Miss U.S. much? First thoughts on what the Biden administration could mean for US trade policy and the UK
What could the election of Joseph R. Biden Jr. mean for US trade policy? Trade policy did not feature highly in the run up to the election (in contrast to 2016). And the immediate focus of the Biden administration is likely to be on dealing with Covid-19 and recovering from it. Its “Build back better” agenda was one of the Biden campaigns central promises.
However, trade will present its share of policy challenges for the new administration. For a start, there are many important connections between trade policy and Covid-19. The overlap ranges from trade restrictions on medical and protective equipment to intellectual property rights and access to vaccinations. Secondly, Mr Biden’s campaign promises on climate and clean energy have trade policy implications. These include dealing with carbon leakage and competitiveness concerns, and the use of industrial subsidies as part of greening industries. Indeed, the administration has said it will make climate change an integral part of its trade policy. And finally trade policy ins one area in which the new administration is less dependent on the other arms of government. While legally, trade policy remains the competence of Congress, the latter has delegated much of that competence to the executive over the years.
Change of style or of substance?
The Trump era was marked by various sources of trade tensions. One of its very first actions was to withdraw from the Trans Pacific Partnership. It renegotiated the North American Free Trade Agreement (NAFTA), relabelling it the USMCA and inserting provisions that would require its partners to use more US produced content. The US also imposed tariffs on a broad range of Chinese imports , and on imports of aluminium and steel from a number of partners. The US then used its tariffs on China, and the threat of further action, to push for Chinese tariff concessions and commitments to increase purchases of agricultural products (in January 2020). At a multilateral level , the US also blocked the appointment of new members to the WTO Appellate Body. That in turn crippled a key part of the WTO’s Dispute Settlement Mechanism. It has been the main source of resistance to the appointment of a new WTO Director General.
As striking as these actions are, the underlying protectionist drift was in place well before the Trump administration. The Obama administration, for example, made extensive use of government procurement and non-tariff measures to discriminate against trade partners. “Buyers remorse” at having allowed China into the WTO is solidly entrenched on both sides of the political divide. And US criticisms of the Appellate Body – notably that it has been guilty of judicial overreach – were shared by previous administrations as well as by other partners.
It is therefore unlikely that there will be a sea change in US trade policy, even if public attitudes towards trade seemed to have improved since 2016 . Still, some changes could be plausibly envisioned. Mr. Biden has indicated that he would contemplate joining a renegotiated version of the TPP. His pledge to re-join the Paris Agreement on Climate Change suggests illustrates his multilateralist preferences. These might also lead him to resolve existing impasses at the WTO.
A decision to unblock the Appellate Body is connected to the US’ approach to China. This is because the a WTO panel found that the tariffs imposed by the US on China were in violation of WTO rules. The US appealed the finding, effectively kicking the case into the long grass given the impasse with the Appellate Body. A decision to reactivate the body would most likely lead to the US losing the case. In which case it would either need to rescind its measures. Or come to an agreement with China, possibly building on the “deal” it agreed in early 2020. At the same time, reviving the WTO’s dispute settlement functions could also allow the US to pursue various cases against China on various grounds – such as the use of industrial subsidies and state intervention, and breach of IP rights – while remaining within the framework of trade law. The panel ruling on the tariffs imposed on China pointedly noted that the US had refrained from using the WTO to solve its trade disputes. “Tough on China, but playing by the rules” might therefore be a way for the Biden administration to demarcate itself from the previous administration while placating domestic political pressure regarding relations with China.
Implications for the UK after Brexit
The Trump administration repeatedly touted, often in extravagant terms, the possibility of rapidly concluding a FTA with the UK. Talks formally began in May 2020, and several rounds have been held. It is unclear how much progress has been achieved. In reality they may have served to underscore the difficulties faced by the UK in dealing with a much larger partner determined to drive a hard bargain.
