The weekly trade report with L.C.
Joe Biden, presumed Democratic candidate for President in November, continued laying out details of his proposed policies this week. His economic and “Trump Lite” trade policies lean heavily in the direction of populist nationalism. They suggest that the former vice president doesn’t want to veer too far from the current president’s trade positions because he wants to recapture the working class voters who voted for Trump in 2016.
Trump’s trade policies have always had their strongest support among factory workers, especially those in labor unions, as well as among farmers and people in rural areas. Those constituencies will be crucial for winning key electoral swing states such as Pennsylvania and Ohio — and Biden is trying to appeal to them.
Biden also seeks to appeal to the left-wing of the Democratic Party, which is protectionist, in contrast with the party’s centrists, who are pro-trade. That shouldn’t be too difficult. Throughout his Senate career, Biden has presented himself as a representative of the working class and of protectionism-favoring organized labor.
Biden’s mixed record as senator and veep
Nevertheless, Biden has a mixed record on trade liberalization versus protectionism. As a senator, he leaned toward protectionism, but that changed when he became President Obama’s vice president. As a senator, Biden voted against free trade agreements (FTAs) with Singapore, Chile, the Dominican Republic-Central America FTA (CAFTA-DR), Oman, and Peru. He also supported the Bush steel safeguards. He did, however, vote for NAFTA; the Uruguay Round Agreements Act that set up the World Trade Organization (WTO); China Permanent Normal Trade Relations (PNTR), which enabled China’s WTO entry; and FTAs with Australia and Morocco.
As Obama’s veep he also supported FTAs with Panama, South Korea, and Colombia, as well as the Trans-Pacific Partnership (TPP). But the TPP is one of the few Obama policies overthrown by Trump that neither Biden nor the Democratic Party have committed to reinstate, despite the self-harm that cancellation has caused the US.
Before he prevailed in the Democratic primaries this year, other candidates attacked him from the left for being too pro-trade, attacking in particular his old vote for NAFTA. Now, President Trump’s campaign, too, is attacking Biden for his NAFTA vote.
Trump trade policies not likely to be reversed
The trade and economic policies that Biden and his campaign unveiled this week should be seen as a warning to US trading partners not to assume that a Biden win in November will mean a complete reversal of Trump trade policies. Some analysts are referring to Biden’s orientation as “Trump Lite.” Still, they expect that he would govern with a lighter hand on trade, taking more care not to breach WTO rules or act unilaterally. Also, as spelled out in his policy documents, he would seek to work in cooperation with US allies in confronting China’s abuses and would be less likely to unleash a tariff war on friendly countries.
He would continue the current hard line on China. He accuses the president of being soft on China despite appearances. John Bolton makes a similar claim in his recently published book.
Biden said this week that he wouldn’t pursue any new trade deals until he strengthens the domestic economy through what he calls his “Build Back Better” plan, centered about stronger Buy American rules. Similarly, a Biden campaign aide told reporters that the candidate would not prioritize new trade deals or rejoin the TPP negotiated by the Obama administration. But he would immediately work with allies “to present a common front” against China’s abuses, calling Trump’s unilateral approach to China “an unmitigated disaster.” A Biden presidency would demand strong labor / environmental provisions in any trade agreements it does undertake. Biden probably wouldn’t demand the kind of managed trade provisions Trump inserted into China, South Korea, and other deals, the aide claimed.
Promoting “Buy American,” re-shoring
Biden stresses that he will strongly promote “Buy American” policies – for government procurement (which can be done lawfully) and also for the private sector (which the government can’t dictate, unless for national security reasons). The campaign aide acknowledged that Buy American policies can potentially run afoul of WTO rules but said the candidate “will not be ignoring WTO rules.” Instead, Biden will call for updating them – certainly not a controversial position these days.
Much of Biden’s emphasis on re-shoring manufacturing centers about medical products. This is in fact also true of the current administration’s re-shoring push. It too starts with medical products but wants to bring other manufacturing “back home” as well.
Biden calls for using the Defense Production Act much more often than President Trump has for combating the pandemic. The DPA enables the government to spur domestic production of needed products by ordering their manufacture and promising the government will buy them. He also calls for expanding stockpiles of strategic goods and preparing a surge capacity to make needed goods during a crisis. Biden’s program for critical materials is a mix of international cooperation and re-shoring. He would seek to assure foreign supplies of critical materials for the US and to open foreign markets for US excess production of such supplies.
A strong anti-corporate flavor
Biden campaign aides told reporters that the goal isn’t self-sufficiency but “broad-based resiliency.” To accomplish this, Biden promises to launch a 100-day review of risks to national security from US reliance on international supply chains and would also use the government’s BARDA (Biomedical Advanced R&D Authority) to enhance capacity to domestically produce medical products.
