THE EDGE SINGAPORE - The great lesson of the US presidential elections in 2016 is to never say never. Contrary to the prediction of most pollsters, Republican outsider Donald Trump narrowly defeated Democrat Hillary Clinton despite losing the popular vote. What has resulted since then has been nearly four years of twists and turns for businesses, as the Trump administration pursued a policy of protectionism and unilateralism. Trump withdrew the US from the Trans-Pacific Partnership and not just picked fights on trade, technology and politics against China, but also initiated trade disputes against US allies. 

But at the impending conclusion of these four years, it seems highly likely that the age of “fire and fury” may be drawing to a close. Former Vice President Joe Biden, officially designated the Democratic nominee on Aug 18 for the upcoming elections, is currently maintaining a 10-point opinion poll lead over the former reality television star. The New York Times reports Biden leading in the key battleground states such as Michigan, Pennsylvania and Wisconsin, traditionally “Blue” states that delivered the presidency to Trump in the electoral college in 2016. 

While Clinton had struggled to pull away from Trump in 2016, Biden’s commanding lead has seen pollsters hinting at the possibility of a Biden victory. “Right now, our model thinks Joe Biden is very likely to beat Donald Trump in the electoral college,” says The Economist, which sees an 88% chance of the Biden ticket prevailing with a likely 350 electoral college votes. Professor Allan Lichtman of American University, who has correctly predicted every presidential election since 1984, has now come out in favour of a Biden victory come November. 

Biden’s recent selection of former presidential candidate Kamala Harris as his running mate has been favourable so far for the ticket. Potentially the first woman of colour to take the vice-presidency, Biden’s VP pick won the approval of 51% of 1,107 registered voters in a YouGov snap poll. Data firm Morning Consult believes that Harris will likely help energise African-American voters, who recorded lower turnout in 2016. But UBS notes that she is unlikely to affect the poll result, even in spite of controversies over her criminal justice record as Attorney-General of California. 

Worse for Trump is the fact that he enters the election in a recession year, which has tended to see incumbents lose the presidency. Jimmy Carter and George HW Bush were swiftly rendered “one-term presidents” in 1998 and 1992 respectively when they contested in recession years. Barack Obama defeated John McCain in 2008 following the Global Financial Crisis, preventing the Republican Party from retaining control of the White House. 

So businesses should prepare for the likely scenario of a Biden presidency going forward. But how will Obama’s former “Number Two” in the White House deal with a more dangerous and uncertain world should he become the 46th President of the United States? 

Playing by the rules 

Perhaps the No. 1 question on the minds of business leaders is how Biden would deal with China should he come into office. Strategic competition between the US and China has grown increasingly tense following trade disputes and technological rivalry between the two powers, with some analysts going so far as to proclaim a “New Cold War”. Businesses are loath to forsake the large Chinese consumer market and hope that they will not have to choose between doing business with either of the world’s two largest economies. 

Conventional wisdom says that Biden’s more conventional approach to foreign policy and the higher tendency for dovishness within the Democratic Party will see Biden stabilise the US-China relationship. Eli Lee, head of investment strategy at the Bank of Singapore, views a Biden presidency as opening the door for a significant reduction in geopolitical risks going forward. In an interview with Lulu GarciaNavarro on the US’ National Public Radio on Aug 5, Biden hinted at a willingness to lift tariffs on China. 

Now, this does not suggest that Biden intends to go easy on China. On the contrary, he is competing with Trump to see who can be tougher on Beijing. Within the political landscape of Washington DC today, one of the only areas of bipartisan agreement between Democrats and Republicans is the need to get tough on China. Like the Republicans, the Democrats — especially within the labour unions — believe that China is stealing American jobs; they also deplore China’s controversial human rights record to a greater extent than the Republicans. 

“There is little prospect for a meaningful improvement in US-China relations under a Biden administration. The two countries would remain locked in a strategic competition for economic and technological dominance. The overarching nature of the conflict between the US and China would remain the same under Mr Biden as it has under Mr Trump; the view that the two countries are competitors, rather than partners, is now firmly held in both Beijing and Washington,” comments a report by the Economist Intelligence Unit (EIU). 

With China having few friends in Washington, says Eurasia Group senior adviser Robert Kaplan at the DBS Asia Insight Forum, Biden’s foreign policy team is also likely to be filled by “liberal hawks” who are increasingly taking a hard line against China. “The basic attitude of such experts is that they want to draw parameters around the US-China dispute and make clearly set rules. But within those parameters, they will be very tough,” he remarks. There will be no return to the pre-Trump US-China relationship, he warns.

