Eric Emerson is a partner at the law firm of Steptoe & Johnson LLP and heads Steptoe's international trade and investment group. Where China is concerned, he is both a storehouse of knowledge on the policies and sensitive to the perspectives of the different players. That is not surprising. For five years, Mr. Emerson managed Steptoe's office in Beijing. On April 25 he served as the moderator for the GBD program:
Searching for Reciprocity
SECTION 301 AND THE FUTURE OF U.S.-CHINA TRADE
Eric Emerson at GBD
We are not in the habit of rating or evaluating the performances of those who volunteer to moderate GBD events. One reason for that is that at different times, we ask different moderators to do different things. We would note, however, that on April 25th Mr. Emerson conducted that office with a light touch. Light but illuminating. In his opening remarks he put the issues in clear perspective. Those issues, of course, are China's rough tactics for acquiring U.S. intellectual property on the one hand and the threats of tariff retaliations on the other, and all of them are bound up in the 301 investigation that USTR initiated last August and the report USTR published on March 22nd.
In the hierarchy of trade issues, Mr. Emerson said those in the China 301 case are the top. He said:
Of all the critical issues that we're facing right now, this is perhaps the most important. [It is] the one that has the potential to have the most significant ramifications on U.S. trade policy and, obviously, on the U.S. economy.
After all five speakers had made their presentations - all excellent - and it was time for Q&A, Mr. Emerson, as is customary, asked the first question. The essence of that question is today's featured quote. The reasoning behind it gives the question a special force. Here is a longer version of Mr. Emerson's question:
Before I open it up to the floor for questions, I'd like to take the moderator's prerogative to ask the first one, if I could, and then I'd love to be able to hear from the audience.
Erin [Ennis], you mentioned that USCBC [the US-China Business Council] has come up with some specific, ambitious, measurable and commercially meaningful goals, negotiating goals that we could have. But I think really, to one of Josh's [Kallmer's] points, he used the phrase, "change behavior." We need to change China's behavior. And I assume that what that means is change their behavior in a way to move towards some of the goals that you have articulated in your testimony.
I guess my question for the panel is, how do we do that? Because it seems to me, based on my experience there [in China] and afterwards-it seems to me that from China's perspective, they think they're doing pretty well. When they look at something like the Made in China 2025 plan and the 10 industries that they are supporting; when they are looking at their SOEs [state-owned enterprises], which certainly have problems, but they are trying to get them ...
You know when we hear SOE reform, we sort of thought at first "Oh, Happy Day." That means privatization. That means market-driven companies - at least maybe I did. It means something very different [to the Chinese]. It means making them stronger. It means making them more powerful competitors on the global stage, and they seem to be moving in that direction. Localizing and nationalizing things like, you know, cloud computing under the cyber-security area.
So, I think from their perspective, they think they are on the right track. And they are doing well. The economy's doing reasonably well. It certainly has its internal problems, and that's not stuff that we're really talking about here. So, how can we change their behavior to move toward these goals that USCBC has articulated, to show them that that path is better than the one that they are on right now?
Certainly, you know, USTR and this Administration is taking one path by saying well, you know, down that path lies pain. Pain in terms of trade restrictions for the United States and so forth. So that's maybe one approach, but, you know, the panel I think is generally, with some exceptions perhaps, sort of opposed to that as a method. You know, can we engage in this cooperative negotiation rather than put in place these punitive tariffs? Fair enough, but then what is the carrot that we have?
And it was Erin Ennis of the US-China Business Council who responded. She didn't provide the magic carrot. Rather she emphasized the importance of clear metrics for determining whether in one area or another a change in China's behavior that may have been promised has in fact occurred.
