On the Ballot: the US, China and the World Economy

Good morning everyone. Welcome to On The Ballot: The US, China and the World Economy My name is Judy Dean. I am a Professor of International Economics, here at Brandeis International Business School. We are very grateful to the Asia Pacific Center for Economics and Business for sponsoring this event, and we welcome you today Let me start by introducing our distinguished panelists. First, our guest speaker, Ms. Wendy Cutler. She is the Vice President at Asia Society Policy Institute, where she focuses her work on Asian economic and trade issues, as well as women’s economic empowerment. Previously, she was a veteran trade negotiator with the Office of the US Trade Representative, where she worked for 28 years. She spent most of her career negotiating trade agreements with Asian countries, including TPP and the US-Korea Free Trade Agreement. Welcome Wendy We also have with us, Professor Peter Petri, who is the Carl Shapiro Professor of International Finance at Brandeis International Business School and Professor Gary Jefferson, who is the Carl Marks Professor of International Trade and Finance at Brandeis University, both of whom are leaders in our Asia Specific Center. Welcome to all three of you Today, we want to engage our three panelists on three major issues as we approach this election First, we’ll discuss a little bit about the US-China trade war, second, about the battle over technology theft, and third, about the broader issues of multilateralism and the global economy. So, after that we will spend 15 to 20 minutes with question and answer, with you our wonderful audience. So, we look forward to hearing your reactions Without further ado, let me start with you Wendy For the last three years, the US and China have been engaged in a trade war. And by many estimates, the cost have been in the billions for both countries. Many people also argue that Phase One agreement put in place in 2022, between the US and China was unrealistic even before the pandemic hit. So, can this war be ended and how important should this be for the presidential candidate? Well, first, thank you very much Judy for inviting me here today, and I just want to just give a special shout out to Professor Petri. Through the years, I’ve gotten to know him when I worked at the Office of US Trade Representative as a negotiator And so much of the work that he contributed, and the studies that he did really helped us make the case for the agreements we were negotiating. And sometimes it wasn’t just the benefits he focused on, but it was also the cost of not participating, which I think is another theme we’ll probably get to later today in this webinar. So, again, thank you very much. It’s really my honor to be here The US-China Phase One Trade Agreement has now been in effective for about eight months And the ironic thing is that the trade issues between the US and China were really dominating the headlines for the first few years of the Trump administration. And in many ways now, are viewed as the stable force in our overall relations as they just deteriorate But when I look at the Phase One deal, I have a number of views with respect to its effectiveness First, as a trade negotiator, I always respect the work of my colleagues, because until you actually sit at the negotiating table, and have to secure concessions from another trading partner, you don’t really know what it’s like It looks very easy from the outside, but at the table, these negotiations are extremely difficult, they’re very detailed, difficult with any trading partner, but particularly China, which is an extremely formidable negotiating partner That said, the Phase One deal, definitely some meaningful commitments, but as you mentioned Judy, I view it as serious shortcomings. Number one, the because of all the tariffs that were put into place to get China to move, and particularly move on structural really important issues, and a lot of those structural issues were not even addressed in this Phase One deal. And second, the administration when they went into this trade war, really raised expectations and set out very detailed objectives of what they wanted to achieve, but they settled for a lot less. So, what we have now in many ways, is an okay deal. We had promised that we’d get into a Phase Two negotiation. I thought that would have happened by now, but it hasn’t happened, and it’s unclear when and if it ever will And I would just say and conclude by saying, it’s not even clear if this deal is going to survive the next few months, given that in many ways, it’s just a fragile truce and there are just a lot of pent up concerns on the US side that are just growing

Peter, let me ask you, Wendy just mentioned that there were structural issues not addressed in this Phase One deal. What’s your view on that? What structural issues should be addressed? Or is this the place to address them in a trade agreement? Well, thanks Judy. Thank you for moderating this, and to everyone else for being along with us The way we got here was a great deal of suspicion of China and particularly it’s technology theft, and its technological development and it’s competition And, so one would have expected this agreement to provide, for example, some important progress on intellectual property protection. One might have also expected it to provide some progress on the question of subsidies that helped China enter important markets, on some of the digital issues that kept American companies, including our tech giants, out of Chinese markets, and none of that really happened. Now there