The pandemic caused extreme economic disruptions and 2020 saw the biggest decline in world merchandise trade since 2009. Yet in 2021, merchandise trade bounced back increasing an estimated 22.4 percent compared to 2020. This remarkable recovery is a testament to the continued strength of the global economy, especially given continued COVID-19 concerns and myriad trade restrictions, particularly U.S. tariffs, that remain in place.

Reflecting on 2021, the Cato trade team looks back at the Biden administration’s trade policy accomplishments. Unfortunately, the administration made little progress—even worsening the situation in some cases—and is maintaining many of its predecessor’s policies. Thus, our 2022 wish list reiterates many of the wishes from last year’s list.

Limit Executive Branch Trade Powers

The U.S. Constitution gives Congress the power to regulate international commerce, including the imposition of tariffs and other taxes, but the legislative branch has delegated vast swaths of its trade-related powers to the president through several laws. Some of these statutes circumscribe the president’s authority, but the Trump years saw increasing recourse to vague Cold War-era statutes that gave the president significant discretion in taking trade actions without congressional oversight. And President Biden appears in no rush to change course.

As Cato’s Scott Lincicome and Inu Manak wrote last year, for example, Section 232 of the Trade Expansion Act of 1962 was used to impose “national security” tariffs on steel and aluminum (25% and 10%, respectively) imports with little economic or geopolitical justification. President Biden could have lifted these tariffs upon taking office but has not done so. Instead, he has negotiated a managed trade arrangement with the European Union to turn those tariffs into tariff-rate quotas that allow an historically low volume of metal to enter duty-free and remaining volumes to face tariffs. As Lincicome and Manak noted, this deal violates both domestic and international trade rules and, given its terms and complexity, may provide little relief for American manufacturers who rely on readily accessible, affordable metals.

The Biden administration has also continued the Trump administration’s policy under Section 301 of the Trade Act of 1974 to impose tariffs on hundreds of millions of dollars in Chinese imports—another clear abuse of the broad procedural and substantive discretion that Congress granted to the president under the law, as well as its textual ambiguity. As Lincicome showed last year, these measures have imposed significant economic costs while failing to achieve their geopolitical objectives.

Congress should take action to limit procedural loopholes in these laws and restore some balance between the executive and legislative branches on tariff and trade policy.

Return to Open Markets and Economic Confidence

While certainly no angel on trade, the United States did use to champion liberalization and lead multilateral and regional trade agreement negotiations. Today, however, U.S. policymakers are increasingly moving away from trade liberalization in support of industrial policy steeped in nostalgia and economic insecurity. The Sections 301 and 232 tariffs and current proposals in Congress to subsidize domestic production of semiconductors and other “critical technologies” are indicative of this move toward protectionism, as is the U.S. government’s expanded use of trade remedies (antidumping, countervailing duty, and safeguards) to restrict imports from certain countries. New provisions to these laws have, in fact, made it even easier for the Commerce Department to abuse its discretion and riddle American businesses and consumers with higher taxes—even for critical goods like construction materials (especially lumber) and intermodal chassis in a time of national emergency.

Meanwhile, a long list of tariff and non-tariff barriers on basic necessities—food, clothing, footwear, etc.—and industrial inputs pre-date the Trump administration and have avoided scrutiny for far too long. For example, marketing orders on produce distort prices and reduce the variety of fruits and vegetables. A wide range of other tariffs, such as 48 percent tariffs on shoes (including ones for children), also remain in effect, forcing American families to pay more for basic necessities such as food and clothing.

In permitting or even championing these measures, American policymakers ignore not only economic theory, high consumer and other costs, and numerous instances of U.S. industrial policy failure, but also the policies—rooted in openness, dynamism, and free markets—that made America great in the first place. Freer trade, in particular, has long bolstered the U.S. economy by providing lower prices, more variety, new opportunities for businesses and workers, increased dynamism and innovation, and national security through international cooperation. The United States should once again be a leader on trade and push other countries to embrace liberalization too. Doing that, however, will require policymakers to get our own “trade policy house” in order first. It’s long past time they started.

