Biden's Agenda

The Steptoe & Johnson law firm issued a Client Advisory on US Trade Agenda in the Biden Administration.

  1. Free Trade Agreements. One of the few specific statements on trade policy that then-candidate Biden made during the campaign is that he does not intend to pursue free trade agreements (FTAs) until significant domestic investments have been made in the areas of healthcare, infrastructure, and education, among others. 
  2. Trade Promotion Authority: Trade promotion authority (TPA), is currently set to expire on July 1, 2021. TPA, also known as “fast track” authority, restricts Congress’s ability to amend covered trade agreements by requiring an up-or-down vote, assuming that the President follows a prescribed set of formalities during the negotiation process. Congressional Democrats will press for greater recognition of social and environmental issues in the context of FTA negotiations, with an emphasis on achieving climate change goals and obtaining stronger worker protections.
  3. Trade Impacts of Domestic Investment/Reshoring: On the issue of domestic investment, the Biden Administration seems likely to prioritize the reshoring of US manufacturing, Buy American programs, and policies to strengthen US supply chains in areas that are critical to US competitiveness.
  4. The US-China Relationship: Over the past two and a half years, the Trump Administration unleashed a variety of new measures aimed at reshaping trade between the United States and China, most notably, the imposition of tariffs on nearly $370 billion in Chinese imports as a result of a Section 301 investigation into China’s intellectual property and investment practices. While President Elect Biden has not yet signaled what he intends to do with these tariffs, it is unlikely that the Biden Administration will simply remove them outright without seeking some kind of concession (trade-related or otherwise) from China in return. President Elect Biden will also inherit a number of other China policy challenges with trade and supply chain implications, including US concerns about state-supported competitors in the high-tech sector and imports produced with forced labor in Xinjiang. On these and other related areas, the Biden Administration will likely face bipartisan pressure from Congress to take decisive action. 
  5. Bilateral Trade Relationships: While the substance of the Biden Administration’s stance toward China may not change significantly, its strategy is expected to differ. Whereas the Trump Administration adopted a series of unilateral actions against China, President Elect Biden will likely adopt a multilateral approach to addressing trade issues. This is in part a reflection of the President Elect’s more globalist approach, developed from his leadership of the Senate Foreign Relations Committee and his foreign affairs portfolio in the Obama Administration. This means that any further US negotiation with China on a “Phase Two” agreement addressing more systemic issues of concern to the United States will likely be shelved in favor of a multilateral approach.
  6. WTO Reform: The Biden Administration will also need to consider multilateral action with respect to the World Trade Organization (WTO). At least in the near term, it is unlikely that the Biden Administration will adopt a significantly different approach from that of the Trump Administration. 

What Changed?

1: Free Trade Deals: Biden will not be in a rush for new deals. Trump wanted deals but was so confrontational he delivered nothing. No Change

2: Trade Promotion Authority: Trump did use Trade Promotion Authority to replace NAFTA with USMCA, but that switch accomplished nothing. Effectively No Change 

3: Domestic Reshoring: Biden will promote made in USA. So did Trump. Manufacturing did not flood back under Trump and won't under Biden either. No Change

4: China: Trump sought concessions from China and never got them. Biden will attempt to do better. But if he is hamstrung by climate change demands and worker rights issues he is unlikely to get very far. And in the absence of Trade Promotion Authority Biden will have a tough time threading a needle between demands of the Greens and demands of the Republicans. Change Remains to be Seen

5: Bilateral Trade Relationships: Biden will drop one-on-one confrontations with a multilateral approach. To the extent he needs cooperation from the EU, well that bickering could last years.  Change in Style, Substance Remains to be Seen

6: WTO Reform: Steptoe says it is unlikely that the Biden Administration will adopt a significantly different approach from that of the Trump Administration. 

I disagree. Trump paralyzed the WTO  by blocking appointments to the seven-person panel for more than two years.

Bloomberg notes the WTO has been unable to issue judgments on new cases since December 2019 because there aren’t enough active members. Trump’s complaint is that the WTO evolved into a legal tool for nations to exert pressure on the U.S., and his top trade official called it a “litigation-centered organization.”

China desperately needs to stay in the WTO system. 

Trump made it easy for China because no one wanted to go along with Trump's self-serving demands. Then rulings stopped altogether.

Biden will make appointments and seek cooperation.  That's different.

If the US can get the multinational cooperation it needs, it may be able to force China to make changes. That is a big if, but it is more likely to succeed than Trump's ever-escalating tariff policy that backfired.

Perhaps after dealing with 4-years of Trump's threats and bullying, we will see better cooperation from allies. 

If not, at least the threat of ever-escalating trade wars under Trump will be over.

Dysfunctional WTO

It's important to note that the WTO was largely dysfunctional before Trump. He turned largely dysfunctional into totally dysfunctional by not appointing representatives leaving the WTO unable to investigate new trade claims.

Why was the WTO largely dysfunctional?

Two words: The EU 

For decades the annual WTO trade talks broke down over agricultural policy. The EU was unwilling to bend on its protections. In return, third world economies would not bend on manufacturing and intellectual property issues.

Why wouldn't the EU bend? 

One word: France. 

France will not bend and perhaps never will on agricultural protections. The EU is largely dysfunctional because of this.

US Role in the Mess

Trump wanted a comprehensive agreement with the EU that included agricultural policy. That was the end of it. 

The irony in all of this is that next to France, the US is the most protectionist country on agricultural policy. 

Look no further than the sugar lobby and ethanol policy. It makes no economic sense to produce ethanol from corn. It makes no sense to drive US candy manufacturers out of the US over sky high sugar prices. 

But here we are. 

Every year in the failed WTO meetings the US says it will bend on agricultural tariffs if the EU does. This is a cop-out. 

Correct Trade Policy

The best practice would be to eliminate tariffs and slash corporate taxes no matter what any other country does.

Capital and jobs would flood in. 

Nonetheless, any step back from escalating trade wars and perpetual bullying is a change for the better even if far from ideal.

Will Biden Be Better Than Trump?

Yes, for the simple reason Trump is one of the worst presidents on trade policy since Smoot-Hawley and the Great Depression.

Biden is likely to quickly work out an agreement with the EU over the Boeing-Airbus dispute. But that is a return to the status quo where both the US and EU offer the airplane manufacturers illegal subsidies. 

Biden will be better in the sense that it is better to have a broken arm than two broken legs. 

If you prefer a car analogy, Trump put global trade in reverse. Biden will return the car to park with a chance at low gear.

Biden is far more likely to make further gains in trade policy in the same way that 20% is far better than 0%. Don't expect fast gains but welcome them if they occur.

Trump's Failure

Trump tried to balance the trade deficit with tariffs. It was a fool's mission as explained in Balance of Trade vs Gold Window

Also consider Trump's Unwinnable Trade War: Gold Explains Why

Mish