Biden’s Worker-First Trade Policy Rankles Foreign Partners

Asian allies like Japan and Australia are increasingly frustrated with the lack of interest from Washington in joining regional trade agreements to counter China’s growing influence. The United Kingdom and Japan are still awaiting lifting of Trump-era steel and aluminum tariffs.

At the heart of these conflicts is the sway progressive Democrats and labor unions hold with Mr. Biden, economists and others say. About 56% of union households voted for Mr. Biden, according to AP Votecast, which conducts voter surveys, compared with 42% voted for Donald Trump.

Unions tend to favor tariffs on imports and “Buy American” policies that increase domestic production. They also generally oppose trade agreements, believing they lead to lower wages and job losses for American workers.

The pursuit of the worker-centric policy could come at the expense of establishing U.S. global leadership on trade, said Ed Gresser, a former senior policy official for the U.S. Trade Representative’s Office during the Obama, Trump and Biden administrations.

“The administration wants to show America’s back,” said Mr. Gresser, now vice president of the Progressive Policy Institute, a nonprofit think tank. “It will be much harder to achieve that if what we’re seeing is the U.S. not participating in trade policy discussions and remaining in more nationalistic and more fearful mode.”

Adam Posen, president of Peterson Institute for International Economics, a pro-trade Washington think tank, said Mr. Biden’s trade policy protects traditional manufacturing workers while raising costs of imported goods for U.S. businesses and consumers.

Mr. Posen says Mr. Biden’s policy panders to “white-male industrial work” and “makes things worse with allies and more expensive for consumers.”

The Biden administration says that it has resolved disputes with the European Union and boosted economic cooperation with the “Quad” nations including Japan, Australia and India.

The policy to give priority to domestic spending to help workers and communities “in no way prevents us from the important work of aligning with allies and partners,” a senior administration official said. “We don’t see a conflict.”

Mr. Biden wants to enlist the support of trading allies and other countries in dealing with China. He was critical of Mr. Trump’s trade policy, calling it a unilateral approach that angered longtime trading partners. Mr. Biden said he would work to repair those relations and enlist the support of allies in dealing with China.

But Mr. Biden has also angered U.S. trading partners. As part of his now-stalled Build Back Better plan, Mr. Biden proposed more generous tax credits for electric vehicles built in United Auto Workers union factories than those made elsewhere.

“The way they formulated this incentive really, really has the potential to become the dominant issue in our bilateral relationship,” Canada’s deputy prime minister, Chrystia Freeland, told reporters last month.

Asian allies are growing impatient at the lack of Washington’s strong commitment to regional trade pacts, and are looking for U.S. leadership in areas such as digital trade, which could include new standards for e-commerce and data sharing.

“The U.S.’s security presence has brought stability and peace in the region,” Singapore’s deputy prime minister, Heng Swee Keat, said in a Nov. 30 speech. “But for this to continue into the next decades, the U.S. cannot afford to be absent from the region’s evolving economic architecture.”

Beijing is boosting its engagement in regional trade policy-making. It has recently applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the new iteration of a trade agreement abandoned by the U.S. in 2017.

China is also the leader of the Regional Comprehensive Economic Partnership, a broad, if limited, new regional trade agreement launching in January without the U.S.

U.K. and Japanese officials say they are frustrated with the slow pace of progress in lifting the steel and aluminum tariffs imposed on their products by Mr. Trump who cited national security threats undermining America’s important industries.

Labor groups, including United Steelworkers, and some lawmakers support the tariffs as a way of protecting U.S. jobs in a critical industry.

A bright spot for the Biden administration’s trade relations is Europe. U.S. Trade Representative Katherine Tai eased a longstanding dispute over commercial aircraft subsidies, lowered tariffs on European steel and aluminum and set up a new framework to discuss emerging technology issues. Resolving the aircraft and metals disputes eliminates billions of dollars in enacted and threatened tariffs and counter tariffs.

“It all adds up to a landmark year for trans-Atlantic relations,” Valdis Dombrovskis, executive vice president of the European Commission said last month.

The administration also orchestrated a global tax agreement that replaced digital-services tax threatened by various nations and avoided a new tariff fight with Vietnam. Its tough stance on forced labor in China and elsewhere has bipartisan support.

USTR spokesman Adam Hodge said that allies have also expressed support for trade policy emphasizing workers. “We will continue working with them to create inclusive prosperity for workers in America and around the globe.”

Ms. Tai’s office brought two cases against Mexican manufacturing facilities alleging the violation of the rights of workers to unionize under the U.S.-Mexico-Canada Agreement, or USMCA. In both cases, the companies agreed to change their practices to come into compliance.

The AFL-CIO is pleased with the Biden administration’s trade policy so far, said Eric Gottwald, the union’s policy specialist on trade.

Ms. Tai visited the AFL-CIO’s Washington headquarters in June, where she said union workers are “the backbone of our economy and our democracy.”

“You are the guiding light of trade policy for the Biden-Harris administration,” Ms. Tai said.

Write to Yuka Hayashi at [email protected]