Redistributive policy

Middle class dynamics for American foreign policy?

Orbis Issue revisited: Spring 2021 (65:2), “Challenges Facing the Biden Administration

A focus on foreign (economic) policy for the middle class remains a key organizing principle for the Biden administration, but so far it has seemed more powerful in terms of rhetoric than implementation. This partly reflects the fact that a key element of foreign policy for the middle class is to make changes at home through redistribution and investment that would reduce Americans’ vulnerabilities. The Biden administration, for example, has focused not only on using restrictive geoeconomic tools like sanctions, export controls, and investment screening, but has also focused on ways to invest. in new capacities and alternatives at home and abroad. The America Competes Act (formerly the US Innovation and Competition Act) which incorporates the CHIPS Act is one of them. Increase STEM R&D spending in the country and some additional spending in coordination with allies in Asia to counter China rather than relying primarily on economic restrictions. The US Treasury has focused on improving global tax treatment and on measures to reduce vulnerability to money laundering in the United States, not just vulnerability abroad.

These are welcome, but not quick fixes, and they have their own intended and unintended consequences, as creating redundancy in supply chains and remaking them is costly.

Other measures aim to increase the resilience of the United States to external and domestic vulnerabilities, including advancing beneficial ownership transparency to make the United States a less safe haven for global tax evasion and illicit activities. Meanwhile, the United States is scrambling to reshape global rules to meet new American priorities, but finding common ground with allies is not a quick and easy fix. The challenge, however, is that the focus on U.S. priorities, including expanding Buy American measures — aimed at supporting U.S. production — and lukewarm interest in new regulators from some allies have limited the development of new coalitions.

“Foreign policy for the middle class” is regularly cited by Treasury, State and Trade officials, including initiatives at the WTO, the recent sanctions review, the approach to global fiscal policy and recently about concerns about forced labour. In practice, it has been more difficult to implement and has reinforced some status quo policies, particularly in trade policy, where, instead, the USTR seems focused on maintaining some of the tariffs imposed by the USTR. Trump administration, even if they drive up the prices of intermediate products. class/low-income buyers. On the sanctions side, the focus on the impact of sanctions on US small businesses is the most palpable example. Efforts to improve communication, find new ways to raise awareness, and reduce information asymmetry are examples of how this frames the thinking process, but implementation is likely to be more difficult. Treasury’s efforts to clarify its rules and respond more proactively to U.S. businesses are welcome, but overall these moves coincide with a set of regulations that increase the compliance burden in ways that are difficult for small businesses. companies. And many of these policies can have negative effects on the middle class and small businesses overseas. This may be intentional, in countries like Iran, but it may pose challenges to US national security by encouraging financial and technological workarounds and forks.

An open question for some of these initiatives, like the recent one on forced labor, might be whether these middle-class interests are shared by the American people. Measures that restrict imports from Xinjiang are a rare bipartisan spark in Congress, for example. The limits of some of these policies can be seen in the inflation messaging, particularly regarding rising gas prices, which focused on calling on OPEC+ to pump more fuel and open up strategic reserves.

In this focus on the middle class, the Biden administration is connecting with some of its key allies – in Canada, the UK, the EU and beyond – but connecting the ties between bilateral/smaller deals groups presents some challenges, especially as more policies focus on localizing jobs and deepening U.S. supply chains, even as imports remain high. The Biden administration appears less transactional than the Trump administration and more focused on building minilateral coalitions around priorities. This reflects his belief that a coordinated set of policies and standards will be more effective. That said, he persists with a high degree of bilateral coordination, selectively building new alliances (QUAD, bilateral groups on supply chain and COVID issues) and trying to redirect existing ones to achieve these goals. . Overall, U.S. efforts to coerce adversaries like China and Russia on human rights, cybersecurity, and other grounds, while collaborating on issues like climate — and demanding accounts to third countries – have not yet borne much fruit. This compartmentalization was always going to be difficult and could encourage decisions that reduce US long-term debt. Likewise, balancing short-term crises — including the energy shortages that Russia exacerbated in the summer of 2021 — and sending a clear message about future goals is a challenge for any administration.

This is an administration that seeks partners, recognizes that it cannot do everything unilaterally, and does not treat all foreign actors the same, that is, a trade threat from Canada or the EU is different from China. However, there is more emphasis on deepening local supply chains where possible, home-based production and other policies that continue to fail to align with allies. Some efforts, like the US-EU Trade and Technology Council (which Social Democrat foreign affairs spokesman Nils Schmid identified in the winter issue of Orbis as a promising development in transatlantic relations) that aims to advance standards, energy and other innovations, as well as recent efforts to close the gaps on steel tariffs, have been positive steps. The same was true of the initiatives with the QUAD, the delivery of the COVID vaccine and the related measures.

Another challenge concerns the risk of protectionism becoming part of it and how to support Americans, especially the middle class, in global trade. As budget cuts in some key countries – China, parts of Europe and some other emerging markets that lack room to maneuver – are putting increased pressure on the US consumer to be the world’s largest consumer, the Leakage risk and other countries benefiting from US fiscal stimulus has become a growing concern that has amplified bipartisan interest in protectionism. Across the political spectrum in the United States and other countries, there is an increased level of comfort with government intervention and involvement, which complicates the interaction between these global roles. It’s not necessarily bad at all; the selection of key sectors of interest, their development and planning for the future involve a role for the government.

What is clear, however, is that this is not primarily a restorationist approach. While there is a desire to coordinate with allies and ensure democracies deliver and build resilience, the United States is seeking to reshape the rules in ways that take power away from adversaries and update /develop new tools, but also allies who have been able to use them. The United States is somewhat less willing than in the past to invest in global public goods for itself and is relatively selective in supporting such measures, picking and choosing those that are politically most expedient. This reflects a palpable shift in sentiment since around 2014 that has altered the role of the United States in the world. The challenge will be to use that power to manage crises and disorder, especially at a time when divisions and distrust are growing in the United States and among many of its allies. While the administration has taken significant steps to rebuild trust with its allies, it will need to continue to tie those long-term goals to those that actually build resilience, lest it be forced into a reactive state.

The opinions expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a nonpartisan organization that seeks to publish well-reasoned, policy-oriented articles on U.S. foreign policy and the national security. priorities.