A Long View
Covid-19 has depressed global trade greatly, but strategic and structural concerns about trade will outlive the virus. The Trump administration had a huge impact on trade, from waging a trade war with China to ratcheting up anti-free trade rhetoric and levying tariffs against China, Canada, Mexico, and the European Union.
Under President Joe Biden, U.S. trade policy will change greatly, although not immediately. President Biden has made abundantly clear that his first priority is the Covid-19 pandemic, and his $1.9 trillion stimulus plan will dominate economic policymaking for weeks. Even if President Biden does not materially address trade policy until after the pandemic subsides, his remarks and nominees for international economic positions suggest what changes to U.S. trade policy he will make during the rest of his term. Three key areas are analyzed below through the lens of his personnel and policy choices to date.
(1) Integration of Trade and Other Strategies
President Biden and his nominees have signaled their intention to integrate trade into general national security strategy and economic policy. In her introductory remarks upon her nomination as President Biden’s U.S. Trade Representative (USTR), Katherine Tai described trade as being “like any other tool in our domestic or foreign policy,” a means rather than “an end in itself.” The nomination of Wally Adeyemo, President Biden’s selection for U.S. Deputy Secretary of the Treasury, also signals an integration between economic and national security policy; Mr. Adeyemo held numerous economic policy positions in the Obama administration, including Deputy National Security Advisor for International Economics, a position on the National Security Council (NSC).
Biden’s intention to integrate trade into broader strategies would pivot from President Trump’s approach. President Trump often spoke about trade surpluses as ends themselves, and his administration closed the NSC’s Office of International Economics. This abolished the position Mr. Adeyemo held in President Obama’s NSC.
President Biden’s appointments this far also reveal that his trade and security strategy will include a focus on domestic economic concerns. Weeks after being announced as Biden’s choice for National Security Advisor, Jake Sullivan gave a far-ranging interview with NPR in which he articulated a view of foreign policy that incorporates and prioritizes the economic concerns of middle-class Americans, and President Biden expressed a similar focus throughout the 2020 campaign. This framework reflects Mr. Sullivan’s recent work: after serving as a senior advisor to Hillary Clinton’s 2016 presidential campaign, he led a project on foreign policy and the middle class at the Carnegie Endowment, which Press Secretary Jen Psaki recently tweeted about Ms. Tai will also surely bring domestic economic concerns to trade negotiations. As Chief Trade Counsel to the Chairman and Democratic Members of the House Ways and Means Committee, she advocated for labor and environmental protections in the recent U.S.-Mexico-Canada free trade agreement (USMCA).
(2) New Free Trade Agreements
Free trade agreements (FTA’s) are notoriously difficult to negotiate and ratify even in the best of times. The pandemic means new FTA’s will not come soon, and Biden has indicated as much. He has repeatedly said he will not focus on FTA’s in the near-term, instead directing his energy to address Covid-19 and domestic issues. However, Biden’s personnel choices suggest renewed opportunities for FTA’s later in his term.
Although the Trump administration negotiated and ratified the USMCA and phase one of a free trade agreement with China, they also abandoned FTA’s the Obama administration had initiated. In January 2017, Trump withdrew the U.S. from the Trans-Pacific Partnership (TPP), the FTA the Obama administration had negotiated with 11 Pacific nations, comprising 40% of global GDP. Trump also ended negotiations the Obama administration had begun with the European Union for an FTA, the Transatlantic Trade and Investment Partnership (TTIP).
Key members of Biden’s incoming team have a wealth of experience with FTA’s. During his time in the Obama Treasury Department, Mr. Adeyemo served as the chief negotiator for the TPP’s provisions on macroeconomic policy. Additionally, Ms. Tai worked on the USMCA for the Ways and Means Committee.
