We know that Republican office holders are not allowed to say that Joe Biden won the election. Apparently there is a similar ban in place for news outlets when it comes to the question of the United States collaborating with China, and other countries, in developing vaccines against the pandemic.
In recent days, there have been articles in several major news outlets about how China vaccinated close to 1 million people, under an Emergency Use Authorization, for vaccines that are currently in Phase 3 clinical testing (here, here, here, and here). While large-scale distribution of vaccines, that have not completed testing for safety and effectiveness, is probably not a good public health practice, none of these pieces raised any questions about whether the United States, and other countries, might have benefited from access to the Chinese vaccines.
It would not be reasonable to distribute Chinese vaccines here based on safety and effectiveness data that had not been thoroughly vetted by the Food and Drug Administration. But, if we had chosen to go a collaborative route in developing vaccines, we could have done our own tests, in addition to using data available from tests done by the Chinese manufacturers.
And, the claims made in these pieces do suggest a high degree of effectiveness. For example, the CEO of Sinopharm, one of the leading vaccine manufacturers, claimed that they gave the vaccine to 81 of the 99 people in an overseas office of a major Chinese corporation. He said there was an outbreak in the office, and 10 of the 18 people who were not vaccinated became infected. None of the 81 people who were vaccinated became infected. This is of course not a carefully controlled clinical trial, and claims by the CEO of the company should be viewed with skepticism, but if anything close to this claim is true, it would suggest that we could have had an effective vaccine much sooner if we had chosen a route of international collaboration with China.
There are now many people in both political parties who want to have a new Cold War with China. There are certainly grounds to have complaints over China's conduct, most importantly its abysmal human rights record and specifically its abuse of its Uighur population. But regardless of what we think of its government, it is not going away.
For this reason, it makes sense to cooperate in areas of mutual benefit. Developing vaccines and treatments against the pandemic would have been an obvious example. Going forward, this applies to biomedical research more generally. It also applies to developing solar and other forms of clean energy in the effort to combat global warming.
It is unfortunate that hostility to China, and the absurd "America First!" philosophy of the Trump administration, along with a quest for pharmaceutical industry profits, prevented this sort of collaboration on a vaccine. It would be interesting to speculate on how many lives here and elsewhere could have been saved if we adopted this approach. Unfortunately, reporters at major news outlets are not allowed to ask this sort of question.
Blog: Enlighten Radio Post: Talkin Socialism: The Biden Economic Plan Link: https://www.enlightenradio.org/2020/11/talkin-socialism-biden-economic-plan.html
...going after the point one percent..and their wealth. Of course, you could keep it simple, and nationalize all land, then lease it back at the appropriate rate -- :) I know, we ain't culturally ready for that here!!
When discussing the superrich in a US context, there are two common starting points. One is to focus on the Forbes 400, an annual list of the 400 wealthiest Americans. Another is to focus on the very top of the income distribution--that is, not just the top 1%. but the top 0.1% or even the top 0.01%.
On the subject of the Forbes 400, Scheuer writes: "The cutoff to make it into the Forbes 400 in 2018 was a net worth of $2.1 billion, and the average wealth in this group was $7.2 billion. The share of aggregate U.S. wealth owned by the Forbes 400 has increased from less than 1% in 1982 to more than 3% in 2018." It's worth pausing over that number for a moment: the share of total US wealth held by the top 400 has tripled since 1982. Scheuer also points out that one can distinguish whether those in top 400 inherited their wealth or accumulated it themselves. Back in 1982, 44% of the top 400 had accumulate it themselves, while in 2018, 69% had done so.
Of course, wealth is not the same as income. For example, when the value of your home rises, you have greater wealth, even if your annual income hasn't changed. Similarly, when the price of stock in Amazon or Microsoft changes, so does the wealth of Jeff Bezos and Bill Gates (#1 and #2 on the Forbes wealth list), even if their annual income is unchanged.
