Realigning the US-China Trade and Economic Relationship





50 years after President Nixon and Premier Zhou Enlai’s landmark “handshake across the Pacific Ocean”, the year 2022 saw an increasingly tense relationship between the world’s two largest economies. The war in Ukraine and the supply chain bottlenecks have pushed up oil and food prices in the US, exacerbating the inflation spike of 2021.


On June 20th, during the 8th China and Globalization Forum, the Center for China and Globalization (CCG) held a special online discussion between Chinese and US think tanks including six renowned experts on trade from the US and China to discuss the trade and economic relations between the US and China. Henry Huiyao Wang, Founder and President of CCG, hosted the dialogue.

Wang Huiyao:

Distinguished Speakers, forum participants. CCG Friends, colleagues. Good evening and good morning, depending on where you are. Thank you for joining the eighth edition of CCG annual China Globalization Forum. My name is Henry Huiyao Wang. I’m the founding President of Center for China and Globalization.

This has been a day full of insightful and productive discussions. Following two online dialogues with former US Treasury Secretary Henry Paulson and historian Niall Ferguson, and Round Table participated by over 20 ambassadors in China and China-Europe Round Table. All happened today. So, this is our last section of the day. I hope everyone enjoyed the form so far. Now we are very honored and pleased to present you the third forum: Special Online Program, China US Think Tank Dialogue: Realigning the US China Trade and Economic Relationship, Inflation, Tariffs and Way Forward.

I’m delighted to see some of my good friends here. Participants from China are represented by Minister YI Xiaozhun, Former Deputy Director-General of WTO, and also former Vice Minister of Minister Commerce of China, and Mr. JIN Xu, President of the China Association of International Trade and Former Deputy Director Gerneral of America and Oceania Affairs Department of MOFCOM. Participants from the US are represented by Craig Allen, President of the US-China Business Council (USCBC), and also Ambassador Wendy Cutler, Vice-President of Asia Society Policy Institute, and former Acting Deputy US Trade Representative. Adam Posen, President of Peterson Institute for International Economics and Jeremie Waterman, President of China Center and Vice-President of US Chamber of Commerce.

2020 is the 50th anniversary of President Nixon’s icebreaking visit to China, which led to the normalization of (the China-US) diplomatic relationship. Half a century later incredible economic interdependence (has been built) between the two largest economies in the world. 50 years later, the bilateral relations are regretfully beset by the decoupling trend, if that is going to be, an intensify strategy competition. So, among the recent meetings and actions between Beijing and Washington, we are nevertheless witnessing more dialogues and more communications. The Biden administration is fighting soaring inflation, while the midterm election are only four months away. China is still on the defense against the COVID-19 and facing considerable challenges in meeting 5.5% growth target of the year. I had a dialogue with the chief economist from the World Bank on Global Economic Prospect, just last week, and he was forecasting China’s (GDP growth rate) below 5.1% to 4.3% according to latest Global Economic Prospect repor (released by) the World Bank. So among all the domestic calls for Washington to remove the tariffs imposed by the Last Administration on the Chinese goods. China can also do the same. Well, economic headwinds prompt the two governments to rethink the strategies in which the sour trade economic ties can be somehow reasonably relinked. So we really look forward to your thoughts.

First, I’d like to introduce our six distinguished panelists invited today. First is Craig Allen, he is the President of US China Business Council, but prior joining the USCBC, Craig had a long, distinguished career in the US public service. Craig worked in the US Embassy in Beijing between 1992 to 1995, and served as Minister Councilor in 2002. He later become a Deputy Assistant Secretary for China fo the U.S. Department of Commerce, and he was appointed the United States Ambassador to Brunei in 2014. Our next US guests is Wendy Cutler. She is the Vice President at Asia Society Policy Institute and the Manager Director of Washington DC office. She joined the ASPI following a very impressive career of nearly three decades as a diplomat and negotiator in the office of the US Trade Representative (USTR), where she also served as the Acting Deputy US Trade Representative. She worked on a range of bilateral, regional and multilateral trade negotiations and initiatives, including the Trans-Pacific Partnership (TPP), US-China negotiations and the WTO Financial Service negotiations. Now, I’d like to also introduce JIN Xu. he is the Chairman of China Association of International Trade and is the President of the University of International Business and Economics, International Development Cooperation College. He has a very rich professional experience in the international commerce and diplomacy, having worked in various embassies in Turkey, UK and the US, and served as a deputy director of journal of Department American and Oceania Trade Affairs MOFCOM. And now he is also president of Canada International Business Officials of MOFCOM. Our next US guest, Adam Posen has been the President of Peterson Institute for International Economics since January 2013, so almost ten years ago. During his tender presidency, the Peterson Institute has won global recognition as the leading independent think tank of International Economics. So Peterson Institute has developed a high level recognition and research partnership in the People’s Republic of China. And prior joining Peterson, Adam Posen also worked as an external voting member on the Monetary Policy Committee for the Bank of England, and was consulted by the UK Cabinet office for the London G20 summit of 2009 during the global financial crisis. So that was also quite a while ago. Now we are coming to another guest from the US is Jeremie Waterman. He is the President of the China’s Center and Vice President for the Greater China and the US Chamber of Commerce, one of the very largest commerce (Chamber) in the US. He has pioneered a number of Chamber business initiatives focusing on China, such as US-China CEO Dialogue, which I attended once in Washington. Before joining the Chamber, he also served at the Office of Congressional Affairs in Africa Office at the Office of the United States Trade Representative. Last but not at least, I’d like to introduce my friend, Minister YI Xiaozhou. He served two terms as the DDG, the Deputy Director General of the WTO from 2013 to 2020. He represented China as a key negotiator in China’s WTO Accession process. Prior to become China’s ambassador to the WTO in 2011, he was the Vice Minister of Commerce in charge of multilateral and regional trading negotiation and cooperation. He also worked as a diplomat at the Chinese Embassy in the United States for more than four years, from the late 1980s to early 1990s. So that’s actually a quite impressive panel we’ve got tonight.