is some of language in there about intellectual property, but much of that recognizes commitments that China had made before the agreement. Ultimately the agreement focused on agriculture, and that it did because of the concern of the administration on voters, in the middle of the United States So it turned out to be a very disappointing agreement from the viewpoint of policy changes But that I think was a almost necessary product of the very contentious, and really disrespectful approach, of which the United States took, and to which China responded in kind, over the course of the agreement. So I think we got what we asked for really. By the way, I should point out that Chad Bown’s data indicate that so far, at least, that the commitments that China has made on trade, are only about half-full. In other words, half of the promises are not visible so far So Gary, let me pick up on Peter’s comment about the missing pieces of IRP protection, and issues of subsidies. Could you talk a little bit about intellectual property rights protection, and what the significance is of them and why it’s crucial that they be resolved, or if you think they should be resolved Well there clearly are deep structural issues with regard to intellectual property, and both the way it’s managed in China, and the way it’s managed in the US and its accessibility. But I’d like to back up for a moment if I could, and pick up on a strand of what Peter had said with regard to the focus of what had been achieved, in the trade negotiations with that focus largely being on agriculture, and as such, so responding to a particular concern of the American President political concern And I’d like to just throw out the general proposition that I think much of this conflict, while there are real economic and structural issues embedded in this, it’s largely a political issue. And it largely has to do I believe with, the concern on the part of many Americans, particularly those in the White House, about China’s rapid rise, and the concern being somewhat broadened by the fact that that rise has not been as peaceful as China has advertised And it’s having been met with a degree of insecurity, and perhaps agitation associated with the President’s America First Policy. And I would say that this is somewhat symmetric, in that he has a counterpart in China who presently is quite a nationalistic also, and as exhibited by

his overtures with regard to the South China Sea, and Hong Kong, Taiwan, Xinjiang. And I think a lot of these issues and outcomes, are somewhat symbolic and are stratagems that largely have a political context to them, rather than being really substantively focused on structure Judy, if I can add here. I think what happened during the negotiation, was there was a real tug of war within the Trump administration on the priority matters that needed to be addressed in this negotiation. Ambassador Lighthizer at the office of the US Trade Representative, I think he very much wanted to focus on what we call the structural issues The notion, if you could really strengthen IPR, if you could get rid of the practices of forced technology transfer, if you could get at subsidies, then you would be making a longterm lasting enduring changes in the Chinese market that would produce a level playing field But the President was much… He’s transactional, and he was very focused on purchases and numbers, and that became very apparent as the negotiations proceeded. And by the time that the decision was reached to basically just cut the losses, pocket, what they had gotten, the whole purchasing commitment side of the agreement became more and more important And I think now when people are looking at whether this agreement is being implemented by China, we’re all just looking at the numbers now Are they going to buy $77 billion worth of additional purchases over their 2017 imports? Those are big numbers. I think on the agriculture side, we are seeing some good news. I think there are two reasons here. I think China is trying to be responsive to what Trump is focusing on in this deal, in order to keep it intact. But also China right now having experienced floods, and drought, and a pig disease, they need our pork, they need our soy of beans So, if you look at China’s trade statistics for September that were just released yesterday, or this morning in China, you’re seeing huge imports into China from the world because they’re recovering, but also from the United States And I think once you see that breakdown, we’re going to see more and more Chinese purchases of US goods, including agriculture goods But I still don’t think they’re going to be able to reach the numbers that they had agreed to in the Phase One deal So let me pick up on two points from both Gary and Wendy, and maybe bring it back to you Peter, for some reactions. Some people have argued, such as Chad Bown mentioned by Peter, that the Phase One deal asked more of China than it could possibly do,, and gave little in return In particular, asked China to remove some of its barriers, and increase its numbers as you’ve described Wendy, but the goals or the objectives, the numbers set, were larger than could possibly be achieved even without a pandemic in place. So they were just unrealistic And one serious criticism had also been that the US gave very little in return. There was no real discussion of bringing down our barriers to Chinese trade, even though that has clearly been escalating over the last three years, our barriers. So Peter, let me turn to you and see your reactions I think you put it just right. I think we did expect a lot of China, and I think we expected it because the President wanted large numbers, and he did essentially nothing in return I mean, remember we had put in place unprecedented tariffs. The tariffs that had not been in effect in the United States, since essentially, the Great Depression and changed them virtually not at all, as a result of the Phase One deal. So I think it was a pretty theatrical and unfortunately, a not well-intended compromise I think China was buying itself sometime Now the question that I’d like to raise, is what will happen if we do change administrations? And the polls now suggest that in fact the Democratic Party is doing well. But I think

