The Future of the U.S. & China - Yukon Huang & Evan Medeiros

we continue on in our conversation about China with two guests joining us Evan Medeiros is the Asia managing director for the Eurasia group we are also joined by UConn Huang of the Carnegie Endowment for international peace he serves as their senior fellow for the Asia program to both of you gentlemen thanks for joining us morning I'll ask you the same question we started the previous segment how do you gauge current relationships between the United States and China well in some ways it's not so bad because you have some discussions it hasn't collapsed you had the 100-day plan they try to forge a meaningful relationship on trade issues but then when you think about what's been happening in the last month three proposals punitive tariffs solar energy products all over and steel and potentially something relating to unforced transfers IPR violations the section 301 of the Trade Act and you see punitive tariffs not being levied in both sides so you see a lot of people talking about trade Wars and the question will be well let's continue can he resolve it on top of that he had the political consideration that's going on you have North Korea if questions about Taiwan you talking about the South China Sea you put these trade worries along with these potential political factors and you're asking yourself are we seeing a potential downhill slide in us-china relations mr. Medeiros how would you assess that from a historical perspective the us-china relationship has been always defined by cycles of good relations and bad relations but I think we're entering into a different phase right now in other words I think we're entering into a phase where the relationship is going to be defined more by competition and disagreement than by cooperation and that's largely a function of the fact that the traditional areas of cooperation like the economic relationship are emerging is far more competitive and UConn did a nice job of outlining where we are in trade and then on security issues it's becoming much more competitive earlier this year the Trump administration released the national security strategy the national defense strategy they publicly identified China as a strategic competitor they talked about China as a revisionist state they grouped China and Russia together so I would say that generally speaking US view about the security challenge and the military challenge by China our hardening so even though the relationship has always been up and down I think the trend line is definitely more towards a more competitive relationship and one in which our interests are diverging more than they converge and so then when those as far as those interests what's best to pursue between the two countries aside from economics and the things you laid out what's the thing that we should be focusing on well right now outside of economics there are a variety of global issues where US interests in Chinese interests converge and those are interests like on climate change reducing emissions of greenhouse gases issues like Public Health solving regional security issues like North Korea's nuclear program and Iran's nuclear program but even on those issues US and Chinese interests don't perfectly overlap and there is underlying all of that there's deep suspicion on both sides about each other's long-term strategic intentions so even on those issues we have to be aware of suspicions distrust and competition well mister Wong what about this idea of suspicions and distrust between the two countries well if you look at from economic angle you have the potential for a very positive relationship China is becoming a outward investor may be hurt be in dollars a year starting from nothing five or six years ago the questioned world will go could go to the United States decoded year we go to the developing countries China has three or four million people largely middle-class consumption market they are increasing looking for services and the u.s. is the strongest in terms of services that's an area of collaboration a u.s. see Congress doing very very well it's growing at two or three percent coming back from the recession China's slowdown has stabilized the moderators potentially gear to potentially even stay at a fairly high level for the foreseeable future if you do it right economically this potential win-win unfortunately the trade war makes us focus upon the problems rather than the potential so we'll talk about these and other topics with our guests until the end of this program if you want to ask them questions Republicans 202 seven four eight eight thousand one Democrats 202 semper 8 8,000 and independence 202 seven four eight eight thousand - mr. Wang though even though as you say that some of the concerns from the United States perspective is say we'll look at the trade deficit look out the imports and exports and look how much we're losing alpha many in this administration has said as much what about that argument and is there validity to that well everyone's focusing on the trade deficit particularly the bilateral trade deficit between the US and China as the problem and I would point out in fact that's the wrong thing to look at America's had a trade deficit for 40 straight years way before China became an economic power so the idea that China is causing America's trade promises is the wrong one America's trade deficit really surged in the late 90s it became really big by around 2000 three or four during that period try didn't run significant surpluses so it's not actually a relationship but he people thinks there is now why does it show up nowadays as a China issue it's probably because in Asia we had this production sharing Network parts and components Britain Japan South Korea Taiwan Singapore Malaysia those parts go to China they're similar into finished products then exported to the United States so that iPhone very popular here in United States so it's $800 iPhone only $8 of that actually stays in China 200-300 dollars of that in parts and components come from other countries and the largest share $400 a profits goes to Apple so what we think is a trade problem with China is actually a trade relationship with the world so he comments tend to say don't look at bilateral deficit look at a multi ler aspect and within that you see that there are many more complex relationships it's not really a China problem US trade deficit problem as he comments would argue is really a question about savings that America is a neck a deficit country in terms of savings because of budget deficits because households don't save enough and when that happens you will always have a trade deficit mr. Matthias I should also mention besides your current work you were the former White House senior director for Asian affairs at the National Security about counsel at the Obama administration but talk about security issues is connection between financial issues like miss Huang was talking about and security issues are there concerns from that aspect that we should pay attention to well the the area in which economics and security converge in the us-china relationship is in the area of perceptions basically do American policymakers do American business leaders American consumers see China has an opportunity or see China as a threat and my concern is that as the Chinese economy has developed the Chinese see themselves as a developing country and tend to protect certain sectors like a developing country you con rightly talked about the services sector in China which is burgeoning it's potentially a huge opportunity for American businesses especially as the Chinese middle class grows and American businesses want to sell into that market but the problem is is the Chinese government protects that market in a way that caps the degree of foreign involvement financial services health care transportation logistics so American businesses can't benefit from that market and so what that does is it creates the impression that the Chinese are sort of using the power that the government has over the marketplace in China as a way to restrict foreign involvement and that creates the sense in Washington that China is not playing by a fair set of rules that the playing field is not level and then there's you add on top of that issues of Chinese protection of intellectual property that if you're an American company and you come up with a product innovation or a process innovation that if you want to sell it in China that you're at risk of losing some of that key technology because your Chinese partner may steal it from you and that's really important in a world in which some of America's greatest innovations are in the high-tech space whether it's cloud computing or semiconductors and there's been a lot of instances of IP theft the US Trade Representative office just released a report two weeks ago saying that there's been for the last 10 years about 50 billion in theft from US companies so that just sort of feed the impression among business leaders policymakers consumers in the United