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I. The Origins of Biden’s Economic and Trade Policies
II. Key Economic and Trade Policies of the Biden Administration
III. Potential Roadblocks to Biden’s Economic and Trade Policies
Ⅳ. Policy Considerations
The election of Joseph R. Biden as the 46th President of the United States indicates that new economic and trade policies are on the way. President-elect Biden is expected to rescind protectionist and anti-climate change policies at the bilateral and multilateral levels imposed by President Trump under “America First”and resume US’role in “Rules-Based International Order.”However, it calls into question how President-elect Biden’s policies would differ from Trump’s and how feasible it is for him to normalize the international order.
I. The Origins of Biden’s Economic and Trade Policies
The Biden administration’s economic and trade policies are first and foremost shaped by the coronavirus pandemic. The pandemic has unfolded an abnormal situation where the United States, which accounts for only 4% of the world's population, has reported around 20% of global Covid-19 infections and deaths. The US economy is expected to shrink by 4.3% in 2020, and unemployment jumped up to 14.7% from 3.7% and slides back nowadays. The federal budget deficit is projected to rise to 3.3 trillion dollars due to Covid-19 stimulus package.
Furthermore, the coronavirus pandemic has revealed income and wealth inequality and deep divisions within the US. The higher rates of Covid-19 infection and death among the people of color and deaths of Afro-Americans due to excessive use of force by law enforcement have sparked debate over systemic racism. Meanwhile, the groups and regions which have suffered from globalization have become the powerful supporters of Trump’s populism.
President-elect Biden is known for pragmatic approaches, centrism, and emphasis on protecting middle-class and social mobility. Joe Biden believes that protecting the middle class is both in the economic and national security interest of the country. Therefore, the election of Biden as the president of the US does not necessarily mean that the US will automatically return to the rules-based international order. The Biden administration is likely to have respect for free trade and multilateralism such as institutions established by the US but less likely to make compromises at the expense of the American middle class. The Biden administration is likely to pursue pragmatic balances between domestic political and economic needs and leadership for alliance and multilateralism while taking (multilateral) consensus-based approaches.
II. Key Economic and Trade Policies of the Biden Administration
During his campaign Biden’s economic plan promoted six pillars including ▲“Buy American”, ▲“Make It In America”and ▲“Supply America”, and converted them into four priorities for transition such as ▲Covid-19 ▲Economic recovery, ▲Racial equality, and ▲Climate change.
The Biden administration plans a large fiscal spending and tax increases to fund its fiscal spending. The Biden administration claims that its large fiscal spending will recover jobs lost due to Covid-19 and create five million good-paying, clean, green jobs.
The Biden administration does not propose a new trade policy seemingly with an intention to focus on domestic economy. Given the fact that the six pillars have protectionist undertones, the Biden administration is likely to practice managed trade which occasionally carries out protectionist policies while upholding free trade. All in all, Biden’s trade policy may not be much different from Trump’s but differ only in the manner it is carried out.
One important trade issue for the Biden administration to resolve is resetting economic relations vis-a-vis China, and the Biden administration is likely to subject it to strategic competition with China. Although the Biden administration identifies China as a strategic competitor, it is likely to make systematic moves toward China while separating competitive areas from cooperative ones. For instance, the Biden administration will maintain a competitive stance in areas such as 5G to determine technology hegemony, whereas cooperating on climate change.
The Biden administration is expected to negotiate lowering tariffs on Chinese goods leveraging Phase 1 Trade Deal, which the Trump administration imposed to rectify China’s unfair trade practices. The Biden administration may find it difficult to revoke tariffs on Chinese goods altogether given the needs to protect the US economy and jobs, Democrats’bias toward protectionism, bipartisan consensus on a hard line approach toward China, and anti-China sentiments in the wake of Covid-19. The Biden administration is also likely to have other countries coalesce around efforts to pressure China at the WTO.
The Biden administration is likely to show less hostility toward the WTO than the Trump administration and emphasize more the need to reform the WTO to restore the multilateral trading system. The Biden administration will attempt to restore America’s standing in the world by leading a consensus-based reform of the WTO and to cooperate with Japan and the EU who are closely allied within the WTO. It is unlikely that the Biden administration will join the CPTPP in the first two years in office. The Biden administration will put off FTAs until the US economy returns to normalcy.