“On most issues of consequence, there is simply no overlap between Xi’s vision for China’s rise and what the United States considers an acceptable future for Asia and the world beyond,” writes Ely Ratner, former Deputy National Security Advisor to Biden and one of Kaplan’s “liberal hawks”, in Foreign Affairs. The EIU report expects that Biden will take a tough stance on trade with Beijing as well as place greater emphasis on human rights issues in its dealings with China, widening the scope for conflict with Washington’s Asian rival. 

“This is a guy who is a thug who in fact has a million Uyghurs in reconstruction camps, that means concentration camps,” railed Biden at a Democratic primary debate in February, referring to the ethnic minority in China’s Xinjiang autonomous region. “We have got to make it clear — they [China] must play by the rules,” said Biden when asked if he would allow Chinese firms to build critical US infrastructure. 

The former VP struck a similar chord in a Foreign Affairs article in March, where he laid out his “manifesto” for US foreign policy. “If China has its way, it will keep robbing the United States and American companies of their technology and intellectual property. It will also keep using subsidies to give its state-owned enterprises an unfair advantage — and a leg-up on dominating the technologies and industries of the future,” he wrote. 

In light of this hostility, Kaplan sees a fault line between the US and China — with Russia relegated to an asterisk. With the concept of “globalisation” redefined, long-established supply chains are being fractured. As such, US businesses will have less incentives to be sympathetic to China, argues Kaplan. Fortunately, appetite for a “hot war” on both sides is extremely low, though Nick Marro, global trade lead at the EIU, warns that the potential for an accidental escalation remains high. 

Democratic Detente?

The silver lining for businesses is that Biden is unlikely to emulate Trump’s unilateralism when engaging Beijing. EIU sees him moving instead towards a more pragmatic approach to US-China relations. He will strengthen US economic power while also exercising global leadership with allies in Europe and Asia Pacific to curb Beijing’s excesses. With bilateral ties likely to be somewhat less fraught as a result, UBS chief investment office expects an improvement in market sentiment — especially in Asia Pacific. 

“The most effective way to meet that challenge is to build a united front of US allies and partners to confront China’s abusive behaviours and human rights violations, even as we seek to cooperate with Beijing on issues where our interests converge, such as climate change, non-proliferation and global health security,” notes Biden in Foreign Affairs. He thinks such a coalition would control half the global economy, allowing the US to enforce standards in areas such as labour, trade and technology amid possible resistance from Beijing. 

Possible Biden appointees seem to agree. “The most consequential thing the United States can do is to invest in the drivers of competitiveness at home — especially as it emerges from the current crisis,” says former US Under Secretary of Defense for Policy Michele Flournoy, a possible Defense Secretary pick. She has notably also called for high-level strategic dialogue to be sustained with Beijing despite growing strategic competition. 

EIU, therefore, expects the Biden administration to relax its use of tariffs to settle trade disputes with China. He is instead likely to take a firm stance on China in other respects, focusing on non-tariff measures designed to strengthen the US domestic economy instead. He has promised to undertake a regular review of supply chains to ensure self-sufficiency in terms of key supplies such as medical equipment, industrial metals and high-tech manufacturing. Biden’s promise of US$700 billion ($959 billion) in government R&D research for firms may also prove to be a sweetener to encourage businesses to reshore their production back to the US from China. 

Biden has also vowed to pursue “aggressive trade enforcement action” against unfair trade practices, such as IP theft. The US government and firms are seen to enlist allies and partners as they seek legal recourse for alleged Chinese trade abuses. This collaborative approach may extend to human rights as well; EIU’s Marro sees Biden supporting recent attempts to punish US firms with supply chain exposure to Xinjiang and that he could ask US allies to follow suit. 

That’s why some Chinese officials prefer a Trump victory in November, fearing that Biden’s coalition-building could further deepen China’s diplomatic isolation. But should the Democrats win the White House in November, Wu Tianjun, China economist with the EIU, believes that the end of Trump’s “twitter diplomacy” could see both powers moving away from polarising verbal jousting to a more constructive diplomatic dialogue. He predicts that the business community of both countries will be the conduit from which ties will be rebuilt. 

Nevertheless, Marro warns that the multifaceted nature of the US-China strategic rivalry could see tensions in other areas increasingly spill over into the trade realm. Trade could become a bargaining chip or casualty from geopolitical tensions duked over familiar fronts such as the South China Sea, cybersecurity and human rights. Political risks for businesses are likely to remain high even if a more moderate administration is elected. 

But perhaps the greatest unresolved area of contention is the ideological conflict between the two great powers, with Biden seeing the US as a bastion of liberty against an authoritarian China. He encapsulates this view in the conclusion of his Foreign Affairs manifesto: “We must once more ... rally the free world to meet the challenges facing the world today ... No other nation is built on that idea. We have to champion liberty and democracy, reclaim our credibility, and look with unrelenting optimism and determination toward our future.” 

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