Buy American: Biden More Protectionist Than Trump?

♠ Posted by Emmanuel in Americana,Trade at 1/25/2021 01:18:00 PM

Is Biden a worse protectionist than Trump? Prove it isn't so, Joe.

I've been engaged with a lot of real-world work, so I haven't been able to post that much as of late (apologies). Still, here's my initial take on events of 2021 with Joe Biden assuming the US presidency. Although the rest of the world breathed a sigh of relief that the isolationist Donald Trump has literally departed the White House with little fanfare, the question remains: How much of an improvement will Biden be for international economic relations? 

A new article makes me question whether he will be much of an improvement since Biden is indicating more "Buy American" provisos for government procurement are in store to shore up US industry during these challenging times: 

President Joe Biden will take steps Monday to encourage the federal government to buy more American-made products, a move the new administration argues will protect U.S. jobs and juice an economy severely hobbled by the deadly coronavirus pandemic.

Biden, who pushed a $700 billion Buy American campaign as a candidate for president, is set to sign an executive order that will advance several policies to boost the federal government’s purchase of U.S.-manufactured goods and services, administration officials said Sunday.

Federal law requires government agencies to give preference to American firms when possible, but critics say those requirements haven't always been implemented consistently or effectively. Some have not been substantially updated since the 1950s.

The federal government spends nearly $600 billion a year on contracts, which is money the administration says can spur a revitalization of the nation’s industrial strength and create new markets for new technologies.

To that end, Biden’s order will increase the domestic content threshold, which is the amount of a product that must be made in the U.S. before it can be purchased by the federal government.

Right now, loopholes in federal law allow products to be stamped "made in America" for purposes of federal procurement even if barely 51% of the materials used to produce them are domestically made. Administration officials did not say how much Biden intends to increase that threshold.

Actually, Trump has tried to implement something similar, although it had some loopholes still that Biden is currently trying to close:

Shortly after taking office in 2017, President Donald Trump issued a series of executive orders that were intended to strengthen rules requiring federal agencies to buy U.S.-made goods when possible. But critics argued that effort fell short, partly because of Trump’s failure to adequately enforce the rules.

The order that Biden will sign is expected to include a clear timeline for updating domestic content requirements and a process for reducing unnecessary waivers, which the administration argues would fundamentally change how the program operates.

Agencies will be required to report twice a year on their implementation of Made in America laws.

Oof! Is Biden even more protectionist than Trump? That won't be such a good signal to open with in terms of repairing strained relationships with other countries. Remember also that the United States is a signatory to the WTO's Government Procurement Agreement (GPA) that was intended to limit these shenanigans encouraging the purchase of own-country goods and services, and would therefore be subject to litigation by other signatories. Indeed, the Trump administration considered pulling out of the GPA for the purpose of introducing more "Buy American" policies:

The U.S. is mulling a plan to withdraw from a global pact worth $1.7 trillion in government contracts, a person familiar with the matter said, in a move that may anger close allies during a delicate moment for trade.

Officials in President Donald Trump’s administration are circulating a draft executive order that would trigger a U.S. exit from the World Trade Organization’s Government Procurement Agreement, or GPA, if the pact isn’t reformed in line with American views, according to the person, who asked not to be identified because discussions are ongoing.

It remains to be seen how Biden will tiptoe around the United States' WTO GPA commitments without offending other member countries. Still, the question remains: Is Biden really going to be more internationalist in outlook than Trump? This episode gives us reasons to doubt whether Biden's actions will match his rhetoric (which is admittedly better to listen to).

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PRC Cities Go Dark Without Aussie Coal

♠ Posted by Emmanuel in China,Energy,Trade at 1/05/2021 04:42:00 AM

While the US-China trade war occupies most of the headlines for obvious reasons--it's the geopolitical rivalry that matters--don't assume there are any number of others going on. Arguably the most notable among these is the deterioration in almost all respects of Australia-China trade relations, which have been accelerated by the Morrison government wanting to investigate China's role in the spread of COVID-19 worldwide seemingly at the outgoing Trump administration's behest.

This not-so-genius move is precisely biting the hand that feeds in terms of Australia losing significant access to its largest export market:

Australia’s economy has been badly hit by escalating trade tensions with China — and it’s possible growth might “never return” to its pre-virus levels even when the pandemic is over, according to research firm Capital Economics.

China is by far Australia’s largest trading partner, accounting for 39.4% of goods exports and 17.6% of services exports between 2019 and 2020, the firm said. But Beijing has for months been targeting a growing list of imported products from Down Under — putting tariffs on wine and barley, and suspending beef imports.

Gross domestic product (GDP) in Australia could contract even more if Beijing continues to pile tariffs on more Australian imports, said its senior economist Marcel Thieliant in a note last week. Goods and services that are already “in the firing line” are worth almost a quarter of Australia’s exports to China — forming 1.8% of its economic output, the research firm said.

The list of affected traded goods grows longer all the time. Exemplifying the current fashion for lose-lose, though, the Chinese are not exactly finding what they need from other countries so easily. Consider coal. Absent affordable and plentiful supplies from Oz, many PRC cities are now reportedly having power outages:

Several major Chinese cities have reportedly gone dark as authorities limit power usage, citing a shortage of coal. Analysts said prices of the commodity in the country have shot up due to the reported crunch. The reports also follow rising trade tensions between Beijing and Canberra, leading some analysts to tie the coal shortages and blackouts to the unofficial ban on Australian coal.

Relations between the two nations soured last year after Australia supported an international inquiry into China’s handling of the coronavirus pandemic. Coal is just one in a growing list of Australian goods that China is targeting, as a result of their escalating row.

Last year, China told its power plants to limit the amount of coal imports from other countries to keep a lid on prices. Beijing reportedly lifted those restrictions later, but didn’t remove curbs on coal imports from Australia. China also reportedly gave state-owned utilities and steel mills verbal notice to stop importing Australian coal.

The case for trade was nevermore evident than it is here. Both governments have done their people a welfare-reducing disservice by engaging in a pointless spat over COVID-19 that neither has an obvious benefit from engaging in.

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