States that China is emerging at China as a rising power is emerging as both an economic threat and a security threat what about those perceptions did you buy it I have it is corrected there's a sense of unfairness here that the foreign companies develop technologies not being protected it's it's basically taken over by Chinese companies and this is not equitable but we also have to realize that growth and efficiency is based upon the concept of competition technology and transfer when we talk about us strength as a technological innovative economy ideas develop the various companies competition allows those ideas to be transferred and proved if it only stays with one company you'd have a monopoly we never work so technological innovation has always been based on the concept that ultimately drives everyone to be better it is ultimately shared and sometimes shared within the country but it also needs to be shared across countries because that's how poor countries grow they grow because their ability to produce more advanced products has increased the question is where that sheridan's is done equitably and fairly and I think this is a legitimate concern there aspects of that process in China which actually needs to be addressed and corrected in order to make this a more transparent and better process we have calls lined up for both of you so I will take our first one from Danny Danny is in Silver Spring Maryland Republican line you're on with our guest Danny good morning go ahead good morning a couple points automobiles what is in China make an automobile and sell it to America and do they buy a lot of our cars number two world with Taiwan who win and number three why is the president president of China afraid of we need approval thank you let's start with economics is there is there a factors the automobile that he brought up well the automobile is interesting area because Chinese really just got into the automobile sector within the last ten years or so in terms of trying to produce in some way so they do have high tariffs protecting domestic industries so whether Japanese manufacturers or European or even US they often enter into joint ventures with Chinese companies in order to flourish now in some ways what you see is a good process developing in China take General Motors suffering a great deal during the financial crisis almost went bankrupt General Motors production of cars in China essentially generated the bulk of General Motors profits allowing it to survive over the last four or five years automobiles have been the fifth largest category of exports to China it's really significant from nothing practically now the interesting thing is what are these automobiles being produced in America export to China it turns out that they are Mercedes Jaguars BMW SUVs okay but they're produced here because those luxury SUVs are manufactured in the US and exported globally and very large sure goes to China now triad is not yet competitive enough to produce on its own an automobile which is what I would call attractive in the US and Europe they would like to so I also see this as a source of tension a few years just like South Korea was an issue but Hyundai be competitive 15 years ago you would say I don't think they're gonna make us how can they compete with the whole area of the cars well today of course is quite competitive so it's both a what I call opportunity but also competition is also gonna increase tensions mr. Medeiros he also brought up Taiwan and that call could you set the stage as far as concerns of China over Taiwan especially into how the United States plays into that yes a day any great question about Taiwan who wins in a war over Taiwan nobody wins everybody is going to lose because from the Chinese perspective the Chinese see Taiwan is core to the legitimacy of the Communist Party so if war starts over Taiwan it's going to be essential that the Chinese devote a lot of energy and resources and it'll get really bad really fast similarly for the United States the US will have to decide what are we going to do are we going to defend Taiwan are we gonna live live up to pledges under the Taiwan Relations Act and the the problem for the United States is that its involvement in Taiwan will be seen as a litmus test for its broader credibility to its allies and partners throughout Asia so everybody's going to lose in over Taiwan why is Xi Jinping scared winnie-the-pooh I don't know when he looks Winnie the Pooh has always been cute and cuddly to me Republican line Chester Virginia mark go ahead good morning Pedro I'd like to ask your guest a question about what would be the positive or negative of mirror tariffs I know that as an example of China charges us 20% on sugar imports them but we only charge them five vote me the positive negatives of our country putting mirror americares on all the countries that we do business with thank you very much German you can talk about if this is a long-term strategy for both countries as a continual tariffs or do you see this as a short-term strategy you mean the tariff is a terrorism I see it as a short-term strategy that what the United States is trying to do is create a greater degree of reciprocity in the relationship in other words America wants access to the Chinese market like China has in the United States and as you Khan said it's not a level playing field depending on what sector you look at and so what the United States is trying to do through both the threat of tariffs as well as the threat of reducing Chinese investment access to the United States is create a more level playing field traditionally the United States has struggled with this because the u.s. doesn't really have a lot of good tools to do it to doing so because the United States has benefited from being such an open market but because of the playing field has become so tilted in in China's advantage I think that that's why the administration is taking these actions which arguably may not even be consistent with American commitments under the World Trade Organization but they feel that it's necessary in order to solve this problem mr. Huang well I living of tariffs higher tariffs is better everybody hits consumers at both ends so when America raises the tariffs on steel and aluminum US companies which produce steel loom products have to pay more and the numbers of people in those industries vastly exceed the people producing raw steel the consequences American consumers have to pay more for their products China and Levy's tariffs higher tariffs on pork or nuts or alcohol on imports from the United States increases the prices these colonies for Chinese so tariffs like good for anyone now are China's tariffs exceptionally distorted or high in some global standard the answer's no the US and Europe have the lowest tariff weighted tariff structures in the world somewhere averaging around three to four percent China's is around somewhere like six to seven to eight percent higher but for a country whose per-capita income is around 70th in the world its tariffs are actually relatively low by developing country standards what makes China different therefore it's not as a tariff structure it's the fact that this is a big country so when you're such a big country and you're very competitive any deviation in terms of tariff is seeing is bad would you compare China's Terr structure for example in South Korea which is much richer China's tariffs are much lower than South Korea's response are what I would say is the the thing that's unique about China that Yukon is highlighting is the fact that China is at once a developing country per capita income at about 8,500 but on the other hand it's such a large economy second largest economy in the world it's pretty rapidly growing that it sort of has attributes of both developed and developing economy and it's able to sort of throw around its market weight in ways that distort the global economy that if it was you know South Korea or Malaysia wouldn't generate that kind of reaction so China sort of is it's the fact that China has these dual identities as an economy that's creating all this friction from Hammond Indiana Jim is next hi hi good morning gentlemen first of all you guys have hit on some points I was going to talk about but with President Trump saying that he is more he's really concerned about the trade deficit I think that's a little bit of red meat for the base I think he's more concerned about the the technology the technology that's being stolen second of all I think a lot of this started in 99 when the Clinton administration sold missile technologies and vanillite technology and Snover supercomputers to China at that point thank you mr. Huang well first of all I realize that technological innovation is never a advantage that stays permanent with any firm with any country it goes over it shifts over time if you go back and historically of course America developed on the last couple hundred years because it borrowed technology from Germany borrowed from the United of the kingdom it goes back and forth technology is