Punitive tariffs, "America First", a break with the WTO – Joe Biden has set out as US President to reverse the policies of his predecessor Trump in many areas. Trade expert Yvonne Bendinger-Rothschild is confident that things will change in Washington in the future – above all, things will be quieter. Biden will not "shoot from the hip" like Trump, she says. The Biden administration understands "how important international cooperation is". "We are no longer in the lawless space of 'anything goes'". Nevertheless, the de-escalation of Trump's policy will take years.
Ms. Bendinger-Rothschild, did President Donald Trump's aggressive trade policies for America First help ensure that 70 million Americans still voted for him?
I continue to believe that there was more talk than action. Of course it sounds great: "America first". But in reality the implementation is much more complicated. You see, to move production back from Asia to the US you first need a skilled workforce. American factories are also closing because there are no skilled staff. I know one example where all employees were over 60 years old and the company couldn't find a successor to train. There are also initiatives by European companies for this "workforce development" in some states. But actually bringing manufacturing operations home takes some work. Trump understood that too. So these have remained rather empty words.
Was there a Trump effect in the trade balance at all that would have brought more prosperity?
I saw a different trend. For example, a company that produced in Asia, assembled in the USA and sold in Europe had to pay customs duties twice. Now she has moved the assembly to Belgium. Rebuilding supply chains is not that easy, there are price issues, where to manufacture, where raw materials can be sent cheaply … But to your question: No! Production was not moved back to the USA, nor was the pseudo-compensation with the Chinese that soybeans should be bought en masse again. It was announced, but in reality it didn't take place. There were only losers.
Which do you mean exactly?
The real effect of the trade wars is that some of our members lost up to 25 percent of their profits due to tariffs. To make matters worse, many companies were unable to move production at all because it made no sense in terms of price or the organization of the supply chains. There are certain compensatory business opportunities in pricing. Fortunately, there is now a new government coming. In the long term, many companies that have swallowed the tariffs would not have been able to hold out.
What difference will a changing of the White House Guard make to American foreign trade policy?
It will definitely get a lot quieter. The USA will no longer be governed via Twitter in the future by making announcements that may then not be implemented. I expect more strategy and planning. Overall, politics will have more hands and feet. We are of course talking to the Biden camp. We can already see that there is better coordination within the government apparatus, instead of just the president shooting from the hip.
Coordination with the Europeans will improve. In addition to closer trade relations, this will also influence the antitrust regulations with Google and Facebook that EU Commissioner Margrethe Vestager started. With a view to China, too, I expect closer cooperation – not necessarily to influence China, but to better manage relations. The Biden administration understands the importance of international cooperation. Joe Biden is not only concerned with labor and human rights in the US, but also in other manufacturing facilities.
Doesn't he want to move China and the Europeans to adopt a fairer trade policy? The question is, is it not, whether Europe is ready to face the confrontation?
The risk of squandering export growth is always a problem. But we have to decide what our priorities are. Do we want to export mercilessly and produce as cheaply as possible for maximum profit, or is it also about workers' rights. A balance has to be found for the acceptance of international standards. For me capitalism is not a negative thing, but a cycle in which a company shares responsibility for society. This social market economy heralded by Ludwig Erhard sets standards. The realization is also finding more and more supporters in the executive floors of the USA. I think the Europeans and Americans are ideal partners here. Especially when you look at the common value system, I have never given up hope of productive transatlantic cooperation.
Many expect a more conciliatory tone in trade policy, but harshness in terms of disputes. Biden also wants to protect domestic products with "Buy American".
There is an announcement of a penalty tax on certain profits abroad – an offshoring tax – and incentives to relocate production back to the USA. But I also see opportunities for European companies here. As I said, German companies are also involved in vocational training with the BDI. Upgrading production facilities for better energy efficiency is also attractive, in the USA they are lagging behind. Our member Pirelli is a leader in the sustainability upgrade of factories, the EU supports this trend and has financed and implemented a large number of projects. Biden's infrastructure program will also come and open up opportunities. I'm already in the process of revitalizing my energy and infrastructure task force. A lot will happen there.
Where could Biden start to de-escalate? The EU ministers have just imposed punitive tariffs on the USA in the subsidy dispute over Airbus and Boeing. That shows that you can't just stop the clock.
The approach will be the World Trade Organization (WTO). There's a lot of American sand in the machine at the moment. Some judge posts in the dispute settlement body are open, which leads to delays. The WTO was practically paralyzed under Trump. I think a Biden government is taking reforms to make it work again. The USA will again be an active partner in talks with the WTO. Not only is this an expression of goodwill, it is in the interests of the US economy. In disputes, the US and its companies are often right. Therefore: The sooner we have placed the judges again, the better it is for the USA.
