What to Expect from Biden’s Trade Policy: Fast Track, China, and Labor

Joe Biden supported the Trans-Pacific Partnership (TPP) in 2015, and organized labor has not forgotten. But there appears to be growing optimism among labor leaders surrounding the president-elect’s commitment to workers in the context of international trade. Biden has made it clear that the interest of American workers will be at the forefront of any new trade talks.

Further, the Biden administration will likely have to navigate the new labor provisions outlined in the United States-Mexico-Canada Agreement (USMCA) trade agreement. While we can expect that trade will take a back seat to domestic issues involving economic recovery and COVID-19, a number of issues may require the incoming president to tackle trade anyway.

Biden said during his November 2020 speech on economic recovery: “One, we’re going to invest in American workers and make them more competitive. Number two, we’re going to make sure labor is at the table.” However, one must wonder how the table will look in the upcoming years.

“Fast-track” is one issue that will be lurking during the first year of the Biden presidency. Trade Promotion Authority (TPA), which allows Congress an up-or-down vote on trade deals negotiated by the executive, expires on July 1, 2021. That time frame will hardly give the next president ample time to set that table, and it will affect trade negotiations with the United Kingdom, European Union, and possibly China.

The most pressing issue on trade talks centers on the Asia Pacific. The U.S. is not part of the Trans-Pacific Partnership, even after having a substantial role in drafting it. The Trump administration withdrew from the agreement early in its term. Twenty-two provisions were suspended in light of the U.S.’s departure from the agreement, but the remaining 11 countries have taken measures to facilitate the U.S. rejoining the TPP. While reentry poses some complications, the Biden administration should prioritize reengagement with the agreement.

The U.S. needs a foothold in the Asia Pacific, and the TPP provides the most viable option to do so. Considering that more than half of the United States-Mexico-Canada Agreement (USMCA)’s text was pulled verbatim from the TPP, Congress and the president should work in tandem to make the TPP a priority. The emergence of the Regional Comprehensive Economic Partnership, which is anchored by China as a counterweight to the TPP, provides further urgency, as it includes 15 countries that account for about 30 percent of world GDP.

Europe is likewise an important objective but poses a different set of problems. Biden has already dismissed hopes of a U.S.-U.K. trade deal coming to fruition in the coming months, likely due in part to internal European tensions involving Brexit. Also, in recent years Europe has taken an aggressive antitrust and protectionist stance towards American tech companies. 

Additionally, new labor provisions in the USMCA will likely force the Biden administration to navigate uncharted waters. Biden expressed support for the USMCA, considering the agreement’s protections for labor and the environment. Labor groups consider the labor chapter of the new agreement to be superior to the labor side agreement negotiated by President Clinton during the NAFTA negotiations. But, as CEI’s Iain Murray points out, concerns regarding labor rights and the environment should be negotiated in separate international agreements. They should not be entangled with trade negotiations.

Most notably, the USMCA’s labor chapter establishes a Rapid Response Labor Mechanism, which the U.S. Labor Department has heralded as the keystone enforcement mechanism of the new trade agreement. This will make it easier for labor unions to bring complaints against specific covered facilities in Mexico, and to give U.S.-based companies an artificial competitive advantage. 

Precisely how these complaints will unfold remains to be seen, but it appears some labor leaders are not wasting time in utilizing these new tools. This past September, AFL-CIO President Richard Trumka announced plans to move ahead on a rapid response case. He also expressed dissatisfaction with the Labor Department’s distribution of funds as outlined in the USMCA.

The new administration can expect ample pressure from labor unions. The Rapid Response Labor Mechanism could become a highly litigious forum that may put additional strain on Mexico-U.S. trade relations.

President-elect Biden has said that domestic issues involving economic recovery and COVID-19 will be his top priorities, but kicking the can down on the road on trade policy would be unwise.