not static now when we talk about technological innovation no one complains we see technological innovation as as strength and to be encouraged but technological innovation like trade has social consequences it can lead to lost jobs they can displace activities but we accept it in terms of innovation because if you ask to the United States encourage technological innovation the answer security yes but trade has the same issue it promotes more efficiency it promotes technology transfers but the difference is involves people in other countries that's why it makes it politically more sensitive the question for both whether you're concerned about trade or technology is how can countries protect or cushion some of the social consequences and these are more serious in some ways with free trade it's more seriously experienced so big so it's footprint in terms of activities affects the world mr. materials I think Jim makes a really important point about distinguishing between the trade deficit is the threat versus forced technology transfer and as you con rightly pointed out the trade deficit is not a good measure of inequity the trade deficit is a reflection of savings and investment balance in the United States and Jim my concern is that the administration and President Trump are so focused on the trade deficit when that's the wrong measure when what they should really be focused on are things like market access the fact that it's a not level playing field and issues of force technology transfer the fact that some of America's best companies that have spent billions of dollars doing technology innovation are forced to share that with China if they want to gain access to the Chinese market so you know I hope the administration focuses on the real market distorting issues and focuses less on the trade deficit I think it's going to be a big political test for the Trump administration is there anything to the callers basis on the Clinton administration selling technology or certain types of technology to China or giving access to that this was certainly a big controversy the Cox Commission did a big report on that I'm not I don't remember all the conclusions of it but look the United States needs to be mindful of any country that's trying to elicit lis acquire US military technology and it absolutely has been a problem in the us-china relationship and it means the United States national security establishment needs to be vigilant about preventing any potential competitor from trying to gain access to either dual use or military technology that would advantage them and when you have a military like China that is devoted a lot in the last 20 years to modernizing their military and as a real competitor with the United States the United States needs to be very careful to make sure that that American companies are not wittingly or unwittingly assisting Chinese military modernization any thoughts to that mr. Wong no I agree fully with that technology transfer which jeopardizes a security interest needs to be carefully regulated the problems of finding whether it really is something that has military significance or is actually a technology which is feely available everywhere a little bit about our guest mr. Huang works is that the Carnegie Endowment for international peace II is their senior fellow for the Asia program what kind of work do you do under that portfolio how many comments I write about Jazzy Connie I talk about trade and growth and as well as tensions affected by economic factors mr. materials is at the Eurasia group as their age a managing director what is the Eurasia group so the Eurasia group is a global political risk consultancy what we do is we advise businesses all over the world American European Asian companies about how politics and geopolitics will invest the it will affect their investment strategies so if you want to invest in China Japan Korea Malaysia our argument is that you need to understand the politics of what's going on in those countries if you want to make good investment are your firm currently dealing with businesses that might be suffering directly from these tariffs that been imposed by the United States or China well the because the effect of the these tariffs are having such a big effect on global financial markets and that basically touches anybody whose major investment in the United States the simple answer is yes from Orange Virginia Democrats lying Kathy good morning go ahead hi thank you for taking my call on a lighter note I am a small-scale entrepreneur and I visit the post office two or three times a week to not only pick up my packages from China but to ship those products all over the United States there's a lot of us out here on a small scale that sell on eBay and Etsy and flea markets and we make some pretty good money in fact we don't make as much money as the retail companies do that purchased these same products in bulk and sell them for ten times what they pay for them so anyway that was just a lighter side I appreciate it I've even chatted back and forth with some of the people that I purchased from some have really sad stories about being tied to their computers and selling their product but I can buy something for 99 cents free shipping and a retail store sells that same product for $9.99 just letting you know there's a little bit of us out here making a little bit of money thank you thank you and we tend to think of these issues on these big macro issues but the the smaller scale to that wasn't there's anything to input from that I just wanted to note that the the fastest-growing most interesting aspect of the Chinese economy is ecommerce connecting producers and consumers skipping big retail distribution channels when Alibaba and mr. mark came to the United States he was talking about trying to establish links with small businesses the United States because they equally small businesses producing things in China and they linking it in ways which you facilitate the payment the shipping to get out of what I call the purely normal big formal channels I think is actually a win-win for both sides mr. duros yeah Yukon makes an important point I mean the emergence of e-commerce not just in the United States but globally is really going to change the world of retail and we have to be mindful of the fact that you know big malls in America in ten years may be a far less significant business and place where we all sort of buy our stuff as e-commerce grows but there's a national security dimension of e-commerce because ecommerce only works if you can get a payments to work electronic payments and the question becomes who is going to provide a payment services in China the Chinese economy the Chinese government has really protected the world of a payment so it's been very difficult for major American companies like MasterCard and Visa to get into the e-payments business and that's allowed companies like Alibaba with all IPE to dominate now ah we pay tried to break into the II payments business in the United States and because of a national security screening process that the Treasury runs they weren't able to do that so II payments you know and the Chinese access to money transfers in the United States is sort of becoming a national security issue and I'll be interesting to see how the world of e-commerce and I payments of vols in between the United States and China we're here from rich and he's in Centreville Virginia go ahead hi thanks for taking my car I was reading the article the other day about China's doing a huge weather modification program and in Tibet and they're going to increase that they're trying to do this with the silver oxide like these tens of thousands of chambers for increasing rain production I think the area is like seven times the size of Spain and it's like 10 billion meters of water or whatever the devil the the measurement on that is but I just well I always wonder you know here they are moving right past us and nobody seems to pick up on that kind of stuff we're always focused on the tariffs and if we had that kind of weather modification system going on the United States we'd have the UN and everybody all over us for unintended consequences so I don't do you go do you guys know anything about that if you did could you make a comment thanks caller I don't know anything about no I don't or doesn't my comment though you know 2/3 3/4 of the country is very dry arid areas and the questions always been how do I promote more irrigation or make it more inhabitable because in fact 1.3 billion people largely concentrate on the coast we have a problem in terms of concentration of populations but you're right and saying of course that when you try to modify that nature you could have unintended consequences those big rivers which flow from Tibet through the coast of the - both South Asian Southeast Asia and through China to the Pacific if you actually serve like change that the flows of those words you could have global consequences so I agree fully with the speaker that if you do actually get into some of these