a President Biden will be also very constrained The politics is just not favoring trade these days. And I think there are some very good reasons for that. I think we know and I think all of us probably would agree that it creates more income overall, but does very little to distributed across society, in any fair way. And until we have government mechanisms in place that can achieve a better distribution of income in the United States, and in other countries as well, I think it’s going to be very hard to continue making the case that we should increase the size of the pie, by deepening trade relationships So Biden will face that, I think of him as someone who’s going to try to do the best to negotiate between these two different issues, but most likely it will not result in an automatic turn around, at least in the practice of US-China trade policy I think that the relationship will get a lot more civil, a lot more respectful, which is essential as well, but that’s a different story So Gary, oh- I think that one of the key changes will be under a Biden administration overall, but also with respect to China, is there’ll be a lot more focus on working with allies and partners, and collectively raising concerns with China versus unilateral tariffs, and just bilateral trade negotiations. And I think that’s going to be very important going forward, because particularly when you look at an issue like industrial subsidies, and the money China gives to its companies, this is something that really lends itself much more to a multilateral solution, than just a bilateral solution. So I think that the approach of trying to bring in a lot of countries and, countries share our concerns, but they haven’t liked our go it alone approach, and our tariff approach But if we can work with them and again, jointly present to China concerns about how they’re not acting fairly in the international trading system, I think that lends itself to more success than trying to continue this bilateral, and unilateral approach So let me pick up on something alluded to by Peter and Wendy, you just referred to this idea that China is not playing fairly and the Global Trading System. It sounds potentially rather ironic, since the US itself has been accused many times of also not playing fairly in the Global Trading System. So this seems like a bit of a one way accusation, and a political football. Gary reactions to that? Yeah, I entirely agree with Wendy that this needs to be sorted out through a multilateral initiative. And I think there are two reasons, at least two reasons One is that the difference in terms of economic GDP between China, and the US is a narrowing, it’s not clear that the US in relation to China continues to enjoy its monopoly hegemonic position, such that it’s able to make the deals, or extract the the leverage that it has in the past, with regard to China and other countries. So the mix metaphor is a bit, rather than just having these two elephants in the room, I think that the US needs to harness the other elephants of the EU, and the perhaps Eastern European, OECD economies, also Japan and South Korea Not only for being able to present China with a consensus, and realize that it’s not just China against the US, it’s China effectively against the rest of the advanced industrial world, which I think will have a much larger impact simply because of scale. But also because, and this is perhaps the more relevant issue, as the present administration in the United States speak so unilaterally it’s really hard, and provides much reason for suspicion that these say X rotations that are emanating

from Washington, are highly US specific, and selfish, and only for US national interest However, if we’re able to pull together a multilateral group with the US, Japan, and South Korea, and speak more or less with one word, I think that that’s serves to vet whatever the suggestions, or demands might be that are emanating from that group, to indicate that these really are legitimate global concerns, and not simply the self-serving interests of a slice of the American political establishment So let me pose a question to all three of you Are there US behaviors in the global economy right now, that would be also considered unfair, or inappropriate based on its role, its agreements with the WTO? In other words, is China the only a bit of a bad guy in the system, or are we also to blame? Maybe I can start with that. But I do want to take issue with something Gary said, I couldn’t agree more that the purchasing commitments in particular, were to benefit the United States And in fact, when the agreement was announced, a number of our trading partners were very concerned that China would basically divert purchases from other countries, in order to buy more from the United States. And they really put a marker down that this wasn’t This was so-called managed trade and inconsistent with the WTO However, I would argue that a