Thoughts on last week's US-China trade deal:
(1) This is a massive, seismic shift in Chinese policy.
Since the media can’t be bothered to tell the whole story, here's my take on what REALLY happened…
bloomberg.com/news/articles/…
Since the media can’t be bothered to tell the whole story, here's my take on what REALLY happened…
bloomberg.com/news/articles/…
(2) In 2016, the U.S. imported $463 billion in goods from China, but we sold them only $116 billion. That’s a $347 billion “trade deficit”, e.g. over 1/3 of a TRILLION dollars LEFT the US
Rinse and repeat for decades, and you have our current situation
thebalance.com/u-s-china-trad…
Rinse and repeat for decades, and you have our current situation
thebalance.com/u-s-china-trad…
(3) The Chinese have been beating us for decades. They know it, we know it, they know we know it, yet nothing has been done about it. So how did we get here?
Well I’m no economist, but even I can figure this out…
i.imgur.com/ERFb1pk.jpg
Well I’m no economist, but even I can figure this out…
i.imgur.com/ERFb1pk.jpg
(4) China uses four key moves to its advantage over the US. (Five, if you count being strategically fluent):
- A low standard of living for its citizens, which allows them to pay very low wages compared to other countries
- A currency — the Yuan — that they can [and do] manipulate to their advantage
- A near-complete lack of environmental controls, until very recently
- And an unenforced intellectual property policy
- And an unenforced intellectual property policy
(5) Let’s focus on that last one — intellectual property theft — since it’s the “dirty little secret” everyone knows but no one likes to talk about…
industryweek.com/intellectual-p…
industryweek.com/intellectual-p…
(6) When companies do business in China, there’s a VERY high risk of intellectual property theft. Chinese firms unapologetically copy products, or simply over-produce them and “backdoor” the extra goods for easy profit.
insurancejournal.com/news/national/…
insurancejournal.com/news/national/…
(7) In the case of technology products, the problem has gotten so bad that one U.S. official called Chinese cyber theft of intellectual property “the greatest transfer of wealth in history”.
foreignpolicy.com/2012/07/09/nsa…
foreignpolicy.com/2012/07/09/nsa…
(9) Enter Robert Lighthizer.
He is the US Trade Representative (USTR), sworn into office in March.
americanmanufacturing.org/blog/entry/pre…
He is the US Trade Representative (USTR), sworn into office in March.
americanmanufacturing.org/blog/entry/pre…
(10) The US Trade Representative negotiates “directly with foreign governments to create trade agreements, resolve disputes, and participate in global trade policy organizations”.
ustr.gov/about-us
ustr.gov/about-us
(11) In matters of foreign trade, Lighthizer is considered a fierce negotiator, and outspoken ally of US Steel.
He’s known as “The Hammer”.
bloomberg.com/news/articles/…
He’s known as “The Hammer”.
bloomberg.com/news/articles/…
(12) In 2001, Lighthizer vocally criticized US officials who supported China’s entry into the World Trade Organization, arguing the move would worsen our trade deficit and hollow out our manufacturing sector.
He was right.
americastradepolicy.com/growth-in-u-s-…
He was right.
americastradepolicy.com/growth-in-u-s-…
(13) Back in August, Trump authorized an inquiry into China’s alleged theft of intellectual property.
He gave Lighthizer one year to decide whether to launch a formal investigation of China’s trade policies on intellectual property.
dw.com/en/us-presiden…
He gave Lighthizer one year to decide whether to launch a formal investigation of China’s trade policies on intellectual property.
dw.com/en/us-presiden…
(14) See those guys behind Trump?
Treasury Secretary Mnuchin, Commerce Secretary Ross --- and US Trade Representative Robert Lighthizer.
i.imgur.com/En0UT09.jpg
Treasury Secretary Mnuchin, Commerce Secretary Ross --- and US Trade Representative Robert Lighthizer.
i.imgur.com/En0UT09.jpg
(15) The public THREAT of a Section 301 investigation into China’s Intellectual Property practices was Trump’s opening move.
So what’s a 301 Investigation? Why would China care?
reuters.com/article/us-usa…
So what’s a 301 Investigation? Why would China care?
reuters.com/article/us-usa…
(16) Section 301 of the Trade Act of 1974 authorizes the President to take any action within their power to impose trade restrictions on foreign countries engaging in unfair trade practices.
lexology.com/library/detail…
lexology.com/library/detail…
(17) China operates unfairly. On many levels. They have for decades.
We know. They know. Lighthizer knows as well as anyone.
