How the Hong Kong Autonomy Act will work; analysing Biden’s China policy after 2 yrs of trade war

published on July 15, 2020

you're listening to a podcast from the south china morning post i view them as a friend i have tremendous respect for president xi nobody in this world and

They're hurting different people so uh there may be a time when we have a decoupling uh that's something the president will consider we're not going to be lifting tariffs i never saw any common ground between

The the two sides the us planet's trading relationship trump himself basically thinks he's playing poker and other parties particularly the chinese are not they're playing

Chess hello and welcome to the us-china trade war update with me finbar birmingham on the political economy desk here at the south china morning post coming at you from times square in the

Heart of hong kong island this week we are marking two years since the start of the trade war when donald trump slapped a 25 tariff on 34 billion dollars of chinese goods on july 6 2018 so we have a lot of

Things happening but in particular with china we're going to be doing a section 301 trade action it could be about 60 billion dollars how did we get here where do we go from here

I'll be joined in part two by former white house trade adviser clark jennings to discuss a situation that has spiraled beyond anybody's expectation in the first part of the show i'll be joined by political

Economy editors joshin and john carter to discuss our own home here in hong kong national security law and the threat of retaliatory sanctions from washington have pulled asia's world city into the

Eye of the storm sharp analysis on what this sweeping and game-changing law means for wider us china relations incoming hold on tight

Joined in the studio by john carter and joe shin our political economy editors and i'm going to start by reading these two gentlemen a historical document to see what sort of trigger response we get

The us customs and border protection has begun collecting a 25 tariff on 818 imported chinese products brackets list one valued at 34 billion us dollars

Guys that was obviously given effect to the first round of trade war tariffs which happened two years ago this week john where were you 734 days ago i was preparing to move to hong kong to

Work for the south china morning post okay and how do you how do you feel about that decision though i i love it here especially my colleagues in the in the trade

Already were firmly installed here at scmp yes by that time i feel that this is something going to be very big but still it's beyond my imagination it's getting so like out of kitchen no one can predict it's uh

Tragically yeah i mean it really has been and it seems to be gathering peace not in terms of tariffs and not in terms really of of actual physical trade but in terms of the rivalry it seems to be snowballing with every

I was going to say every week but it seems like we're waking up or we're getting through every day and there's a sort of cataclysmic or a seismic event that john last year would have been our biggest

Story of the month no indeed and it's um you know it raises serious questions about where the bilateral relationship is going um and obviously the the biggest

Issue with regard to that uh is going to be how the presidential elections in november play out when this thing started a couple of years ago we based here in hong kong were sort of

Bystanders commentating from the sidelines still on in physical trade terms but obviously in in recent weeks and months we've seen hong kong really be dragged into the eye of the storm

The national security law which was ruled out um last week um really has uh provoked a huge reaction from the united states we're expecting some sort of sanctions to come we're not

Sure what they look like but the us government is is expected to sanction some individuals perhaps hong kong officials perhaps chinese officials for their role in this sweeping national security law

John this is one of the many moving parts and i think like it's attempting to to sort of cover them all as different moving pieces but they all seem to be part of one big blob

That's all dragged together where do you see this national security law fitting in with the the wider trade trade war in us china relations as we've already described the bilateral relationship is deteriorating

And this the national security law in hong kong is the latest major event in in a long series of events and if as expected the us sanctions uh uh hong kong and chinese officials

For their role in the new security law the question is how many officials will be sanctioned and what goes next the new hong kong autonomy act which has been passed by both the house and senate

Would mandate sanctions not only against individuals but against banks that do business with those individuals that would give and now trump hasn't signed that law yet but is expected to do so soon

Um if the us is going to sanction banks and that those sanctions wouldn't come for a year so it's not clear uh what which president would be in implementing those sanctions i think

They have to come within a year i don't think well it's like it's a year it's within a year after the state department report which in the state department has 60 days to come up with their report

Uh renaming the individuals and then the administration has a year up to a year to impose the sanctions on the individuals and the banks and so one of the things that the us could do and this is

