Biden’s trade policies towards China will be more consistent rather than softened

Following Biden’s victory in the U.S. Presidential election, all sides begin to predict how he might handle the trade relationship with China. Alex Capri from the National University of Singapore thinks that Biden is likely going to choose to decouple with China in certain strategic areas while trying to establish trade policies towards China based on multilateralism.

DW: How would you assess the effectiveness of the Trump administration’s trade policies towards China over the last four years?

Alex Capri: In the regard of Trump’s policies on tariffs and the “Trumpian position” on deficits, it has been a complete failure for a couple of reasons. Whatever duties were imposed on imports of Chinese goods in the United States, those costs were passed on to consumers or if we are talking about parts, components and materials, those costs were passed on to manufacturers or absorbed by the value chain.

The deficit increased anyway. It was essentially a net increase. There were duties imposed on many of these goods. I think that was a failure. Also, we didn’t take into account the sale and the exchange of services as well as the net effect of the servicification of the global value chain, which adds multiple levels of values and revenues to American companies and third parties. It was a very crude way to measure trade and trade success or failure.

The other thing that needs to be looked at is the systematic rivalry and much broader geopolitical competition of which the trade issue was just one thing. If we step back and look at the entire section 301 investigation on the other items that cover IP theft, technology transfer and subsidies, that’s part of the broader systematic competition and that has produced an environment of non-tariff measures.

Those non-tariff measures also had a mixed yet more profound effect than the actual duty rates. What we are talking about here is export controls, licensing, companies being put on restricted entity lists. Those have profoundly affected Chinese companies and individuals, but it also has a ripple effect out to the entire ecosystem.

DW: Will Biden’s trade policies towards China be different from that of the Trump administration?

Alex Capri: The same overarching rivalry will continue and the trajectory that the two superpowers have been on will continue. The bifurcation of global value chains will continue. There will continue to be strategic decoupling. There will also be diversification of operations and supply chains and ring fencing, closing off the entire ecosystems as a result of that.

There are also the nebulous area that includes many dual-use technologies that are ubiquitous. These technologies could potentially become subject to further export controls. Therefore, they could fall into the previous category that I mentioned. Below that, there was the rest of the really innocuous stuff, including continued trading.

There is now this environment where multinationals are now going to have to navigate their ways through this landscape and they need to know what potentially is going to decouple, what isn’t going to decouple and how they are going to respond accordingly.

I think there will be a more multilateral focus with the Biden administration. They will put stock in international organizations and frameworks and they will look to work with allies. It’s a return to the Obama administration. If we look at the Obama administration’s “Pivot to Asia,” a big component of that was the transpacific partnership.

There will be cases where the U.S. under the Biden administration will continue to act unilaterally when U.S. interests are perceived to be threatened in any of these strategic sectors.

DW: Would the Biden administration consider rejoining the Trans-Pacific Partnership?

Alex Capri: The TPP promotes all the principles that Biden upholds. Those discussions will take place but it won’t be an immediate thing. It will also depend on the relationship with Congress and how the balance of power ends up shaking out.

I wouldn’t be surprised to see a phase two trade deal with the U.S. and China to go forward. However, I wouldn’t expect the U.S. to soften its stance on export controls and sanctions. I think what we will see is a more coherent and consistent policy on export controls under the Biden administration.

What we will see domestically is we will see a much better communication and coordination with the business sector as the U.S. Department of Commerce is contemplating new export control measures. There will be more predictability once the Biden administration begins to articulate its position. It will have a calming effect and it will be a framework where policies are tethered to a framework.

Under the Trump administration, it has been mercurial and it has been a lot of back and forth. It is also very transactional. That transactionalism is often tied to Trump’s personal gains or motives. That stops with Biden as well. The other thing is that the Biden administration will begin to rebuild the State Department.

The State Department is really important to conduct diplomacy and diplomacy is important in bilateralism and multilateralism. To have a competent official as ambassador or deputy secretary of state carrying out policy will be very important. We will see a return to that as well.

DW: Do you foresee there to be any area where China and the U.S. have rooms to show goodwill towards each other?

Alex Capri: I do think there are rooms for showing goodwills. One of the first things that Biden is going to do is he will rejoin the Paris Climate Accord and I think in that regard, there is always room for international cooperation around big issues like climate change.

The other thing is that the Biden administration is beholden to a more progressive portion of the Democratic Party, including the Green New Deal. That deal will have a lot of difficulty in the United States. Biden wants to grow the economy in the United States by building infrastructure. He wants to build out digital infrastructure as well as clean tech.

That sort of approach domestically could also be extended to international alliances and international private and public partnerships. Stuff around the Paris Climate Accord would be a possibility. It’s fairly innocuous that this is something both sides can get some scheme in the game.

This interview first appeared in Mandarin on DW’s Chinese website.