Recent FTA’s indicate where new agreements under the Biden administration may emerge. The U.S. and the U.K. have not agreed to an FTA, although they have had initial rounds of negotiations, so a new agreement may be on the horizon. The United Kingdom and the EU agreed to an FTA in December 2020. The U.S. and the EU also still do not have an agreement, though the EU seems open to new FTA’s. In December 2020, the EU released a blueprint for the transatlantic partnership, specifically mentioning Biden’s election as a key opportunity to strengthen relations. It remains to be seen how willing the EU is to start negotiating any deal until the U.S. lifts its steel and aluminum tariffs. However, President Biden’s recent recommitment to the Paris Climate Accord is likely a necessary, if incremental, first step because some EU member states require another country’s ascent to the accord as a precondition to an FTA. Additionally, in November 2020, the U.S. and the EU agreed to a mini-FTA for lobsters. The EU also agreed to an FTA with Canada in 2017.
President Biden may pivot back to Asia for an FTA. Since President Trump abandoned the TPP in 2017, the TPP’s other member countries have enacted an FTA without the United States. Labor provisions could be a concern for an American FTA with Asian countries, but Ms. Tai’s experience addressing labor concerns in FTA’s would equip her well to do so again. Mr. Adeyemo’s experience with the TPP for the Obama administration would also prove relevant to renewed FTA efforts in Asia. Finally, an FTA with Asian countries would offer a bulwark against China, so this could support the administration’s broader China strategy.
(3) Currency Manipulation?
A key area to pay attention to in any FTA’s the Biden administration negotiates is currency manipulation. In a trade context, currency manipulation allows a country to artificially lower the prices other countries pay for their products. This makes the country’s exports unfairly competitive. In this way, exchange rate policy is trade policy.
Currency manipulation has gained political salience in recent years. President Trump accused China of manipulating its currency many times. In 2019, the Trump Treasury Department officially labeled China a currency manipulator and did the same to Vietnam and Switzerland in December 2020.
Biden officials have said they prioritize addressing currency manipulation, but their specific plans have not been revealed. During the campaign, President Biden committed to “aggressive trade enforcement” actions against Chinese currency manipulation, and in her confirmation testimony before the Senate Finance Committee, Dr. Janet Yellen, President Biden’s Treasury Secretary, said she supports efforts against countries’ currency manipulation that seeks “an unfair trade advantage.” Ms. Tai served as the head of U.S.-China trade enforcement at USTR, and Mr. Adeyemo has also warned against currency manipulation many times.
However, Mr. Adeyemo’s experience with the TPP may prove most relevant to currency manipulation. Mr. Adeyemo served as deputy chief of staff to former Treasury Secretary Jack Lew, and upon President Biden’s announcement that he would nominate Mr. Adeyemo as Deputy Treasury Secretary, Mr. Lew praised Mr. Adeyemo’s work negotiating a deal for greater foreign exchange policy enforcement in the macroeconomic declaration that accompanied the TPP. The Wall Street Journal identified Mr. Adeyemo’s role similarly.
Three critical points emerge from this declaration. First, it affirms that each TPP country will avoid unfairly manipulating exchange rates, particularly for competitive purposes. Second, it requires each TPP country to promptly disclose data regarding their foreign-exchange reserves, IMF assessments of their exchange rate, and foreign-exchange intervention their government enacts. Finally, it establishes regular dialogue between officials of all TPP countries about macroeconomic and exchange rate policies. This framework could help shape the Biden administration’s approach to currency manipulation in trade agreements, and Mr. Adeyemo appears well-positioned to lead those efforts due to his experience working on these provisions.
In his prolific biographies of President Lyndon Johnson, historian Robert Caro puts forth a corollary to the aphorism “power corrupts.” Caro writes that power reveals, too. After three presidential campaigns across thirty years, Mr. Biden finally holds the office and wields its power. Ultimately, his power over trade will reveal his vision and priorities for the subject, but there will be few chances for major trade policy change until the pandemic abates. At present though, Biden’s personnel selections, namely Messrs. Adeyemo and Sullivan and Ms. Tai, signal that his administration will reframe U.S. trade strategy and address numerous structural trade issues. Personnel does not reveal as clearly as power does, but personnel does preview.
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