By Sourcing Journal
This article was originally published by Sourcing Journal on September 29, 2020. We are sharing because it explains the possible impact of the U.S. presidential election on the sewn products industry. Please note SPESA does not support or endorse any political candidates.
Be prepared for a major reset of U.S. trade policy if Democratic nominee Joe Biden is elected president.
As the first of three presidential debates gets set to kick off, experts see the former vice president softening President Trump’s aggressive approach to international trade into a more multinational diplomatic strategy, while also turning the talk about Made in America into action with a true U.S. manufacturing plan.
“Between Biden and Trump, you have two almost diametrically opposed visions of the world,” Julia Hughes, president of the United States Fashion Industry Association, said. “With Trump, its trade wars and criticism–none of our allies are doing enough–while what most people anticipate from a Biden administration is that the temperature is going to go down. He’s not going to be as confrontational, although I am sure that any Democratic administration is still going to be focused on enforcement and on battles with our trading partners to protect American interests.”
Striking a trade balance
Phil Levy, chief economist for logistics company Flexport, who oversaw international economic policy for the late Sen. John McCain when he ran for president against former President Barack Obama in 2008, said if elected, Biden would like to push the international trade issues aside.
“The campaign has said that they want first to do domestic investments and ‘only after that, do we want to get to trade,’” Levy said.
The Democratic National Committee (DNC) and Biden campaign’s platform on trade said Democrats will negotiate “strong and enforceable standards for labor, human rights and the environment in the core text of our trade deals.”
“Future trade agreements should build on the pro-labor provisions added to the United States-Mexico-Canada Agreement (USMCA) by Democratic members of Congress,” the platform states.
The Biden-DNC platform said Democrats will take aggressive action against China or any other country that tries to undercut American manufacturing by manipulating their currencies and maintaining a misaligned exchange rate with the dollar, dumping products like steel and aluminum on the U.S. markets or providing unfair subsidies.
“The problem for Biden, unlike for President Obama when he took office–he had all kinds of issues to deal with, but on trade it was a relatively stable situation,” Levy said. “Whereas, a President Biden would have a whole bunch of ticking time bombs that he would have to deal with pretty quickly. So, I think that would be the struggle. I don’t think it’s his core passion, he’s not a free trader. He’s voted in this direction, but he has deep sympathies for unions and if you look at his policy platforms, they’re chock full of ‘Buy American’ proposals, but he’s also all about, ‘we have to stand by our allies and reshape our alliances.’”
Buy (and manufacture) American
Chris Haynes, associate professor of political science and national security at the University of New Haven, said a lot of Biden’s trade policy is centered on his “empathy and concern for American manufacturing and labor.”
“It goes back to his Scranton roots and really does shape his understanding of how he wants to retool trade,” Haynes said. “One thing he does want to change from what Trump is doing is to take a much more multilateral approach to negotiating with our trading allies and confronting and corralling China. There’s a more realized understanding that China’s economic and political system is so different, their way of doing business is so different that by taking an approach like its 2004, China is able to outmaneuver the United States. What Biden seems to want to do is build a larger coalition of partners, Europe and Japan in particular, that are much more willing now in 2020, for a variety of reasons, to join up with Biden to confront China on intellectual property theft and access to their markets, likely under the auspices of the World Trade Organization.”
Haynes said Biden will aim to link boosting American manufacturing to sustainability and the Green New Deal. A Biden administration, he added, would try to build on the “bringing home” of supply chains such as PPE and raw materials. Biden has proposed a $400 billion investment in procurement and trying to build up infrastructure and “Buy America,” as opposed to a diversification strategy favored by some.
“Biden’s campaign agenda is focused on domestic preparedness and helping shore up our manufacturing base,” Kim Glas, president and CEO of the National Council of Textile Organizations, said. “That seems to be his real priority versus going out and negotiating a bunch of free trade agreements on Day One. His agenda is about how do we strengthen Buy American, how do we invest in strategic industries, what are the research and development tools that we need to enhance here in the United States.”
The DNC platform said Biden would likely eliminate Trump’s tax and trade policies that encourage big corporations to ship jobs overseas and evade paying their fair share of taxes.
