It is hard to exaggerate the significance of President Joe Biden’s May 14 announcement of tariff increases on a range of imports from China. The move opens a new front in the Biden administration’s China de-risking strategy. It also puts into sharp relief the challenging trade-offs involved in the growing policy arena of economic security.

In the May 14 announcement, President Biden directed U.S. Trade Representative Katherine Tai to impose a set of staged tariff increases on about $18 billion worth of imports from China in an array of “strategic sectors”: steel and aluminum, semiconductors, electric vehicles (EVs), batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products. The decision was based on the mandated four-year review of the tariffs imposed by former President Donald Trump in 2018 under Section 301 of the Trade Act of 1974.

The White House said the tariff increases were designed “to protect American workers and American companies from China’s unfair trade practices,” including forced technology transfers and theft of intellectual property. It also cited China’s “growing overcapacity and export surges that threaten to significantly harm American workers, businesses, and communities.” The products subject to the increased tariffs were “carefully targeted at strategic sectors—the same sectors where the United States is making historic investments under President Biden.”

The May 14 action marked a departure for the Biden administration. Its previous efforts to reduce risks and vulnerabilities in the U.S. economic relationship with China had been focused on the export side of the ledger, primarily denying Beijing access to sensitive U.S. technologies. The new measures target the import side, restricting China’s access to the U.S. market. Although Biden surprised many analysts after he entered office by leaving former President Trump’s earlier duties in place, tariffs had not been the favored arrow in the de-risking quiver of the current administration until now.

Few would argue with the diagnosis of the underlying problem that the Biden administration is trying to remedy. For at least two decades, China has tolerated or encouraged intellectual property theft and forced technology transfers from the United States and other advanced economies. There is a clear line from those practices to China’s development of competitive technology products such as telecommunications hardware and electric vehicles. Beijing’s massive industrial subsidies have also been well documented and have contributed to overcapacity in a number of key sectors. With domestic demand in China weak, overcapacity there will inevitably be offloaded onto world markets, creating the risk of a “second China shock.” One worrisome harbinger has been the surge of Chinese car exports over the past few years, from around one million vehicles in 2020 to nearly five million in 2023.

Nor can anyone fault the Biden administration for concluding that mere jawboning is unlikely to change China’s behavior. For years, successive U.S. administrations have challenged Beijing, directly and indirectly, on its problematic industrial and technology-transfer policies. As recently as last month, Treasury Secretary Janet Yellen was in Beijing warning her counterparts about the risks posed by Chinese overcapacity.

Nevertheless, the Biden administration’s approach to this intractable problem is rife with trade-offs. The least of these is arguably the direct cost to American consumers. In theory, tariffs represent a tax on downstream consumers of the targeted products (as starkly shown by a new paper from the Peterson Institute for International Economics, which finds that presidential candidate Trump’s proposed 10 percent across-the-board tariffs and 60 percent tariff on imports from China would cost the average American household around $1,700 a year). The Biden tariffs cover only $18 billion worth—or around 4 percent—of imports from China, reflecting limited existing trade in many of the targeted products: few Chinese EVs are sold in the U.S. market today, and steel from China accounts for only about 2 percent of total U.S. steel imports. So the immediate price impact is likely to be small. But will tariffs have to rise further to give domestic manufacturers more space to compete, and will this have the desired effect or just reduce competition in the U.S. market while ratcheting up costs to consumers?

Another trade-off that has been widely noted in the wake of the May 14 tariff announcement is between the Biden administration’s goals of reducing economic dependencies on China and mitigating climate change. While massive subsidies and forced technology transfers may have enabled their success, the fact is that many Chinese EVs, batteries, and other clean-energy products today are highly competitive in price and quality; allowing them into the U.S. and other markets could help the Biden administration’s efforts to reduce emissions. The administration has struggled with this trade-off throughout its term, excluding Chinese solar modules and cells from earlier tariffs to ensure a sufficient supply while domestic producers built up their capacity.

Alongside the economic trade-offs of the May 14 tariffs are significant diplomatic ones. The Biden administration has gone to great lengths to strengthen ties with traditional allies in Europe and Asia, and to win over new partners around the world. Since Chinese overcapacity has to go somewhere, a tariff wall around the United States is likely to produce trade diversion to Europe, Japan, Korea, and other markets, increasing the pressure on those countries to take similar measures to limit Chinese imports. These partners are also worried about retaliatory steps by China that could have global effects, such as further restrictions on exports of critical minerals like graphite and gallium that are mostly processed in China.

Allies are also worried about the implications for the international economic order of a U.S. drift toward protectionism. Unilateral Section 301 tariffs such as those announced on May 14 are generally viewed as inconsistent with U.S. obligations in the World Trade Organization (WTO). While this concern carries little weight in Washington, where the WTO is generally viewed as ineffective and not fit for purpose, the institution and the trade rules it notionally safeguards are seen in most other capitals as a critical underpinning of a rules-based order. The practical concern is that U.S. actions inconsistent with existing rules give other countries license to violate them as well.

As an aside, an official from a foreign embassy in Washington contacted for this article noted that, for all the suspicion with which Section 301 is viewed in her capital, it would have been more troubling if the Biden administration had used Section 232 of the Trade Expansion Act of 1962—which authorizes trade restrictions to address threats to national security—to justify the new tariffs, which were ostensibly designed to address disruptions to U.S. commerce, not national security. Ironically, Section 232 action would have been more likely to pass muster in the WTO, which historically has taken an expansive view of member states’ rights in national security.

Could some of these trade-offs have been avoided if the Biden administration had taken another tack? Given that China has long been pursuing a non-market, export-powered model of growth that is widely viewed as disruptive to the global economy, the administration might have worked through institutions like the G7, the Organization for Economic Cooperation and Development, and the International Monetary Fund to build an international coalition demanding that Beijing change direction and, once that proved ineffective, authorizing collective action to rein in China’s exports. This approach would have taken more time and had less immediate political benefit domestically but might have posed fewer trade-offs for broader U.S. interests.

There is little doubt that global risks—including ones stemming from China’s mercantilist policies—have increased in recent years, and that government intervention in markets to mitigate those risks is in many cases warranted. But as the U.S. government pursues economic security policies such as those announced on May 14, it needs to thoroughly weigh the costs and benefits and consider alternative approaches that could make the trade-offs less pronounced.

To read the full article as it appears on the Council on Foreign Relations’ website, click here. 

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From the end of the Second World War through the end of the Barack Obama administration, the meaning of U.S. leadership on trade was pretty clear: negotiating agreements to open markets in any country that was willing to do so. However, its definition is far from clear today. The administration of President Joe Biden has tried out approaches that put trade in the service of fighting climate change, empowering workers, discouraging monopolies, embracing U.S. allies, sanctioning Russia for its invasion of Ukraine, curbing Chinese influence, and bolstering U.S. manufacturing. But in the election year of 2024, that complex structure looks at risk of crashing from the weight of its own ambitions. 