So, I would like to start with this order as we introduced. The US and China have actually…after more than four decades of diplomatic relations, 50 years after Nixon’s visit, everything had really gone well until five years ago, when President Trump came up. Things started to really deteriorate. Now we are facing such a big challenge. We are facing a global pandemic. We are facing the conflict of Ukraine. The war is going on right now. We are facing the energy crisis, food crisis, high inflation and slow economic growth in China and the US. So, what’s your take as a businessman, as a trade negotiatior, as a government representative, for the sake of the world, and making things to avoid the catastrophe happening if we continue walking on the path we are currently on. Perhaps Craig you can start first, since you’re leading a big, very large of US-China Business Council.

China needs to achieve higher quality growth

Craig Allen:

Thank you, Henry, and thank you to all CCG colleagues for putting this meeting together. We need far more US-China dialogue, so we are grateful for your leadership. And it’s a great pleasure for me to be here with when JIN Xu, Adam, Jeremie and YI Xiaozhun, some old friends that I have not seen for a while. So also, there’s never been a better time for this discussion, as the World Bank has cut its forecast for global GDP growth in 2022 to 2.9 %, down from 5.7% in 2021. So, a cutting of the projected growth rate by 50%. And that is has enormous implication. But the World Bank suggests that there are three reasons for the downgrade, Russian’s invasion of Ukraine, blockdowns in China and supply chain disruptions.

So, I’ll make some very brief comments about American and business perceptions, particularly towards trade with Asia and with China. If I had to summarize American businesses overall orientation, I would say that there are many short-term challenges, but still enormous long-term opportunity. But we have to survive the short term to get to the long term. Regarding US trade policy, there has been remarkable consistency between the Trump administration and the Biden administration. While the tone of the two administrations is very different, the substance of the trade policy seems very familiar. Tariffs remain in place. There have been expansions of export controls and sanctions. There seems little interest in market facilitation abroad, and virtually no interest in negotiating new free trade agreement. Because the continued focus of the Biden administration is on defensive elements of trade policy. American companies are supportive of the Biden administrations’ other economic initiatives, and these would include the US-EU Trade and Technology Council (TTC), the Indo-Pacific Economic Framework Agreement (IPEF) and the recently announced America’s Partnership for Economic Prosperity. The American business community very much wants greater US engagement with the world, and we understand the administration’s wish to focus on supply chains, a multilateral approach to export controls, infrastructure and investment screening. But we want closer relations with friends in Europe, Asia and Latin America. At the same time, American companies views in about China are changing. There’s a feeling of increased risk and greater volatility. Those American companies, who are dependent on supply chains that originate in China are concerned about policies and events that they cannot influence or even predict, or a much less manage. Risk is up, costs are up, uncertainty is up, visibility is down.

So let me try and break down this uncertainty into four different categories. First, China’s dynamic-zero COVID strategy adds uncertainty or risk to supply chains that are impossible to model. Maybe a factory three or four tiers down your supply chain. Maybe a company that you’ve never heard of before will have to close down, and that could have ripple effects over your company on a global basis. I know of at least one company that had to postpone a global launch of a product due to an unanticipated lockdown in China. Secondly, China’s relationship with Russia, as articulated in the February 4 statement of “friendship without limits” changes the world in quite a significant manner. We’re not certain what friendship without limits mean, and how this affects other countries’ interests, particularly over the longer term. But given Russia’s invasion of Ukraine, we could certainly say that political risk is up. Third it’s clear that China’s future growth will be lower than past growth. China is transitioning its growth model from a fixed capital investment and net exports growth model to one that will be driven by consumer demand. But this is a hard transition, and on top of that, China’s demographics are quite challenging. So, while we wish you well, and we do hope that higher quality growth will be achieved. We know that won’t be easy. And far, I think that the Chinese government, seems to be focused on more on a state driven trade policy. That has articulated in the dual circulation policy. It is oriented towards self-reliance in technology, self-reliance in agriculture, and self-reliance in energy. Now, it’s hard to say what that means for foreign investors, but foreign investors have become more cautious.

So, in conclusion, we are optimistic, over the longer term. We do expect China to continue to produce a trillion dollars of new GDP growth annually for the foreseeable future, and we do hope that China remains the world’s largest growth engine for GDP. But this is a complex environment, and companies are notably more cautious than they have previously. Then. Thank you very much.

Wang Huiyao:

Thank you, Craig. While I think the potential of all the American business in China,you have always been champion that. And of course, we are facing a lot of difficulties now, but I think we see US companies are still largely prosperous over here in China. So that’s right. I mean the pandemic has separated us for too long with there’s a lot of lack of communication. I think that China has taken very strong stand saying that sovereignty, territorial integrity, are absolutely important and for this every country should be respected, including Ukraine. Of course, friendship with every country is without limits. So, there’s probably over-interpretation. But anyway, I think the concern should be addressed. That’s why we need more dialogues.

But next we have Wendy, according to this the alphabetic order. Wendy, you are really a trade person throughout your career, you’ve been involved in so many negotiations, really an architect who saw the TPP through. (You) always focus on Pacific, Asia-pacific (issues). But we see the protectionism, we see free trade is meeting a lot of challenges. It’s good to know MC12 WTO ministerial meeting over last weekend, we have seen some progress on fishery, on patents of the vaccine, grain export restriction forbidden. So finally, you know, we’re coming to some common sense on how we should move forward. But you are the trade expert, you’ve been promoting this area. So, what do you think about current trade relations? How can we really overcome that, particularly the high inflation now in the US? There’s a call from the business community. I think,, Secretary Yellen and the Secretary of Commerce, suggesting that maybe we should lift the tariffs posed on China, and China should do the same on the US (exports). So what do you think? We should probably really push for some more trade exchange so we can lower the risk of meltdown of a world economy. And so, as a trade expert, what’s your take of the situation? Wendy, please.

TRIPS Waiver compromise on MC12: new model for the US-China cooperation

Wendy Cutler:

Well, thank you very much, Henry, and it’s really my honor to join the CCG again for your annual conference and to be on a panel with such distinguished colleagues. You’ve asked me a lot of questions. I don’t have a lot of time, so let me just make a few comments responding to some of the points you made in the opening just now.

