THE TTALK QUOTES 

On Global Trade & Investment
Published By:
The Global Business Dialogue, Inc.
Washington, DC  Tel: 202-559-9316
 
No. 76 of 2019
THURSDAY, NOVEMBER 21, 20219

Click HERE for Tuesday's quote from Daniel Patrick Moynihan.
THE CHINA CHALLENGE AND RESPONSES

 "At the heart of this trade dispute is the fact that we live in an integrated global economy with deeply connected, multicontinental supply chains."

Rep. French Hill (R-Arkansas)
October 16, 2019
CONTEXT
Rep. French Hill is in his second term as the Congressman from Arkansas’s Second Congressional District. A banker from Little Rock, Mr. Hill served in the administration of George H.W. Bush as executive secretary to the Economic Policy Council and later in the Treasury Department as deputy assistant secretary for corporate finance. On Wednesday, October 16, he chronicled from the House floor America’s decades of frustration with China and Chinese economic policies. In doing so, he praised President Trump for confronting China more directly and more forcefully than his predecessors but criticized the president for the trade fights he has picked with others, fights which, in Mr. Hill’s view, have weakened America’s ability build an effective coalition against China’s violative and corrosive policies on trade and investment. 

After cataloguing the America’s losses from China’s theft of U.S. intellectual property, among other things, Congressman Hill said,

Despite encouragement and best intentions, China has not changed, Mr. Speaker, but, instead, has grown more aggressive; hence, the challenge of one world, two systems is market-based capitalism versus state-controlled communism. They are not compatible when it comes to this complex global market I described.

Having noted, for example, that “ President Clinton threatened to impose 100 percent tariffs on selected imports” if Beijing failed to enforce provisions of an agreement on intellectual property, but to no effect, Mr. Hill praised President Trump’s more muscular approach, but with a catch. As he put it:

The President’s success in this endeavor may well be diluted by the opening up of trade disputes all over the world simultaneously, including disputes with America’s allies.

He went on to reference the administration’s reopening of different agreements and the 232 tariffs on steel and aluminum. As for what might have been, or might be, achieved in the absence of these non-China related U.S. trade actions, Mr. Hill said: 

In my view, the President would be more successful if he focused on this Chinese challenge and rallied the world to a common purpose of focusing on China on that important point to clearly understand the consequences of non-compliance. We have done many things in this country that are improving that relationship and fighting, but we must have full global support in order, I think and believe, to ultimately lever China into compliance.
COMMENT
You editor does not expect to outlive any of the issues raised here. We do expect to return to them again and again in the weeks, months, and years ahead. Here we shall limit ourselves to three observations and one curmudgeonly remark.

Hong Kong. The Challenge of “One World, Two System,” grows ever more acute, especially now. The phrase itself, of course, is an allusion to what China promised the arrangement with Hong Kong would be, namely, “one country, two systems.” That does not appear to be working out, and legislation expressing Congress’s strong views on the developments in Hong Kong is headed to President Trump’s desk. This is The Hong Kong Human Rights and Democracy Act of 2019 (S. 1838). It passed the Senate on Tuesday, November 19, by unanimous consent. The House approved it yesterday, 417 to 1.  President Trump is expected to sign it. If and when he does, there will be more than a small rhetorical storm across the Pacific as Beijing expresses its outrage. That’s the first observation. 

Supply Chains . The second has to do with supply chains. The role of supply chains in the U.S.-China relationship does not really loom that large in Congressman Hill’s floor statement from the 16th of October. But he did mention supply chains at the beginning. We made that sentence today’s featured quote because China’s role in U.S. company supply chains – as well as those of other countries – is one of the two enormous economic factors that must be considered in connection with almost anything the United States does vis-à-vis China. 

China’s Market. The third is the sheer size of the Chinese market, which for many products and sectors – cars, cotton, and coal, to name but three – is the world’s largest.

The Curmudgeon on Allies.  Our curmudgeonly comment has to do with the term “allies.” We think it is used way too often and too loosely, especially in the economic sphere. Almost every country in the world votes against the United States on issues important to the U.S. in the U.N. Perhaps those votes are meaningless. But the concrete world of buyers and sellers certainly is not. For several U.S. allies, China is their most important customer. Australia, China, and South Korea are all in that category. And then, of course, there is the issue of divergence by issue. Today’s Morning Trade from Politico, for example, includes the headline “EU looks to China on Appellate Body Crisis.”  Yes there are points of agreement between the United States and countries allied with the United States in NATO, ANZUS, or other agreement, but it is a mistake to think of those countries as allies on trade. Where trade is concerned, those who wish to work together need to do so issue by issue and with a clear understanding that there are limits to any such cooperation. Most of the countries involved in such joint efforts are democracies. That means that they are constantly pulled in different direction by their interests, by events, and by elections.    
SOURCES & LINKS
One World, Two Systems takes you to the pages from the Congressional Record for October 16, 2019, with Representative French Hill’s statement on China policy. This was the source for today’s featured quote 

Hong Kong Legislation is a link to the Library of Congress page with details on the Hong Kong Human Rights and Democracy Act of 2.

Morning Trade , November 21 is link to today’s issue of this valuable publication.
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