What are Biden’s trade policy issues? Let’s assume that he takes office and that there is no Democratic majority in the U.S. Senate. What does all this mean for international trade? Firstly, it’s not clear that policy will change very much directly. The reason is that the Democratic Party concerns about international trade are rather like those of the Trump administration. The Democratic Party platform contains very similar emphases on the unfair activities of other countries. The Democratic Party platform does not approve of the way the Trump administration has been handling China, but it seems to share the same concerns. There is slightly more emphasis on workers’ rights in other countries, but to some extent these issues are also being taken up by Republicans in the Senate, at least as regards forced labour.
In one respect however the new administration may help international trade, if only indirectly. International engagement, and U.S. involvement in multilateral agreements, will be restored to some extent. This means that WTO may see a revival if the U.S. helps to restore its role in dispute resolution by allowing the appointment of new tribunal members. There will be less resort also to trade measures as a tool of general policy. Countries will always introduce countervailing duties in response to antidumping or subsidy activity, but tariffs mean pain for consumers immediately while hurting producers only in the longer term. If the United States wishes to punish some other country for perceived misbehaviour that is not trade-related, it could do so more effectively by financial measures, freezing of assets, and control of movement, or more positively although less easily through new investment agreements.
Another way in which things may change is in government spending. Infrastructure was supposed to be improved under President Trump but little actually happened. Now it may be the only way a stimulus package can be agreed politically. This would not be as beneficial for international trade as a consumer-based stimulus would be, but if the emphasis was on climate there would be more to it. Advances in transport systems, renewable energy, food production and manufacturing processes and recycling technologies will encourage innovation that will benefit the world economy as a whole.
Biden’s trade policy issues also include two outstanding questions on pluri-lateral agreements. Firstly, will the US re-join the Trans Pacific Partnership (TPP), now slightly transformed into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)? The new administration is more committed to international cooperation, but the CPTPP agreement does not include provisions that the US had insisted on in the original agreement, so membership would have to be re-negotiated.
The second question is that of an agreement with the EU, the Transatlantic Trade and Investment Partnership (TTIP). This will take longer to be realized. There is not so much enthusiasm on the EU side, and, precisely because the scale of economic integration between the U.S. and Europe is already very large, it is not so easy to identify and agree on very beneficial improvements. Furthermore, Brexit complicates the dynamics: the UK had been a strong TTIP advocate. However, Canada already has an agreement in operation with the EU, the Comprehensive Economic and Trade Agreement (CETA). Canada is also a member of CPTPP. This may provide a stimulus to negotiations and a model for some aspects of TTIP, especially in the area of investment dispute resolution, which was one area of difficulty in earlier TTIP negotiations.
Now, Voyager? Or maybe later….
Sending goods by sea is the norm. And, if you’re worried about CO2 emissions, you’ll initially be glad to hear that according to the World Shipping Council “Maritime shipping is the world’s most carbon-efficient form of transporting goods – far more efficient than road or air transport.” . They give figures of 10 grammes of CO2 to move a tonne of goods one kilometer. To do the same by rail (diesel train) takes 21, truck and trailer 59, and by air the figure is 470 grammes. But of course an electric train, depending on the source of the electricity, might do better, as might an electric truck in the future. The main problem is that world trade is so big that, even though most of it goes on ships, the total CO2 emissions are enormous. (So are other pollutants: the fifteen largest ships produce more Nox and SO2 than all the cars in the world).
What can be done? The International Maritime Organisation, a UN specialised agency, has a target of reducing CO2 emissions from world shipping by 50 per cent by 2050. Continued technical progress in ships, engines, and fuels will all play a role. But there are also big benefits from ships going more slowly. This has been an increasing trend in any case as a cost saving measure, but it also reduces the CO2 emissions. An obvious additional step is to start taxing maritime fuel, which at the moment, like aviation fuel, is not taxed at all. The IMF has been looking at this and is quite excited about it:” In short, maritime carbon taxes are an economically and administratively promising instrument”
Further steps to take include the electrification of rail lines, which opens up the possibility of using alternative energies in rail freight. What about trade wars? New tariffs on trade and “bringing the jobs home” should cut down on international sea freight, shouldn’t it? Well, producing locally of course reduces the need for imports and thus for freight. But it is almost certainly not the most efficient way to go. Tariffs impose a cost on consumers and they hinder growth and this means that there will be fewer resources for combatting climate change or for anything else.
There’s another development, an unfortunate by-product of climate change that may actually be useful. With global warming, new sea routes are opening up in the Arctic, the fabled Northwest and Northeast Passages. They could halve the time of sea freight voyages between some big markets.