U.S. national security adviser Jake Sullivan said on Thursday that the Biden administration is pursuing a new global economic strategy that aims to make up for past U.S. failures to manage the rise of China and to strike the proper balance between market forces and public spending.
“At the end of the day,” Sullivan said, “what we are trying to do is build the capacity to make things and deploy them and the resilience to be able to withstand the shocks in today’s world, from the climate crisis to a global pandemic to a war.”
The administration is deploying trillions of dollars in public spending to reshape an economic system that remained overly dependent upon market forces even as state-centric rivals such as China rose to dominate major industries.
Despite complaints about Chinese economic policies, Sullivan insisted the administration does not seek to decouple from China, only to reduce an excessive dependence upon Chinese suppliers for critical goods and minerals.
The International Monetary Fund in recent weeks has warned that rising tensions between the two nations threaten to split the global economy into rival trading blocs.
President Biden has pushed through Congress major legislation that identifies key sectors — such as advanced semiconductors, clean energy and infrastructure — that represent the foundation of decades of economic growth, Sullivan said. Rather than wait for companies to react to market signals, he said, the administration aims to use government funds to attract private investment, leading to total spending of $3.5 trillion over the next decade.
As the president seeks to revive domestic manufacturing, address the changing climate and narrow the gap between rich and poor, he seeks “to restore an economic mentality that champions building. And that is the core of our economic approach,” Sullivan said.
Greater domestic manufacturing is needed to maintain U.S. technological leadership and to produce the clean-energy products needed to address the climate crisis, he said.
Speaking at the Brookings Institution in Washington, Sullivan said past failures of economic policy also had eroded American democracy.
China was welcomed into the global trading system, yet continued to subsidize both traditional and advanced industries. As low-cost Chinese products gained market share, many American communities paid the price, he said.
“The so-called ‘China shock’ that hit pockets of our domestic manufacturing industry especially hard, with large and long-lasting impacts, wasn’t adequately anticipated and wasn’t adequately addressed as it unfolded,” he said. “And collectively, these forces have frayed the socioeconomic foundations on which any strong and resilient democracy rests now.”
Much of Sullivan’s speech amounted to a sweeping dismissal of the trade policies pursued by presidents of both parties for almost three decades after the end of the Cold War. Sullivan said the United States had relied on “oversimplified assumptions” about the workings of market economies in seeking international agreements to reduce tariffs.
Officials promoted greater trade as an end in itself, believing that integrating authoritarian countries such as China and Russia into the world economy would promote a more peaceful world and produce widespread prosperity at home.
Instead, Russia and China doubled down on repressive rule while income inequality widened in the United States, fueling populist resentments.
“Economic integration didn’t stop China from expanding its military ambitions in the region or stop Russia from invading its democratic neighbors,” Sullivan said. “Neither country had become more responsive or cooperative.”
Sullivan said the bipartisan push for greater trade liberalization, as a tool to promote widespread prosperity, was “a promise made but not kept.”
“The fact is that those gains failed to reach a lot of working people,” he added.
Business leaders have criticized Biden for not pursuing any new trade deals, which generally offer other nations improved access to the U.S. market in return for similar benefits for American exporters. Instead, the president has proposed “framework” agreements in Asia and Latin America, which would link U.S. trading partners in a cooperative arrangement involving standards for digital trade and measures to promote stronger supply chains.
The proposed Asian and Latin American pacts reflect the administration’s efforts to strengthen regional ties while placating congressional opponents of further trade liberalization, which the president’s labor union allies blame for the loss of millions of manufacturing jobs.
Sullivan denied that the administration is pursuing an “America alone” strategy or seeking to exclude other countries, saying such criticism is “just flat wrong.”