U.S. trade policy was once fairly simple. Following the powerful insights of British political economist David Ricardo, countries that opened their markets to trade and investment by exporting what they produced best (and importing the rest) saw enormous—and largely shared—gains in wealth. The United States, with a huge consumer market and a slew of competitive multinational companies, considered itself a big winner from trade liberalization and encouraged agreements of every shape and size. As an added bonus, opening the U.S. market to imports helped to strengthen political alliances around the world. The job of American political leaders, therefore, was to keep negotiating trade agreements that provided ever more market opportunities for the United States and for other countries. It was a classic, and rare, win-win. 

One version of U.S. leadership on trade calls for restoring that old model by launching new negotiations in Asia or Latin America that would further reduce tariffs or regulatory impediments to trade. Even if that were politically possible—and with the Republican Party under Donald Trump abandoning its support for free trade it is almost certainly not—the case for restoration is weak. With tariffs already at historic lows, the gains from further market-access negotiations are likely to be small. More importantly, restoration would not tackle any of the biggest contemporary challenges: accelerating the transition to green technologies, lifting stagnant wages, containing the risks of artificial intelligences, and maintaining power balances that discourage conflicts in Europe and Asia. 

Finding balance in Biden’s broad trade agenda

The Biden team should be applauded for experimenting with different formulations in its efforts to restore U.S. leadership that so badly eroded in the Trump years. Those efforts include U.S. Trade Representative Katherine Tai’s worker-centered trade policy, National Security Advisor Jake Sullivan’s “small yards, high fences” approach for controlling technology trade with China, and Treasury Secretary Janet Yellen’s friendshoring strategy for including allies in the clean energy supply chain. All represent serious efforts to build a trade policy for a more complex world. 

But the Biden administration has yet to grapple with the contradictions among those different approaches. Take the recent $14.1 billion bid by Japan’s Nippon Steel to purchase U.S. Steel, the Pittsburgh-based Industrial Age icon. On friendshoring grounds, Japan is a critical ally and blocking the acquisition would seem wholly unjustified. On clean energy grounds, steel companies are struggling to meet new EU requirements, which favor cleaner steel over products made with dirty carbon emissions; new investments from Nippon Steel could help to make the United States a global leader. But Biden has come out against the acquisition on “worker-centered grounds,” the United Steelworkers union opposes the deal, and Senator Sherrod Brown (D-OH), who is in a tough reelection fight in a right-leaning state, says the deal would weaken trade enforcement. 

Or consider the likelihood of new tariffs on imports of solar panels from Southeast Asia. Both the Obama and Trump administrations put tariffs on panel imports from China, which are heavily subsidized by the Chinese government in violation of U.S. trade laws. Those tariffs shifted panel production to several Southeast Asian countries that are important to the United States, including Malaysia, Thailand, and Vietnam. Some of that production is likely Chinese-made panels being shipped through the region, and the Commerce Department last year ruled that those products should face import tariffs, too. 

But the Biden administration has suspended any collection of those tariffs until June as part of a two-year moratorium on new tariffs meant to keep down the costs of solar panels and encourage more Americans to install them on their homes. Solar panels from Southeast Asia (or China for that matter) pose no security threats, help the economies of U.S. allies, and encourage a quicker U.S. transition away from dirty energy. But the lower cost of imports also discourages American manufacturing, costing jobs in panel production (even as it increases jobs in installation). Senator Brown, along with Democratic senators from Georgia—a critical electoral state—are calling for the tariffs to be imposed. The president seems likely to comply. 

All of these scenarios could be seen as the inevitable conflicts that emerge when trying to design new trade policies for a complex world. But one of the requirements of economic leadership is that countries should be seen as at least occasionally paying a price for their principles. In the free-trade era, the United States made politically unpopular decisions to lift import barriers in sectors such as textiles and apparel, and often complied with difficult rulings made by the now-neutered dispute-settlement panels of the World Trade Organization. 

The biggest challenge for U.S. trade policy today is to acknowledge those trade-offs and find consistent approaches to resolving the contradictions. This could be too much to expect of the Biden administration in an election year, especially given the dangerous alternative. But until firmer ground can be found, U.S. claims for renewed leadership on trade will continue to ring hollow.  

To read the full article as it appears on the Council on Foreign Relations’ website, click here. 

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One of the most high-profile results of a friend-shoring policy is that Canada and Mexico have recently replaced China as America’s largest trading partners by total trade, while Mexico has overtaken China as America’s top importer. This followed the introduction of Donald Trump’s trade strategy, which aimed to reduce US dependence on Chinese goods – partly for political reasons and partly because of Trump’s perception of China as a rival power.

Joe Biden has also placed restrictions on trade with China in an attempt to strengthen US competitiveness with China and grow the US tech industry.

The US raised tariffs on imports from China significantly during the Trump administration. These levels remain high, making the costs of importing goods from China to the US more expensive.

In addition, the International Labor Organization Global Wage Report 2022-23 shows that China has experienced the highest rate of real wage growth among all G20 countries over the period 2008-22, also pushing up the price of Chinese goods.

The Biden administration continues to champion friend-shoring, which has further encouraged companies to shift production from China to Mexico as they weigh up geopolitical risks against differences in the costs of production.

While data on the number of firms relocating production is not available, the latest trade data suggests Mexico has managed to capitalise on the US-China rivalry.

Closer relationships with allies can be created by forming new trade agreements, for example, the US, Mexico, Canada Agreement (USMCA), which is more about geopolitics and friend-shoring than lowering tariff barriers as was the case of its predecessor, the North America Free Trade Agreement (Nafta).

But the USMCA was also a product of its time. US political will had shifted towards undermining political competitors and setting out anti-China political statements that resonated with voters.

Trump, a consistent critic of Nafta, had argued that it undermined American jobs and wages, a statement that undoubtedly played well in US industrial states experiencing manufacturing decline. A paper from the National Bureau of Economic Research suggested that far more US jobs were lost due to competition with China.

Doing business with your friends

Friend-shoring is a new term for something that has been around for a long time. Countries engaged in sanctions, blockades, and friend-shoring during the first and second world wars on a much larger scale.

In 1948, the US initiated economic sanctions against the Soviet Union, a 50-year-long strategy that started with export restrictions and was solidified by the Export Control Act of 1949.

These sanctions, intensified after the Battle Act of 1951, were aimed at limiting strategic goods to the Soviet bloc and became a permanent fixture of cold war policy following the escalation of the Korean war.

Data analysis shows how trade responds to political factors. For over sixty years, trade economists have made extensive use of the gravity model of trade, which has provided empirical evidence that countries tend to trade more with countries geographically closer to them as well as where there is a common language, common legal system, common exchange rate regime and shared colonial history.

Research also shows how political distance between countries and formal military alliances affects trade.

Governments can use trade policy to strategically support their own industries, so reducing trade with rivals can be part of a political agenda based on boosting domestic manufacturing (and jobs) rather than relying on imports. The US Chips and Science Act, and in the EU, the European Chips Act, are examples of policies that can inflict economic pain on adversaries while ensuring domestic production of this key component in high-technology manufacturing.

However, developing an industry takes time. By the time the industry is established, it may not pay off, either due to falling prices caused by increased supply or an economic slowdown that suppresses demand.

