In early 2025, a new US administration and European Commission will be in place. It will then be more critical than ever that the United States and the European Union (EU) coordinate their approaches to international trade across a wide range of issues. A significant impediment to this coordination is the persistent temptation—by a range of players in transatlantic circles—to articulate and emphasize supposedly fundamental differences between Washington and Brussels in a way that highlights the virtues of one and denigrates the other. As satisfying as that classic conflict narrative is, it has real-world negative consequences for both parties and should be reassessed by all players in favor of the reality that what unites the United States and the EU dwarfs their differences.

State of play and the strategic imperative

Leading into 2025, cascading joint challenges of supply chain vulnerabilities, climate change, deindustrialization, competitiveness, geopolitical crises, and damaging third-country non-market economy policies and practices—coupled with an international rules system designed for another era—will increasingly drive both sides to use unilateral measures to protect and achieve legitimate policy goals. The US tariffs on steel and aluminum and the Inflation Reduction Act are two such examples; the EU Carbon Border Adjustment Mechanism (CBAM) and Deforestation Regulation are two others. Other measures risking transatlantic friction include the EU’s Corporate Sustainability Reporting Directive, the longstanding Boeing-Airbus subsidies dispute, previous tensions over the EU digital services tax, a failure to reach a critical minerals agreement, and US companies’ compliance with the EU’s Digital Markets Act.

The current trend is not abating. Unless the United States and the EU cooperate on those unilateral measures, there is a high risk that they will result in significant bilateral trade clashes. At a minimum, this will undermine achieving generally shared goals; at worst, it could result in spiraling bilateral trade retaliation.

A significant barrier to transatlantic trade cooperation is the persistent underlying narrative—among policymakers, think tankers, and others—that the United States and the EU approach the world from fundamentally different perspectives. In the memorable words of a distinguished commentator twenty years ago, the United States is from Mars, and the EU is from Venus. This can be an attractive narrative, as it allows each to claim virtues that the other supposedly lacks. It allows Washington to take pride that it is tougher and more clear-eyed than a feckless EU; it allows Brussels to claim that it is more law-abiding and multilateral than the “Wild West” United States.

But this narrative is a choice, not a fact. And the strong inclination to triumphantly celebrate supposed fundamental differences has negative real-world impacts. This narrative finds its way into public statements, is sometimes amplified by a press happy to report on big-picture fights, and can end up deeply embedded in the public consciousness, determining whether or not there is public support for US-EU cooperation. And this narrative of fundamental differences between the United States and the EU—each side claiming the higher virtue—undermines US-EU cooperation.

Further, US-EU cooperation is a necessary but insufficient condition for making progress on these global challenges. In a context in which cooperation with other trading partners is essential, setting up a sharp divide between the United States and the EU encourages those trading partners to take sides and discourages their cooperation with the EU and the United States.

Recent among many examples are the discussions over the Global Arrangement on Steel and Aluminum. To recall, the United States imposed tariffs on steel and aluminum from around the world because of damaging subsidized and non-market excess capacity in China, and the EU retaliated with its own tariffs on US products. Both sides brought dispute settlement disputes to the World Trade Organization (WTO). The United States and the EU de-escalated the situation by agreeing to a temporary two-year settlement in October 2021, under which historical levels of EU steel and aluminum could enter the United States duty free, and the EU suspended its retaliatory tariffs. By the end of October 2023, the EU and the United States were to have reached a permanent arrangement to free up bilateral trade in steel and aluminum and eliminate retaliatory tariffs. It didn’t happen, amid somewhat angry recriminations, but at the last nail-biting minute, Washington and Brussels agreed to extend the truce for another fifteen months to give breathing room to negotiate a deal.

The inability to reach a final arrangement on such a tight timeframe was not surprising. Its goal is as ambitious and unprecedented as it is critical: Climate change is an existential crisis, and non-market-based products threaten key industries and their ability to produce sustainable products. Washington and Brussels urgently need to address these issues, and this novel arrangement is a way to tackle both simultaneously: It would incentivize bilateral trade in environmentally sustainable and market-based products and disincentivize trade that is not. US National Security Advisor Jake Sullivan declared the arrangement “could be the first major trade deal to tackle both emissions intensity and over-capacity.” Negotiating such an agreement is not only novel, but it is challenging in an international rules system that prohibits discrimination against “like” products and that was negotiated when non-market state actors were not much of a factor.

That this was a groundbreaking negotiation addressing critical new joint challenges could and should have been the explanation for the inability to reach a permanent arrangement. That narrative would have supported the parties’ continued work to reach a final arrangement.

Instead, the public explanation from Brussels for the failure was that the United States was insisting on WTO-illegal tariffs and an illegal free pass on the EU’s CBAM as part of the arrangement. The EU’s trade chief, Valdis Dombrovskis, largely stuck to the line ahead of negotiations, stating, “As the EU, we’re committed to multilateralism, to the rules-based global order. We would like to avoid engaging in agreements which manifestly violate World Trade Organization rules.” Later, he hit Washington for failing to provide a clear path to end the tariffs, which Brussels deemed illegal. The United States was less vocal publicly on the failure to reach an agreement, but trade watchers understand the United States’ implied position is that the EU is institutionally hidebound, unwilling to reach beyond currently existing regulations that have failed for decades to fix the problem.

Each of these positions fit into the Mars-Venus narrative—and left each side convinced that it was right. But when talks break down with one party characterized as a rule breaker and the other as being rigid and unimaginative, it does not create an environment for further joint progress. How does the EU then justify negotiating with a rule breaker or ultimately finding a compromise along the lines of something it condemned? How does the United States justify continued discussions with a rigid institution that is unwilling or unable to be creative enough to meet new challenges?

To be clear, the United States and the EU will have good-faith disagreements over their approaches to issues, even those on which they agree. There is nothing wrong with confronting and trying to resolve those disagreements. But the readiness to attribute those disagreements to values-based fundamental differences digs a virtually unbridgeable gulf.

Looking ahead

This dynamic has shaped (and thwarted) cooperative US-EU efforts in numerous areas, including reforming WTO dispute settlement, addressing distortions caused by non-market actions of state enterprises, subsidies, excess capacity, coercion, and a host of other issues. Unless there is a change, it will continue to do so. And the number and significance of areas in which US-EU cooperation will be critical will only increase as joint global challenges mount.