The IRS used to (up to 2014) release data on the "Fortunate 400" top income-earners in a given year; in 2014, the cutoff for making this list was $124 million in income for that year. Another approach is to looking at the top of income distribution. the top 0.01% represents the 12,000 or so households with the highest income in the previous year.
There are basically four ways to tax the super-rich: income tax, capital gains taxes, the estate tax, or a wealth tax.
In the 2020 tax code, the top income tax bracket is 37%: for example, if you are married filing jointly, you pay a tax rate of 37% on income above $622,500. (This is oversimplified, because there are phase-outs of various tax provisions and surtaxes on investment income that can lead to a marginal tax rate that is a few percentage points higher.) But one obvious possibility for taxing the superrich would be to add additional higher tax brackets that kicks in a higher income levels, like $1 million or $10 million in annual income.
The difficulty with this straightforward approach is what Scheuer refers to as the "plasticity" of income, that is, "the ease with which higher-taxed income can be converted into lower-taxed income." Scheuer writes:
Plasticity is an issue when different kinds of income are subject to different effective tax rates. By far the most important aspect of plasticity, with implications both for understanding the effective tax burden on the superrich and for measuring the extent of their income and therefore income inequality, concerns capital gains.
To put this in concrete terms, if you look at the wealthiest Americans like Jeff Bezos or Bill Gates, their wealth doesn't rise over time because they save a lot out of the high wages they are paid each year; instead, it's because the stock price of Amazon or Microsoft rises. They only pay tax on that gain if they sell stock, and receive a capital gain at that time. Thus, if you want to tax the super-rich, taxing their annual income will miss the point. You need to think about how to tax the accumulation of their wealth
In the US, taxes on capital gains have several advantages over regular income. The tax rate on capital gains is 20%, instead of the 37% (plus add-ons) top income tax rate. In addition, you can let a capital gain build up for years or decades before you realize the gain and owe the tax; thus, along with the lower tax rate there is a benefit from being able to defer the tax. Finally, if someone who has experienced a capital gain over time dies, and then leaves that asset to their heirs, the capital gain for that asset during their lifetime is not taxed at all. Instead, the heir who receives the asset can "step up": the basis, meaning that the value for purposes of calculating a capital gain for the heir starts from the value at the time the asset was received by the heir. Taken together, the "plasticity" of being able to gain wealth by a capital gain, rather than by annual income, is a core problem of taxing the superrich. Scheuer explains:
Most countries' tax systems treat capital gains favorably relative to ordinary labor income (Switzerland being an extreme case where most capital gains are untaxed). Realized capital gains represent a very high fraction of the reported income of the superrich. For example, realized capital gains represented 60% of total gross income for the 400 highest-income Americans in tax year 2014. ... For tax year 2016, those earning more than $10 million report net capital gains corresponding to 46% of their total income, whereas capital gains are a negligible fraction of income for those earning less than $200 k.
There are other ways to tax capital gains. For example, one of Joe Biden's campaign promised was to tax capital gains income at the same rate as personal income for anyone receiving more than $1 million in income in that year. Before getting into some of the reasons, it's worth noting that every high-income country taxes capital gains at a lower rate. Scheuer writes:
Five OECD countries levy no tax on shareholders based on capital gains (Switzerland being a prominent example). Of those that do, all tax is on realization rather than on accrual. Five more countries apply no tax after the end of a holding period test, while four others apply a more favorable rate afterwards. The tax rate varies widely with the highest as of 2016 being Finland, at 34%. With a few exceptions, the accrued gains on assets in a decedent's estate escape income taxation entirely, because the heir can treat the basis for tax purposes as the value upon inheritance.
Why is capital gains taxed at a lower rate, all around the world? Why is it taxed only when those gains are realized, perhaps after years or decades, rather than taxed as the gains happen? One reason is that there is an annual corporate tax, so income earned by the corporation is already being taxed. Or if the capital gain is being realized on a gain in property values, there were also property taxes paid over time. In general, many countries want to have a substantial share of patient investors, who are willing to hold assets for a sustained time. Trying to tax capital gains as they happen, rather than when they are realized, would also raise practical questions--for example it might require people to sell some of their assets to pay their annual taxes.