Something of a nuclear option is to restrict major foreign banks including chinese banks from using the us dollar system and that would really wreck havoc with the banks themselves and

Potentially with the chinese economy and potentially with the world economy because china is the second largest economy in the world you restrict some of its major actors from working on the world stage

And you don't know what the ripple effects are going to be it could be significant joshin how much of a concern do you feel like this is within china um they're obviously expecting something

From the united states but did they expect this nuclear option uh well i think for china they are um the biggest change from two years ago i think two years ago the mainstream idea is that

The china us relationship will neither be too good nor be too bad i think that's a kind of default mode for chinese researchers in china chinese policymakers

And two years later i think this has completely changed they say they see the the us is trying to contain china or to sort china's development i think this is more of a kind of new

Consensus now so china's choice will only be like at what kind of level or what kind of timing to engage in this full-fledged confrontation

Against the united states and uh the financial sanctions whether it will happen or not will not change this historical uh trajectory for for china but do you think that there's um do they

When you mention obviously that i get a sense that people are expecting the worst i suppose that they don't expect too good too bad this is the the people are are

Bracing themselves for this nuclear option would that be fair to say oh well uh these they um i think they seize risks certainly it's on their radar as we can see uh kosciuchin you know the china

Banking regulator has been warned against you know the the money printing uh by the fed and also particularly uh just china's security uh regulatory by chairman is warning

That china could be treated as russia in terms of financial sanctions so you can see that beijing is is seeing this risk but as for how serious or how uh realistic that this is

Going to happen i think this is still a low probability even for most debating uh policymakers sort of watches yeah now one thing to keep in mind is that

Trump has opposed unilateral and mandatory sanctions since he became president he wants flexibility so if he is re-elected president um it is and he were to be confronted with

The need to impose sanctions the current thinking is that he wouldn't do as much as he might he would do perhaps not the minimum but certainly not with the the

This nuclear option now if it's biden we don't know obviously it could be he would want to remain tough on china or perhaps he would like to de-escalate tensions and one way to do

That is not to impose mandatory sanctions it's just what you're picking up what you're saying there john trump's track record sort of speaks for itself in this for him he he

Um he said himself that he didn't target uh chinese officials with regard xinjiang and the persecution of uyghur people there because he didn't want to jeopardize the phase one trade deal

Right with regard to the the united states relationship with russia as per the 1991 chemical and biological weapons control and warfare elimination act a bit of a mouthful this was after the the russian

Government was accused of poisoning a couple of people in the united kingdom trump was obliged to put sanctions on russia but he went for what was considered the lowest ball that he could throw which was blocking us

Banks from operating in russia rather than going after um russian entities so he left them alone and that was considered by sanctions experts to be among the lesser options that he could have

Taken so to your point john he has track record of not going hard and juicing the chinese government has already warned um washington that they're crossing these perceived red

Lines such as what they see is interfering in hong kong interfering in taiwan and so on will put the phase one trade deal at risk do you think that the chinese government is serious on that

That they will sort of torpedo this deal if trump oversteps that mark well for the chinese government the uh the phrase one trade deal is the only thing uh possibly uh they can rely on to maintain this uh

Um bilateral relationship from getting to a very low point so at the moment i don't see any point for beijing to you know to give up uh its commitment on this

Uh phase one trader deal on the country i think china will as china is seeing the other issues as hong kong taiwan and south china sea there are little limited room for come promise so they

Are relying more on these kind of trade deals uh you know to to to maintain this relationship on the other hand we can also see that china has been threatening you know

They will also launch their non-reliable entity list against the supposedly us companies but so far one year later more than one year later after they make the threat they haven't announced it and one

Important thinking behind this is they don't want to piss off the us businesses they still want to put a friendly face to the us business community you know china is still open for

Business you know we have no intention to uh usurp your leadership of the world you know we are our market is big as long as we can sit down and have this uh nice talk discussion and you know you

Can still make money here that's one one of the things that china is relying on to manage this uh bilateral relationship because for beijing apparently it's not time yet

For china to have a uh or out confrontation against the united states interestingly joshin and what you say there um the business community has always been considered i think within a