Let me just focus on tariffs for a minute. I mean, my perspective on tariffs through the years is they’re easy to impose, but they’re really hard to lift. And why are they hard to lift? Because once they’re put in place, constituencies develop in countries that want to keep these tariffs. They benefit from the tariffs. So they’re very vocal. And we are seeing that in the United States, particularly among NGOs and labor. Second, when it comes to tariffs, particularly the China tariffs, there’s a burden, an onus, on the administration to show what they’ve gotten in return if they were going to lift some of these tariffs. And frankly, there hasn’t been really any progress on addressing the structural issues that were have been identified by the United States with respect to the Chinese market. And China hasn’t lifted its tariffs, which haven’t helped the United States say, well, China lifted them, maybe we should lift ours. And so that’s the dilemma. I think that the administration finds itself in now. It’s curious this debate on tariffs now is public, with senior cabinet officials arguing both sides of the debate, and ultimately, the president will have to make the decision. And just this weekend, he said that he’s looking at this issue.

So, what type of decision could the United States make? Well, there are a number of options. They could just leave things as is. They could decide to roll back certain tariffs, particularly those tariffs that have been a heavy burden on US consumers and businesses during this time of inflation. They could reimpose an exclusion process, a full-scale exclusions process, or they could even increase rates on some products and decrease rates, or eliminate tariffs on other products. And those are the policy options that they have. And my senses that soon will be hearing what their decisions are. I would just urge my Chinese friends, no matter what we do — but particularly if the United States goes ahead and rolls back some tariffs — that China responds in kind, even for its own reasons. But I think that would be a very positive step. And just as the tariff war led to kind of a downward spiral, and tariffs, if you’re optimistic, maybe we can see kind of an upward spiral, meaning that if the United States were to roll back some, China could roll back some and even more, and then the United States can respond in kind. I see Adam kind of smiling. I’m sure love some comments on this. Before I conclude, I just wanted to make a few comments on the WTO and the recent ministerial conference in Geneva, because I think there are some interesting developments which haven’t gotten a lot of attention. And that is number one that with respect to the waiver for intellectual property rights for vaccines, the United States and China were able to work together to find a compromise on the issue of whether these this waiver would apply to China. I happen to be in Geneva about a month before the ministerial and I can tell you both sides were really dug in on their position. China was willing to say publicly, we’re not going to avail ourselves to the waiver. But for the United States, that wasn’t enough legal certainty. And when you look at the agreement that was reached on TRIPS, there is a footnote which suggest very intense negotiations between the two, between the US and China, but we were able to find a pragmatic outcome. And I think that’s important, not only for the TRIPS waiver, but potentially for other issues that confront the United States and China in the WTO and elsewhere, and particularly with respect to the issue of whether China is a developing country or not, for the purposes of the WTO. This TRIPS waiver compromise, I think, can be viewed as perhaps a model going forward. And my final comment on the ministerial WTO work going forward is that when folks looked at the WTO in recent years, I think a lot of people were blaming US China trade tensions for the WTO wars and troubles. But in effect the US China trade tensions were not front center last week in Geneva.

In fact, the US and China share common interests with respect to a number of issues, including the Customs moratorium on electronic transmissions, as well as response to the pandemic and response to the food crisis. And so, as the WTO moves forward and focuses on reform issues, both with respect to WTO governance and issues like e-commerce, climate change and trade, food, pandemic, etc. I think there are opportunities in Geneva for the United States and China to work together more closely. Thank you.

Wang Huiyao:

Thank you, Wendy, for your upbeat attitude. I think we really need upward spiral for that. If US lifted a tariff, I think, personally, China could do the same. And let’s have an upward spiral on that. And that’s really good. But what do you like on the WTO conclusion? I think it not only surprises many observers, but also the industry academics, that finally the WTO is working, and it also shows the US and China can work together. Those are positive news. I mean, those little news can really amplify that, and let’s get the spirit through into other areas.

So, now I’d like to have Mr. JIN. You are a Chinese diplomat for many years, you were the Commercial Counselor at China’s embassy in the UK, just not too long ago. You worked in the US, but also you were actually DDG at the US and Oceania Affairs Department at MOFCOM before. So what’s your take? Giving what our two US guests have said so far? Mr. JIN please.

Jin Xu:

I should say, thank you very much, Henry. You provide such good opportunity to meet so many old friends, like Craig Allen. We didn’t see each other for more than ten years, but I still remember, ten years ago, we really had a very good time. We worked together and travelled together in China. Also, we travelled together in the States, many places. Wealso joined many meetings together to listen to Chinese entrepreneurs and American entrepreneurs, how they enjoy the political relations that time, the time since 2000 to the 2010! I didn’t prepare and written a speech, but I really have a lot of questions on my mind. I cannot read or write them all in all my papers. So, I want to take this opportunity to ask Craig Allen. What’s going on now? We had so many great times together. What kinds of challenges we are facing now? Craig Allen, do you remember ten years ago when the Chinese enterprises… Chinese buying mission to United States, we visited a lot in the States, actually a lot,even to somevery remote places. And almost all the people, all the entrepreneurs, all the businesses, they welcomed Chinese. The people welcomed Chinese buying mission, buy activities at that time. We had some problems, like a trade deficit. But we can join our hands. We can solve all the problems together. In the past five years, you had new leaders. They are the Trump and the Biden administration. And something changed now, and I really don’t know, but also a lot of Chinese enterpreneurs ask me the same question. So, I think we should join our hands together again to solve the problems to face all the challenges, not only from US, not only from China, actually from the whole world. Now, we have the same problem in our economy, like inflation in the United States, like China with low GDP development in recent years. So how can we solve the problem through our cooperation? How can American administration reduce tariffs imposed on China? And I think, of course, Chinese government or Chinese people also, we hope we can do the same thing when we have the same a treatment from US.

So, Craig Allen, Thank you very much. You invited me again just now, just 10 min ago, to go back to US. I’m really looking forward to going back to US, since I’m too old. I’m 65 years old. I’m retired, but I think I’ll have much more flexibility as I have my passport to go there. I also want to invite you and your friends from enterprises coming to China and talk about our challenges and problems, to talk about our cooperation, between the business people and so I want to stop here now. Thank you very much.

