American trade policy is at an inflection point. Those who champion a muscular, tariff-driven, “America First” variant of former President Trump’s trade policies will be deeply disappointed by the Biden administration’s posture. At the same time, advocates of the trade-liberalizing, free market orientation of the Clinton and Bush administrations will be disheartened, as well.
Might President Biden pursue a “third way” in trade relations with our partners?
Whatever the case, it is clear that trade will take a back seat to other, more pressing priorities for the Biden administration in its policy agenda, such as the pandemic, the economy, judicial reform, race relations and climate. Moreover, as Biden asserted in an article last spring in Foreign Affairs: “As president I will not enter into any new trade agreements until we have invested in Americans and equipped them to succeed in the global economy.”
Just what are the most salient issues that will shape the Biden administration’s trade policies over the next 12 months, and where will things likely stand a year from now?
Recognizably, the trade agenda is a broad one. It includes the need to renew Trade Promotion Authority, advancing free trade agreements with the UK and Kenya, repairing trade relations with the European Union and rejoining the WTO but not necessarily the Trans-Pacific Partnership (now known as CPTTP). One can expect progress on each of these initiatives before the end of the calendar year. However, the most important and most challenging trade priorities of the Biden administration are: China, labor and the environment, trade enforcement and “Buy American.”
Regarding China, expect trade relations to remain icy or freeze over even more. The Biden administration is not eager to loosen Trump-era tariffs any time soon, nor is Xi Jinping with tariffs on his side. China remains our third largest goods trading partner (over $558 billion in two-way trade), with a huge U.S. merchandise trade deficit totaling $311 billion last year. While former President Trump chose tariffs over other means to reduce the deficit with China, his trade war cost the U.S. economy $316 billion and 300,000 jobs. As for China’s “Phase One” deal whereby it pledged to buy an additional $200 billion in agricultural products, that has not materialized. Nor will it.
Trade-related issues such as the forced transfer of technology from U.S. firms to Chinese companies and China’s theft of intellectual property (between $225 billion and $600 billion year) as well as non-trade related ones (China’s repression of the Uighur Muslim minority in the Xinjiang region) will further exacerbate relations with China.
Tough talk on China by the administration and keeping tariffs in place may be all well and good, but one should not overlook that as of the end of last November, China owned over $1 trillion of the total outstanding U.S. government debt issued by the Treasury. That is a Damocles…
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