Looking At U.S.-China Trade As Trump Meets Xi
RACHEL MARTIN, HOST:
If you went to a Donald Trump rally during the presidential campaign, you could count on hearing something like this.
(SOUNDBITE OF RALLY)
PRESIDENT DONALD TRUMP: We can't continue to allow China to rape our country, and that's what they're doing. It's the greatest theft in the history of the world.
MARTIN: So today, President Trump has a chance to express that sentiment directly to China's president, Xi Jinping, if he so chooses. Trump is hosting him at Mar-a-Lago. Here's what the president tweeted about the talks. The meeting, he said, will be very difficult because America can no longer have, quote, "massive trade deficits and job losses." Trump also signed an executive order commissioning a review of the causes and effects of trade deficits.
Charles Freeman was a trade negotiator under President George W. Bush, and I asked him if there are still unsettled questions about the costs and benefits of trade deficits.
CHARLES FREEMAN: I think any serious economist that has followed the trade debates over the years doesn't have questions about why we have trade deficits and what's wrong with them, what's good about them. But certainly the American public has a lot of questions about trade deficits. The American public probably doesn't really understand, you know, if we're running a $300 billion trade deficit with China, how are we not losing to China?
MARTIN: What's the answer to that? It is a lot of money.
FREEMAN: It's a lot of money but remember, I mean, we're getting something back for that money. And the Chinese are largely plowing the profits from that trade deficit back into the U.S. economy. So it actually does kind balance out. And there are a lot of nuances.
But, by and large, the notion that a bilateral trade deficit, you know, what I sell to you and - that I don't buy anything back, that's not a real good indicator of a relative economic success or failure between countries. It just isn't.
MARTIN: Yet then-candidate Trump tried to tie those together at every turn, talking about how China is manipulating its currency and that that is in some way responsible for the trade deficit that the U.S. is running against China. He promised to label China a currency manipulator on day one of his presidency. He hasn't done that yet. Why not, do you think?
FREEMAN: Probably because China isn't manipulating its currency right now in the sense of trying to gain an unfair trade advantage by reducing the value of its currency. Since 2014, actually, China has been intervening massively to try to keep the value of the renminbi - the Chinese currency - up relative to the U.S. dollar.
MARTIN: What would be the implications if Donald Trump did attempt to label China a currency manipulator? What does that even mean in practical terms?
FREEMAN: In practical terms frankly, not much. Ultimately, it's - there's no action that one can take.
MARTIN: Trade between the U.S. and China is something that has evolved through governing processes, international trade agreements. So Donald Trump comes in. He's a disrupter. That's part of his brand. But how much power does the executive branch really have to irrevocably change America's trade relationship with China?
FREEMAN: Well, it can - the executive branch can really do a lot of damage by, you know, canceling trade agreements, bringing back some of the trade laws that we had, trade rules that we had back in the past before China joined the WTO, before we joined the WTO. So there are things that can be done. They wouldn't be WTO legal, but that doesn't seem to bother the president that much if it's perceived to be putting America first.
MARTIN: It could violate the World Trade Organization, but...
FREEMAN: Of course, yeah, very clearly, but...
MARTIN: ...Then what does that mean? What are the implications of that?
FREEMAN: Well, that means that other countries can retaliate against us, and we end up with a trade war. And that's not good for anybody.
MARTIN: Where do you think President Trump could and should pressure China on trade?
FREEMAN: Well, the big challenge that we have with China right now is China's gone down the road in the last few years of being a very serious employer of industrial policies, trying to boost their domestic industries at the expense of foreign competition. And that's really where we have the biggest challenge.
And that, frankly, is in places like higher technology, semiconductors. And then the really competitive parts of the U.S. economy, China's now trying to go head-to-head with us and doing it in ways that really are not consistent with, quote, "market principles."
MARTIN: Because they can give a company a subsidy. There are no real market effects to a corporation that fails.
FREEMAN: Correct. There's very - there's, I mean, it's a rigged economy.
MARTIN: Which makes it difficult for the U.S. and China to ever play by the same ground rules because we're not.
FREEMAN: Correct. Correct.
MARTIN: You negotiated with the Chinese under President Bush, as we've noted. What is your advice as a negotiator to Donald Trump in this moment?
FREEMAN: The impossible - listen. Just don't speak first, let the other side put its issues on the table and see what you like and what you don't like. But listen, don't speak. American negotiators, Americans generally, we like to fill up the silence with our ideas.
And, frankly, that lets the other side cherry pick what you like and what you don't like. So it may be difficult for this president to practice silence. But that's probably the best advice I can give him or anybody else in dealing with the Chinese.
MARTIN: Charles Freeman was a U.S. trade negotiator from 2002 to 2005 in the George W. Bush administration. He is now managing director at BowerGroupAsia, a consulting firm. Thanks so much for your time today.
FREEMAN: A genuine honor, thanks.
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