By Bob Davis
Leading members of the Biden administration are promising a very
different approach to international trade. No longer would American
negotiators focus on opening markets for financial-service firms,
pharmaceutical companies and other companies whose investments
abroad don't directly boost exports or jobs at home.
Those making the case include President Biden's national
security adviser, Jake Sullivan, and members of his transition team
who are likely to get senior trade jobs. The new thinking is
becoming mainstream among Democrats.
Trade policy should "involve a laser focus on what improves
wages and creates high-paying jobs in the United States, rather
than making the world safe for corporate investment," Mr. Sullivan
wrote early in the presidential campaign. "Why, for example, should
it be a U.S. negotiating priority to open China's financial system
for Goldman Sachs?"
Clinton administration Treasury Secretary Lawrence Summers goes
even further, arguing against prioritizing gains for Hollywood,
investment banks and inventors who want intellectual-property
protection. Their "elite concerns" don't contribute much to U.S.
employment or tax revenue, he said in an interview.
Those views are reflected in Mr. Biden's tax proposals, which
are intended to prod U.S. companies to keep jobs at home rather
than easing investment overseas. Expanding facilities in the U.S.
would earn a tax credit; shifting production abroad, especially to
tax havens, would be penalized by higher taxes.
A Biden trade transition task force member, Brad Setser, has
provided much of the intellectual firepower behind the proposed
Although U.S. negotiators push to open markets for
pharmaceutical companies, Mr. Setser argued at the Council on
Foreign Relations, the firms do much of their production in low-tax
countries like Ireland, leading to a big U.S. trade deficit in the
sector. Boosting U.S. financial-service firms' business in China is
another priority, but the sector's exports to China are dwarfed by
sales to tax dodges in the Cayman Islands.
Mr. Setser urges that trade and tax policy promote U.S. exports
of manufactured goods, a call picked up by Mr. Sullivan and
incoming U.S. Trade Representative Katherine Tai.
Ms. Tai says the new administration wants a "worker-centered
trade policy," not one focused on corporate competitiveness or
bargain prices. "People are not just consumers, they are also
workers and wage earners," she told a big business group
The Biden plans have produced a lot of eye-rolling among
skeptical trade policy veterans. Administrations dating back to at
least the Clinton years have promised something similar. The Trump
administration's trade representative, Robert Lighthizer, asserts
he already created a worker-centered policy.
Mr. Lighthizer used tariffs to try to drive manufacturing back
home, although growth in factory jobs stalled once the
administration resorted to levies that drove up costs for many
factories. He also pushed for and won greater access to Chinese
markets for U.S. financial-services firms, which wouldn't be a
"We have made inroads on financial services," said Mr.
Lighthizer in an interview. "I want them to do well." But he said
U.S. car makers and other manufacturers also benefited from the
Trump administration's China trade pact.
There are many reasons why U.S. trade policy continues as it
has. Trade economists say that market openings for financial
services, pharmaceuticals and other big investors abroad do benefit
middle-class Americans, if indirectly.
The revenue strengthens big companies so they can do research at
home, spin out new products for American consumers and pay good
wages to American workers.
The drug industry's merchandise trade deficit doesn't reflect
the value of the research and development and other work done in
the U.S., said a representative for the Pharmaceutical Research and
Manufacturers of America.
The industries that the Biden team would de-emphasize also have
the lobbying muscle to fight back. The financial-services industry
contributed about $200 million to Mr. Biden's election, according
to the Center for Responsive Politics. That is roughly four times
as much as the industry chipped in for Donald Trump's election.
The industries also have powerful allies in Congress, which
plays a large role in setting the U.S. trade agenda. The
pharmaceutical industry has been able to hold up trade deals until
it got what it wanted, although that could be changing. The
industry failed to get the protection from competition from
near-copies that it sought in the U.S.-Mexico-Canada deal
negotiated by Mr. Lighthizer with an assist from Ms. Tai, who was
then a House staffer.
Essentially, the Biden team is betting that political changes on
Capitol Hill and in the public will be sufficient to help it pursue
a revamped trade policy. In the past, Republican lawmakers have
been reliable free traders who sought to help companies clear away
barriers to investment overseas. But during the past four years, as
former President Trump pushed a protectionist trade policy, that
has changed. A number of GOP lawmakers have endorsed subsidies and
tariffs to help U.S. manufacturing.
The deepening competition with China has accelerated the embrace
of industrial policies favoring manufacturing as has the global
pandemic in which the U.S. found itself short of health gear it
"The point of further trade negotiation isn't to make the world
safe for multinational corporation investment," said Mr. Sullivan
in an interview during the presidential campaign. "It's about jobs
--Anthony DeBarros contributed to this article.
Write to Bob Davis at email@example.com
(END) Dow Jones Newswires
January 24, 2021 05:44 ET (10:44 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.