Policy recommendations

There are ways to lay a better foundation for US-EU cooperation going forward:

• Focus messaging on common values and interests. All proponents of stronger transatlantic ties—think tanks, academics, business and nongovernmental organization (NGO) stakeholders, and government officials alike—should emphasize publicly and privately the reality that what unites the United States and the EU in the world trade order dwarfs their disagreements. These proponents should avoid the temptation to signal the virtues of one partner by denigrating the other and creating appealing, but largely false, fundamental differences. Those narratives, setting up epic conflicts between the forces of “good and evil,” are exciting but have profound negative effects in the real world.
• Identify priority areas for coordination and work most intensely and cooperatively on those aspects for which there is maximum overlap of interest. US and EU government officials should focus now, ahead of and in early 2025, on specific priority issues that require the most intense coordination. Issues represented by the Global Arrangement on Steel and Aluminum—climate change, including CBAM and similar measures—and non-market policies and practices should top the list. For each of those priority issues, the parties should identify the areas of strongest overlap in interest and work intensely on those areas. Where there are significant differences in approach that cannot be entirely bridged, those should be cabined off and addressed separately. The United States and the EU should also agree on principles of cooperation that avoid casting aspersions on the other party.
• Build buy-in from all stakeholders. Finally, the United States and the EU’s joint work on identified priorities, and the messaging that accompanies that work, should be strongly informed by the broad US and EU stakeholder community—including business, agriculture, labor, NGOs, think tanks, and others. This would ensure that the priority areas of work are, in fact, those that have a meaningful real-life impact, and would crystallize a positive public narrative supporting that work, both domestically and internationally.

To improve the cooperative dynamic in 2025, the United States and the EU should focus less on whether one is from Mars and the other from Venus, and more on the planet they share: Earth.

L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He served as assistant US trade representative for Europe and the Middle East in the Office of the United States Trade Representative from 2010 to 2023.  

To read the report as it was published on the Atlantic Council webpage, click here.

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It won’t be easy. Ambitions to broaden and deepen the transatlantic marketplace suffer from past disappointments. The Transatlantic Trade and Investment Partnership foundered in disputes over hormone-treated beef and investor-state dispute settlement. The current EU-US Trade and Technology Council has produced only narrow benefits. In the absence of coordination, both Washington and Brussels have resorted to unilateral measures, such as the US Inflation Reduction Act, national security-related tariffs on steel and aluminum, and the EU’s doubling down on its long-proposed carbon border adjustment mechanism. In the future, the need to take urgent unilateral measures will only increase as the dire consequences of failing to act become clear.

A comprehensive transatlantic economic agreement—not a traditional trade agreement—could avoid relitigating the issues that have sunk past US-EU trade and investment initiatives. Rather, learning from the lessons of past efforts, Washington and Brussels must accept that, despite their shared interests, Europe and the United States have decidedly different economic cultures and polities. And any new comprehensive agreement should accommodate these differences while coordinating parallel approaches to the rapidly evolving global economy.

One pillar of such an agreement should be addressing third-country practices. Both the EU and the United States are currently implementing a lengthening list of defensive trade measures—tariffs on electric vehicles and solar panels and investment screening—to protect their domestic industries and workers from subsidized Chinese competition. Unless Washington and Brussels can agree on mutually reinforcing defensive measures, Beijing will simply exploit differences in future US and European market openness. Recent experience with US duties on Chinese subsidized steel and aluminum production painfully demonstrates that unilateral defensive trade measures can adversely impact European producers. Washington and Brussels have spent more time and effort fighting each other than jointly confronting China’s nonmarket practices.

A bilateral comprehensive agreement could identify a set of policies—the types and levels of state subsidies, the use of stolen intellectual property, state regulatory and other protectionist measures—that Washington and Brussels agree lead to “unfair” competition and thus merit parallel defensive measures that do not distort transatlantic commerce.  

The second pillar of a comprehensive agreement should be improved regulatory cooperation. Regulations often seem esoteric, but they set the rules of business behavior. In a world in which market-based economies are in competition with state-driven economies, the United States and the EU need regulations that reinforce each other, do not conflict, and do not inflict unnecessary collateral damage.

Regulatory cooperation is not about adopting identical rules (the United States and the EU have tried and failed before). Nor is it about forcing US and European regulators to sit down and talk with each other (which has produced little in the way of results). Rather, Washington and Brussels need to first agree that in a deeply integrated transatlantic economy, regulations should achieve their objectives without unnecessarily undermining bilateral trade. Second, they need to agree on joint pre-regulation research and information-gathering so that regulators are each working with a common set of facts. And the US and EU regulators need to offer each other’s stakeholders a meaningful opportunity to provide pre-standard-setting and pre-regulation input to minimize business friction.

Finally, successful coordination of external measures and future regulation will not be possible without a third pillar—greater ongoing input from the business, labor, consumer, environmental, and political communities. It is a fundamental principle of democracy that those affected by governmental actions have a right to participate in such decision making. But it is also practical. As the ones directly affected, these stakeholders can ensure that the issues addressed are of practical significance. In this regard, it is particularly important that the US Congress and European Parliament are fully involved as negotiations proceed, to ensure that whatever is agreed upon has a chance of entering into force.

As both Brussels and Washington face an uncertain and challenging 2025 and beyond, they cannot afford to allow past failures to constrain future ambitions. They face too many shared challenges. Going forward, the EU and the United States can either row together in increasingly turbulent waters, or they will most assuredly sink separately.

L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He served as assistant US trade representative for Europe and the Middle East in the Office of the United States Trade Representative from 2010 to 2023. He was chief negotiator for comprehensive trade agreements with the EU and the United Kingdom, as well as trade lead for the US-EU Trade and Technology Council.

Bruce Stokes is a visiting senior fellow at the German Marshall Fund, a former senior fellow at the Council on Foreign Relations and the former international economics correspondent for the National Journal.

To read the blog as it was published on the The Atlantic Council webpage, click here.

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However, two years on it is becoming increasingly clear that the legacy of the IRA is tethered to a renewed pact between government and the US economy, with key implications for trade, technological competition with China, and foreign policy writ large.