Wang Huiyao:

Okay, thank you. Mr. JIN. You brought back lot of good memories that’s really keep some of that spirit. After all, facing all those upheavals and all those difficult times, it’s a moment we have to think — think back and also think through and how we can really work together.

Now, I’d like to invite now, Adam Posen, you are the president of a well-known think tank in the world. And also, we’ve been talking since last year, also on this topic too. You do a lot of the international economic research, and also very strong on Chinese economic research. Also, the inflation that you’ve been doing a lot even on analyzing if the tariff is lifted from China, that could be attributed to a few points, maybe cut down 1% on inflation in the US. As an expert on the economy in the US and also strong researcher on China. What do you think about this tariff problem, and how we can do, at this critical time now, with the war, with the pandemic, with the all the crisis going to happen? Probably we may have a famine down the road. It’s a shortage of food and the shortage of energy. In China, 70% energy consumed depends on imports. You know, these high prices will hit China too. So what do you think? Can we do something to cut down inflation and can the US and China work together when they’re facing the common challenges, like those economic recession that is down the road? So Adam, your turn, please.

Pragmatic optimism should be built

Adam Posen:

Thank you Henry very much for including me again in the CCG ongoing dialogues. And it’s very nice and honor for me to be on a panel with so many distinguished folks in the US-China and Chinese trade field.

I’ll come back to being in a similarly, I hope,pragmatic, optimist position at Wendy, but I’ll start on the inflation front. China’s entry into active world trade, not just formerly into the WTO coincided with…But I don’t think (it) actually caused a general low inflation in the world that is evident by the fact that we are talking about. Peterson and my colleagues, Gary Clyde Hufbauer, Megan Hogan and Yilin Wang, have done the work about how changing tariffs on China would make a material difference to inflation, but would only affect a small portion of the total inflation we see. Now, inflation remains primarily a short-term macro economic outcome, and the reason I want to emphasize that is twofold. First, we have made the case in our Advice Chair, Larry Summers, has encouraged and utilized our work to further make the case that it should be what we would call no-brainer for the Biden administration to some Chinese goods in US own self interest on inflation, as well as in general. The fact that they have not. Wendy and others have described their dispute over this shows you just how strong the anti-China and anti-trade feelings are in the US Congress, and that’s a sad reality. I think we’re forcing them to show their true colors to some degree by having this out there, the studies of what difference would make and how little the tariffs have accomplished. But I think we all have to recognize what this shows. The Second reason I want to emphasize the trade with China. China‘s role in the world economy is not the main driver of inflation or deflation. It is because it says again that we can try to … we can try to separate those issues. China and the US together, or the multilateral system, or the G20, can make progress from those issues where it seems hard to accept, but we should still try to make progress on them. And so, turning that around, picking up on what several of the panelists speaking before me. They said about the relative expectation to the success of the WTO ministerial. To just complete it. I think, as others have said, it is potentially a positive model to see China and the US not getting in the way of each other. Perhaps starting out with Covid positions, and ultimately on the TRIPS waiver and on other things.

Essentially saying, the de facto desire of China doesn’t content. It doesn’t reset its developing country status, but de facto, it does for things that involve real developing countries. And I hope, in that sense, I want to go back to something Henry, that you and I spoke about. I think, the last time I was on a CCG panel, which is right now there’s not that much good to be done in the bilateral US China relationship. But it would be, I think, good for world peace, good for things like vaccines and disease control, good against hunger, and good for longer term development. If the US and China could agree on some rules of the road for how they treat the rest of the world, and in particular, that we do not go down a bidding war with other countries, be it Argentina or Chad or Vietnam, that there is healthy competition among businesses in private investment, but that we do not see ourselves as forcing other economies to choose one side or the other.

And I think there are practical steps we can take together to reduce that risk, so that building on the kind of pragmatic optimism limited. But I think real that came out of the ministerial and how much better that did than, say, the G20 meeting around, the IMF Spring meetings, when there could not be even a communique shows that if we get away from the Russia-China linkages, in the direct the US-China disputes, we may be able to do constructive things on climate change and global health and development. Thank you.

Wang Huiyao:

Thank you, Adam, absolutely right. You mentioned about global good. Both US and China have a moral responsibility. I think if the world is okay, we may dispute a bit, but now that the world is really in big trouble, we really have to work together. I mean, there’s no choice, US and China are the two largest economies. We are so appreciating and valuing the MC12 of the WTO ministerial meeting , that we have achieved some progress. Of course, Secretary John Kerry and the Chinese Climate Envoy Xie Zhenhua are also working on the climate change. And I know the top diplomat Yang Jiechi met with Jake Sullivan just recently. And the Defense Minister of China was in Shangri-La Dialogue, and answered a dozen of questions on the spot. He also met six bilateral counterpart ministers So, I hope the pandemic, at least, the quarantine probably is coming to the end. Let’s start dialogue and meeting and give some, you know, even if it’s small good news, let’s really promote the upward spiral, like Wendy mentioned. So now, our friend Jeremie. I was at your organization at the CEO Summit in Washington 2019. It was great. We were hoping that China and the US were signing a trade deal, and everybody was so bullish. They were talking about expanding business in China, having new office in China. And I remember it was exactly just before President Trump put a hold on that trade deal. So, what’s the thinking from the largest chamber in the US? You’re representing such a large stakeholder of the US economy, what’s your take? You probably have even more broader perspective in the business community, Jeremie Waterman.

A shift in trajectory doesn’t seem likely

Jeremie Waterman:

Thank you, Henry. And like the others, I’ll just say it’s an honor to join CCG trying to immobilizating the forum. Very much appreciate CCG’s efforts for a dialogue and understanding at this crucial time in US-China relations, and really at this crucial juncture in the global economy. So, congratulations to you and to your colleagues. And I’m I’ll just so much has been said already on this panel. Obviously a very distinguished and esteemed panel. Well, I’ll try to be brief and not repeat too much.

But I would say, first of all, you’re right. As the largest business organization in the United States, we do have a broader perspective, both on US China relations, and of course, the global economy and certainly the US economy. Our members range from small businesses and chambers of commerce across the country that support their communities, to the leading industry associations and global corporations that innovate and solve for the world’s challenges, as well as to the fast and emerging industries that are shaping the future. We at the Chamber’s China Center, for the better part of two decades, have documented both the growth of the US-China economic relationship and the challenge imposed by China’s trading investment regime, for the US competitiveness and market access.

