China Experts Disagree on What 'Victory' Would Look Like in US-China Relationship
Panelists at the annual Washington International Trade Association think there will be a U.S. deal with China that will avoid more tariff hikes, but they disagree on when and what it will mean for the relationship going forward. David Dollar, an expert on U.S.-China economic relations at the Brookings Institution, said that "realistically China is not going to change its system overnight." He scoffed at a deal that includes purchases of U.S. commodities in an effort to shrink the trade deficit. "I see that mostly as a shell game and mostly PR."
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Dollar said there won't be news out of the two days of negotiations with China this week. "We'll get some fairly bland statements," he said, along the lines of: "Talks are going well." When the beginning of March arrives, Dollar isn't sure if the U.S. will try to keep some of the tariffs in place, or roll them all back. And, he said, if the U.S. wants to keep some tariffs on, can China accept that?
Bonnie Glaser, director of the China Power Project at Center for Strategic and International Studies, thinks there will be another 30 or 90 days of negotiations with no changes to tariffs at the deadline. "The odds of this coming apart in the near term are not great," she said. "But it could fall apart later on" if China doesn't follow through on its promises of policy changes.
The title of the panel Dollar and Glaser were speaking on at the Jan. 29 conference was "In a Trade War With China, What Does Victory Look Like?" Dollar said for him, a victory would be "we stop shooting ourselves in the foot," in other words, roll back the tariffs on China. "With tariffs, we make our economy less productive."
At an earlier WITA panel, Rep. Kevin Brady, R-Texas, ranking member on the House Ways and Means Committee, said he was an advocate for allowing China to join the World Trade Organization and that China's follow-through on its promises since then has been a "great disappointment." He said people should not expect "an overnight miracle" in changes from China, but said there could be some progress over the next two months of talks. He said the U.S. "ought to feel comfortable trading tariffs for measurable reforms."
"I think the key is to avoid a protracted trade war that does damage to both sides," Brady said.
Glaser said there has been a fundamental shift in Washington, as many now see the economic relationship between China and the U.S. as harmful. "I think this will endure beyond the Trump presidency," she said. Dollar said that narrative is wrong. "The world's more complicated," he said.
David Goldman, an economist and columnist for the Asia Times, said China will be looking to provide the U.S. with what it wants to some degree, but said that "the one thing I think they can't do is change their spots."
Goldman said it's wrong to think of China's subsidies and industrial policies as a "China model" of development. Instead, he said, it's really an Asian model -- practiced in Japan, Taiwan, Singapore, South Korea and China. He said all these countries treat capital goods at companies as a public good, and therefore worthy of subsidy in the same way the U.S. subsidizes highway construction.
As a result, he said, "Huawei now owns the 5G network, pretty much." He said Huawei has spent $20 billion a year working on 5G, and Ericsson and Nokia are far behind. "We don't have a U.S. company that can provide 5G equipment. That's a scandal," he said. Goldman said unless the U.S. government returns to a government-corporate research alliance, as in the heyday of Bell Labs, General Electric and other industrial giants, its future is deindustrialization and less wealth. "The Chinese are boiling us like the proverbial frog," he said.
He said the government doesn't have the political will to do this kind of investment now. "But I hope we'll get it," he said. Goldman both agreed and disagreed with Dollar on how profitable it has been for the American economy to outsource manufacturing to China. He said that shareholders really like companies like Facebook and Microsoft that are capital-light, and so there's been a stock market boom. "It's been somewhat of a Faustian bargain," he said.