5 questions for Claude Barfield on the future of trade policy with China

How much will the Biden administration change America’s approach to trade policy? In particular, what will our approach to China look like? Will we see a reversion to the pre-Trump status quo, or are US policymakers dedicated to treating China as a geopolitical rival going forward? Recently, I spoke with Claude Barfield to explore these questions and many more.

Claude
is a resident scholar at AEI, where he studies international trade and technology
policy. He is also a former consultant to the Office of the US Trade
Representative.

What follows is an abbreviated transcript of our conversation. You can read our full discussion here. You can also subscribe to my podcast on Apple Podcasts or Stitcher.

Pethokoukis: Do you expect that over the next four years we will see a substantially different approach to US trade policy compared to the previous four years?

Barfield: Yes, I do. Biden will attempt to move away from the idea of “America First” and try to unite our allies wherever possible. However, some things will carry over, even if the Biden administration doesn’t want to recognize it now. In particular, Biden is going to move carefully in terms of Chinese trade policy. Already, Biden has said that he won’t initially take off the tariffs that Trump had instituted on China. That’s because you can’t actually take trade policy with China and separate it from technology and security policy. For instance, while you could say that dealings with Huawei to some degree are a trade issue involving the use of trade export controls, they also have major strategic and security implications. So Biden will undoubtedly act differently in certain instances, but he’ll be cautious regarding what he changes with China.

What is the current state of Trump’s Phase One deal with China? Will there be a Phase Two?

As far as I’m concerned, the Phase One deal is not a big deal. Basically, the Chinese agreed (through state-controlled enterprises) to buy more US goods. And aside from China’s promise of some internal changes to their intellectual property rules, Phase One is essentially an agricultural deal. I’m glad for our farmers, but from a trade policy point of view, this is straight managed trade. It’s great for us, but it’s created friction with some of our allies — when you agree to buy more wheat or soybeans from the US, you’re probably not going to buy as much from other countries that produce it. Some of our allies have not been happy about the way that was done, so the sooner we can get away from that, the better.

U.S. President Donald Trump (RIGHT) and Chinese Vice Premier Liu He (LEFT), who is also a member of the Political Bureau of the Communist Party of China Central Committee and chief of the Chinese side of the China-U.S. comprehensive economic dialogue, sign the China-U.S. phase-one economic and trade agreement during a ceremony at the East Room of the White House in Washington D.C., the United States, Jan. 15, 2020. Via REUTERS

As to what happens going forward, it’s dependent on
US-China relations as they develop under Biden. Already, the Chinese have not been
fulfilling their promise in terms of quantities of agricultural products bought,
so they may just cancel the deal. But I don’t think they would stop buying all
of our agriculture, because they actually need a lot of this stuff, such as
pork (they’ve had a problem with swine flu) and soybeans (not an easily
substituted product). So that’s going to be a part of larger negotiations that
we develop under Biden.

President Trump talked about
his trade war as though he wanted China to stop treating the US unfairly and to
provide a better trade deal. But other people saw it as a strategic maneuver to
hamstring China in a “new cold war.”

Will the Biden administration’s
trade policy with China primarily just try to get better deals for America, or
will it act to hamstring China as a geopolitical rival?

So far, the Biden administration has signaled that they’ll separate US trade, diplomatic, and security relations with China from trade policy with the rest of the world.

Remember: There’s bipartisan support in the US for being tough on China — in fact, for a majority of Trump’s term, the Democrats in the Senate criticized him for being too soft. Regardless of who won in 2016, the US was headed for some sort of confrontation with China’s state-directed, mercantilist economy, which is now the second-largest economy in the world. The rest of the world can’t live with the effects that China’s internal protection and internal subsidy have on trade, so policy change was somewhat inevitable.

The problem with Trump was that he was very erratic, so the legitimate grievances we have against China — outlined in a very well done Section 301 report in his first year — didn’t become a part of his political strategy until late 2019, meaning not much of the report was implemented during his term. It would certainly be unfortunate if the Biden administration doesn’t go back to the Section 301 report’s structural analysis and call for change in China, and I think that he will.

What should the Biden administration do to put us in a better position to deal with China?

I hope they’ll try to rally allies and other members of the WTO into making an agreement. For instance, I’d be in favor of the United States getting back into the Trans-Pacific Partnership (TPP), but there are a number of problems with it in terms of US domestic policy. Our politics of trade internally have changed dramatically. Biden, as a Democratic president, will be bound by his interest groups’ demands regarding labor and the environment. So even if the president wanted to go back into the TPP, we’re not going to just waltz back into it. Also, nations have already put together agreements without the United States — we can’t just walk in and think that they will bow to our new demands.

Given these difficulties, it’s possible this will be put
off for now. But it depends. In 2009, Obama entered office having run as an
anti-trade candidate, but he turned around by the end of the year and began to pursue
a trade deal with Asia. So it could very well be that Biden will decide that he
has to move up his trade agenda sometime before he’d originally planned on
doing it.

It doesn’t seem like Europe
is entirely on board with uniting against Chinese mercantilism. Am I wrong
there?

I think it’s still early. The recent China-EU investment agreement was a selfish signal from Europe: The Europeans were keen to move ahead, so they accepted the deal even though Chinese markets made very few concessions and the Biden administration had asked that the signing of the agreement be put off until they had a chance to get in office.

However, the Biden administration has reacted circumspectly — and sensibly — to this direct snub. And several weeks ago, Europe did publish a statement several weeks ago saying, “We’ve got to get together,” urging the new US administration to move away from the Trump “America First” and let the countries be allies together, naming China as a strategic competitor. There’s also a strong human rights movement in Europe reacting to what’s happening in Hong Kong. This all signals a divided mind in Europe, and we’ll just have to see how that all works out.