The past few days have been quite an experience. I hope everyone was able to get a good night's sleep and is on the way to recovery!
The election of Joe Biden as president has implications beyond trade policy, but this blog is about trade, so I'm going to focus on that and leave my more emotional reactions for Twitter. So what happens with U.S. trade policy post-Trump? Or to put it another way, who should clean up the mess and what should they do instead? In this blog post, I'll offer a few quick thoughts. Expect a lot more of such thoughts from me and everyone else in the coming weeks and months.
Let me talk first about personnel because, as they say, personnel is policy. One of the most important aspects of the post-Trump trade policy will be whom to put in charge. There are a number of key positions here, including the U.S. Trade Representative and Deputies; international economic advisers in the White House; and certain positions at the Commerce Department.
In my ideal world, of course, the people chosen here would be in the mold of Cordell Hull, who believed that trade liberalization is the path to peace and prosperity. But such a choice is unlikely in the current atmosphere and with Biden as president (Biden has a mixed record on trade), so I'm going to put that fantasy aside and think about plausible choices for this moment.
There are a wide range of trade policy crises for the new U.S. Trade Representative -- and other trade officials too, but I'll focus on the USTR job -- to deal with: U.S. trade relations with many close allies are in bad shape; trade liberalization has stalled; the institutions themselves (the Appellate Body, of course, but also the WTO) are struggling to function; the Congressional/Executive balance of power over trade has been completely thrown off; misinformation about many trade issues has seeped into the Washington establishment view; and even pre-Trump, it felt like the conventional approach to trade agreements was no longer working.
For all these reasons, the job of the next U.S. Trade Representative will be a serious challenge. The person who takes it will need experience and objectivity in order to navigate through all these issues. We need someone who is knowledgeable, pragmatic, non-ideological, familiar with both the key Congressional players and foreign government officials, and not closely tied to special interests. Sometimes the U.S. Trade Representative position goes to a non-trade specialist, for political reasons. If that happens here, we definitely need strong deputies who can carry the substantive load.
Shifting to the substance of trade policy, in terms of what specifically the new U.S. Trade Representative should do, for many of these issues, it's important to take into account who is in charge of Congress. The final breakdown of the Senate is still up in the air (there are two runoff elections in Georgia that will determine it), but it seems likely that Congress will be split, with the Democrats in charge of the House and Republicans in charge of the Senate. If that happens, it means U.S. trade policy can't just focus on what Democrats want, and that's going to make things very interesting. How easy will it be for a Biden administration and a Republican Senate to work together in general, and on trade in particular? There are reasons to be skeptical of the possibilities here. The Obama administration struggled with this on the TPP, and that was before Trump entered the scene and tried to push the Republicans in a more protectionist direction. Will a Biden administration fare any better with this? And what approach to trade policy will the Republican Senate take with Trump out of office? (Keep in mind, he will be out of office, but probably not out of the picture.)
On the other hand, if the Democrats win those elections in Georgia and take control of the Senate, things look very different. A Biden administration could then focus more on what Democrats want. As it happens, in some areas at least, the Trump administration's actual trade policy was already about that, as pressure from House Democrats shaped key aspects of the Trump administration's approach to the USMCA. It is easy to imagine that the new Democratic trade leadership might draw on what the House Democrats pushed the Trump administration to do, for example on issues such as investment, intellectual property, labor, and the environment.
With all that in mind, here are some suggestions for what the Biden administration might/should do on a few of the key trade issues the Trump administration has left us with:
-- Section 232 tariffs/quotas on steel/aluminum: Repeal them all as quickly as possible. This will help the U.S. economy and repair relations with allies. Repeal won't necessarily be easy, because there are interest groups who benefit from the tariffs/quotas and will lobby to keep them in place. The Biden administration might have to come up with something to offer these groups as an alternative. (And more broadly on Section 232, the Biden administration should stop using this statute as a means of protectionism or threats of protectionism.)
-- WTO Appellate Body: Engage with WTO Members by proposing specific reforms for appellate review and by agreeing to the appointment of new Appellate Body Members. We need effective dispute settlement to ensure the rule of law in international trade.
-- China: Sit down with the EU, Japan, Canada, Australia, the UK and various others to do the following: develop a concrete plan for negotiating new trade commitments of some sort with each other; jointly negotiate with China to force it to upgrade its liberalization commitments; and jointly bring WTO complaints against China. The Section 301 tariffs will be in the mix here. I'd like to see them go immediately, but I can see how politically that might have to wait for progress on my three suggestions above. As to the Phase 1 China deal, I'm not sure it has much value overall, but there are aspects of the substantive obligations (e.g. on forced technology transfer) that seem useful and perhaps could be carried over to a jointly negotiated deal.
-- Bilateral and regional trade agreements. Two key questions are: With whom should we be negotiating, and what should we negotiate about? A lot of people in the trade establishment want the U.S. to rejoin the TPP. Is there a path forward for that, both on the specific terms under which the U.S. would join, and on Congress passing it? What is a package of TPP obligations that Congress would agree to? With a Democratic administration, I would think IP and investment would be minimized as issues, if they are in there at all, and labor and the environment will be ratcheted up (a mention of climate change, for example). But will Republicans in the Senate go along with it? On some of these issues, they did so for a Republican president, but I wouldn't be surprised if they changed their minds with a Democratic one. As for bilateral trade agreements, what do we do about the talks that are underway (e.g. UK, Kenya)? Can the current negotiating texts serve as a basis for an eventual deal? Will the Japan phase one talks be turned into something more comprehensive? And can we figure out a way to negotiate liberalization with the Europeans? Overall, I wouldn't expect quick action on trade agreements from a Biden administration, although perhaps the UK one is far enough along that there will be support for getting it done before TPA expires. And speaking of TPA, what are the chances it will be renewed next year?
Of course, Democrats are not a monolith and everyone is going to need to give them a little time to deal with their internal battles. The progressives and the moderates will be fighting it out for control of this issue. If everyone is being reasonable, there are compromises that can be made, with each getting some of what they want. But it may take a few months (and sometimes not everyone is reasonable!).
We are all hoping for a new, more positive direction on U.S. trade policy. I can see how a Biden administration can give it to us. They should take us far away from what Trump was doing, and with the experience from failures during the Obama administration, perhaps things will go more smoothly this time. As of today, I am feeling optimistic on a couple of these issues, although it's very possible that's just the effect of the election outcome, and pessimism will soon creep in.
