Claire Rclairereade.jpgeade is senior counsel at Arnold & Porter in Washington, DC and a senior associate with the Freeman Chair in China Studies at the Center for Strategic and International Studies. She previously served as the assistant U.S. trade representative for China affairs in the Office of the U.S. Trade Representative from 2010 to 2014 and as the chief counsel for China Trade Enforcement from 2006 to 2010. Ms. Reade was responsible for implementing U.S. trade policy toward China, Hong Kong, Macao, Taiwan, and Mongolia.

Claire Ready spoke for YCW Beijing in November 2016.



Young China Watchers (YCW): U.S. Congress has yet to ratify the Trans-Pacific Partnership (TPP), and President-elect Trump has vowed to withdraw from the agreement on his first day in office. Will this create a vacuum of influence in the region for China to fill, particularly with its own trade agreement, the Regional Comprehensive Economic Partnership? Will the other 11 countries that signed on to the TPP gravitate toward a new agreement with China, and what does that mean for America’s role in the Asia-Pacific?

Claire Reade (CR): I don’t think China is ready to take up the kind of leadership that the TPP represented, in terms of trying to build new rules that are needed for the new trade challenges that we face. The old trade agreements focused on tariff barriers, but as tariffs have dropped, real issues for trade are shifting toward non-tariff concerns, including countries using regulatory rules to create industrial policy goals to try and favor domestic companies—eg, misuse of what we in the U.S. call antitrust laws. Also, there is now so much data flowing back and forth over the internet and big data being collected that we need to establish rules to allow those flows so companies can efficiently use that information in day-to-day business. It’s a challenge to try to figure out what new rules will help 21st century trade work; I don’t think China is really ready to lead internationally on these new areas.

Another concern in this context is transparency and following the rule of law. For example, it is critical for government to put out draft policies for the public to see, give them enough time to comment, and then take the comments into account. That sounds boring but it is really important for predictability and trying to drive better rules. TPP worked on this.

Now what? It’s conceivable if you take the U.S. out of the TPP equation, suddenly other TPP parties don’t get enough to make their concessions worth it. If you take one piece out, you may no longer have a viable approach.

 

YCW: Trump has also promised to erect high tariffs on Chinese goods, prompting a potential trade war with Beijing, which has promised a ‘tit-for-tat’ response. Many Chinese scholars have argued that China would not be hurt by a trade war. Do you agree with their assessment, and what would be the long-term economic consequences of a trade war?

CR: Trump has nominated a number of economic advisers who are going to understand extremely well the potentially disruptive economic implications of high tariffs. They are going to have information at their fingertips telling them the impact of enforcing a 45% tariff on every product. They will bring that information to bear and will be able to point out any systemic impacts on the globe, the U.S. stock market, as well as on pensions and 401k plans. Hopefully, that will put a stop to serious risks. If you look at the impact of tariffs from a macroeconomic perspective, experts indicate that neither economy would actually collapse. But it definitely would cause damage and disruption to both economies and that could be avoided.

 

YCW: During your time as the Assistant U.S. Trade Representative for China Affairs, you were involved in nine cases brought against China by the World Trade Organization (WTO). The U.S. and European countries have filed anti-dumping cases against China through the WTO in recent years, accusing the country of discarding its excess steel supply in foreign markets. Do you think the cases will affect China being given market status within the WTO in December?

CR: It’s ironic that this is a fight because Chinese leaders themselves have repeatedly said that China is not yet a market economy. China’s Third Plenum decisions talked about the importance of letting the market play a role in the allocation of resources, and leaders admitted that the market is not yet playing a decisive role. There’s a real disconnect between Beijing’s concerns here and its own admission of its economic status.

But to the Chinese, there is a perception that there was supposed to be an automatic ending of any of the alternative rules in the technical trade laws related to anti-dumping after 15 years [of WTO membership]. So politically, I think for China that’s a concern. When you look at the situation overall in economic terms, over 90% of trade from China comes in without any kind of anti-dumping duties attached, so it’s not a major economic problem. At the same time, it obviously matters to China from this broader political perspective. That said, if you look at the relevant WTO documents, the language is not cut-and-dry. We’ll have to take it a step at a time; the next critical point is going to be looking at the legal merits of whatever decision the WTO makes.

 

YCW: You are a strong advocate of the Strategic & Economic Dialogue (S&ED) between the U.S. and China. Should parts of the S&ED be reformed, and what do you think are the prospects of the dialogue remaining in place?

CR: It’s hard to know Trump’s views on keeping these institutions in place, but history has shown the value of communication. In some ways, we are so used to the idea that we can automatically pick up the phone and talk about issues with other leaders, that we forget none of that can be taken for granted in China. Developing a relationship and potentially cooperating with our counterparts is really important. We may be able to have selected high-level discussions that solve a few headline problems, but a lot of these other issues require more detailed discussion. In that sense, it’s a no-brainer that we need to have productive exchanges.

However, under President Xi Jinping’s administration, it’s not clear whether decisions have to go all the way to the top or if they can be made at a level below him, say, by vice premiers. If the S&ED structure could permit cabinet members to actually have meaningful interactions and potentially build meaningful relationships with their vice premier counterparts in China, it could be very interesting. That would reduce the concerns about the S&ED just offering formalized presentations without genuinely tackling issues.  My other suggestion is that it’s important to have one person on each side who can triage the issues and make decisions across subject areas, particularly on the Chinese side, so there is concentrated power to make progress.

 

YCW: How would you characterize the U.S.-China relationship at this moment, today? In your view, what is the greatest threat to the relationship?

CR: I would say the U.S.-China economic relationship is highly interdependent, and increasingly so because we’re in a globalized world. At the same time, the mood is darker in the United States. There is a sense that nationalism is on the rise in China, with ongoing, and maybe worsening, problems for foreign-owned businesses in China. The increasing sense of a protectionist Chinese drive favoring national champions is a big concern. There is also excess capacity in key Chinese sectors, demonstrating problems with how China’s economy is functioning; that is having profound and adverse effects on the global market.

China has too big an impact globally to have these injuries shrugged off by others. Given the pain being caused, it is not working for China to claim that it is a developing country and we need to wait without asking for changes in its policies. This darkening mood was developing before the U.S. election so I don’t think it’s a Trump effect, but Trump has taken a very vocal stance on the idea that China may be “cheating.” That leaves us with the question of how we rebalance our relationship, manage our interdependence, and ultimately encourage opportunities to move forward in a positive direction, while avoiding wasteful conflict. This is a real challenge.

 

  • Interview by Jordyn Dahl

 

Speaker Interview – Claire Reade: Senior Counsel at Arnold & Porter
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