Shuji Kajiyama/AP Photo
U.S. Trade Representative Katherine Tai listens to a reporter’s question at a press conference at the Foreign Correspondents’ Club of Japan, April 20, 2023, in Tokyo.
The U.S. trade representative (USTR) has traditionally been an ally and advocate for the corporate version of free trade. President Obama’s USTR, Michael Froman, worked hand in glove with banks, corporations, and tech lobbyists to promote a deal called the Trans-Pacific Partnership, now mercifully defunct. That deal, like so many others, was a backdoor ploy to use trade agreements to get provisions of law that Congress would never have enacted as freestanding legislation—deals that gut domestic regulation via trade rules.
It fell to Donald Trump’s U.S. trade representative, Robert Lighthizer, to break with the trade orthodoxy. Lighthizer, whom I profiled in this piece titled “Trump’s One Good Appointee,” was providential. A trade lawyer with a deep knowledge of the system, he used Trump’s hostility to China to break with the larger corporate free-trade regime and its primary instrument, the World Trade Organization.
Lighthizer also took advantage of Trump’s hostility to Mexico to work closely with congressional Democrats to get a revised version, called the U.S.-Mexico-Canada Agreement (USMCA), which was far better on labor rights and domestic-content rules for tariffs. It also weakened the “investor-state” provision giving corporations special rights to overturn domestic regulations as violations of free trade.
Lighthizer’s partner in revising NAFTA was the top Democratic House staffer on trade, named Katherine Tai. When Biden named Tai as his U.S. trade representative, progressive critics of corporate free trade and U.S. indulgence of China’s mercantilism were jubilant.
Tai’s speeches have astutely connected Biden’s industrial-policy programs, the supply chain crisis, the need for labor rights, and the critical imperative of containing China to a drastically different philosophy of trade policy. In a recent landmark speech at the National Press Club, Tai explicitly disavowed past U.S. trade ideology and policy, which she said “created an incentive for countries to compete by maintaining lower standards, or by lowering their standards even further, as companies sought to minimize costs in pursuit of maximizing efficiency. This is the race to the bottom, where exploitation is rewarded and high standards are abandoned.” She added:
When efficiency and low cost are the only motivators, production moves outside our borders. It becomes increasingly consolidated in one economy—such as the PRC [China]—which manipulates cost structures, controls key industries, and became a dominant supplier for many important goods and technologies.
This is welcome and refreshing. But just because Biden and Tai reversed the policy, the corporate strategy on trade did not go away. It just went underground. The conventional wisdom on trade and its corporate allies in and out of government are all too alive.
Today, it’s fair to say that Tai is subject to more cross-pressures than any other Cabinet-level appointee. Other progressive Biden appointees had to transform the agencies they were named to head. But for the most part, Gary Gensler at the SEC did not face resistance from career staff, most of whom came to the SEC because they believed in the mission of regulating securities; they were thrilled to see a chair, finally, who supported that mandate.
At the FTC, Biden’s chair Lina Khan faced criticism early in her tenure that she was responsible for sinking morale at the agency. But attacks on Khan should be appropriately seen as projection from conservatives who were burdened with massive conflicts of interest. The purported internal dissent has not prevented Khan from implementing her aggressive agenda of reviving antitrust.
By contrast, much of the USTR career staff of about 300 people includes both traditional free-trade ideologues, as well as more corrupt staffers looking to exploit their deep knowledge and contacts with a lucrative post-WTO revolving-door career as well-paid lobbyists. The Commerce Department, which is committed to carrying out Biden’s industrial-policy agenda, is also a center of pro-corporate trade traditionalists.
The latest pending trade deal known as the Indo-Pacific Economic Framework (IPEF), comprising countries that account for about 40 percent of global trade, is emerging as a key test. Will Biden’s trade policy be devised by the president and his trade chief Tai, or will it be ghostwritten by corporate lobbyists inside and outside USTR? My colleague David Dayen wrote recently about a research study documenting just how this capture has occurred in the past.
The past is far from past. Tech giants and their lobbyists created a new concept of digital trade that basically defined any efforts to regulate privacy or monopoly power by the U.S. or its trading partners as a trade violation. These provisions were inserted into both the proposed TPP, which was killed, and the generally decent USMCA, which became law. Such language is now on track to be part of IPEF, which is scheduled to be completed by a meeting of Asia-Pacific nations in November.
Former trade official Jonathan McHale, who served as deputy assistant U.S. trade rep for telecommunications and digital trade policy, was a principal author of the TPP deal and the USMCA digital language. Since June 2022, he has been vice president for the Computer & Communications Industry Association, a leading Big Tech lobbyist.
McHale has boasted publicly that he created key provisions of the now-pending IPEF.
Robb Tanner, who was McHale’s deputy, and now has McHale’s old job at USTR, is a strong advocate for a corporate-friendly version of IPEF, and is working to undermine both Tai and Biden. Elizabeth Warren released an investigative staff report detailing other examples of how the revolving door at USTR works, summarized in this recent piece by David Dayen.
Another key test for IPEF will be whether it contains enforceable provisions on labor rights. The USMCA was a major breakthrough on that front, thanks to a Rapid Response Mechanism that allows the U.S. Department of Labor to block shipments of products from Mexico produced by companies with fake unions. A key author of that provision was Katherine Tai.
Critics of the corporate capture of trade policy, such as Warren and Lori Wallach of Rethink Trade, have expressly refrained from criticizing Tai personally, because they appreciate the cross-pressures under which she works. Warren was once Tai’s law professor, and the two are on cordial terms.
The balance of political leverage may be shifting in Tai’s favor. Tai does not have the personal access to her president that pro-corporate trade reps enjoyed under Obama, Clinton, and both presidents Bush, and it is not her style to threaten to fire insubordinate staff. But Jake Sullivan, who has been reborn as something of a trade hawk around both the China issue and supply chain concerns, is a close ally, as are the key antitrust officials, Lina Khan at the FTC and Jonathan Kanter at the Justice Department, who appreciate the risk of Trojan horse trade deals undermining their work.
Tai has also strived to keep small businesses and labor at the table in the ongoing negotiations, as a counterweight to the usual presence of multinationals in trade policy. Tai sees an Asia policy that just reconcentrates supply chains in another part of the Pacific Rim as unacceptable, and wants to reverse that trend.
Altering conventional wisdom and traditional policy takes more than presidential speeches and high-profile initiatives. It takes a serious shift in how power is exercised. Tai is a key bellwether in that struggle. She deserves Biden’s direct support.
