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Talking Trade blog

US President Joseph Biden: Time for a “reset” on trade?

Published 09 November 2020

The elections in the United States are finally (almost) finished. While it feels like it has been underway for a lifetime, Joe Biden has captured the White House and will take up his post on January 20, 2021.

With the election finally concluded, thoughts are quickly spinning to what can be expected out of the United States.  While many people outside of the US are anticipating a radical reshift of trade and foreign priorities, a healthy dose of pragmatism suggests the US will not suddenly revert to “pre-Trump.”

There will be substantial shifts in tone and approach.  Biden has had a long history of involvement in foreign policy.  He is, by nature, interested in cooperative outcomes.  Both traits suggest significant adjustments in the methods used by the United States in the international arena—anchored by building coalitions around specific topics and an overall embrace of multilateral solutions.

For trade, this means that US should swiftly change its approach to the World Trade Organization (WTO).  The selection of the next Director General for the WTO has been hamstrung by US objections to the front-runner.  The process had been extended to today (November 9), in the hopes that the election would provide greater clarity on American interests in the next four years.  A renewed outbreak of Covid-19 in Geneva has pushed back the deadline further. 

If the outgoing Trump administration continues to block a new appointment of DG or does not take on board the Biden team preferences, the WTO may opt to postpone the decision until January.   

The US will not, however, be able to show up immediately in Geneva or, for that matter, in most locations.  All politically appointed posts, including the US Trade Representative and WTO Ambassador, will need to be filled. 

Getting appointments confirmed by the Senate could be a long, fraught process.  The final composition of the Senate is currently unclear.  There is a runoff election in the state of Georgia that will be ferocious, as the outcome will decide which of the two American parties controls the Senate. 

At the moment, Republican Mitch McConnell remains the Senate Majority Leader.  McConnell has a long history of blocking actions by a Democratic White House.  If he were to remain in his post and opted for obstructionism, it could be a long and grueling process to get seats confirmed for the Biden White House.

This would leave a large number of posts around the world vacant for an uncomfortably long time.  In addition to changes at the top, Biden’s team will need to work furiously hard to restaff whole sections of the US bureaucracy, which have been alarmingly vacant for long periods of time.

If this disruption at the top were not impediment enough to pushing for new policies, it remains unclear exactly what both parties will want to accomplish, particularly on trade issues.

Traditionally, Democrats have been more skeptical of trade.  This stance has changed in line with American public opinion to be more receptive to trade as a potential force for good.  But it remains unclear how the Democratic party will respond to specific trade initiatives.

It is also uncertain how Republicans will approach trade.  In the past, free trade was a key plank in the party platform.  Donald Trump scrambled this approach and it is not obvious how the Republican party will choose to address trade in the coming few years. 

Getting clarity inside both parties will take time.  Trade, in general, is not going to be the key priority.  Instead, expect Biden and the incoming Congress to focus significant time and attention on a host of domestic policy items including handling the escalating pandemic and economic fallout from disruption.

There are two specific trade issues that will likely come up first:  China and the CPTPP.

While there is unlikely to be much clarity on trade in the early days of the Biden Administration, it is a good bet that US policy towards China will not shift by as much as many might expect.  The two parties may not know exactly where they stand on a variety of issues, but both are united in arguing that China remains a threat that requires a strong stance by the United States.

The form and approach to tackling China will be different, with a greater emphasis on working with others in the international system and a more nuanced and targeted approach to addressing specific issues.  Expect slightly less reliance on unorthodox tools from the toolkit, although difficulties getting policies through Congress is likely to mean the continuing use of Executive Orders for trade priorities.

Watchers hoping for the swift removal of tariffs are likely to be disappointed.  The US Treasury is making a lot of money from the collection of a wide range of tariffs from imports arriving from China and elsewhere.  Some of these tariffs will probably go away, especially those imposed on US allies. 

The bulk of the China tariffs, however, will remain in place.  Once revenue starts to flow into the US budget, it is very difficult to reverse course. 

The other issue of importance to US trade watchers is the Biden approach to what is now called the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).  Biden was in the White House when the US was an active partner in the predecessor agreement, the TPP.  Many therefore expect the US to swiftly take up membership.

Not so fast.  While there are a range of sensible reasons for the US to get into the agreement, the practical issues are likely to prevent American participation for some time.

In addition to difficulties in restaffing key posts in USTR, State, Commerce and elsewhere, and the challenges of shifting policy priorities in Congress on trade, there is a looming deadline that is going to be extremely challenging.

Before the US can engage in trade negotiations with anyone, it needs to have something called Trade Promotion Authority (TPA) in place.  The TPA provides instructions to the Executive Branch from Congress about what policy priorities need to be included for a final agreement to receive a simple up-or-down vote at the end.  Absent TPA, Congress can shred any potential agreement.

The current TPA approval expires on July 1, 2021.  Congress has never embraced voting on TPA, as there are few upsides to pushing through trade legislation. 

For the US to rejoin talks on CPTPP, it will either need to start prior to the end of TPA or get TPA approval in process.  (Or get really creative about arguing that the TPP started under TPA approval and renewed approval is not necessary now.)  Both of these steps will be tricky in the first five months of a Biden Administration.

Trade openness was not part of the campaign for anyone and it is unclear whether Biden will want to spend his limited political capital pushing a potentially controversial trade agenda so swiftly in his administration. 

While a change in US leadership is likely to be cheered around much of the world, a healthy dose of pragmatism suggests that getting different concrete results on the ground will take longer than many expect and may not, ultimately, result in as much shift as some seem to anticipate.

© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).

Dr. Deborah Elms is Head of Trade Policy at the Hinrich Foundation in Singapore.  Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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