What It Takes For An American To Do Business In China
MARY LOUISE KELLY, HOST:
To talk more about this looming trade war, we turn to Claire Reade. As an assistant trade representative for the Obama administration, she was responsible for developing U.S. trade policy toward China. Claire Reade, thanks for being here.
CLAIRE READE: It's my pleasure.
KELLY: So give me some perspective on what has been quite a week, the U.S. and China lobbing threats back and forth. What is your takeaway as we head home from the workweek?
READE: Well, I hope the United States expected the response that they got because any China watcher would tell you that China will not want to come to a negotiating table from a position of weakness. China would definitely respond with an immediate and clear message.
KELLY: The Chinese cannot respond in kind, though, because the U.S. doesn't send $150 billion worth of goods to China, right?
READE: Correct, but the trade relationship is bigger than just the production and export of goods. There's a whole services side to the trade, and it's a number of things that you don't necessarily think about. So it includes tourism, which is in the billions of dollars. It also includes education.
KELLY: Help me set the negotiating table here. If the U.S. and China are hoping to sit down, which remains the hope among most the people we've been interviewing this week, and maybe not come to this full-out trade war, what kind of leverage does the U.S. bring to that table?
READE: I think the U.S. brings without question a certain amount of leverage. My worry is that the U.S. may have an overestimate of its leverage because economists will tell you that if the U.S. blocked every single product made in China from the U.S. market, it would have an effect on China's GDP of about 3 percent. So what that means in plain English is that the U.S. market is not absolutely critical to China's survival.
KELLY: Let me ask you the flip side of that. I mean, stand up and walk around to the other side of the negotiating table with me. What leverage does China bring to the situation?
READE: Yes. It has an autocratic government that can bring all its people in line, and they can therefore tolerate a lot of pain in terms of, you know, loss of sales, loss of investment, et cetera, if the government tells them they need to. And China may be of the view that the combination of the pressure from a democracy and perhaps the volatility of the stock markets may cause the United States to want to come to the table and get a deal rather than live with those adverse consequences.
KELLY: And what about the goal here? One of the original rationales that was laid out for - when President Trump started talking about throwing tariffs at China was protecting intellectual property, protecting the intellectual property of U.S. business people and companies trying to do business in China. How big a problem is that?
READE: That is really a big problem.
KELLY: Are these sanctions that the U.S. has threatened this week the right approach?
READE: What the proposed sanctions do is give everyone a jolt. Nobody quite knows what we are facing, but everyone is paying attention, so the tariffs themselves are not the answer. They are the wakeup call.
KELLY: A wakeup call to what?
READE: I think a wakeup call to China to understand that it should probably try to come to the table with something that is not just a marginal shift in its economic behavior but is a bigger shift and a meaningful shift that can be measured and can be enforced.
KELLY: That's Claire Reade, a former assistant U.S. trade representative, now at the Center for Strategic and International Studies. Claire Reade, thanks very much.
READE: My pleasure.
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