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FRIDAY, OCTOBER 12, 2018
Click HERE for Wednesday's USMCA quote from President Trump.
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CHINA AND AMERICAN POLICY
"I think it's important that we all remember that, had Secretary Clinton won, there would have been a course correction."
Jeremie Waterman
September 26, 2018
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Jeremie Waterman has been working on China, and in particular the China trade issues, for a long time. He knows them well, and that knowledge came through clearly in the candid and balanced talk he gave at last month's GBD Gavel Day lunch. (Gavel Day refers to the passing of the chairman's gavel from one year's chairman of the GBD Board of Advisers to the next.)
A former executive at the U.S.-China Business Council, Mr. Waterman is today the President of the China Center and Vice President for Greater China at the U.S. Chamber of Commerce. When he spoke at the GBD lunchtime conference on September 26, he had just returned from China, and he told the audience that, for the Chinese, containment, that is an effort by the United States and others to contain China, was the dominant narrative in China. It is their explanation for today's tough policies on both sides. That is not how Mr. Waterman sees the situation, as he made clear in this passage in his remarks:
I think if a Chinese official or Chinese scholar was sitting next to me he'd say, "Well, isn't this containment in fact?" And I would say, "No, this is not containment at all."
Rather, Mr. Waterman said, what China is seeing is pushback from the United States and others against certain Chinese policies and "China isn't appreciating the pushback." Those comments, which came near the end of his remarks, led to a peroration of sorts, and we'll get back to that in a moment. First, however, it is worth highlighting some of the historical ground Mr. Waterman covered in the build up to his concluding remarks.
CHINA AND THE WTO
China's accession to the WTO in 2001 is the logical starting point, and Mr. Waterman is clearly not among those who see that development - and America's encouragement and facilitation of it - as a large-scale error. To the contrary, he recalled the enthusiasm associated with bringing an economy of 1.4 billion people firmly into the global trading system. And on the Chinese side, he said, "they were committed to - not necessarily looking like us - but to moving forward with real market-based reforms."
And reforms were forthcoming. Mr. Waterman put it this way:
Business the world over, governments the world over, thought it made sense [for China to join the WTO]. And in fact, it did. Many of the benefits that continue to accrue to American and other foreign companies to this day are derivative of the reforms that China made, in particular, from 2001 to 2006: increased transparency, increased market access, a lot of sector-specific ... openings that were very, very positive and continue to reverberate to this day.
DISAPPOINTMENTS AND FRUSTRATIONS
But this is 2018, and we have also had years of frustration and disappointments in trade and in other areas as well. We have reached a point where, in Mr. Waterman's words, "Trust has been drained out on the U.S. side." In that connection, he noted that the issue of currency manipulation dates back to 2004, and he cited commitments made by China's leader during the Obama Administration. "Xi Jinping came to the [White House] Rose Garden in 2015. He promised ... no militarization of the South China Sea. [He said] we're going to treat [America's] ICT companies fairly."
And those disappointments were not the sum total of problematic Chinese policies, either for American business leaders or U.S. Government officials. Mr. Waterman explained:
As Xi Jingping took over, we really saw China stepping on the gas, I think, away from the market economy, unfortunately. Today, it's not just about the State Council or state-owned enterprises. It's really about the party. That's something that perhaps isn't understood enough. ... China has a hybrid economy today; it's not just about state-owned enterprises or private enterprises ... . It's a party influenced, party led economy in many respects.
NO TO TARIFFS BUT...
Therein lies the challenge for the United States and indeed for the world. And while Mr. Waterman was clear that some change was inevitable, he was equally clear that for the Chamber and U.S. business write large, the tariffs the Trump Administration has imposed are the wrong way to go. (Indeed, the Chamber has a website on the issue, www.thewrongapproach.com.) In one elaboration of that thought, Mr. Waterman said, "Obviously, the tariffs are highly counterproductive and something that, across the business community, we're agitating against."
Peroration is a big word for what would best be described as quiet - quiet but candid - talk among friends. And yet it is apt. After rejecting the notion of containment in favor of simply pushback, Mr. Waterman concluded:
I think, again, overall, certainly the [U.S.] business community is very open to and embraces competition, and I think so does the country writ large. I don't think our history-. I don't think we have any problem buying foreign products. I don't think we have ... any issues buying a better product from somewhere else. It's really a question of "How" - how China is competing. What are the rules?
And we have some real issues there, and hopefully China will move forward with the reforms, the long-promised reforms, long stalled reform... that it has promised to do, because they're in China's interest. Unfortunately, what we're seeing when we look at standards and competition policy and security policy, cyber security, we're seeing a China that's moving...data policy...we're seeing a China that's moving not toward greater integration, but toward closing, unfortunately.
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If there is a bright line that divides fiction from non-fiction, it is the alternative history. We can never know whether Mr. Waterman was right in saying that a President Clinton would also have chartered a new course towards China. And yet we believe him. We think he was right, and that his speculation was well grounded in the speeches Mrs. Clinton gave as Secretary and in other developments.
As for the tariffs, there is no doubt that they have inflicted pain which - judged simply by itself - any rational person would wish to have avoided. But that is not the issue. For the United States, the more fundamental questions are: what would have been the long-term consequences of maintaining the status quo in the U.S. commercial relationship with China? And will the current tough policies - tough on the U.S. as well as China - lead to any significant improvement?
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Mr. Waterman began his presentation on September 26 saying, "I really don't have the answers here. I don't think anyone does." It is striking that so many seem acutely aware that they do not have the answers or that they are not confident of the ones they have. We could all name dozens of issues where members of Congress are lined up like opposing football teams, each set in his or her own purpose, whether to take tackle or score. But China is different. Yes, the questioning is sharp, but the pronouncements are often hedged. People know there is a problem, but they don't know what the solution is.
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RELATED EVENT - OCTOBER 17, 2018
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The China component of American trade policy has a special relevance to the topic of GBD's next event, which is on WTO Reform. The link will take you to the announcement for this session, which will be held from 3:30 to 5 PM on Wednesday, October 17, 2018. The same announcement includes the list of speakers and registration options.
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Waterman on Gavel Day is a link to our transcript of Jeremie Waterman's remarks at GBD "Gavel Day & Look Ahead" conference on September 26, 20018. This was the source of today's quotes.
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©2018 The Global Business Dialogue, Inc.
1717 Pennsylvania Ave., NW, Suite 1025
Washington, DC 20006
Tel: (202) 463-5074
R. K. Morris, Editor
Joanne Thornton, Associate Editor
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