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25 Jan, 2021 12:53

As Biden embraces Trump’s America-first protectionism, foreign investors give up on the US and bet big on China. Power has shifted

As Biden embraces Trump’s America-first protectionism, foreign investors give up on the US and bet big on China. Power has shifted

By backing globalization and free trade, Beijing is outmanoeuvring an inward-looking US, overtaking it to become the world’s No1 destination for foreign investment & creating a dilemma for the new man in the White House.

Donald Trump is gone, but many aspects of his legacy are here to stay. On trade, absolutely it seems. Biden’s team members have pledged a “new look” on international trade and investment which will involve a renewed emphasis on putting American jobs first as opposed to simply opening up international markets for US companies, a line which could potentially out-Trump Trump himself. 

Not surprisingly, as it has sought to get into the driving seat and handle domestic crises, it has “put trade on the backburner” and effectively relegated it as a priority, showing indifference, for example, towards a potential new trade deal with the UK of which Trump and Boris Johnson had pursued.

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In the midst of it all, an astonishing new development has taken place: In the year 2020, China has overtaken the United States to become the biggest destination for foreign direct investment (FDI) in the world, obtaining over $140 billion across the year. Although varying fortunes in the pandemic is partially the reason why, the move follows a trend that has seen investment into the US slump dramatically under Trump across a four-year period, a product of political unfavorability, his ‘America First’ policy and also pushing out Chinese companies and investors.

When these two factors are considered together, liberal talk of a Biden comeback against China and building “trade coalitions” seems highly unlikely. The Democrats have absorbed Trump’s protectionist legacy and do not have the political space to economically empower other countries against Beijing. Things such as rejoining the Transpacific Partnership (TPP) remain a non-starter. Given this, with China containing its strategy of raking up new free trade agreements, Biden doesn’t really have the answer to Beijing that many hoped he would, and the evidence is continuing to grow that China has the upper hand economically.

When Biden was elected, it was the hope of mainstream liberals in the US that Trump and his era of ‘America First’ was over. The new president was pitched as a credible, reliable and respectable figurehead who would restore America’s ‘altruistic’ vibes and counter China via a swing back to multilateralism, as opposed to Trump’s unilateralism. It was assumed that the only reason the US had failed via China under the previous administration was because he was awful, therefore under a ‘respectable US’, countries would immediately swing back to their true interest, with the new president having called for trade coalitions against China. But the question is, how exactly? 

Herein lies the contradiction awaiting the Biden tenure. He talks about combatting Trump, but also is seemingly inclined to follow Trump’s presidency in the bid to shore up American jobs, and its underlying assumption that rushing into free trade agreements with lesser developed countries will be detrimental to the domestic political interest unless those nations primarily buy goods from America rather than sell to them. 

The biggest and most obvious route to countering Beijing would be to join the TPP and counter the Regional Comprehensive Economic Partnership (RCEP) that China is a part of. However, due to its domestic unpopularity, this is seen as increasingly politically untenable and a “hard sell.” In light of this background, Biden’s ability to resolve trade disputes with the European Union are not about to go away easily either, especially given that the EU demonstrated its strategic independence through its new investment treaty with China, which his administration explicitly opposed.

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In this case, what Biden and his supporters aspire to is easier said than done, and China is undoubtedly going to keep up the pace of its own free trade game and add to its successes. Recently, the country’s Foreign Ministry set out its priorities for 2021, which involves seeking new trade deals with Israel, the Gulf Cooperation Council, the South Korea-Japan trilateral agreement, and Norway. In comparison to the ‘America first’ and ‘American jobs first’ rhetoric, Beijing has persistently pitched itself as a defender of multilateral free trade, openness and matched its words with actions by gaining more and more deals. 

Trump put the US on the backfoot with this, and Biden’s willingness to embrace aspects of his agenda, even if not in as destructive a manner, will likewise further damage its position. China is advocating globalization, America protectionism.

Therefore, it is not a stretch at all to argue China has the upper hand economically, and that this will only grow. As I have repeatedly noted, 2020 and the global pandemic shifted the balance of power. Beijing will continue to respond to the US, not by confronting it, but by diplomatically outmanoeuvring it on trade. 

This comes in addition to China being the only major global economy to register growth in 2020, the world’s largest recipient of foreign direct investment in the same year, and subsequent forecasts of it overtaking the US in gross domestic product by 2028. In this case, Biden has no easy answer to China when it comes to trade, and the lockstepping of national protectionism is only going to inhibit Washington’s bid to compete globally.

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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.