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Hello from DC, where coronavirus has truly taken hold, and your FT bureau has taken to working from home like most of the city. Following market panic on Monday, the US administration is pondering how to best protect industries at risk of serious financial damage, including airlines, hotels and oil companies, to name a few.
Meanwhile, the Rust Belt has spoken. “Mini” Super Tuesday in the US brought more action and excitement to political types following the Democratic primaries — and this time there was something for trade lovers too. This week’s column takes a look at the fortunes of Joe Biden and Bernie Sanders in Michigan as the Democratic primary rumbles through the industrial Midwest, where trade has historically been on voters’ minds more than most other places. Our person in the news is Valdis Dombrovskis, the EU’s financial regulation chief, while our chart of the day looks at Michigan’s auto trade with Mexico and Canada.
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‘They are still angry about Nafta’
Michigan, deep in the industrial heartlands of the US, provided the first stage for a showdown on US trade policy between Bernie Sanders, in one corner, and Joe Biden in the other. As veteran pollster and Democratic strategist Stan Greenberg has pointed out, while most voters don’t engage too thoroughly with US trade policy, Michigan is different. In Michigan, “Nafta is very much top of mind,” said Mr Greenberg, and they are broadly not fans. “They are still angry about Nafta,” he added, “though they think USMCA is an improvement”.
So what does this mean for Joe Biden, and what does his win in Michigan on Tuesday mean for US trade policy?
We’ve already covered Sanders’ trade views at Trade Secrets, and pointed out that while he embraces multilateralism and holds corporations, rather than nation states, accountable for “bad deals”, his protectionist tendencies have more in common with Donald Trump than Biden.
Biden is very different. He was the only one of the Democratic nominees to vote for the Nafta trade agreement, has supported normalising trade relations with China and backed the Trans-Pacific Partnership while serving as Barack Obama’s vice-president. It’s fair to say he has played a starring role in Sanders’ much disliked “establishment” when it comes to advancing a trade agenda.
In a series of recent campaign ads, Sanders took Biden to task over exactly these issues, betting that Biden’s Achilles heel in the Midwest would be his support for the sorts of deals that Sanders and Trump blame for hollowing out American manufacturing. “If we are going to defeat Trump in Michigan, in Pennsylvania and Wisconsin it will be very hard for a candidate who voted for these disastrous trade agreements,” Sanders argued at a rally in Detroit on Friday.
It was a repeat of the attacks Sanders made on Hillary Clinton in 2016. Those were reiterated, with much success, by Trump. Back then they worked — but now it seems that our early indicator in the form of the Michigan vote tells us that when a trade-engaged Democrat electorate votes, they’ll choose the trade-friendly candidate over the protectionist.
The Obama administration bailed out US carmakers General Motors and Chrysler in 2009. Joe Biden, who was around at the time, is likely to use this to boost his credentials as a friend to the workers © Getty
Why might that be? Greenberg suggests that criticising free trade worked in 2016 because Nafta had been a “burning issue” more back then than it is today. TPP also came under fire. While Democrats remain divided on trade, a new and bigger mission has arisen — to beat Trump.
These currents are working well for Biden. And while he hasn’t set out his trade policy in huge detail, we can draw some observations from what he’s said.
In September’s televised debate, Biden took broad questions on trade and tariffs as an invitation to demonstrate hawkishness on China, but argued for more engagement too. “The problem isn’t the trade deficit,” he said, arguing that intellectual property theft and steel dumping are more immediate problems to be addressed. “We’re either going to make the policy or China’s going to make the rules of the road,” he said. “You need to organise the world to take on China, to stop the corrupt practices that are under way.”
The hawkishness could placate industrial workers who think their jobs have been moved abroad, even as Biden goes further than Sanders in his belief in America as the policeman of the world (something Trump has repeatedly said America is not). Biden was also around when the Obama administration bailed out US automakers General Motors and Chrysler in 2009, and is likely to use this to bolster his credentials as a friend to the workers.
The agenda of a trade-friendly Biden is likely to encompass more trade deals, and more China hawkishness. Dealing with a Democratic party that remains deeply divided on trade might mean Biden has to make sure his deals maintain high labour standards and environmental protections to keep those in the party more sceptical of trade happy. But if he’s elected, it probably won’t be because of his trade policy, which even places like Michigan may have sidelined in favour of simply winning.
Charted waters
Showing support for the manufacturing industry in Rust Belt states such as Michigan — a state that Trump won by a wafer-thin margin in 2016 — is key for US presidential hopefuls. The White House has argued that its new USMCA trade deal, replacing Nafta, will create more jobs in the auto industry, where exports from Michigan to Mexico and Canada have been declining in recent years.
Person in the news
Valdis Dombrovskis has said that, while assessments on equivalence can start as soon as possible, Brussels will take the ‘actual decisions’ later than June © Krisztian Bocsi/Bloomberg
Who is it?
Valdis Dombrovskis, the EU’s financial regulation chief
Why are they in the news?
The EU is looking to rebuff British pressure for a quick decision on market access rights for the City of London as the country tries to protect its powerful financial services in the wake of Brexit.
Dombrovskis has sternly warned that while assessments on equivalence can begin as soon as possible, the EU will take the “actual decisions” later than June.
Britain and the EU are preparing for a second round of talks on the future of their relationship next week.
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