areas it needs to be done fairly carefully so but to the larger issue advancement of technology is that something being driven largely by the private industry of China is that supported by the Chinese government I think a lot of that is state driven now if you think about it a huge number of wind turbine transmission lines lie in the western parts of China because of the terrain that power needs to be generated and transmitted to the coastal areas so lo and behold what China has been doing for example is improving the conductivity of transmission lines such that China is in fact the best in the world in terms of this kind of technology so this kind of state involvement certain areas can actually lead to technological change which people are not expected from new jersey will hear next from pat with our guest hello Pat good morning hi I'd like to know from either of your guests number one in the Cold War we had trading bloc's as well as political alliances we didn't trade with communist countries we didn't hand over our knowledge we are not knowledge is power in this day and age and now aren't we really surrendering our future economic and possibly political to China how is an American company supposed to compete with a state-owned enterprise and on another Sun in our hemisphere do we have to worry about China in the Panama Canal thank you mister Medeiros well I would say the Cold War was a very very different today largely because of the high degree of interdependence between America and China and UConn talked about how trade and investment flows are both ways the fact that America you know imports something like 500 billion worth of goods from China every year American consumers American businesses benefit from this American companies are deeply deeply invested in China so the world in which you have trading Blox the world in which there's an ideological competition between the United States and China is just it's a very very different world than we have today and you know it's important to keep in mind that we are interdependent and we do benefit from the Chinese economy in the trade and investment relationship between us what's wrong I would just comment on the fact that if you look at the major products being imported from China to the United States whether it's Apple you at Packard where they're Walmart sources 67% of many of its consumer goods from China the control of trade into the United States is actually controlled by American companies so it's a it's a mistake to think this is purely a China driven issue it was actually American companies now why did they do this one is because of course it's extremely profitable the source of low low cost consumer goods is great but the other fact is developing countries including China are growing anywhere from four to six percent a year US and Europe even when they do well growing two and a half to three so of American companies restrict their business prospects to let's say selling on the United States they're also condemning themselves to a growth and profit of prospects which is substantially reduced as opposed to looking at the whole world it is the rest of world actually emerging market economies are growing much faster to o27 for 80,000 won for Republicans 202 some four eight eight thousand for Democrats and independents 202 some four eight eight thousand to our guest here to talk about future of us-china relations factoring into that the recent consolidation of xijiang things power what should be the concerns for the United States from that act if any maderos well what it suggests is that we're in a world now where the Chinese Communist Party is going to be playing a greater role in all aspects of life in China and what that means is that we're likely to see far less progress on human rights types of issues so access to information freedom of speech which as Americans is important to us but also what it means is that the party may be playing a greater role in economic affairs at the same time and so there's a lot more news reporting recently about how the Chinese Communist Party is starting to get involved in the affairs of joint ventures American multinationals and so the question is as Xi Jinping consolidates his power as he puts the party in control of both policy formulation and implementation is that going to result in policies that lead John in a direction of greater political and economic liberalisation I think that's a huge question mark will it help solve some of the problems in the us-china relationship of creating a more even playing field and will it lead to the United States and China finding a way to work together in Asia and globally or will the party increasingly as it plays a greater role in Chinese policymaking will it bring the us-china relationship into a more competitive frame will the Chinese begin to see American allies like Japan in Korea as a greater threat and I think that that's a that's a big open question mark because whenever you have an institution like the party playing a greater role it raises questions about what is the ideological lens through which they evaluate these their their approach to policymaking the Kissinger Institute's Robert Daly described the act as such and part saying domestically China will become more repressive academics think-tank experts writers and artists will not make public statements at odds with or even moderately critical of GEOSS doctrine his cult of personality would grow because of his bandwagoning the encouragement of party media and diminished checks on his actions she would be emboldened domestically and internationally mr. Wang do you buy any of that or do you believe in that well I think Evans captured quite correctly the this the political developments in China have increased risks political risk made it more likely that repression of human rights will increase so certainly the academic community research community civil society in China the elements of it are probably disturbed unhappy about this now right now the criticism is more public in the West because we've heard a free press you don't have that in China but my guess is that you actually pulled all the Chinese you probably find that a majority would still say I support this so despite all these risks why would they because along with this potential control potential clamping down there is the question can we actually move forward more rapidly now can we do it more decisively by bringing all the factors that you need to do this under the control of the party that's what the argument is I'm not saying whether it's going to materialize so Xi Jinping has created this national commission of supervision it's addressing corruption and people concerned about whether in doing so it will also infringe upon individual liberties and the rule of law less noticed in fact is that one of the aspects of this commission is not just the penalize people are corrupt but to penalize officials and others who don't actually perform up to expectations so the question is I have certain guidelines and rules I also expect you to follow it because over the last four or five years many the local officials that just basically ignored them now this has good things and bad things about it so there's also this question it's trying to go and actually become more efficient more competitive this certainly will not help in terms of tensions of the West it will actually increase it but for some Chinese there's also the view of maybe this will be good for us in the long run in terms of performance I mean I you you can articulated the dilemma very very well on the one hand what Xi Jinping will say is I and my people need more power if we're gonna bring about structural changes to the economy to the political system in order to ensure that we rebalance the Chinese economy we become a major global power but on the other hand by concentrating power intensely and reducing the degree to which there is power sharing the degree to which there is a process for transition away from Xi Jinping whenever you have concentration of power there's huge risks of bad information flow inefficient decisions actually an accentuation of certain levels of corruption so there's a huge I think she Jinping is making a huge is taking a big big gamble that may you know may or may not turn out right but it very much is is a dilemma I'm concerned because I worry about the fact that the lack of processes for power sharing the high concentration of power the fact that nobody knows who's going to succeed Xi Jinping may actually lead to highly inefficient decision-making you know there's one leader that surrounds himself with people that know he's not going anyplace the tendency will be to tell him what he wants to hear not give him bad news and as a result not make good decisions and when you look at the political culture of China that's that's where it is tended to go what about this idea of transition eventually and if he's sitting if such a structure is being set up now that makes it difficult for transition later well I wrote an article a couple weeks ago