In the case of US chips, it is particularly interesting to note that the existing industry focuses on design and production of high-quality chips. Therefore, the latest policy will see low-cost microchips, the mainstay of the Chinese chip industry, start to be produced in the US and compete with the established US high-end suppliers.

The US has experienced the negative effects of these types of policies before. Just consider the US support for the steel industry, a popular choice among US presidents, including the current administration. Under the Trump administration, this saw 25% tariffs imposed on steel imports, which benefited the US industry but imposed costs on steel users.

Countries such as Australia were exempt from this policy, while other allies, such as the EU, were hit hard. Industrial policy can reduce dependence on rivals, but it’s not clear that friends always get special treatment.

Other policies can tie in with a friend-shoring agenda. The new generation of EU trade agreements deal with issues including labour rights and environmental protection, making it clear that third countries that want to do business with the EU need to meet the same standards. The EU has also been debating new anti-forced labour legislation, so this type of legislation may also start to get more serious consideration in the UK, for instance.

Friend-shoring policies aren’t new, but the slogan is. Self-sufficiency at the national level can inflict short-term pain on adversaries but may hold limited benefits in the medium term. However, there is broader acceptance that businesses need to have the certainty of trading bloc friends.

Half of all trade currently takes place between members of trade blocs, and recent trade data for the US and Mexico suggests that trade blocs may become more important over time as production moves.

To read the full article as it appears on The Conversation’s website, click here.

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After the 1960s, U.S. policy became more nuanced, with liberalization efforts balanced by new, coercive tools (like Section 301 of the Trade Act of 1974) enabling successive administrations to use tariffs and other means to respond to unfair trading practices abroad. In retrospect, the 1994 North American Free Trade Agreement (NAFTA) and the establishment of the World Trade Organization (WTO) the following year may be the high point of the U.S. strategy based on free trade. While the George W. Bush administration was able to achieve free trade agreements with several small and medium-sized economies, two mega-deals pushed by the Bush and Obama administrations—the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership—never made it past the finish line.

Then came Donald Trump, who repudiated the post-war belief in the value of free trade by imposing punitive tariffs on both rivals like China and like-minded partners like the European Union, blocking new appointments to the appellate body of the WTO’s dispute settlement system, and nearly pulling out of the U.S.-Korea Free Trade Agreement.

But with the arrival of the Biden administration—which doesn’t fit neatly into the protectionism-free trade continuum—an additional lens is now needed to assess the state of U.S. trade policy. Given the major transformations underway in the global economy, a framework borrowed from international relations would help. In parallel to protectionism-free trade, U.S. trade policy should also be considered along a continuum of realism-idealism.

After the destruction of World War II, the United States and its European partners led a major effort to build an international economic system based on an idealist confidence in cooperative international institutions to advance U.S. interests: the GATT and later the WTO, the World Bank and the International Monetary Fund, and finally the G20 in response to the 2008 global financial crisis.

This approach is beginning to look incomplete. The interlinked security and values challenges presented by China’s domestic and foreign economic practices, the existential crisis of climate change, and disruptive technologies like artificial intelligence cannot be managed by idealism alone. A greater realist consideration is needed of the economic balance of power, climate and technological sovereignty, and pragmatic forms of cooperation.

The idealist structures and outlook that took hold after World War II are often referred to as a “liberal international order.” One reason for this is its emphasis on shared liberal values among countries, like individual freedom, high standards for consumers and workers, and a commitment to human progress. And at one end of the realist spectrum lies a mainly values-neutral stance that only a raw assertion of national power within a zero-sum context can promote a country’s interests.

But another, much more benign view—what could be called “liberal realism”—sees the opportunity for building coalitions of like-minded countries to advance their shared values and interests even in a world characterized as much by anarchy as order. This approach may hold the key to ensuring that the United States continues to thrive in a post-idealist global economy.

To read the full analysis as it appears on the American-German Institute website, click here.

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While many recoil at the prospect of a rematch between Joe Biden and Donald Trump, Super Tuesday’s outcome sealed Nikki Haley’s failed bid to challenge the former Republican president. With the second Biden-Trump face-off going down to the wire this November, the two presidential candidates are competing to raise the stakes against China. Thus, some argue that regardless of who wins, the United States’ overall China policy may remain largely unaffected. 

In rhetorical terms, that might hold true. However, in practice, the gap between their approaches to China may be more significant than anticipated.

With a political career spanning six decades, Biden has demonstrated his adeptness balancing his China policy, tailoring his message for different audiences. Domestically, the initial phase of his presidency was enveloped in a widespread anti-China sentiment in the United States, amid speculations about the origins of the COVID-19 pandemic and China’s aggressive “wolf warrior” diplomacy. Against that backdrop, despite undoing many of Trump’s policies, Biden opted to retain the most high-profile piece: his predecessor’s tariffs on Chinese imports. As his presidency progressed, Biden took meticulous steps to gradually escalate the crackdown on Beijing’s tech development without inciting significant backlash from concerned Americans. 

Throughout his tenure, Biden strategically executed his China policy to address the prevailing anti-China sentiment among the domestic audience while minimizing the political costs incurred. This approach not only thwarted attempts by his political rivals to portray him as soft on China, but also shielded him from much of the criticism that Trump faced regarding his dealings with the Asian powerhouse.

On the international stage, Biden has positioned himself as a coordinator among traditional allies of the United States who is also willing to cooperate with China, a stark departure from Trump’s isolationist stance. On the one hand, Biden has aligned allies in the Indo-Pacific and globally to counter Chinese military presence and aggression in the South China Sea, reaffirming unwavering U.S. leadership in the face of China’s assertiveness. On the other hand, he has pursued active engagement with China, facilitating high-level dialogues to deescalate tensions between the two nations. This includes meetings between himself and Chinese President Xi Jinping, despite occasional challenges such as the Chinese surveillance balloon that passed over the U.S. mainland in early 2023. 

Although Biden has achieved some success in handling China, it is important to recognize flaws in his broader foreign policy, particularly exemplified by two significant setbacks in the Middle East that have provided new geopolitical opportunities for China. First, the chaotic withdrawal of American troops from Afghanistan severely undermined the credibility of the United States’ military commitments, especially in deterring adversaries like China. Second, the Biden administration has struggled to offer a concrete resolution to the prolonged Israel-Hamas conflict. The U.S. veto against an immediate humanitarian ceasefire in Gaza has further tarnished the country’s leadership image in the Global South, inadvertently strengthening China’s narrative a proactive peacekeeper through its shuttle diplomacy efforts.

These foreign policy mishaps may reinforce stereotypes regarding the Republicans’ perceived advantage in foreign policy compared to the Democrats, potentially playing out in the GOP’s favor. To at least partially mitigate the negative impact of these setbacks, which can easily provoke domestic backlash in today’s United States and raise suspicion from the international community, it is politically prudent for the Biden administration to focus on a less controversial target – China. This strategy is exemplified in Biden’s narrative of China-U.S. relations as a competition, a theme that was reemphasized in the 2024 State of the Union address.

