Biden’s ‘America First’ trade policy

Author: Editorial Board, ANU

Nine months into the Biden presidency, it’s becoming apparent that the US administration doesn’t have a trade policy of its own. Former president Donald Trump’s import tariffs on Chinese goods remain in place, as does his Phase One trade deal with China outside of established global trade rules. The dispute settlement system at the WTO is still unable to enforce its rules due to the United States’ blocking the appointment of Appellate Body judges.

Bereft of new ideas, US Trade Representative Katherine Tai recently doubled down on China tariffs and the Phase One trade deal. As Gary Hufbauer writes in our first feature this week: ‘Three-quarters of Tai’s actions are Lighthizer’s policies with softer edges and a smiling face’. The only new policies are the protectionist Buy American measures that limit US government procurement to domestic production. President Biden has taken that principle to heart and bought Trump’s ‘America First’ trade policies.

The United States used tariffs and the threat of higher tariffs to coerce China into a bilateral trade deal, signed in January 2020. Japan was coerced into a trade deal with the United States the year before under the threat of tariffs on automobiles. The Phase One trade deal between the United States and China moved the world’s two largest economies and trading nations decisively towards managed trade, away from free trade.

Instead of opening new Chinese markets, the deal centred on an agreement for China to purchase US$380 billion worth of American agricultural goods, manufactures and energy by the end of 2021 — without regard to the interests of competitors in the Chinese market. Large powers like China and the United States rarely consider the spillovers of their actions on smaller powers, even if they are allies. Purchase quotas of US$80 million worth of US agricultural goods means that China has to divert imports from other import suppliers. The collateral damage has fallen significantly on Australian producers, with the added insult of their being at the receiving end of the most blatant economic coercion China has unleashed on any country to date. American wine growers, barley and beef farmers as well as coal miners have displaced more competitive Australian producers in the Chinese market, at US instigation and with deliberate Chinese complicity.

At the same time, high-level officials, like Indo-Pacific tsar Kurt Campbell, claim the United States has the back of the very allies and partners that have been injured by the trade diversion resulting from managed US–China trade. As James Curran points out, asked how ‘an inherently bilateral agreement that has no regard for the multilateral consequences of how those Chinese commitments are fulfilled’ squared with her emphasis on the wellbeing of allies and other market economies, USTR Tai had no answer.

Trade coercion against Australia is but one of the long list of Chinese trade practices with which much of the global trade community has a problem. The industrial subsidies that China extends to state-owned enterprises distort markets and competition in China, and those distortions spill over into international markets. Forced technology transfer has been required of many foreign companies as the price to pay for operating in the Chinese market. There are other non-market practices in China which the Phase One trade deal with the United States is entrenching.

True, China is breaking no rules on some of these fronts, because they are areas in which there are no international rules to break. Industrial subsidies and pervasive agricultural subsidies, for example, are both yet to be disciplined by international agreement.

The rules in the WTO have not kept pace with developments in modern commerce and they need updating. But the US embrace of managed trade with China and its market-sharing approach to tech and other trade with Europe (despite reversing course on Trump’s steel and aluminium tariffs there) is not the kind of leadership that’s now needed.

Bilateral and regional agreements have tried to fill the gap. Prominent among those agreements is the Trans-Pacific Partnership (TPP) for which the United States led the negotiations, before Trump nixed the deal on day one of his presidency. The TPP was salvaged with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which created new rules for international commerce in areas where they were lacking in the WTO and opened new markets for its members. Strategically, it was…

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