Updated February 14, 2024
U.S. Trade Policy: Future Direction and Key Economic Debates
Congress plays a major role in shaping U.S. trade policy
U.S. Trade Policy Objectives and Tools
through the exercise of its constitutional authorities. Article
I, Section 8 of the U.S. Constitution grants Congress the
Since World War II, U.S. trade policy has sought to achieve several
“
interrelated objectives. They have included (1) fostering economic
Power To lay and collect Taxes, Duties, Imposts, and
growth and securing more open, equitable, and reciprocal market
Excises” and to “regulate Commerce with foreign Nations.”
access for U.S. exports and investment; (2) protecting U.S.
Congressional interest in trade policy also stems from the
producers from unfair foreign trade practices and rapid surges in
impact of trade on the economy, foreign policy, and
fairly-traded imports; and (3) strengthening the rules-based
national security of the United States and the economic
multilateral trading system to help achieve the above objectives and
success of firms, farmers, and workers. Through periodic
further U.S. foreign policy. In seeking to fulfil these objectives, U.S.
enactments of Trade Promotion Authority (TPA)
policymakers have employed an array of policy tools, such as trade
legislation, Congress has defined U.S. trade policy priorities
negotiations, FTAs, trade remedies (e.g., safeguards), TAA, export
and negotiating objectives for trade agreements, established
promotion, trade preference programs, and economic sanctions.
consultation and notification requirements for the President
to follow during negotiations, and granted the President
Economists generally agree that, in the aggregate, the
authority to implement limited reciprocal tariff reductions
economic benefits of reducing trade barriers outweigh the
with trading partners. TPA also has provided for expedited
costs. Nonetheless, the processes of trade liberalization and
legislative consideration of broader trade agreements that
globalization present both opportunities and challenges for
meet congressional requirements.
the United States. For example, reducing trade restrictions
tends to lower prices, increase the variety of goods and
The Biden Administration continues to review the Trump
services available to U.S. consumers, and increase the
Administration’s trade policies, with its actions thus far
competitiveness of U.S. firms’ and farmers’ exports in
pointing toward continuity in a number of areas. Congress
global markets. Some studies also show that U.S. firms
last passed TPA in 2015 (P.L. 114-26), but the authority
engaged in trade often achieve greater productivity and pay
expired in 2021, and President Biden has not asked
higher wages and benefits to their workers.
Congress for its renewal. The President has indicated that
he has no immediate plans to embark on new free trade
However, because the gains from trade tend to be more
agreement (FTA) negotiations, although he has launched
widely dispersed than the losses, the benefits are often not
trade initiatives that focus on targeted trade issues and may
readily apparent or well quantified. As a result, some
not require congressional action, such as the Indo-Pacific
groups argue that globalization has benefitted some
Economic Framework for Prosperity.
segments of the population more than others. Affected
stakeholders often point to offshoring, job losses, stagnant
Members of Congress and the broader trade policy
wages, and rising inequality among some groups as
community have mixed views on the current state of U.S.
indicators of the negative aspects of globalization. Yet, the
trade policy and its future direction. As such, the 118th
causes of these trends are highly contested. The growth of
Congress is positioned for continued oversight, debate, and
global supply chains (GSCs)—combined with changes
action regarding President Biden’s trade policy agenda.
related to technology, labor productivity, consumer
Effects of Trade Liberalization
preferences, and broader economic factors—has also
Since the 1930s, some economists and U.S. policymakers
transformed or disrupted some U.S. economic sectors.
across political parties have recognized the importance of
Trade Policy Concerns
negotiating trade agreements to achieve more open and
Some Members contend that although past trade
rules-based international commerce, while remaining
negotiations and FTAs have lowered or eliminated U.S.
cognizant of potential costs to specific segments of the
trade barriers, these tools have failed to keep pace with
population. Past Administrations have used congressionally
changes in the global marketplace, effectively address
delegated authorities and tools to pursue and achieve trade
foreign protectionist practices, and enhance reciprocal
liberalization (i.e., the removal of trade barriers). Congress
market access for U.S. firms, farmers, and workers. In their
has played a major role in shaping and approving these
view, some countries (e.g., China) “play by different rules”
efforts (see textbox). However, concerns over the impact of
and conduct their economic and trade policies based on
greater import competition on some firms and workers have
priorities that often undermine those of the United States.
engendered ongoing debate and led to complementary
Concerns go beyond tariffs, focusing on issues such as
legislative action to mitigate the potential negative effects
industrial policy, labor rights, intellectual property, and the
of trade liberalization (e.g., Trade Adjustment Assistance
environment. In addition, the COVID-19 pandemic and
[TAA]). The effects of these actions, and the mechanisms
Russia’s war in Ukraine have exacerbated concerns related
by which trade affects the U.S. economy, are difficult to
to globalization, import dependencies, and GSC
quantify, which is partly due to the challenges associated
vulnerabilities. To increase resilience, some Members call
with disentangling the effects of trade liberalization from
those of other domestic and global economic developments.
https://crsreports.congress.gov
U.S. Trade Policy: Future Direction and Key Economic Debates
for “reshoring” production or limiting imports while others
competition. Notably, imports may also be items that either
encourage using a greater diversity of foreign suppliers.
are not available or are more costly to produce domestically
or serve as inputs in domestic production, including goods
Some policymakers also point to alleged weaknesses in the
that are subsequently exported—thereby supporting jobs
institutional design of the World Trade Organization
and keeping costs low for U.S. consumers and producers.