with the title is China normal it should be normal because we have these concepts in the West about political evolution economic evolution and the normal countries behave in certain way and what we know of course is that China is not moving in that normal way and the answer I put out my article is it's never been normal is that you able to grow for four decades at almost 10% a year that's just not normal unprecedented and done it in ways which are defined normal conventional wisdom so this issue about what she's doing but there are own ways we look at it looks very bad we don't see experiences of countries which move this Takai direction with good outcome so I think it's very logical and very reasonable to say this is a problem it's going to crease risk it's likely to fail strikes me is not a not unrealistic assumption other hand has never been normal and the nature of this collective action the power exercised in the wrong way is extremely effective and we see this of course when we look around the United States a little bit about whether they able to come together and figure out where the America needs to go now how did we get everyone on the same wavelength of course that's one of the strengths as well as one of the weaknesses of democracies you have that deliberation but you also have a question to try to bring the energy together in a constructive fashion from Hammond Indiana independent line Erin you are next glad thanks for your two excellent guests today I would like for them to just very quickly give you their ideas on China's a plan to phase out internal combustion engines I want them to give me their ideas about the impact of our China's pursuit of space technology its economic and security ramifications they are leaping way ahead of us on this but I want them to also give me their views on cryptocurrency thank you I mean China III used this illustrated at more general point green technology environmental global warming why is it so strongly supported by the Chinese leadership but here the United States there's a heated debate and many people feel that's a bad thing it's bad thing because it imposes costs on business and therefore it may hamper America's ability to grow so why did is it that a country like China which has been growth learning forever it sort of embraced green technologies in this case a battery power and going to a different source of energy to drive not just cars but everything else because they see this is a potential growth vehicle that you guys produce new things better things you can actually export invest in it generates jobs we see see the opposite so in this particular case of the internal combustion energy China says we have hundreds of millions of more drivers we don't have the land we don't have the oil we're running out of it if you're importing a lot we can't be dependent on the world for these petroleum resources we need to move to a higher technological level and I really want to create that encourage it so they put a tariff on cars coming in because they want people to experiment in this particular area so come to like Tesla has a hard time coming into China which is I think a bad thing but there's tremendous amount of money being invested in and more efficient energy vehicles from the sign of space technology anything that to that yeah I mean it's a great question Erin about space technology what's interesting to me is the fact that China is a developing country with per capita income of eighty five hundred dollars a year that the government is devoting so much to becoming a space power and I see it as a reflection of on the one hand they believe that if you want to be a great power globally that great powers are space powers and you know generally speaking that's true I think the other interesting thing is the Chinese government has appears to believe that investing in space will have all sorts of knock-on effects spillover effects to commercial technology innovations and historically that's been true in the West and I think the Chinese are internalizing that as well the question is how much money and resources are they actually going to pour into this as they you know they find that there's all sorts of areas that they need to invest in and I don't know the question to that but it's clear that the government Xi Jinping is very much committed to becoming a space Power now whether or not they're gonna you know try to send a mission to Mars or anything that ambitious I don't know but this is clearly a priority for them Joe is from West Virginia Democrats line hi Joe hi man the last guy asked enough questions to cover the whole program and you need to give me a little bit break Pedro these two gentlemen are like lobbyists for China and both of you when you guys do one of these programs you should have a sort of like an opposing view but the reason America imports 500 billion dollars worth of products from China each year is because the corporate lobbyists over the last 25 years have put laws in place the the encourage that just like Walmart corporation having its headquarters located in a Chinese government's property we in doing that in passing legislation and given favored nation status to China they destroyed the American economy and that's why people voted for a person like Donald Trump even though he is not what we think he is he pushes the middle class voters buttons so that we voted for him because this is what we hate because everyone's forgetting just like your gentleman reference to in the last question this is Communist China there's no freedom over there they don't have to worry about unions somebody wants to draw join the trade union and trying to a guy walks out and shoots them in the back of the head with a pistol and then the problem goes away and we're condoning this in America and now we're making a dictator out of a supposed to president okay we'll leave it there either I mean I mean I'd I'd welcome you cons analysis of basically that does America benefit from trade with China is this a result of lobbyists or is this just a result of the global marketplace well why is the US trade so much with China Yukon well first of all let me point out the trade with China it's not actually China's trade with Asia because a large chunk of the products coming from China are actually made a Singapore Japan South Korea Taiwan American allies democracy so it's not really it's like when you buy something from Amazon is it being made by Amazon not really it's being produced by all sorts of people it just shipped through Amazon it's a lot of products coming into the u.s. via China are actually made elsewhere so I don't think that's an issue the second issue is is the level of trade as a share of the economy abnormally high in some ways either in the United States or China and incredibly they're actually the same 35 to 40 percent of the US economy in the Chinese economy is accounted for by exports and imports that's actually much lower than Germany South Korea with 70 to 80 so this concept that trade is dominating America or dominating China in terms of exports imports as a share of the activities is that you not right and the major reasons not right is both China u.s. share one common characteristic they are huge continent economies there are more or less self-sufficient many ways and the question that is this trade help them specialize in ways that both sides benefit as Evan mentioned earlier I think there is an issue in terms of China's not being open enough to services which is America's strength now if we sit here in the United States that ask what is America's strength what is really important only 8% of the America's population are employing manufacturing more the eighty-five percent are in services and the interesting thing about 85 percent in services more than half of that and growing very rapidly as high-value services that's what generates higher salaries the salaries and high-value services are 48 50 percent higher than in manufacturing so what Americans are looking for are opportunities for higher paying jobs that lies in services so the interesting aspect of the trade in China does not lie in these manufacturing products it lies in America's ability to get more open markets in China so that US can export more high-value services where there's education finance entertainment the media architecture accountancy this generates more jobs for the US ironically also increases and generates more jobs in China is a true win-win so by focusing on these terrorists and these manufacture products you're actually missing the whole boat it really affects very few people from Maryland independent line Jose oh hi hello you're on go ahead hey yeah I just wanted to say amen to the previous caller it it seems to me that the whole premise of this conversation is kind of disingenuous when the elephant is in the room is that all of our trade from not only China but pretty much everywhere else it's driven you know primarily to the benefit of corporations and not the United States of America and its citizens and so you know to suggest