SAN FRANCISCO — Political anxiety over trade in America’s Rust Belt is still alive and well, and it’s threatening to sink President Joe Biden’s efforts to confront China and reshape the global economy.
In recent days, the U.S. has pulled back on trade negotiations with Asian partners after pushback from Sen. Sherrod Brown (D-Ohio), who is facing a challenging reelection bid in an increasingly red state. Now, the agreement won’t be finalized in San Francisco this week, as the administration had planned for months, Treasury Secretary Janet Yellen confirmed on Monday.
“It appears not to be complete,” Yellen said of the trade pillar on Monday evening in San Francisco, though “significant progress” has been made.
Despite the trade pact — called the Indo-Pacific Economic Framework — not being subject to congressional approval, Brown’s comments sent a clear signal that “spooked some folks” in the administration, said one official familiar with the talks.
“People are taking the time to make sure they do right by him,” said the official, who was not authorized to speak publicly. “He’s up next year.”
The last-minute punt on trade provisions — confirmed by trading partners on Monday — has upended Biden’s long-planned rollout of the new economic agreement and highlights just how much power electoral politics in swing states continues to have over U.S. trade policy.
Lawmakers like Brown now face the challenge of dealing with the legacy of former President Donald Trump’s protectionist policies that proved attractive to voters in key states. The Biden administration kept most of Trump’s tariffs in place but has attempted to reengage with the international community and undo the alienation wrought by the former president. But in states like Ohio, the White House’s efforts to have it both ways with a more palatable “worker centric” trade policy aimed at protecting jobs could come at a political cost to Democrats.
“I’m glad to hear the administration has decided not to move forward on an agreement that lacks enforceable labor standards,” Brown said in a statement to POLITICO. “Instead of negotiating trade deals behind closed doors, we should be working to strengthen enforcement so that American workers can compete on a level playing field.”
Among other nations, the state of play is clear. U.S. trading partners recognize the domestic political situation the Biden administration faces, said Australian trade minister Don Farrell, who confirmed that the trade negotiations would be punted in an exclusive interview with POLITICO. Though U.S. negotiators did not explicitly blame domestic political concerns for the delay, Farrell said it’s a commonly acknowledged fact among the trading partners.
It wouldn’t be the first time domestic U.S. politics have upended an American-led trade initiative in the region. In 2017, Trump withdrew from the Trans-Pacific Partnership — a more ambitious trade deal launched by former President Barack Obama. That agreement became a political football in the 2016 election and U.S. trade chief Katherine Tai has previously told her colleagues she believes Hillary Clinton’s support for TPP is a key reason why she lost the race.
“We understand the political environment in which the Americans are dealing with these sorts of issues,” Farrell said on Monday. “Nobody wants to see a repeat of the 2016 situation with the Trans-Pacific Partnership.”
The Biden administration has stressed that discussions will continue on the trade provisions. And the 14 member nations of the White House’s Indo-Pacific Economic Framework are still expected to announce voluntary agreements on supply chains, sustainability and anti-corruption, which were negotiated before this week.
“Throughout the IPEF negotiations, we have focused on promoting workers’ rights and raising standards,” said a spokesperson for the White House National Security Council. “We are on track to achieve meaningful progress and lay the foundation for a new framework for regional economic cooperation.”
Failure to reach a trade deal would be a direct blow to the Biden administration’s efforts to isolate China economically. While the White House had hoped to project a unified economic bloc in front of Xi Jinping in San Francisco, they now will present an opening for the Chinese leader to cast the U.S. as an unreliable partner.
Though Farrell and other trade ministers have committed to continuing the talks and are projecting optimism, the sentiment behind the scenes is sour.
The U.S. about-face “came as a shock,” said a member of a foreign negotiating team, granted anonymity because they were not authorized to speak to the press. “There have been seven rounds” of IPEF negotiating already, that official noted, which all cost member nations money and time. “Everyone is drained out.”
The move is already being slammed by groups representing American corporations, which have pushed Biden to pursue even more ambitious trade negotiations than were being considered under IPEF. Not even being able to deliver a modest trade pillar will seriously challenge U.S. credibility in future global economic discussions, officials from the Chamber of Commerce said Monday.
“It would be a terrible blow to U.S. credibility, after we negotiated and then withdrew from the TPP, if we were to do something similar with the IPEF,” said the Chamber senior vice president for international policy, John Murphy. “So we need this spiral of timidity and U.S. trade policy to be brought to a halt, because it really threatens the competitiveness of U.S. companies internationally.”
The decision to pull back on the trade pillar came quickly. Just last week, Brown told his Senate colleagues that he would publicly oppose the entire IPEF package unless the trade negotiations were dropped, arguing the trade provisions did not include adequate labor and environmental protections. That fueled fears among some Democrats that the new economic package could be painted by Trump and Republicans as a job-outsourcing global trade deal — as they did in 2016 with the Trans-Pacific Partnership — even though Biden’s IPEF package is considerably less ambitious and does not touch on tariffs or market access issues.
Brown’s opposition stirred anxiety among other Democrats who were already displeased with the level of consultation they were given on the talks by the U.S. Trade Representative’s office, which has maintained that IPEF is an “executive agreement” that would not require Congressional approval. Soon after Brown, Senate Finance Chair Ron Wyden, who oversees trade, also urged the administration to drop the trade talks.
But to the administration’s critics, the abrupt shift was not surprising. Because the IPEF trade negotiations expressly avoided discussion of tariffs or market access, they argue the U.S. had little to offer trading partners in exchange for them agreeing to higher labor or environmental standards, as Brown and the White House wanted.
“It was always going to be a tough lift for the US to try to get enforceable labor and environmental provisions, as well as digital trade provisions, when they weren’t willing to put market access on the table for our trading partners,” said Clete Willems, a former economic adviser to President Donald Trump. ”Even though this outcome is disappointing, it’s not totally surprising.”