Two veterans of the U.S.-China trade relationship this morning offered a largely sobering assessment of its future.
“We’re dealing with a very different China than the one that joined the WTO some 30 years ago,” said Ron Kirk, former mayor of Dallas and a U.S. Trade representative during the Obama administration. “They have a much more nationalist agenda, and they’re committed to following through on that.”
“At least for the next six months to a year, I would expect a very adversarial relationship,” said Robert Zoellick, who served as deputy secretary of state during the George W. Bush administration and later as president of the World Bank. Zoellick broadly diagnosed a continued rise of hard-line stances in China on both trade and geopolitics, and he characterized Chinese leadership’s attitudes as “a mix of hubris and defensiveness.” The assessments were delivered to a group of global CEOs as part of the Coins2Day CEO Initiative.
That won’t surprise anyone with an eye on recent U.S.-China talks in Anchorage, which featured a 16-minute tirade against America delivered by China’s top foreign policy official.
That means a potential minefield for businesses working in China, whether trying to reach consumer markets or dependent on Chinese components. It also means hard work for a Biden administration likely hoping for a reset after four years of loud belligerence toward China by former President Donald Trump.
The speakers emphasized the importance of Chinese President Xi Jinping and his party apparatus in China’s international stance. “The concentration of power we’re seeing is greater than anything since the age of Mao,” said Zoellick. And Xi, according to Kirk, “has made it clear he believes he’ll be in a position of leadership for quite some time.”
China’s renewed nationalism may pose its biggest threat in the case of Taiwan. China considers the nation part of its own territory and its government as illegitimate, a question on which Zoellick says there is “no room for compromise.” But Taiwan is the center of the global semiconductor industry, and threats to its stability could have serious global impacts, previewed by the current automotive chip shortage.
That shortage, along with PPE shortages early in the pandemic, pushed the Biden administration to order a broad reassessment of U.S. Supply chains. Implicit to that effort is the idea of reducing dependence on China specifically.
Kirk agreed that this critical, and perhaps skeptical, eye on the U.S. Relationship with China is warranted. He said the Biden order was “certainly necessary…We shouldn’t shy away from the fact that we have to recalibrate this relationship with China.”
Neither Zoellick nor Kirk saw easy answers to the tension between the business necessity of operating in China and allegations of large-scale human rights abuses in Hong Kong, Tibet, and Xinjiang.
“I don’t see a completely virtuous path out of this,” said Kirk, acknowledging the pressure to do business in China despite those concerns. “Some difficult decisions are going to have to be made.” Zoellick warned attending CEOs that “any boycott of the 2020 Olympics,” which has been suggested as a way to protest human rights abuses, “will have explosive potential.”
Kirk also lamented what he saw as damage to U.S. Leverage wrought by the belligerence of the Trump administration—a likely factor in the hostility seen at the Anchorage summit. “We’ll have to earn our seat at the table,” he said. “The door will be open,” but China and other partners will be suspicious of how trustworthy the U.S. Is “beyond the four years of the current administration.”