Since the early 1980s, the prevailing dogma on both sides of the aisle regarding US economic policy has largely been one of skepticism about direct government intervention in the economy. Trade and domestic market liberalization have been features of Republican and Democratic rhetoric since at least the Reagan administration. Of course, US government spending did increase over this period, and Washington did often step in with, for example, countercyclical spending during economic downturns. Nonetheless, most US politicians took as axiomatic that the government should not be “picking winners and losers” in the economy. The IRA has ushered in a new era in which this reflexive aversion to economic intervention may be vanishing.

Industrial policy has risen from the gutter

The IRA’s subsidies and grants for low-carbon electricity generation and technology manufacturing, along with its capitalization of the US Department of Energy’s Loan Programs Office, represent a divergence from the once-dominant economic policy consensus. The IRA is among the most significant government investments in the US economy since President Franklin D. Roosevelt’s New Deal. In fact, it is rivaled only by primarily demand-side stimulus packages, such as the American Recovery and Reinvestment Act (ARRA) of 2009 and the CARES Act of 2020.

According to Goldman Sachs estimates, by 2032 the IRA will provide $1.2 trillion in incentives with the intention of fueling the deployment of energy technologies. This includes technologies that are currently profitable, such as solar and onshore wind, as well as new market entrants, such as electric vehicles, grid storage, new forms of bioenergy, offshore wind, clean hydrogen for hard-to-abate sectors, point-source carbon capture, and carbon removal. If the broad-scale deployment of these technologies is achieved at the scale envisioned by prevailing models—which is dependent on additional regulatory reform—these effects of the legislation will be uniformly positive for climate mitigation and economic growth alike.

These positive effects are being borne out in data. Of an estimated seventy-eight billion dollars in public investment since the IRA’s enactment, the bill has shepherded between five to six times that figure in private investment. In fact, investment in low-carbon technologies and manufacturing has comprised about half of private investment growth since the IRA’s passage. That is a success.

The implications of the IRA as a shift in economic policy are not uniformly positive, however. The global consequences of this shift have manifested in at least two ways.

First, the floodgates of government market interventions have been opened. In 2023 alone, governments around the world implemented more than 1,600 industrial policies. The IRA is both an example of this general trend and, given the size of the US economy and the IRA’s intervention, something other countries have reacted to with their own interventions. For example, the United States’ use of subsidies for its economy has prompted adverse reactions from the European Union, whose single market makes the use of subsidies difficult, and prompted concerns regarding the comparative advantage of its domestic industry. This year, the European Parliament and European Council passed the Net-Zero Industry Act, which provides financial support through grants, loans, and other funding mechanisms to promote research, development, and deployment of clean technologies and manufacturing capacity—a direct response to the IRA.

In a sense, the IRA has prompted global competition among governments to make public investments in emerging industries and technologies.

Second, trade measures have arisen as a method by which to protect, or “ring fence,” domestic industrial policy strategies from foreign competition. Notably, the May 2024 suite of tariffs announced by the White House represent a substantial signal of intent to isolate encroachment of Chinese imports on domestic industries that have not yet been established and that the IRA supports. In the IRA, certain softly punitive measures impact trade, stoking additional tension. For instance, eligibility for subsidies under the Clean Vehicle Tax Credit is limited, based on the country of origin of critical minerals and battery components and excluding several US allies and partners.

Economic competition among the United States, the European Union, and China is increasing, and the decades-long criticism of China’s subsidy-centric growth model by Washington and European capitals is being usurped by a new industrial policy with US and European characteristics. In some sense, although all three blocs are competing, two distinct visions have emerged: the bottom-up, private sector-led and government-enabled vision of the United States and European Union, and the top-down, state-directed vision of China.

Trade-offs, tariffs, and technological innovation

Will this trend continue? Industrial policymaking in democracies is necessarily impacted by political feasibility, what is favored by those with power, and what works within the parameters of a state’s administrative capacity, as an International Monetary Fund publication recently reflected. As such, the IRA is also a product of the political moment, dubbed by the Breakthrough Institute as a period of “post-COVID congressional profligacy.” It is difficult to predict what the next major industrial policy package in the United States will consist of, but it will likely be shaped as much by the political forces at play as by rigid economic analysis.

Careful reflection is needed going forward, as industrial policy, by definition, leads to concentrated benefits and carries diffuse costs. As such, it can also lead to unintended or counterproductive outcomes. The recent tariffs may prove this true, depending on one’s definition of the intended outcome.

Take the 25 percent tariff increase that was imposed on imports of Chinese solar cells. While this may protect domestic solar manufacturers, it may also slow the rate of solar deployment overall, given the higher resulting price for panels. Absent this tariff, solar panels would likely be cheaper, so it would be fair to say that the Biden administration’s implicit target of countering China’s industrial prowess is countering its explicit goal of achieving a carbon-free power grid by 2035.

The effects of trade policies such as this are unclear. What is clear is that acknowledgement of the trade-offs is necessary.

Public investments in infrastructure do have an important role. They are critical conduits of productivity growth and are necessary in areas where clear incentives for the private sector are not present. For instance, while nuclear energy is critical for bolstering the reliability of the electric grid, its business model has suffered significantly from the natural gas production boom that the United States has experienced from 2005 to the present. The affordability of gas, and increasingly of other resources, such as solar power, has made nuclear power’s high operating and capital costs less attractive to utilities, among other factors. Programs such as the Department of Energy’s Civil Nuclear Credit Program, which provides financial assistance to the United States’ nuclear reactor fleet, play an essential role.

Looking forward, however, it is also worthwhile to recall what is historically the engine of growth for the modern US economy, and the principal root of US competitive advantage in the global economy—technological innovation. It was not the tariffs of the McKinley administration or the safety net of the Roosevelt administration that led the way in supercharging US growth, although safety nets and infrastructure definitively do breed innovation.

Attempting to reinvigorate domestic industry through grants, loans, or subsidies may be necessary to achieve goals such as “reshoring” manufacturing. At the same time, investments in research and development (R&D) are proven over decades to provide consistent macroeconomic returns and drive technological progress. An independent report commissioned by the Department of Energy’s Office of Energy Efficiency and Renewable Energy found that investments of twelve billion dollars made by the office since the mid-1970s have yielded more than $388 billion in total undiscounted net economic benefits to the United States.

