Bidenomics Is Still Incomplete

With an eye on next year’s elections, U.S. President Joe Biden has launched a major effort to communicate his administration’s key accomplishments—the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act—under the heading of Bidenomics. If these measures are successful, they should reinforce Americans’ faith in the ability of government to advance their prosperity in a democratic and market-economy framework.

But, as generationally important as these efforts are, the president needs to be equally clear about his approach to updating the global economic order, something that has been lacking until now. Several U.S. allies—who are more attached to the international economic status quo than the United States—fear that the current focus on domestic investments in the U.S. could detract from, rather than renew, the rules-based global economy that has provided stability and predictability over the past 75 years.

The Inflation Reduction Act in particular has unsettled U.S. partners, especially in Europe. While many European political and business leaders have been positive about the law’s investments to combat climate change, its “Buy American” and local content rules have led to accusations of protectionism. In combination with what they view as the Biden administration’s insufficient commitment to reforming and relaunching the World Trade Organization (WTO), there is a concern about the future of a global economy organized according to widely shared principles that the United States has traditionally spearheaded.

The European Union, which is based on voluntary cooperation among its members states, has in part been able to thrive since its creation in the second half of the twentieth century because of a predictable and an enabling international economic environment despite lacking the full foreign and defense powers of a nation-state such as the United States. Germany, the EU’s most powerful member, has been one of the world’s main beneficiaries of a rules-based global economy, rebuilding itself after World War II to become a manufacturing-based export superpower.

The EU has recently made progress in equipping itself with new tools to respond to less benign geoeconomic realities such as one-sided dependencies on raw materials (China) or energy (Russia)—and more is promised in strategies for Germany’s national security and the EU’s economic security. But the organization continues to be wary of a world where power, rather than rules, would be the main determinant of international economic relations. If the law of the jungle were to dominate, the EU would be less able to defend its values and prosperity than now.

Yet the deterioration in the global economic order centered on the WTO, the International Monetary Fund, the World Bank, the G-20, and other fora can hardly be attributed to the Biden administration, whose domestic programs are, in fact, one response to it.

Instead, there are four reasons for this evolution. First, the rise of China’s state-capitalist economy has seriously disrupted the multilateral trading system, which was not built to accommodate a large, nonmarket economy. The inability of the WTO’s dispute settlement system to sanction China for the practices of its highly subsidized state-owned enterprises is a sign of the weakness of globalization’s current rules.

Second, while climate change has finally risen to the top of the international trade agenda, there is uncertainty surrounding both the practicality of multilateral negotiations under the aegis of the WTO to advance decarbonization and whether its current rules can accommodate government actions needed to pursue their net-zero greenhouse gas emissions goals.

Third, technologies such as artificial intelligence are rushing ahead faster than international rules can be written to ensure they serve ethical purposes. Progress on this front is more likely to come from smaller engagements, such asthe G-7, than from broader groupings such as the WTO or G-20.

And finally, in 2019, the Trump administration blocked appointments of new judges to the WTO’s Appellate Body, depriving it of the ability to render binding decisions on disputes—and thereby negating one of the most noteworthy advances in global economic order in the post-World War II era. Under Trump, the United States t also imposed national security tariffs on imports of steel and aluminum—including from allies such as the European Union and Japan—that have stressed the WTO under its current rules.

The Biden administration has taken several steps in conjunction with allies and other like-minded partners that do go a certain way to counter the drift toward international economic anarchy. These include the creation of new bilateral and regional cooperation platforms, such as the U.S.-EU Trade and Technology Council, the Indo-Pacific Economic Framework, and the Americas Partnership for Economic Prosperity, to create common approaches to key international economic challenges: decarbonization, supply chain security, semiconductor production, export controls, and investment screening. The White House has as also removed the Trump-era steel and aluminum tariffs, returned the United States to the U.N. Paris Agreement on climate, and stepped up cooperation with allies to bring economic tools to bear in response to Russia’ invasion of Ukraine.

While these discrete, pragmatic engagements are important for building common approaches between the United States and like-minded partners, it remains an open question how they hang together in a way that updates the global economic order for the 2020s and beyond.

In a more diverse, multipolar world, it may be natural for the global economic order to feel “more like Frank Gehry” in its jagged architecture than the “clear pillars” of the Parthenon, as U.S. National Security Advisor Jake Sullivan put it in recent remarks. But the administration needs to communicate how the elements of this more complex blueprint will reinforce each other to create a stable and lasting structure.

It is particularly important to clarify where the countries of the global south fit into this new architecture. On the one hand, the administration’s regional initiatives include several of these countries and should help advance some of their main priorities, such as decarbonization and resilient supply chains. On the other hand, large regional powers including Brazil, India, and Indonesia have traditionally valued global (or near-global) arrangements such as the WTO and the G-20 as ways to influence international policymaking alongside the U.S., the EU, Japan—but also China, whose cooperation will be needed to promote both climate action and macroeconomic stability.

One option for the Biden administration to start building out its strategy for global economic order is to preview how the outcomes of the U.S.-EU Trade and Technology Council, the Indo-Pacific Economic Framework, and the Americas Partnership for Economic Prosperity will complement each other, making the whole greater than the sum of its parts. Such synergies could, for example, help create leverage for updating World Trade Organization rules that have a bearing on climate action, such as subsidies for fossil fuels vs. renewable energy.

Alternatively, the White House may believe the WTO alone can no longer promote an orderly and high-standard global economy that serves U.S. interests. If so, now is the time to start thinking about how regional partnerships can form the avant-garde of a new institution, acting alongside—although not in direct competition with—the WTO and other pillars of the current global economic order.

In either case, the administration needs to declare its preferred endgame, so that allies know where it stands and can start to work together with the United States toward a mutually beneficial renewal of the aging structures of the current global economic order.