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Trade War

Newsletter 49 - December 11, 2020

Dexter Roberts
Dec 11, 2020
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Welcome to Newsletter 49 of Trade War.

Starting with some disturbing news, China has detained a Bloomberg News staffer on ‘national security’ grounds, someone I know well and have huge respect for, from my time in Beijing. Under its present leadership, China is a becoming an increasingly hostile place for the press to operate in; this terrible news is one example.

President-elect Biden reportedly is considering nominating Pete Buttigieg, former Democratic rival for the presidency, as U.S. Ambassador to China. And Taiwanese-American trade expert Katherine Tai is a top candidate for USTR.

The Chinese Communist Party continues to clamp down tighter on private business and sharp inequality plus a lack of social mobility, are concerns for China’s leadership.

China detains Bloomberg news staffer on ‘national security’ grounds

Deeply disturbing news out of China: one of my former colleagues has been detained on ‘national security’ grounds. I worked with Haze Fan in my last years at Bloomberg in Beijing and she was one of the most driven, most conscientious - and most generous - news folks around. (I thank her in my book for being such a great colleague and it is deeply deserved.) This alarming news about Haze needs all the attention it can get.

Twitter avatar for @hkfp
Hong Kong Free Press HKFP @hkfp
China detains Bloomberg News staffer Haze Fan on suspicion of ‘national security’ offences hongkongfp.com/2020/12/11/chi… @Hazeology @business @Bloomberg #china @CPJAsia @ifjasiapacific @IFEX
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10:52 AM ∙ Dec 11, 2020
125Likes112Retweets

Ambassador Buttigieg for China?

Axios is reporting that Pete Buttigieg could be appointed by president-elect Biden as the next U.S. Ambassador to China. “Letting him deepen his foreign policy chops could boost Buttigieg's future, since many inside the Democratic Party believe his return as a presidential candidate,” Axios writes.

Sharp, calm, clear-eyed..

He would be “great: sharp, calm, [and] clear-eyed on the challenge,” tweets MacroPoloChina’s Matt Sheehan, who, with his colleague Holly He, did a short interview with Buttigieg where they asked him about China and trade early this year.

Twitter avatar for @mattsheehan88
Matt Sheehan @mattsheehan88
Rumor mill says Pete Buttigieg in line for US Ambassador to China. Think he'd be great: sharp, calm, clear-eyed on the challenge + thinking long term. This January in Iowa, @JianingHollyHe & I got to ask Pete how his approach to China would impact Iowans:
soundcloud.comPete Buttigieg talks China policy in Iowa - Heartland Mainland: the Iowa China Podcast.Pete Buttigieg outlines his approach to China, and how that impacts Iowa, on the Heartland Mainland podcast.
3:59 PM ∙ Dec 9, 2020
18Likes8Retweets

You’ll waste away…

Jorge Guajardo, a former Mexican Ambassador to China, has a different take. His advice to Buttigieg: take Australia as a diplomatic posting, instead. “That’s where the US will stand up to China, and demonstrate to its lies that it’s a worthy partner,” he tweets.

“In China you’ll waste away and no one will see you. All done through capitals, not embassies,” he writes, referring to the fact that the US-China relationship is mediated through Washington-based senior officials and those in Beijing - not the ambassador on the ground.

Twitter avatar for @jorge_guajardo
Jorge Guajardo @jorge_guajardo
My advice to @PeteButtigieg , take Australia. That’s where the US will stand up to China, and demonstrate to its lies that it’s a worthy partner. There needs to be a high profile ambassador. In China you’ll waste away, no one will see you. All done through capitals, not embassies
Twitter avatar for @axios
Axios @axios
SCOOP: President-elect Joe Biden is considering a high-profile ambassadorship for Pete Buttigieg, possibly sending him to China, people familiar with the matter tell Axios. https://t.co/jZwa6cDHzQ
3:23 AM ∙ Dec 9, 2020
913Likes129Retweets

Mandarin-speaking USTR?

Biden may choose a Mandarin-speaking, former China enforcement head at the U.S. Office of the Trade Representative, as the agency’s new director. Katherine Tai, the daughter of Taiwanese immigrants to the US. and a Harvard Law School graduate, “can help the US confront Beijing on issues like forced labour and intellectual property rights while preserving a functioning trade relationship between the world’s two largest economies,” reports the the South China Morning Post.

“Lawmakers in both chambers were impressed by Tai’s handling of the negotiations in Congress with the Trump administration over changes sought to the US-Mexico-Canada deal that replaced Nafta,” the Hong Kong-based paper writes.