And will that also have a positive effect on all the punitive tariffs that have been imposed between Europe and the USA?
Yes, at least bit by bit, the punitive tariffs will be reduced again. Will they all fall instantly? I do not think so. That is too complex to implement. In the Airbus dispute even jam and olive oil are involved. It will take years, but we're getting back on track. Also with regard to the Paris climate agreement, things are being turned back. But it will take time for the Biden team's infrastructure policy to take effect.
Yes, but we are talking about tariffs and taxes on European products in the billions …
We have our punitive tariffs, the Americans have theirs. Biden must first analyze this product by product. In the short term, nothing will change significantly, especially not during the first six months. Processes are initiated and discussions for a better future are initiated. That also takes time. Perhaps they will occasionally lift a few tariffs for each other where there is not much to lose, and to show goodwill. But strategically speaking, January 20th will not see all punitive tariffs drop in one fell swoop. That's not how international trade works. Would be nice. But it's unrealistic.
Does that also apply to import duties on steel and aluminum?
Yes, to make matters worse, the Canadians are still involved in this triangle. The sound won't be so shrill anymore, I think. But when you see the reality of the processes, it is conceivable that at working level, in bilateral talks, you take away some of the restrictions and tariffs and say that now we will deal with the big problems. Steel is one of them, it's not that easy to solve.
If German companies are hoping for less blockade policies, how will that be expressed in concrete terms? Import duties on European vehicles are still in the room, right?
Most BMWs sold in the US are made in the Carolinas and surrounding areas. I don't think US bosses will have sleepless nights. Suppliers or parts manufacturers from Europe are more likely to be affected, but German cars are produced locally on the American market. Suppliers have lost sales, yes. But handbags that Hermes flies in are a bigger problem politically and strategically.
Will trade policy even become a priority for Biden? He has already given up on Great Britain …
I am already expecting the transatlantic partnership or a new variant of TTIP to return as an issue in the next two years. That makes sense too. We need a strategic trade agreement on both sides of the Atlantic. It will inevitably lead to conversations being resumed. Guaranteed not in the first 100 days, then the WTO problem will be tackled first and tariffs and sanctions will be looked at. TTIP did not come about under Obama because the time was not right. If Biden is giving the British the cold shoulder at the moment, that doesn't mean that he thinks the same about Europe.
What did he mean to the British?
The attempt on the part of the government in London to come up with an agreement in six months would have failed anyway, even with a second Trump administration. But what Biden signals: We are back in a reality of the rule of law, no longer in the law-free space of "anything goes". This will also have a positive effect on the coordination with Europe vis-à-vis Russia and China.
TTIP had already failed de facto before Trump was elected. Would Biden actually seek a renaissance? "Buy American" doesn't sound like market opening?
I don't know if this is eaten as hot as it is cooked. "Buy American" is easier said than done. If you go to the hardware store here, every screwdriver is "Made in China". I have relatives in Germany get the tools I need and pick them up the next time I visit. I would not find quality products like those available in Europe here. However, I see a lot of cooperation between European and American companies. For example, a device for hand disinfection is installed in the USA with domestic steel pipes, but other parts come from France and the gel from Canada. I see this tendency and cooperation in both directions.
Trump immediately withdrew from the Trans-Pacific Trade Agreement (TTP) negotiated by the Obama administration. It was to become a bulwark against China. Now Washington has to watch as China forges the world's largest free trade agreement together with Asian countries as well as Australia and New Zealand. Is there a back to TTP? And can that go faster than TTIP?
That begs the question of whether the jacket is closer to you or the pants? Do you want to smooth things over with Europe or China first? That will be primarily a political decision that is difficult to predict. Perhaps it depends on how many hurdles and open problems there are still to be solved – and which trade agreement could be implemented more quickly in order to "generate a profit" for the Biden government.
Is there even an appetite for free trade in a mood that is also economically nationalistically heated – and that with a congress that is likely to be divided?
One of Biden's goals is to restore America's role in the world. This of course also includes trade. You have an incentive to make amends to Europe and the rest of the world. The bottom line is that America is back, we're back in the game and active partners.
Marina Zapf spoke to Yvonne Bendinger-Rothschild
The interview was published on November 18th by Capital.de
. (tagsToTranslate) economy (t) Joe Biden (t) Donald Trump (t) trade relations (t) punitive tariffs