Very strong lobby group and in the pro-china camp within the united states obviously because they want to do business there we saw a story in the wall street journal at the beginning of the week

Um where i think something like 400 no sorry 40 american business groups 400 would be a lot 40 american business groups called on uh the us administration to put more pressure on

Uh china to buy more goods um so i mean i wonder whether we see that the tide is turning there or whether it's um maybe some us businesses are ready to cut their losses john or do you think maybe not

Well i think that is part of of the evolution of trade relations between china and america that a lot of american businesses are splitting their businesses into

Uh if you're if you're selling in china then you produce in china if you're selling outside china then you're looking if you haven't already you're looking to move some of your production out of china

To other countries where there aren't the political issues that are currently burdening the us china relationship and so there is a rethink of trade in commercial relationships with china but

Is by no means an abandonment of china because it is the world's largest consumer market it is 14 billion consumers uh that's huge in any

Company that wants to uh make money is going to need to be in china you look for instance at tesla whose stock market value recently became more than toyota which produces 20 times more cars more than that uh be

Largely because uh uh of their success of their new plant in shanghai producing and selling cars in china because their plant in the us and california have been shut down for almost two months

Because of the coronavirus yeah it's the chinese sales that kept tesla going yeah and the chinese economy has been been bouncing back um just a quick update before we wrap up about the uh progress towards the trade

Deal um friend of the show chad barn has been tracking us exports to china very closely um they're still quite a bit behind based on

The us census bureau data for for may but we can also see that um there are strong purchases in the fields of agriculture so exports in may of the 548 products covered by the trade war deal

Were 115 percent up on um may 2019 and 11 higher than may 2017 which is the baseline of the deal so we can see that they are buying more 468 percent surge in the shipments of meat

Um from may 2017 largely due to the fact that china has opened the market to more meat products um but you shin we also saw this week or this month rather maybe even last month that china has had to i guess

Close the border to some um meat imports because of um chronovirus outbreaks elsewhere so i guess what we see is um everything is sort of dependent on these little pockets of chronovirus outbreaks

Or big pockets around the world so everything seems a little bit fraught uh economically at the moment yes i think uh think about these kind of china decided to you know stop

Importing uh meats from individual uh exporters in europe or united states it's more related to uh control of the coronavirus but the real big picture is uh you know the the chronomy's impact is it

Dampened uh china's over overall demand for imported goods that's a real problem for um exports in the in the us or in europe so if you know china's demand is very weak for instance china's demand for

Oil for fuel it certainly reduced a lot because uh the planes are grounded and you know people are not travel as much as before so this is this will definitely affect the implementation of the uh

Phrase one trade deal at the same time china is saying look you know buy market we shouldn't import that much but still we are willing to you know honor our promises we are buying as much as we can

And i think as long as there's a hefty load of soybeans on ships to china by november trump may be happy with with that absolutely i mean he needs all the help he can get at this point

Before we uh finish up john give us a snapshot of what's ahead in the chinese economy next week well we have two very big pieces of data next week first on tuesday we'll have the new

Trade data for june as you recall exports rose surprisingly in april but then fell again in may and so the question is in june what will exports do um given the

Sharp effect of the chronovirus in europe and america on demand for those exports um so that will tell you something about this the state of chinese trade economy and then on thursday we

Get gdp data for the second quarter um and this is likely to show expected to show a modest rebound one to two percent uh which by chinese standards is is very slow growth but it is growth

Um and the us and europe are posting um quarterly growth rates of minus nine minus ten percent so china is the first uh economy out of the coronavirus problem they they

Locked down their economy for two months and it worked and cronovirus cases have made a a modest rebound in china but nothing near what's going on in the united states for

Instance and so the chinese economy is improving led by domestic demand and so going forward uh china is going to have a lead time of at least one quarter if not two quarters on the

Rest of the world a douche in just to finish up as somebody who's been covering the chinese economy for many years did you ever think you'd be um covering a story where one to two percent growth

In china would be held as a as a global success oh yes uh i mean given the background of the global economic slowdown i think one percent is already a win for for china so yes definitely yeah great

