Policy predictions

Experts weigh in on what Biden administration could mean for trade

Posted on Mar 12, 2021 :: Global
Jessica Thiel
Posted by , Insight on Manufacturing Staff Writer

More than a year into the pandemic, dealing with the health crisis and resulting economic fallout remain the top priority and focus at the federal level. Amidst that, it’s easy to forget that pre-pandemic, experts predicted that if one factor was likely to trigger a recession, it was trade wars. 

The Biden administration has indicated it won’t focus on new trade talks until domestic stimulus is secured and COVID-19 is brought under better control, says Roxanne Baumann, director of global engagement for WMEP Manufacturing Solutions. Still, pressing trade issues remain, first and foremost with China, but also with Brexit, the U.S.-Mexico-Canada Act, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which evolved from the Trans-Pacific Partnership that the United States declined to enter.

When attention does shift back to trade policy, U.S. trade representative nominee Katherine Tai has promoted an agenda of “worker-focused” trade that treats Americans as “workers and wage earners, not just consumers.”

“So far, we have seen a Biden approach that’s somewhere between Trump’s aggressive trade wars and an uncritical acceptance of any and all free trade. He has a long track record of trade liberalization; yet he promises to focus on domestic priorities to boost U.S. competitiveness, including implementing ‘Buy American’ policies to strengthen workers and wage earners here,” Baumann says.

Ngosong Fonkem, an international trade attorney with Page.Fura, P.C. in Chicago, and co-author of the recent book “Trade Crash: A Primer on Surviving and Thriving in Pandemics and Global Trade Disruption,” says the four years of the Trump administration’s America-first trade policy represent one of the most volatile periods in international trade history.

To predict what trade policy will look like under the new administration, Fonkem looks to statements Biden made as a presidential candidate. “During his electoral campaign, he stated that his administration, unlike the Trump administration, will seek to advance its trade agenda through collaboration with others, wherever possible, rather than unilaterally,” he says.

Fonkem also is watching Biden’s trade-related appointments. In the case of Tai, who is of Chinese descent and speaks fluent Mandarin, her nomination “signals that President Biden intends to continue President Trump’s tough-on-China policy,” he says.

Other appointees, including Secretary of State Antony Blinken, Treasury Secretary Janet Yellen and Department of Commerce Secretary Gina Raimondo, have spoken in favor of maintaining a strict stance when it comes to China, he says. Yellen has cited the need to address China’s trade barriers, dumping of products, giving of illegal subsidies to corporations, intellectual property theft, and lax labor and environmental standards. 

Don’t expect to see U.S. policy toward China to change radically with the new administration, Fonkem says, especially given the ongoing tensions between the two nations. What likely could change is the way the United States confronts tensions with China. 

“Under a Biden administration, we are likely to see a significant change in style and tone — less confrontational, less trade by Twitter and unilateralism. Biden will certainly try to build a coalition of allies to confront China, but it is not clear whether that would be successful given China’s economic weight,” he says.

Baumann says Biden has promised to unite with allies, particularly the European Union, to form a united front against China. 

Given the situation with China, the United States could look to further engage India, one of its traditional strategic partners, to “act as a counterbalance to China” in Asia, Fonkem says. In 2019, the Trump administration removed India from its Generalized System of Preferences program, which allowed zero tariffs on $6.3 billion of exports to the United States and accounted for one-tenth of U.S. goods imports from India. The Biden administration may look to restore India’s GSP status or pursue a limited trade deal with the nation, he says.

As for Brexit, which happened at the end of 2020, Fonkem says a trade deal between the United States and United Kingdom is unlikely in the near future. In a post-election phone call between Biden and UK Prime Minister Boris Johnson, the two discussed the need to strengthen “bilateral ties, collective defense and fighting climate change.” They discussed the benefits of free trade between the two countries, but Fonkem doesn’t see an agreement as imminent.

Under USMCA, which went into effect last July, Fonkem expects to see strict enforcement of the agreement’s labor provisions, which include prohibiting the import of goods produced by forced labor, addressing violence against workers exercising their labor rights, addressing sex-based discrimination in the workplace, and ensuring immigrant workers are protected under labor laws.

Another trade agreement the United States had considered entering, the TPP, proceeded without the nation’s participation and became the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, CPTPP. It’s now a trade agreement that includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Biden supported the TPP when it was being considered during President Obama’s tenure, leading to speculation that he could attempt to join the CPTPP or initiate similar bilateral trade agreements, Fonkem says.

“The TPP was generally criticized domestically in the U.S. Even though the renegotiated CPTPP largely resembles the USMCA, which was approved with bipartisan support, the Biden administration would likely need to renegotiate and rebrand any similar agreement in the Pacific to make it politically viable for congressional ratification,” he says.

Regardless of what happens, Baumann says it will remain vital for companies to focus on trade and export, as global market diversification helps firms stay resilient and adapt more quickly to market changes. She expects export to be a key pillar of the Biden administration.

“For Wisconsin manufacturers, this market diversification shields them from domestic market downturns. With 197 countries in the world, someone needs or wants your products. The trick is to proactively go after the best opportunities, with the least risk,” she says.