Nevertheless, Trump does not share Biden’s consideration in balancing domestic and international aspects of foreign policy. Operating under the “America First” doctrine, the former president prioritized actions that he believed would benefit the United States economically, often disregarding concerns about undercutting U.S. global leadership. Hence, despite frequently adopting a negative tone when addressing China, Trump was still willing to describe China-U.S. relations as “the best relationship we’ve ever had” during the 2020 State of the Union address, shortly after signing the Phase One trade deal aimed at rebalancing trade between the two nations.

Even though Trump recently boasted about plans to initiate another China-U.S. trade war by imposing tariffs of 60 percent or higher on Chinese goods in a potential second term, such actions are highly unlikely to materialize for two key reasons. First, many business and rural Republicans have already rejected Trump’s proposals to slap new tariffs on Chinese imports, with some GOP China hawks even aligning with Democrats to voice their opposition. 

Second, while the U.S. economy under the Biden administration has gradually recovered, the risk of recession and inflation remains. Increasing tariffs on Chinese imports could potentially wreck the U.S. economy again, contradicting Trump’s objective. Economic growth has consistently been a central selling point of his policies.

Perhaps the most pronounced difference between Biden and Trump’s China policy lies in their approach to Taiwan. On multiple occasions, Biden has unequivocally stated that the United States would come to Taiwan’s defense in the event of an unprovoked attack by China. Furthermore, he has continued to strengthen alliances and partnerships in the Indo-Pacific region amid China’s increasing assertiveness. 

In contrast, Trump characterized Taiwan as an economic rival, alleging that it “took away” American businesses. Aligned with the New Right within the GOP, Trump has doubled down on his pursuit of a path to isolationism, exemplified by his opposition to the Senate bill aimed at providing foreign aid to Ukraine, Israel, and Taiwan. Trump’s indifference to Taiwan led China to speculate that the island might be abandoned by the United States if he won the election.

While Biden continues to emphasize competition with China, his long-standing political experience makes him more predictable than Trump, whose grip on the Republican Party is tighter than ever before. Under Biden’s leadership, the competition with China has evolved into a philosophical and political issue, whereas Trump predominantly views it through an economic lens. 

For China, then, the November 2024 election is a contest between a predictable hard-liner and an unpredictable opportunist. As the election approaches, the anti-China rhetoric from both presidential candidates will likely intensify. However, clearer versions of their China policies will also emerge, revealing more details of the policy gap between them.

Jiachen Shi is a Ph.D. candidate in Political Science at Tulane University.

To read the full article as it appears on The Diplomat website, click here.

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The Allure of Steady States

In introducing his 2022 National Security Strategy, President Joe Biden promised to “win the competition for the 21st century.” But what winning means remains unclear. Indeed, senior officials within the Biden administration reject the notion that the United States should aim for a specific “end state”—which usually describes a situation following the completion of an objective—when it comes to China. Instead, Kurt Campbell and Jake Sullivan have advocated that the United States “seek to achieve not a definitive end state akin to the Cold War’s ultimate conclusion but a steady state of clear-eyed coexistence on terms favorable to U.S. interests and values.” They reject end states in favor of “accepting competition as a condition to be managed rather than a problem to be solved.”

There are three strong arguments against identifying an end state for U.S. strategy on China. First, “solving” the “China challenge” is a misnomer since even a change of governance in Beijing would bring about new challenges. If the Chinese people choose to make fundamental changes to their country’s political structures tomorrow, tensions over Taiwan and U.S. regional presence would no doubt remain. Political science research even suggests that a democratizing China could worsen tensions with the United States. As a result, some experts have endorsed the Biden administration’s focus on steady states, with Center for a New American Security CEO Richard Fontaine affirming that Washington “should manage global problems, not try to solve them.”

Second, bureaucratic disagreements could stymie efforts to select an ideal end state. Although there is growing concern about China in Washington, there remains little consensus on the strategy that U.S. policymakers should adopt. A debate about end states might therefore prove divisive since no single end state is likely to appeal to all stakeholders. Even within the Biden administration, it could be difficult to get democracy and human rights advocates on the same page with environmentalists and economists. Getting Congress on board would be another matter altogether. As a result, it might not be possible bureaucratically to agree on an end state.

Third, even if U.S. leaders could agree on what they ultimately want, doing so might alienate allies and partners. For example, if the United States sought to accelerate the collapse of the Communist Party, few if any U.S. allies and partners would be comfortable with that objective. Conversely, returning to a “new type of great power relations” would leave many worried about a great power condominium. Forcing a discussion on end states might thus weaken rather than strengthen the very coalitions that the United States needs to address the challenges that China poses.

The Necessity of End States

It is entirely reasonable, therefore, that Kurt Campbell has urged turning “the focus from end states to steady states.” Indeed, many in Washington agree that it might be wiser to sidestep the end states discussion, at least for the time being. The question is whether this approach is sustainable. Can policymakers build a lasting China strategy without an end goal in mind? Will the American people and friends abroad support a strategy predicated on an ongoing competition with no ultimate objective? In short, is managed competition a description of the current situation, or is it an actual strategy?

Advocates of identifying an end state counter their critics with three arguments of their own. First, without a clear objective, it is difficult to assess the success or failure of America’s current strategy. The Biden team sometimes says it is aiming for managed competition with China. But this simply implies competition without conflict, which already exists today. Strategy usually requires identifying an objective and then marshaling resources and plans to accomplish that goal. If the objective is simply maintaining the status quo of competition without conflict, then so long as deterrence holds, the administration’s strategy is working. This makes it nearly impossible to assess or measure progress, since the objective is already being accomplished.

Second, without a clear aim it is difficult to explain how the United States should make difficult strategic choices on everything from economic de-risking to deterrence posture to diplomatic engagement. Building political support for costly policies within the United States and among allies and partners requires a clear logic, which demands more than a hazy concept of competition. The vagueness of managed competition can justify almost any policy, from tough export controls and investment restrictions to deep dialogue with Beijing. Identifying an ultimate objective would help policymakers determine how to assess trade-offs strategically.

Third, the Biden team has been effective at describing what it does not want with China, but ineffective at describing what it does want. For example, Chinese media asserts that U.S. leaders committed privately to “four no’s and one no-intention” during last year’s Xi-Biden meeting in Bali, Indonesia. Regardless of the veracity of these claims, senior U.S. leaders have made a wide variety of statements asserting that they:

• “don’t want to contain China”
• “are not seeking a new Cold War”
• “do not see the relationship . . . through the frame of great power conflict”
• “don’t seek to block China from its role as a major power”
• “don’t seek to block China . . . from growing [its] economy”
• “[are] not seeking to decouple from China”
• “do not seek to transform China’s political system”
• “do not support Taiwan independence”
• “don’t want to see the status quo across that strait changed unilaterally”
• “are not looking for confrontation or conflict”

These statements lay out what Washington does not want, without presenting a positive vision. This is one reason that Chinese observers are so skeptical of American assurances—many seem to be substanceless platitudes at odds with American actions. Although the National Security Strategy and Indo-Pacific Strategy articulate some positive goals such as “strengthening democratic institutions, the rule of law, and accountable democratic governance,” these documents say surprisingly little about U.S. objectives vis-à-vis China. This leaves many American citizens, members of Congress, and foreign policymakers unsure about whether Washington actually has a vision for what managed competition entails. For all these reasons, it would be beneficial for the United States to identify an ultimate objective of its China policy.