Scheuer runs through a variety of different ways of ways of taxing capital gains, and you can consider the alternatives. But again, there are reasons why no country has pursued taxing capital gains as they accrue, rather than as they are realized, and why no country taxes such gains as ordinary income--and in fact why some countries don't tax them at all.
Another alternative is to tax wealth directly. I've written about a wealth tax before, and don't have a lot to add here. Scheuer offers the reminder that Donald Trump was an advocate of a large but one-time wealth tax on high net-worth individuals back in 1999, when he ran for president on the Reform Party ticket, as a way to pay off the national debt. Here, I'll just offer a reminder that a wealth tax is based on total wealth, not on gains. Thus, if there is a an annual wealth tax of, say, 3%, then if your wealth was earning a return of 3% per year, the wealth tax means you are now earning a return of zero. If there is a year where the stock market drops, and the returns for that year are negative, you still owe the wealth tax.
About 30 years ago, 12 high-income counties had wealth taxes, but the total is now down to three. The general consensus was that the troubles of trying to value wealth each year for tax purposes (and just consider for a moment how the superrich might shuffle their assets into other forms to avoid such a tax), just wasn't worth the relatively modest total amounts being collected. The one country that continues to collect a substantial amount through its wealth tax is Switzerland--but remember, Switzerland doesn't have any tax at all on capital gains. Scheuer writes:
So far, the Swiss case is the only modern example for a wealth tax in an OECD country that has been able to generate sizeable and stable revenues in the long run. It enjoys broad support, as evidenced by the fact that it keeps being reaffirmed by citizens in Switzerland's direct democracy, where most tax decisions must be put directly to voters. However, its design and the role it plays in the overall tax system are quite different from current proposals in the United States. In particular, it is not geared towards a major redistribution of wealth, and indeed wealth concentration in Switzerland remains high in international comparison.
A final option, which is not a focus of Scheuer's discussion, would be to resuscitate the estate tax: that is, instead of taxing the superrich during their lives, tax the accumulated value of their assets at death. For an example of a proposal along these lines, William G. Gale, Christopher Pulliam, John Sabelhaus, and Isabel V. Sawhill offer a short report of "Taxing wealth transfers through an expanded estate tax" (Brookings Institution, August 4, 2020). They point out, for example, that back in 2001 estates of more than $675,000 were subject to the estate tax; now, it applies only to estates above $11.5 million. Maybe $675,000 was on the low side, but an exemption of $11.5 million is pretty high--only about 0,2% of estates are subject to the estate tax at all. They calculate that rolling back the estate tax rules to 2004--which was hardly a time of confiscatory taxation--could raise about $100 billion per year in revenue.
Taking all this together, it seems to me that a middle-of-the-road answer on how to raise taxes on the superrich would focus in part on the estate tax, and in part on the capital gains tax--and perhaps in particular on limiting the ability to pass wealth between generations in a way that avoids capital gains taxes.
Puerto Rico's Nutrition Assistance Program (NAP) basic household benefits have shrunk significantly over the last three months — as the Commonwealth depleted emergency federal funding — which may make it harder for many households to afford the food they need amid COVID-19 and an uncertain economic recovery.
"America and other countries have no right to obstruct China's economic rise or dictate its development model. But US President-elect Joe Biden's incoming administration can and should revise decades-old trade arrangements with China to take account of changed realities."
but....the author cannot make up his mind how to deal with the changed reality.
It is amusing watching the confusion in the bourgeois intellectuals when socialism succeeds. :)
America and other countries have no right to obstruct China's economic rise or dictate its development model. But US President-elect Joe Biden's incoming administration can and should revise decades-old trade arrangements with China to take account of changed realities.
NEW DELHI – Once US President-elect Joe Biden's administration has made the relatively easy decisions to rejoin the Paris climate agreement, remain in the World Health Organization, and attempt to reboot the World Trade Organization, it will confront three key foreign-policy issues. In order of importance, they are China, China, and China.