that well you know it's benefiting America is that's not true it's benefiting American companies and to the point about our service industry in this country whether its telecoms or financial institutions or whatever technology when you call for for assistance or information about these products that are supposedly generating so many jobs in the United States you get someone in India or you know some some other place far far far away from here but I think the whole thing is another previous caller mentioned the fact that the lobby that has lobbied our government to serve its interest against our own people and how can we be a self-sufficient nation and be secure if we have no manufacturing base okay all right thank you when I think I appreciate the frustration articulated by the last two colors I think it's important to keep in mind that Americans consumers benefit enormous ly from trade globally in trade with China every time we go to Walmart Target Gap and Old Navy and we're able to buy you know a high quality manufactured good at a pretty cheap price we're benefiting from global trade because it's much better and cheaper for other countries with lower labor costs to produce those items than it is for the United States so consumers benefit look at farmers I mean farmers have been very very vocal in the past few days farmers that produce fruits and nuts and pork and beef and then grain soybeans sorghum etc these are huge exports to China benefit enormously so I think you know it's important to keep in mind that they're diverse aspects of us society but that trade globally in trade with China also has its benefits famila well let me just just point out some factual issues about employment manufacturing in the United States over the last five years US employment in manufacturing has been increasing steadily in absolute numbers the numbers of people in manufacturing in China has actually been declining that's easy to explain what's happening in China China's discovering that services is the future they're better paying jobs they're running out of workers Automation means you don't need so many people in the factories so manufacturing employment in China is decreasing not increasing so it's not issue losing jobs here to China China is actually giving up jobs manufacturing jobs here in u.s. are actually increasing for the first time in five years and why is that because the cost of mobility of very heavy items logistics has become so high that much more manufacturing which used to be done overseas is that you occurring in the US so just factually when you think that US is losing manufacturing jobs abroad it isn't doing so the question then is the increase in low-cost consumer goods how does it help what potentially how can it help America to grow faster well by reducing the cost of consuming items that we normally spend it generates savings for America to invest and become more productive so America as an economy over the last ten years has become much more efficient productive than people expected and shows up now in innovation it shows up in the IT it shows up with the high value services of which America is the global leader we don't have an unemployment problem today in in the u.s. in terms of the numbers we do have problems in terms of where it's located and social disruption and the issue then for America is how do I deal with that and of course the problem is not so easy Europe deals with this so the Scandinavian countries deal with it because they put more money into the welfare systems and social benefits on employment insurances that is costly it has a tax concern and this of course in the United States is a big issue because here in the United States very to increase the size of the garment for social services from bill in Illinois independent line good morning it's a statement that I'm going to make and it's a question a technology has been transferred and usurped and stolen by this rule that of American company can only purchase 49% of a Chinese entity Schwinn bicycle was in business a hundred years and they went to China to manufacture bicycles their technology was taken and they were gone in a year in that and the problem is only multiplied many fold by in high and high-tech entities I there is no way you can protect intellectual property if you allow a company to go in to China as a minority stakeholder after the fact it can't be done I am interested in these gentleman's comments thank you German first of all we think of innovation technological transfer is very static it doesn't new things come up this competition is transferred you come back so how does Apple how does Intel deal with this basically they deal with this by being at the frontier every year they come out with new products they've discovered that's the only way to compete because knowledge is so easily shared if you look back historically we look at IBM's computers you look at Kodak you look at Xerox copy machines ideas innovation basically evolved you can't stop this the issue then is the transfer overseas should China in fact have a rule that says you must transfer and the answer is it is a common practice among developing countries who encourage more people to come in that you have this transfer but the problem is trying to so big and therefore this create unfair bargaining power because you have a government and it's government support and dealing with a company now how does Europe deal with this Europe has actually been much more successful on this because it gets into contracts and relationships in a broader spectrum of items and it doesn't actually transfer certain items as much as American companies have so there are ways to try to deal with this but I do think that the the caller has a legitimate concern I think America should be discussing with China where they can liberalize those rules for joint ventures and a lot more companies to come in and have sole ownership of the rights of the technology and does occur in certain areas Connecticut is next Democrats line Peter hello good morning thank you for c-span I just wanted to know about the umbrella that the United States is providing defensively for South Korea and Japan and the basin it seems if we had that money invested in the United States I know it's not a perfect world we can't do that but that would make a great deal of improvement to the American economy thank you very much it's a great question Peter a few things to think about number one the burden for US forces operating in Japan and Korea is shared in fact in both this in both the cases of Japan and Korea those government's pay the majority of the share of for supporting US forces in those countries so the financial assistance for the United States is not dominant second consideration keep in mind is if the u.s. pulled out of those treaties it would fundamentally change and potentially destabilize East Asia and the question is is that in the US interest if the u.s. pulled out of Japan and South Korea there's a real risk that both of them would develop nuclear weapons in order to protect themselves against North Korea and security threats from China and that would highly destabilize that part of the world that at the Asia Pacific region which is now the fastest growing part of the world and a big growth driver and a source of trade and investment for the United States so is that in the US interests we actually have President Xi from November of last year in the United States talking about the topic of denuclearization and the Korean Peninsula and the asia-pacific overall here's a bit of what he had to say on the Korean Peninsula nuclear issue we reiterated the firm commitment to achieving the nuclearization of the peninsula and upholding international non-proliferation regime the two sides will continue to fully and strictly implement UN Security Council resolutions at the same time the two sides commit to working toward a solution through dialogue and negotiation and we are ready to discuss with the relevant parties the pathway leading to enduring peace and stability in the peninsula and the Northeast Asia the two sides will maintain communication and cooperation on the Korean Peninsula issue we believe that China and the United States are countries we were the important influence in the Asia Pacific as I said to the president the Pacific Ocean is big enough to accommodate both China and the United States the two sides need to step up communication and cooperation on Asia Pacific affairs faster common friends build constructive interactions and jointly maintain and promote peace and stability and prosperity in the region so Mr materials if that's the case or at least the objective how does that practically play out how does what practically what the president said at the end as far as building up the cooperation between the two countries on these shared interests well look the Chinese talk a good game about cooperation with the u.s. related to North Korea and stopping North Korea's nuclear program there the track record of Chinese cooperation is very mixed now of late it's