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A Trade Policy for the Middle Class Will Not Save US Manufacturing

The Biden administration has turned its back on free trade, arguing that decades of globalization have not benefited US manufacturing workers. That may be true, but its new plan for a “fairer, more durable” international economic order is unlikely to improve their wages or job prospects.

MILAN – US trade policy is on the cusp of a major transformation. In a recent speech at the Brookings Institution, Jake Sullivan, President Joe Biden’s national security adviser, outlined the administration’s strategy to “build a fairer, more durable global economic order.” At the heart of this new approach is the belief that, although the world has reaped the benefits of free trade over the past several decades, American workers got a raw deal.

Sullivan’s first piece of evidence is that “America’s industrial base had been hollowed out.” While most analysts focus on manufacturing’s declining share of GDP – 11% in 2021, compared to 28.1% in 1953 – the decline of manufacturing is also reflected in the composition of US trade. Around the turn of the century, manufactured goods accounted for more than 80% of US merchandise exports. By 2022, this share had shrunk to below 60%.

It is unlikely that globalization and free trade were the primary catalysts of this de-industrialization of US trade. After all, manufacturing’s share of exports has remained close to 80% for the European Union and hovers around 93-95% for China. Compared to other major developed exporters, the US is an outlier. This implies that China’s rise as the world’s leading manufacturing powerhouse is not the cause of the relative decline in US manufacturing exports.