The US Shifts Focus to Domestic Production in Trade

The US has shifted from trade liberalization to investing in domestic production and collaborating with “like-minded countries,” stated the US trade representative, warning of regulatory and environmental barriers.

The traditional approach based on tariff reduction no longer works in the highly competitive global economy of the 21st century, Tai said in a speech at the law school of American University in Washington.

Trade must work hand in hand with industrial policy, she said, and the US is using it to invest in infrastructure, semiconductors, and clean energy technology.

Incentives result in well-paying jobs, including those without a college degree, the secretary emphasized.

Previous trade agreements focused on ‘aggressive liberalization and tariff elimination,’ making the US and other countries reliant on China for key raw materials.

This has allowed Beijing to utilize non-market practices under state direction to dominate key global sectors, the US secretary emphasized.

The administration of President Joe Biden must respond to China’s ‘economic mercantilism’ with strategic investments at home to make the US more competitive and must “strengthen cooperation with like-minded countries to create a fairer and more sustainable future for our people.”

This approach, she says, is the foundation of trade engagements such as the Indo-Pacific Economic Framework (IPEF) and the US-EU Trade and Technology Council.

The new US policy will not focus on tariffs but on regulatory and environmental issues, food security, labor, and the digital economy, which have proven to be significant barriers to trade, Tai explained.

Negotiations by the Office of the US Trade Representative (USTR), based on the new approach, allow for the export of US rice, wheat, corn, shellfish, and beef to the European Union, the export of pork and pecans to India, and the export of beef and ethanol to Japan.

US agricultural exports reached $202 billion last year, which Tai partially attributes to her office’s efforts, although the rise in commodity prices was also influenced by the Russian war in Ukraine.

The need to abandon the traditional stance aimed at trade liberalization has been difficult to explain, but many have agreed after the COVID pandemic that supply chains must be more resilient and that dependence on China should be reduced, the US secretary highlighted.

– We are approaching a consensus that things need to be done differently – she asserted.