“She not only brings trade expertise to the job, but an ability to problem solve with all sides of the political spectrum,” tweets Wendy Cutler, a former U.S. trade negotiator. “Those skills will be needed as we navigate a post-Trump trade policy.

Twitter avatar for @wendyscutler
Wendy Cutler @wendyscutler
Very exciting to hear about nomination of #Katherine Tai as USTR. She not only brings trade expertise to the job, but an ability to problem solve with all sides of the political spectrum. Those skills will be needed as we navigate a post-Trump trade policy
12:24 AM ∙ Dec 10, 2020
115Likes26Retweets

Failure borne of ‘America First’ intransigence

Focusing on the key state of Washington, long one of the biggest state-level trading partners with China , two lawyers with deep experience representing American companies in China, lay out why they think the trade war has been a bust; instead, they advocate the U.S. take a multilateral approach.

In 2019, the export of Washington products hit by China’s retaliatory tariffs —including wheat, lumber, and ultrasound equipment - fell by 23% - or almost a quarter - compared to the year before, write Amy L. Sommers and Michael Burke in the Seattle Times. The Trump policy is “a failure born of an “America First” intransigence that ignored our friends and didn’t leverage them into the broader coalition necessary to address a changing China.”

“A multilateral approach promises to untangle the knot that sits at the center of the tangled ball of Trump’s China policy: Countries falling into line with the U.S. risked being hung out to dry when China retaliates. The Biden administration would understand that effective policy requires weaving together a consensus to tackle this China challenge.”

Twitter avatar for @AmySommers1
Amy Sommers (she/her) 李雅美 @AmySommers1
My buddy @meburke4 & I go way back to the days when China biz felt like Silicon Valley during the dotcom period, abounding in optimism. For mos, the Q has been what course a Biden Admin would pursue vis-a-vis 🇨🇳: Same as Trump? Mike & I have views seattletimes.com/opinion/the-pa… 1/
seattletimes.comThe path to a new China policyRather than leaving allies at the mercy of China’s scapegoating and trade sanctions, Biden understands the imperative to stick together, and has stated, “ poked our finger in the eyes of all of our allies out there ... The way...
6:48 PM ∙ Dec 6, 2020
11Likes7Retweets

‘Admiring the problem’

Here is an interesting tweet thread by Stanford professor and former U.S. Ambassador to Russia, on the Trump team’s approach to China. As Michael McFaul writes, Trump and co. have done a good job at recognizing the problems in the relationship, but have not come up with ways to solve them.

“I applaud the Trump administration diagnosis of the China challenge. The 2017 National Security Strategy rightly focused on great power competition -- China and Russia -- as needing more attention,” McFaul writes. “But how many times can we keep "admiring the problem" without following up with bold policy responses commensurate [to] the size of the challenge?”

“If this moment [is] really the beginning of Cold War 2.0 as Trump, Pompeo, et al claim, then why have not they organized a Bretton Woods 2.0? A Marshall Plan 2.0 to compete with the PRC's BRI, AIIB. etc? Where is the NATO 2.0 in Asia? Why did they pull out of TPP?”

Twitter avatar for @McFaul
Michael McFaul @McFaul
When I was in government, I remember Ambassador Bill Burns saying many a time in meetings that we were doing a great job "admiring the problem." But we were not solving the problem. That comment reminds me of Trump & team's China policy. THREAD 1/
8:52 PM ∙ Dec 8, 2020
380Likes56Retweets

Private business: must follow the party

China’s powerful leader Xi Jinping is curbing the power of private businesses and increasingly expects them to follow the dictates of the Chinese Communist Party, reports the Wall Street Journal’s Lingling Wei.

“The government is installing more Communist Party officials inside private firms, starving some of credit and demanding executives tailor their businesses to achieve state goals,” Wei writes.

“The view that state planners are better at running a complex economy has gained currency this year, with Beijing relying heavily on state directives to engineer a V-shaped recovery from the shock of Covid-19.”

Twitter avatar for @Lingling_Wei
Lingling Wei 魏玲灵 @Lingling_Wei
Communist Party committees in the workplace — Behind China’s clampdown on private companies. “We have no choice but to follow the party.” My latest on China’s political economy @WSJ
wsj.comChina’s Xi Ramps Up Control of Private Sector. ‘We Have No Choice but to Follow the Party.’Push driven by a conviction that markets and entrepreneurs are not to be fully trusted; ‘the market-reform camp is all but gone’
3:23 PM ∙ Dec 10, 2020
41Likes23Retweets

China lags US, Russia, most of Europe, in social mobility

Growing inequality marked by a lack of social mobility is a growing concern for the leadership in China, reports Bloomberg News.