lot of the rest of the agreement, whether it be IPR, forced technology transfer, the financial services market opening, most of those commitments are also going to be extended to the rest of our trading partners. So, they got the benefits from the trade agreement, it, wasn’t just the US interest. Of course, when we do a trade agreement, we’re looking to open the markets to those industries and stakeholders that are going to benefit the United States the most. But that said, again, a lot of what we achieve are just automatically applied to other countries. So I think we just need to keep that in mind. I’d also just take issue with the question as well. Our hands aren’t clean in the WTO, but a lot of this is in response to the WTO rules, not being updated to reflect in particular Chinese practices, and really the reluctance of advanced developing countries, including China to make concessions And so even before Trump, in Washington we’re growing concern about the WTO, and whether it was delivering for the United States. And one of the reasons why the last negotiating round never got off the ground, the Doha Development Negotiation in the WTO, was because advanced developing countries, they wanted more concessions from the developed countries without really willing to open their markets. Now, you can argue that what Trump did in response by basically ignoring the WTO rules, and just putting tariffs in place, whether was that a good policy or not, I don’t think it was And I would have preferred that we stood up for our rights, but in a WTO consistent manner But that said, again, it’s hard for me to put the blame on the United States. We carried the WTO for a long, long time, and then over time, it just failed to deliver both with respect to negotiation, and also a lot of the dispute settlement cases as well. We can get into the whole appellate body issue, but and anyway, the whole system seems to be in urgent need of reform, and that’s what’s being discussed now Okay. I’d love to pick up these issues on the WTO, and we will in just a few minutes. But I want to return to some of the issues that Gary raised, and in particular, to turn over to this issue of technology theft, which many have argued is one of the driving forces behind

the launch of the trade war to begin with. So a question to you Gary, politicians have argued that this is one of the primary causes of the trade war, this issue of technology theft. And there certainly seems to be a considerable amount of evidence that American and other firms from other countries have been the victims of such behavior But economists generally would argue that a trade war is not the way to solve the problem So how serious is the technology theft, and how do you think it should be addressed? So certainly the so-called technology war, and the trade war are connected. It’s hard to say that the technology war caused the trade war, or the trade war caused the technology war. I think they are a truly inseparable and in a important way, say originate from the same impulses. But, as you asked the question, there are clearly specific issues relating to the technology matter that have to do with technology theft. And clearly that is a very serious problem, particularly from the perspective of the United States, in that Christopher Wray, the director of the FBI has been quite vocal about this, citing estimates from the administration and non administration sources, suggesting that between 300 billion and $600 billion a year of valuable technology is being stolen by the Chinese, and identifying a specific individuals that have been arrested prosecuted. Although there, to the best of my knowledge, there haven’t been many actual outcomes of that in terms of sentences But this is a clearly an important issue, and there are a variety of channels to which this happens. There’s the standard reverse engineering approach, there is clearly a leakage of researchers who have been working in American labs, who are conveying proprietary technology to Chinese sources, and then of course there is the technology for markets program, which has been in place for some time, and has been increasingly under attack by American administrations, having once been a rather accepted means of conveying appropriate technology from us companies to Chinese companies So all of these have become more serious as China in certain industries has moved increasingly toward, and sometimes it’s actually occupying the global technology frontier, with the implication that the US is losing space We’re being challenged in the space that it occupies on that frontier, which is quite unsettling for American companies. I would say one last thing, and there’s a lot to say about this issue in terms of how serious it is. It’s clearly serious from the US perspective, from a global perspective, so-called 30,000 foot perspective, an economist will understand the problem of time and consistency, that is in the first period. We’d all love to see all the patents undone, and all the valuable technology that has been accumulated simply freely dispersed across the globe, and see billions of persons as a result, raise their living standards. But then we come to the second period, and the companies and governments that have invested dearly in the development of these technologies, are going to certainly receive a great disincentive to replicate that in future rounds. And that may be the end of technological progress However, it doesn’t seem to have been the case, in which as a result of this technology transfer and theft, that the major American corporations, certainly not Apple,