However, public R&D spending in the United States has been stagnant for decades as a percentage of gross domestic product. If government investment is looking for the best rate of return, as sound investors do, R&D may be an underappreciated “asset class” that should increasingly be targeted by the United States and its partners.

William Tobin is an assistant director at the Atlantic Council Global Energy Center, where he focuses on international energy and climate policy.

To read the blog as it was published on the Atlantic Council webpage, click here.

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My answer is a cautious “Yes”. Below I discuss several key factors that could determine whether the WTO survives and how they might influence the future role of the WTO.

Will the friends of the WTO continue to see residual value in it?

We have to be realistic. The WTO’s ability to constrain US trade policy has weakened considerably and is likely to weaken more under a second Trump administration. The best-case scenario that can be expected from a second Trump administration is benign neglect and even that is not the only plausible scenario.

The question is how much residual value other key members (e.g. Canada, the European Union, Japan, Korea, Switzerland, China, Australia, New Zealand, Brazil) will see in a WTO that, in practice, does not regulate their trade relationships with the United States. The WTO’s weakened ability to regulate trade relations with the United States is a huge loss, that is for sure. Yet, the scope of other trade covered by the WTO should be sufficiently large to provide an incentive to these countries to keep the faith in the WTO. While some of these countries have a vast network of free trade agreements (FTAs) that would give them some security should the WTO fail, the network is neither broad nor wide enough to entirely replace the WTO. Also, the need to comply with WTO rules can help stave off internal protectionist pressure as well as pressure from allies to take protectionist actions against certain countries. How much political capital they invest in supporting and driving the WTO will be one of the most decisive factors in determining whether the WTO survives a second Trump administration. To their credit, many of these countries already have taken a bigger role in the WTO since US leadership started to wane. But the next four years could require them to become even more proactive if the WTO is going to continue being relevant.

Would the Trump administration allow the WTO to continue operating?

Three scenarios seem plausible. A first scenario is one of neglect in which a second Trump administration effectively would ignore the WTO’s rules but would not actively seek to obstruct the WTO’s operations. The WTO’s role regulating trade relations with the United States would continue to weaken. However, it would still play an important role regulating trade relations between the other 163 members. WTO members may even continue their efforts to modernise WTO rules through plurilaterals and other initiatives. Some of these members still may hold hope that the United States can be brought “back into the fold”, while others may resign themselves to “ride out” the administration. This scenario partly describes the situation during the first Trump administration if one ignores the blocking of the appointment of adjudicators to the WTO Appellate Body. In this scenario, the WTO is more likely to survive, albeit with the risk of further weakening, unless the other 163 members succeed in their efforts to modernise the rules without the participation of the United States.

A second scenario is one in which a Trump 2.0 administration decides to actively disrupt the operation of the WTO. Concerns about this scenario may already be reflected in the proposal recently submitted regarding African countries to bring forward a decision to reappoint the Director-General. A threat to the WTO’s budget is another concern. Survival of the WTO in this scenario is not assured.

While some may consider that paralyzing the WTO would be in the US interest, such a move would be short-sighted. WTO rules protect US exports of goods, services and intellectual property rights. The US network of trade agreements does not have the geographic breadth of the WTO and has remained largely static for several years. Relying on unilateral action alone to fight foreign trade barriers is inefficient. Thus, there may still be sufficient incentives for a second Trump administration to play the role of an absent parent but without entirely blocking the operation of the WTO.

The third scenario is one where a second Trump administration pursues a “WTO minus China” strategy. This could take the form of tariffs clubs within the WTO that exclude China. The clubs could be sectoral, along the lines of the proposed Global Arrangement on Sustainable Steel and aluminium, or broader in scope. These clubs would undermine the Most-Favoured Nation (MFN) principle, a key tenet of the WTO. However, some would argue that such clubs are no different than FTAs, which are allowed.

Any attempt to exclude China would raise tensions in the WTO. A strong response from China can be expected. Moreover, candidate Trump has spoken about raising tariffs on all imports across the board, not just those originating from China. A second Trump administration might raise tariffs and then seek concessions from trade partners (other than China) in exchange from bringing them down again. This would be seen as an attempt to renegotiate its WTO obligations and would certainly create frictions with other trading partners. Meanwhile, many of these trading partners also are likely to resist effort to exclude China. It is hard to see how these tensions would be resolved. What is clear is that this scenario would put the WTO under severe strain.

Will China agree to address some of the concerns raised by its trade partners?

The United States has justified some of its trade actions by arguing that they are necessary to confront with a Chinese regime that doesn’t “play fair”. US concerns about Chinese overcapacity and the role of state-owned enterprises are shared by many WTO members.

China should have a strong interest in preserving the WTO given its role providing stability to trade relations with many of its trading partners and in preventing further fragmentation. But other WTO members expect China to do more to address the concerns of other WTO members. WTO members want China to make more information available about its subsidies, at all levels of government. It could also show more willingness to address overcapacity and make commitments on state-owned enterprises. If it does not, the frustration with the WTO framework will grow among partners other than the United States. These partners also will see unilateral action as the only effective way to address concerns with Chinese policies, further increasing internal tensions at the WTO.

Can WTO members overcome India’s obstructionism?

India has been obstructing WTO initiatives for many years, including attempts to move forward among smaller groups of WTO members (so-called “plurilateral” initiatives). Its position is unlikely to change in a second Trump administration. Members’ frustration with Indian obstructionism has been growing. Some members are taking a firmer stand against it and pushing for changes to WTO decision making. Members will need to continue to challenge India and to seek ways to make decision making more flexible. The problem is that a second Trump administration may not want decision making to be more flexible and may prefer a hamstrung WTO. What role India would take in such a scenario, and other members’ reactions to it, would prove critical for the organisation’s survival.

Will WTO members find a balance between trade and national security?

National security concerns will continue to weigh heavily on future trade policy. Invocation of national security as a justification for trade measures is likely to continue and may even grow under a second Trump administration. Indeed, it was the first Trump administration that used national security to justify trade measures on steel and aluminum.

The United States has put forward a consistent position on national security at the WTO, under which there can be no independent review of a country’s invocation of the security exceptions. This position is unlikely to change in a second Trump administration. If anything, the position is likely to harden.

