What the White House will need to do to fulfill its promise to ensure trade’s benefits are spread more equitably.
The news on Thursday that consumer prices have risen more than expected in the past year added fuel to a smoldering debate over the threat of inflation as the economy rebounds. It also mostly drowned out another announcement on trade policy, one the Biden administration had hoped would send a major signal that it was breaking from the past.
Katherine Tai, the U.S. trade representative, told the A.F.L.-C.I.O. during a speech on Thursday that the White House was working to put workers first in its negotiations with its trading partners, a shift from the usual focus on macroeconomics and business interests. In her speech, Tai said the previous approach had “created a trust gap with the public about free trade.”
“We want to make trade a force for good that encourages a race to the top,” Tai said. “The first step to achieving this goal is creating a more inclusive process. In order to understand how trade affects workers, we want to come meet with, listen to, and learn from them.”
Our economics reporter Jeanna Smialek interviewed Tai for an article published ahead of her speech. After the address this morning, Jeanna (who was also busy covering the inflation news) spoke to me about what the trade representative’s announcement means — and what the administration would need to do to make good on the commitment.
In her speech today, Ambassador Tai said the United States would put a priority on workers in its dealings with other countries. The Obama administration said some similar things, but frankly the U.S. trade representative’s priorities have long been driven at least partly by corporate interests — which doesn’t always equal a commitment to American workers. If the Biden administration follows through on Tai’s pledge, how significant would this shift be?
There’s a widespread perception in economics — as Ambassador Tai noted — that for too long policymakers and analysts looked at free trade as something that grows the overall pie, without paying sufficient attention to who was getting a slice. Focusing on the distributional impacts of trade, and especially on what it means for workers at home and abroad, is a shift that has really started in recent years. If the Biden administration can make meaningful changes here, that would be a big deal, but I think how sweeping those could practically be remains a major question.
This lines up with a broader shift in economic priorities that this administration has sought to communicate to the public. That includes handing cash payments directly to Americans through the stimulus, and the Fed’s stated emphasis on reaching full employment. From a political standpoint, how much does this reflect an attempt to speak directly to the concerns of working-class voters, in ways that previous administrations haven’t?
The cash payments to American workers and families started under the Trump administration, and the Federal Reserve is politically independent. The central bank’s increased focus on full employment has really been a product of a relatively low-inflation era, which gave it more room to work on labor market outcomes.
But it is clear that a focus on workers has intensified across recent administrations, Democrat and Republican alike. I suspect that some of that is driven by economics and cold hard facts: Labor’s share of the nation’s income has been falling for a long time now, this is a democracy, and voters have taken note. When we talk about economic prosperity, whom that prosperity is accruing to — everyone or just an elite few — is increasingly a big part of the debate.
The Biden administration has already taken some steps in line with Tai’s pledge — insisting on workers’ rights in dealings with Mexico and with the World Trade Organization. But as you mention in the article, it’s not yet clear how the administration plans to live up to its promise on a larger scale. As Tai reworks the country’s approach to trade, what will you be watching for?
Ambassador Tai mentions in the speech that the administration will look to use meetings in Europe next week to make a start on “new standards to combat the harmful industrial policies of China and other countries that undermine our ability to compete.” I think it will be interesting to see what comes of that, and to see how much the administration can do to insist upon worker protections in trading partners, like China, where the United States’ desires and priorities hold less sway.
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