If he proves it via the 301 investigation — and he undoubtedly would — Trump can remedy the situation however he sees fit.
ustr.gov/about-us/polic…
We know. They know. Lighthizer knows as well as anyone.
If he proves it via the 301 investigation — and he undoubtedly would — Trump can remedy the situation however he sees fit.
ustr.gov/about-us/polic…
(18) China, having lost significant leverage, took a defensive stance.
Xi openly called for “restraint”.
bloomberg.com/news/articles/…
Xi openly called for “restraint”.
bloomberg.com/news/articles/…
(19) Meanwhile, despite threats to do so during the campaign, now-president Trump declined to name China a currency manipulator, and delayed probes into other imports that could directly impact them.
reuters.com/article/usa-ch…
reuters.com/article/usa-ch…
(20) Why?
Because in Chinese culture, saving face — MiànZi (面子) — is so important in that it can make or break a deal.
internchina.com/face-%EF%BC%88…
Because in Chinese culture, saving face — MiànZi (面子) — is so important in that it can make or break a deal.
internchina.com/face-%EF%BC%88…
(24) Remember, Trump gave Lighthizer a YEAR to DECIDE whether to open a formal investigation.
This put him in a position of strength.
economist.com/news/finance-a…
This put him in a position of strength.
economist.com/news/finance-a…
(25) Experts said the long lead time could allow Beijing to discuss the issues raised by Washington without being seen to cave to pressure…
straitstimes.com/world/united-s…
straitstimes.com/world/united-s…
(26) "Ensuring President Xi does not lose face is a top priority for China,” a Chinese official said.
Check.
news.abs-cbn.com/overseas/04/07…
Check.
news.abs-cbn.com/overseas/04/07…
(28) China displays its power over Kim Jong Un.
Trump thanks Xi Jinping, calling him “very bold”. Thereby “giving face”. 面子
“Good Cop”
theguardian.com/world/2017/sep…
Trump thanks Xi Jinping, calling him “very bold”. Thereby “giving face”. 面子
“Good Cop”
theguardian.com/world/2017/sep…
(30) The media, as usual, was exactly wrong.
China has no desire for trade war. Or military conflict, for that matter.
reuters.com/article/us-chi…
China has no desire for trade war. Or military conflict, for that matter.
reuters.com/article/us-chi…
(31) Meanwhile, “The Hammer” goes to work on Mexico.
More on that another time.
farmpolicynews.illinois.edu/2017/08/nafta-…
More on that another time.
farmpolicynews.illinois.edu/2017/08/nafta-…
(34) THIS is how you greet the President and First Lady of the United States of America in 2017.
i.imgur.com/Z1PgxHX.jpg
i.imgur.com/Z1PgxHX.jpg
(35) Also, this.
These are not “meaningless” gestures by the Chinese.
They were open to a deal.
cnn.com/2017/11/07/pol…
These are not “meaningless” gestures by the Chinese.
They were open to a deal.
cnn.com/2017/11/07/pol…
(38) $37 Billion for Boeing, including 40 wide-body 787s.
Those are built right here in South Carolina, my friends.
reuters.com/article/us-tru…
Those are built right here in South Carolina, my friends.
reuters.com/article/us-tru…
(39) But Trump got something else in the deal. And it’s not being reported.
A fundamental change in Chinese Intellectual Property enforcement is underway.
reuters.com/article/us-chi…
A fundamental change in Chinese Intellectual Property enforcement is underway.
reuters.com/article/us-chi…
(40) "We will no longer tolerate the audacious theft of intellectual property. We will confront the destructive practices of forcing businesses to surrender their technology to the state and forcing them into joint ventures in exchange for market access."
nytimes.com/aponline/2017/…
nytimes.com/aponline/2017/…
(41) As I said earlier, this is a foundational change in Chinese policy. A truly level playing field.
Including opening up their financial system to foreigners.
Unprecedented.
todayonline.com/world/asia/lan…
Including opening up their financial system to foreigners.
Unprecedented.
todayonline.com/world/asia/lan…
(42) It all began with Trump’s U.S. Commerce Department, under secretary Ross, and US Trade Representative Lighthizer.
A Section 301 investigation on theft of U.S. intellectual property, patents, and trademarks is what led to this change in China.
i.imgur.com/uftvYHb.jpg
A Section 301 investigation on theft of U.S. intellectual property, patents, and trademarks is what led to this change in China.
i.imgur.com/uftvYHb.jpg
(43) It's been 43 years since the Trade Act of 1974 was enacted.
In the interim, not ONE President has done this...until @realDonaldTrump was elected.
In the interim, not ONE President has done this...until @realDonaldTrump was elected.