In lieu of FTAs, the Biden administration will place emphasis on building a US-centric supply chain. The Biden administration views that America’s dependence on China for medical goods, semiconductors, telecommunication equipment, and essential raw materials pose a threat to national security. A US-centric supply chain has merits in lowering threats to supply chain and national security by producing essential security goods domestically while simultaneously achieving ‘buy American’and ‘make it in America’, creating jobs, and decoupling from China.
What distinguishes the Biden administration from the Trump administration is its approach toward climate change. The Biden administration aims to decarbonize electricity generation by 2035 and achieve the goal of a “net-zero emissions”economy by 2050. The Biden administration is planning to invest two trillion dollars over the next four years accordingly. It is not certain whether the Biden administration will introduce a carbon tax. President-elect Biden stands centrist toward green new deal and is rather likely to impose carbon tariffs on imported goods based on the level of carbon emissions. The Biden administration is more likely to rejoin the Paris Climate Agreement than not, which President Trump withdrew from.
III. Potential Roadblocks to Biden’s Economic and Trade Policies
While the Biden administration intends to roll back Trump’s policies, Biden’s policies would not deviate much from Trump’s and may be constrained by domestic political and economic conditions as well as the international strategic environment.
The Democratic Party underperformed at the November election, raising concerns that the incoming administration’s efforts to push through its policy agenda may pick up less momentum. The Democratic Party holds majority in the House but holds ten seats fewer than the 116th Congress. In the Senate, the majority party will be determined by the runoff election of Georgia in January 2021. The Biden administration may be forced to compromise with the Republicans, which will in turn risk delay and modification of policy agenda, and President Biden may have to rely on unstable Executive Orders in case of a failure to compromise. Also, the Biden administration may face resistance from progressive Democrats. The Democratic Party is divided into moderates and progressives over the issues of trade, climate change, taxation, and immigration, and 94 progressives may not walk in lockstep with a centrist president Joe Biden.
The Biden administration may hesitate to deliver on policy promises as the country heads towards the 2022 midterm elections. In order to pave the way for the Democratic Party to hold majority in the midterm election, the Biden administration is expected to take cautious steps when selecting which policies to introduce. Besides, the division within the US will burden the Biden administration. Despite his failed quest to get reelected, President Trump received over 74 million votes, indicating that many Trump voters remain firm in their support, and Trumpism will well remain a political force even after Trump’s term in office is over. In order to win the midterm election in 2022, the Biden administration may focus on policies less divisive and easy to pass through Congress.
Since the US has experienced a relative decline in national capabilities and leadership before and after the outbreak of the Covid-19 pandemic, the Biden administration may find it more difficult to achieve policy goals than the past. The Biden administration’s plan to build a US-centric supply chain and a common front against China requires cooperation from other countries, but the US is likely to have limits in its ability to provide them with incentives to do so.
In contrast, despite the Covid-19 pandemic, China has come out intact and secured leverage applicable to its relations vis-a-vis the US and may wield it to pressure the Biden administration. China is projected to post an economic growth of 1.9% in 2020, reducing its capability gap with the US and increasing its clout in the world economy. China would be able to capitalize on the promise to cooperate with the US on climate change as a source of leverage with which to negotiate tariff reductions and containment strategy. Also, China would be able to provide incentives for other countries to not join the US-led anti-China coalition.
Ⅳ. Policy Considerations
The economic and trade policies of the incoming Biden administration suggest that the US will maintain its strategic competition with China, which in turn will exert pressure on other countries caught between the US and China. Korea should be prepared to take part in a concerted effort to address China if it is about upholding rules and norms which Korea has already committed itself to. Nevertheless, if such efforts are coalesced around issues that could affect Korea’s distinct interests, Korea needs to prepare for coordination. Korea needs to accelerate its efforts to establish and implement climate change policies in accordance with those of the Biden administration. Furthermore, it is imperative that Korea review its options regarding the CPTPP given the possibilities that the US may change its stance toward the CPTPP since the RCEP is signed.
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