What will a Joe Biden presidency mean for trade relations between the United States and the rest of the world, particularly China? Stephen Olson, Research Fellow at the Hinrich Foundation, discussed some of the possible paths forward at a Chamber webinar on 12 November. 

“Prior to the election, the conventional wisdom was that Beijing would prefer a Biden victory,” he said. “To be honest, I’m not sure that that is correct.”

This is because Joe Biden will do two things Donald Trump has not done, Olson explained. He will place a much higher priority on human rights issues, which will spill over into the trade agenda. He will also be keen to work constructively within an alliance system, which means the U.S. and other nations will be able to present a united front on their grievances with China. 

On China, there are three key issues facing the President-elect: the punitive tariffs introduced by Trump, the Phase One agreement, and how to move forward in the longer term. Olson expects the first two to remain in place, at least initially.

“For the longer term, the key thing is that Biden has largely the same trade agenda vis-a-vis China as Trump did,” he added.

The main concerns – industrial subsidies, state-owned enterprises, technology transfer, and national security issues involving technology companies – have been on the back burner since Covid-19 took hold, but they will resurface when negotiations between the U.S. and China start again. Although the disagreements are significant, Olson suggested a course of action that could break the deadlock.

“One possible way forward, and perhaps the most logical, would be to engineer a responsibly managed partial economic decoupling,” Olson said.

“With the benefit of hindsight, we can see that the very high levels of economic integration that these two countries have been pursuing for the past two to three decades was perhaps a bit unrealistic, and maybe a little bit naive, given how fundamentally different the economic systems are, how profound the differences are in governing philosophy, and the rise in geostrategic tensions.”

A partial decoupling would not have to be adversarial, Olson said, and could lead to a more stable and mature relationship. 

A broader question is how much influence the progressive wing of the Democratic party will have on Biden’s trade policy. In the run-up to the election, the party had presented a united front, but it is likely that the battle between centrists like Biden and progressives will recommence. 

And among these progressives are some fairly unconventional views. For example, Elizabeth Warren has suggested a stringent list of conditions for countries that want to do a trade deal with the U.S., including no subsidies for fossil fuels and enforcement of religious freedom. Biden is unlikely to adopt the more controversial elements, but it shows the pressure he will be under from a wide range of opinions within his party. 

Whatever path a Biden Administration takes, the global trade picture has changed, Olson said. 

“Irrespective of how this internal battle plays out within the Democratic Party, we all have to wrap our brains around the fact that the United States has, in a very fundamental way, crossed the Rubicon on international trade,” he said. 

“There will not be any return to the full-throttle pursuit of free trade that we saw under Bill Clinton, George Bush and Barack Obama.”

Olson explained that there is an increasing belief across the political spectrum in the U.S. that these free trade policies benefitted multinational firms and financial institutions, but did not work out so well for middle-class Americans. So new trade policies will be much more centred on U.S. workers. 

Another important question is the future role of the U.S. in the global trading system. “After four years of the most tumultuous, combative, norm-busting, unconventional presidency in U.S. history – will things go back to the way they were before?”

Olson remarked that, from a trade perspective, the U.S.-China trade war was not the most disruptive thing that Trump did. From the end of the Second World War until Trump took office, the U.S. led the way in pursuit of the ideal that global economic integration can make the world more prosperous and peaceful. 

Trump took a very different approach, and deliberately abdicated the traditional leading role of the United States. 

“From the perspective of the rest of the world, it seemed like the U.S. was determined to break every norm and blow up the very trade system the U.S. created in the first place,” he said. 

It may be some time before we get a clear idea of Biden’s trade approach, as the new President will have to deal with a worsening Covid-19 situation and other domestic issues. But a more stable environment is highly likely to prevail. “The style and tone of trade policy will be a lot more conventional and responsible, with a greater inclination to work through multilateral channels.”

This return to normalcy in international relations and policymaking will should provide a better environment for resolving the issues with China, and for the U.S. to find its place in the global trade system in a post-Trump world.