Will Biden Liberalize US Trade Policy? And What Does “Liberal” Even Mean These Days?
By: Christopher Wall
Tags: Biden, Trade, Supply Chain Management, Logistics, Trade Policy

By Christopher Wall and Robert Landon

The global economy is waiting anxiously to learn more about the incoming Biden administration’s future trade policies — and the team that will execute them. Will they keep China’s trade tariffs in place, for example? And will they try to restart the Trans-Pacific Partnership? Right now, we don’t know the administration’s position on even these most basic questions.

But one thing is for sure in 2020. Traditional paradigms no longer provide a clear guide to policy.

In the latest season of “The Crown,” we see a great example of traditional political paradigms breaking down. Members of Margaret Thatcher’s Conservative-with-a-Big-C cabinet argue against her massive proposed cuts to Britain’s social safety net. At first, they almost sound like members of the UK’s left-wing Labor party.

So why do they oppose a policy that aligns with their own beliefs? Because any massive and sudden change in the status quo violates their even deeper conservative-with-a-small-c principles.

When Fair Is Foul, and Foul Is Fair

Nowhere do terms like liberal and conservative, progressive and radical get more tangled up than in talking about international trade policy. In America, for example, economically “liberal” trade policy (the embrace of free trade — long a bedrock of the conservative movement) is largely opposed by the American left, who are called — wait for it — liberals.

The confusion began in the early 1990s when Democrat Bill Clinton — let’s call him a Big-L Liberal — embraced the Republican (and economically liberal) North American Free Trade Agreement (NAFTA).

Since 2017, the terms and ideological positions have become even more scrambled. The trade policy of the Big-C conservative Trump administration sounds a lot like the politically liberal Democrats who see free trade as a threat to American workers. Trump began his administration by rejecting the politically Liberal Obama administration’s economically liberal Trans-Pacific Partnership, which would have significantly lowered trade barriers with 11 nations along the Pacific Rim.

Then in 2018, the Trump team slapped US$360 billion worth of tariffs — long anathema to small-c-conservatives — on a wide range of Chinese goods. And he claimed to be doing so to protect U.S. manufacturing jobs, an age-old goal of Democrats.

Democratic Policy in a Post-Free-Trade Era

In such a topsy-turvy world, what, then, can we expect from a Biden administration?

The Signals are mixed.

On one hand, Biden played a central role in both NAFTA and PTT. On the other hand, he has made the containment of China and protection of US jobs a key part of his platform — just like Trump. Meanwhile, his public statements have left him with a lot of wiggle room. He has not committed to restarting PTT, for example. But neither has he said he will end the Trump-China tariffs.

Those tariffs pose a particular conundrum. In many ways, they align with traditional “Liberal” and Democratic Party principles. However, suddenly removing them could be destabilizing in its own way — just as Margaret Thatcher’s fellow Conservatives feared her social policies were too radical.

Who is on Biden’s Short List?

To better understand what’s ahead, let’s consider the leading contenders for two positions that will have the most significant effect on trade policy under Biden — US Trade Representative (USTR) and the Secretary of Commerce.

US Trade Representative (USTR)

Biden announced that he will nominate Katherine Tai, the chief trade lawyer for the House Ways and Means Committee, to become USTR. Ohio’s self-proclaimed progressive (i.e. Big-L Liberal) Senator Sherrod Brown (D-Ohio) said in a statement that Tai is the “most qualified candidate for the job.”

“She played a critical role in securing real improvements for workers in the USMCA agreement last year,” opined Brown.

That sounds classic Big-L Liberal thinking. Yet, Democratic moderates and some Republicans support her too, according to Politico. They cite her demands that China adopts “fair” trade policies — which, in today’s upside-down world, have become a big-C Conservative talking point.

Secretary of Commerce

For Commerce Secretary, Rohit Chopra, commissioner at the Federal Trade Commission and favorite of Senator Elizabeth Warren, is considered the leading candidate. Similar to Tai, Chopra earned his Big-L Liberal bona fides by helping to reform the student loan system and defending consumer rights at the Warren’s Consumer Financial Protection Bureau.

However, there has been some talk that Biden will nominate a centrist Republican in the mold of Meg Whitman.

What We Do Know

Neither of these potential appointees is likely to return policy to Biden’s old NAFTA days. However, commentators do agree three principles will likely govern trade policy for the next four years:

1) Containment of China Is Paramount.

Over the last few decades, China’s business, labor, trade, and monetary policies have made the country almost impossible to beat. In 1992, Chinese exports to the world totaled US$67 billion. In 2019, that figure reached US$2.6 trillion. That’s a 3,800% increase.

Probably more than any other factor, China’s wild success is responsible for scrambling the terms of the old free trade debate. And Biden has been clear in his desire to contain China. Reviving or reworking TPP — which excludes China and embraces its competitors — is one way to achieve that. Then again, keeping Trump’s China tariffs could achieve the same ends.

2) “Fair” Trade, But With Sharper Teeth

Fair is often in the mind of the beholder, but in general “fair trade” is an attempt to provide a level playing field among international competitors. It does so by punishing or excluding nations that have an unfair competitive advantage because they:

Refuse to open up their own markets to international competition, especially when in violation of existing agreements.

Cut costs by enslaving, abusing, or otherwise under compensating workers.

Cut costs by failing to meet basic environmental standards.

Manipulate currencies, subsidize industry, or otherwise artificially lower prices on their export goods.

Trump’s US-Mexico-Canada Agreement (USMCA), which replaced NAFTA, moves in the direction of fair trade, with new labor and environmental regulations. In short, fair trade is now a bipartisan principle.

However, Biden’s administration is likely to enforce those regulations with more rigor, given the records of both Chopra and Tai on labor or environmental issues.

3) A Return to Multilateral Agreements

While Biden has hedged his bets on the TPP, we can expect his administration to embrace a more multilateral approach — i.e. working with a range of other nations in a coordinated way on a common set of goals. TPP is a great example. It was all about containing China by joining forces with other nations on the Pacific Rim and negotiating with China as a more powerful block, rather than nation by nation.

A Brief Case for a Small-P Progressive Approach

Now that so many traditional political and even economic paradigms have been scrambled, we’d like to make case for a new one — a small-p progressive approach to international trade.

By small-p progressive, we mean the willingness to take calculated risks and try new approaches, regardless of whether they may fall under some antiquated paradigm of radical vs. moderate or liberal vs. conservative.

This approach assumes that economic prosperity is a goal worth pursuing, as long as that growth is sustainable, environmentally, and otherwise. It also assumes that workers should not be exploited to achieve that prosperity. Finally, it assumes that we will move more quickly toward prosperity by growing international trade as much as possible.

Of course, we may argue about the definitions of sustainability and exploitation, and even prosperity. But no one, right or left or center, can argue with the goals themselves.

Perhaps the best example of this is the USMCA, with its new approaches to environmental and labor protections. Do we know yet if USMCA will achieve its goals? No. Will it need tweaking? Almost certainly. But with a small-p progressive approach, we can observe what happens, assess outcomes free from ideological blinders, make intelligent adjustments accordingly, and test other new promising new approaches policies, too.

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Christopher and Robert work for Zeus Logics, whose customs clearance platform connects trade partners, optimizes operations, proactively minimizes risk, and identifies new trade opportunities.