Biden's dilemma is that China has become too deviant to cooperate with fully, too big to contain or ignore, and too connected to decouple from. So, what principles should govern America's economic engagement with it?
Two decades ago, the United States and the rest of the world bet that China, as it became richer, would open up economically and politically, while remaining benign in its international conduct. Under the resulting implicit contract, embodied in China's 2001 WTO accession agreement, the world promised to guarantee market access for Chinese exports; in return, China would make its economy more open and transparent, and play by international rules.
But China has changed since then, and not only by becoming much richer and a much larger trader. Under President Xi Jinping, an authoritarian in the mold of Mao Zedong, China has repudiated Deng Xiaoping's three guiding tenets: collective leadership in domestic politics, steady economic opening and reliance on market forces, and quiet cooperation with the world. Instead, Xi's repressive regime is fashioning a new brand of inward-oriented, state-dominated capitalism. And it poses a threat to many of its neighbors, including Taiwan, Australia, India, the Philippines, Vietnam, and Japan.
In other words, the world has lost its China wager. Even where China has adhered to the letter of the contract – concerning currency and intellectual-property, for example – it has violated the spirit. The Biden administration and the rest of the world are thus entitled to renegotiate the deal.
America and others have no right to obstruct China's economic rise, because its 1.4 billion citizens are entitled to pursue prosperity and security. Likewise, China is entitled to choose its development model, with its own balance between the state and the market.
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Subject to these caveats, however, America can – and should – revise the decades-old contract to account for changed realities. The more China plays by the rules, the more such a revision would benefit developing countries that can trade with it.
For starters, China is no longer a poor country, but its status as a developing country entitles it to favorable treatment under global trade rules. This status must be revoked.
Second, China departed from the spirit of the original contract through beggar-thy-neighbor exchange-rate policies (especially from 2004 to 2010) that artificially preserved its economic competitiveness. That problem went away for a while, but is beginning to resurface.
The world must respond by codifying and enforcing rules on exchange-rate manipulation. And where the line between state and commercial entities is blurred – as it is in China – the definition of "excessive" intervention should be widened to include foreign-exchange purchases by state-owned banks as well as those by the central bank.
Third, the 2001 WTO accession agreement imposed obligations on China concerning its state-owned enterprises (SOEs). But, with the Chinese state playing a much larger direct and indirect economic role under Xi, these rules have to be adapted, tightened, and made more justiciable. Regarding Chinese investment abroad, for example, the world should treat skeptically China's claim that the government is distinct from SOEs because the latter are run on commercial principles. The burden of proof should be on China to prove this.
As for inward foreign investment, the basic aim should be to ensure a far more level playing field. The new rules should therefore cover not only explicit state policies but also the actions of SOEs, as well as more of China's government procurement policies and practices.
But Biden must first persuade China to agree to renegotiate the contract. Immediately removing all of President Donald Trump's unilateral tariffs on Chinese imports could help. The Biden administration could also lend quick support to the WTO, by approving the choice of the body's new director-general and restoring its Appellate Body. And the US could signal its willingness to join China-led international financial institutions such as the Asian Infrastructure Investment Bank, and to end the West's monopoly of the leadership of the World Bank and International Monetary Fund.
Beyond improving the atmospherics, Biden must consider his tactical options: unilateral, multilateral, and regional. In theory, he could go even further down the unilateral road than Trump by threatening China with a return to the pre-WTO arrangement under which its market access would be reviewed annually by a fickle, more protectionist Congress.
But, as Chad Bown of the Peterson Institute for International Economics has demonstrated, even the more limited Trump strategy has failed, because the world has become too dependent on China to embrace restrictive trade actions against it. Moreover, success would be enormously costly: the global trading system's integrity would be decimated, wrecking a half-century of international efforts.
Biden also has the multilateral option of renegotiating with China as part of an effort to revive the WTO, which has been languishing largely because of Trump's hostility to it. The problem is that China – as a WTO member with significant clout – would have to agree to any changes.
