Biden faces tough, necessary trade policy decisions in 2021

2020 was a volatile year for international trade. The COVID-19 pandemic caused a massive slowdown in global production. At the same time, the World Trade Organization (WTO) remained gridlocked and the U.S.-China trade war raged on with no end in sight. All of these factors contributed to an estimated 9 percent reduction in global trade flows.

Enter Joe Biden. 

The president-elect pledges to reduce trade tensions abroad while promoting economic recovery at home. It’s going to be a difficult balancing act — and one that has many wondering whether Biden will succeed.

At least three major trade issues face the Biden White House in the coming year. 

The first is China. The U.S.-China trade war is, perhaps, the defining feature of the Trump administration’s foreign policy. Back in 2016, Trump talked tough on trade, criticizing China for discriminatory subsidies, currency manipulation and intellectual property theft. Once in office, Trump oversaw a historic increase in U.S. tariffs, leading to a trade war that now involves over $700 billion in bilateral trade.

There’s a broad consensus among economists (and many U.S. industry leaders) that Trump’s tariffs did more harm than good. Yet, in spite of evidence of the trade war’s costs, Biden already stated that he has no intention to lower barriers in the near future. Instead, his policies will focus on creating U.S. jobs and restoring America’s economic competitiveness. He pledges significant investments in infrastructure and stricter enforcement of “Buy American” policies to bolster production at home.

Equally important is Biden’s pick for U.S. trade representative. Katherine Tai brings useful litigation experience to the table. During the Obama administration, Tai helped enforce America’s trade rules, playing a leading role in America’s trade disputes against China.

In light of Biden’s rhetoric, and his Cabinet appointees, any reduction in U.S.-China tensions are likely to take significant time.

The second issue is what to do about America’s trade deals. The Trump administration cast doubt on the legitimacy of international trade law by threatening to leave the WTO and withdrawing from the Trans-Pacific Partnership.   

Biden has hinted at a more cooperative approach, promising to “renew alliances” with traditional economic partners. However, he remains tight-lipped when it comes to specifics about the future of the WTO. He stated only that domestic economic objectives take priority over any new deals.

One early test may be whether Biden pursues ongoing negotiations with the United Kingdom. Talk of a U.S.-UK deal has been lingering for several years but was held up by uncertainty surrounding Brexit. Now that the European Union and UK have reached a trade deal, space has opened up for bilateral talks.

From America’s point of view, a bilateral deal with the UK creates opportunities to skirt long-standing disagreements with the EU, such as Europe’s prohibitions on genetically modified organisms and its civil aircraft subsidies. However, there remains significant distance between the U.S. and UK on taxation and food safety.

If we do see a U.S.-UK completed in the immediate future, it will be a useful indication of Biden’s view of America’s trade deals. 

The third trade-related issue is the most important: inequality.

The simple, unfortunate fact is that income inequality has been increasing in the U.S. (even before COVID made things worse). The last decade has shown us, repeatedly, that global market shocks hurt working- and middle-class labor. The Great Recession, trade wars and COVID-19 all contribute to reductions in household income and risk leaving some portion of the economy behind.

Biden’s trade policy decisions need to recognize the close connections between global markets and local welfare. This means, at a minimum, recasting trade policy to increase social inclusion and strengthen the power of labor. These are the best ways to ensure that average workers are not sacrificed on the altar of free trade.

None of this will be easy — especially in a world still coming to grips with COVID-19 and its disastrous economic effects. Questions linger over whether governments can cooperate in an era of increasing nationalism or whether Biden will enjoy the same trade policy authority granted to Trump.

Either way, 2021 will be a test of Biden’s trade policy strategy. In an era of growing inequality, millions of workers hope it’s a test he will pass.  

Jeffrey Kucik is an associate professor in the School of Government and Public Policy and the James E. Rogers College of Law (by courtesy) at the University of Arizona.