or a Microsoft, or Amazon, who’s market values ranging between a trillion or $2 trillion. Now they don’t seem to have been severely damaged by this. And it seems that American firms, perhaps rather than actually investing as much as they should, perhaps up to $300 billion a year in technology security measures, instead, they’re working on just moving up the ladder more quickly. I think that it really has led, if anything, to more of an acceleration and advance in technology. That’s not to say there shouldn’t be more robust measures, such as when a Chinese company for which there is some suspicion of theft, or cyber security, enters into the US market, there could be a $25 billion bond posted, so that if indeed there is demonstrable evidence that they have violated US security rules, then they could lose that and be expelled. But I think that’s a very different approach than what’s being taken now So, Peter, what do you think about Gary’s view, that perhaps this is actually just accelerated companies to move up the ladder more quickly? That it has had a positive impact on technology development? First of all, a quick point, I think technology theft has a very distinguished long-standing history in international economic competition Waltham Massachusetts was the place where we established the American textile industry, based on probably even stolen British technology And I think technology theft will be there, as long as countries compete. I don’t think that the Chinese have really done a out of proportion technology theft. I’m sure they have done quite a bit of it. But if you think about how this tech war has evolved, the companies that have come under most attack from the United States, are companies like Huawei, companies like TickTock… The company is not TickTock, but the product TickTock, Alibaba and other companies, which are not stealing technology, on the contrary, they were pretty much a frontier in their respective narrow fields And they all depended on US techniques, but for the most part, they depended on access to US technology and bought it. And what the United States is now in effect doing, is cutting off access to this basic technology Semiconductors, semiconductor design and so, on in order to stop those companies from capturing markets downstream So I think what the Chinese see that as, is the United States wanting to maintain hegemony in advanced technology. And there are reasons for doing that, including for example, military security. But the net effect is to essentially doubt for the Chinese to double down, and to strengthen the hand of the technology nationalists within China, so that all of these other problems like, addressing technology theft, or even addressing issues like subsidies to the tech companies, are becoming much more difficult to solve. So I think in fact, we are at a step down this road, which would be very hard to reverse, because the level of trust now in China about continuing to have interaction with the United States on technology and independence with United States on technology has fallen off So we are at a point now where it will be harder to negotiate, or example subsidy issues than it would have been maybe some years ago. So, I’m not sure this has gotten this far. There are several different ways in which the United States has injured itself, including for example, by burdening American companies that would like to sell abroad, but the United States now has extra territorial prohibitions of the companies it sells to, from they can sell to later on down the road. We have done a lot of damage in terms of scientific cooperation. We have cutoff scientific cooperation

among our universities. So there’ll be a lot of work to be done if one is through reverse the effects of the last- So Peter has raised an important point in the field of economic development. For example, the role of knowledge exchange, the importance of foreign investment, as a key driver of development in the world is really well established. And so as Peter notes, the US has imposed restrictions on itself, and where it’s firms can invest and these measures seem to be if anything likely to be damaging to many countries in the rest of the world, as well as damaging to the firms who want to invest. So how do we balance the interests of the firms, and the value in exchanging technological know-how, with the concerns raised about property rights? Wendy, you mentioned earlier that the issues of the WTO rules not being adequate, and it is clear that the WTO does restrict members from imposing requirements of knowledge transfer, as a means for entering a market, that that’s a violation of the WTO rules. So, what do we do about this? How do we balance these two sides of this equation? This is frankly such a complex issue, and there’s so many aspects to it, including what Gary was saying. Law enforcement in the US, what Chinese companies are doing here, as Peter mentioned, there’s the whole issue of what our companies were doing in China, and there is a lot of criticism, particularly from this administration that our companies in wanting to profit and invest in the Chinese market, we’re willing to turn over a lot of their technology to their joint venture partners, as a means to really gain inroads and a presence in that market. So, how do you… And then on top of it, you have the Chinese Government really pouring in unprecedented amounts of money into state-owned enterprises, and even private firms to build it’s advanced technologies sector And so, policy responses are very difficult to develop in a way that hurt China, but don’t