The Biden administration will face serious triage decisions starting with its first day in office. Controlling the horribly mismanaged pandemic will obviously be job one. Coaxing a strong stimulus round from a reluctant Congress will be another, if it remains stuck on Inauguration Day. Rejoining the Paris climate accords? Check.
But as President Joe Biden’s team in Washington, D.C., attempts to normalize the United States’ role in the world after four years of Donald Trump, this Washington will be very interested in trade.
According to the Washington Council on International Trade, approximately 40% of the state’s jobs are connected to international commerce.
Unfortunately, Washington merchandise exports for 2020’s first nine months are down more than 36% compared with 2019. For aircraft and parts, the state’s most valuable export, the drop is a catastrophic 69%, according to WiserTrade, an economic research firm.
The losses aren’t entirely attributable to the pandemic and the 737 MAX crisis. The failed Trump trade war with Beijing also dampened demand.
China, Washington’s largest trade partner, is seeing renewed economic growth because of aggressive moves that contained the virus. Yet exports from our state fell 34% through September (aircraft and parts declined 27%).
As the largest commercial aviation market in the world, China is of prime importance to Boeing, Washington’s export powerhouse.
In 2018, the last “normal” year before the 737 MAX grounding, Boeing delivered a total of 192 commercial jets into China, 165 of them 737s, which accounted for 28% of all its 737s that year.
Based on estimated real aircraft prices from valuation firm Avitas, the total of 806 commercial jets Boeing delivered that year were worth approximately $60 billion. The planes delivered to China were worth about $11.8 billion — nearly one fifth.
Keeping that share, much less expanding it, won’t be easy with competition from Airbus, as well as China’s race to create its own manufacturer of airliners.
But America’s most trade-dependent — and trade-vulnerable — state may be disappointed in Biden’s planned moves.
In an interview with New York Times columnist Thomas Friedman, Biden didn’t appear in a hurry to undo the damage to U.S. interests in world trade.
“I’m not going to enter any new trade agreement with anybody until we have made major investments here at home and in our workers,” as well as in education, the president-elect said. He promised to “fight like hell by investing in America first.”
If that sounded Trumpian, remember that Biden will actually propose ambitious infrastructure investments, not proclaim nothingburger “infrastructure weeks.” He’s also interested in increasing federal money for research into clean energy, advanced materials and biotech.
As for Beijing, Biden said he would “pursue trade policies that actually produce progress on China’s abusive practices — that’s stealing intellectual property, dumping products, illegal subsidies to corporations” and requiring “tech transfers” from U.S. companies to their Chinese counterparts.
Biden said he wants “leverage” for negotiating with Beijing, something he sees lacking — not least because of the country’s pitiful response to the pandemic, years of austerity in building advanced infrastructure and failure to address inequality.
Leverage? One idea is a trade agreement including Pacific Rim allies and partners, with high standards for labor and environmental protections. Not only would it open new markets for American companies and workers, but the agreement would have geostrategic value in countering Beijing’s influence.
Yes, I mean the Trans-Pacific Partnership, the U.S.-centered, signature trade initiative of Biden’s former boss, President Barack Obama. It was a casualty of the 2016 election, as Trump declared that it and virtually all such deals were bad for U.S. workers. This forced Hillary Clinton to abandon TPP, too, even though it was crafted to benefit Americans.
The 11 other TPP countries moved ahead, with provisions for the United States to join.
While America withdrew from the world under Trump, China seized the opening to join a new Regional Comprehensive Economic Partnership. Arguably the largest single trade liberalization deal in history, it comprises 15 countries including Australia, Japan, New Zealand and South Korea. Beijing’s enormous market will be the big winner.
“The creation of a new, China-centered economic bloc illustrates the difference between reality and reality TV,” Joschka Fischer, former German vice chancellor, wrote on the policy site Project Syndicate. “When Trump arrived in the White House in January 2017, one of his first official acts was to withdraw the US from the Trans-Pacific Partnership. … Witnessing this U.S. act of self-harm, China’s leaders presumably couldn’t believe their luck, and [Xi Jingping’s] government has been working hard to exploit Trump’s generous gift ever since.”
Yet the partnership lacks the rigor of TPP: Nothing about labor and environmental standards or addressing the problem of state-owned companies. Intellectual property protections are limited to the laws each country already has.
Despite rising populism and the bad odor of “neoliberalism,” globalization isn’t going away. International supply chains are more tightly bound than ever. Decoupling the Chinese and American economies is also unlikely.
The United States depended on China for 85% of its imports of pandemic personal protection equipment, including N95 respirators and masks. We even import most American flags from China. Meanwhile, the trade war and subsequent “truce” did nothing to reduce the trade deficit (a meaningless statistic for economic power) or to bring back manufacturing jobs.
Investing in U.S. workers and infrastructure or emphasizing a return to leadership in expanding trade opportunities isn’t a binary choice. The two go together. Here’s hoping the Other Washington under the new administration understands that.
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