The Lawyer's Daily : More of same, just nicer: International trade under Biden

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This article was originally published by The Lawyer’s Daily, part of LexisNexis Canada Inc. 

With the election is the United States being called by all major U.S. news organizations, President-Elect Joe Biden should take over the highest executive office in January 2021. While a deadly novel coronavirus and global warming may initially take precedence, matters of international trade will soon be on the agenda as the new president and his cabinet look to pull the U.S. economy out of the pandemic recession. It will be important for Canadian companies selling into the U.S. or exporting elsewhere in the world to understand how the Biden administration will treat international trade matters.  

While the 2020 electoral campaign in the U.S. was in large part a clash of two conflicting views of America, international trade may be the one area where the two candidates came closest to agreeing. Both approach international trade with the same lens — the protection of U.S. jobs. While we can expect that the Biden administration will be more respectful of international norms, in the end his goal is to put American workers first.

One of the hallmarks of Biden’s platform was his “Made in All of America” policy. In it, he promises to tighten “Buy American” rules imposed on large federal procurements. This is important to Canada, as U.S. federal contracts are important to many Canadian-based contractors. Biden has promised to tighten the U.S. content rules so that they require “legitimate” American content. Biden also promises to restrict the use of waivers to exempt projects from Buy American restrictions. Finally, his platform promises to extend the scope of Buy American rules to include them in research and development grants.

With respect to trade agreements, while the president-elect has not threatened to tear up existing trade agreements, we should not expect that his administration will rush into new ones. Biden has not indicated an intention to renegotiate or expand the scope of the Canada-United States-Mexico Agreement (CUSMA). Instead, he has indicated that he will not enter a new trade agreement until the U.S. has recovered from the economic impacts of COVID-19 and is competitive enough to seek out new trade partners. When that time comes, he has indicated that he will encourage the robust participation of labour and environmental groups in the negotiation process.

Biden has already indicated that the future of any U.S.-U.K. free trade agreement is in doubt particularly if the U.K.’s Brexit negotiations result in a breach of the Good Friday Agreement (which ended the violence in Northern Ireland). U.S. entry into the Trans-Pacific Partnership is also unlikely to happen anytime soon. Biden has indicated that he does not agree with the terms of the agreement as drafted, despite the fact that significant elements of the agreement were negotiated with the U.S. at the table while he was vice-president. Biden has stated that, if the U.S. opted to join, he would seek to renegotiate the partnership to include stronger labour and environmental protections.

Allies of the United States should feel relieved that a Biden administration will curb the use of punitive tariff measures as a national economic policy tool. While Biden has not ruled out the use of punitive tariffs against China and others to address violation of trade rules, he has signalled much more restricted use against allies. In particular, Biden heavily criticized Trump for imposing wide-ranging tariffs on allies, including Canada, under s. 232 of the Trade Expansion Act of 1962. Trump had cited “national security” grounds as a basis for imposing tariffs of 25 per cent and 10 per cent respectively on global imports of certain steel and aluminum products. While the tariffs were eventually lifted against Canada, they were very disruptive during the time that they were in place and the threat of their reimposition (as recently as September 2020 on aluminium products) prevented Canadian exporters from aggressively pursuing contracts in the U.S.

Biden will likely continue to use of economic sanctions as a foreign policy tool to punish international “bad actors.” What may change are the targets of these sanctions. Biden will almost certainly roll back the reimposition of some of the sanctions on Cuba. It is also likely that the Biden administration will again use the removal of sanctions as a “carrot” to help negotiate curbs on Iran’s nuclear program. If this happens, the realignment of U.S. sanctions with those of Canada and the EU will be welcome to Canadian businesses and financial institutions that have had to contend with the potential application of “secondary” sanctions by the U.S. on companies with dealings in the United States. On the flip side, Biden has indicated a willingness to impose sanctions for new geopolitical reasons, including the failure to follow international environmental norms. Biden has hinted that, during his tenure, the U.S. could impose sanctions on countries such as Brazil, for its failure to stop the burning of its rainforests.

In the end, the Biden administration should result in a “normalization” of U.S. trade policies. He has expressed a desire to see the U.S. resume a leadership role in establishing international trade rules and reforming multilateral institutions like the World Trade Organization (WTO). This respect for international rules should not be seen as a sign that the U.S. under Biden will see a liberalization of trade policies. The president-elect’s focus is on American workers and he is unlikely to engage in any new trade policies that conflict with his focus on putting American workers first.