Biden’s Trade Plans Will Boost China’s Power in Asia
Supporting the middle class at home and reasserting leadership abroad may be mutually exclusive, especially in Asia.
This article is part of Foreign Policy’s ongoing coverage of U.S. President Joe Biden’s first 100 days in office, detailing key administration policies as they get drafted—and the people who will put them into practice.
U.S. President Joe Biden outlined his big new foreign-policy idea in a speech on Feb. 4: rebuilding the U.S. middle class. “There’s no longer a bright line between foreign and domestic policy,” he said. “Every action we take … we must take with American working families in mind.” On the surface, this sounds exactly like the kind of sloganeering you’d expect from a Democrat, along with its sister promise of a “worker-centered” trade policy. Skeptics in the party’s left wing worry such pledges could amount to nothing given Biden’s heritage as a free trade enthusiast. But this agenda deserves to be taken seriously. It echoes traditional progressive concerns about trade’s impact on labor and environmental standards. At a deeper level it flows from a wide-ranging rethink, led by the likes of National Security Advisor Jake Sullivan, about the costs that two decades of hyperglobalization have imposed on U.S. society.
Worthwhile though this rethink is, it also presents Biden with a new foreign-policy dilemma. The U.S. president wants simultaneously to support workers at home and to reassert U.S. economic leadership abroad—especially in Asia. At the very least, these two aims are in tension, and in many ways they are mutually exclusive.
At the heart of this lies the problem of China. Policymakers such as Sullivan and Biden’s chief Asia advisor, Kurt Campbell, want to deal with Beijing by rekindling Asian alliances and partnerships damaged under former President Donald Trump. The United States once used both its security and economic sway to do this, for instance via projects such as the original Trans-Pacific Partnership (TPP) trade deal. But on almost any measure, U.S. economic influence in Asia is declining, just as China’s is rising fast. Beijing is doing a good job of supplanting Washington’s role as champion of regional trade liberalization and integration, too. Put bluntly, if Biden’s domestic-focused agenda actually comes through, it is likely to make it harder for him to push the kind of economic and trade policies that might attract partner nations in Asia and rebuild the United States’ broader economic influence.
Biden’s plans both reject and accept Trump’s legacy. “I’m not looking for punitive trade,” Biden said last year, suggesting he wants to scrap his predecessor’s mercantile, coercive focus on tariffs. Biden’s advisors are also critical of Trump’s uncoordinated approach, where officials such as U.S. Trade Representative Robert Lighthizer worked to strike deals with China at the same time as hawks such as Secretary of State Mike Pompeo were hitting Beijing with new restrictions. The idea now is that Sullivan and others will work more closely with the likes of Katherine Tai, Biden’s nominee for U.S. trade representative, all with the aim of repairing the United States’ domestic social fabric. Washington “cannot get grand strategy right if it gets economic policy wrong,” Sullivan and fellow Obama-era official Jennifer Harris wrote last year in Foreign Policy.
Even so, Biden’s advisors now accept at least some of Trump’s criticisms of globalization. Orthodox economists have long said trade boosts growth, leaving sufficient gains to compensate the losers of increased competition. But in practice that compensation almost never happened. U.S. consumers did enjoy cheap imported goods, but those benefits were small compared to the high costs competition imposed on particular industries and communities. Although heralded by Biden at the time, deals such as the TPP are now viewed as excessively favoring corporations and their shareholders, opening up markets for banks and pharmaceutical giants while doing little to stop them stashing money in tax havens or redomiciling their headquarters. TPP included environmental and labor protections, but it did not deal with issues like currency manipulation or technology standards. Meanwhile, trade policy did little to push back against the opaque financial structures that facilitate money laundering and corruption, allowing autocrats and kleptocrats to thrive.
In general, this trade rethink has much to recommend it. Moving away from Trump’s destructive policies is a good start, not least following recent evidence that his tariffs on China cost Americans nearly a quarter of a million jobs. Elsewhere, there remains a lively debate about whether trade policy, rather than technology, caused the problems that hit the U.S. middle classes over recent decades. Yet the fact of stagnant incomes, combined with perceptions of unfair trade policy, have clearly been an important force behind the anger and political instability that now dog the U.S. political system. “Our relative capacity to just absorb all of the costs of an open international economy is just less than it was before,” as Sullivan recently put it. Elsewhere he describes “getting our own house in order” as the administration’s primary national security challenge.