hurt the United States And achieving that proper balance is going to be very difficult going forward. To even make things more complicated, I think the line is blurred now between commercial technology, and military technology. And so more and more, we’re going to see restrictions being imposed due to, “National Security concerns.” China started doing this when it built its internet firewall. The Trump administration is being accused of enthusiastically using this exception to put restrictions in But on the other hand, there is some validity to the fact that the technology that’s dual-use now. And just because you’re selling technology to a commercial company in China, does no longer mean it’s going to be cabined-off and won’t be shared with the military So, there just a lot of complex issues that are going to need to be worked out, and it’s going to be sloppy and messy going forward. And I think the question’s going to be, on which end of the spectrum policy makers will end up on. I do think a couple of things, again, I’m going to come back to. I think even in this area, we really need to work with our allies and partners because if we put very stringent restrictions on the activities of our companies, then you can see companies from other countries filling that void, and selling to China. And one thing I’ve learned as a trade negotiator, and talking to companies through the years, is once you lose market share, it’s very hard to regain it. And it’s very hard to show the country that you’re a reliable supplier The other challenge, and I think Peter alluded to this is that, if we put so many restrictions on the export of technology, then are we just accelerating, China’s desire to be self sufficient? And we’re seeing that now they’re just even pouring more money into the tech sector Xi Jinping is scheduled to go to Shenzhen I think tomorrow, on the 40th anniversary of their market opening for that city, which is the high tech hub, China. And people are expecting

he’s going to be making announcements as even more subsidies, and more financial assistance to ensure that Chinese companies are less reliant on the US and the for technology So again, I don’t really have the answers here. But I think these are the issues that are going to be just front and center in the next administration. And again, I don’t see Biden coming in, and unwinding all these export controls, or unwinding investment restrictions And I see Congress, which we really haven’t talked about, which is, already in this Congress there’s over 300 bills have been formulated to deal with the China challenge. I think Congress on a bipartisan basis, is going to be very active particularly in the technology field. So this is going to be a difficult area to thread the needle going forward, in a smart and effective way So- Gary please Yeah. If I could… I think the most desirable outcome is one of symmetry And there are two types of symmetry, one is warfare, and the other is a collaboration of some sort. You certainly don’t want the warfare of symmetry. China, I think has as many instruments in this as we have, they control over 80% of the earth rare elements that we use in our semiconductors, and smartphones, and magnets that are used in the electric vehicles, and so forth. In the same way that we are proposing to nationalize TikTok, we have many more companies of consequence in China, than they have here, in the automobile sector, in telecommunications, that they could also insist be converted to Chinese ownership So a war of sorts, would I think be deeply damaging to both sides in the world as a symmetric exercise But I think that, as Wendy said, one of the difficulties of courses that these technologies are dual purposes technologies, and to advance perhaps a somewhat crude analogy, over the last 50 years, with the Soviet union and our missile and bomb capabilities, we’ve achieved a state of mutually assured destruction, which has brought about a certain degree of equanimity around the globe. And I think likewise, a symmetry in which we develop all the same cyber skills, basically cyber technology capabilities on Sides can lead to a state of mutually assured disruption. That is it may disrupt our a power system, or our communication system We have the same capabilities to retaliate, and arriving at that system, I think requires a certain degree of confidence, or assurance of both sides, that we’re able to protect ourselves through some sort of retaliatory measures And that then allows for negotiation, as in the SALT talks and other talks with regard to defense to the Soviet union, concerning how to manage these disruptive capabilities. So I’d like to imagine that we are able to migrate in that direction as between the two countries, or as between China and the rest of the world I’d like to use that to lead into our final topic for a few minutes, because our time is flying. So Peter, let me turn to this more of the global issues, that all of you have alluded to beyond just US and China. The current administration openly has criticized the WTO, and threatened to withdraw the United States from it. The opposition right now seems to also be advocating a America first approach. So should the US support multilateralism? Should we worried about this? How can we What’s the best approach going forward? Interesting Judy, and we have already touched on this in several different ways. But I think this