My sense is that most other WTO members are uncomfortable with giving countries absolute discretion on the invocation of the security exceptions. Invocation of security as a justification for trade measures will continue to generate tension in the system. Although a written accommodation may be unrealistic (including because the United States would likely block it), a tacit, political accommodation on the issue could be an option.

***

Given the above, the survival of the WTO is by no means guaranteed. Much will depend on the political capital that other WTO members are willing to invest in preserving it, China’s willingness to address concerns raised by many WTO members, as well as the approach ultimately taken by a second Trump administration. Overcoming Indian obstructionism would help modernise the WTO, which, in turn, will make survival more likely. However, the inability to move forward is more of a medium-term than an immediate threat. Finally, there will always be some tension between trade and national security. A more robust political process (as opposed to litigation) would allow the WTO to contribute to managing those tensions.

What role would the WTO play then if it survives? The WTO will continue to be caught between the geopolitical rivalry between the United States and China. It is increasingly difficult to conceive of a scenario in which the WTO regulates both trade with the United States, on the one hand, and trade with China, on the other hand. It looks likely that a Trump 2.0 administration will either feel unconstrained by the WTO and ignore it, or it would seek to drive a wedge between China and other WTO members. Neither scenario will appeal to other WTO members who would much rather be able to rely on WTO rules in their trade relations with the United States and who also see value in the WTO for their engagement with China. WTO members will need to be strategic. It is in most members’ interest to preserve the WTO.

To read the full article as it was published on JD Supra, click here.

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The resulting damage is strategic as well as economic with the rise of China’s authoritarian state-capitalist model combining heavy public subsidies with technology protectionism and unilateral economic coercion.

In November 2023, trade officials capped years of a trade policy vacuum by failing to reach an agreement on the trade portion of its signature economic initiative in Asia, the Indo-Pacific Economic Framework for Prosperity (IPEF). The embarrassing debacle only reinforced Asian views that the United States is an ‘unreliable’ economic partner.

While deeper social and economic shifts have contributed to the United States reaching a low point in trade leadership, the proximate political event was Trump’s election in 2016.

Abetted by advisers who either knew better or were ideological cranks, such as economic adviser Peter Navarro, Trump’s ‘America First’ trade policy was guided by the president’s personal whims and false longstanding conclusions about postwar US trade policy. These false conclusions include the notion that trading partners — rather than US consumers and businesses — pay for tariffs, trade policy is the main factor influencing the US trade balance or that the World Trade Organization (WTO) always rules against the United States.

Two decisions in particular were damaging for strategic and economic reasons: withdrawal from the Trans-Pacific Partnership and the spurious invocation of a national security rationale to levy tariffs on steel and aluminium imports, even against US allies.

US officials have refused to accept a WTO decision that the tariffs violated international trade rules. Meanwhile, in the Asia Pacific, nations have negotiated new regional agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership agreement. These agreements have spurred increased trade flows and investment, leaving the United States behind.

Initially advanced by the United States, the CPTPP was the first major trade agreement to include an e-commerce chapter. Beijing is now pressing to join the CPTPP and though members can slow down the application, China may achieve its goal in the future.

Under Biden, the United States adopted a conciliatory tone toward US allies. Yet Biden continued many of Trump’s worst policies, including the so-called ‘national security tariffs’ and dawdling over proposals to restart the WTO dispute settlement process, which had been hampered by the Trump administration’s refusal to allow the appointment of new WTO Appellate Body judges — a stance continued by the Biden administration.

Arguing that traditional trade agreements negotiated under both Democratic and Republican presidents had sent jobs offshore and devastated local communities, US Trade Representative Katherine Tai promised a new ‘worker-centric’ trade policy that would be inclusive and equitable. During a major speech in April 2023, Jake Sullivan, Biden’s National Security Adviser, posited a ‘new Washington Consensus’ that eschewed free trade agreements and built upon new strategic industrial policy. Former director of the National Economic Council and former president Barack Obama’s top economic advisor, Lawrence Summers, strongly criticised the ‘aggressive economic nationalism’ and the statist emphasis in the speech.

The result of these policies is that while other nations, including major strategic competitor China, have moved forward with growth-enhancing trade pacts — with 36 agreements being notified to the WTO — the Biden administration’s only major international economic initiative — the IPEF — remains in limbo. IPEF is stymied by US refusal to offer market access concessions in exchange for its demands for politically difficult labour rights and environmental concessions.

Given the increasing centrality of the digital economy in the future, the most damaging policy reversal by the Biden administration is the decision to abandon longstanding US digital trade policies that championed the free flow of data, opposed forced data localisation and protected individual source code. In a triumph for misguided progressivism and trade union muscle, the United States Trade Representative officials withdrew from WTO e-commerce talks, asserting the need for more ‘policy space’. Even a Biden administration ally, US Senator Ron Wyden, labelled this move as a ‘win’ for China.

Trade policy is off the table until after the US presidential election. Even in 2025, the outlook is not good for renewed US leadership. Trump has vowed to cancel the IPEF and introduce across-the-board 10 per cent tariffs on all trading partners. There is no sign that Biden, if re-elected, would challenge the anti-globalists in his own party. Happy New Year.

To read the full article published by American Enterprise Institute, click here.

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So Trump pressured Mexico and Canada to replace their mutual pact with one more to his liking. After a couple of years of negotiations, he got what he wanted. Out was the North American Free Trade Agreement. In was the U.S.-Mexico-Canada Agreement.

The USMCA, which Trump hailed as “the fairest, most balanced and beneficial trade agreement we have ever signed,” will reach its third anniversary Saturday.

The trade pact hasn’t proved to be the economic bonanza Trump boasted it would be. It couldn’t have been, given that trade makes up less than a third of America’s $26 trillion economy.

Yet while the the deal’s overall impact has been slight, it has nevertheless been helping workers on the ground. It’s just that the beneficiaries have so far been mostly in Mexico. Novel provisions of the pact have enhanced the ability of long-exploited Mexican workers to form unions and secure better wages and working conditions.

Trade officials and experts predict, though, that the benefits will also flow, in time, to U.S. workers, who no longer must compete with severely underpaid Mexican laborers without real bargaining power.

