US trade policy is at an inflection point. Those who defend a muscular and tariff America First variant of former President Trump’s trade policy will be deeply disappointed by the stance of the Biden administration. At the same time, the supporters of trade liberalization and the free market orientation of the Clinton and Bush administrations will also be discouraged.
Could President Biden pursue a third way in trade relations with our partners?
Either way, it’s clear that trade will take a back seat to other more pressing priorities the Biden administration has on its political agenda, such as the pandemic, the economy, judicial reform, race relations and the climate. Furthermore, as Biden claimed in an article published last spring in Foreign Affairs: As President, I will not make any new trade deals until we invest in Americans and equip them to succeed in the global economy.
What are the most salient issues that will shape the Biden administration’s trade policies over the next 12 months, and where will it be a year from now?
It must be recognized that the trade program is vast. This includes the need to renew the Trade Promotion Authority, advance free trade agreements with the UK and Kenya, restore trade relations with the European Union and join the WTO, but not necessarily the Trans-Pacific Partnership (now known as CPTTP). Progress on each of these initiatives can be expected before the end of the calendar year. However, the biggest and most difficult business priorities of the Biden administration are: China, Labor and Environment, Commerce Enforcement, and Buy American.
Regarding China, eExpect business relationships to stay freezing cold or freeze even more. The Biden administration is not keen on easing Trump-era tariffs any time soon, nor is Xi Jinping with tariffs on his side. China remains our third largest merchandise trading partner (over $ 558 billion in bilateral trade), with a huge US 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 US economy 316 billion dollars and 300,000 jobs. As for the phase one agreement with China, whereby it pledged to purchase an additional $ 200 billion in agricultural products, that did not materialize. No more.
Trade-related issues such as the forced transfer of technology from US companies to Chinese companies and Intellectual property theft in China (between $ 225 billion and $ 600 billion per year) as well as those unrelated to trade (Chinese repression of the Uyghur Muslim minority in the Xinjiang region) will further worsen relations with China.
Tough administration talks about China and maintaining tariffs can be all right, but remember that at the end of November last year, China had more than a trillion dollars worth of the total US government debt issued by the Treasury. It is a sword of Damocles hanging over the United States; Withdrawing from China even a small portion of this amount to invest in other sovereign debt could slam the United States hard. In the future, we could see a case of rupture.
When it comes to labor and the environment, unlike the Trump administration, both will feature prominently in U.S. trade deals going forward and in the implementation of existing ones. President Biden specifically called for conditioning new trade agreements on partners’ ability to meet climate goals under the Paris climate agreement, including a ban on fossil fuel subsidies.
The United States-Mexico-Canada (USMCA) Agreement, which came into effect on July 1, 2020, is an example of the central role that labor and the environment will play in trade agreements. day, includes stricter labor provisions and a chapter on environmental issues, strengthening environmental protection.On labor, AFL-CIO and workers’ advocacy groups file a petition in a labor complaint about alleged violation of workers’ rights by Mexicans specifically on organization and negotiation. Going forward, whether they are American workers or foreign workers, the Biden administration will vigorously defend workers’ rights.
When it comes to trade enforcement, given that new free trade agreements will not come to the forefront of the political agenda of the Biden administrations, the priority will be enforcement of existing agreements. As with most agreements, implementation (the last step) is when things often fail. The inability to effectively monitor and enforce trade agreements has always been the most problematic feature of free trade agreements in particular. These include chapters of agreements such as dispute settlement mechanisms, cross-border trade in services, intellectual property and digital trade. Under the Biden administration, rather than unilateral action, emphasis will focus on negotiation, mediation and multilateral action.
Finally, back to the Buy American Act of 1933, signed by President Herbert Hoover on the last day of his tenure, President Biden issued an executive order on January 25, to ensure that America’s future is made in America by all workers in the Americas. While the executive order is only for federal government procurement, it nevertheless increases the cost to the US government – that is, to taxpayers.
According to the Peterson Institute, the annual cost to taxpayers for every American job saved by Made in America will exceed $ 250,000. In addition, such a policy ignores the fact that our trading partners have adopted the same measures in retaliation. Nevertheless, rest assured that over the next year and beyond, this policy in light of the presidents’ deep links with the unions will be a pillar of the economic policies of the administrations.
Even at this early stage, it can be seen that there are more than a few similarities between Trump and Biden’s business agendas. The biggest difference will be in the style, tenor and tone of the business relationship and the absence of sneaky statements such as trade wars are good and easy to win. Biden’s preference for multilateralism, strong consideration of labor and the environment in trade relations, and refusal to use tariffs as an ax bodes well for US trade relations over the next four years.
Jerry Haar is Professor of International Business at Florida International University and International Fellow of the Woodrow Wilson International Center for Scholars in Washington, DC. He is also a member of the board of directors of the World Trade Center Miami.
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