In contrast to the Trump administration, the Obama administration (under which Mr. Biden served as Vice-President), was sceptical not just about the prospects of a FTA with the UK but Brexit as a whole. Mr. Biden will likely retain the view, generally shared in the US until 2016, that the closer the level of integration between the UK and the EU, the better it is for the US, the UK and EU. One of the economic reasons for this is that the deeper an agreement between the UK and the EU, the easier it is for US firms that establish affiliates in the UK to participate in cross-border value chains.
The Biden administration will likely build on the negotiations already undertaken with the UK. Moreover the Trump administration’s attitude was to undermine multilateralism in order to force smaller nations to negotiate directly with the US in an unfavourable environment, with fewer outside options. If the Biden administration helps to revivify multilateralism, that would at least improve the UK’s fallback position for dealing with the US.
At the same time, the US will deal with the UK within a broader perspective of strengthening US-EU relations. Whether that involves FTA negotiations remains to be seen. The Transatlantic Trade and Investment Partnership negotiations were launched in 2013 and ended without an outcome in 2016. While that coincided with the election of Donald Trump, deep-seated differences on matters such as regulatory issues had long hampered progress. Those differences remain. But the common interest both sides have found in dealing with China might help to revive interest in bilateral talks.
A broader framework for US-UK cooperation could also emerge if both parties try to accede to the CPTPP. The Obama administration was one of the driving forces behind the original TPP (that very fact was a prompt to the Trump administration to withdraw from it). It therefore would be logical for the US to reactivate its interest, something Mr. Biden has already flagged. The UK for its part has signalled its interest in the CPTPP, and indeed has seen its FTA with Japan as a stepping stone to that destination. If dealing bilaterally with the US proves to be difficult, then perhaps accession to CPTPP might provide an alternative. Meeting the US in the Pacific , rather than across the Atlantic sounds odd. But the broader framework offered by the CPTPP might help the UK when dealing with a partner many times its size. Moreover, if the US insists on a renegotiation of the CPTPP as a price for accession, CPTPP members may welcome the UK as a moderating influence.
Greening FTAs?
As already observed, climate and sustainability are high on the incoming administration’s political agenda. This includes the integration of trade and climate policy. This integration could provide a means of rallying the left-wing of the democratic party to trade, and rallying business groups to climate.
For its part, the UK has included environmental and sustainability objectives in its negotiating objectives for its main FTAs. This largely draws on the approach the EU has taken this approach in some of its FTAs. The EU-Singapore agreement, for example, contains provisions committing both parties to their commitments under multilateral environmental treaties and the Paris agreement. The UK could use its negotiations with the US, for example, as a “laboratory” to test environmental and sustainability provisions. Indeed the inclusion of these might help the Biden administration muster support for a trade agenda across the sceptical elements of the democratic party. From a UK perspective, one of the isues it faces in championing a greener approach to trade is the size of its market: it can offer relatively few market access carrots to partners in return for environmental and sustainability commitments. But if both the US and EU were so push a Greener FTA agenda – including through bilateral cooperation – the UK’s interests in this area could be significantly boosted.
Wide awake in America
The change of administration comes at an important juncture for world trade. Hit by the effects of the pandemic and with its governance in crisis, global trade requires concerted action. The multilateralist instincts of the Biden administration could support this. That will not, however, help to cover the fault lines that have emerged, notably in relation to China. But it may allow for a more orderly resolution of disputes.
From a UK perspective, the Trump administration may have been a vocal supporter of both Brexit and a bilateral trade agenda, but political affinities have not yielded visible results so far. The Biden administration will revert to the line taken by most US administrations – that deeper integration between the UK and the EU is good for both. It can pursue a bilateral relationship with the UK, but could do so in the context of reinvigorated US-EU relations, and possibly in the context of its dealings with Asia and the Pacific. The main issue for the current UK government is whether it can adjust to a new administration quickly enough, given the political affinities it had with the previous regime.