came into office promising to revamp our trade policy. He railed against the trade agreements signed by his predecessors, calling Nafta “the worst deal maybe ever signed,” and assured Americans that reversing the trade deficit would be “easy.” His message resonated across industrial landscapes hollowed out by factory closings. But four years later America’s trade gap is at levels not seen since 2006, and we’ve shed more than 200,000 manufacturing jobs.
Former Vice President
has said that for our economy to thrive, America must trade with the 95% of the world’s consumers who live outside our borders. But he’s made it clear that a new American trade policy has to start with putting our own house in order.
From the start of his tenure, Trump has picked fights and alienated allies. Canada was branded a “national security threat” by the administration to justify import taxes on steel and aluminum, and Mexico was warned that unless it stemmed the flow of “criminals and rapists” to the United States the destination for 80% of its exports would be slammed shut. The vaunted U.S.-Mexico-Canada Agreement turned out to be an updated Nafta that could have been modernized without the drama. In fact, much of the work to revise Nafta began in the Obama-Biden administration, and it was congressional Democrats who successfully negotiated stronger, more enforceable labor and environmental provisions in the agreement.
But nowhere has Trump been more feckless on trade than with China. A realignment of our trade relations with China was long overdue, but the phase one agreement signed in January prioritized exports from battleground states in the short term over fundamental U.S. complaints such as Chinese subsidies to state-owned enterprises, its abysmal human rights record, and cyber-enabled economic espionage condoned by a government that otherwise keeps airtight control over the internet. The pact has not delivered the promised benefits. As of the first nine months of the year, China had purchased slightly more than half the amounts it had pledged. Chinese steel and aluminum overcapacity continues to distort the global market and put pressure on workers in the United States.
The failure of a trade policy based on a chaotic mix of tweets, tariffs, and tantrums was predictable. When U.S. sales to China fell, other countries stepped in to fill the breach. Brazilian soybean exports to China boomed while U.S. farmers suffered the consequences. Although many American allies share our objections to Chinese trade policies, Trump made no effort to forge a coalition, opting instead to threaten Japan and the European Union with tariffs on imports of cars and automobile parts. Relegated to spectators, our allies stayed on the sidelines while the world’s two largest trading nations traded tariffs. In our commercial spats with China, “America First” became America alone.
Regaining U.S. credibility abroad will likely only be the first step for Biden. For decades Americans have argued about the benefits of trade, and our resulting inability to agree has led to trade inertia. Even when the strategic imperatives of a trade policy are evident—witness challenging Chinese dominance in Asia or anchoring our security with next-door neighbors—the U.S. labor sector has hesitated to come along, fearing that workers will be sacrificed to other strategic foreign policy objectives.
Their distrust should not come as a surprise since America’s workers have not shared in the gains brought about by increases in labor productivity. From 1979 to 2018, labor productivity grew nearly 70%, but wages rose less than 12% after inflation. During that period labor unions have been decimated so that today only 10% of U.S. workers are unionized. Biden has pledged to strengthen public and private sector unions, and make it easier for workers to join them.
For labor to become a full partner on trade, U.S. policies will need to put workers front and center, even if it means deemphasizing during trade negotiations issues dear to business such as intellectual property protection for pharmaceutical companies and blanket investment shields. Instead of turning to macroeconomics data to measure the success of our trade agreements, expect a Biden administration to focus on whether they create good paying jobs and benefit the middle class.
Biden has also said his administration would demand that U.S. trading partners live up to their commitments on worker rights. Significant allegations of labor rights abuses, including violence against unionists and child and forced labor charges, have been filed against nations party to trade agreements with the United States, such as Bahrain, Colombia, and the Dominican Republic, but these complaints have languished for years without effective follow-up by the Department of Labor or remedial action by our trade partners. Unlike the Trump administration, which sought to slash funding for the Department of Labor’s Bureau of International Affairs, expect a Biden presidency to allocate additional resources to monitor and enforce our trade commitments.
Biden—with a long track record of devoting attention to Latin America—would work with the Mexican government to implement the labor reforms required by the USMCA. Only if American workers are assured that the protections enshrined in our trade pacts carry real meaning will they believe that these agreements can create a level playing field where they stand a chance to compete.
American companies are often at a disadvantage when venturing abroad against “national champions” that can count on the backing of their home governments, and as a result U.S. business has missed out on emerging market opportunities in promising sectors such as infrastructure development. A Biden administration strategy to boost goods and services exports is likely to seek to make better use of economic statecraft tools that Trump has tossed aside in favor of tariffs and sanctions. A more active and efficient U.S. Export-Import Bank, Development Finance Corporation, and State Department will be needed to counter Chinese inroads in Latin America and Africa, and provide alternatives to China’s Belt and Road Initiative.
If the United States decides to help write the next chapter of the world’s trade rules, we will not be alone. Many others, including Australia, Japan, the EU, and Vietnam are also troubled by Chinese behavior. Biden’s years in government tell us that, instead of bullying, his administration will aim to negotiate common positions with our partners. Rather than hobbling the World Trade Organization into irrelevance or worse, as the Trump administration has suggested, a Biden administration will look to build consensus for reforms that turn the WTO into a less bureaucratic institution that can address environmental, fair competition, and labor concerns, and serve as a bulwark to Chinese attempts to rewrite the rules.
Biden’s call to “work with allies” and “engage with our closest partners” to reduce our dependence on adversaries for essential supplies may provide an opportunity for the new administration to kick-start a new trade policy. During the first months of the pandemic, Mexico and the United States failed to coordinate designations of “essential activities,” which put at risk the ability of U.S. companies with factories in Mexico to produce critical goods. As the U.S. looks for alternative supply chains for critical products, the existing agreements with our hemispheric partners may be a good place to start. Before doing so, however, expect a Biden presidency to focus on fixing the troubles at home, regaining the trust of our workers, engaging our allies, and assuring Americans that trade will benefit all.
Jose W. Fernandez practices law in New York. He served as assistant secretary of state for economic, energy and business affairs from 2009 to 2013. In that role, he co-led the U.S. government interagency review that resulted in the 2012 Model Bilateral Investment Treaty. The views expressed here are his own.