[News analysis] Biden’s take on “America first” leaves postwar free trade order in disarray

Posted on : 2022-09-05 17:16 KST Modified on : 2022-09-05 17:16 KST
Biden’s bid to buy American is leaving its alliances around the world bruised
US President Joe Biden speaks at a rally in Wilkes-Barre, Pennsylvania, on Aug. 30. (Reuters/Yonhap)
US President Joe Biden speaks at a rally in Wilkes-Barre, Pennsylvania, on Aug. 30. (Reuters/Yonhap)

US President Joe Biden emphasized “buying American” in his State of the Union address on March 1.

“When we use taxpayers’ dollars to rebuild America, we’re going to do it by buying American. Buy American products. Support American jobs,” Biden said in the speech.

Biden promised to ensure that “everything from the deck of an aircraft carrier to the steel on highway guardrails is made in America.” He also said the US needs to make “more cars and semiconductors.”

Those pledges are manifested by the CHIPS and Science Act and the Inflation Reduction Act, both of which took effect in August.

If we include the guidelines for the Infrastructure Investment and Jobs Act, announced in April, that require the use of American steel, Biden is moving swiftly to follow through on the promise he made in his State of the Union speech to buy American in the areas of infrastructure, electric vehicles and semiconductors.

But the US’ drive to pass legislation aimed at containing China and strengthening American competitiveness is also creating a backlash because of its discrimination against and marginalization of American allies, including South Korea, Japan and EU countries.

The Inflation Reduction Act, which provides up to US$7,500 in tax credits for electric vehicles made in North America, faces criticism for violating the World Trade Organization (WTO) prohibition against discrimination and free trade agreements’ “most favored nation” provision. The Korean government is taking steps to respond, and the EU has objected that the law is incompatible with the WTO because it discriminates against vehicles made overseas.

As the US’ campaign to contain China dovetails with its goal of raising its share of semiconductor production — which has fallen from 37% in 1990 to 12% today — it has invented the peculiar concept of making subsidies conditional on refraining from investing in certain countries. That will inevitably disrupt the Chinese operations of Samsung Electronics and SK Hynix, which are planning major investments in the US.

The US hasn’t bothered to conceal its attempt to raise the share of goods made at home while taking into account American companies’ production capability. The White House’s guidelines for the Infrastructure Investment and Jobs Act, which will involve US$550 billion in spending, require 100% of steel and 55% of other manufactured goods to be made in America.

The section on electric vehicle batteries in the Inflation Reduction Act also calls for a gradual increase in the share of American-made products depending on materials, parts, and timing.

US experts say the true meaning of the US government’s strategy of reorganizing the supply chain is evident from the way it’s marginalizing allies in pursuit of production facilities and overtly favoring American-made goods.

The supply chain reorganization that the US has been pushing because of the COVID-19 pandemic, the war in Ukraine, and the need to contain China has two main planks: moving production facilities to the US and strengthening supply chain cooperation with allies and partners.

As the US shifts the focus to expanding domestic manufacturing facilities, it’s going beyond “reshoring” (bringing home companies that had gone overseas) and blatantly trying to absorb its allies’ production facilities.

Since the THAAD fiasco, Korea has faced the “China risk” of being next door to a country that has weaponized its massive market to put pressure on its neighbors. But now Korea is also forced to confront an “America risk” as the US openly seeks to twist supply chain reorganization to its own benefit.

The political situation in the US is one factor behind this sort of “economic nationalism.” Biden is focusing on policies that appeal to white blue-collar workers, who are his main support base. The Democratic Party believes that the white working class’s antipathy to liberal trade policies played a major role in Hillary Clinton’s loss to Donald Trump in the 2016 presidential election.

Biden brought up the idea of “jobs” once again in the signing ceremony for the CHIPS and Science Act, remarking that “we need to make these chips here in America to bring down everyday costs and create jobs.”

This has led to criticism that the Biden administration is continuing to be influenced by the “America first” vision espoused by the Trump administration that came before it.

Considering that the US’ growing revival of protectionism is undermining the free trade order it has led since World War II, this trend could have serious long-term repercussions for the entire global economy.

When asked at her Senate confirmation hearing whether she would place an emphasis on duties and trade barriers in office, Katherine Tai, the US Trade Representative who has a reputation as a commerce hawk, said, “Maybe if you had asked me this question five or ten years ago, I would have been inclined to say ‘yes.’”

She then went on to call many of the US’ trade policies in recent history “very painful,” indicating that a major shift is on the horizon for America’s free trade policies.

A recent opinion piece in the Financial Times titled “The enemies of globalization are circling,” argued that a decade ago, protectionism was “still a dirty word in US politics,” but that this is no longer the case.

By Lee Bon-young, Washington correspondent

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