Pursue More Trade Agreements

The United States has trade agreements with 20 countries, each of which reduces tariffs and other trade barriers between participating nations. Not only has the United States been slow to sign new trade agreements, it has moved away from a free trade agreement template that liberalizes members’ economies and fosters cooperation towards a managed trade model that increases government regulation of commerce and fosters disputes.

Early on, the Biden administration made clear that it would prioritize “domestic investment” over negotiating trade deals. In July, the administration let Trade Promotion Authority lapse, scuttling prospects for any bilateral trade negotiations to make significant progress in the near future—even for the few talks that the trade-skeptical Trump administration had already initiated with Kenya, India, Brazil, and the United Kingdom. Biden’s steel deal with the EU, meanwhile, is anything but free trade, and the United States has refused to reengage in the Asia-Pacific through the already-completed Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) that the Obama administration (and then VP Biden) had once championed. Meanwhile, China and several other AsiaPac countries have just implemented their own version of the CPTPP, the Regional Comprehensive Economic Partnership, further enhancing China’s economic and geopolitical gravity in the region at the United States’ expense.

Regional trade agreements are a third-best form of trade liberalization, but they can be useful in surmounting domestic political obstacles to liberalize trade and achieving geopolitical objectives. In addition to prioritizing unilateral trade liberalization, the United States should move away from Trump-era managed trade deals and re-embrace real free trade agreements that, while imperfect, can eliminate government restrictions on cross-border commerce and enhance peace and security around the world.

Rethink “Buy America” and other U.S. Procurement Mandates

The Biden administration and many members of Congress have made improved infrastructure a top legislative priority, but this goal is undermined by a more hidden form of protectionism embraced by President Biden (like President Trump before him) and Congress: Buy America and other “local content” laws restricting federal purchases to goods produced in the United States. Indeed, such provisions were actually strengthened in the Infrastructure Investment and Jobs Act (IIJA) signed into law late last year.

While measures mandating the purchase of American products have a certain superficial appeal, they come with considerable, albeit less obvious downsides. Chief among these is raising the cost of goods purchased by the federal government and potentially decreasing quality. (After all, if the American-made goods at issue already offered the best value, such laws would be valuable only to the lawyers paid to navigate them.) Higher costs mean reduced purchases (e.g. fewer bridges repaired in an infrastructure context), more debt, higher taxes, or some combination thereof, and additional regulatory burdens mean slower projects. If the nation’s goal is improved infrastructure, why is the U.S. government making it more expensive and difficult to achieve?

Unfortunately, the problems don’t end there. To meet the Buy America standard in the IIJA, manufactured products must be domestically produced and ensure “the cost of the components of the manufactured product that are mined, produced, or manufactured in the United States is greater than 55 percent of the total cost of all components of the manufactured product.” Such criteria might please Congress but are sure to increase the law’s already high costs (in terms of both money and time): firms competing for government contracts must either manufacture their products in the less efficient manner desired by Washington—thereby placing them at a competitive disadvantage for non-government business—or adopt separate production processes for the commercial and government markets (with all of those extra costs). Either way, the result is reduced American competitiveness. Compounding matters, such restrictions invite retaliation by U.S. trading partners or their imposition of similar measures.

These laws might be politically popular, but they undermine the provision of public goods while roiling trade relations and damaging the economy. As such, they should be rethought if not outright repealed.

Discard Maritime Protectionism

Only days after taking office President Biden reaffirmed his support for the protectionist Jones Act, which like Buy America laws for federal procurement, applies to private coastwise shipping and undermines many of the administration’s priorities. On the infrastructure front, the law—along with the Foreign Dredge Act—contributes to the reduced efficiency of U.S. ports and waterways through higher dredging costs. With regard to climate change, meanwhile, the law also significantly increases the cost of domestic shipping—the most carbon-friendly means of transporting goods—thus disincentivizing its use. According to economist Tim Fitzgerald, reform or repeal of the Jones Act could produce environmental benefits alone of over $8 billion.