The Biden administration must therefore consider the regional route that Trump abandoned when he withdrew the US from the Trans-Pacific Partnership (TPP) in 2017. Rejoining its successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), would enable the US to integrate more deeply with the rest of Asia and possibly also with Europe, thereby reducing its dependence on China while inflicting de facto exclusion costs on it.
This strategy has major advantages. It would create a trading area that would complement, rather than undermine, the international trading system. And such a move would not be subject to a Chinese veto; in fact, it would likely force China to the negotiating table, because it would not want to be kept out of such a large market. But joining the CPTPP would not be painless: it would require the US to countenance more trade opening, which the current domestic mood might not allow.
The recent signing of the Regional Comprehensive Economic Partnership, a pan-Asian free-trade agreement including China, might seem to signal a different approach than that proposed here. But Asian countries have fewer options relative to China: They are more dependent on and integrated with it, and Trump's 2017 rejection of the TPP left them without an anchor for managing economic relations with China. After Trump, and considering China's increasing assertiveness, Asian countries might go along with or even secretly hope the US and Europe reset relations with China.
In any event, Biden should have no illusions: China is too important to ignore, but the challenge it presents defies easy solutions. America and the world should brace themselves for the long haul.
To prepare for his transition of power, President-elect Joe Biden has created agency review teams tasked with understanding the operations of various government bureaucracies. Those appointments provide clues to how he might govern.
In the case of economic policy, Biden looks set to empower a younger generation of empirically-minded progressive economists who take a pragmatic view toward fighting recessions and inequality.
Biden's review team for the Council of Economic Advisers consists of three economists: Martha Gimbel of the philanthropic foundation, Schmidt Futures; Damon Jones of the Harris School of Public Policy at the University of Chicago; and Jay Shambaugh of George Washington University.
Shambaugh has the most experience in the world of government and policymaking, having served two previous stints at the Council of Economic Advisers under President Barack Obama and also as the director of the Brookings Institution's Hamilton Project. Though his academic research deals with trade and exchange rates, Shambaugh has written on a large number of big policy issues -- the COVID-19 pandemic, wage growth, automatic stabilizers, climate change, and many more.
Jones, the most academically oriented of the group, has written papers on a broad array of public policy programs including education, basic income, Social Security, retirement plans, tax refunds. Gimbel has spent most of her career in the private sector and has primarily focused her work on jobs and employment.
The lineup hints at the dismaying breadth of challenges the Biden administration will be facing. Covid-19 is still raging, and the recession it spawned threatens to outlast the pandemic for years. Wage stagnation, rising inequality and increasing precarity have plagued the U.S. economy for decades. Behind it all looms the dread specter of climate change.
Picking experts with enormous breadth like Shambaugh and Jones suggests that Biden will be thinking very hard about how to allocate political capital and decide which problems to attack first. The inclusion of Gimbel, though, suggests that getting the U.S. out of its pandemic-induced recession will probably be job No. 1.
The team also offers clues to Biden's economic policy orientation and ideology. They're supporters of more activist government, for both recession-fighting and in terms of addressing longer-term issues such as wage stagnation. Nor are they the neoliberal tinkerers of the 1990s, obsessed with targeted programs, clever incentives and fiscal limitations; These economists are likely to advocate big, simple, powerful interventions. This approach reflects a changing consensus on the center-left -- a realization that small tweaks won't cut it against the big challenges of the new century.
But it's also a very empirically driven group. Unlike many leftists whose positions are guided by a combination of high theory and pure ideology, these economists are extremely data-oriented and pragmatic. They represent not the rejection of mainstream economics that leftists would like, but rather a shift within the profession -- a movement away from free-market theory and toward empirical analysis that often (though not always) shows the effectiveness of government intervention.
There's more than just the CEA transition appointments for sussing out Biden's inclinations on economic policy, with teams assessing the Treasury Department, the Office of Management and Budget, the Office of the United States Trade Representative and more. It's difficult to draw conclusions from people with such a broad array of backgrounds, from tech companies to regulators to academia, but the selections generally telegraph a combination of pragmatism and progressivism.