The problem is that this kind of talk sounds ominous when heard in Asia. Prior to Trump, the United States was both a major source of demand for Asian exporters and the most important advocate for the free trade policies that many regional leaders felt would improve their chances of economic development. Now, both those U.S. roles are declining. Meanwhile, China’s weight has only grown given its rapid post-pandemic recovery. Beijing’s successful completion of the Regional Comprehensive Economic Partnership trade deal, which brings together 15 Asia-Pacific nations but not the United States, confirmed China’s role as a regional trade champion. Nations in Southeast Asia see themselves as ever more reliant on China for growth. Even staunch U.S. allies such as Japan and South Korea, which worry about China’s rising geopolitical power, recognize their financial interdependency with Beijing. Almost no one wants to be in the position of Australia, facing punitive economic punishments from Beijing for perceived national security slights.
Some of Washington’s partners in Asia might be more willing to back U.S. attempts to manage China in the security sphere if an economic dividend came along with it. This was always the thinking behind economic deals like the original TPP, which was heavily supported by U.S. foreign-policy analysts, who viewed trade deals as an essential way to underpin lasting security relationships. But Biden’s talk of rebuilding the U.S. middle class sends a pretty clear signal that the United States is now likely to be more difficult to do business with, not easier. Few Asian exporting nations are enthused by requirements to add more labor rights into trading deals, or more restrictive requirements in areas such as state-owned enterprises. “All this is a tough lift in Southeast Asia in particular,” as Deborah Elms, a policy expert at the Singapore-based Asian Trade Centre, put it. “Political leaders here want new markets for exports, not outsiders meddling, and for this China is now often an easier partner.”
Sullivan and Campbell know all too well that Washington now needs to develop a new economic agenda that attracts Asian partners. But their options are limited. Rejoining the TPP, now reconfigured as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), is the most obvious option. But doing so would mean overcoming a host of administrative and political hurdles, not the least of which would be domestic political opponents accusing them of selling out the very middle class they promised to protect. Biden has said he will strike no new trade deals until the COVID-19 pandemic is under control. Yet even then, the politics will be perilous. In all likelihood, Biden’s team will eventually conclude that they should rejoin, given a paucity of better options. Whether they will be able to make the domestic politics work and actually do so remains unclear.
Much the same is true for attempts to build an economic component into the Quadrilateral Security Dialogue that brings the United States together with Australia, India, and Japan in a fledgling security alliance. If the United States isn’t a sufficiently attractive economic partner now, could it not become more so by working with its allies—some of whom, such as Japan, carry significant economic clout across Asia? Yet so far, at least, the Quad has already been slow to advance its main focus on security cooperation. Tacking on areas such as infrastructure investment or development assistance, let alone trade, seems unrealistic in the near term.
Biden says he still wants to write the global “rules of the road” on trade, while his advisors highlight potentially ambitious plans for Washington to develop new multilateral ties, for instance by working up new rules and standards in areas such as artificial intelligence or green energy vehicle standards. “It seems to me that there is work to be done to conceive of an agreement which isn’t building on top of the traditional [free trade agreement] structure that governed U.S. trade policy for 30 years,” Sullivan said in a recent interview. This hints that the United States wants to move beyond old-style agreements such as the CPTPP and potentially begin to think even bigger by starting negotiations on new, next-generation trade agreements that focus on areas such as digital trade.
This sounds good in theory, but it is likely to be a slow-moving and complicated process in practice. Meanwhile, Asia’s economic landscape is changing rapidly, with the United States largely outside it. The CPTPP may soon enlarge to include countries such as South Korea and Britain. The Regional Comprehensive Economic Partnership is likely to come into force by the end of 2021, cementing China’s new place at the heart of Asia’s economic system. Taken overall, Biden’s focus on a “worker-centered” trade policy is a good domestic political play. But assuming it ends up being seriously pursued, it will come with foreign-policy costs. Over recent decades the United States won friends in Asia by opening up its economy and helping others open up their own. That same deal is no longer on the table. Without it, Biden’s task of building alliances and managing China’s rise will be that much harder.