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Hello and welcome back for another edition from Washington DC. Tonight we will have the pleasure of watching the second and final debate between President Donald Trump and Joe Biden — the organisers have promised to use their mute buttons to avoid any interruptions. We’ll see if they follow through.
Given the economic shock of the pandemic, trade has been less of a factor in the 2020 campaign than it was four years ago but it is still very much on voters’ minds in some swing states. Aime Williams did a great piece on the political dynamic in Michigan earlier this week, highlighting how the evidence is very mixed for the president.
It’s not for us to guess who will win the race for the White House — and Trump could yet pull off a victory — but let’s assume that he loses to Biden and engage in a spot of educated speculation about who might then run his trade policy. Today’s main piece explores potential candidates for the job of US trade representative: a role less high profile than the heads of the Treasury, State or Defence departments, but one which can be just as critical.
The chart of the day looks at US-China import price inflation while tall tales of trade fact checks manufacturing employment statistics ahead of the debate tonight. You’re welcome.
USTR runners and riders
Biden has not even won the presidency but speculation over his likely cabinet is already in full swing in Washington’s virtual corridors and Zoom chats.
When it comes to the job of USTR, we have already written that there is a small but non-trivial chance Biden might want to keep Robert Lighthizer on board. He has a relatively good relationship with Democrats on Capitol Hill, he knows the details of all of Trump’s trade wars and he hasn’t ruled out accepting another stint.
But the alternative — that Biden makes his own choice of new trade chief — is more likely. The decision will be far from easy: the former vice-president is facing a fierce tug of war between the progressive and moderate wings of his party on key appointments and any mis-step could land him in trouble.
“For Democratic politicians, trade is controversial. They will want someone acceptable to labour [unions] but not anathema to business because the latter will be instrumental in getting any agreements they produce through the Congress. This is also a position the progressive wing of the party will be watching closely to make sure the appointee is not a lobbyist,” said Bill Reinsch of the Center for Strategic and International Studies. “Finally, don’t expect a sitting senator, or at least not a Democrat. Biden needs every one of those to stay in the Senate.”
With this context in mind, it may make sense for Biden to pick a Democrat from the House of Representatives who is well-versed in balancing the different opinions and interests on trade within the party. Possible candidates include Ron Kind of Wisconsin, Stephanie Murphy of Florida and Jimmy Gomez of California. Each of them serve on the House ways and means committee, and each has become increasingly vocal on trade in recent years.
There are other possibilities with experience in Washington. Tom Perriello, a former House member from Virginia, is one name floating around, as is Mike Wessel, of the congressional US-China Economic and Security Review Commission. Former US trade officials such as Jennifer Hillman, Miriam Sapiro and Fred Hochberg might also be in the mix, Reuters reported last month.
There are also some plausible candidates from beyond the Beltway. Pete Buttigieg, the former mayor of South Bend, Indiana, who ran for president but has since become an effective surrogate for Biden and sits on his transition advisory board, may have a shot given his experience in dealing with the impact of globalisation on a medium-sized Midwestern city. John Kasich, the former Republican governor of Ohio who defected to Biden and spoke at the Democratic national convention, is being vetted to serve in his possible administration, according to Politico, with USTR as one option.
Whoever takes the job faces big challenges. Managing the trade conflict with China — which Kamala Harris, the vice-presidential nominee, has already accused Trump of losing — is probably the main one. De-escalating economic tensions with the EU, and possibly concluding an agreement with the UK, is clearly another priority.
Finding a way to restore US leadership and credibility at the World Trade Organization is a third. Finally, Trade Promotion Authority — congressional authorisation for the administration to negotiate trade deals more effectively — will have to be renewed next year. Even without a president making abrupt policy announcements by tweet, these will not be easy tasks.
Import price inflation on plastic goods coming into the US from China has risen sharply since the middle of the year (clothing and furniture imports are still in deflationary territory). This could be because of tariffs being fully priced in, with the possibility that Chinese exporters are no longer sharing the burden. It is unclear what the outcome of the US presidential election will mean for the simmering trade war between Washington and Beijing: despite Trump’s rhetoric, some analysts believe Biden’s multilateral approach to foreign policy may prove harder for China in the long run.
Tall tales of trade
Given that the next election debate is tonight, we thought it might be useful to fact-check a classic Trump claim in advance. Before the pandemic hit, Trump often stated that he had led a “blue-collar boom” — and even afterwards, such as during a visit to Ohio in August, he spoke of delivering a “manufacturing miracle”. So we wouldn’t be surprised if he said something similar tonight.
But what do the numbers tell us? When Trump took office there were 12.4m manufacturing jobs in the US, an increase of 3.2 per cent since the start of Barack Obama’s second term. By the time the pandemic hit in February 2020, manufacturing employment had risen to 12.9m, a rate of 3.9 per cent, so Trump can genuinely claim that he produced industrial jobs at a faster clip than his predecessor.
But fast forward to the present, wrapping in the bungled response to the pandemic, and it’s a different story. By September 2020, manufacturing employment in the US was 12.2m, having wiped out all the gains incurred during the Trump administration, and more. Indeed, it is now back to the same level as August 2014. It’s also worth noting that almost all of the manufacturing employment gains under Trump came during his first two years in office, before the US-China trade war entered its most heated stages. In 2019, manufacturing jobs were essentially flat, suggesting that the sharp tariff escalations may well have backfired.
The EU and UK will embark on an intensified final phase of Brexit talks on Thursday after Britain agreed to lift its block on negotiations, prompting the biggest rally in the pound since March.
Agricultural supply chains might be opaque and fragmented, yet smallholder farmers play a vital role in global food supply — and digitised supply chains can help multiply Africa’s crop yields.
Factories across Europe are buzzing with activity again, encouraging some industrial bosses to invest in extra production as they shrug off the rise in coronavirus infections that is casting a shadow over the continent’s economic recovery.
The best trade stories from Nikkei Asia
New Japanese prime minister Yoshihide Suga is seeking closer diplomatic ties with Vietnam, but foreign direct investment by Japanese companies has fallen more than 40 per cent this year.
Rice has become the latest front in India-Pakistan tensions, with Pakistan preparing to contest India’s claim that basmati rice sold in the EU is genuine only if it originates from specific areas of India.