Former Diplomat: China Feels They Outflanked Us in Trade

The former minister counselor for trade affairs in the U.S. Embassy in Beijing told an audience that in the last few years, Chinese government officials "feel like they've outflanked us on the trade front." James Green, who was speaking on a Flexport webinar on the future of U.S.-China trade policy, said that officials were pleasantly surprised that the tariffs on most exports to the U.S. did not hurt their economy more. And, he said, between sealing the Regional Comprehensive Economic Partnership and applying to join the Trans-Pacific Partnership, they also feel like they have other options for exporting when things with the U.S. sour.

The Chinese also closed an investment deal with Europe, he noted, but that blew up because China imposed sanctions on European Union parliamentarians. He said that the Chinese government didn't mind. "Well, Europe, you want this more than we do," was their attitude, he said.

But, Green said, that doesn't mean Chinese officials have no anxiety about U.S. leverage in commercial matters. He said they are closely watching whether the U.S. will arrive at an Asia-Pacific digital trade agreement, and they don't want the U.S. and the EU or the U.S., Japan and South Korea to jointly try to create rules that would punish Chinese economic practices such as support for state-owned enterprises. Green said China sees these efforts as ganging up on it.

Green said it would be extremely hard for any one of these alliances to result in a united front on what to do about Chinese subsidies. And he said if any of the talks seem to be heading that way, China will do its best to undermine them, for instance, by offering sweetheart market access deals to Japan or to the EU.

Moderator Phil Levy asked Green if China really could join the TPP. Green said not in the next few years, but he thinks it could be possible within 10 years. He said China thinks that if Vietnam can be in the TPP, why is China any different? Green and Chris Rogers, Flexport's principal supply chain economist, disagreed on whether the situation for importers -- who collectively are paying $4 billion a month in Section 301 tariffs on Chinese goods -- will improve.

Green said he thinks the exclusion process will be broadened, so that while tariffs may not be rolled back, they may be less painful for importers. But Rogers said, "I think things are going to get worse." He noted that U.S. Trade Representative Katherine Tai talked about looking at new tools.

Rogers and Green also had differing, but in some ways converging, views on what the results of the Trump administration's trade war are. Rogers said, "It kind of worked. He wanted more exports to China, he got that." He said that Trump wanted fewer imports from China, which was happening until the huge surge in imports this year in response to stimulus payments and the COVID-19 pandemic.

"Transactionally, he got what he paid for," Rogers said, but it didn't change China's behavior.

Green agreed that it didn't change China's behavior, but said that if you look at the goal more narrowly, he thinks the former USTR wanted to get U.S. companies to think about their over-reliance on China for inputs or consumer goods. "I think that happened," he said, but they haven't necessarily shifted their supply chains in response.