The Trump trade policy has been characterized by a protectionist America-first agenda. Featuring unilateralism and isolationism, its hallmarks have included a repudiation of multilateral trade agreements and negotiations, a unilateral trade war with China, and a winner takes all approach to longstanding trade relations. There have been some gains for the U.S. – using “NAFTA 2.0” to level the playing field for US auto workers, for example. However, the primary legacy has been a confrontational and combative relationship with US trade partners and escalating tensions with such as countries as Cuba and Iran. How will US trade policy change under a Biden Administration?
Among the host of complex issues awaiting its attention, this post explores two key issues – US-China policy and WTO paralysis.
It is easy to forget that until just ten (10) years ago the United States was the world’s unchallenged economic superpower, with Japan running a distant second. With China’s growth has come its increased willingness to flex its muscles in Asia, and through the Belt and Road Initiative, to spread its money and influence around the world. There are also concerns as to whether China’s centrally-controlled economy has given it advantages that were not envisaged when it joined the World Trade Organization (WTO) –its state-owned enterprises and currency controls, notably. And the U.S. has labeled China’s approach to technology transfers as intellectual property theft.
These complex issues are complicated further by the inter-connectedness of the U.S. and Chinese economies and required a re-direction and re-focus of US policy towards China. The Trump Administration undoubtedly inherited a US-China policy that was still evolving. However, its confrontational, “winner-takes-all” approach focused on using tariffs to try to cow China into submission. This approach has negatively impacted the U.S. just as much as, if not more than, it has China. It also left unaddressed and may have complicated the task of the new Administration in developing an effective policy toward China as a super economic power.
So, how is US trade policy likely to change under a Biden Administration? Will they roll back the tariffs currently in place on about US$550 billion worth of Chinese imports? The view by keen trade watchers is that the tariffs provide some leverage for discussions with China and should be used to get something in return for lifting them. On the other hand, the WTO has ruled that the tariffs violate international trade rules. While the U.S. has not always been diligent about complying with WTO rulings it considers not to be in its interest, this ruling is likely to be another factor to be considered as the incoming Administration considers its options.
The right thing to do would be to roll back the tariffs that have imposed costs on U.S. businesses and consumers who will be struggling from the economic effects of the pandemic for some time. The Biden Administration is also likely to move towards a collaborative approach and work with its trade partners on this issue.
As one of the creators of the current multilateral system the U.S. has a major stake in its success. As the organization dealing with the rules of trade, the WTO’s dispute settlement mechanism is integral to the peaceful resolution of trade disputes. However, these functions have now been paralyzed because the U.S. has blocked new appointments to the WTO Appellate Body. Consequently, the Body no longer has enough members to review appeals from panel decisions. Again, the concerns underlying this U.S. inaction precede the Trump Administration. In fact, the U.S. has blocked new appointments under the George W. Bush and Obama Administrations. The U.S. accuses the Appellate Body of arriving at decisions that ignore the commitments and concessions negotiated by WTO members. Such accusations ring loudly whenever the U.S. does not like a ruling.
Would another U.S. President have allowed the situation to reach this crisis stage? That is now a moot point. What is clear is the issue calls for a negotiated solution that is beyond the scope, or the inclination, of the Trump Administration.
The WTO certainly seems to think so. It cannot be a coincidence that the meeting scheduled to consider the appointment of its next Director-General has been postponed until further notice.
Behind the policy and approaches of the Trump Administration’s are concerns that have plagued U.S. Administrations for some time. This is why we should expect that the primary change in U.S. trade policy from the Trump to the Biden Administration will be one of tone. The underlying goals will remain the same, but with greater respect for U.S. trade partners, multilateralism and negotiations.
The Biden Administration will also have to navigate a changed landscape. It will be able to thank the Trump Administration for having blasted to the world longstanding U.S. grievances, perhaps creating the space for serious negotiation. At the same time, nature abhors a vacuum. Unchallenged U.S. global leadership is a thing of the past.