Details of the Biden trade and economic policy are available in documents from his campaign. But what grabbed the most attention was a July 9th speech he gave on economic policy at a metal manufacturing plant in Dunmore, Pennsylvania. It had a strong anti-corporate flavor, inveighing against “shareholder capitalism” – the idea that companies’ only responsibility is to their shareholders. Biden also vowed to raise taxes on business – “It’s time that corporate America pays their fair share of taxes.” He accused President Trump of being concerned only with the stock market. He promised to spend federal money on purchasing American products as well as on investing in R&D and helping small business.
Wisdom of government spending extolled
This continues Democratic policy, especially found among the party’s left, that government spends money more wisely than the private sector that is the source of that money.
Biden also promises aggressive action against China, including trade and intellectual property enforcement, promising to “win… the industries of tomorrow” by fighting unfair trade practices and intellectual property (IP) theft.
Biden’s campaign said the releases and speech this week are part of a larger rollout of his economic policies. They will be followed by several more speeches before the Democratic National Convention on
- infrastructure,
- clean energy,
- education and training, and
- racial equality.
A statement on manufacturing policy is also expected.
Buy American enforcement
On July 7th the campaign released a document titled, “The Biden Plan to Ensure the Future is ‘Made in All of America’ by All of America’s Workers.” It said,
Biden believes that American workers can out-compete anyone, but their government needs to fight for them. Biden does not accept the defeatist view that the forces of automation and globalization render us helpless to retain well-paid union jobs and create more of them here in America. He does not buy… that the vitality of US manufacturing is a thing of the past.
A key part of the long and detailed document is Biden’s push for stronger, tighter “Buy American” rules, which was also promoted in his Dunmore speech.
Biden wants to “bring back critical supply chains… so we aren’t dependent on China or any other country for… critical goods in a crisis.” In classically populist language, the document says, “For decades, big corporations and special interests have fought for loopholes that redirect taxpayer dollars to foreign companies.” To counter this, Biden calls for tightening, strengthening, and updating domestic content rules by closing loopholes in current law, cracking down on waivers to Buy American requirements and on false advertising that something is made in America, and extending Buy America rules to new forms of government assistance. The former vice president also strongly endorses the Jones Act, the protectionist Buy American law for US shipping and ship-building, which not only imposes major costs on the US economy but is a constant source of irritation to US trading partners.
Sanders involvement in Biden policy
The Biden campaign also recently released other documents outlining his proposed response to the pandemic, which prioritized bringing manufacturing of “critical” products back to the US. They call for taking “steps in the aftermath of the crisis to produce American-sourced and manufactured pharmaceutical and medical supply products.” The goal “is to develop the next generation of biomedical research and manufacturing excellence, bring back US manufacturing of medical products… and ensure we are not vulnerable to supply chain disruptions….”
A document produced together with his former rival for the nomination, Sen. Bernie Sanders (I-VT), said,
Democrats believe more products in our homes, stores, and workplaces should be stamped ‘Made in America’ and will expand support for American manufacturing. We will end policies that incentivize offshoring, and instead accelerate on-shoring of critical supply chains…. Too many corporations have rushed to outsource jobs, and too many countries have broken their promises to be honest and transparent partners.
The document was released on July 8th by the “Biden-Sanders Unity Task Force.”
Industrial policy suggested
In short, the overall thrust of the approach he presented this week is to prioritize domestic manufacturing to become less reliant on imports, especially for medical-related products, but also allegedly would have a focus on encouraging innovation. He would have the government play an active role in boosting cutting-edge technologies, aimed at keeping the US competitive. This would be accomplished by beefing up Buy American rules, through other procurement policies (e.g., using the DPA), and through spending on R&D and education.
Biden, like all Democrats, is much more oriented toward government activism, central planning, and industrial policy than the traditional Republican Party. President Trump, however, also departs considerably from this Republican tradition. Biden aligns with traditional Democratic traditions in featuring an anti-corporate, anti-big business element. President Trump’s Trade Representative Robert Lighthizer has similarly criticized business and promoted industrial policy.
Public more favorable to trade than Trump or Biden
This puts Biden in line with much of the Democratic Party. On trade, however, rank-and-file Democrats, like the US population as a whole, have become much more favorable to trade in the last few years. Last February the Gallup organization reported that “More Americans than Gallup has seen in a quarter century view foreign trade positively.” This led some analysts to say that Biden is missing a chance to separate himself more definitively from President Trump’s failing trade policies, instead of just vowing to somehow implement them more effectively.
It should be noted that US presidential candidates historically often campaign as populist protectionists but revert to mainstream pro-liberalization trade policy once in office. That was certainly true of the last two Democratic presidents, Bill Clinton and Barack Obama. It was not true of Donald Trump and might not be true of Joe Biden either, if elected.
L.C. reports on trade matters for business as well as Founders Broadsheet.
Photo credit: Spencer Platt/Getty Images via NPR
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