“U.S. workers win when workers in other countries have the same rights,’’ said Cathy Feingold, director of the AFL-CIO’s international department.

Thea Lee, a deputy undersecretary at the U.S. Labor Department, suggested that the pact and Mexico’s reforms haven’t been around long enough to yield measurable help to American workers yet. “We’re going to see the positive results first for Mexican workers because Mexico is undergoing a massive, comprehensive, ambitious labor market reform,” she said.

In some ways, the USMCA as a whole has fallen short of Trump’s promises.

Take the trade deficit with Mexico. Despite Trump’s insistence that the USMCA would pull more manufacturing back to the United States, the gap between what America sells and what it buys from Mexico keeps widening: It has surged from the $64 billion gap in 2016 that so irritated Trump to a record $139 billion last year.

The former president also predicted that exports of U.S. auto parts to Mexico would rise by $23 billion. They have increased since 2020 — but only by about $8 billion.

“I don’t expect that we’re ever going to be able to say that (the USMCA) accomplished very much,’’ said Alan Dierdorff, a professor emeritus of economics and public policy at the University of Michigan. “I don’t think it hurt much. But I don’t think it helped much.’’

Trump said the pact would create 76,000 auto industry jobs. Since January 2020, vehicle and parts manufacturers have actually added nearly 90,000 jobs. And North American commerce has flourished. America’s trade with Canada and Mexico — exports plus imports — reached a record $1.78 trillion last year. That was up 27% from 2019 and was above a 20% gain in trade with China over the same period.

But it’s hard to tease out which economic gains can be credited to the USMCA and which happened for a variety of unrelated reasons. That is especially true in light of the unusual economic tumult of the past three years: A devastating pandemic, followed by severe labor shortages and supply chain backlogs and a resurgence of rampant inflation.

Also complicating any effort to calculate the USMCA’s impact is President Joe Biden’s own aggressive efforts to rejuvenate American industry with trillions of dollars in infrastructure spending and subsidies.

For all of Trump’s bombast, the USMCA actually left in place much of the pact it replaced. NAFTA erased most of the import taxes that the United States, Mexico and Canada imposed on each other’s goods. It created a duty-free regional bloc meant to compete with the European Union and China. That structure remains mostly in place.

“It’s still pretty much the same as NAFTA,” Dierdorff said.

Still, some substantive changes have occurred. When NAFTA took effect in 1994, for instance, the internet, e-commerce and smartphones weren’t part of everyday business. The new pact updated North American trade rules for the digital age.

The USMCA, for instance, bars the United States, Mexico and Canada from hitting each other with import taxes on music, software, games and other products sold electronically; allows the cross-border use of electronic signatures and authentication; and protects companies from having to disclose in-house source codes and algorithms.

Given how it modernized North American trade, the “USMCA is a marked improvement,’’ said Neil Herrington, the U.S. Chamber of Commerce’s senior vice president for the Americas.

Perhaps the most consequential changes the pact wrought were designed to reverse one of NAFTA’s unhappy byproducts for Americans: The old deal incentivized companies to close factories in the United States, ship production to lower-wage Mexico, then export goods back into the United States — duty free.

The USMCA sought to make it harder for autos and auto parts to enjoy tariff-free treatment. To qualify, 75% of a car and its parts had to come from North America, up from 62.5% under NAFTA. That meant more content had to come from higher-wage North American workers, not imported cheaply from China or elsewhere. And at least 40% of vehicles would have to originate in places where workers earn at least $16 an hour — that is, the United States and Canada, not Mexico.

But those so-called automotive rules of origin stumbled out of the gate. Enforcement was delayed as customs officials faced supply chain backlogs at the height of the COVID crisis.

“Border officials were worried about clearing cargo in ports and getting rid of congestion,’’ said Daniel Ujczo, senior counsel at the law firm Thompson Hine in Columbus, Ohio. “They didn’t have a ton of time to deal with USMCA.’’’

Even after the auto rules took effect, the United States was slapped down for the way it tried to enforce them. A USMCA trade court, in a case brought by Mexico and Canada, found that Washington was applying the rules more strictly than was allowed.

The United States has achieved more success in using the deal to pressure Mexican employers to comply with their country’s labor reforms. Workers there can now vote freely and fairly on joining unions, approving contracts and choosing union leaders. In the past, pro-company unions in Mexico signed contracts behind workers’ backs. Strikes were rare, wages stayed low and union leaders got rich.

The USMCA armed the United States, Mexican workers and union activists with a new weapon: The “Rapid Response Labor Mechanism.” This allows the U.S. government to crack down on individual factories in Mexico — by, for example, suspending tariff exemptions for their products – if they violate Mexican labor law.

“We took a lot of the key parts of (Mexico’s) labor reform, and we baked them directly into the trade agreement,’’ said Josh Kagan, assistant U.S. trade representative for labor affairs. “We’re holding Mexico to actually implement this labor reform they’ve undertaken.’’

So far, the United States has used the mechanism 11 times to demand corrections of labor law violations. Mexico has so far cooperated, by sending law enforcement and labor inspectors to guard ballot boxes in new votes that independent unions have mostly won.

Under pressure from a U.S. complaint, Mexican officials and observers oversaw a union vote in which the old union was thrown out. The new union won the right to negotiate — and an 8.5% wage increase, plus bonuses.

“If workers had tried a similar organizing effort before, “they would have fired us immediately,” said Manuel Carpio, who works at a General Motors plant in Silao, in the state of Guanajuato.

Still, it isn’t a perfect process, said Julia Quiñonez, who organized an independent union at a U.S.-owned auto parts plant, VU Manufacturing, in the city of Piedras Negras, Coahuila, across from Eagle Pass, Texas. The old union joined with the company to try to bar the new union. The two sides are still struggling.

“We have heard about other cases where the companies have respected the process and agreed to corrective plans,” Quiñonez said. “But the VU case has been plagued by a lot of deceit, corruption and frustration.’’

One problem, Quiñonez said, is that cases tend to be kicked back to the same Mexican courts and authorities that should have enforced the law in the first place.

“The obstacles we are facing are the normal resistance you might expect in a system that has been operating for at least 80 years,” she said.

