If there ever was a honeymoon for the Biden administration's "worker centered" trade policy, it is now most certainly over. At least in the eyes of some prominent economists in Washington, the latest of whom is Adam Posen, president of the Peterson Institute for International Economics. Posen, a former Bank of England policy maker and Federal Reserve economist, provided a useful reality check for supporters of Brexit and Trump's trade wars when those debates were raging. Now he has leveled a scathing review of Biden's trade policies in Foreign Policy magazine and taken to the airwaves, highlighting the perils of protectionism that's moved from the fringes into a bipartisan majority in Congress. Read More: Biden to Tout New Investments with Three-Week Blitz "We have to confront that these views, even if popular and widespread, are wrong," he said this week on Bloomberg TV. Zero-Sum Fallacy Posen writes that that the US administration's effort to "take away production from others in a zero-sum way" will ultimately backfire and leave America worse off in the end. Read his essay yourself, but here are some key takeaways: - Decoupling from China will raise costs for US consumers and businesses
- Disregarding the interests of US allies will erode US influence abroad
- Made in America policies raise costs and make US exports less competitive
- Subsidy races breed corruption and stifle innovation
- Friend-shoring will increase the fragility of global supply chains
- Industrial planning will not significantly reduce income inequality
Posen isn't the only one heaping criticism. Last week, Biden's top trade official received a grilling from lawmakers who demanded to know why the US was no longer negotiating traditional free trade agreements. In response, Trade Representative Katherine Tai testified that previous trade deals have made the US economy more vulnerable and led to the decline of American industries. "We are not pursuing traditional fully liberalizing trade agreements, because we see those as part of the problem that we are trying to correct for," Tai told the Senate Finance Committee. Meanwhile, American public opinion remains solidly on the side of trade as an opportunity rather than a threat, according to the latest Gallup polling, even after a trade war with China and the political drumbeat to re-shore US manufacturing jobs. For the 11th year in a row, a majority of respondents said the economic benefits of US exports outweighed the possible damage from foreign imports, Gallup's latest annual survey on the issue found in February. —Bryce Baschuk in Geneva |
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