been very good basically beginning in 2016 as North Korea accelerated its testing of nuclear weapons and ballistic missiles you saw the Chinese increasingly put skin in the game in other words starting to reduce the degree of trade and investment in North Korea it basically in order to pressure Kim jong-un the leader of North Korea to stop these kind of provocative activities and gotten to the point at which I think it's having real influence on North Korea and that's one of the reasons why kim jonghwan beginning this year appears to have shifted strategies and he's reached out to the United States he's reached out to South Korea he's now reached out to China with his recent first trip abroad and the question becomes what's next Kim Jong is going to have a summit with Donald Trump he's going to have a summit with president moon and then the question is will that lead to some kind of negotiation process now in the 2000s about ten years ago there was something called the six-party process in which six parties got together and talked about away a pathway toward denuclearization that ultimately fell apart as did a previous negotiation process and so the question becomes is China going to be willing to keep pressure on North Korea to actually get them to follow through and achieve denuclearization now when when pass efforts fail and I'm skeptical I'm skeptical of both North Korean intentions I'm skeptical that China is really gonna hold North Korea's feet to the fire because ultimately while China doesn't like North Korea having nuclear weapons the destabilization of the Korean Peninsula like that may be required to force North Korea to give up its nuclear weapons it's sort of too much for the Chinese to bear and you know as we've talked about today China's got so much going on at home I think as long as they can sort of manage the North Korean issue and prevent it from moving to a either war or a major humanitarian crisis they're going to be prepared to sort of you know make sure that this if a new negotiation process comes about that it that it continues and sort of doesn't lead to a major destruction mr. Wang big Evan said it all I grew with that let's go to Apple Valley California independent line Julia yes I had a question about our debt to China how did we get in debt with China and is there a contract involved what's the answer great well when the US government borrows it sells Treasury bills and bonds and China buys these so does Japan and so does pension funds in American public China is the largest purchaser of US government securities it's fluctuated sometimes with Japan being the largest but even China and Japan together they're don't buy the majority of the debt majority says bought by Americans American corporations so this concept that Americas is more indebted to foreigners and this is potentially a risk I think is overdone partly because they actually don't care for the majority of the debt the second thing is that even if they did the question is could they be disruptive in terms of selling and causing a interest rates to rise sharply and having a problem with a dollar to become weaker they answer no because by doing so they actually reduce their own that the value of their own holdings here so they won't likely do it so I think the debt issue is something people worry about but it's actually overstated is that a security issue then in some level I don't believe so it would only be a security issue of China could use it as leverage could they you know use it as a threat to force us to do something we don't want to do and an end as you Khan said it's not really a source of leverage Middletown Ohio Gary is next for our guest Gary thanks for calling go ahead yeah I wanted to touch on the trade deficit that we have with China look they can paint this many different ways but when you owe that much to another country they do have leverage and they can use it and they will use it and it's being used right now and as far as Donald Trump he shouldn't be making any kind of decisions until he gets his affairs in the order before he puts us into another trade deficit with any other country we do have carry a trade deficit with China and therefore we do owe China when Bill Clinton was in office we owed no other country anything there's no reason why we should only two other countries that's my comment for the day mr. materials he said that when it comes to that leverage that we were speaking about just see if that China can will and is be currently using that leverage against us yeah I just simply disagree I mean I appreciate the sentiment behind the question we always need to be mindful of China or any country having undue influence over the United States so we can have freedom of action for ourselves but as you Khan said before the trade deficit is a reflection of the savings in interest balance in the US economy it's not a source of leverage and but if you want to look at it as a source of leverage keep in mind that China sells 500 million of u.s. goods of Chinese goods to the United States in other words China benefits a lot from access to our market so if the United States wants to I wouldn't recommend it wants to start playing around with access to our market then that could be a source of leverage for the United States that's what I think the Trump administration is trying to do now the problem is is that it will result in retaliation it could lead to a tit-for-tat cycle that ultimately will hurt American farmers consumers and businesses I mean this question of leverage and the role of the trade deficit is an interesting one so Gary's raised the point that I think is commonly felt out there China has a significant large trade deficit with China XI the US has a large trade deficit with China but the US has a trade deficit with 98 countries not just China 98 okay so it has a greater debt burden in some ways how bad is this the second point I would point out how does it manage to have a trade deficit for 40 straight years after all of you or I or household constantly spent more than we earned it and how to borrow and therefore have a deficit that wouldn't happen the bank wouldn't allow us someone would lend us the money so how is it America could have a trade deficit for 40 straight years way before China even became a economic or trading power and that's actually the role of the dollar because the dollar is the global currency America can run a trade deficit and pay people with dollars as long as they were willing to accept it u.s. can run deficits forever so some of you comments would say that the deficit is not an issue America actually has an exorbitant privilege it could perpetually consume more than forever now then you get to the question leverage what is the ultimate leverage the ultimate leverage is the dollar being the global currency because that allows the u.s. control the International payments and financial system anybody who trades and uses dollars ultimately has to go through the Federal Reserve to clear their transactions so that's why America has what I call the ultimate weapon in terms of sanctions and potential threats cutting a country off access to its banking system and that's not trades trade is not the issue it's the dollar and that's why I think the US has been king I'm protecting the role of the dollar globally because it's the ultimate leverage in this international financial system it's not about trade deficits this is Paul and he is in Fort Edward New York independent line hi you know I was going to talk about how the these trade deficits these trade agreements have wiped out our I live in upstate New York and manufacturing is gone never to come back still in China but you're you just started talking about how our dollar is what's going to save us but would with either one of your guests described the petro dollar and in the future wouldn't it be better if we had more of a debate about trade rather than to people that are promoting trade it doesn't seem like that c-span style thanks a lot well I think China's created petrol dollar market trying to nominate an renminbi or Iran as currency because it's trying to get the Chinese currency more like a global currency just like the dollars because they recognize that the dollar conveys significant imagines to America and so it likes to reduce that dependency I don't think it'll happen the dollar will be the global currency for the foreseeable future primarily because of the strength and extensive markets here in the United States so I don't think that's an issue a question about trade trade is not a new issue or the argument about whether a free trade is good or bad has been debated for hundreds of years we do not debate whether you should be a farmer I should be a lawyer and he should be a mechanic in an automobile company and we're all three producing different things if we trade with each other because you're better at being a farmer than I am that's trade so the logic of trade is essentially where countries grow so countries have been trading forever the issue is whether or not there are