“If companies shut down their operations here and outsource jobs, we’ll claw back any public investments or benefits they received from taxpayers,” it states.
Biden’s comprehensive manufacturing and innovation strategy will also marshal the resources of the federal government. Specifically, it follows six lines of effort that “will remake American manufacturing and innovation so that the future is made in America by all of America’s workers.”
It will first make “Buy American” real with a $400 billion “Procurement Investment” that together with the Biden clean energy and infrastructure plan will power new demand for American products, materials and services and ensure that they are shipped on U.S.-flagged cargo carriers. The plan calls for a retool and revitalization of American manufacturers, with a particular focus on smaller manufacturers and those owned by women and people of color, through specific incentives, additional resources, and new financing tools.
Biden’s plan would make a $300 billion investment in research and development and breakthrough technologies–from electric vehicle technology to lightweight materials to 5G and artificial intelligence–to unleash high-quality job creation in high-value manufacturing and technology. Biden’s plan seeks to ensure that the major public investments–procurement, R&D, infrastructure, training and education–reach all Americans across all states and regions, including urban and rural communities, with historic investments in communities of color and an emphasis on small businesses.
It would also pursue a “Pro-American Worker Tax and Trade Strategy” to fix the “harmful” policies of the Trump Administration and give manufacturers and workers the fair shot they need to compete for jobs and market share, while also bringing back critical supply chains to America “so we aren’t dependent on China or any other country for the production of critical goods in a crisis.”
“In addition to bringing back the jobs lost this year, Joe Biden’s plan to ensure the future is made in all of America will help create at least 5 million new jobs in manufacturing and innovation,” the platform said.
Though to accomplish these initiatives, Biden would need Congressional cooperation.
Levy said Biden is certain to look to boost U.S. manufacturing, including apparel and textiles.
“I think he’s been clear on it; I think it’s been his instinct and I think it also follows the pattern,” he said. “You certainly saw a decent amount of that in the recovery program that he helped oversee for the Obama administration. There’s going to be a challenge to it because it’s going to be seen as protectionist. There is a bipartisan support for industrial policy now and that will play into that.”
China and the world
A Biden administration, said Hughes, would want to be playing a global leadership role that has historically been part of the DNA of American interactions around the world.
On China, Levy said there’s going to be a “really big choice” that Biden would have to make fairly quickly of whether he does a reset or does he take what he inherited and work from there.
“He’s criticized the China tariffs as ineffective, and that’s true–it’s damaging American consumers and farmers, which is also true–but there’s also going to be huge pressure to show ‘I’m tough on China,’” Levy said.
Nicole Bivens Collinson, president of international trade and government relations at Sandler, Travis & Rosenberg, said during a webinar Tuesday that Biden has said he may keep Trump’s tariffs on China and has pledged to “insist on fair trade.”
“Biden is far more likely to pursue a more multilateral approach and work with allies to try to come up with remedies against the bad actors in the world, the biggest of which, of course, is China,” Collinson said.
Hughes noted that Biden has been “very careful” in policy language. She predicted that tariffs might not be lifted on Day One, but that there will be a “fresh look taken” on them and some or all will eventually be lifted.
For Glas, the presumption is that Biden won’t look to get rid of the tariffs on China that have helped the domestic textile industry, at least not right away. The DNC and Biden campaign said it will “rally our allies in a coordinated effort to pressure the Chinese government and other trade abusers to follow the rules and hold them to account when they do not.”
Experts and pundits agree that Biden is sure to take a more global approach to running the government and putting the U.S. back in a leadership position around the world.
Levy sees Biden going back to a more multilateral approach globally, such as working within the World Trade Organization and rejoining the Paris Climate Accord. He could see Biden joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which evolved from the Trans-Pacific Partnership, which never entered into force due to Trump’s withdrawal on Day One in office, and helping to “force China’s hand” that way.
He said Biden could also break the logjam on the WTO appellate body appointees and could cut some of the national security tariffs.
“I do see a reset on the WTO under a Biden administration, both on how it operates and on how we act within it, but also a recognition that it needs to exist and is needed,” Hughes said.
On free trade agreements, she noted that the Biden campaign has “wisely” not said much about them because she thinks the administration would need to give some deep examination of “what is the U.S. interest in free trade agreements?”