The worker provisions in the USMCA were strengthened in negotiations between Trump’s trade team and congressional Democrats. Working on those talks was Katherine Tai, then the chief trade counsel on the House Ways and Means Committee and now Biden’s top trade negotiator.

The Biden administration says it views the worker provisions in the USMCA as a model for future trade deals that seek to benefit workers, not just companies that want to expand their exports.

“I don’t think anybody knew how the Rapid Response Mechanism process would play out,’’ the Labor Department’s Lee said. “But people have found that it’s working as anticipated and as hoped.’’

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There was a time when cars manufactured in China were ridiculously unsafe. They tended to crumple in a collision like they were made of cardboard. But over the past 20 years, the Chinese have learned a lot from the American and European car companies that started manufacturing in China, thanks to local rules that require foreign companies to partner with a Chinese company.

That requirement has sparked a transfer of information and technology unlike any in modern history. Today the Chinese are making cars that are as good or better than those from companies like Mercedes, Ford, Volkswagen, or GM, and the Chinese new car market dwarfs all others. Last year, there were 27 million new cars sold in China, 13.75 million cars and light trucks sold in the US, and 9.25 million cars sold in the EU.

Now the Chinese automakers are ready to start exporting cars to foreign markets, but are finding Europe much more welcoming of Chinese made cars than the US, which has been having an on again, off again trade war with China since a former failed president bragged that trade wars were easy to win.

Tariffs play a major role here. The EU import duty on foreign made cars is 10%, and all cars — foreign and domestic — are eligible for EV purchase incentives. In the US, the import duty is 27.5% and only cars that follow stringent rules regarding the sourcing of battery materials and components are eligible for federal EV incentives. In addition, cars must have their final assembly point in the US, Canada, or Mexico.

Some political leaders in the EU are beginning to question whether lax import rules will lead to a swarm of Chinese cars coming to the Continent that overwhelms domestic manufacturers. The latest offering from Volvo — which is owned by Geely, a Chinese company — is instructive. The new Volvo EX30 is a world class electric car, albeit a smallish one, and its price of just $34,995 in the US is a shot across the bow of every other car company.

5.4 million battery-electric vehicles were sold in China last year, which is two-thirds of all EV sales in the world. China also controls 76% of global battery cell production capacity and has a dominant position in every aspect supply chain for raw materials used to manufacture all those batteries. That offers the country’s carmakers a strategic advantage and the ability to build EVs at prices that few can match.

China & Europe Collide

That’s a potential headache for European automakers. The EU proposes to ban cars with conventional engines by 2035. Who is going to supply customers with affordable cars when that happens? The Chinese, says Politico. Last quarter, for the first time in history, China surpassed Japan to become the world’s leading auto exporter, according to China’s General Administration of Customs. “The quality and value for Chinese cars has improved by leaps and bounds, especially in the last three years,” said Michael Dunne, an independent automotive consultant active in the US and China.

Chinese exports were only 3.5% of European auto sales last year, according to S&P Global. But Transport & Environment estimates that Chinese companies could make up 18% of the EV market in Europe by 2025. Germany’s national statistics office said in May that imports of electric vehicles from both Chinese companies, including companies like Volkswagen who import cars manufactured in China to Europe, represented 28% of all its EV imports in this year’s first quarter — three times more than during the same period in 2022.

“They are leveraging their specific product know how over incumbent European brands that employ a lot of people to make engines,” one senior automotive manager told Politico. To match that kind of efficiency, “VW would have to lay off half of its staff.”

The risk to Europe’s economy is extreme, Politico says. Cars are the continent’s largest industry and biggest employer and account for 10% of manufacturing activity. Until now, car exports from Europe have generated a trade surplus of between €70 billion and €110 billion every year over the past decade for the European economy, but there is a real danger that surplus could diminish or even disappear as Chinese electric cars go from a trickle to a flood.

The prospect of that trade surplus evaporating is leading to growing pressure on the European Commission to boost tariffs on foreign cars. Automakers in France want higher trade barriers, but the big German manufacturers, which are reliant on sales of their cars in China, worry that protectionist tariffs could bring retaliation from Beijing.

William Todts, the head of Transport & Environment, wants as many people as possible to switch to EVs, but not if it destroys the continent’s most important industry. “The goal is not to obstruct ambitious car and battery makers: the world sorely needs them. It’s to ensure intense but fair competition,” he wrote recently, adding that if the EU doesn’t act to block unfair competition from both China and the US, “Europe may well be on course to become a dumping ground for subsidized Sino-U.S. EVs and batteries.”

America Fears China

The generous incentives for electric cars and trucks baked into the Inflation Reduction Act are designed primarily to blunt the ability of Chinese companies to flood America with cheap electric cars. It is also intended to boost domestic (read non-Chinese) sourcing of battery materials.

The political winds in America are dramatically anti-China at the moment. “Mention the word ‘China’ to a member of the House or Senate, Democrat or Republican, the executive branch, they will give you the same look and say, ‘No, not welcome here,’” said Michael Dunne.

An example of the anti-China sentiment can be found in the experience of Microvast, a Texas company that won a tentative $200 million grant from the Biden administration to build a battery component factory in Tennessee. The government said the goal of the award was “bolstering domestic supply chains for lithium ion batteries and creating well paying jobs in the United States.”

Last month, the Energy Department announced with little explanation that it would not award the money after all. The proposed grant had drawn ferocious criticism from congressional Republicans because of the company’s ties to China, including a Microvast subsidiary there.

Ford got similar pushback in February when it said it would work with CATL, the largest battery maker in the world and one that is based in China. Ford insists it is just licensing the technology and that CATL will have no role in the factory. Ford CEO Jim Farley told a financial conference earlier this year, “They have some of the best battery technology. If localizing their technology in the U.S. gets caught up in politics, the customer is really going to get screwed.”

Gotion, another battery company based in China, is experiencing its own set of problems as it tries to establish a battery factory in northern Michigan. Despite the prospect of good paying jobs in an area that desperately needs them, the reception from the locals has been hostile, and that is putting it mildly.

The Takeaway

One solution Chinese companies could try is to build factories in America. After all, that is one of the things the IRA is meant to encourage. Doing so is what helped Japanese companies become successful in the US market. Today Japanese companies are firmly embedded in the US economy, and no one gives it a second thought. If China finds building US factories is too fraught, it could try establishing factories in Mexico to avoid the burden of the US import duty. (To be fair, China has had an import duty of 25% on all cars imported from the US for many years, so it’s not like the US tariff is out of line.)