The administration has also set a goal of deploying 30 gigawatts of offshore wind energy by 2030, yet here too the Jones Act serves as an obstacle to its realization. And for an administration that prides itself on promoting U.S. goods via legislative mandate, the Jones Act discourages their domestic purchase by subjecting them to shipping costs that are typically far more expensive than those faced by imports.

If the administration is serious about realizing many of its stated goals, it should begin by identifying the Jones Act and other protectionist maritime laws as an impediment to their realization.

Revive Multilateralism

The World Trade Organization (WTO) has struggled for years but entered a constant state of crisis when the Trump administration started working to proactively undermine it. Tensions peaked in late 2019, when the United States blocked new appointments to the WTO Appellate Body, which hears dispute settlement appeals, and thus crippled what was inarguably the organization’s strongest and most effective instrument to maintain open and non-discriminatory trade among member nations. Although there may be legitimate concerns about WTO disputes and negotiations, the Trump administration did nothing to seek a solution to the impasse it created.

Getting the dispute settlement function back online is critical to reestablish more stability and predictability in the world trading system. Members have suggested numerous ways to resolve the deadlock, but the United States remains the only holdout and the Biden administration—much like its predecessor—seems uninterested in changing course. This position makes little substantive sense, given the administration’s goal of reining in China’s unfair trade practices and the WTO’s dispute settlement system’s relative efficacy in disciplining China’s behavior when Members bring cases and follow-through on compliance. Bringing more cases to the WTO could help bring longer-term changes to China’s economic model, as opposed to the failed approach of “Trumpian unilateralism,” which hasn’t altered China’s actions (not least because it lacks an enforcement mechanism) and may have even made things worse. Restoring the Appellate Body is easy (the U.S. merely needs to lift its hold on new appointments) and should be the administration’s top WTO priority in 2022.

The WTO’s negotiating arm also needs resuscitating, but the United States has stepped back from its traditional leadership role, which has been crucial to getting negotiations across the finish line. Members have recently agreed to cut red tape on domestic services regulations, made progress on tackling fisheries subsidies, and reengaged on an agenda for addressing issues on trade and environment. The negotiations on fisheries subsidies may be the most important because they involve all members and provide an opportunity to address China’s growing economic clout. On the other hand, pursuing “plurilateral” deals with willing nations could achieve important liberalization objectives, for example on environmental goods, by sidestepping the WTO’s traditional (and slow) “consensus” approach. Regardless, U.S. leadership is sorely lacking, and the Biden administration needs to reengage in these talks to ensure ambitious outcomes.

Finally, revitalizing multilateralism will also require a broader discussion of WTO reform, centered on negotiations, deliberation, and dispute settlement. For example, members need to improve special rules for large and rapidly growing economies, transparency for trade-distorting actions, dispute settlement procedures, and market access for services and digital trade. To do so, however, the United States must be willing to put its own sacred cows—agriculture subsidies and trade remedies, for example—on the altar. And the Biden administration must lay out its own vision for WTO reform—something it has so far refused to do—instead of just calling on others to “fight for the vision of the WTO that you want.” Articulating that vision will be key to moving these reform efforts forward.

New Year, New Opportunity

The new year lets us reflect on the past year’s missteps and chart a new and better course in the years ahead. Far from ushering in the end of globalization, the pandemic demonstrated its resilience and dynamism. Trade continued to satisfy American consumers’ and companies’ needs and desires, despite the many artificial barriers policymakers have thrown in our proverbial harbors. Congress and the administration disappointed in 2021, but 2022 is a fresh start. They should refocus the United States’ global position and recall the clear benefits of open trade and the many failures of American protectionism. Our wish list is obviously ambitious and we harbor no illusions that it will be fully achieved this year. But it can—at the very least—show readers and policymakers just how much there’s left to do restore American leadership on trade and in the process contribute to a more prosperous, stable, and peaceful society.