Why free trade isn’t top of Joe Biden’s to-do list
Don’t expect President Joe Biden to mend relations with China and usher in a new era of free trade, writes Russell lLynch — in that regard, the next occupant of the White House may be very much like his predecessor
Joe Biden may have been the ultimate victor in a race for the presidency that split America down the middle, but experts say the shadow of Donald Trump is likely to linger over the nation’s outlook on the world for years to come.
With the bitter battle in its final throes, the Democrat has planted one foot in the White House by cultivating a far different image to the senator who welcomed China into the World Trade Organisation in 2001.
China’s leader Xi Jinping welcomed Biden to Beijing in 2013 as an “old friend”, but such bonhomie now looks unlikely, as bashing China was one of the few things the two candidates agreed on during the campaign.
Biden’s manifesto instead stressed that he would “stand up to the Chinese government’s abuses”.
Perhaps almost as significantly, the man who originally supported both the North American Free Trade Agreement and the Trans-Pacific Partnership — both torn up by Trump — also pledged to “use taxpayer dollars to buy American and spark American innovation”.
Such sentiments have prompted trade experts to question whether Biden’s election will herald a renewed blossoming of international trade relations.
The trade war between China and the US since 2018 has resulted in import tariffs on goods from both nations jumping to 20 per cent. The bank ING estimates that China’s exports to the US will have fallen 23 per cent or US$122 billion ($179b) compared to 2017 by the end of the year, with trade in the opposite direction down 24 per cent or US$45b.
Simon Evenett, professor of international trade at Switzerland’s University of St. Gallen, warns that Trump’s stronger than expected performance at the polls is “bad news for any enlightened trade policy, for the simple reason that a large number of people have endorsed his viewpoint”.
He says: “First term Democratic presidents are rarely adventurous on trade. This will make Biden even more cautious of doing anything aggressive on the liberalising front. What you might get is an even tamer first term.
“There is a remarkable convergence at the political level and among the population in the US to a much more anti-trade, anti-China position. There has been a wholesale shift in thinking in Washington and scepticism about China, its promises and its trajectory.
“Biden’s language will be less inflammatory but the hard-core identification of US commercial interests and the perception that China is a threat to them will not change.”
The effect of the trade wars has been hugely magnified by a coronavirus-inspired slump that is expected to knock 10 per cent off global trading volumes in 2020, according to the International Monetary Fund’s latest economic outlook. But the report notes that “the bulk of the distortionary tariff and non-tariff barriers” instituted around the world over the past two years remain in place.
The latest figures from the Global Trade Alert database show that countries imposed 1610 restrictions on trade so far this year, compared to 554 liberalising measures.
Despite the focus on tariffs, ING’s international trade analyst Joanna Konings says subsidies — again exacerbated by Covid-19 — are also being used more commonly as governments look to give a leg-up to domestic companies. “The issue of subsidies has been creeping up,” she says. “A subsidy is also a trade barrier and we are trying to find our way into a world after coronavirus where firms are competing properly with each other again.”
The idea of Biden — the “Buy American” champion — looking to overturn that in the short term seems unlikely. Alan Winters, professor of economics at the University of Sussex, warns: “The US is not going to go into a burst of trade liberalisation. They are not going to ease up that much on China. In fact, Biden may be better than Trump in organising a coalition against China.”
When finally confirmed in office, the Democrat will also be closely watched for his approach to the World Trade Organisation (WTO). Trump plunged the body into further limbo in October by vetoing the Nigerian consensus candidate of the body’s other 163 nations, Ngozi OkonjoIweala, in favour of the South Korean Trade Minister Yoo Myung-hee.
Former WTO official Stuart Harbinson says it is “quite difficult to see a way out of the jungle”.
He adds: “New administrations have thousands of things to sort out — political appointees like the US trade representative. I don’t think the WTO will be very high on their list of priorities when it comes to tackling the most urgent issues. It could take a while for the shape of US trade policy to become clear, maybe even months.”
Trump shut down the WTO’s highest dispute resolution mechanism, the appellate body, by blocking the appointment of new judges last December. But US concerns with the WTO long predate Trump, such as frustration over the lengthy decision making process of the appellate body — a “court” which the US insists it does not recognise — as well as China’s designation of itself as a “developing country” entitled to special treatment under WTO rules.
As president, Biden is unlikely to walk out altogether, according to Harbinson, but he will be keen to rein it in: “The US has complained of a creeping judicial activism and are saying they didn’t sign up to that. A lot of members have sympathy with that. Biden might be thinking about developing constraints on the appellate body.”
For the UK in particular, the chances of an immediate Brexit deal look less likely as Biden’s team remember Boris Johnson’s previous remarks about a “part Kenyan” president in Barack Obama, as well as the approving labelling of the PM as “Britain’s Trump” by the American original. The split Congress may also see the lapsing of the Trade Promotion Authority next July, the fast track route which allows an administration to get deals through both houses on a simple yes-no vote.
Whereas Trump would be “moderately well-disposed” towards a UK-US trade deal, Biden “will not be at all bothered”, Winters says. Even if Biden makes overtures towards the WTO, he could pursue a strategy of “picking people off one by one”.
“It is important to remember that the US has never liked international courts. If you go right back to 1947 and the signing of the General Agreement on Tariffs and Trade [a WTO forerunner], the US had a very bilateralist view of trade: you talked with someone and you bartered concessions with them. The multilateralism that the GATT started to evolve towards was not something that the US administration took to terribly comfortably. They went along with it because of geopolitics, really.”
Biden’s liberalisation is a case of back to the “old normal” according to
Evenett: “Before the
Second World
War, the US was a nation that did not like foreign entanglements.
After that they felt they had no choice and the rise of the Soviet Union solidified the outward engagement. Now what you’ve got is Americans turning around and saying, ‘Maybe George Washington was right, maybe we should avoid foreign
entanglements’.”
So hopes for a grand new era of international co-operation may be misplaced under Biden.
Winters warns: “The US isn’t necessarily going to be blocking progress but it is not going to be an instigator. We are going to have to entice them in or work around them.”
The US is not going to go into a burst of trade liberalisation. They are not going to ease up that much on China. Professor Alan Winters