A utopian would look at the enormous challenges the Earth faces as average temperatures continue their uphill climb and perhaps adopt the wisdom of Rodney King, who so famously said, “Can’t we all just get along?” The obvious answer is obviously no, we cannot. For many years, the US reveled in the fact that low paid minions around the world were keeping the shelves at Walmart stocked with inexpensive goods, but now the wheel has turned and “globalization” has lost much of its allure, and the shoe is on the other foot, so to speak.

How the world handles the challenge of low cost electric cars from China will be indicative of how it deals with more pressing problems. Looking at the current situation, it’s hard to be overly optimistic that humans will be able to put aside their parochial interests for the common good. Perhaps the next species to have mastery over the Earth will be better at pursuing cooperation instead of “winner take all” competition.

The Earth doesn’t care where electric vehicles come from, but humans do. ‘Tis a conundrum for sure.

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be “woke” and doesn’t really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: “The secret to change is to focus all of your energy not on fighting the old but on building the new.”

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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.

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Most important, when taken as a whole and given its timing just as the 2024 presidential campaign begins, the speech seems to be politically out of tune and picking the wrong targets. It is vigorous if defensive in rebuking the Biden administration’s liberal-internationalist friends for their worries that it may be overreaching in industrial strategy and under-reaching in trade policy. It is premature at best in positing that the administration’s global-economy agenda has achieved consensus status as the “project of the 2020s and 2030s,” and does not recognize — despite warnings from allies as important and close to the subject as Japan — the strength of the Chinese counter-“project.” And while spending lots of time in an argument with the 1990s, it elides not only the recent Trump administration record but the domestic political challenge from the administration’s Trumpist/isolationist enemies — which, in a few months, will seek to end the Biden administration, and with it not only Sullivan’s version of international economics but the 80-year liberal-internationalist legacy the speech rightly praises.

Message and Audience: Sullivan’s message throughout is a defense of three aspects of administration policy against concerns from its critical friends, and friendly critics, at home and in allied governments: that (a) its “industrial strategy” risks trying to do too much by expanding into places that private markets can serve pretty well, (b) its trade agenda is trying to do too little, missing opportunities to promote growth and high-wage employment at home and to build alliances abroad, and (c) its overall approach has veered close enough to economic nationalism to appear at times indifferent to the interest of allies and friends, and to risk damaging the “rulesbased order” the administration ably defends in diplomacy and security. Uniting these strands of argument, with special force in the opening and the close, Sullivan seeks to convince the critics that the approach is recognizably in the liberal-internationalist tradition of earlier Democratic presidencies, though appropriately adapted to meet an extensive list of new challenges. Two passages illustrate:

Opening: “The idea that [Biden administration policy] is somehow America alone, or America and the West to the exclusion of others, is just flat wrong. This strategy will build a fairer, more durable global economic order, for the benefit of ourselves and for people everywhere. So today, what I want to do is lay out what we are endeavoring to do.”

Close: “The world needs an international economic system that works for our [American] wage-earners, works for our industries, works for our climate, works for our national security, and works for the world’s poorest and most vulnerable countries. That means … targeted and necessary investments in places that private markets are ill-suited to address on their own—even as we continue to harness the power of markets and integration. It means providing space for partners around the world to restore the compacts between governments and their voters and workers. It means grounding this new approach in deep cooperation and transparency to ensure that our investments and those of partners are mutually reinforcing and beneficial. It means returning to the core belief we first championed 80 years ago: that America should be at the heart of a vibrant, international financial system that enables partners around the world to reduce poverty and enhance shared prosperity. And that a functioning social safety net for the world’s most vulnerable countries is essential to our own core interests. It also means building new norms that allow us to address the challenges posed by the intersection of advanced technology and national security, without obstructing broader trade and innovation.”

China: Some of the specific elements of the speech are very well done. The concise passage on China policy, consistent with Treasury Secretary Janet Yellen’s more detailed April 20th address, argues that the Biden administration’s approach is serious, strict on security-related trade, but also not seeking confrontation and looking for areas of mutual benefit. This clearly explains goals, limits, and methods. Some samples:

Export controls and trade: “We’ve implemented carefully tailored restrictions on the most advanced semiconductor technology exports to China. Those restrictions are premised on straightforward national security concerns. Key allies and partners have followed suit, consistent with their own security concerns. We’re also enhancing the screening of foreign investments in critical areas relevant to national security. And we’re making progress in addressing outbound investments in sensitive technologies with a core national security nexus. Our export controls will remain narrowly focused on technology that could tilt the military balance. We are simply ensuring that U.S. and allied technology is not used against us. We are not cutting off trade. In fact, the United States continues to have a very substantial trade and investment relationship with China. Bilateral trade between the United States and China set a new record last year.”

Summary paragraph: “[W]e are competing with China on multiple dimensions, but we are not looking for confrontation or conflict. We’re looking to manage competition responsibly and seeking to work together with China where we can. President Biden has made clear that the United States and China can and should work together on global challenges like climate, like macroeconomic stability, health security, and food security. Managing competition responsibly ultimately takes two willing parties. It requires a degree of strategic maturity to accept that we must maintain open lines of communication even as we take actions to compete.”

Trade, Tariffs, and the “Projects” of the 1990s and 2020s: Some other sections don’t hold up so well. The lengthier passage on trade policy in fact mixes eccentric history with jumbled policy arguments, and ends with puzzlement about where the administration really wants to go. Here, Sullivan’s point of departure is an ill-grounded sparring match with the U.S. policy agenda of the 1990s, characterized briefly and incorrectly as follows:

“The main international economic project of the 1990s was reducing tariffs.”

As history, “reducing tariffs” might, with some distortion and oversimplification, describe the main trade policy goals (though not the “main international economic project”) of the Roosevelt and Truman administrations in the 1930s and 1940s, or of the Kennedy and Johnson progressivepolicy.org administrations in the 1960s. For the 1990s, it doesn’t work even for trade policy alone. And if the administration feels it must start an argument over policies thirty years in the past, and contrast its own approach with them, it should understand those policies and describe them accurately.

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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