These are no ordinary times for global trade. If the last few years was dominated by Trump’s attack on global trade, Covid-19 has made matters worse both due to slowing economies and protectionist temptations, vis-à-vis food security to say the least, in an increasingly complex geopolitical environment. What then Joe Biden’s likely presidentship bodes for global trade? Here is a quick summary based on a slew of recent opinions by leading trade observers from global banking circles as well as political and economic observers in the US and China.
Perhaps the broadest consensus is that unlike Trump’s ‘economic nationalism’, Biden is much pro-market. He has been known to actively seek advice from rather pro-market economists including former Fed boss Janet Yellen, Harvard professor Raj Chetty and the famed Larry Summers. His decision to choose pro-market Kamala Harris instead of Elizabeth Warren has also helped him win the confidence of financial markets on both sides of the Atlantic, as well as across the Pacific.
Little wonder then that soon after the results were in, Citibank’s private bank division announced that “perhaps the greatest clarity post-election is for global trade,” adding that “US foreign policy will enter a more predictable phase without escalating tariff threats.”
But this does not mean that America will be reversing all of Trump’s policies. Far from it, if Biden’s “Buy American” economic plan ala Trump’s ‘America First’ policy is any guide. Under his Buy American slogan Biden had proposed to invest $300 billion in research and development of technologies such as electric vehicles, 5G cellular networks and artificial intelligence, and an additional $400 billion for federal procurement of products made in the US. Which is not surprising given more than doubling of US unemployment since Covid-19. At one point during the campaign season, Biden had also proposed penalizing US firms that move jobs abroad.
Most international analysts contend that whilst Biden had criticized Trump for “reckless” application of tariffs, especially against China, he made it clear during his election campaign that his administration will not roll back those tariffs without due diligence. Ergo, expect anti-China tariffs to continue, albeit of course Biden’s tone should be expected to be much more diplomatic than Trump, a factor that may help towards reconciliation.
There also seems to be a growing consensus that unlike Trump’s unilateral action against China, Biden will adopt a multilateral approach where instead of threatening Europe to choose US over China, the US can now be expected to seek diplomatic collaboration.
And although Biden advocated for the Trans-Pacific Partnership under Obama administration stating that while the TPP wasn't a perfect deal, it was a good way for countries to come together "to curb China's excesses", Biden can be expected to renegotiate the trade deal under renewed terms.
In his second Democratic presidential primary debate last year Biden said: “I would not join the TPP as it was initially put forward. I would insist that we renegotiate pieces of that with the Pacific nations ... so that we could bring them together to hold China accountable.” However, many analysts still doubt if Biden would be able to do so despite apparent geopolitical benefits to the US, since nationalistic sentiments still run high as is evidenced by the tough final round between him and Trump this month. Which is why any revision is not widely expected in Biden’s first term.
The two countries are also expected to continue fighting over domination of 5G networks, quantum computing, electric vehicles, artificial intelligence and biotechnology, whereas there is also a growing consensus that the US under Biden will keep pressure on China on account of intellectual property-rights, state subsidies for manufacturing and China’s influence in South China sea.
To this end too, the US is expected to strengthen ties with the EU, whereas climate change is also expected to bring the two sides to work together. Accordingly, Biden is seen joining the Paris Agreement, whereas Biden has frequently made it clear that his administration will seek to use trade agreements to address global warming. His plans include: global ban on fossil-fuel subsidies, tariffs on imports that produce a lot of carbon, and trade deals that include commitments to reduce emissions.
Given America’s sticky inertia of ignoring global warming for decades, and the growth in fossil fuel exports she witnessed in Trump era which helped a sizeable constituency of voters, the implementation of Biden’s plans looks ambitious. But if Biden is successful, it could potentially pave way for a new era, one that Pakistan should prepare for.
Comments
Comments are closed.