We have long advocated for a very balanced and rational approach to commercial relations with China, one that recognizes the importance of a market of 1.4 billion people, while managing the realities of China’s political and economic models. As we all know and appreciate, the US-China bilateral relationship will have sweeping implications that already has and will continue to beyond our two countries for the world. That’s why I think, Henry, we’re all gathered here under this banner of CCG and globalization. Craig is exactly right. China remains a very important market for many American companies. Forgoing the market for many is simply not an option if they wish to be competitive globally. But as the global economy teeters amidst soaring inflation in the United States and other Western countries, energy price spikes and acute food shortages stemming from Russia’s invasion of Ukraine. Obviously, the economic slowdown that you’ve talked about, Henry, and the supply chain disruptions in China as it manages through dynamic zero-Covid.

And of course, the new variants. We shouldn’t forget that we are still in a pandemic. That is, that is very much moving forward. Maintaining and growing commercial ties between the US and China in a mutually beneficial manner will be central in our view to ensuring global economic stability in the months and certainly years ahead. Obviously, the Chamber, we are doing what we can at home here in the United States. We’re working with our lawmakers to enact policies that strengthen US competitiveness at home and abroad. Obviously, President Biden signed an infrastructure bill last year, that we were very supportive and excited about. We’re also hoping that lawmakers in the Congress will reach a consensus on a final package in the coming weeks to support the US semi-conductor industry and other parts of our innovative economy and beyond our shores, we’re pushing the administration to knock down barriers to trade and support agreements around the world. Of course, we also want a level playing field in and with China, where American business can compete in a fair environment. Four decades of our economic engagement, linkages, involving trillions of dollars in wealth assets and commercial flows have been built up, with benefits accrue to both countries and their peoples.

But I think, Henry, you started, your opening comments were perhaps sadly on point. And as we’ve already heard this evening, there is much greater risk around those linkages today, as momentum continues to build toward a future in which the two countries are less engaged. As Evan Greenberg, the esteemed CEO of Chub, underscored in a major address last week at CSIS, that’s not what the American business community wants. But barring a shift in trajectory, which doesn’t seem terribly likely at present, one has to assume that the pressure to select, at least selectively disengage, and driven by concerns about national security and competitiveness, will remain. And of course, that’s on both sides.

Our sincere hope with the chamber is that the two governments, supported by their business communities, will continue to work together to improve the business environment in both countries, address those structural concerns in the relationship, as Wendy mentioned, find a path forward on tariffs, and avoid a wide ranging decoupling that would be bad for both countries and leave the world considerably worse off. We are hopeful that present, that when President Biden and President Xi talk next, which we hope will be very soon, the two can make some progress on trade, including tariffs. We’ve heard a lot about tariffs, a lot of questions about tariffs, and a lot of you, I think that tariffs on both sides have not been helpful. We urged the two leaders to turn periodic talks into progress in action.

So, obviously our elected leaders shape the future of bilateral relations. Conversations like this one under the auspices of CCG are critical to demonstrate our support and reach to demonstrate our support and commitment to reach productive solutions that can guide our path forward. So again, congratulations to you. And yield back whatever time I have left. Thanks.

Wang Huiyao:

Okay, thank you. Thank you, Jeremie, for your great comments. I think absolutely the business community wants to see things that a bit normal. We don’t want to see the decouple. Because it takes so long to come the stage we are now. And you talk about President Biden’s infrastructure bill, China has also developed very well infrastructure, so maybe someday the US and Chinese companies can work together on infrastructure in the third countries. And, I was talking to Larry Summers the other day. In our dialogue, he was suggesting that the World Bank should be replenished with more funds on green infrastructure. I think we have the World Bank, AIIB, ADB, AFTB, the development banks, maybe we can work together. I mean, after the WTO progress. So, thank you, and hope to see you in China again. You have been a frequent traveler in the past number of years. I haven’t seen you for the last two years. Hope to see you soon. But, now, I’d like to invite our adviser for CCG, but also break a key speaker that we invited, Minister Yi Xiaozhun. You’ve been serving as the Vice Minister of China Ministry of Commerce. You served at China’s Embassy in the US, ambassador to WTO, and also DDG for WTO almost ten years. So, you came back now, you’re working still very active on the research and development on those new trade issues. So, what’s your take?

Shared geo-economic interests more important and salient

Yi Xiaozhun:

Thank you very much Huiyao. I’m also very pleased, actually, I’m very excited to join some of my old friends for this CCG conference. I didn’t see Craig for more than 30 years, right? So as my response to the comments by previous speakers, let me share with you some of my views on the importance of US China cooperation to meet global challenges.

I’m very much concerned that this Russia-Ukraine conflict could be the spark that lights a bonfire of accumulated global economic problems, from disrupted supply chains and spelling inflation to unsustainable debts and disruptive and microeconomic imbalances. If the conflict continues, or wars can escalate, its destructive impact will reach far beyond Ukraine and Europe, leading to energy and food shortages, stall growth and the real, possibly a major global economic crisis on a scale not seeing since the great financial crisis of 2008.

The 2008 crisis was devastating, but one silver lining was all major economies, in particular, the US and China, demonstrated political will to cooperate at debt, critical juncture, forging the G20 and taking the unprecedented collaboration within the IMF, the World Bank and the WTO, and taking the collective steps needed to prevent the crisis from spelling out of control, to lay the groundwork for global recovery. But what worries me most is that, due to the current geopolitical tensions, three Breton Woods institutions responsible for global economic governance, are in various stages of disrepair and dysfunction.

And the G20, the last line of defense against financial crisis, is seemingly paralyzed. It’s unclear whether the G20 leaders and ministers can even meet in the same room, let alone achieve the concerted policy coordination needed to head off economic disaster. Faced with a new financial crisis or the next pandemic, there’s every sign that countries will resort to me first better than neighbor policies, thus making a bad situation far worse.

Being the world’s largest economies and trading nations, both the US and China will lose out if they continue to disrupt, distrust each other and choose to let the situation drift. The whole world will be much better-off if they do the opposite.

