Reconciling the rhetoric and reality of Biden’s trade policy

Author: Shihoko Goto, Wilson Center

Even as the Biden administration continues to tout cooperating with allies to ensure stability in the Indo-Pacific, the United States is unlikely to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) anytime soon.

With little appetite in Congress for the United States to sign new trade deals, US economic strategy in the region will focus on confronting Chinese challenges — efforts alongside like-minded countries that Washington will continue to lead. But this strategy might be less effective when new trade and investment partnerships are brokered without the involvement of the United States.

The first major hurdle that must be overcome to pave the way for the United States to potentially join the CPTPP will be reauthorising the Trade Promotion Authority (TPA), which expires on 1 July 2021. TPA allows the White House to submit a trade agreement for an up-or-down vote in Congress without any amendments being made and is a critical tool for negotiating new trade agreements. Without it, passing a deal as broad and ambitious as the CPTPP would be extremely challenging and overly time-consuming.

Even if a revised TPA were to be legislated in a timely manner, that still leaves the challenge of dealing with paltry Congressional appetite on both sides of the political aisle for signing on to a mega trade deal. It is hardly surprising that the latest annual Trade Policy Agenda prepared under US Trade Representative Katherine Tai states that the Biden administration will pursue a trade agenda focussed on appealing to voters that ‘will encourage domestic investment and innovation and increase economic security for American families, including through combating unfair trade practices by our trading partners’.

The focus on domestic growth is not unlike the objectives pursued by the Trump administration. Although former US president Trump’s singular focus on reducing the US trade deficit with China came under sharp criticism, his questioning of the economic gains to be made by trade deals for the average American was begrudgingly acknowledged by even those who staunchly opposed US withdrawal from the Trans-Pacific Partnership (TPP).

In fact, when it comes to trade with Asia, the Biden administration has yet to overhaul Section 232 which enabled the Trump administration to impose tariffs on steel and aluminium in the name of national security on some of Washington’s most important allies, including Japan. These tariffs remain in place despite over 300 US businesses pushing the Biden administration to terminate it immediately.

To be sure, US manufacturers are clamouring for these tariffs to be lifted not for foreign policy gain, but rather to remain competitive and to be able to source supplies from beyond US borders without paying a penalty. Still, US allies are disconcerted by Biden’s rhetoric of cooperation not aligning with US actions when it comes to economic policy. The Biden administration’s massive infrastructure and economic revitalisation spending proposals have been regarded warily in Tokyo, Seoul and elsewhere.

Putting aside the White House’s uphill task of securing congressional approval for the packages totalling US$6 trillion, growing unease persists about whether the Biden administration’s rhetoric to work together with allies will actually extend to the economic front.

Yet, the United States cannot confront the China challenge without relying on like-minded nations. Beijing is already moving to hedge against US measures that could isolate it from the global economy through its dual circulation strategy. In doing so, China is moving forward with plans to reduce its dependence on overseas markets and technology, while simultaneously boosting the reliance of emerging markets on Chinese goods and know-how. Coupled with the Belt and Road Initiative, Beijing’s goal is to build a new order centred around China, especially on the economic front.

Even if the United States does not join any comprehensive trade deals any time soon, it is imperative for Washington to demonstrate that it is willing to work together with like-minded partners for political as much as economic considerations.

For instance, a bilateral investment treaty with Taiwan would be a tremendous win for Taipei given the concessions Taiwan has already made to import US beef and pork. For Washington, it would strengthen Taiwanese voters’ support for the United States in light of ever-increasing pressure from Beijing. At the same time, it would also bolster a trade relationship upon which the United States remains heavily dependent on for the most advanced semiconductors.

Equally effective would be for the Biden administration to sign on to newly developing economic partnerships that aim to deal with both post-COVID-19 growth challenges and the China challenge at the same time. The trilateral Supply Chain Resilience Initiative is such an opportunity, which would allow the United States to cooperate with Australia, Japan and India on their efforts to reduce over-dependence on China-based supply chains.

Even though the Biden administration will be hemmed in by its domestic considerations and unable to ink new trade deals any time soon, that should not constrain it from aligning its policies to abide by its rallying cry for cooperation. The call for working together with partners on the economic front is hardly altruistic. The United States alone cannot push back against China’s broader regional ambitions without collective action. Washington’s sole focus on its narrowly defined domestic growth considerations might mean that its call for cooperation will simply be dismissed as empty words.

Shihoko Goto is Deputy Director for Geoeconomics and Senior Associate for Northeast Asia in the Asia Program at the Wilson Center.

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