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Inside Washington

Biden administration: New trade approach ahead

TAGS: Policy
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GLOBAL VIEW: For the new Biden Administration, global trade issues range from working with China, dealing with the World Trade Organization and perhaps reengaging the Trans-Pacific Partnership countries.
A closer look at how the incoming Biden Administration will approach agricultural trade differently.

This is the second installment of a special multi-part series offering what we might see under the incoming President Joe Biden administration. 

How incoming President Joe Biden handles trade will be very different from his predecessor and important to watch as he begins to look outward. At the forefront he will need to handle domestic issues with COVID and the economic situation, but many hope he will then turn to a more cooperative relationship with world trading partners.

When Biden served as the vice president under President Obama he was chosen because of his experience in Congress on international affairs. As Anne MacMillian recently notes, trade and foreign affairs are “Biden’s bread and butter.”

While speaking on a Webinar hosted by the North American Meat Institute, MacMillian, agriculture and food practice group leader at Invariant who also served on Secretary of Agriculture Tom Vilsack’s staff, says international affairs is where Biden is most comfortable. “It is going to look a lot different than the last administration’s trade agenda,” she says.

Trump took a more bilateral, individual approach to trade matters, whereas Biden is expected to form more coalitions with like-minded world trading partners to counter China. But Trump’s tariffs against China are not likely to come down immediately as Biden is expected to evaluate his options.

MacMillian notes Biden is unlikely to throw the baby out with the bath water. “There were some actions, particularly against China, that were productive.”

Handling China

Farmers were harmed significantly in the start of the trade war as exports dropped dramatically. Trump’s administration did provide Market Facilitation Program payments which tried to help offset those loses and provided $14.5 billion in 2019 and $8.5 billion in 2018. Although 2018 and 2019 brought lower trade values to China, the phase one trade deal completed in January 2020 brought a return to higher trade levels, although still below the promised levels.

American Farm Bureau Federation Chief Economist John Newton says China is not expected to meet its phase one year one target of $33-$36 billion, but currently sits at $22.5 billion with 11 months of data. He says China will likely fall short on those targets depending on how strong exports finish in December, but still at record levels of trade.

Related: China still major driver in 2021 ag economic outlook

The million-dollar question is how Biden views China and whether he will continue or not continue the phase one agreement and if there will be a phase two. Newton says AFBF will work with the new U.S. Trade Representative to communicate the benefits of the first installment.

Randy Russell, president of the Russell Group, explains it doesn’t matter who controls the administration either Democrats or Republicans, “China is a huge vexing problem for the American public.”

Reengaging on TPP

Newton says Biden re-entering or re-engaging with Trans-Pacific Partnership countries could be “something worthy of consideration.”

Michael Nepveux, AFBF livestock economist, says TPP offered a huge win for the livestock sector. “I wouldn’t be surprised if we do end up re-engaging” on TPP, especially considering the geopolitics of countering China’s strength in the region. “I think from a livestock perspective it would be a smart move.”

Myers adds that TPP also offered a lot of opportunities for crop markets of the now Comprehensive and Progressive Agreement for Trans-Pacific Partnership member countries and could offer a “huge opportunity for U.S. producers going forward.”

Executive power on trade

MacMillian adds Trump moved so much power from the legislative branch to the executive branch. Before Trump came to office, Congress fought over renewing Trade Promotion Authority so Congress would get an up or down vote on whatever the President finalized in a trade deal. Instead, over the last four years Trump largely circumvented Congress.

She says it will be interesting to watch how much Biden follows that precedent of running more trade policy out of the executive branch rather than the legislative.

Russell adds Trump and his team of USTR Ambassador Robert Lighthizer and economic adviser Peter Navarro saw tariffs as a lever and a means to an end in forcing other countries to the table. Trump did see advances with Korea, Japan and China. It is not expected that Biden will remove the tariffs immediately, but will want to get something in return from trading partners if they’re taken off.

Related: Tai nominated as USTR ambassador

The incoming nominee for USTR Katherine Tai speaks fluid mandarin and has past experience as a China enforcement head with the USTR. She’s also praised for her help on the House Ways & Means Committee staff in getting the U.S.-Mexico-Canada agreement across the finish line.

Biden is also expected to be more engaged at the World Trade Organization. During the Trump Administration, the United States blocked appellate judge nominations. This essentially stalled out the ability for countries to challenge any rulings that go against them.

First Installment: Biden administration: Labor issues offer pros and cons

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