The Impracticality of a Unifying Objective

Aprimary reason the Biden team has rejected end states appears to be that no single end state is simultaneously realistic and acceptable to two key audiences: the American public and policymakers in ally and partner countries. Administration leaders insist “neither collapse nor condominium are tenable end-states” and note that each suffers from fatal flaws.

The goal of bringing about the collapse of the Communist Party has some notable champions. When he was Secretary of State, Mike Pompeo suggested that “we, the freedom-loving nations of the world, must induce China to change.” Others have insisted that Washington should aim for Xi Jinping to be “replaced by a more moderate party leadership” and for the Chinese people to “challenge the Communist Party’s century-long proposition that China’s ancient civilization is forever destined to an authoritarian future.” Many Americans are tempted by these arguments. After all, the United States brought about its opponents’ downfall in two World Wars and then waited out the Soviet Union during the Cold War. Why should the United States not do so again?

Explicitly attempting to bring about the end of the Communist Party, however, poses numerous problems. Washington has few levers to alter China’s domestic governance model. Worse still, making such an objective explicit could actually strengthen the Communist Party’s hold on power. And a public U.S. goal of forcible regime change would be opposed by most, if not all, U.S. allies and partners. Finally, attempting to remove the Communist Party from power would usher in a zero-sum struggle, which could lead to a heightened risk of conflict. For all these reasons, the Trump White House asserted that its approach was “not premised on an attempt to change the PRC’s domestic governance model.” The Biden team has done the same, with Jake Sullivan noting the U.S. goal “is not to bring about some fundamental transformation of China itself.”

The other end state rejected by the Biden team is creation of what they have called a great power condominium—essentially, an agreement by Beijing and Washington to share global leadership. The basic logic of those who favor such a condominium is analogous to the common understanding of the “responsible stakeholder” concept promoted by Robert Zoellick almost 20 years ago when he was Deputy Secretary of State. He suggested efforts “to encourage China to become a responsible stakeholder in the international system. . . [to] work with us to sustain the international system that has enabled its success.” Along similar lines, Michael Swaine, Jessica Lee, and Rachel Esplin Odell have more recently advocated “ultimately integrating Beijing into inclusive economic and cooperative security mechanisms.”

Unfortunately, this end state is hard to imagine today. Julia Bowie has described the responsible stakeholder theory as resting on “the expectation that China would become a status quo power.” Indeed, Zoellick had asserted, “China does not believe that its future depends on overturning the fundamental order of the international system.” But now even the European Commission has publicly described China as a “systemic rival promoting alternative models of governance.” Beijing’s coercive actions against Japan, India, South Korea, the Philippines, Australia, Lithuania, Canada, Norway, and others have driven a global reassessment of China’s behavior. Over 70 percent of respondents in a July Pew poll said that China does not contribute to peace and stability nor take into account the interests of countries like theirs. As a result, it is difficult to imagine a successful effort at engagement without some fundamental changes occurring in Beijing. The “era of engagement” appears to be over, at least for now.

So neither collapse nor condominium appears to be a practical end state around which to build consensus. They have something else in common: neither seems possible under Xi Jinping. Another concerted American attempt at engagement appears unlikely to shift Xi’s worldview, including his assessment that “Western countries led by the United States have implemented all-around containment, encirclement and suppression of China.” Even if American leaders could change Xi’s views of the bilateral relationship, there is no political appetite on either side of the aisle in Washington to test this proposition. U.S. officials from both parties appear to concur with Orville Schell, who has argued that it was “Xi’s aggressiveness that put a stake through the heart of ‘engagement’ as a viable US or Western policy.”

To say that engagement is now implausible as a strategy is not to imply that diplomatic meetings with Chinese leaders are unwise. The Communist Party is so opaque that American leaders are likely to learn more from their Chinese counterparts than vice versa. Yet, the objective of this diplomacy must change, even if its value remains. Leaders in Beijing and Washington now describe their aims in bilateral dialogues not as seeking to “improve” the relationship but rather to “stabilize” it. This is a much more limited objective predicated on continued competition, rather than an outright improvement in the relationship. In short, few on either side expect that these engagements will lead to any major change in behavior.

The Need for Phased Objectives

If end states are unattainable in the near-term and steady states are unsatisfying in the long-term, does that doom efforts to embrace a well-defined objective for America’s strategy on China? No. There is a third way: a phased approach. The United States could endeavor to maintain a stable steady state in the near-term while awaiting more fundamental change in China in the long-term. Doing so does not require American leaders to choose either collapse or condominium, but rather leaves the door open for either, depending on the choices of the Chinese people. If the United States is going to articulate an end state, this phased approach is the only approach likely to win support in both Washington and key allied capitals.

In the short-term, the Biden administration is right that America’s aim should be to establish a more durable steady state. Many of the administration’s actions have put the United States on a sounder path, particularly efforts to bolster cooperation with U.S. allies and partners while investing in the sources of American strength. Central to these initiatives will be reinforcing deterrence through adjustments to U.S. and allied military capabilities, posture, and planning. Unfortunately, efforts to make measurable progress with China on crisis management mechanisms have been slow going. Nonetheless, the Biden administration is right to try—and be seen trying—to push China to reduce the risk of conflict.

In the long-term, the United States should be clear that it is awaiting substantial changes in China’s behavior or governance. This is not a strategy of forceful regime change, but rather patience until the Chinese people themselves bring about a fundamental transformation in Beijing. Until then, the best Washington can hope for is to manage a risky competition and hope it does not spiral out of control. The Xi Jinping era will continue to be difficult and dangerous, so ultimately the American public and friends abroad should want a more durable end state. If this “patient but firm” approach sounds familiar, it is for good reason—it echoes U.S. strategy in the Cold War. Just as George Kennan foresaw the “break-up or the gradual mellowing of Soviet power,” Washington should hope for the mellowing or break-up of Chinese power. Then as now, waiting for regime failure should not be equated with forcible regime change.

Raising parallels with American strategy in the Cold War is not to suggest that the challenges posed by Beijing today are the same as Moscow’s decades ago. China bears little resemblance to the Soviet Union. Beijing boasts a far larger and more globally integrated economy than Moscow ever had. Yet, the Chinese Communist Party’s governance model is less attractive internationally than the Soviet system was in the early Cold War. Beijing’s political appeal lags far beyond that of the Soviets, who benefited from the communist bloc of aligned sympathizers worldwide. To date, Xi Jinping has also been less willing to use force at scale abroad than Soviet leaders, although U.S. policymakers must be wary because Beijing’s behavior could change over time. Thus, China is far more economically engaged abroad than the Soviet Union was, but is also less threatening ideologically. Containment is therefore inapplicable; Washington should not challenge Beijing abroad in the same way that it confronted Soviet influence globally, particularly given China’s current economic headwinds.