China only ranks 45th out of 82 countries, below the U.S., Russia and most of Europe, in social mobility, according to a new World Economic Forum index; China’s 5.8 million millionaires and 21,100 residents with wealth above $50 million as of the end of last year, puts it second only to the U.S.

“A 2018 report by the Organisation for Economic Co-operation and Development found that it would take seven generations for someone born into the bottom 10% in China to approach mean income, compared with five in South Korea and four in Japan,” Bloomberg reports.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
“China lags the U.S., Russia and most of Europe in social mobility” - fascinating story on growing inequality, now one of China’s biggest challenges
bloomberg.comBloomberg - Are you a robot?
7:02 PM ∙ Dec 10, 2020
4Likes2Retweets

Notable/In Depth

China “does not have to do particularly well to catch up with the U.S. in terms of overall GDP, since it has four times as many people,” writes David Dollar, the former U.S. Treasury rep in China.

Twitter avatar for @TomOrlik
Tom Orlik @TomOrlik
China "does not have to do particularly well to catch up with the U.S. in terms of overall GDP, since it has four times as many people" Former U.S. Treasury China rep @davidrdollar speaking some uncomfortable truths for the China hawks brookings.edu/wp-content/upl…
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11:19 PM ∙ Dec 8, 2020
35Likes17Retweets

China’s aircraft stuck on runway

While China is on a path to becoming a high-tech superpower in many industries, that’s not the case for its commercial aircraft business. Check out this short video put together by CSIS’ Scott Kennedy on China’s travails in its goal of creating a rival to Airbus and Boeing.

Twitter avatar for @KennedyCSIS
Scott Kennedy @KennedyCSIS
China is on a path to be a high-tech superpower in many sectors. But not in commercial aircraft, where China has suffered decades of frustration. Watch @CSISCBE's latest short video report: csis.org/programs/chine…
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2:02 PM ∙ Dec 7, 2020
15Likes11Retweets

China may have talked big about its Belt and Road Initiative, but recently overseas lending has fallen off a cliff, reports the Financial Times.

Twitter avatar for @JKynge
James Kynge @JKynge
#China's overseas lending falls off a cliff as a multitude of problems with the Belt and Road Initiative pile up and other factors also take their toll @Jonthn_Wheatley Excellent data by @KevinPGallagher ft.com/content/1cb3e3…
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3:10 AM ∙ Dec 8, 2020
41Likes22Retweets

Purchasing power parity may be a popular alternate measure of economic strength because it removes market exchange distortions, but it also doesn’t count productivity, and that’s a problem, points out a report by the Peterson Institute for International Economics.

Twitter avatar for @PIIE
Peterson Institute @PIIE
Purchasing power parities (PPPs) remove distortions caused by market exchange rate movements, but also remove other factors important to relative price levels, like productivity differences, which should be included when comparing economic size/strength.
piie.comUsing purchasing power parities to compare countries: Strengths and shortcomingsGood international economic policy requires good comparative data on national economic performance. In May 2020, the World Bank published the latest comprehensive update of purchasing power parities (PPPs), as part of the International Comparison Program.
6:12 PM ∙ Dec 7, 2020
3Likes1Retweet

Upcoming speaking

China's global push for influence online - in Taiwan, Hong Kong and the U.S. Please tune in to this timely discussion I am joining on December 17. You can register here.

Twitter avatar for @ACScowcroft
Scowcroft Center @ACScowcroft
Tune in on December 17 as @AmyStuddart, @pumashen, @dtiffroberts, and @etbrooking discuss the changing nature and role of China’s efforts to exert influence online and around the world. Hosted by @ACScowcroft, @DFRLab, and @IRIglobal. Register today.
atlanticcouncil.orgCountering Chinese disinformation - Atlantic CouncilA timely discussion examining key takeaways about Chinese disinformation efforts from new publications by the Atlantic Council and International Republican Institute.
4:01 PM ∙ Dec 10, 2020
1Like2Retweets

And recent speaking..

In case you missed it, here is the video of my recent conversation at the Commonwealth Club of California with acclaimed China author Mei Fong, about how demography, inequality, and stalled reforms are holding back China's economic future.

Twitter avatar for @dtiffroberts
Dexter Roberts @dtiffroberts
ICYMI, here's the video of last week's conversation with @meifongwriter about how demography, inequality, and stalled reforms are holding back China's economic future; at @cwclub youtu.be/XsLqd57vKrE via @YouTube
youtu.beThe Myth Of Chinese CapitalismAs discussed in his new book The Myth of Chinese Capitalism, Dexter “Tiff” Roberts will describe how surging income inequality, an unfair social welfare syst...
4:05 PM ∙ Dec 8, 2020
4Likes2Retweets
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