Biden trade policy

Biden’s Trade Policy: Modern American Industrial Strategy

Biden’s Trade Policy: Modern American Industrial Strategy

One way to interpret much of Sullivan’s speech is that it attempts to make lemonade out of lemons.  Given that the White House has had little cooperation with Congress, much of the economic agenda outlined by Sullivan will have to be enacted through Executive Orders.  Having foreign policy driven by this process severely limits the scope of the possible.  For example, while Sullivan rails in the speech about a focus on tariffs in the past, this is also an area of Congressional responsibility.  Unless and until Congress is prepared to address tariffs, the topic cannot be added to any negotiated trade agenda.  Declaring that tariffs are the root of all evil is a handy way of avoiding doing anything about them. Something similar is likely for a wide range of potential foreign economic topics which require or are enhanced by Congressional support.  Absent endorsement from Congress, it is necessary to come up with a complicated and complex agenda that allows the US to engage on economic issues with potential friends in Asia and elsewhere. Even within topics, the scope of commitments can be constrained by self-imposed negotiating limits on potential American actions.  This includes, as Talking Trade noted earlier, funding to support an IPEF or broader trade agenda, unless resources have been allocated elsewhere and can be readily redeployed.

US Worker Centered Trade Policy Meets Global Competition

US Worker Centered Trade Policy Meets Global Competition

The United States has a new chief trade official. Katherine Tai was unanimously confirmed as the next US Trade Representative (basically trade minister). As USTR, Tai is expected to develop and execute US trade policies. The extent to which American policies on trade are adjusting remain to be seen. Thus far, Tai has been relatively quiet on her objectives, speaking only during her confirmation hearing. She has to hire her three deputies and a chief agriculture negotiator who will help flesh out and deliver policies. The early signs, however, suggest that potentially important changes are on the horizon. The key buzz word is that from now on, the US will pursue “worker centered” policies. It remains unclear what “worker centered” actually means. In practice, the phrase is likely to mean different things to different people. It will take cues from long-standing Democratic party objectives to support organized labor and environmental protection. These concerns have been embedded into a series of trade agreements for the United States, including the renegotiated NAFTA or USMCA. Tai took the lead role of shepherding the final USMCA document through Congress and building support from within Capitol Hill for the agreement. Her personal ability to forge bipartisan consensus on renewal helped with her smooth passage into her new role at USTR. US President Biden has suggested that trade agreements are not going to be part of American trade objectives in the near term. This suggests that worker centered policies will need to be anchored in something other than trade deals. Where might they be found? In large measure, it appears through enforcement. The US is likely to be giving extra scrutiny to US trade partners under various free trade agreements (FTAs) and other preference programs. It will also be looking hard at obligations and commitments made at the World Trade Organization (WTO) which have not been pursued with sufficient vigor by members. The US is also likely to change its position on a number of domestic policies. This includes an increasing use of “Buy American” policies and a probable review of US commitments under the WTO’s government procurement agreement and other similar chapters in existing FTAs.

Setting Trade Policies in the Biden Administration

Setting Trade Policies in the Biden Administration

Of course, confirmation is only needed at the top. Restaffing the rest of the vacant posts, however, will also take some time. This includes restarting the pipeline for junior talent in various agencies. At the same time that staff are being rapidly hired or rehired, it will be important to figure out what these people are meant to be doing. Getting alignment on policy is always challenging. The Biden team inherits a disrupted trade and economic policy landscape as well. As Biden’s team members have been saying recently, it will take time to sort out policy priorities and determine next steps. This is particularly true for China policy, where some of the existing policies, like tariffs, are likely to remain in place while others might be adjusted, removed, or even toughened. Incoming staff members will need to spend time taking stock of what policies are in place, which have been partially implemented, which are clearly not working well, what impact any or all of these policies have had, and what opportunities and challenges remain. Biden has already called for a “worker centered” trade and economic policy objective. It remains unclear exactly how this outcome might be best met. Existing policies will need to be recalibrated to better fit revised goals.

US President Joseph Biden: Time for a “Reset” on Trade?

US President Joseph Biden: Time for a “Reset” on Trade?

If this disruption at the top were not impediment enough to pushing for new policies, it remains unclear exactly what both parties will want to accomplish, particularly on trade issues. Traditionally, Democrats have been more skeptical of trade. This stance has changed in line with American public opinion to be more receptive to trade as a potential force for good. But it remains unclear how the Democratic party will respond to specific trade initiatives. It is also uncertain how Republicans will approach trade. In the past, free trade was a key plank in the party platform. Donald Trump scrambled this approach and it is not obvious how the Republican party will choose to address trade in the coming few years. Getting clarity inside both parties will take time. Trade, in general, is not going to be the key priority. Instead, expect Biden and the incoming Congress to focus significant time and attention on a host of domestic policy items including handling the escalating pandemic and economic fallout from disruption. There are two specific trade issues that will likely come up first: China and the CPTPP.

US Trade Policy in 2021

US Trade Policy in 2021

So, on trade, Trump and whatever might now be called the “Trump wing” of the party will be opposed to trade agreements (except for “really good ones” that are different from the current crop of deals). He made three big promises: to hike tariffs on China and Mexico; to “rip” up NAFTA, and to withdraw the US from the Trans-Pacific Partnership (TPP, now renamed the CPTPP after US withdrawal on Trump’s first Monday in office). Note that—in an otherwise wildly inconsistent presidency—Trump has delivered nearly all of what he set out to do in trade. Trade is the one area where Trump has strongly held beliefs that have not wavered across decades. He has found officials that share his vision of a world where the US continues to dictate outcomes and allowed them to press ahead. As he faces a very tough re-election fight in 2020, Trump is likely to continue to escalate one area that matters to him—reversing the economic “war” that the US had been losing by pursuing aggressive policy actions. The President already had extraordinary leeway to maneuver on trade, as we noted in 2016. The past years have shown that the presumed “guard rails,” like Congress, have been less effective in limiting actions than many anticipated. His use of Executive Orders and options pulled out of the US policy “toolkit” of largely forgotten provisions, often dating back to height of the Cold War with the Soviet Union, has continued to rise. Trade, President Trump believes, is a big part of what got him into the White House. Hence, expect it to remain dominant in the few months leading to the election. His advisors will also be more eager than ever to lock in policy actions consistent with Trump’s views on trade.