And there are a few more clues here and there. The trade team includes Council on Foreign Relations economist Brad Setser, who has tirelessly railed against trade imbalances and currency manipulation by foreign exporters. That appointment strongly suggests that Biden will not be returning to the free-trade consensus of the pre-Trump era, but will instead take a harder line against Chinese competition in particular. Lily Batchelder, a specialist on taxation who has suggested an innovative new type of inheritance tax, is on the Treasury team, suggesting that the Biden administration is thinking about taxing the very wealthy at higher rates.
This sort of tea-leaf reading can't answer the question of what Biden will actually be able to accomplish. Pushing through big changes will be a tall order with a probable Republican-controlled Senate and a number of conservative Democrats, and Biden will probably be forced to resort to small-bore executive action in many cases.
But it's clear that Biden will preside over a new type of Democratic administration -- one that's at least willing to aim high and contemplate bold action against a variety of problems, rather than contenting itself with small tweaks and competent management. That's the kind of administration the U.S. could use more of.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
China seems able to compensate innovation without going nuts forcing IDEAS into a PROPERTY box, from which no power on earth can prevent leakage! I doubt they will do much in that direction, regardless what Biden, or the NYT, recommends. Still, I like Dean Baker's wit. The fact that ideas are crappy commodities because they cannot convey either an exclusive source, or use, is a rather profound signal about the world of commodities, i.e., capitalism
The New York Times had an article discussing the prospects for U.S. trade relations with China during Biden's presidency. At one point it tells readers:
"Mr. Biden has given few details about his plans for U.S.-China relations, other than saying he wants to recruit American allies such as Europe and Japan to pressure China to make economic reforms, like protecting intellectual property."
Stronger and longer patent and copyright protections have redistributed enormous amounts of income upward over the past four decades, likely more than $1 trillion annually (half of all corporate profits). If Biden plans to put stronger enforcement of U.S. intellectual property claims at the center of his trade relations with China, it means he wants to redistribute even more money away from the vast majority of people who voted for him to the richest 10 percent of the population.
That should be a big deal in a news story on Biden's trade policy towards China.
NEW DELHI – Once US President-elect Joe Biden's administration has made the relatively easy decisions to rejoin the Paris climate agreement, remain in the World Health Organization, and attempt to reboot the World Trade Organization, it will confront three key foreign-policy issues. In order of importance, they are China, China, and China.
Why Biden Can Overcome Political Gridlock
Biden's dilemma is that China has become too deviant to cooperate with fully, too big to contain or ignore, and too connected to decouple from. So, what principles should govern America's economic engagement with it?
Two decades ago, the United States and the rest of the world bet that China, as it became richer, would open up economically and politically, while remaining benign in its international conduct. Under the resulting implicit contract, embodied in China's 2001 WTO accession agreement, the world promised to guarantee market access for Chinese exports; in return, China would make its economy more open and transparent, and play by international rules.
But China has changed since then, and not only by becoming much richer and a much larger trader. Under President Xi Jinping, an authoritarian in the mold of Mao Zedong, China has repudiated Deng Xiaoping's three guiding tenets: collective leadership in domestic politics, steady economic opening and reliance on market forces, and quiet cooperation with the world. Instead, Xi's repressive regime is fashioning a new brand of inward-oriented, state-dominated capitalism. And it poses a threat to many of its neighbors, including Taiwan, Australia, India, the Philippines, Vietnam, and Japan.
In other words, the world has lost its China wager. Even where China has adhered to the letter of the contract – concerning currency and intellectual-property, for example – it has violated the spirit. The Biden administration and the rest of the world are thus entitled to renegotiate the deal.
America and others have no right to obstruct China's economic rise, because its 1.4 billion citizens are entitled to pursue prosperity and security. Likewise, China is entitled to choose its development model, with its own balance between the state and the market.