may be actually the clearest distinction between a continued Trump presidency, a Trump presidency on steroids, so to speak, and a Biden presidency I think Donald Trump for decades has been opposed to multilateral initiatives, to international organizations. He would like to withdraw from the WTO, whether he will or not doesn’t… I don’t think it’s so essential, but he’s likely to make the dispute resolution mechanism and most further initiatives, essentially impossible. So for all practical purposes, I don’t think we would see much from multilateral efforts to address the issues we have talked about Biden on the other hand, is likely to turn very clearly to a multilateral approach in addressing trade. Now, at some level it will be very easy because I think the rest of the world will welcome making America sane again, essentially, in its interactions with the rest of the world. So in some ways it will be easy, everybody will want the US back, nice conversations will be taking place But in some ways it will be harder. It will be harder because of the issues we discussed before, the distrust that we have now built up on the part of China, on the part of many people in the United States about China, about continued cooperation and interdependence in which each country depends on the other, in some crucial ways, on technology, or production capabilities, or so on So, we know all about social distancing, I think some kind of commercial distancing is probably going to be with us for some time to come. In the case of the United States, that has to do partly with respecting the disenchantment with the way the American economy, is distributing its its gains. In the case of China with concerns about the US wanting hegemony. I think Gary’s idea of symmetry is great, but on the way there, the next decade or two, when the United States believes that can in fact stay ahead of China militarily, it’s going to be very dangerous So, I can see that coming eventually, but for the near future, it may be that you should expect less from our international institutions, than we did in the wake of the Uruguay round Well there is really a lot of hope four countries agreeing, and then being able to discipline a world trade order. But to the extent that that happens at all, it will be done multilaterally, and I think the Biden administration will make a real effort to engage our allies in that process Let me just make one point about this. I am afraid, this is based in part of my own research, is that we are, the United States and the West in general, losing East Asia in this process We have really undervalued our ties, we have ended some of the initiatives we had to connect the two sides of the Pacific. And each station in the meantime is continuing to develop trade agreements, supply chains, and China is becoming very powerful in that part of the world. So a special subsection of this multilateral approach, is that we should try to find some way to get the US back to East Asia Okay. In the interest of time, I’d love to open up for questions from the audience. Please use the chat for your questions and we will read them to the panel While we’re waiting for- Yeah. While we’re waiting, I wanted to ask Wendy a question. When did in recent weeks made a strong case for the United States under a different administration, perhaps rejoining what was once the TPP, and what is now East Asia’s CPTPP are you optimistic? (silence) Oh, Wendy you’re muted (silence)

Okay, am I unmuted now? Good. Yeah, so recently in the Asia Society, we just published a report about how we could get back in the TPP. My view is there’s some really compelling reasons, that the next administration should seriously, consider it One of the reasons is what Peter just mentioned East Asia is moving along without us, and frankly, this is… Not only was this the growing bright spot of the world, in terms of economic growth, but with COVID now the economic recovery of East Asia is quite impressive. Second, there is more and more talk about how we need to adjust our supply chains, and I think CPTPP, provides a useful framework of trusted supply chains, where we could reduce our reliance on China and trade more with countries that we view as trusted partners But in all of that, I think it’s… I’m not optimistic, I’m not pessimistic, I think that in the immediate term, in a new administration, there’s a lot of domestic work that needs to be done. We need to focus on our own domestic economic recovery with a pandemic, we need to build our competitiveness, we need to rebuild America, so where I come out on, it may be in the medium term, we should look at that as a serious proposition But in the short term, I think we really need to get back in the game in Asia, and I think we can do that through proposing a narrower negotiation at the outset, perhaps on digital trade, perhaps on trade and climate, perhaps on supply chains in medicals products But that would be a way to build trust, build some momentum, as we domestically try and get our act together, and see if we can develop a bipartisan consensus that engagement in a regional agreement like the TPP would be in our interest What makes me a bit more optimistic is that if you look at the recent polling on trade, particularly the Gallup polls, they do show an increasing support of trade. Now, a lot depends on the way the questions are asked, I understand that, but there seems to be a growing recognition, and appreciation of the benefits of trade Also the US-Mexico-Canada Agreement, just passed Congress with one of the strongest bipartisan votes ever for a trade agreement. And that gives me some hope that maybe there is a path forward in the United States, for trade agreements, and the Democrats, and Republicans coming together recognizing that. So it’s going