPS and Science Act, Bipartisan Infrastructure Act and Inflation Reduction Act, along with private-sector efforts to adjust supply chains in response to the pandemic and national security concerns, economic tailwinds may be blowing in the other direction.

Whether they result in higher pay and better conditions for American workers implied in the doctrines of “America First” is far from guaranteed.

Union negotiators in Arizona, where the fabrication plants for semiconductors enabled by tax credits in the CHIPS Act are scheduled to be built, say they faced pushback and cold shoulders from plant managers right from the get-go.

“They’d rather import nonunion workers who would be paid a subpar wage than even have a conversation with the unions,” Arizona’s Building and Construction Trades Council president Aaron Butler said in April, according to reporting by The American Prospect.

Butler described a meeting with a vice president of chipmaker TSMC as “iciest” he’d ever been in.

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