costs and disruptions to that process at times and the answer is yes concussion protecting people and the answer is yes but that we have not been very successful then the question is can you distort the benefits of a trading system so that one person is getting more or rather than another and the answer is potentially yes and I think the real issue today is a sense that China is getting more than really is entitled to it's not contributed enough and I think there's a fair amount of validity to that argument so the question is how do you address this and as we've been talking about tariffs is not the way it's just penalizing consumers in each country so what is the right method and we actually haven't gotten into it there are two potential vehicles for addressing this one is the trans-pacific partnership the TPP a president Crump basically bowed out of that when it was already negotiated so why is that the correct vehicle because that gets into things like IPR protection environmental concerns the role of state enterprises unreasonable subsidies technology transfer so by having that you establish a standard which is desirable and then what do you do you try to get charged actually to buy into it and if they can buy into it you start dressing some of these concerns now the other vehicle for dressing this is the bilateral investment treaty between the United States and China and it's been a discussion for a long time and that also addresses many of these similar issues now a key component of the bilateral investment treaty was this issue about China's saying I have a list of industries which I will restrict or control when you have if you want to come in or access it I will set the the regulations and some of these basically distorting and unfair so the pressure from America is I want that list to be very small I want as Evan said I want colors be it'll come in do whatever they want to do and I think that is desirable so here are two two means of addressing exactly what people are concerned about and the colors have mentioned many these but we're not focusing on those but focusing on tariffs who is basically hurt consumers rather to pursue your grievance but frankly would bring child to the table and since she encouraged them will force them or nurture them into changing some of these restrictive practices which is hurting America let's go to Horseheads New York Caroline hi hi how you doing I just want to say I love your speakers such an interesting I'm just so interesting listening to them speak I just had a couple of concerns and questions I was just wondering our massive trade with China and our massive financial interconnectedness seems to put us at risk from my point of view in a manner similar to Europe's dependence on Russia for their gas for instance for heating it changed their politics that changed their ability to to deal with Russia in a in a equal footing and I feel like we've we've gotten ourselves into a mess with China for the same reason your previous caller the lady the other lady brought up the unequal nosov the the Chinese citizens and the fact that um well you know Jesus the way they're the way they're treated and how much they're paid so I don't know it just didn't seem that her question was answered you answered it in an economical way with economics but her question had to do with selling our national security down the pike for a $3 you know bag of salt at Walmart or $3 saltshaker got Walmart God's thank you thank you very much mr. Maduro she wants a go yeah Caroline thanks for the question the way I think about it is the us-china relationship the economic relationship is one of interdependence not dependence in other words we both benefit from this relationship but I agree with you we need to be careful that as the relationship is one of interdependence that because of China's size and its growing market power that it doesn't force American companies to engage in practices that result in them being forced to transfer technology in ways that that benefit Chinese companies and disadvantaged American companies and that's sort of the debate that's going on in Washington right now because some of these practices have happened the Chinese have used their market power in an unfair way you con in answering the previous question talked about the growing numbers of non-tariff barriers that is that's basically the government policies by China the that disadvantage the u.s. ability to continue to benefit from trade and investment with China and I think the US needs to do a better job of addressing those the bilateral investment treaty the trans-pacific partnership those are tools to get at that problem but all of that is very different than the national security question because there's no instance in which the United States should ever think of compromising its national security interests because of its trade with China now the technology question and forced technology transfer IP theft begins to blend these two issues together and I think the United States takes these issues very very seriously I want to squeeze on a call from Kansas real quick Damian independent line go ahead good morning thank you for having me I just wanted to say that a few things about China I have a great respect admiration admiration for a nation that's been in existence as long as it has number one as far as technology when the printing press was invented you could go to China you know what it was invented in Europe you could go to China and buy a book and a book start with paper money number two democracy didn't build a wall right and number three why would we want any kind of a war with China because they wrote the book thank you very much so with that in mind and finishing thoughts we started with this topic of the future of relations with everything we talked about what do you look at specifically to gauge where where our relations wide could be economic could be military could it be a lot of things where do you start as far as looking ahead and gauging using that to gauge where we're going to be with China so I think looking forward we need to think about where the US and China are in Asia and where the US and China are globally because that will give us a sense of what the trajectory for the relationship looks like in other words are we going to be able to manage our differences in the asia-pacific are we going to be able to manage through the fact that the Chinese military presence is growing the fact that China is very uncomfortable with our alliances in our the US and China going to be able to sort of maneuver and adjust to one another in a way that creates at a minimum a sort of stable status quo call it a stable balance of power or will it be one in which competition is growing differences increase that begins to assume a military dimension and you have some kind of miscalculation or accident that takes the relationship from one of competition to one of outright rivalry and then globally we have to pay its attention to the fact that as China rises as it becomes much more influential in parts of the world that traditionally were peripheral the Middle East Latin America for example are the Chinese going to begin thinking about global governance contributing to global problem solving in a way that opens areas of cooperation with the United States and again that will add to the ability for the US and China to manage our differences so there's some real challenges on the security side and I think this is probably going to be the most important security dynamic in the 21st century is how the US and China are going to address China's rising power I would just add to security dimension in terms of the economic factors that can actually help on this front if you open up on both sides services and trade the interconnections between the merchandise trace is powerful because it's not oil and gas is one speaker said for Russia which means that they don't do concern of our relationships to be able to trade merchandise you have to have open relationships you have to open financial systems people have to go back and forth services you have all these people streaming from China to go in the universities here because it's America's great strengths tourism also you have people going to China's study ultimate that is in fact the solution in my view the people actually get to know each other and this question to stress differences in cultural values can get addressed in a much more beneficial way yukon Huang was with the Carnegie Endowment for international peace he serves as the senior fellow and the Asia program Evan Medeiros is the Asian managing director for the erasure group so both of you gentlemen thanks for the conversation q thank you that's it for our program today another one comes your way at seven o'clock tomorrow we'll see you then

Channel: Washington Watch

Views: 147,999

Rating: 4.4606142 out of 5

Keywords: U.S., China, Yukon Huang, Evan Medeiros, trade, international relations, Eurasia Group

Id: 1gUa1aWB7Qo

Length: 75min 41sec (4541 seconds)

Published: Thu Apr 05 2018