What can be done? Let me suggest three steps that could help repair, even restore global economic cooperation.

First, countries, especially the US, Europe and China, need to acknowledge their common economic interests. Our geopolitical differences make the headlines, but I would argue that it’s our shared geo-economic interests that are more important and salient. Whether it’s transitioning to low carbon energy, spreading technological innovation, managing digitalization, addressing domestic inequalities or strengthening rule based economic relations, we have more in common than we realize, including a common interest in cooperating, and we need to focus more on that essential fact.

Second, the US and China need to identify the areas of economic cooperation. Will they generally see eye-to-eye and can achieve meaningful progress and mutually beneficial results? One good example is the progress made in the G20 on global minimum corporate tax. The environment, from deforestation to plastic pollution to even carbon pricing is even a more important area where China and the US face similar challenges, have similar objectives, and can find cooperative solutions if they are prepared to be more open-minded, creative and collaborative about it. The WTO surprising success, as mentioned by Wendy at this recent twelfth Ministry Conference, demonstrates how the multilateral trading system can deliver, even under the most challenging circumstances. When countries, in particular, the largest ones, focus on producing outcomes that benefit everyone. The significant outcomes from MC12 of the WTO are unthinkable without the support by the US and China. Here is what the WTO Director General Ngozi Okonjo-Iweala tweeted after the conference: “China-USA cooperation was instrumental in getting to positive outcomes. ”

Third, we need to focus on restoring trust. Four decades of globalization has made the world dramatically better-off, but it’s also made us more interdependent. That’s the price of our prosperity. Of many ties binding the global economy together, the most important is trust. Our willingness to lower barriers, depend on one another, work with rather than against each other. If cooperation seems to be breaking down, it’s because suspicion has replaced the trust between the US and China, between Europe and China, even between the EU and the US.

Rebuilding trust begins with rediscovering the benefits of working together. The last thing the world economy needs right now is more mistrust, more fragmentation, more delusions that we can solve, or shared global challenges on our own. Let me stop here.

Wang Huiyao:

Okay, great. Thank you. Mr. Yi, for your comprehensive comments. You also made quite a few recommendations. I think, absolutely, we see the Breton Woods system is probably not functioned well, that we need to upgrade, improve and enhance. But that system that has carried us for the last 77 years needs to be strengthened and improved. And also, maybe we need to add more new institutions, like the AIIB and other institutions like you mentioned about digital, data. There are many things we could add to the to the new dimension. So, the WTO is a great story that we see some revival of that. Let’s have this kind of revival spirit carries suit to put other institutions and into business. I mean, we also see the G20 coming. We had the Indonesian ambassador to China here talking at CCG today about how busy they are preparing for the G20, and how there are high expectations for that. And there will be a minister meeting soon. It seems all G20 leaders will be there.

And after our first round of talking, we seemingly have all felt that China, the US being the two largest economies, have some responsibility to work together, even though we have a lot of differences. So how can we really make things working together? Giving the world is facing larger threats, climate change, the Pandemic, and famine, and energy crisis, all those big threats that are facing the mankind. We shouldn’t have a vacuum there. I mean, there’s a vacuum of global coordination and cooperation, particularly as the US being in charge, of this global governance for so many years now. We are in the process of finding ways on how we can work together between China and US.

So. this is important. I start with Wendy. And Minister Yi mentioned about corporate minimum tax. That’s something China working with US and now the IPR, or the vaccine. Another area is climate change, we had a joint statement. So on the trade, how we can really further work together. Giving the inflation is so high now. And let’s find a graceful way to get out with. There are already things easy to set up, difficult getting done. Inflation is a big incentive. American consumers, the voters… President Biden is facing the Mid-term election. It’s probably time to do some, release some of the inflation pressure. And same as China, after the Covid attacked the Chinese economy this year. So, we all need some leadership and political will, and let’s really continue this upward momentum in the WTO. So, let’s have some final thoughts on that.

Wendy Cutler:

I have been listening carefully to everyone’s comments, which I think were great. Just a few responses. Number one, on tariffs, it’s interesting, because China has been very vocal about how these tariffs have been unhealthful, destructive, should be lifted. But that was point to the United States to go first. And so, one thing I just want to put on the table:What if China goes first? What if China Take the initiative and just eliminate, let’s just say, tariffs and $25 billion worth of US imports, and see how the United States responses. In other words, I’m not sure why it’s our responsibility to go first.

In the old days when I was in the government, and with Minister Yi, we have that kind of engagement where I think we could pick up the phone and maybe orchestra something like this. But I don’t think that kind of engagement is present today, which is unfortunate. But again, I want to just put that on the table as well. And I think that China would be pushing on an open door in the United States, because there are many here who want to lift tariffs. But, as Adam mentioned, it’s complicated. Particularly given our politics.

I am fully supportive of trying to find areas to cooperate on, particularly using international institutions. I think that makes it a lot easier for the United States and China to cooperate. But I think it’s important that we recognize there’s little trust. I don’t think we should start big. I think we should start small, find very practical areas where we could quietly make progress and build on that over time. I think this kind of top-down trying to resume big dialogues and take on mega issues, I think, kind of doom us to failure. So, my recommendation is to start small. I mean, Minister Yi mention plastics pollution or we talked about the TRIPS waiver. I think that since there’s such a lack of trust and confidence between both sides, starting small, scoring some wins, I think over time, could help us challenge the larger issues.

Wang Huiyao:

Yes Thank you. Yes, absolutely. I think we need to do that. I think that there’s high expectation from China to see the US do something first, because the US started first to add it on, and they want to see the US go first. But I’m sure China will respond correspondingly. I’m personally quite sure of that. But let’s hear from Craig. I mean, you are close to the business community that does business in China and outside world. It is probably more from business concern. And I saw some congressmen call for lifting of that. So, what’s there? the intention and how business is really doing that.

Craig Allen:

Thank you. President Xi and President Biden have met virtually at least twice, and both times they have called for confidence building measures, or we could call them CBMs. And, the best community, entirely supports that, and is delighted to be able to provide some ideas on ways that would be mutually beneficial to start small, I think, as Wendy very correctly said, but at least thus far, I have no progress to report. And I think that we’re entering quite a political period, both in China and in the United States. And November will be upon us quite quickly, and perhaps we should be preparing for confidence building measures immediately after the 20th Party Congress, and the midterm, elections, November is around the corner.

