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What the new US president means for global trade conflicts and why the Chinese in particular should fear him, says economist Gabriel Felbermayr in an interview with tagesschau.de.
tagesschau.de: Joe Biden’s Victory in the US Elections: Will It Help the World Economy?
Gabriel Felbermayr: Definitely yes. Because you can negotiate with Joe Biden and find solutions to the urgent problems we have. That was nearly impossible with its predecessor. So clearly: this is the best option for the global economy.
tagesschau.de: If the EU imposes new punitive tariffs on American goods immediately after Biden’s election, doesn’t that show that the old conflicts will remain for the time being? The dispute over subsidies for Airbus and Boeing has not been resolved.
Felbermayr: Absolutely. These are very tangible economic differences. The United States can impose punitive tariffs on Europe in the amount of 7.5 billion euros, Europe now the United States for four billion dollars. There is a lot going on in the aviation industry, so Europe has to bargain hard with the Biden administration. But the big difference is that now there is the possibility of negotiation. And I believe that both parties will at least endeavor to find a solution.
tagesschau.de: How could it be seen?
Felbermayr: WTO decisions can be read in such a way that Europeans paid more illegal subsidies to Airbus than Americans paid to Boeing. So Europe would have to give more than the United States. I imagine that in the end the Americans will lower their punitive tariffs and the Europeans will renounce them entirely, so that the WTO ruling is implemented in the dispute. Then we will have to talk to Americans in more detail about how we at the World Trade Organization intend to address subsidies in the future.
tagesschau.de: Especially in the dispute with China, Trump has always followed a very hard line. Will it be different with Biden?
Felbermayr: I think a government under Biden will be just as tough on this. His concern is to protect the industry in the United States, to protect jobs. Joe Biden is also a thorn in the side of America’s major trade deficits with China. But presumably it will proceed very differently. It should look for allies, certainly in Europe, but also in Asia, Japan, Korea and elsewhere. For China, things could be more difficult in the end. Under Trump, China was able to offset trade with the United States elsewhere. If Biden forms a coalition, the Chinese have fewer options.
Engagement Specialist
Tagesschau by: Where will Biden make the biggest impact on economic policy?
Felbermayr: The clearest difference with Trump is in climate policy. It’s ambitious that Biden wants to make America climate neutral by 2050. On health policy, too, he could be able to push through Barack Obama’s reforms and help more Americans get health insurance coverage. Biden also has big plans for transportation infrastructure, which he wants to renovate. This is perhaps the fastest way to achieve success.
tagesschau.de: But what can you do without a majority in the Senate?
Felbermayr: The president of the United States can make a difference even without Congress, for example, in trade relations or foreign policy. Sure, a Republican majority in Congress would delay it. However, you are the right candidate for this situation. Biden has shown time and again in the past that he can seek and find compromises.
tagesschau.de: One of your first official acts could be for the United States to rejoin the Paris Agreement. Would that be a breakthrough for international climate policy?
Felbermayr: That would be important as a symbol and encouraging for Europeans. But that doesn’t mean much in concrete terms. We know that the promises made in Paris are not enough. We need a concrete and ambitious American climate policy, and it will be difficult for Biden to implement it. There is a massive and well-founded resistance. Unlike Europe, Americans have large reserves of oil and natural gas that represent economic interests. However, it is very important that Europeans once again have an ally in climate policy.
Labor market boom
tagesschau.de: If more than 70 million people voted for Trump in the election, how much does that have to do with the economy?
Felbermayr: Economics probably played a very important role. Above all, they seem to have strongly influenced groups of voters who are actually attributed to Democrats. The good election results for Latinos or Blacks could be due to the fact that the job market flourished in the Trump years. Wages have risen significantly, especially for low earners. And that has obviously paid off for Trump in some states like Florida or Texas, even if the foundation for it was laid under Barack Obama.
tagesschau.deIn the run-up to the elections there was a lot of controversy over the second stimulus package, Trump broke up negotiations on it. What happens now?
Felbermayr: The way Donald Trump is currently acting, we can’t expect this stimulus package to arrive in the next few weeks. This means that in this critical phase no new boost from the United States can be expected for the US economy and the global economy. This is not OK.
The vaccine accelerates recovery
tagesschau.de: What do you expect now from the global economy?
Felbermayr: That depends a lot on how the infection process develops. A few weeks ago we were still quite optimistic about the fourth quarter. We saw growth of two percent for Germany. Now I think we will end up in black numbers. But that is also associated with a high level of uncertainty. In the world economy, however, with the great exception of China, many emerging countries have significant problems, such as India or the states of Latin America. The second crown wave will also leave its mark on the euro zone. The economic recovery is taking a long time, we have to adapt. We will probably only reach pre-crisis levels in the fourth quarter of next year. Or even early 2022. If a vaccine arrives, from an economic point of view, it would significantly accelerate the recovery in the next year.
The interview was conducted by Philipp Jaklin, tagesschau.de.
