(Bloomberg) -- Democratic presidential candidate Joe Biden is preparing to face tough questions in Tuesday’s debate on how he would approach China if he wins the White House in November.
His team is privately acknowledging that they expect the issue to be a focus during the first debate in Cleveland, Ohio, according to a person familiar with their planning. Over the past week, Biden advisers have honed in on questions about the world’s second largest economy – anticipating attacks from President Donald Trump on the former vice president’s record of dealing with Beijing.
If he beats Trump, Biden will need to decide whether to scrap, keep or escalate the billions in tariffs levied against Chinese imports, and whether to stick to or renegotiate the partial trade deal Trump signed in January.
He’d have to determine if his administration continues the sanctions imposed on Chinese officials for their crackdown on human rights in Hong Kong and the western region of Xinjiang and possibly expand those sanctions further.
Biden would also inherit a litany of restrictions to cut off Chinese technology companies’ access to American intellectual property and a patchwork of relationships across the region that could help, or complicate, tensions with China.
Priorities
Biden’s campaign advisers say they would prioritize domestic issues like investing in research and development and U.S. manufacturing to compete with Beijing from a position of strength -- and deal with international matters like trade later. But the multifaceted rivalry with China will be difficult to ignore, and senior policy advisers including longtime Biden hand Jake Sullivan and former deputy secretary of state Tony Blinken have already publicly conceded as much.
“China poses a growing challenge. It’s arguably the biggest challenge we face from another nation-state,” Blinken said last week at an event hosted by the U.S. Chamber of Commerce. “I don’t think the question is who’s tough or who’s weak on China. The question is who has the most effective strategy to protect and advance our security, our prosperity, our values.”
On the campaign trail to date, Biden has offered little detail on how he’d deal with China’s economic ascent -- perhaps to maintain maximum flexibility should he win the election. In some instances, he may have a hard time undoing existing policy. Both parties in Congress have overwhelmingly been in favor of tougher actions against Beijing on tech, human rights and trade.
Trump has touted his record on China frequently, boasting he’s the toughest president and the first to take on the Asian giant. The president’s campaign has produced multiple TV ads focusing on Biden’s past comments that China’s rise was good for the U.S.
By comparison, Biden’s ads have criticized Trump for downplaying the threat of the virus as it spread in China and for policies that allowed the Chinese nation to grow stronger.
Here’s a look at some of the key economic and trade issues related to China that’ll confront Biden if he takes the oath of office on Jan. 20 and what we have gleaned from his statements so far:
Phase One
The deal forged earlier this year has fallen short in one of Trump’s crucial selling points: China’s commitment to buy an extra $200 billion of American goods and services over two years. According to Bloomberg Economics, China so far has only purchased about half of what would be needed to stay on track to reach the annual target.
Full-year data for the trade flows will be public in February 2021 -- shortly after Biden would take office – and analysts expect those numbers to disappoint as well.
Biden has attacked Trump for praising the deal and prioritizing it over holding Beijing accountable for the coronavirus spread earlier this year. But his campaign hasn’t said whether he’d keep or nix the deal.
Biden would have to decide if he’d build on the agreement in a second phase or renegotiate the terms of the existing deal.
Asked about a potential phase-two agreement in a Biden administration, Blinken listed subsidies and cyber theft as some of the areas where Trump’s deal underperformed and said “we would have to come back and actually engage on the systemic issues that continue to pose a real problem when it comes to our commercial relationship with China.”
Tariffs
Biden could face some pushback if he unwinds the tariffs, which have bipartisan support in Congress as well. So far, he hasn’t committed one way or the other.
He says he’ll immediately review all of Trump’s trade actions and called the president’s approach to tariffs “short-sighted and destructive.”
“I will use tariffs when they are needed, but the difference between me and Trump is that I will have a strategy—a plan—to use those tariffs to win, not just to fake toughness,” Biden said in response to a questionnaire from the United Steelworkers union.
There’s widespread belief among China watchers that Biden will not remove existing tariffs -- at least not in the short-term.
“He’s going to be way more cautious on removing tariffs than people expect, because that’s money. That’s money coming in,” said Deborah Elms, executive director of the Asian Trade Centre in Singapore. “After they’ve been in place for a certain amount of time, the tariff revenue is baked into the budget, and you’d need to find an offset to account for that.”
Still, what to do on tariffs wouldn’t necessarily have to be a binary choice. Biden could decide to lower the duty rate for certain products or increase the amount of exclusions for industries that have been hurting.
Technology Race
Biden said he’d heavily invest in American R&D to counter China’s technological innovation and acknowledged that certain Chinese companies pose a national security risk to the U.S.
As president, he would have to decide whether to continue the Trump administration’s aggressive campaign against Chinese tech firms and inhibiting American companies from supplying them.
Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings, says “there’s a lot of uncertainty about the tactics” but the strategy of pushing back on Chinese technology will probably remain.
One thing the business community is hoping for: more adherence to the rule of law when it comes to actions on national security grounds, says Steven Okun, senior adviser for consulting firm McLarty Associates. Under the Trump administration, the definition of national security has expanded to capture areas like competition and human rights.
The Trump administration this month cited national security when it announced a ban on China’s WeChat and TikTok from U.S. app stores. A federal judge this week temporarily blocked the White House’s ban on TikTok, but the Commerce Department vowed to defend the underlying executive order from legal challenges. Separately -- to avoid a ban --Tiktok parent ByteDance is negotiating with Oracle Corp (NYSE:ORCL). and the U.S. government to take a stake in the Chinese company.
Blinken noted the Biden team would hone in on commercial cyber espionage after Beijing fell back on a 2015 agreement between Barack Obama and Chinese President Xi Jinping that laid out “very clear demands and specific consequences if China did not seize espionage against U.S. businesses.”
But “trying to fully decouple from China, as some have suggested, I think is unrealistic and ultimately counterproductive,” he said.
©2020 Bloomberg L.P.