President Biden’s elusive trade policy

Author: Gary Clyde Hufbauer, PIIE

President Biden’s trade policy recalls Samuel Beckett’s play Waiting for Godot. This is exactly what Biden wants the business community, foreign partners and Congress to do: wait for two huge bills on domestic “infrastructure” spending – the use of the term must be understood loosely. – be promulgated.

Biden wants no distractions to stand in the way of Congress’ extremely close and highly contested votes on the two bills, which together portend new spending of at least $ 3 trillion over 10 years. The progressive wing of the Democratic Party, led by MK Alexandria Ocasio-Cortez, is poised to thwart any presidential pursuit of conventional trade policy, namely lowering barriers to promote bilateral trade. According to the far left, trade liberalization enriches businesses and impoverishes workers. It does not provide any net benefit to Americans.

Progressives argue that trade policy should restrict trade to promote overseas labor rights and gender and ethnic equality in countries that practice discrimination. It should uplift marginalized communities, achieve climate and environmental goals, and most importantly, raise the standard of living of working Americans. Biden can’t go along with this bloated agenda, but he doesn’t want to risk gradual opposition to his major spending bills.

Observers could conclude that by early 2022, when spending bills pass or fail, Biden could devote his time to trade policy. But by then, the midterm electoral outlook will dominate White House thinking. Past experience and current polls strongly favor the Republican Party to capture the House of Representatives in November 2022, and possibly the Senate (where the party’s roster is now tied). But Biden is far from resigned to his statistical plight. Trade policy will thus become a pawn for the fate of the next elections.

Today’s Republican Party – unlike the party of previous post-war Republican presidents – has embraced Trump’s love for tariffs and fear of China. Trump’s senior business lieutenant, former Ambassador Robert Lighthizer, has just enthusiastically reaffirmed the two themes in The Economist. So any move that opens up U.S. markets will be criticized in the November election as a sign that Biden is selling America. It is a debate that he wants to avoid.

Against these negative forces, there is a positive consideration: the foreign policy dimension of a more engaging US trade policy. This is where trade ambassador Katherine Tai comes into play. He is a master of rhetoric that soothes foreign ears without alarming progressive Democrats or protectionist Republicans. Three-quarters of Tai’s shares are Lighthizer policies with softer edges and a smiley face. Trump’s “national security” tariffs on steel and aluminum are still in place, but they have just been converted to a tariff rate quota for EU exports – with roughly the same impact on EU exports. high prices in the United States but paying European steel producers with the quota rent.

The fact that the American Iron and Steel Institute and the United Steel Workers both applauded the deal says it all – it’s still a managed business. Likewise, the Boeing-Airbus dispute was temporarily resolved by taking retaliatory tariffs off the table and asking the aviation giants to come to a standstill deal.

Trump’s 25% tariffs on imports from China persist with the narrowest opening of exclusions to save struggling US businesses that depend on Chinese intermediate goods. Perhaps the most significant change from Lighthizer’s playbook was Ambassador Tai’s upbeat speech on October 13 in Geneva, concluding with this statement: “We all recognize the importance of the WTO and we all want her to succeed ”. During his tenure, Lighthizer never visited the WTO.

At the same time, Ambassador Tai fails to recognize that lowering US barriers to trade actually benefits the US economy, especially when paired with lower barriers abroad. Almost all of Tai’s trade speeches carry the phrase “worker-centered”, which in practice means a listening ear to anti-dumping, countervailing, and safeguard “trade remedies”, as well as the absence of lowering barriers on steel imports without the consent of the United Steel Workers, and no reform of the Jones Act, which guarantees dizzying cabotage costs.

Tai even expressed skepticism about Australia’s proposed Indo-Pacific digital deal, fearing it would help tech giants. Instead, she emphasizes overseas labor practices, exemplified by her support for fast-track cases involving Mexican union elections, her insistence on anti-forced labor provisions in the troubled fishing and new restrictions on imports from Xinjiang.

Tai’s engagement in the WTO negotiations will be limited to topics that do not arouse any internal opposition, for example a joint declaration initiative on e-commerce which, for other reasons, is dead in the water. Meanwhile, Tai has linked the revival of the WTO dispute settlement system to meaningful negotiations, a chicken-and-egg formula given the reluctance of the United States to make concessions on liberalization of the United States. trade.

Will the scenery change after the US midterm elections in November 2022? The brightest prospect might be a US bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). But if Democrats lose the House of Representatives, the Republicans are unlikely to renew the Trade Promotion Authority (TPA).

Without TPA, congressional proceedings would kill a CPTPP offer. China’s bid for CPTPP membership creates strong geopolitical reasons for US membership, but perhaps not enough to overcome congressional resistance. Most likely, US membership will remain a pending project for the president-elect in 2024 – even if Biden follows the model set by Obama and opens negotiations after the midterm elections.

Gary Clyde Hufbauer is a non-resident senior researcher at the Peterson Institute of International Economics.