According to the motto “America First”, Donald Trump understood international trade as a zero-sum game. For him, a negative trade balance meant that the United States’ trading partners were not playing by the rules. High on the agenda over the past four years was China, but the president was equally critical of the trade policies of close partners such as the European Union (EU) and Japan. The Trump administration also placed national security interests at the forefront of its trade policy. It used the argument of national security to justify tariffs on steel and aluminium, for example, and threatened tariffs on cars and mobile cranes.
Build Back Better - Joe Biden’s Trade Policy Agenda
Joe Biden’s trade policy team has been in office since March, so only initial conclusions can be drawn about its trade policy. Gina M. Raimondo was sworn in as Secretary of Commerce in early March 2021. The Department of Commerce (DOC), which she heads, is responsible for investigations under Section 232 of the Trade Expansion Act of 1962 and thus the additional tariffs on steel and aluminium currently in force. The office of the U.S. Trade Representative (USTR) was taken over in mid-March 2021 by Katherine Tai. The USTR’s areas of responsibility include the 301 investigations that provided the rationale for the U.S. punitive tariffs against China, as well as the dispute over subsidies for the aircraft manufacturers Airbus and Boeing. What trade policy will the new U.S. administration pursue? In early March 2021, the USTR announced the Biden administration’s Trade Policy Agenda for the current year.
The “Trade Policy Agenda 2021”
The 2021 trade policy agenda identifies nine priorities:
- “Tackling the COVID-19 Pandemic and Restoring the Economy”;
- “Putting Workers at the Center of Trade Policy”: To this end, there should be increased cooperation with trade unions and representatives of marginalized groups;
- “Putting the World on a Sustainable Environment and Climate Path”: Together with its allies, the United States aims to develop market-based and regulatory climate policy initiatives”;
- “Advancing Racial Equity and Supporting Underserved Communities”: the trade agenda should focus on initiatives that promote economic equity and reduce social and economic barriers;
- “Addressing China’s Coercive and Unfair Economic Trade Practices Through a Comprehensive Strategy”: The Biden administration condemns China's “coercive” and “unfair” trade practices that harm U.S. workers, threaten technological advantage, jeopardize supply security, and undermine national interests, according to the Trade Policy Agenda;
- “Partnering with Friends and Allies”: Rebuild partnerships and alliances to return to U.S.-led multilateral trade policy;
- “Standing Up for American Farmers, Ranchers, Food Manufacturers, and Fishers”;
- “Promoting Equitable Economic Growth Around the World”: The Biden administration would initiate a review of existing U.S. trade programs and increasingly incorporate corporate responsibility and sustainability into trade policy;
- “Making the Rules Count”: Comprehensive enforcement of trade rules.
Especially remarkable is the strong focus on environmental and climate policy. Katherine Tai wants to actively use trade policy to make the United States and its trading partners more environmentally friendly and to take action against overfishing, deforestation, and climate change, among other things.
Where Do We Stand in the Transatlantic Trade Conflicts?
With regard to the transatlantic trade disputes that have emerged under the Trump administration, the picture is mixed. In the WTO dispute over subsidies for aircraft manufacturers Airbus and Boeing, the Biden administration has agreed to the EU proposal for a tariff moratorium. This is currently valid until July 11, 2021, during which time a negotiated solution is to be found. Although the reciprocal tariffs are WTO-compliant, they place a significant burden on companies on both sides of the Atlantic.
The U.S. tariffs on steel and aluminium and the EU’s rebalancing measures are still in force. The EU is rightly insisting that the United States stops labelling the EU a “national security threat” and withdraws the tariffs. Recently, there was a rapprochement: on May 17, 2021, the EU and the United States announced their intention to jointly address the problem of global overcapacity in steel and aluminium and to find solutions before the end of the year. The EU is also refraining from extending its retaliatory tariffs (rebalancing measures) for the time being. Possible 232 tariffs on auto imports appear to be finally off the table under the Biden administration.
Potential for conflict with United States’ trading partners lies in the planned tightening of Buy American requirements. President Biden has directed the Federal Acquisition Regulation (FAR) Council by executive order to revise and tighten existing Buy American Act regulations by July 25, 2021.
There could be more transatlantic cooperation in the future on supply chains. Also by executive order, Biden ordered various federal agencies to review supply chains for certain products – pharmaceuticals/pharmaceutical ingredients, critical minerals and other “strategic materials” (e.g., rare earths), semiconductors, and high-capacity batteries (including e-car batteries) – by June 4, 2021. Biden wants close cooperation with allies and partners to establish resilient supply chains. Likewise, according to the new industrial strategy, the EU Commission aims to reduce critical supply chain dependencies in collaboration with international partners.
President Trump wanted to bring jobs back to the United States. But with his trade policies, he also hurt his own economy – for example, through tariffs and counter-tariffs – and upset allies. With Joe Biden, the past four years will not be erased. Nor will all trade policy conflicts be resolved overnight. Joe Biden will also consistently defend U.S. jobs, and his trade policy will also include protectionist elements, such as “Buy American” tightening. Such elements hurt the competitiveness of U.S. companies.
Some goals in the trade policy agenda are new and would have been unthinkable under the Trump administration, such as the strong focus on environmental and climate policy or even the promotion of social justice as a goal of U.S. trade policy. Others pick up where the previous administration left off. China, for example, remains at the top of the agenda. Biden, too, sees China as a systemic rival that poses a threat to national security and U.S. jobs. In addition to trade issues, the Biden administration criticizes China’s rapid expansionism in the Indo-Pacific region, human rights abuses in Xinjiang, and its increasing authoritarian crackdown in Hong Kong and Taiwan. But he will be more cautious in the use of tariffs and will again seek to close ranks with partners such as the EU in dealing with China.
What is absent from the Biden administration’s trade policy so far is the goal of negotiating new trade agreements. The current Trade Promotion Authority (TPA), under which trade agreements can be ratified more quickly and easily under U.S. law, expired on June 1, 2021. There have been no signs yet of the administration extending TPA. The focus of Biden’s trade policy seems to lie in other areas for the time being.