It is ironic that American strategists have spent much of the last few years playing the “Kennan sweepstakes” by trying to develop a phrase akin to containment that might guide American strategy. A better strategy is simply to adopt Kennan’s own phased approach: patience and firmness today while awaiting the mellowing or break-up of the Communist Party tomorrow. This is no panacea. It will have critics in Washington, Beijing, and beyond. But combining these two concepts is not as radical as it might seem. Indeed, Robert Zoellick ended his responsible stakeholder speech by insisting that “We can cooperate with the emerging China of today, even as we work for the democratic China of tomorrow.”

The Biden team has done an able job executing the first phase of an enduring American strategy on China. In fact, the early portion of the phased strategy recommended here might look almost identical to the Biden administration’s approach. Where a two-phased strategy would differ is in the long term. The indefinite maintenance of an inherently risky and increasingly tense competition should not be the ultimate objective of American strategy. As the time nears to hand off the baton to a second Biden administration or a new Republican team, U.S. leaders should be discussing end states. Effective strategies require clear objectives, so it is time to go back to the future and embrace a phased approach.

Zack Cooper is a Senior Fellow at the American Enterprise Institute (AEI), where he studies U.S. strategy in Asia. He also teaches at Princeton University, is a partner with Armitage International, and co-hosts the Net Assessment podcast for War on the Rocks.

This article was co-published with Foreign Policy. To read the full article as it was published by the ChinaFile, click here.

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After World War II, a multilateral push toward freer and wider trade transformed the global economy. Tariffs and barriers fell, and more goods crossed more borders. It happened in phases, neither consistently nor all at once. A first phase started with the General Agreement on Tariffs and Trade (GATT), with the United States seeking to build up free markets to counter global threats posed by the Soviet Union. A more recent phase included the creation of the World Trade Organization (WTO) in 1995, and China and many of the former parts of the Soviet Union, including Russia, joining the multilateral trading system.

In the first two decades of the twenty-first century, however, as the WTO stumbled to negotiate new trade agreements, this trading system began to break down. Without multilateral progress, more nations sought to negotiate free trade agreements (FTAs). Now, industrial policies are proliferating and countries are focusing on “strategic” trade relationships, approaches generally at odds with the multilateral trading system first established in 1947. And this latest trend is not surprising given the vacuum left by the decline of the WTO and the disruptions in trade brought on by COVID-19 and Russia’s war in Ukraine.

The Biden administration has championed this new era, seeing it as a moment to reinvest in US manufacturing and better counter China’s economic clout. However, there has been blowback, and the chorus of critical voices aimed at US trade policies is large and growing. While much of this criticism is valid, as recent trade policies cast aside effective tools, such as FTAs, too cavalierly, there also have been earnest efforts to address pressing new realities.

To begin with, the administration’s efforts to collaborate with the European Union (EU), resolve existing tensions between the two, and forge new paths on critical issues, such as trade and climate change, stand out and deserve credit. During the Obama administration, negotiations on a transatlantic FTA were simply too ambitious, at least at the time, to get to the finish line. Later, the Trump administration upended the trade relationship with tariffs on steel and aluminum, even as it sought cooperation on addressing China challenges, such as nonmarket excess supply. Now, the Biden administration is focusing on reaching a long-term agreement to eliminate these tariffs and developing a framework for incentivizing trade in lower carbon-intensive goods. This work is critical as a counter to China and to avoid the EU’s pending carbon border adjustment measures applying to US exports in key sectors.

In contrast, the Biden administration’s signature effort in Asia to fill the vacuum left by abandonment of what is now the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) has fallen short. The recently concluded supply chain pillar in the Indo Pacific Economic Framework (IPEF) is new, different, and seeks to meet the needs of the times. That said, the commitments in this pillar are soft ones, meaning there are few provisions that parties “shall” do something, and instead many that they “intend to” do something. Administration characterizations that this model is better than the old FTA model ignore the fact that FTA negotiations provide scope to include innovative chapters, including ones on supply chains.

The real challenge for the United States will be pinning down a trade pillar agreement that avoids falling far short of similar provisions in FTAs, such as the US-Mexico-Canada Agreement (USMCA) or the CPTPP. The Biden administration will be hard-pressed to obtain high-ambition commitments in the areas of good regulatory practices, trade facilitation, agriculture, labor, and environment without the leverage of market access commitments that accompany FTA negotiations. Count me skeptical. My own experience as an assistant US trade representative for environment and natural resources some years back suggests that FTA negotiations provide the best leverage for environmental commitments, such as those in the Dominican Republic–Central America FTA and the illegal logging provisions in the Peru FTA.

Digital trade is one area in which concerns are extremely high. The Biden administration’s review of its approach to commitments on cross-border data flows and data localization in trade agreements may make sense to ensure compatibility with regulatory trends in the United States. However, it appears the administration’s pullback in IPEF and WTO negotiations is an overreaction and will have significant implications for one of the top exporting sectors for the United States.

The US-India trade relationship is a test case for this new era. US policies toward India have evolved rapidly on the strategic front, and India’s perceived role in alliances to counter China is a central reason for this. However, the US-India trade relationship is playing catch-up to match breakthroughs on the strategic and defense fronts. While there are plenty of landmines ahead in the bilateral strategic landscape, including diverging self interest in relationships with Russia, the trajectory is likely to continue to be positive. On the trade and commercial front, the direction in the bilateral relationship is also positive, but it has a much lower starting point. The Trade Policy Forum, which wrestles through high-profile trade irritants, and the companion Commercial Dialogue, which helps to bring private sector chief executive officers into the circle, are producing more breakthroughs and expanding the scope of government-to-government collaboration on the economic front. However, Washington and New Delhi need to get more creative in building a bigger trade relationship, and they should start in 2024.

It is unfortunate that an FTA with India is not in the cards so long as the Biden administration continues to view this approach (wrongly, in my view) as archaic and not built for new challenges. Consequently, other forms of negotiation should fill the gap until there is a return to good sense and resumption of FTA negotiations. Early possibilities could include negotiations on India’s beneficiary status under the Generalized System of Preferences program and a critical minerals agreement.

For the moment, it appears a first-term Biden administration’s trade policies will continue to disappoint many experts, including former negotiators, members of Congress on both sides of the aisle, and the exporting private sector, even if some of its innovations bear fruit in the future. One might hope that there already are internal discussions taking place on what a second term might bring in trade policy, including consideration of bringing back some of the old policies while continuing to find new ways to address pressing priorities. It will take a combination of both to redress the harms brought on by globalization and the challenge of China while also innovating to bring climate change to the fore of US trade policy.

Mark Linscott is a nonresident senior fellow at the Atlantic Council’s South Asia Center and former assistant US trade representative for South and Central Asia, WTO and multilateral affairs, and environment and natural resources.

To read the full blog post, click here. 

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The US National Security Advisor told the Brookings Institution in April that the Biden administration will be driven by domestic considerations.

“That is part of what we have called a foreign policy for the middle class. The first step is laying a new foundation at home—with a modern American industrial strategy,“ he said.

This was no real surprise given the legislation championed by President Joe Biden from the moment he came to the White House. Moreover, the United States has embraced industrial policy almost since its inception. In agriculture, maritime, textiles and clothing, steel, cars, semiconductors and many other sectors, the guiding hand of the government has always been present, offering financial assistance and protection from competitors. Justification for this assistance has taken many forms, including national security, the protection of jobs, regional development, and the national economic interest.