Stuff guys thank you so much we've got a great guest coming up in the next part of the show clark jennings is his name and he has an extensive cv but the bit that you're

Most interested in is that he was the white house trade adviser to president barack obama he's going to give us some incisive analysis on how we got to this point but we're also going to throw it forward

To the us election the upcoming campaign and where the us china dynamic may feature in that on a topic that we expect to hear discussed a lot more over the next few

Months what might the situation look like under a president joe biden clark jennings is the managing director for asia at the us government relations

And public policy advisory firm cnm international in a previous life clark was white house trade advisor under the president obama administration he joins us on the line from singapore today clark thanks for joining us

Two years on from the first tariffs of the us china trade war can you really believe how wildly out of control things have spiraled well first of all thanks for having me finbar and it's great to talk today

Um i think did you do we noticed today the actual anniversary it was june july 6th so it was uh three days ago yeah this way well so in an auspicious week then we'll just leave it at that um

You know no to answer your question i don't i don't know that we would have thought that we would have fallen this far is the answer and when i look back on two years

I'm trying to work through the question of whether this was all worth it and and of course where we stand and what to expect moving forward and you know to to try and work through that calculus i think of

All right well let's look at you know what has this all gotten us so far and i'll answer this from you know more of the lens of the us domestic view since since that's where i'm from but you know

This is all of this and you know at the impetus of the trump administration has contributed to an incredibly volatile period in our stock market in our us domestic economy it's added to

An incredible amount of uncertainty for the business community um i also look at things like you know tangential effect but you know you saw this week the white house has indicated uh

Its intent to withdraw from the world health organization in the middle of a global pandemic which is related to us china relations we have we the united states has been forced to commit

I think it's now over 28 billion dollars of american taxpayer money to subsidize farmers and ranchers across the united states for the lost sales that they would have had to china and and lastly i just i

Have yet to seen any real data that shows the kind of broad realignment of supply chains or a sort of mass re-shoring of production and manufacturing to the american shores

That we were promised by this and so again it just comes down to you know was this worth it and if there were any gains at what cost you know at what cost not only to the us domestic economy but

At what cost to our relationships around the world and our standing on the global stage yeah and but we the those are all very valid points but i think a lot of people would

Also say that people perhaps you didn't give or didn't support this trade war the start didn't support the tariffs have sort of said okay but you have to give um president trump some

Uh some sort of credit for bringing china right into line to an extent so all those things considered do you feel like maybe under previous administrations the one you served

Included maybe you guys could have gone a bit harder on china does that tell you that does this sort of situation tell you that sure and i think that's exactly right i think we and i'm willing to give

Credit where it's due to the trump administration i think there is a growing consensus in washington at least that to your point there needed to be tougher stance

You know i don't i don't think i will uh be considered blasphemous for saying that you know as an obama appointee that the obama administration you know could be criticized for maybe not going far enough for

Certain points in the us china relationship i think the bush administration you know would be guilty administrations across party lines prior to those because there has been i

Think a bipartisan consensus going back decades even that the way to and deal with china was to engage you know i always always think of um i think it was the former us trade rep

Bob zelick who famously you know opined that we want china to become a responsible stakeholder you know to liberalize their market come into the international order

And be a responsible stakeholder in the goal system well let's all admit that that's failed you know that strategy has not worked and so you know i certainly to your point i absolutely agree and i think

There is a consensus in washington that that strategy has not worked and so we have to think about okay what what is a new strategy but the question of course is what is that strategy that's the

Million dollar question yeah and i think i think there's i think people and i share this view i think the principle that it was time to take stronger action on china is widely agreed but i think it's in the

Trump administration's execution and in their tactics and the way that they have gone about this that has been disastrously flawed what would what would a halfway house look like and i know you said this

Is the 64 thousand dollar question and i guess it you know if if we are where we are now right the united states and china they are where they are you might have another four years of president trump you may well have a new

President in uh joe biden i mean which parts of the trump policy do you think he will have to hold on to he i guess um can't revoke everything that trump's done

Um considering that may be seen as a concession to to beijing i mean what do you think that some sort of a halfway house under biden might look like well let's start a big picture with

