White House and Biden administration officials say the president’s first foreign trip was about establishing credibility with partners: laying the groundwork for plans on everything from trade to tax rates that will eventually deliver for America’s middle class and its counterparts in other democracies.
It’s a set of hopes that rest on handshake diplomacy and international agreements with disparate foreign governments, which are supposed to eventually deliver gains to the middle class.
“The intentions are clearer at this moment than the outcome,” said Ashley Tellis, co-author of a 2020 paper with Jake Sullivan — now Biden’s national security advisor — on how to apply foreign and trade policy for the benefit of the U.S. middle class.
Sullivan, in a call with reporters Thursday, pushed back on that observation. “This was an unusually productive substantive set of summits with real, tangible outcomes,” Sullivan said. He pointed to the U.S. commitment of half a billion Pfizer vaccines to the 100 lowest-income countries, which he said helped to galvanize vaccine commitments from the other G-7 members. With Biden mandating American production of those doses, the plan also serves as a minor boost for domestic manufacturing.
But other middle-class benefits from the week of global summitry are less direct.
Perhaps the most tangible policy outcome from Biden’s first venture overseas as president was the G-7 agreement on a 15 percent global corporate minimum tax. The administration has been quick to trumpet the commitment from fellow nations, but it’s unclear just what benefit that will have for U.S. jobs or American wages — compared to, say, a $15 minimum wage — or if it will even come to pass.
Biden’s ancestral home, Ireland, is the most vocal opponent of the proposed 15 percent corporate minimum tax rate, and it may take the president’s personal intervention to shift their position. Even if Biden succeeds, the new tax will come into effect in 2023 at the earliest.
Treasury Secretary Janet Yellen told the Senate Finance Committee on Wednesday that she is determined to hold the line as negotiations continue among more than 130 countries. “We would not agree to any type of carve-out that would meaningfully weaken a global minimum tax regime — not from China and not from other countries,” she said.
Even Biden’s domestic political allies aren’t convinced the agreement goes far enough. While labor unions welcomed the 15 percent tax rate announcement, Cathy Feingold, who runs the AFL-CIO’s international department, said it was too low to fund the programs needed to overcome Covid-induced inequalities. “A 15 percent rate could raise $150 billion globally each year. But with a 20 percent rate you raise $300 billion annually, and with a 25 percent rate it’s $580 billion,” she said.
Though American businesses might soon face stricter tax rules, the administration is keen to note that they will benefit from new market opportunities. The White House says there’s a $40 trillion market for new infrastructure in the developing world, one that China currently dominates. Bidens’ Build Back Better World plan, agreed to with G-7 leaders, is designed to complement domestic infrastructure ambitions by creating, as the plan notes, “new opportunities to demonstrate U.S. competitiveness abroad and create jobs at home.”
The administration wants to fund and build infrastructure to high, green standards around the world — betting rich democracies can do that better than Chinese competitors. But even if the administration meets their goal of mobilizing “hundreds of billions of dollars” for these projects, that’s only a fraction of expected domestic infrastructure spending, and not all of those jobs will go to Americans: the benefit for domestic workers will be marginal.
In some cases, the Biden approach abroad thus far has been simply to keep Trump policies in place, as with tariffs levied — under the guise of national security — on European steel and aluminium.
The steel tariffs are popular in swing states and among affected workers, though there’s scant evidence that they’ve majorly impacted domestic production and sales. The American steel industry has added several thousand jobs since the tariffs were put in place in 2018: a modest increase but a mere blip among the 160 million-strong national labor force.
One area where Biden’s foreign policy could have a more direct impact on the U.S. middle class is on trade. In a speech to labor unions on the eve of Biden’s overseas trip, U.S. Trade Representative Katherine Tai evangelized about ending a global “race to the bottom” — which for 40 years led nations to compete to limit wages and regulations to attract corporate investment.
Sullivan said Friday that an agreement to end a 16-year dispute between Airbus and Boeing is a win for workers on both sides of the Atlantic, and a sign that the race is ending.
“The U.S. and the EU will be working together to protect jobs and protect technology in Europe in the United States” by turning their collective political power “against China’s predatory practices,” instead of each other, Sullivan said. “In the end it will help secure and grow jobs in our own aviation industry by relaxing the tariffs and by protecting against predatory competition from China,” he said.
Boeing supports around 10,000 American businesses in its supply chain, and directly employs over 140,000 American workers. Unions have been pushing Boeing, Congress and the administration to limit job cuts planned by the company, and expressed support for USTR shifting attention to Chinese business practices.
But if the Airbus-Boeing dispute is anything to go by, it could be a decade or more before China amends what Tai labeled its “nonmarket practices.” And as airlines work to recoup pandemic losses, it’s unlikely that lower sticker prices for large aircraft will trickle down to the average American’s flight home for Thanksgiving.
More broadly, the administration’s confrontation of China economically remains a long-term project and not something that the president could tidy up in his first trip.
As that long-term project takes place, Secretary of State Antony Blinken is taking an expansive approach to the middle class challenge. Speaking in March, Blinken said he would use “every tool to stop countries from stealing our intellectual property or manipulating their currencies to get an unfair advantage. We will fight corruption, which stacks the deck against us.”
For the Biden administration, everything from anti-corruption networks to vaccine donations is branded as a boost to the middle class. And while international summits at 5-star resorts and 18th century European villas may seem far removed from the pocket book concerns of working families, the administration sees them as staging posts in a steady policy approach.
“Europe is the most promising place to test run a foreign policy for the middle class,” said former Ambassador Dan Baer, the Obama administration’s envoy to the Organization for Economic Cooperation and Security in Europe.
“If you’re going to think about how to negotiate a next wave of globalization, it makes sense to start with negotiations with other democratic governments who have a commitment to the social welfare of their citizens. That means not just Youngstown or Bakersfield but also Stuttgart and Marseilles.” Baer said.