China Is Ready To Step In If U.S. Retreats From Trade Deals, Author Says Renee Montagne talks to Eswar Prasad about the potential costs of U.S. disengagement from free trade pacts. He's a Cornell economics professor and author of Gaining Currency:The Rise of the Renminbi.
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China Is Ready To Step In If U.S. Retreats From Trade Deals, Author Says

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China Is Ready To Step In If U.S. Retreats From Trade Deals, Author Says

China Is Ready To Step In If U.S. Retreats From Trade Deals, Author Says

China Is Ready To Step In If U.S. Retreats From Trade Deals, Author Says

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  • <iframe src="https://www.npr.org/player/embed/499409079/499409080" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Renee Montagne talks to Eswar Prasad about the potential costs of U.S. disengagement from free trade pacts. He's a Cornell economics professor and author of Gaining Currency:The Rise of the Renminbi.

RENEE MONTAGNE, HOST:

If there's one thing this election season has made clear, it's that many Americans are against free trade deals. Donald Trump opposes free trade, and Hillary Clinton has also backed off supporting it. Meanwhile, China seems to be doing more and more business with the rest of the world. Eswar Prasad is the author of "Gaining Currency: The Rise Of The Renminbi." He recently wrote an op-ed predicting what would happen if the U.S. retreats from such agreements, saying this would essentially amount to handing China a gift.

ESWAR PRASAD: The risk of U.S. disengagement from the world is that China now stands ready to fill in the void because China is now the second largest economy in the world. It now accounts for about one-sixth of global trade. So if the U.S. were to back off from any trade deals, given how many countries in the Asian region and beyond see their future more closely connected to that of the Chinese economy, China can really play a role in terms of bringing those countries into its embrace. And it's developed a strategy for doing so very effectively.

MONTAGNE: Although, is this a good long-term strategy for China in the sense that, let's say, it says, you know, no strings attached - here's hundreds of millions of dollars or even billions of dollars to do what you need to do, if they're going to countries that have longstanding problems with corruption or an inability to move their own countries forward economically?

PRASAD: The Chinese are clever enough to recognize that their investments in some of these countries that don't have good governments are risky, so they make sure that they structure their investments in a way that they can, in fact, gain the maximum economic advantage. The other interesting thing is that it's not just poor developing countries beating down China's door. Many of the major advanced economies are also signing up to be good friends with China.

And China's been very good at playing off some of these major advanced economies against each other. Last year, we had this spectacle of London and Frankfurt falling over each other to make sure that they could be in line to get as much renminbi business as possible because, as China's currency plays a greater role in the world economy, the currency is going to be traded more and more around the world.

MONTAGNE: So what does this all mean, these various changes that are happening? What does this all mean to the U.S., especially if Americans continue with this broad rejection and suspicion of international trade deals?

PRASAD: At one level, it's a good thing for the U.S. and the rest of the world if China becomes more engaged with the international community and sees the rules that govern international trade and finance as being in its own interests and supports them. But the problem is that there are many values that the U.S. has tried to spread around the world, including freedom of expression, democracy, free markets.

All of these are not necessarily values that the Chinese government cares very much about. And although having a more engaged China may be good for the world, it's certainly not going to be good for U.S. influence and, more importantly, for many of the values that the U.S. has tried to propagate around the world.

MONTAGNE: Eswar Prasad is a professor at Cornell University and a senior fellow at the Brookings Institution. Thank you very much for joining us.

PRASAD: It's been my pleasure. Thank you, Renee.

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