There are compelling reasons for the shift the administration is undertaking. But the track record of US industrial policy is mediocre at best and too often such policies have brought more harm than good.

Populist elements in the Biden administration harbor deep skepticism about markets and their ability to deliver for the middle class. Mr. Sullivan said policymakers in the United States were too often captured by the rationale “that markets always allocate capital productively and efficiently…And the postulate that deep trade liberalization would help America export goods, not jobs and capacity, was a promise made but not kept.“

It is true that markets have not always provided all the answers. Market-based mechanisms have done little, for instance, to offset the negative externalities of environmental degradation. Leaving the development of basic infrastructure entirely to the private sector has left roads, bridges, and ports in a sorry state.

Yet, the suggestion that the United States has run its economy on strictly market-based criteria is fantasy. And just as markets have their shortcomings, the government’s track record in picking winners and losers has been less than stellar.

Once governments go down the rabbit hole of industrial policy, they often find it difficult to claw their way out again. Companies that have drawn deeply from the government trough rarely volunteer to surrender this patronage. That a cohort of Biden administration progressives is actively seeking a taxpayer- and consumerfunded crutch to prop up specific sectors is extraordinary – particularly when such programs often line the pockets of the already rich.

Pushing the needle in one direction or the other leads to unintended consequences that bring their own set of risks. These include souring of relations with other countries, adverse environmental repercussions, threats to health and safety, corruption, and inflation. Often the impact goes unnoticed, at least in the beginning. But over time – and many industrial policies have lasted for decades – a slow slide into a more inefficient, less productive state is inexorable.

Washington is a town which develops ecosystems devoted to the preservation of corporate subsidies, government contracts, and protection from competition. Although the CHIPS and Science Act, the Inflation Reduction Act (IRA), and the Infrastructure Act are only in their embryonic stages, this dynamic is already at play.

Industrial policy also tends to get very complicated, very quickly. Just look at the contortions into which the administration has twisted itself in determining who qualifies for tax breaks under the IRA.

Any assessment of the administration’s policy must weigh the gains to the specific sectors receiving government subsidies and protection, versus the cost to the taxpayer and the consumer. The evaluation must take into consideration how US allies respond to the policy, whether the government can minimize the inevitable distortions and inefficiencies that arise, and whether these policy byproducts become a long-term burden on the economy.

To read the full report, please click here.

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As the US and its allies increase efforts to restrict China’s access to advanced semiconductor chips, experts say the measures could impact Beijing’s development. But they will also cause collateral damage to US firms.

To read the full article, please click here.

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They say President Joe Biden’s strategy imperils U.S. jobs and represents a potentially illegal end-run around Congress.

Critics are calling on Biden to halt mineral negotiations with the European Union and other nations while also slamming a recent mineral deal with Japan. The Biden administration insists that its strategy to boost supply chains among allied nations is the most potent counter to Chinese dominance over global minerals.

At issue is whether Biden should prioritize domestic mineral production and ensure producers in the United States — not manufacturers in foreign countries — reap the benefits of a coveted EV tax credit, known as 30D. The credit was included in last year’s Inflation Reduction Act.

Now, the Treasury Department is in the hot seat as it prepares to screen new trade deals and determine whether the pacts allow access to $3,750 in U.S. tax credits for EVs produced with minerals extracted or processed in partner countries. The mineral negotiations represent a marquee example of the threat Biden’s clean energy pursuit poses to other key administration policy priorities, most notably the rapid expansion of domestic manufacturing.

“They have three goals here,” Bill Reinsch, a trade expert at the Center for Strategic and International Studies, said of the Biden administration. “One is to facilitate the transition to green technology. The second one is to enhance domestic manufacturing and jobs. And the third is to do it in a way consistent with trade law and international trade rules. They can’t do all of those at the same time.”

Minerals such as lithium and cobalt are essential for today’s fleet of EVs. And experts agree that mineral production and refinement will likely form the backbone of the clean energy economy in the future and the millions of jobs that come with it. Minerals are also necessary for a long list of medical devices, smartphones and other staple products.

Meanwhile, compliance with the U.S. EV credit is based on mineral and manufacturing sourcing mandates designed to counter China by strengthening supply chains in the United States and nations with which the U.S. has trade agreements.

But critics are digging in for a fight. They’re challenging the Treasury Department’s loose interpretation of a “free-trade agreement” in the Inflation Reduction Act’s text.

“There’s enough noise to suggest Treasury is going to face some significant challenges in using this broad brush to redefine what trade agreements actually are, from a legal and constitutional standpoint,” Rich Nolan, president of the National Mining Association, a U.S. lobbying group, said in an interview.

Nolan said the mining group is “pushing the administration to bring those tax incentives home, so that those materials come from U.S. mines, from mining communities mined by American miners.”

A U.S. Geological Survey study released in January found that the United States is 100 percent import-reliant on 15 critical minerals, including minerals used in EVs like graphite and manganese. The U.S. remains more than 95 percent import-reliant on rare earths and titanium, while American companies import more than a quarter of lithium used in manufacturing, according to the study.

Another recent assessment from Securing America’s Future Energy, which promotes domestic energy production, laid out the Chinese dominance of global minerals in stark terms.

“Chinese-owned companies have strategically purchased stakes in major mineral deposits around the world, control anywhere from 60 to 100 percent of processing (depending on the mineral), and produce upwards of 70 to 90 percent of the world’s battery components,” the group said in a March report.

Talks ‘in the pipeline’

In March, Biden and European Commission President Ursula von der Leyen launched negotiations over a “targeted critical minerals agreement” that will “count toward requirements for clean vehicles in the Section 30D clean vehicle tax credit.”

The announcement came amid claims from various world leaders that the Inflation Reduction Act’s incentives violate World Trade Organization rules against subsidies that promote domestic products over imports.

The Office of the United States Trade Representative, which leads U.S. trade negotiations, said the E.U. talks are ongoing.

“We will continue to work with our EU allies to boost mineral production and expand access to sources of critical minerals while diversifying global supply chains,” said USTR spokesperson Sam Michel. The Swedish ambassador to the U.S., Karin Olofsdotter, recently told E&E News that a transatlantic pact is “in the pipeline.”

The Japanese deal, announced two weeks after the E.U. talks launched, “affirms” the two countries’ “obligation not to impose prohibitions or restrictions” on bilateral trade relations.

Now, Indonesia, Argentina, and the Philippines are signaling interest in similar deals. Even South Korea, which already shares a trade deal with the United States that was passed by Congress in 2011, is aiming for more mineral concessions.

“President Biden and I welcomed the expansion of our [bilateral] mutual investment in advanced technology, including semiconductors, electric vehicles and batteries,” South Korean President Yoon Suk Yeol said during a recent event at the White House, according to a translator. “President Biden has said that no special support and considerations will be spared for Korean companies’ investment.”

Congressional complaints

U.S. lawmakers say they’ve been kept on the sidelines.

Rep. Adrian Smith (R-Neb.), the chair of the House Ways and Means Trade subcommittee and the co-chair of the U.S.-Japan Congressional Caucus, said the Biden administration has not briefed him on any mineral trade negotiations.

