How Biden can fix Trump’s trade policy

World leaders were quick to applaud Joe Biden’s victory in the presidential election, signaling widespread hope that he will restore confidence in America’s foreign policy commitments and bring an end President Trump’s four-year attack on international law.

Much of the focus will be on Biden’s trade policy, which impacts America’s allies as well as the thousands of U.S. firms who opposed Trump’s trade wars. But a sweeping reversal of Trump’s “America first” approach is unlikely. Instead, Biden must undo Trump’s mistakes while still addressing the very real challenges facing the U.S. economy. 

There isn’t an easy path forward. Trump was right about a couple of things. It’s true that United States faces difficulty grappling with globalization’s downsides. The U.S. economy suffered a 28 percent decline in total manufacturing employment since 2000. And, while not all of those losses are due to free trade, some of them are a direct result of increased import penetration. It’s also true that the old rules governing trade need updating, a position many of America’s trade partners share.

The trouble was Trump’s approach, which saw him break from eight decades of pro-trade U.S. policy by increasing tariffs to levels not seen since the Great Depression.

Trump’s brash, unilateral approach has been costly. Biden inherits an economy facing around $100 billion worth of trade retaliation from key partners, including China, the European Union and Canada, which account for half of all U.S. exports. These tariffs already cost U.S. firms roughly $50 billion, as exports fell by 25 percent in 2019. At the same time, consumers face higher costs for everyday goods — and those price hikes disproportionately hurt poorer households. It’s no coincidence that economic inequality in the U.S. is rising faster under Trump than under any president in 30 years.

America’s current troubles don’t stop at the border. Trump’s attack on a rules-based trading system has generated high economic and diplomatic costs. The U.S. currently faces two dozen trade disputes at the World Trade Organization, which are a direct response to his trade wars with China and the European Union.  

Taken together, Trump has dealt clumsily with the real challenges facing the U.S. economy. This raises the question: what should Biden do?

Moving forward does not require a return to unfettered trade liberalization. Instead, it requires a combination of policies that boost U.S. competitiveness, protect labor and recast the multilateral trading system to prioritize social inclusion.

Those reforms have to start at home. Biden promises over $1.3 trillion in vital infrastructure, directing money to everything from highway projects to broadband for rural communities. These investments are the first step in bolstering America’s productive capacity. At the same time, Biden plans deep investments in research and development to help protect America’s comparative advantages in high-tech industries and boost jobs. 

Perhaps most importantly, Biden must restore a regulatory environment that alleviates the downward pressure on labor. The Trump administration perpetrated a violent war on U.S. labor market regulations and further shifted the concentration of political influence toward firms. On this front, Biden has already promised to strengthen the collective bargaining rights that could help workers protect their welfare.

Of course, domestic reforms are only half of the story. There are external pressures as well — not least, China. Concerns over intellectual property theft and state-subsidized production aren’t going to disappear when Trump leaves office. For his part, Biden says he will stand firm defending U.S. interests against anti-competitive behaviors. The important thing is to distance the U.S. from Trump’s unilateralism, which concentrated the costs of addressing China on America’s firms, workers and consumers. A more cooperative approach, harnessing the shared interests of U.S. trade partners, is better suited to address common concerns over discriminatory trade practices.

Cooperating with allies would be a welcome relief to many. Trump previously cast doubt on the World Trade Organization’s legal authority, rejecting trade dispute decisions and threatening – more than once – to abandon the global trade regime entirely. 

Criticisms of the WTO didn’t start with Trump. America’s trade bureaucrats have long been concerned about the volume of disputes filed against U.S. trade practices as well as the content of those decisions. The Office of the United States Trade Representative argues that the WTO’s Appellate Body oversteps its bounds. 

But where Trump wanted to simply sweep the chess pieces off the board, Biden has an opportunity to reform trade rules.

There are plenty of good ideas out there. American Phoenix’s Beth Baltzan recently offered a model free trade agreement designed to provide governments the policy leeway necessary to protect workers from a race to the bottom. Her plan complements efforts to rethink trade law in a way that promotes social inclusion. Gregory Shaffer, a law professor at UC Irvine, argues convincingly for rules that curb tax evasion, reduce the pressure on social insurance and reinforce labor standards. 

These reforms are feasible and necessary. They just take political will and cooperation among like-minded partners. Luckily, the president-elect already signaled his willingness to retake a seat at the global bargaining table. Biden intends to rejoin the Paris Agreement and repair ties to the World Health Organization.

Given Biden’s posture in these other areas, a multilateral approach to trade isn’t too far-fetched. Besides, it’s the best way to pull the United States out of an economic Wild West — and it’s the best way to take globalization’s dangers seriously.  

Jeffrey Kucik is an associate professor in the School of Government and Public Policy and the James E. Rogers Colleges of Law (by courtesy) at the University of Arizona.