Biden's China policy? A balancing act for a toxic relationship

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WASHINGTON (NYTIMES) – In addition to a deadly pandemic and a weakened economy, US President-elect Joe Biden will inherit one more challenge when he takes office in January: a toxic relationship with the world’s second-largest economy.

President Donald Trump has placed tariffs on hundreds of billions of dollars of products from China, imposed sanctions on Chinese companies and restricted Chinese businesses from buying US technology – a multiyear onslaught aimed at forcing Beijing to change its trade practices and as punishment for its authoritarian ways.

He shows no sign of letting up in his final days in office: On Thursday (Nov 12), Mr Trump issued an executive order barring investments in Chinese firms with military ties.

The hard choices for Mr Biden will include deciding whether to maintain tariffs on about US$360 billion (S$484.38 billion) worth of Chinese imports, which have raised costs for US businesses and consumers, or whether to relax those levies in exchange for concessions on economic issues, or other fronts, like climate change.

Mr Biden will need to walk a careful line. He and his advisers view many of Mr Trump’s measures, which were aimed at severing ties between the Chinese and US economies, as clumsy, costly and unstrategic.

They say they want to take a smarter approach that combines working with the Chinese on some issues like global warming and the pandemic, while competing with them on technological leadership and confronting them on other issues like military expansionism, human rights violations or unfair trade.

In a speech Monday, Mr Biden promised to make significant investments into American industry, including US$300 billion in technology industries that he said would create 3 million “good-paying” jobs, as well as channeling more government dollars into purchasing American products like automobiles and pharmaceuticals.

“We’re going to invest in American workers and make them more competitive,” Mr Biden said. He added that he would ensure that labour unions and environment groups were “at the table” in any trade negotiations and push for the United States, rather than China, to set the world’s trading rules, along with other democracies.

“The idea that we are poking our finger in the eyes of our friends and embracing autocrats makes no sense to me,” Mr Biden said.

Even if Mr Biden departs from Mr Trump’s punishing approach, his administration will be eager to maintain leverage over China to accomplish its own policy goals. And the new administration will face pressure from lawmakers in both parties who view China as a national security threat and have introduced legislation aimed at penalising Beijing for its human rights abuses, global influence operations and economic practices.

“This is likely going to be a period of continuing uncertainty on the US-China front,” said Mr Myron Brilliant, executive vice-president of the US Chamber of Commerce. “There is no question that President Trump has adopted a tough stance on China, and this probably doesn’t give President-elect Biden a lot of political flexibility early on, but we expect a significant departure in tone, style and process.”

Mr Biden has given few details about his plans for US-China relations, other than saying he wants to recruit US allies such as Europe and Japan to pressure China to make economic reforms, like protecting intellectual property.

He has pledged to devote more resources to enhancing American manufacturing capacity, infrastructure and technological development, to ensure the United States retains an edge over China even as it invests huge sums in fields like telecommunications, artificial intelligence and semiconductors.

But Mr Biden will face pressure from both parties not to revert to the approach that he and many of his predecessors had earlier embraced in trying to transform China’s economic practices by bringing it into the global economy.

Like many Democrats and Republicans in the 1990s and early 2000s, Mr Biden argued that integrating China into the global trading system would force Beijing to play by international rules, to the benefit of US workers. In 2000, he voted to grant China permanent normal trading relations, which paved the way for China’s entry into the World Trade Organisation and deeper global economic ties.

In 2016, Mr Trump won the presidency in part by loudly rejecting that approach, arguing that the United States needed to isolate, not integrate, Beijing.

Two decades later, Mr Biden acknowledges that China exploited the international system, and he has called for a more aggressive approach. Mr Biden has said the United States must get “tough with China,” and referred to Xi Jinping, the Chinese leader, as a “thug.”

Congress is also relatively unified on taking a tough stance on China. Hundreds of China-related Bills are circulating, including several bipartisan efforts that echo Mr Biden’s emphasis on competing with China by investing in US industries like quantum computing and artificial intelligence.

Mr Biden’s first moves could also be dictated by Mr Trump’s final months. Many trade experts say they are concerned Mr Trump, who has promised to make China “pay” for not doing enough to contain the coronavirus, could amp up his economic fight. Several of Mr Trump’s aides are bitter at China for its role as the source of the coronavirus, which they see as a major contributor to Mr Trump’s loss, people familiar with their thinking say.

One area of focus is the trade deal that Mr Trump signed with Chinese officials in January. While China has largely kept commitments to open up its markets to US companies and Mr Trump’s advisers have continued to defend the pact, Beijing has fallen far behind schedule in its promise to buy an additional US$200 billion of goods and services by the end of next year.

Mr Trump’s most likely path will be to leave the deal intact, said Mr Chris Rogers, a global trade and logistics analyst at Panjiva. But he wouldn’t rule out “a scorched-earth policy where China is declared to be in violation of its Phase 1 trade deal commitments and there’s a return to tariff escalation,” Mr Rogers said.

“President-elect Biden will be left holding the pieces if the deal is broken,” Mr Rogers added.

Whether Mr Biden opts to roll back Mr Trump’s more punitive measures will depend, at least in part, on China’s future behaviour, including whether it pursues more aggressive incursions into the South China Sea, Taiwan and Hong Kong, people close to his campaign say.

“The Trump administration never did lay out a coherent, comprehensive, engaged trade strategy,” said Ms Thea Lee, an economist and the president of the Economic Policy Institute. “It was much more scattershot: Throw up a tariff here, do a deal with China, disparate elements that didn’t seem to talk to each other.”

“But there are a lot of tools in that toolbox, and I would like to see the Biden administration be thoughtful and strategic about how to use them,” Ms Lee said.

Bastion Balance Seoul.