When President Donald Trump was elected in 2016 and took his “America First” campaign into government, many of the world's pundits declared the end of the western-led trade order and globalization. Four years on, there are still plenty of thinkers who see reasons for gloom. However, Bloomberg asserts that “the reality” is also that the trading system looks remarkably resilient,” albeit a little wounded.”
What exactly that means remains to be seen. But Bloomberg reports several things being discussed by key advisers, including that “dealing with China and its economic rise will color everything,” said Wendy Cutler, a veteran trade warrior who now leads the Asia Society Policy Institute. In addition, the Biden team believes that “manufacturing isn't going away as an American obsession.” The trade-transition team named this week “is replete with people with a background in manufacturing or the labor movement.”
Jason Miller, the head of the team, once looked after manufacturing policy from the National Economic Council during the Obama administration, at a time when it had set a goal of doubling U.S. manufacturing exports.
The report also notes that the current administration and economic generals such as U.S. Trade Representative Robert Lighthizer have “scrambled the American politics of trade, opened the door to a new suite of tactics and tariffs and brought to the fore what in many cases have been long-standing and bipartisan U.S. grievances.
“The system's resilience should not be the end to a comforting story; it should be the starting point of a badly needed effort to reinforce and update the international order and address the real threats to its long-term viability,” Jake Sullivan, one of Biden's closest policy advisers, wrote in a 2018 Foreign Affairs article.
The new team also will focus on “the importance of bringing home critical supply chains” and pledges to “build a strong industrial base,” Bloomberg says. These are policies that fit with the president-elect's plan to make sure the U.S. approaches its relationships with everyone from China to allies in Europe from a position of domestic economic strength.
However, rather than relying on new defensive trade barriers as President Trump has done, the new policies are expected to hinge on encouraging investment at home via tax incentives and government spending on infrastructure and alternative energy to boost demand. The underlying idea is that a stronger, more confident U.S. — rather than a belligerent one — can turn around the narrative that it's a declining superpower, Bloomberg said.
The new team is emphasizing that perhaps the top trade issue it faces is what to do about relationships with China, including decisions on whether to retain or lift tariffs and national security-driven bans on companies such as Chinese-owned Huawei Technologies Co., as well as whether to build on the current administration's “phase-one” deal with Beijing.
Among these decisions is the question of whether to go down the “seemingly unlikely” path of rejoining the Trans-Pacific Partnership, which doesn't include China. The TPP has long been seen by strategic thinkers in Washington as a way to strengthen the U.S. position in the Asia-Pacific and to help counter China's economic rise.
President Trump abandoned the pact on his first full workday in office. Many Asian allies would love for the U.S. to come back. In addition, the new administration also must address a brewing trade war with Europe related to a long-standing dispute between Airbus SE and Boeing Co. over industrial subsidies and plans by France and other countries for new digital-service taxes aimed at American tech giants such as Alphabet Inc.'s Google and Facebook Inc. Attention will also turn toward negotiations with countries such as Kenya and a post-Brexit UK, though none of those appear close to a conclusion.
Bloomberg also notes that President Trump and USTR Lighthizer have shown what's possible on Capitol Hill by prying at least parts of the Republican Party away from free-trade orthodoxy. For decades, Republicans carried trade agreements over the finish line allied with only a small number of moderate Democrats—alienating those in the Democratic Party who felt trade deals left too many U.S. workers behind.
In the process of hammering out an updated trade deal with Canada and Mexico, Lighthizer won influential Democratic allies ranging from House Speaker Nancy Pelosi, D-Calif., to Senators Sherrod Brown, D-Ohio, and Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee. He also won over a decidedly pro-Biden labor movement.
There are those who also see a lesson relearned on the pitfalls of protectionism, Bloomberg points out. Douglas Irwin, a Dartmouth College historian of U.S. trade policy, argues that future administrations are likely to pause before using tariffs again in the way the current administration has. “We had an experiment for four years about what it's like to use tariffs for all sorts of objectives, and I don't think it's going to be viewed as a success,” Irwin says.
These questions include the uncertainty that will continue shaping investment and trade and which will remain even if the new president moves away from the use of tariffs. Add to that a pandemic that's caused many countries to look inward and the task rebuilding the global trade order “only grows,” and it indicates the coming rebuilding will require more than just physical repairs, Bloomberg says.
So, we will see. Trade policy has long been a challenging area for U.S. producers who were highly skeptical of the current administration's “get tough” tariff policies aimed at important and growing ag markets — and it will continue to be an area that should be watched closely as efforts to implement proposed changes are considered, Washington Insider believes.