Foreign policy under biden i would say first of all we would try to counteract um what you know some of the the broader flaws of the trump administration strategy which has led us to

Push away our allies um famously on day three administration of course um the trump white house you know pulled out of tpp and we can talk about that separately but that you know kind of took away our biggest economic

Opportunity to strengthen our trade relationships in asia and he has gutted our state department our foreign service and and walked away from global institutions so i think you certainly

Would see a reset to have a more engaging posture to look to re-establish the us you know on the global stage and work with our like-minded partners

Now to china actions specifically i take a good point you know i don't think that you know joe biden would come into office and would start walking back all the things that um

That that trump has done in the us china relationship i think you may see him roll back some of the tariff actions for example that are that are purely quote unquote

You know trump core policy i certainly think you know questions around the revocation of visas for example you know this is now getting broader than just trade but some of these things he would look to

Walk back immediately but i don't see and this is key i think there's become this kind of hardening of the consensus view in washington as we've already mentioned um that's it's it's kind of hardened around the need

For action in china and so i don't think you can walk back for example some of the actions potentially against huawei um you know and the integration in in some of our ict

And tech supply chains you know that's just too politically divisive um so i think you're going to continue to see on that front there's there's going to be some real strategic competition that

Of course it is going to continue to play out between the us and china particularly around tech cyber security you know open internet that that's not going to change and i

Think the obvious administration would continue that how long can biden be sort of quiet on this i mean it's smart i think you know a lot of people have said that it's smart for biden to allow

Trump to sort of say what he's saying and keep a low profile but i guess sooner or later he's gonna have to come out with a china policy he issued his strongest statement yet

Uh was it last week earlier this week feels like a million years ago at this point but he actually um came out with some concrete criticisms of china and so on but i'm wondering what he i mean how

Long can he leave it before he sort of starts revealing his hand on china it depends on if we have presidential debates in the fall um you know for for starters uh he would certainly be

Asked that question in at least one of them you know and that's a little bit up in the air or at least a concern among people about whether we will actually have those debates

But more broadly i i think it's a topic he's not going to look to engage on at least the forefront there's simply too much going on on the domestic front at home in the us and then this campaign obviously the cove

Response and economic concerns health care social issues criminal justice and racial justice um that this is let's be honest this is not going to be a top of mind

First priority for the biden campaign i also think i think there's more downside for biden in talking about this now to your point the trump administration is most definitely going to continue

To push him on these questions this this was one of the first actually one of the first actions that came out in the campaign once biden emerged from the primary i think that trump there's a super pac aligned

With trump that made something like a 10 million dollar ad buy in some key midwest battleground states and started labeling him as beijing biden yeah you can still you can

Still go to beijingbidencom right now to get your fill of that um so look it's out there and they think it's strong footing for them i think on the trump side it's obviously a comfort area for the

President where he feels strong and wants to be on the attack and i think there's more i think there's just there's less to be gained for joe biden to be talking about this issue because he wants to be laser

Focused on the us recovery and there's more political potential downside there so i think he's going to play it cautious at least in the campaign yeah where does hong kong figure in this

Clark you know obviously we're waiting to see what president trump will do with regard the hong kong autonomy act we're waiting to see what potential sanctions may look like um you know uh biden has come out and also been

Critical of um china's um rollout of the of the national security law um i guess some of these powers that at the president's disposal are one-off powers um and and the fact that there is a unified

Voice critic criticizing china on hong kong do you feel like um biden is sort of in a bind there like he he sort of has to has to go hard on hong kong do you think he would be as hard

As trump maybe or what's your sense of what that might look like i think what i would say there is that it he may have to he may be forced into a stance there and the reason i say that is

Not simply the trump administration or the trump campaign that will want to push him on that it's that the us congress will push him on that and his former colleagues in the senate

Um this is this is a kind of boiling issue in the congress and i think a lot of the uh the members of that body want to see and we've seen some action obviously

Coming out of them um already and i i think that's something that's going to continue now will it rise into an issue that you know boxes uh you know potentially boxes of

