President Biden’s Trade Gift to China

He’s given up on new digital trade rules with allies in the Pacific.

WSJ editorial. 

"Hard to believe, but President Biden has shown stronger leadership in the Asia-Pacific on defense than on economics. His Administration had hoped to announce a skinny trade deal with allies in the region at the Asia-Pacific Economic Cooperation summit this week, but it collapsed amid opposition from progressives and unions. 

The Indo-Pacific Economic Framework (IPEF) trade deal was intended as a substitute for the Trans-Pacific Partnership (TPP) that Donald Trump abandoned in one of his worst decisions. IPEF doesn’t lower tariff barriers or expand market access. But its most useful contribution would be protecting digital trade on terms similar to those negotiated with Mexico and Canada in the USMCA deal.

This includes barring foreign governments from discriminating against U.S. tech companies, or requiring that data be stored on local servers, or compelling American companies to turn over proprietary source code including algorithms. Yet the Biden Administration can’t even bring itself to support these modest trade protections.

Last month U.S. Trade Representative Katherine Tai withdrew support for such digital trade principles at the World Trade Organization (WTO) in order “to provide enough policy space” for debates to unfold. But the debate in the Administration is already over.

Federal Trade Commission Chair Lina Khan and Justice Department antitrust chief Jonathan Kanter importuned Ms. Tai to jettison provisions in IPEF that would protect U.S. tech companies from unfair foreign regulation. They believe other countries should be allowed to regulate U.S. tech giants as common carriers a la Europe’s Digital Markets Act.

The AFL-CIO said in February that U.S. digital trade policy let Big Tech “avoid regulatory oversight in the United States and countries around the world.” That’s false. Strong digital trade protections help U.S. businesses in myriad industries and don’t prevent foreign governments from regulating American firms on nondiscriminatory terms.

The unions lobbied for measures in IPEF that “facilitate meaningful oversight of source codes and algorithms to ensure compliance with labor and employment laws”; “address abusive employment practices in the technology sector”; “protect and promote the economic security of creative professionals,” and “discourage low-road digital offshoring.”

Progressives in Congress last week added to these demands in a letter to Mr. Biden warning against IPEF rules that would “restrict governments from obtaining information on algorithms to systematically enforce against self-preferencing and other competition policy threats and wage and hour and other labor violations done via ‘bossware’ programs.” So-called bossware tracks employee productivity.

In sum, unions and progressives want to use IPEF not to advance U.S. economic interests, but to promote their anti-business agenda. But their demands are opposed by U.S. businesses, Members of Congress in both parties and America’s Indo-Pacific trade partners. New digital trade rules are the casualty.

Unions are also demanding that IPEF include labor protections for foreign workers similar to those in U.S. law. Yet foreign governments won’t make any labor concessions without the U.S. giving ground on market access. Thus, Ohio Sen. Sherrod Brown (D., AFL-CIO) is now calling on the Administration to abandon the IPEF's entire trade pillar.

By withdrawing from TPP, Donald Trump gave up an opportunity to counter Beijing’s economic influence in the Indo-Pacific. Now Mr. Biden is letting President Xi Jinping expand China’s digital sphere of influence too."