to be an uphill battle, and this isn’t going to be top on anyone’s policy priorities. But I think it’s something we need to continue to focus on, and if we’re not ready for a big negotiation, like a TPP type agreement, then let’s look at something narrower, but we should be in the Asia-Pacific region, working with the other countries there, and integrate ourselves more into that growing and dynamic economy Thank you, Wendy. We do have a couple of questions here in our remaining few minutes, both to Wendy First of all, are there carrots that the US could offer China, and vice versa in order to move us forward into this next phase? That would be, I would say to Wendy (silence) Oh, you’re muted again, Wendy Okay, if the host can just keep me unmuted, that would be helpful. So I mean, it’s a good question because lately we’ve been really focused on sticks, but I would argue that we tried a lot of carrots before that. And we tried to work with China in the lead up to the Trump administration in many ways, by engaging in dialogues, on working on issues that were of importance to them And frankly, a lot of those efforts really did yield encouraging results. But in any trade negotiation, you do want carrots and sticks Obviously one carrot right now would be to unwind some of our tariffs. Peter had mentioned, we still have tariffs in place in $370 worth of

Chinese imports. That could be a carrot if China were willing to put on the table for negotiation, some of these key structural issues that we were discussing earlier So again, I would put that out on the table. I also think there is an opening to work on issues of importance, not just to China, but to other countries in the WTO, and work together in the US, play a leadership role. That’s another carrot we can offer. And I really think in the climate change area, where both the United States and China, and the rest of the world are facing very dire situation, there’s a lot we can do in the trade space there, work together, which in many ways could help build trust between the United States and China A follow-up question. Someone asks, what would happen if the US did withdraw from the WTO? This is a big one that I think we’ll have to end on this question, but I will ask any of the panelists who want to reply to that Well, maybe I’ll just start and say, even if we withdraw all the other countries are going to stay in, or most of them will. They’re not going to follow our lead. And so therefore we’re going to find ourselves again, on the outside, looking in, and no other country will be obligated to provide the kind of market opening that we now enjoy. So I think it would be a terrible strategic blender to withdraw from the WTO. I recognize it needs urgent reform, and I hope those efforts lead somewhere, but again, we’d be shooting ourselves in the foot, and we be opening a vacuum for China and other countries to lead and shape the rules without us So again, it would be a bad decision, something I think that we would regret for years, and years Peter Go on Peter I think you’re muted Peter I can’t, I can’t do it. Oh, okay, good. I think I just want to emphasize what Wendy just said. We are shooting ourselves in the foot. For the last four years, we may have assembled a great threat against the world, by being able to disrupt the world trading system But all of this has essentially hurt us, and has hurt confidence in the global cooperation in ways that maybe we can stop, and I hope that we will But if this extends from international trade, to the personal relations between countries, science, cooperation, educational cooperation, cooperation on climate change, and that is whatever else we do, restoring some respect and stability to world communications will be very important If I could just build upon that, I do think, I think others may agree, this is one of the most important moments for the United States, in that basically the world around the United States is changing And from East Asia, there is a great wave coming Things are changing, not the entirely in the narrow self-interest of the United States I think the United States would best mobilize itself at this time to be able to step-up and do what is still has the capacity to do, which is to be the world’s leader in formulating, and legitimising the rules of the game. Whether that’s trade, technology, perhaps in some ways spilling over into a human rights, or at least use of the social media, cyber security and so forth. We do still, I believe have the chance to be the most effective voice in this area But that special status, I don’t think is going to last for a long time We may have another decade, and I think we need to use this, to try to formulate

with this as much broad based consensus across nations as possible, and strategies for engaging China, so that at the end of the next decade, we are able to believe that we really have established, the best context for the rules of the game, in order to address the many issues that happen raised this morning. It’s going to be a huge challenge particularly given the legacy that the Trump administration leaves If we do have a new administration, there are atmospherics that have to be addressed, in terms of the prejudices. But I think it’s clear that this is a challenge, and we do have hopefully, the will resolve to address it successfully Thank you, Gary. Great way to end our discussion today. Thank you all for your participation, for your questions, and sorry we didn’t have a longer Q&A now, but you appreciate your involvement. And thank you to the Asia Pacific Center for sponsoring this event