Although not all the races have been called, Democrats and Republicans are providing an update on the mixed outcome of the midterm elections. While a red wave has not materialized, there is also no clear mandate for President Joe Biden’s agenda. Republicans are expected to secure a tight grip on the House, while Democrats have retained control of the Senate. Although trade policy was not a major topic of discussion in the election, inflation and the overall health of the economy remained at the forefront of voters’ concerns, which had Democrats fearful of being to crush. What will shared congressional control mean for Biden’s economic policy, and will it pivot on trade?
Although Democrats have occupied the Senate, a major question remains regarding the composition of the Senate Finance Committee, which handles trade issues. Notably, Senators Richard Burr (R-NC), Rob Portman (R-OH) and Pat Toomey (R-PA) are retiring, and it’s unclear who will take their place. Toomey was a staunch advocate for trade, one of the few senators to push for reform of two trade laws – Section 232 and Section 301 – which the Donald Trump administration has abused to start a trade war with the US. American allies and China. Portman, who served as the United States Trade Representative under President George W. Bush, has also been a prominent pro-trade voice in the Senate, and in recorded comments at a recent event noted that he feared that the current trade debate is “causing us to lose sight of the benefits of trade”, which he called “a valuable tool in our competitive arsenal”. The absence of Portman and Toomey will be felt strongly on Senate finances, and there may be less opposition to the executive branch’s overreach on trade and the Trump-era tariffs that Biden has mostly left in place.
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The House retirements will also leave a mark on the Ways and Means Committee, with the departures of Representatives Ron Kind (D-WI), Stephanie Murphy (D-FL) and Thomas Suozzi (D-NY). Suozzi’s seat moved to the GOP. Both Kind and Murphy were moderate Democrats and pro-trade supporters, but their views on trade aligned more with President Barack Obama’s approach than Biden’s, which has largely been a continuation of trade policy. of Trump. Their seats also tipped over. Rep. Adrian Smith (R-NE) is in the running to chair Ways and Means, though it’s too early to say if he can secure the spot. Smith criticized the Biden administration’s trade policy, particularly the lack of a traditional proactive trade agenda and the waiver of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, which the administration negotiated at the twelfth ministerial meeting of the World Trade Organization. conference last summer. At the very least, Ways and Means’ Republican leadership could push Biden to be more mindful of consulting Congress on trade issues.
But a divided Congress bodes ill for the Trade Promotion Authority (TPA) legislation, which expired in July 2021. The TPA allows Congress to set trade negotiation goals while giving the president limited power in time to negotiate agreements subject to accelerated voting procedures. in Congress. It is important to note that the TPA requires the executive branch to consult with Congress throughout the negotiations, which is important because the Constitution grants Congress exclusive authority to regulate commerce with foreign countries. The TPA thus serves as an executive branch check on trade, while sending a signal to foreign trading partners that what the president proposes in negotiations will be honored by Congress as it will have been guided by specific objectives and regular consultation. The problem, however, is that Democrats and Republicans remain divided on TPA legislation. Democrats won’t support a bill that doesn’t include Trade Adjustment Assistance, which is a program that helps workers who lose their jobs due to trade disruptions. But Republicans remain skeptical of the TAA, due to research that shows it has no noticeable impact on employment outcomes.
How the TPA debate unfolds will be one to watch, not least because the Biden administration has embraced Trump’s penchant for executive trade deals – “mini-deals” struck by executive branch agencies with other governments that “have some relationship with trade, broadly defined. but are not subject to congressional scrutiny. President Biden’s flagship trade initiative, the Indo-Pacific Economic Framework (IPEF), falls into this category. Biden’s trade representative, Katherine Tai, recently said she was open to “largely bipartisan” TPA legislation, but criticized trade liberalization, calling the lack of market access in IPEF a hallmark, not a feature. bug. Congress expressed frustration with his “inability to properly consult with Congress.” She is likely to face greater pressure on transparency in the new Congress, especially from Republicans.
The midterm results therefore point to tensions and possible opposition to Biden’s trade policy. But it doesn’t have to be that way. If Biden reflects on the midterms outcome, all signs point to him having to pivot on trade. Why? According to exit polls, the top issues motivating voters were abortion and inflation. As the party base was energized by the Democrats’ message on abortion rights, the majority of voters blamed Biden for high inflation. Republicans could put additional pressure on Biden to explain why he is not using all the tools in his toolbox, including trade, to reduce inflation. If Biden is to allay fears of higher inflation and a possible recession, he should seize the opportunity to do whatever he can to ease the burden Americans are feeling on their wallets.
The first thing to do is lift the Section 301 tariffs that Biden has continued to impose on China since Trump’s failed trade war. Although some administration officials worry that lifting tariffs will make them more lenient on China, Americans’ views on U.S.-China relations do not reflect China’s obsession inside the ring road. In fact, Morning Consult’s foreign policy tracker shows that less than a quarter of voters rate US-China relations as the most important foreign policy issue facing the United States. The challenge for Biden is to reframe the issue to reflect the reality that the tariffs have failed to achieve their goal. In fact, far from punishing China, the evidence clearly shows that American businesses and consumers bore the brunt of the costs. Biden could argue, as research from the Peterson Institute for International Economics has found, that lowering those tariffs can help keep inflation in check. He could also cite research that has detailed the high costs to U.S. consumers and businesses of maintaining Section 232 tariffs on steel and aluminum, and removing those trade barriers as well.
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Likewise, Biden could help Americans understand the benefits of working with allies to ensure secure supply chains for the items they use every day. One concrete action he could take would be to expand talks with the European Union under the auspices of the Trade and Technology Council to remove regulatory barriers to trade, such as those preventing Americans from importing milk. mothered from Europe. It is trade liberalization that could directly help countless American families. Biden could also step up his efforts in supply chain resilience negotiations for IPEF and provide additional carrots to our trading partners, such as market access, to help move those talks forward.
Finally, Biden could show how to achieve his ambitious climate goals without imposing significant costs on American families. To that end, it can work with U.S. business partners to ensure their electric vehicles will qualify for the consumption tax credit offered under the Inflation Reduction Act. Americans should be able to buy the most affordable electric vehicle for them and have access to a wider variety of options, such as vehicles made in Europe or South Korea. In addition, Biden could take steps to reduce the costs for consumers and businesses to access the technology needed for a green transition at all levels by reviving talks on the Environmental Goods Agreement (EGA) at the ‘World organization of commerce. Completing this deal would give Americans access to environmentally friendly products and technologies from around the world. It should go even further and extend the EGA to also include services such as engineering and architecture, which are essential in the design of green infrastructure.
At a press conference the day after the election, President Biden seemed emboldened by the midterm results and clearly stated, “I’m not going to fundamentally change anything. In terms of trade policy, that would be a mistake. While the Democrats managed to avoid a widespread defeat by the Republicans, they may not be so lucky in 2024, especially if inflation continues to climb and the United States enters a recession. And with Congress in control of the split, Biden’s domestic policy agenda will stagnate and he will have to turn to foreign policy initiatives to get results. Trade is a place where it can do that and, if framed properly, with bipartisan support.