Biden’s trade policy is wrapped up in domestic and Trumpian politics

Author: Gary Clyde Hufbauer, Peterson Institute for International Economics

Former US president Donald Trump looms heavily over the US political landscape. His celebrity candidates, JD Vance in Ohio and Dr Mehmet Oz in Pennsylvania, won their respective primary battles to become Republican Senate candidates in November 2022. Both are likely to win seats.

Trump’s grudge candidate, David Perdue, lost in the primary to sitting Georgia Governor Brian Kemp. But on balance Trump’s endorsements, alongside the retirement of several Republican officeholders who disagreed with his policies, strengthened his control over the party.

Record inflation, abetted by massive stimulus in 2020 and 2021 and super-easy monetary policy through to February 2022, has practically eliminated Democratic party hopes of retaining control of Congress in the November 2022 election.

Biden’s valiant support of Ukraine is overtaking memories of the humiliating withdrawal from Afghanistan. An exceptionally tight labour market means that anyone who can get out of bed can find a job. But in today’s political landscape the pain of inflation matters more. Deserved or not, Biden is blamed and his party will suffer electorally accordingly.

Political arithmetic seemingly compels Biden to follow Trump’s international policies, even while he pursues a different domestic course. Trump set the stage for the US withdrawal from Afghanistan and Biden implemented the shameful departure. Trump and his trade ambassador, Robert Lighthizer, scrapped decades of orthodox Republican adherence to free trade and multilateralism.

Pressured by progressive Democrats, such as Senator Elizabeth Warren and Congresswoman Alexandria Ocasio-Cortez, Biden and his trade ambassador, Katherine Tai, steer clear of any suggestion that open markets might be good for America. Instead, their trade policy claims to be ‘worker centric’, improve labour rights, foster gender equality, raise minorities and better the environment. An almost impossible set of assignments.

In practice, ‘worker centric’ means protecting manufacturing jobs, even though vacancies in the manufacturing sector are soaring. Ambassador Tai can cajole other countries to adopt the International Labour Organization’s fundamental rights and endorse Paris Club goals on carbon emissions, but it is fanciful to imagine that US partners will implement more stringent rules than their domestic constituencies already accept. Meanwhile, the World Trade Organization remains consigned to monumental US indifference.

Biden’s truest adherence to Trumpian doctrine is his continuation, even escalation, of the Cold War with China. Ever since Thucydides, scholars have observed the action and reaction cycle that characterises great power relations.

Sino–US relations might be different today if Trump had launched a charm offensive with Beijing in 2018 rather than a trade war. The same can be said of US–Russian relations if George H W Bush had adhered to his promise, following the fall of the Berlin Wall, not to enlarge NATO. Biden’s challenge is to ensure that fierce competition with China does not end in fatal catastrophe.

Biden’s amplified hostility towards China, taken from Trumpian scripture, now encompasses exports, imports, investment, technology and scientific exchange. Facing a conflict between hostility and a policy of limited international economic engagement, Biden has rediscovered a forgotten feature of geopolitics — that economic engagement is vital for cementing alliances.

Not wanting to embrace two-way market access in goods and services trade and fearing that two-way foreign direct investment enriches corporations but not workers, Biden and his team have concocted engagement frameworks that have the feel but not the substance of past initiatives like the Free Trade Agreement of the Americas (FTAA), the Trans-Atlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) — now morphed into the Comprehensive and Progressive Trans Pacific Partnership (CPTPP) without the United States.

With the EU, Biden’s alternative framework is styled as the US–EU Trade and Technology Council (TTC). The TTC creates multiple working groups and task forces to address artificial intelligence, product standards, semiconductor supply chains, digital platforms, labour rights and more. But the heart of cooperation is sanctions on Russia and eventually China. In short, the overarching mandate of the TTC is security, cloaked in the language of economic engagement.

The newly announced Indo-Pacific Economic Framework for Prosperity (IPEF) between the United States and 13 Asian partners is much the same. The four pillars — connected economy, resilient economy, clean economy and fair economy — seem lifted from a public relations handbook. IPEF members can pick and choose which pillars to join. Unnamed in the IPEF declaration but by far the most important are implicit US security assurances to Asian partners that find themselves at odds with China.

The even newer Americas Partnership for Economic Prosperity (APEP), unveiled by Biden at the Summit of the Americas on 8 June, is equally long on rhetoric and short on substance, but security does not feature in hemispheric relations.

Can Europe or Asia expect major changes in Biden’s current strategy — security cooperation wrapped in fuzzy economic frameworks — when the president faces a Republican Congress in 2023 and 2024? If Biden makes an early, secret decision not to seek a second term, he will free himself from the shackles of progressive Democrats and Trumpian Republicans.

In that scenario, the Biden administration might embark on meaningful efforts to revive the WTO and put economic substance in TTC and IPEF, and even APEP. Biden might even offer olive branches to Beijing. But if Biden harbours hopes of a second term, the next two years will be much like the last — wordplay but little substance in international economic engagement.

Gary Clyde Hufbauer is Non-resident Senior Fellow at the Peterson Institute for International Economics.

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