Andy Wong/AP Photo
Vice President Joe Biden with his Chinese counterpart Li Yuanchao in Beijing, December 5, 2013
If any policy area is even more of a challenge and a litmus test for Joe Biden than how to constrain predatory finance, it is trade. For two Democratic presidencies, Clinton’s and Obama’s, the trade orthodoxy has ruled: promote corporate globalism under neoliberal theories, but create a bizarre exemption for statist China as long as American bankers and corporations get a piece of the action.
Because trade, as much as financial engineering, has daunting technical details, Biden will tend to delegate policy decisions in both areas to presumed experts. But in neither area is expertise ideologically neutral. So personnel will literally be policy.
On trade, the inertial power of the orthodoxy is immense, both in the weight of the conventional wisdom and the power of donors to urge Biden to appoint “sound” advisers. There are legions of Clinton and Obama alums, both inside and wanting in.
Exhibit A is Steve Ricchetti, one of the senior people on the campaign, and a longtime Biden intimate. At the Clinton White House in 1993, Ricchetti was the point man for muscling NAFTA through a very skeptical Democratic Congress. (The bitter divisions over NAFTA helped cost Democrats control of the House in the 1994 midterms.)
Ricchetti went on to lead the campaign for so-called permanent normal trade relations with China, giving China access to the global trading system and U.S. markets with far too few reciprocal changes in China’s own mercantilist behavior. He then left the White House to become a lobbyist. He is the epitome of a corporate globalist.
After a few turns of the revolving door representing pharmaceutical and tech companies, he ended up back in government first as counselor to Biden and then as Biden’s chief of staff from 2013 to 2017. As the Prospect has reported, Ricchetti’s most recent work as a lobbyist has focused on representing such pharma companies as Novartis, Eli Lilly, and Sanofi, which all like the globalist status quo.
But the problem goes well beyond Ricchetti. Legions of people who served in top or second-tier trade jobs under Clinton and Obama want back in. And Ricchetti is perfectly positioned to invite them in.
A good example is Jennifer Hillman. Hillman is another corporate globalist. Now at the Council on Foreign Relations, she is the consummate Democratic trade official in waiting. In an email to me, she described herself as an “informal adviser” to the Biden campaign, but declined to answer further questions about what that meant.
Hillman was general counsel of the Office of the U.S. Trade Representative under Clinton. She then served on the U.S. International Trade Commission, and in 2007 was appointed by the Bush administration to be one of seven appellate judges on the appeals panel of the World Trade Organization.
In these positions, Hillman tended to favor abstract theories of free trade and the raw power of the WTO over the national interest. One of the measures allowed by U.S. law is the use of countervailing tariffs in cases where foreign competitors try to grab market share by pricing their exports below the cost of production, a practice known as dumping. As a WTO appeals judge, Hillman took a dim view of anti-dumping measures and regularly ruled against them, as violations of some imagined, idealized free trade.
In fact, she was too extreme a globalist even for Obama chief trade official Michael Froman— which is saying something since Froman is the epitome of a corporate globalist. But Froman was critical of her rulings and made sure she was not appointed for a second four-year term.
Basically, the WTO rulings infuriated critics of foreign mercantilism in both parties, for whom anti-dumping tariffs were perfectly legitimate measures, consistent with both U.S. trade law and international law. The rulings created a backlash and political headaches for Froman.
Hillman, judging by her writings and public pronouncements, views the WTO as a form of global government with the power to overrule national governments. Hillman was also a big defender of NAFTA, and was critical of the revised USMCA treaty, which had been painstakingly negotiated by House Democrats, the labor movement, and Trump trade officials to improve on NAFTA.
She is also a defender of so-called investor-state provisions in trade deals, which allow corporations and financials to do end runs around national regulations and laws to special, rigged trade tribunals, on the premise that health, safety, or environmental regulations infringe on trade rights. The best single thing about killing NAFTA was that it killed investor-state. Hillman also mourned when the proposed Trans-Pacific Partnership (recently disavowed by Biden) went down.
In the COVID crisis, her recent writings and tweets have been far more solicitous of the effect on the WTO than on the U.S. economy. In a recent tweet, Hillman declared, “Everyone needs to keep saying it again and again. Tariffs are taxes on imports paid by American importers and passed on to American consumers.”
Hillman’s proposed solution to the supply chain catastrophe is to “eliminate tariffs on imports of pharmaceuticals and medical equipment,” and to “waive all Buy America requirements” for medical supplies—which of course would make the U.S. even more reliant on insecure offshore supply chains.
Trump has grasped one essential truth that resonates with the electorate and has eluded the trade policy establishment: China’s mercantilism has been taking the U.S. to the cleaners.
In fact, tariffs are a policy tool, not good or evil per se. And in the coming negotiations over how to reset the U.S.-China relationship, tariffs can be used well, badly, or not at all.
Trump’s policy has been clumsy, bombastic, and strategically incoherent. But he has grasped one essential truth that resonates with the electorate and that has eluded the trade policy establishment: China’s mercantilism has been taking the U.S. to the cleaners.
Where Obama blocked Hillman’s appointment to the WTO appellate body, Trump went Obama one better. He vetoed all such appointments, denying the body a quorum, and putting it out of business.
This tactic was the work of Trump’s U.S. Trade Representative, Robert Lighthizer, who in many respects has a far more realistic view of China than the Democratic trade establishment.
His wisdom has been kept under wraps by Trump, who favors cheap symbolism over nuanced and strategic diplomacy.
In the next era of trade policy, there will be an epic three-way struggle. The Donald Trump/Peter Navarro/Steve Bannon brand of China-bashing will emphasize racist nationalism rather than a coherent industrial and trade policy. As a counter, the orthodox view will work to preserve a pro-corporate brand of multilateralism, with China as a footnote.
The third view, a sensible brand of economic nationalism, will work to rebuild our economy and insist that China play by symmetrical rules if China wants access. It is urgent that Biden take his advice from proponents of this third school. But it remains to be seen if Biden is listening.
In the wings is Mike Froman, former grand architect of trade policy in the Obama administration (with the epitome of a revolving-door career between Washington and Wall Street). He endorsed Biden early, and is said to be part of his kitchen cabinet of policy advisers. In my article on the Biden DNR (Do Not Reappoint) list, I ranked Froman number 3, just behind Summers and Obama budget director Peter Orszag.
My sense of the Biden campaign when it comes to trade, as on other key issues, is that there are many hands on the steering wheel. Because Biden is in favor of industrial policy as well as stronger labor rights, which both require major revisions to orthodox views of trade, he would be wise to seek the advice of more heterodox advisers. Elizabeth Warren could be a powerful counterweight to the Wall Street view of trade.
But the Wall Street globalists tend to burrow down, deep in the Democratic establishment—and they are already in senior jobs in Biden’s campaign. They are not going quietly, and they have the donors on their side. Between now and November, this is going to be trench warfare, and it will get even more contentious once a transition team is named.
Let’s remember, Hillary Clinton lost the 2016 election in Wisconsin, Michigan, Pennsylvania, and Ohio, places where trade and the loss of industrial jobs are very much on the mind of voters. She lost because she listened to the usual suspects, and supported disastrous trade policies like NAFTA and the proposed Trans-Pacific Partnership—both killed by Trump.
There is a far better approach to trade than Trump’s. But if Biden doesn’t define a positive view of economic nationalism, Roosevelt style, Trump could win on trade again by default. It’s hard to clean house when the people on the wrong side of these issues own the house.
