THE TTALK QUOTES
On Global Trade & Investment
Published Three Times a Week By:
The Global Business Dialogue, Inc.
Washington, DC   Tel: 202-463-5074
Email: Comments@gbdinc.org
No. 5 of 2017
TUESDAY, JANUARY 31, 2017
Filed from Portland, Oregon

Click  here for the January 20 quote from the 2017 Inaugural Address. 
U.S.-CHINA TRADE: THE HARD BARGAIN

"On balance, trade with China benefits America. ... [W]e get value from the relationship. We just have to figure out how to get more value out of it."

Erin Ennis
January 27, 2017
CONTEXT
Last Friday, January 27, the Global Business Dialogue hosted an event at the National Press Club on the topic China Trade: 5 American Views. Erin Ennis, senior vice president at the U.S. China Business Council, led off the discussion. Today's featured quote weaves together an observation she made at the beginning of her remarks and the closing sentence. 
 
Those bookends had some heft to them. Ms. Ennis cited, for example, the facts that U.S. exports and investments in China supported some 2.6 million American jobs and added $216 billion to U.S. GDP in 2015. As for America's imports from China, they significantly lowered the cost of living for American shoppers, saving the average household about $850 in 2015. These and other figures she quoted can be found in a report the U.S.-China Business Council released earlier this year on Understanding the U.S.-China Trade Relationship. One statistic that caught our eye in that report was the assessment that "U.S. factories are still 90 percent more productive than Chinese manufacturers." Perhaps the most important, however, is the fact that China's middle class is now seen as larger than the entire population of the United States. In short, success in the Chinese market is critical to the long-term success of American business. 

Ms. Ennis had her concerns, however, a lot of them. And those concerns were not simply about the issues that bedevil any large trading relationship. They were concerns about the direction of China's policies. The hopeful moment was the fall of 2013, when a critical gathering of China's top leaders - the so-called Third Plenum - produced a document promising significant reforms. "Our analysis," she said, "and the experience of our companies that are doing business in the market is that, by and large, the reforms have not been implemented. And in some sectors, China has even become more restrictive, particularly in technology and cyber related sectors." 

The things that need to be done in China, at least from the perspective of American business, are not things the U.S. government can force China to do. They are things the Chinese will have to decide to do on their own and for their own reasons. That is not to say that Ms. Ennis didn't have some suggestions. She did. Here are a few of them. China could: 
  • Reduce the restriction on foreign ownership in China. (In many sectors, she said, China is quite open, with no restrictions but in autos, for example, and in many service areas restrictions apply.);
     
  • Make licensing requirements the same for foreign and domestic firms
     
  • More broadly, eliminate the distinction between Chinese and foreign companies;
     
  • Keep regulatory decisions non-political
     
  • Cooperate in bringing the WTO Environmental Goods Agreement to a Conclusion; and 
     
  • Address the issue of overcapacity in steel and other industries.
COMMENT
A Thought. For us, the essence of Ms. Ennis's presentation was captured in this short paragraph: 

"We could have a very different conversation about China and a U.S. campaign and the U.S. Administration's policies if we were all able to point to China and say, 'We've got problems. They should be buying more of our stuff. But in general our companies are being treated on an equal basis with the domestic companies.' That's simply not happening right now."

Moreover, although it was a solid, workmanlike, and essentially up-beat presentation, there was something disquieting about Ms. Ennis's remarks. That disquieting element is not hard to put your finger on. American business doesn't really know where Chinese commercial policy is headed, and the greater their reliance on the Chinese market, the more troubling that uncertainty is likely to become. (Obviously, U.S. policy too is fraught with unknowns, but we'll leave those for another day.)

And Resources. So much for our two cents. The more important point is that Ms. Ennis's presentation from last Friday is now available on-line. You can listen to it at Ennis Remarks
 
For that matter, all of the presentations from last Friday's GBD event are available as MP3 recordings on the Welcome page of the GBD website, www.gbdinc.org. That said, over the next several days, we expect to publish TTALK Quotes from each of last week's speakers.
SOURCES & LINKS
www.gbdinc.org takes you to the Welcome page for the Global Business Dialogue website. Here you will find a link to Ms. Ennis's January 17 presentation, together with similar links to the presentations of each of the other speakers at last Friday's event.

Understanding the U.S.-China Trade Relationship takes you to the page of the U.S.-China Business Council's website with information on this report.

Reform in China takes you an article from the Economist on the results of the Third Plenum.

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