(WTO), including the limitations of WTO rules to address
digital trade and nonmarket economy trade practices. To
Inequality. Some analysts and policymakers argue that
remedy these shortcomings, some Members support the
globalization and trade liberalization—especially after
imposition of unilateral trade restrictions. They view such
China’s entry into the global economy—have contributed to
measures as justified in the short-term to “level the playing
declines in the real wages of U.S. workers and growing
field” and point to similar actions in the past that led other
disparity in wealth in the United States. Despite intense
countries to eliminate their trade barriers and open their
focus on this issue in the academic literature, there is no
markets to U.S. exports. Other Members have encouraged
clear consensus on the net effects of trade on wage and
the Administration to continue working closely with allies
income inequality. Some researchers have found that trade
to improve the functioning of the WTO, use further trade
may have an impact on income inequality depending on the
liberalization to address concerns and emerging issues that
distribution of gains and losses across sectors and regions,
existing trade rules may not cover adequately, and initiate
but over the long term, a wide range of factors within the
or join trade agreements such as the Comprehensive and
economy determines the distribution of income, such as
Progressive Agreement for Trans-Pacific Partnership.
economic mobility and technological change, with trade
Key Areas of Economic Debate
liberalization generally judged to be less significant.
The concerns described above have led some policymakers
Some studies have found that the slowdown in real wage
to question the rationale behind U.S. FTAs and global
growth and increased wage inequality may be the result of
economic integration. They have called for suspending (or
slow U.S. productivity growth and the bias in technological
reversing) past efforts to liberalize trade and increasing
change toward greater use of higher skilled workers
trade barriers to protect domestic industries and workers.
throughout the economy. This might increase their wages
Many economists caution against protectionist measures
relative to those of the less skilled. Another factor that may
because they impose costs on the economy as a whole that
have contributed to wage inequality is de-unionization.
are likely to exceed any potential overall benefits. These
Outlook and Issues for Congress
costs can arise from implementation and enforcement,
Economists and analysts generally assert that, for the
higher prices, inefficient resource allocation, and foreign
United States, retreating from global trade, ceding
retaliation. Two key areas of debate are evaluated below.
institutional leadership, and raising trade barriers may not
Employment. Jobs are constantly being created and
address the underlying causes of the adverse effects of trade
replaced as some economic activities expand and others
on some groups, and may jeopardize economic growth and
contract, and trade—like other market forces—contributes
foreign policy goals. While some may justify protectionism
to this process. For example, both trade and investments in
under certain conditions (e.g., to safeguard national
productivity-enhancing technologies may result in less
security), research has shown that it is generally ineffective
demand for certain types of labor, while creating new job
as a means to address these effects or bring jobs back to the
opportunities for others. Although some workers may
United States. Protectionism often imposes costs that
benefit from these developments (e.g., those who get
outweigh the benefits and has unintended negative effects,
higher-paying jobs when exporters expand their
not only on U.S. consumers that purchase imported goods,
production), others bear the costs (e.g., those who are
but also on U.S. industries that use those goods as inputs to
displaced due to import competition or automation).
their own production and that employ workers. In some
instances, it can lead companies to shift production abroad.
Economic theory suggests that the degree to which an
economy is open to trade affects the mix of jobs within it,
As Congress engages with the Biden Administration to
but trade has little impact on the total level of employment.
chart the next phase of U.S. trade policy, Members may
Specifically, trade affects the mix of jobs because workers
examine the role of trade in the U.S. economy and how
and capital shift away from U.S. sectors that are less
trade liberalization, or globalization more generally, affects
productive relative to those abroad toward U.S. sectors in
U.S. employment, income distribution, productivity, and
which the United States has a comparative advantage
innovation. They may also assess the current U.S. trade
relative to its trading partners. For some policymakers, a
policy approach to determine if it advances U.S. economic
key concern for U.S. trade and broader economic policy,
and security interests and/or if today’s fast-changing global
therefore, is ensuring that displaced workers are able to gain
economy calls for a multifaceted approach—one that
the skills necessary to take advantage of new employment
includes but is not limited to elements of trade policy (e.g.,
opportunities that may arise. However, a growing body of
trade liberalization, FTAs, and WTO reform). Members
literature highlights potential challenges in workers’ ability
may consider complementary responses such as labor,
or willingness to move to new sectors when their jobs are
social, education, regulatory, and infrastructure policies that
lost or wages are dampened due to import competition.
maximize the benefits and reduce or soften the hardships
and costs from trade, increase economic resilience, and help
In a large, dynamic economy like that of the United States,
ensure that growth is inclusive. These policies affect the
the main influences on total employment generally are a
overall U.S. economic climate and, as components of public
function of factors such as the business cycle, workforce
policy, are subject to congressional action.
availability, regulations, taxes, interest rates, education, and
technology, rather than trade liberalization or greater import
https://crsreports.congress.gov
U.S. Trade Policy: Future Direction and Key Economic Debates
IF12327
Andres B. Schwarzenberg, Analyst in International Trade
and Finance
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https://crsreports.congress.gov | IF12327 · VERSION 4 · UPDATED