Subscribe to Project Syndicate
Enjoy unlimited access to the ideas and opinions of the world's leading thinkers, including weekly long reads, book reviews, and interviews; The Year Ahead annual print magazine; the complete PS archive; and more – All for less than $9 a month.
SUBSCRIBE NOW
Subject to these caveats, however, America can – and should – revise the decades-old contract to account for changed realities. The more China plays by the rules, the more such a revision would benefit developing countries that can trade with it.
For starters, China is no longer a poor country, but its status as a developing country entitles it to favorable treatment under global trade rules. This status must be revoked.
Second, China departed from the spirit of the original contract through beggar-thy-neighbor exchange-rate policies (especially from 2004 to 2010) that artificially preserved its economic competitiveness. That problem went away for a while, but is beginning to resurface.
The world must respond by codifying and enforcing rules on exchange-rate manipulation. And where the line between state and commercial entities is blurred – as it is in China – the definition of "excessive" intervention should be widened to include foreign-exchange purchases by state-owned banks as well as those by the central bank.
Third, the 2001 WTO accession agreement imposed obligations on China concerning its state-owned enterprises (SOEs). But, with the Chinese state playing a much larger direct and indirect economic role under Xi, these rules have to be adapted, tightened, and made more justiciable. Regarding Chinese investment abroad, for example, the world should treat skeptically China's claim that the government is distinct from SOEs because the latter are run on commercial principles. The burden of proof should be on China to prove this.
As for inward foreign investment, the basic aim should be to ensure a far more level playing field. The new rules should therefore cover not only explicit state policies but also the actions of SOEs, as well as more of China's government procurement policies and practices.
But Biden must first persuade China to agree to renegotiate the contract. Immediately removing all of President Donald Trump's unilateral tariffs on Chinese imports could help. The Biden administration could also lend quick support to the WTO, by approving the choice of the body's new director-general and restoring its Appellate Body. And the US could signal its willingness to join China-led international financial institutions such as the Asian Infrastructure Investment Bank, and to end the West's monopoly of the leadership of the World Bank and International Monetary Fund.
Beyond improving the atmospherics, Biden must consider his tactical options: unilateral, multilateral, and regional. In theory, he could go even further down the unilateral road than Trump by threatening China with a return to the pre-WTO arrangement under which its market access would be reviewed annually by a fickle, more protectionist Congress.
But, as Chad Bown of the Peterson Institute for International Economics has demonstrated, even the more limited Trump strategy has failed, because the world has become too dependent on China to embrace restrictive trade actions against it. Moreover, success would be enormously costly: the global trading system's integrity would be decimated, wrecking a half-century of international efforts.
Biden also has the multilateral option of renegotiating with China as part of an effort to revive the WTO, which has been languishing largely because of Trump's hostility to it. The problem is that China – as a WTO member with significant clout – would have to agree to any changes.
The Biden administration must therefore consider the regional route that Trump abandoned when he withdrew the US from the Trans-Pacific Partnership (TPP) in 2017. Rejoining its successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), would enable the US to integrate more deeply with the rest of Asia and possibly also with Europe, thereby reducing its dependence on China while inflicting de facto exclusion costs on it.
This strategy has major advantages. It would create a trading area that would complement, rather than undermine, the international trading system. And such a move would not be subject to a Chinese veto; in fact, it would likely force China to the negotiating table, because it would not want to be kept out of such a large market. But joining the CPTPP would not be painless: it would require the US to countenance more trade opening, which the current domestic mood might not allow.
The recent signing of the Regional Comprehensive Economic Partnership, a pan-Asian free-trade agreement including China, might seem to signal a different approach than that proposed here. But Asian countries have fewer options relative to China: They are more dependent on and integrated with it, and Trump's 2017 rejection of the TPP left them without an anchor for managing economic relations with China. After Trump, and considering China's increasing assertiveness, Asian countries might go along with or even secretly hope the US and Europe reset relations with China.
In any event, Biden should have no illusions: China is too important to ignore, but the challenge it presents defies easy solutions. America and the world should brace themselves for the long haul.