Under Joe Biden, status quo on trade policy?

By Avirup Bose & James J Nedumpara

In 2016, Donald Trump’s campaign for the presidential polls focussed on reorienting US trade policy—which prioritized American goods and workers, promising to end years of disastrous trade agreements, resulting from negotiations by ‘weak’ and ‘foolish’ establishment in Washington. The message resonated with industrial voters, who delivered Trump a resounding victory in the US’s industrial northern states. Predictably, Trump disengaged from multilateral trade initiatives and withdrew from certain landmark treaties, including the Paris Climate Change Agreement and the Trans-Pacific Partnership (TPP). Blunt trade mechanisms such as unilateral tariffs, import quotas, boycotts, flurry of Section 301 actions, etc., decorated Trump’s trade policy.

In contrast, president-elect Joe Biden’s campaign focussed less on the US trade policy. Even his public remarks do not disclose much about his approach to addressing global trade challenges, other than focusing on specific domestic trade issues. Not only must Biden re-engage with the world trade order, he must also attempt to build a strong US domestic trade consensus, especially to diffuse Trump’s centre-left ideology celebrating trade/economic isolation.

Given the rather brief mention of ‘trade policy’ both under the Biden campaign and his economic plan, what can we expect to be Biden’s trade policy? Will it be different from Trump’s, and where will it be similar?

President Trump’s trade policy is simple and transactional. His administration preferred transactional approaches that selectively addressed certain trade and tariff issues as opposed to more durable and carefully negotiated multi-party agreements.

Has this policy succeeded? To his credit, the Trump administration renegotiated the NAFTA and brought into force the new US-Mexico- Canada Agreement (USMCA) in July 2020. The USMCA provides relatively stronger provisions on labour and environment when compared to the NAFTA. It also removes the investor-state dispute settlement measures and includes special provisions for the automotive and digital sectors. Biden will most likely follow Trump’s lead and not rejoin the TPP as it was signed. He has campaigned to renegotiate deal to improve labour and environmental standards and counter-balance China.

Tariff protections and grey area measures surged during Trump’s administration. Biden might drop tariffs against allies like the European Union, but to what extent Biden will push forward an EU trade deal is hard to predict. Given the Biden campaign’s protectionist rhetoric around ‘Buy American’, one might safely conclude that his administration will not be as pro-free trade as the EU would prefer. Additionally, the two powers would have a major disagreement on how best to deal with China or to address some of the emerging trade issues such as e-commerce and trade facilitation, where the EU and China are part of the plurilateral group.

The US trade policy under Biden will continue to be increasingly influenced by China. The US was able to stem, albeit temporarily, the increasing trade deficit with China. Yet, the Phase-one trade deal between China and the US, signed in the midst of the pandemic, remains a piece of paper without real implementation. In his recent interview with the Times, Biden said he would not immediately scupper the trade agreement Trump reached with China in January. Further, Biden seems comfortable with decisions of the Trump administration, with experts predicting that Biden will not lift the tariffs against China. Another area where Biden’s USTR will benefit from Trump’s policy will be reforms in the areas of subsidies, forced technology transfer, notification requirements, and judicial overreach in trade adjudication.

President Trump’s trade policy has had the severest impact on the WTO, with the Appellate Body (AB) virtually shutting down. Trump refused to fill new positions at the Appellate Body of the WTO, and thereby paralysed a central part of the WTO dispute settlement mechanism. The Biden administration would most likely not rush to fill the WTO Appellate Body. Biden’s ‘Buy American’ provisions for public procurement could violate WTO rules, and his administration has no incentive to return quickly to business as usual at the WTO.

Biden wants to ‘lead the democratic world’, and trade policy is not a priority for him. Where the world leaders are convalescing in building the global trade architecture, Biden’s team is conspicuously absent from such negotiations. Will Biden double-down on protectionism, or package his aggressive liberal foreign policy with openness to trade and attempt to redirect the future of the international economy by combining good global trade policy and domestic US politics? We will have to wait and watch.

Bose is associate professor at Jindal Global Law School; Nedumpara is Head of Centre for Trade and Investment Law, IIFT. Views are personal