President Donald Trump’s poll numbers are bleak. No matter the outcome in November, however, on at least one issue his side can declare victory: The era of free trade, already on the wane, is officially over. It has been replaced by a new “America first” industrial policy, which even Trump’s Democratic opponent, former Vice President Joe Biden, has now embraced.
Biden’s campaign is shifting its economic focus from “green jobs” to “reversing offshoring.” In political terms, the proposal goes at Trump’s (relative) strength — the economy. On policy terms, however, Biden is continuing the abandonment of the economic narrative that has sustained centrist Democrats since the 1990s. The basic story was that offshoring and deindustrialization were inevitable, and the important thing was to train Americans for the jobs of the 21st century.
Indeed, until very recently economists who served in Democratic administrations said that concern about trade was misplaced. Manufacturing jobs losses, they argued, were driven by technology, and any attempt to stem those losses was bound to backfire.
The left wing of the party never quite bought this narrative, of course, and discontent with it predates the 2020 Democratic primary. (Recall that in 2016, Hillary Clinton ran against a trade deal, the Trans-Pacific Partnership, that she helped negotiate.) Still, through much of former President Barack Obama’s tenure, this was conventional wisdom. Even Obama, who was skeptical of free trade as a candidate, was thoroughly converted by 2016, when he wrote an essay for the Economist extolling free trade as a way of expanding opportunity for working Americans.
The Trump administration’s trade agenda, by contrast, is focused on expanding US exports rather than reducing barriers to free trade. While that agenda has met with limited success at best, the Democratic response has been to question not its premises but its execution.
Biden’s proposal criticizes Trump for failing to close loopholes that would stop companies from outsourcing. It proposes not only to reverse the preferential treatment of foreign profits, but also to add an additional 10% tax penalty for any US company that manufactures products overseas for sale in the US, or locates overseas a service center that deals with US customers.
In addition, Biden’s campaign has promised to end all deductions and capital expensing for firms that use offshore production that could “plausibly” be done by US workers. That’s a sharp turn from Biden’s rhetoric just a year and a half ago, when he criticized both the extreme left and the extreme right for turning their back on globalization.
At the time, Biden argued that clear rules of the road were all that was needed for US companies to thrive in a global environment. Today he’s added not only penalties for shipping jobs overseas but a 10% “Made in America” tax credit for companies that bring production back to the US.
These measures are different in method from Trump’s tariff-based policy, but the purpose is the same: to subsidize domestic production relative to imports.
Trump’s meteoric rise in the Republican Party was driven by his anti-globalist apostasy. Biden’s capitulation now means that free trade has no prominent defenders in either party. In the 2020 presidential campaign, when it comes to trade policy, Trumpism — as opposed to Trump himself — is running unopposed.
Bloomberg