Joe biden during the campaign i don't know that that's the case but it would certainly be something that if he were to win on november 3rd that's going to be at the front of the list of issues that

He's going to be forced to deal with yeah you're sat in singapore clark is there a sense that the international community um back in in 2018 there was strong outcry against

Tariffs against the trade war um there was a sense that the international community was not supportive of this is there a sense that as we discussed that maybe in washington the criticism and the hard action on

China is more about it has more bipartisan support do you get that sense from the international uh community as well i think there's a recognition i don't

Think it differs necessarily um you know from that consensus in washington i think well and first of all let's draw this line there is there is a there's a clear difference i think um in

The way that you know american multinationals and other multinational companies grapple with this question between those that are viewing the issue more broadly so those for example that

Sit here in singapore and look at it through a lens of you know how they're conducting business throughout the asia pacific more broadly versus those companies that are in china to be in china and

Truly have a you know substantive substantial stake in operations and business serving the chinese market you know those companies um those companies are serving china for

China and they're going to be there i don't see them pulling up stakes and leaving you know even amid all of this talk of reshoring and supply chain ship i think i saw there was some surveys by

Amcham china the american chamber of commerce in china earlier this spring that said they surveyed their membership which is large and said you know how many of you are actually making moves based on this and

I think their only their numbers were something like only nine percent um have actually started relocating or shifting their sourcing i think the eu chamber did a similar one and it was

Similar numbers you know we're amid a global uh you know i stretched and called it economic calamity it's most certainly a global downturn you know corporate cash is tight

And there's just this incredible amount of certainty and not the least of which finbar of course is what's going to happen on november 3rd so i think a lot of companies are sitting tight and i think they are concerned um on the

Overall dynamics and i certainly think there's concern about where we go from here but i think at this point and certainly over the course of the next couple of months

We've been talking just now about the dynamics of the campaign i think it's probably prudent to wait and see what happens on november 3rd yeah and just to round up clark um you mentioned earlier in the call that there

Are issues that possibly won't be what ruled by stuff like huawei stuff like um tech um i guess a separation of technological um areas do you see that decoupling as as being inevitable and how far do

You expect that to go that's my biggest concern to be honest with you you know i think when we talk about decoupling i think you know some in washington and certainly an

Administration have kind of this this very simplistic view that you know it's it's almost all turkey for america that everything should be made here by americans for americans and that's

Simply not i believe a viable reality in a globalized economy of course what is my concern though is your point is this this fragmenting particularly of the open

Global internet of our communications our tech and ict infrastructure the creation of the splinter net you know and where there is a wall and expanding the the great firewall and

It becomes a wall between china and us and everyone else has to kind of line up on either side i can tell you sitting in singapore singapore doesn't want to be forced to choose

You know that and i think other countries would answer in a similar fashion don't force us to choose one side or the other but i do think this is the spot we have to pay the most

Attention to because you know you can go straight to the you know china's made in china 2025 plan and kind of map against those pillars whether it's robotics or biotech or artificial intelligence

5g there is this this thrust in dc that we need to start competing and drawing those lines clearly and this is kind of this is american industrial policy

Uh being formulated in front of our eyes and so the question becomes for elected officials for policymakers and for those of us that you know our broader stakeholders in the international community is that the

Direction we want um and i think that's the most challenging question and i think it's something that we really need to be watching the companies need to be watching

Um because it's going to draw kind of that's going to be the battle lines for the future we will check in on this throughout the next few months clark will be keen to talk to you again before and after the election of

Course see how see how things change and see we'll see where the world is um but that's been brilliant thank you so much for for your time today and we'll talk to you soon

Absolutely i look forward to it thanks thanks for listening to this week's us china trade war podcast i have been finbar birmingham on the political economy desk here at

The scmp don't forget to keep up with scmpcom for all news on us china national security law hong kong and follow us on twitter at scmp economy

I'm at f birmingham that's birmingham with a be or not like the city keep washing your hands keep your social distance and we will see you again same place next week

For more podcasts from the south china morning post head to scmpcom where you can hear more about technology trade culture and society

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