I do have to say, that that, despite even though our platform today is the Center for China and Globalization, that there seems to be a tendency or a risk, that companies and governments are going to be focusing on regional economies rather than the global economy. And I think that is dangerous. It’s not either or, it’s melting the two. And I was quite inspired by Yi Xiaozhun’s comments that we do need to strengthen the global norms, even as we strengthen or invest on a more regional basis. One cannot have a regionalization without a strong global economy, and one cannot have a strong global economy without strong regional economies.

But companies are thinking more on a regional basis. How secure is my supply chain? Can I avoid a single point of failure? What are my political risks? How do I keep cost low and maintain efficiency with flexibility? And I think that nexus between a regional trade policies and global trade policies deserves to be studied further. Thank you very much.

Wang Huiyao:

Yeah, thank you, Craig. Yes, I think we all need small progress. But you are right, November is really crucial month. Probably by then, the 20th party Congress and mid-term election has already happened. And then we gather the G20 with a fresh start, probably let’s really do some work to pave for that, and so that we can be more pragmatic, more realistic. After all those upheavals and an economic slowing down and pandemic. So, we really need a fresh start. I think, maintain that momentum, and small progress is absolutely crucial. Let’s build on that. Wendy mentioned about waivers on TRIPS and plastic initiative. I remember Minister Yi inviting me to the WTO three years ago to talk about that issue. Now finally we see some progress.

And also, this issue about a global corporate minimum tax is o important because we see a lot of companies make a lot of money overseas, but then their money is in the tax heaven, not really backed to the Mid-west, rust belt, and China often becomes a scapegoat. So, this minimum tax really helps to address that kind of concern, probably partially, I hope, so that China would not be seen making money all the time, because multinationals actually can balance quite a bit of that with the minimum tax. That I think it is really in the right direction.

I see Mr. Jin is coming back, I would like to ask you again, what’s your take so far, and what do you think about China-US relation going forward? You were the Deputy Director of American and Oceania Affairs at MOFCOM, so what do you see the trade prospects between our two countries?

Jin Xu:

I really agree. We need take some steps. But who goes first? The US or China? We have already had enough tremendous changes in bilateral relations, but many things still remain the same, like our economy, our mutual desire on our products. And, we have a lot of common challenges, like the climate change. And, we are facing a lot of difficulties in our economies, I said before, like inflation. The US and Chinese GDP, growth rates are slowing down. But we have already done many things. We have many things remaining the same. Even we have Covid there for the past three years. We still have a lot of people rushing to United States, especially young people study in different colleges, different universities. Also, still a lot of business people. They want to export their products, export more products to US market. Also, we have a lot of American businesses people, they want to reduce the inflation. So, you need to import more things from China. That’s our mutual desire for the coming years.

So I agree Minister Yi’s idea. We should build up our mutual trust in the future, for the time being, especially. Who would go first? Craig, I think you have your tariffs; we should do some concrete steps in the future. We can take common, steps together. But it’s time now, we cannot delay anymore. That’s for the interest of China, that is also for the interest of the United States.

Wang Huiyao:

Thanks! I think it’s very, very important, as you mentioned, to build up the trust. Let’s do that. I think this dialogue is really great. I feel encouraged. And we should have corresponding moves on both sides. And giving the world has needed the US and China to work together. And we see such a well-boosted perception of WTO after the US and China worked out some new arrangement, and the WTO has really achieved some progress. So, this is really great progress that the US and China can work together, and we must work together.

So, Adam, you are now in London. You’ve been traveling across the Atlantic and the Pacific for many years. So, from a think tank’s perspective, what’s your analysis for the future US-China economic relations? How can we really — while may remain differences — try to maximize our common ground, particularly economy? We’ve been built of this economy for the last five decades now. This is the Nixon’s 50 years anniversary visiting to China. It has built up the relationship so interwoven, people to people exchange, tourism, infrastructure, all the things together. How can we really be decoupled? Unless we really think about, we cannot really get along. We’re all human beings. So, your final comments please.

European Union as a counterweight between the U.S. and China

Adam Posen:

Well, thank you, Henry. I would just say that we’re starting a project at Peterson Institute trying to assess what decoupling would look like. We didn’t want to think about it, because it was, for all the reasons you said, for all the reasons Evan Greenberg said at the other day that I’ve said. Frank Erickson said, it’s a terrible thought, but at this point, I think we have to start showing just how costly it would be and make that case. But beyond that, I think it is interesting and important, you mentioned trans-Atlantic, for China to take EU seriously as an actor and for the US to take the EU seriously as an actor, and hope that the EU lives up to that, because essentially it’s…I don’t want to say it’s the swing vote, but on a number of issues, particularly in climate but also international taxation, that was rightly mentioned.

The Europeans are at a higher standard than neither the US nor China. And the degree the Europeans can push both our governments to be more aspirational, more principled, I think it is going to be very important in the years ahead. I think when push comes to shove, we all know that there are two competing forces, that the values and security interests Europe shares with the US are greater than those it shares with China. But Europe, and particular, European businesses, desire to free ride on the US and stay out of conflict with China is very strong, and we have to hope that this turns from being a problem to being what I’d call a ballast, a weight, that keeps the relationship from getting too off track. Because Europe will be a counterweight between us and China.

And I think, as much as I respect the Minister and my friend Wendy and others talking about the international institutions, I think a lot will be determined by that trilateral relationship, as well as where Japan and Australia and Singapore come in. And I think that China, at the moment like the US, is doing both sides of its mouth to these countries, as someways bully, as someways as friends. The US and China do the same. So we’ll have to see how that works out. Thank you.

Wang Huiyao:

Thank you, Adam. Yes, you talk about Europe and the EU, and it’s really important trilateral relation. You’re right, I think, but China is a larger trading partner. China is also the largest trading partner of 130 nations. So, we see last year, even during the pandemic, China’s export has gone up almost 30 %. So, you see, the world really needs China. And, how can we really maintain our healthy, constructive relation is really a challenge to all of us. So, Jeremie Waterman, and you are following all the business and, what’s there in general of the US business community senses on this China-US relation, trade relations, tariffs and all those things?