“This is basically a workaround. And I don’t think it’s sustainable long-term,” Smith told E&E News. “I think there will be attempts to assert legislative prerogative.”

Never far from the spotlight on Capitol Hill, Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.) has regularly blasted the Biden administration’s implementation of the Inflation Reduction Act, saying recently he would “vote to repeal my own bill.”

Manchin has also threatened a lawsuit. Still, legal experts say it’ll be a tough case to make because of challenges in meeting legal standing. The moderate Democrat is now set to face off against West Virginia Gov. Jim Justice next year to retain his seat in a state Biden lost by nearly 40 points in 2020.

The Inflation Reduction Act text says that EVs qualify for half of the $7,500 credit if the minerals used in the models are “extracted or processed” in the U.S. or “in any country with which the United States has a free trade agreement.”

Meanwhile, the proposed Treasury guidance for the 30D credit gives access to 20 foreign countries with which the U.S. has traditional free trade agreements passed by Congress, along with “additional countries that the [Treasury] Secretary identifies,” such as Japan.

Reinsch, the long-time Washington trade expert, predicted the fight over the definition of a free-trade agreement will likely be settled in court.

“Since the term is undefined in the [Inflation Reduction Act], that’ll probably be resolved by litigation. This is America. Anybody can sue anybody for anything,” he said. “There’s no legislative history here to provide any guidance. And the term is not defined in the statute. So it ends up with judges.”

The two top Democratic trade lawmakers in Congress called the Japanese deal “unacceptable,” arguing the administration “does not have the authority to unilaterally enter into free trade agreements.”

“Even among allies, the United States should only enter into agreements that account for the realities of an industry, learn from past agreements, and raise standards,” Rep. Richard Neal (D-Mass.) and Sen. Ron Wyden (D-Ore.) said in late March, the day the Office of the U.S. Trade Representative announced the deal with Japan. “Agreements should be developed transparently and made available to the public for meaningful review well before signing — not after the ink is already dry.”

An aide for Wyden’s Senate Finance Committee, who was granted anonymity because the person is not authorized to speak publicly on the issue, said the Biden administration last briefed the committee on mineral trade talks in “early March.”

The congressional complaints are echoed in environmental and labor circles.

Ben Beachy, vice president of manufacturing and industrial policy at the BlueGreen Alliance, touted domestic manufacturing as the best solution to curb the U.S. climate footprint.

“The onshoring of EV manufacturing will help to cut the climate pollution that, ironically, is often baked into imports of EV components,” Beachy said. “That’s because overseas corporations tend to be more emissions intensive than U.S. factories in producing the aluminum, steel and other materials that go into EVs.”

He said the Japanese deal should “not be repeated” with the E.U. or other countries.

A recent BlueGreen Alliance study found that the Inflation Reduction Act has spurred new domestic manufacturing projects that will create 900,000 jobs. The law sparked a wave of new battery plant announcements. And the Department of Energy recently extended a $2 billion loan to a battery recycling plant in Nevada.

But the mineral negotiations are not the first time the Biden administration has struggled to balance climate and domestic manufacturing priorities.

In April, the Republican-controlled House of Representatives voted to repeal a Biden administration pause on solar tariffs from four Southeast Asian countries where the administration itself determined China is processing solar products in circumvention of U.S. tariffs. And despite a veto threat, the Senate passed the measure Wednesday with nine Democrats in support.

Biden administration officials say the pause was necessary to maintain high levels of solar deployment in the United States.

‘Immediate action today’

For months, top Biden administration officials have urged allied nations to band together with the U.S. to develop collaborative mineral supply chains.

“When we look at critical minerals and we look at solar panels and wind turbines and electric vehicles and batteries, there is already now an effort by some to narrow the control of that supply chain into one or a handful of countries,” Amos Hochstein, deputy assistant to the president and senior adviser for energy and investment, said in a March speech in Washington.

“We have to take immediate action today to work as a global community with our allies and to make sure that that market changes fundamentally,” he said. At the time of the speech, Hochstein was the State Department’s special presidential coordinator for global infrastructure and energy security.

David Turk, deputy secretary at the Department of Energy, told E&E News recently that the effort to boost allied mineral supply chains globally should be a “full interagency” strategy, pointing to expertise at DOE and assistance tools at agencies such as the U.S. International Development Finance Corp. and the U.S. Agency for International Development (USAID).

“We have our national labs, [and] we’re bringing some of that expertise to the table,” said Turk. “We’ve been having a lot of good conversations, including with [the White House]” and the Treasury Department.

Last year, the U.S. Trade and Development Agency helped to finance a mineral processing facility in the Philippines. And on May 1, following a summit at the White House with Philippine President Ferdinand Marcos Jr., Biden announced a new package of assistance to the Philippine mineral sector, including $5 million in USAID funds to boost mineral processing and EV component manufacturing in the country.

Turk said he’s looking for “good, forward-leaning language” on minerals in the upcoming G-7 nations summit in Japan.

The U.S. is home to some of the largest mineral reserves globally. And the U.S. mining sector continues to push the Biden administration to open up key mineral reserves in Minnesota, Arizona and Alaska.

But even where the administration is putting its weight behind mine proposals, judges are raising objections.

Mining experts say a 2019 judicial decision, which halted the Rosemont copper mine in Arizona, is complicating the approval mining permits by requiring companies to prove the existence of valuable minerals even at the locations mining companies want to dump mine waste.

House Republicans included language in their lead energy and permitting package to allow a company to “use, occupy, and conduct operations on public land, with or without the discovery of a valuable mineral deposit.”

Backing Biden

Proponents of EV deployment in the United States are putting their weight behind the Treasury Department’s liberal interpretation of trade agreements.

“We’re certainly supportive of expanding negotiations. We want to make sure we have the largest reach of eligibility possible for the clean vehicle credit,” said Leilani Gonzalez, policy director for the Zero Emission Transportation Association, an EV deployment advocacy group.

She added that with countries still in the middle of developing mineral supply chains, the question to answer is whether they can meet the requirements that the Department of Treasury has laid out.

Abigail Wulf, director of the Center for Critical Minerals Strategy at Securing America’s Future Energy, the pro-domestic-energy organization, also called for a “broadened” definition of trade deals.

“We think it’s a good thing to expand the tent when it comes to trade agreement countries,” said Wulf. “Simultaneously, while we’re letting down those draw bridges, we need to be making sure that the U.S. and others are building high enough walls around the Chinese Communist Party.”

The Inflation Reduction Act disqualifies vehicles from the 30D credit if the EVs contain minerals or battery components from a foreign entity of concern. While experts expect Chinese entities to fit that definition, the foreign entity of concern portion of the 30D credit doesn’t take effect until 2024.

On top of her support for the mineral negotiations, Wulf urged the Biden administration to pass traditional trade pacts with congressional support and enforceable labor and environmental standards. The United States last closed an enforceable trade deal with Mexico and Canada in 2020.

Still, Wulf said the administration is showing little appetite for that route.

“The problem with these trade agreements that aren’t ratified by Congress is that they aren’t actually enforceable,” Wulf said.

To read the full article, please click here.

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