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Craig: US trade policy direction will be set by early Biden moves

Think tank R Street Associate Fellow Halie Craig in conversation with Borderlex on the potential direction of United States trade policy under Joe Biden – and what it could mean for future cooperation with the EU.

Halie Craig is an Associate Fellow at R Street, a think tank in Washington. She specialises in trade and investment policy.

“I don’t see the Biden administration diverging too much from where the Democrats have more traditionally been on trade policy,” said Halie Craig.

Executive powers

To Craig, who has worked in Congress as trade policy adviser to Republican Party Senator Pat Toomey, one of the fundamental questions for the new Biden administration will be how to handle the President’s executive powers. Outgoing president Donald Trump has used executive orders widely to roll out his trade policy agenda.

The US China Phase One agreement of early 2019 is an ‘executive’ agreement that required no congressional approval, for example. The US’ Section 232 steel and aluminium tariffs imposed on national security grounds have equally not required green light from Congress.

“It will be interesting to see if a Biden administration takes a page from the Trump playbook or not. They very well could,” reckons Craig.

Halie Craig pointed to the fact that previous Democratic administrations have readily engaged in executive policy-making.  The question is whether they will use that for beneficial ends – such as repealing tariffs – or whether there will be so much pressure on the administration that these powers will be used to for more protectionist action – such as in the area of public procurement or climate change.

Joe Biden’s pick for United States Representative Katherine Tai will have a pivotal role to play. Tai has served many years as adviser on trade in Congress.

“Tai understands that both Democrats and Republicans expressed concerns about the Trump administration not sufficiently looping them in on trade policy issues,” said Craig.

“This is an opportunity for Biden to work with Congress if he wants to rebuild relationships between the executive branch and the House. Trade policy is an area where that partnership can be strengthened.”

Whether that will ultimately happen “is up to the president and his staff”.

More protectionism?

The Trump administration’s main legacy is to have brought many Republicans to a more protectionist view on industrial and trade policy that many Democrats have long agreed with. As a result, post-Trump, the Democrats have more leeway than they had under earlier administrations, reckons the R Street analyst.

Halie Craig points to the Trump administration’s renegotiation of NAFTA, the trade agreement with Canada and Mexico. The episode brought a shift from more liberalised trade towards more restrictive trade, with a particular focus on items such as stricter rules of origin for automotive production. The Trump administration has extensively used subsidies for agriculture. It rolled back protections for investors – the ISDS mechanism – and introduced a sunset clause in USMCA.

“All this, coming from a Republican administration, is pretty unorthodox in US trade policy. It will be hard for the Republicans to close that box once it’s been opened. This benefits the traditional Democrat trade policy agenda.”

Multilateralism and climate focus

“The one real bright spot will be the shift back towards multilateralism,” said Craig. The incoming team is “genuinely invested in reengaging with trading partners.”

“A huge priority of the Democrats over the last four years has been the climate change agenda. The rhetoric around it has ramped up.” Leading party figures have championed initiatives such as the Green New Deal.

“Especially for younger voters in the Democratic party, climate change is really the pivotal issue. We will definitely see that in trade agreements,” reckons Craig.

President Biden’s announcement that the US would be re-joining the 2015 Paris Agreement on combating climate change “is an important signalling mechanism showing that the US administration is prioritising this issue right away”.

“The obvious area of cooperation between the EU and the Biden administration is climate.” Craig also points to the Democrat’s strong interest in labour issues and labour right enforcement provisions in trade agreements as an issue that could bring the US and its traditional partners back to the discussion table.

As to a US commitment to the World Trade Organization, Craig expects early moves from the Biden administration to show goodwill and get the institution running again.

The Trump administration choked off the dispute settlement system’s Appellate Body by refusing to nominate judges to replace outgoing members. It also vetoed the nomination of the organisation’s member’s favourite candidate to lead the institution as director-general, Ngozi Okonjo-Iweala. Removing the veto on Okonjo-Iweala early and ublocking the Appellate Body nomination process “would be an easy way to show goodwill to the members of the international community.”

No easy tariff roll-back

Whereas re-engaging trading partners will be a priority for the new administration – rolling back some egregious trade policy actions of the Trump administration might not be an easy path to tread. Getting rid of the Section 232 steel and aluminium tariffs affecting US allies, for instance, will not be straightforward.

“I don’t know the path to repealing them. They have become so entrenched now domestically. Beneficiaries would not be too pleased if they were to repeal them at the stroke of a pen on Day One. Political allies in the labour community would not be very happy with rolling them back either,” said Halie Craig.

Trump’s China legacy will also live on. Biden could single-handedly repeal Section 301 tariffs on China or the Phase One agreement inked with Beijing. But the likelihood that he will do that is very low. “The tariffs may be one point of leverage that the Biden administration would have if they wanted to continue negotiating with China. It would be damaging to just walk away.”

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