Jeremie Waterman:

So let me make four points. And it’s a great question.

First point, and at the risk of speaking for all four Americans on this call, I think all of us would like to see the tariffs, if you know most of them, if not all of them, come down. I think there’s a consensus there, certainly the organization that I represent and the organization that Craig runs, I think we both have been very forthright about our desire to see those tariffs come down, that those tariffs do more harm to the United States than they do than they benefit in any way. And I think there’s an opportunity right now, as you mentioned, given where we are with inflation, and given perhaps a sentiment in both countries and the economic challenges in both countries, there’s an opportunity to make progress. So, we’re hopeful on tariffs. We are hopeful that we don’t have to wait until after our political process in November concludes, in China’s political process, later this fall, concludes to steep some movement in that area.

The second point I’d make about cooperation. I think cooperation, hopefully would not be regarded as zero sum. Cooperation should be…both sides should move forward with cooperation because it’s in shared interest, in China’s interests to do so, in the US interests to do so. And that means that that cooperation, that those efforts, should be insulated from what are obviously a very clear set, an arguably growing set of differences between the two sides, if cooperation is conditioned, in an area where it clearly makes sense to work together. But if it is conditioned on areas of difference then it’s very hard to cooperate.

The third point, which is related to that, would be that we have to be clear about the cooperation, and there needs to be more work to identify where cooperation really is mutually beneficial. Obviously, it was very difficult, notwithstanding the outcome at WTO MC12 on the vaccine waiver, it was a very difficult, it was a very difficult issue for the US and China to navigate, and is part of the reason why negotiators had to stay there over time. So I think, deciding where it makes really the two governments actually working together to identify those areas.

And the final point would be, I think we need to cooperate, but we should also be realistic about what cooperation can do based on the area of cooperation, right? So obviously, during the SED (the China-US Strategic Economic Dialogue) and then later the S&ED (the US-China Strategic and Economic Dialogue), we had many, many cooperative initiatives, where we had outcomes. In fact, I think Craig was in the government at that time, Wendy was in the government. Maybe Jin Xu was still…You can remember long, long lists of cooperative outcomes. The reality though, is those cooperative outcomes did not move the needle among the populations and among the governments more broadly. So I think there also needs to be a dose of realism there. Now we’re living in a different age. We’re living in an age of ESG, of climate change and so forth. And so these areas that may not have resonated as much in the past may resonate much more today. But I think a dose of realism is also in order, as we assess future prospects. So I’ll leave it there. Thank you.

Wang Huiyao:

Thank you, Jeremie, a really great comment. And we see the business company that is still quite practical, and wants to see we make some progress, I think. So, our government on both sides should do something. I really hope that we need to do that. So finally, Minister Yi, you’ve been following closely on the multilateral of China-US relations, too. So what’s your final recommendation? And comments?

Trade liberalization rather than trade defense

Yi Xiaozhun:

I think all panelists here share very similar views. We are all business friendly, We are all very pro bilateral trade relations, and we want to contribute to that movement. And I fully agree with previous speakers that we should work together. China and US should work together to move little by little. I agree with Wendy. Look at the WTO MC12, all those issues. China and the US share very similar interests on e-commerce moratorium, we share the same interest. On food export ban, we can work together; we can support each other. And on TRIPS waiver. I mean, China didn’t take advantage of that negotiations, but China has to pay, but that’s fine. As long as it’s for public good, and China is happy to make its contribution. So, in the future, I think we can find a lot of more areas to work together, multilaterally. For example, on plastic pollution. And before I left Geneva, I personally tried very hard to launch the initiative, not me, but by WTO members led by China and Fiji, on Joint Initiative on Plastic Pollution Control governance initiative in the WTO. I think that is very much in the same interests of the US, of the EU and other developing countries. I think those countries can work together on those issues. And as long as they can start from those small steps, then we can see that the trust will come back, little by little, but steadily.

And finally, let me add one more point personally. I don’t think decoupling is a good idea. I worked in the WTO for many years. I know that its major role is to promote global economic integration and trade liberalization. But right now, what we are seeing is the major economists are focusing much more on trade defense than on opening trade. That is a real pity. For me, I would very much like to see some progress in the MC12 on trade liberalization, but it didn’t happen. I’m even more concerned of a world fragmenting into distinct economic blocks with different ideologies, political systems, technology standards, cross-border payment, trade systems as well as reserve currencies. It’s terrible.

The DG of the WTO warned us recently, we need to think carefully before talking very carelessly about decoupling and deglobalization. She said countries should think twice before they split up economies and supply chains into political blocks. And the WTO economists have estimated that if the world split into two trading blocks, it would lower the long-run level of real global GDP by about 5 %, it’s a big number.

It’s my dream. Maybe I’m not realistic, that instead of zero-sum world of economic nationalism, both the US and China could work together to promote a positive sum world of economic cooperation, because interdependence would give countries a stake in each other’s success. Let me stop here.

Wang Huiyao:

Yes, thank you. Mr.Yi I think we’re running out of time, but we have made, I think, very comprehensive, but also quite constructive discussing dialogue with all the senior panelists from both the US and China. You are all experts, and CCG is really pleased to have you on this CCG Annual China globalization forum.

So, we really have learned a lot. And I think, we have some consensus that both we all recognize we all need to work together, we cannot afford not to cooperate, and we have made some small progress on the WTO recent MC12 minister meetings. And also, we agree that tariff is not good, and both countries probably should bring it down. And so, we have, the business community are still the backbone of China-US relations, and we all need each other. And also people-to-people exchanges are still vital. I think this is already a great, good outcome of our dialogue. I really hope that we can see you next year at all a real forum.

And again, I appreciate all your participation. I know our US friends are participating on a holiday. Today is holiday for you in the US, I really appreciate that. And we have many people watching on our program, but we’re going to make it broadcast later, on the record as well. We have to end it here. And I would like to thank you again very much. Appreciate all your and thank for others. Thank you.

Note: The above text is the output of transcribing from an audio recording. It is posted as a reference for the discussion.


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