Biden’s Trumpy Start on Trade by Anne O. Krueger
After declaring that “America is back”, US President Joe Biden has worked to reverse much of Donald Trump’s toxic legacy. But a glaring exception has been trade policy, where a disturbing continuity has cast doubt on the ability of the new administration to achieve its broader political goals.
WASHINGTON, DC – Former President Donald Trump has done enormous damage to the reputation and future of the United States, both nationally and internationally. Yet while President Joe Biden has set out to reverse the legacy of the previous administration in many areas, he has yet to focus his attention on US trade policy.
This must change. Trump’s trade policies were not just a disaster for US and world trade; they have also made it more difficult for the United States to achieve a wider range of economic and foreign policy objectives. Reversing these policies should therefore be a top priority for the new administration.
After all, America’s friends and allies (especially the European Union, the UK, Canada, Mexico, Japan, and South Korea) remain deeply shaken by Trump’s protectionist impulses. In addition to slapping tariffs on a wide range of products, his administration forced a renegotiation of the North American Free Trade Agreement and the Free Trade Agreement between the United States and Korea, and withdrew the United States from the Trans-Pacific Partnership (TPP) to which the United States. had agreed. He declared a “trade war” with China, despite that country’s membership in the World Trade Organization (WTO), and without regard for the US trading partners’ own relations with China. Taken together, these policies have seriously damaged America’s standing in the world.
Leading the world towards an open multilateral trading system under the General Agreement on Tariffs and Trade of 1947 (GATT, which became WTO in 1995) was one of the major achievements of the United States after WWII. global. The system works precisely because members voluntarily commit to open, rules-based trade policies. This ensures, among other things, that foreign traders have the same rights as nationals in the event of a dispute between them and that the principle of non-discrimination between trading partners prevails, except in the case of preferential trade arrangements.
Trade flourished under the GATT, with the United States leading negotiations on multilateral tariff reductions and the removal of other trade barriers (including quantitative restrictions). In the following years, developing countries witnessed the success of open markets and decided to start dismantling their own highly protectionist regimes. For the most part, this has resulted in a remarkable acceleration in the growth of production and trade. For more than half a century, world trade has grown about twice as fast as world GDP.
This growth was of course far from regular. Significant slowdowns followed the oil shocks of the 1970s, the Asian financial crisis of the late 1990s, and the Great Recession a decade later. Growth in world production and trade has resumed since the global financial crisis of 2008, but not as rapidly as in the years preceding it. And China, after an overhaul of its trade policies in the 1990s and its accession to the WTO in 2001, has become the world’s largest trading power.
Subscribe to Project Syndicate
Enjoy unlimited access to the ideas and opinions of the world’s greatest thinkers, including weekly long readings, book reviews, news collections and interviews; The year to come annual printed magazine; the entire PS archive; and more. All for less than $ 9 per month.
Besides reducing domestic poverty and improving the standard of living of its own people, China’s spectacular economic boom can only raise problems with other countries. But thanks to the WTO and its dispute settlement mechanism, there was a multilateral forum where these issues could be addressed – that is, until Trump arrived.
Although Biden reaffirmed America’s commitment to internationalism and multilateralism, he slowly acted to undo the damage Trump has done to critical institutions like the WTO.
Biden also did not reverse Trump’s withdrawal from the TPP. Now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the United States’ accession to this pact of 11 countries would be a boon for American exporters. Currently, US companies are at a distinct disadvantage compared to their competitors from CPTPP countries, as their exports to these economies are subject to duties that do not apply to exports from bloc members.
Biden also failed to end the trade war with China, even though that effort was completely unsuccessful in achieving its stated goals. While the United States’ bilateral trade deficit with China fallen a little, the deficits with Vietnam, Malaysia, and others have increased in proportion to their exports replaced those from China.
Although the Biden administration eventually accepted a new general manager for the WTO, he has done little to reduce Trump’s tariffs and even announced that he will strengthen “buy American” provisions in government procurement. Biden says he wants to protect American jobs, but the Trump administration’s tariffs on imported iron and steel, which cost a net total of around 75,000 jobs (excluding additional losses caused by retaliatory tariffs from other countries), remain in place. If Biden is serious about helping American workers, he should recognize that exports create good jobs and that the contribution of the export sector to the United States GDP doubled due to the opening of multilateral trade.
As for the US current account deficit, it can only be resolved by reducing US spending relative to income, not protectionism. And because the WTO’s government procurement deal has led other countries to open up government tendering processes to US exporters, its weakening is unlikely to benefit US workers; in fact, it can even cost jobs.
China is here to stay. While there are certainly trade issues to be addressed, it is best to do so multilaterally. The United States and China both lost in the trade war. An offer by the United States to remove tariffs if the Chinese reciprocate and join multilateral discussions on the outstanding issues could benefit both countries and the rest of the world.
Strong economies make prosperous countries. Efforts to protect domestic industries are a sign of weakness, not of strength. If the Biden administration is to achieve its stated goals, it will remove Trump’s protectionist measures, work multilaterally, strengthen U.S. infrastructure, invest in the skills and education of the workforce, and expand the capabilities of American research. It should be obvious by now that the pursuit of trade policies of the last administration is the recipe for failure.