Friday, March 29, 2024

How will Biden fix Trump’s America?

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America looks certain to dial back the aggressive trade tactics of the Trump era if Joe Biden is confirmed as President.
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Big questions, however, remain about how much the Democrat will be able to do to reverse course and pursue a genuinely trade-liberalising agenda.

Votes were still being counted as Farmers Weekly went to press last week, but a Biden victory looked the more likely outcome, even as lawsuits in several states promised to drag out the final result.

Donald Trump swung a wrecking ball through America’s trade relationships during his four-year term.

Abandoning its championing of the rules-based trading system since World War 2, Trump used the US’ leverage as the world’s biggest economy to the maximum extent possible against China, the World Trade Organisation (WTO), and others.

Trump’s complaint against China’s trade policies is not controversial in the US. Theft of American companies intellectual property and the subsidisation of Chinese industry is seen as a worsening problem by both main political parties.

But his decision to start a trade war using tariffs to bludgeon the Chinese with was a wild departure from the general direction of previous administrations in reducing trade barriers.

Former trade negotiator Charles Finny says Biden will be less inclined to use tariffs as a weapon and more likely to call on the WTO to resolve disputes with trading partners.

Trump stymied the WTO’s dispute settlement system by refusing to approve the judges needed for it to operate.

“There will be a more constructive engagement with the WTO and a different approach to dealing with trade disputes than the tariff first approach followed by Trump,” Finney said.

“It is going to be more like how we have been used to dealing with the US for decades, as opposed to what we have had with Trump.”

But while Biden looked less likely to use the threat of tariffs as a negotiating ploy, there was little to suggest that he would be particularly active in pursuing new trade agreements to roll them back either.

As Barack Obama’s vice-president, Biden backed the US’ leadership of the TransPacific Partnership (TPP) trade talks, which aimed to break down barriers to trade and investment in the Pacific Rim region.

Trump took the US out again just days after taking office.

Former agricultural trade envoy Mike Petersen says the closeness of the election and limited support among the current crop of Democrats in Congress for free trade generally meant Biden would be wary of rushing to rejoin the 11-country Pacific Rim agreement, which still remains New Zealand’s best shot at a trade deal with the US.

“The Democrats effectively engaged with us in TPP under Obama and that was likely going to take us through … to an agreement,” Peterson said.

“But Biden was part of an administration then, which is quite different to what it is now.

“Now we have a Democratic party, which has probably gone more to the left, and there are more of the Bernie Sanders-type supporters that are harder and tougher on trade.”

Even if Biden could convince his party to use its majority in the House of Representatives to vote for his trade deals they potentially faced a further hurdle in the Senate which the Democrats had been unable to win back in last week’s elections.

Dairy Companies Association chair Malcolm Bailey says it remains to be seen whether the Republican-controlled Senate would forward deals passed in the Democrat-controlled House to the President for signing.

“Are they going to revert to form and be more supportive of trade liberalisation or are they going to be the protectionist party we saw under Trump? We just don’t know,” Bailey said.

He says many of the targets identified by Trump, such as the WTO and Canada’s use of subsidies to protect its dairy farmers from imported competition, were the correct ones but he was dubious about the way he had gone about trying to reform them.

“The way of going about that is not to bring the dispute resolution process to a halt,” he said.

“We were pretty dismayed by that. The US, in economic terms, can engage in brinkmanship with a lot of trading partners but we certainly cannot.

“NZ’s interest is very much aligned with getting the WTO disputes system up and running again.”

But Bailey says he was hopeful Biden would use Trump’s trade deal with Canada to force it to live up to its commitment to rein in subsidies which, as well as blocking imported competition, were distorting the world price for dairy products by creating huge surpluses of milk powders which were finding their way onto the international market.

“Whoever is in charge of the US, we would be supportive of them trying to nudge Canada in a more sensible direction,” he said.

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