1 00:00:15,396 --> 00:00:22,676 Speaker 1: Pushkin from Pushkin Industries. This is Deep Background, the show 2 00:00:22,716 --> 00:00:25,716 Speaker 1: where we explored the stories behind the stories in the news. 3 00:00:26,116 --> 00:00:30,956 Speaker 1: I'm Noah Feldman. Welcome to this week's show, where we're 4 00:00:30,956 --> 00:00:33,476 Speaker 1: going to take on the looming question of our time, 5 00:00:34,036 --> 00:00:38,156 Speaker 1: trade wars. Almost no topic has been more prevalent in 6 00:00:38,196 --> 00:00:42,236 Speaker 1: our public discourse since Donald Trump was elected in twenty sixteen. 7 00:00:42,796 --> 00:00:45,596 Speaker 1: We've seen trade wars threatened, We've seen us pull back 8 00:00:45,676 --> 00:00:48,636 Speaker 1: from trade wars, and now we seem to be back 9 00:00:48,676 --> 00:00:52,516 Speaker 1: in the game again. To discuss this crucial and all 10 00:00:52,516 --> 00:00:55,916 Speaker 1: important topic, I decided to turn to the person whom 11 00:00:55,956 --> 00:00:59,276 Speaker 1: I learned everything that I know about trade from my 12 00:00:59,396 --> 00:01:02,476 Speaker 1: trade guru, as it were, and that's my colleague at 13 00:01:02,476 --> 00:01:05,716 Speaker 1: Harvard Law School, Mark wu. Mark had an important job 14 00:01:05,716 --> 00:01:08,316 Speaker 1: in the Office of the United States Trade Representative. Then 15 00:01:08,396 --> 00:01:11,156 Speaker 1: he decided that wasn't enough. He went to law school, 16 00:01:11,276 --> 00:01:13,356 Speaker 1: He became a law professor, he got tenure at Harvard 17 00:01:13,476 --> 00:01:17,156 Speaker 1: Law School, and all along the drumbeat of Mark's path 18 00:01:17,196 --> 00:01:21,236 Speaker 1: breaking scholarship has been the growing challenges in the US 19 00:01:21,356 --> 00:01:25,036 Speaker 1: China trade relationship and the way that those challenges would 20 00:01:25,156 --> 00:01:29,236 Speaker 1: ultimately transform the nature of the international trade regime of 21 00:01:29,356 --> 00:01:31,796 Speaker 1: all of the scholars that I know, I can't think 22 00:01:31,836 --> 00:01:35,116 Speaker 1: of anyone else who started by saying something that left 23 00:01:35,196 --> 00:01:40,396 Speaker 1: him way out on the dissenting cold side of the field, 24 00:01:40,916 --> 00:01:43,516 Speaker 1: kept on saying it, kept on saying it, and then 25 00:01:43,596 --> 00:01:49,716 Speaker 1: turned out to be painfully accurately and sadly right. Mark, 26 00:01:49,756 --> 00:01:51,916 Speaker 1: Thank you for being here, Thanks for having me. No, 27 00:01:52,196 --> 00:01:54,476 Speaker 1: I wish it were under a happier circumstances than the 28 00:01:54,556 --> 00:01:57,836 Speaker 1: fact they were actually in a trade war. Now, so 29 00:01:58,316 --> 00:02:02,956 Speaker 1: let's start with the question of how much of where 30 00:02:02,956 --> 00:02:06,236 Speaker 1: we are is Donald Trump. All those years when you 31 00:02:06,276 --> 00:02:10,356 Speaker 1: were talking about rising trade tensions between in the United States, 32 00:02:11,076 --> 00:02:13,316 Speaker 1: you were not predicting there would be someone named Donald 33 00:02:13,316 --> 00:02:16,916 Speaker 1: Trump who would become president, but you were predicting structural 34 00:02:17,316 --> 00:02:20,396 Speaker 1: differences that you always said would lead to greater and 35 00:02:20,476 --> 00:02:24,876 Speaker 1: greater conflict. Would all this have happened eventually in one 36 00:02:24,876 --> 00:02:27,556 Speaker 1: way or another even if Donald Trump had not been 37 00:02:27,596 --> 00:02:32,796 Speaker 1: elected president. There is an underlying structural tension in the 38 00:02:32,956 --> 00:02:38,156 Speaker 1: US China relationship. So to that extent, would the economic 39 00:02:38,236 --> 00:02:42,956 Speaker 1: relationship have deteriorated? I think the answer certainly yes. Would 40 00:02:42,996 --> 00:02:47,156 Speaker 1: it have deteriorated in this particular way with this type 41 00:02:47,196 --> 00:02:52,396 Speaker 1: of confrontation. I think that part is very much specifically 42 00:02:52,436 --> 00:02:55,876 Speaker 1: Donald Trump. I don't think we'd be seeing policy conducted 43 00:02:55,956 --> 00:02:59,956 Speaker 1: via tweets and sort of this whiplash left, whiplash right 44 00:03:00,076 --> 00:03:03,996 Speaker 1: type of approach. That's very much a Trumpian style of 45 00:03:04,076 --> 00:03:07,076 Speaker 1: approach towards taking on China, and it's something I think 46 00:03:07,116 --> 00:03:09,356 Speaker 1: has really thrown the Chinese for a loop as well. 47 00:03:09,956 --> 00:03:15,876 Speaker 1: We'll talk about that. How do people sitting in Beijing, sophisticated, 48 00:03:16,116 --> 00:03:18,996 Speaker 1: educated people with years of experience in watching the United 49 00:03:19,036 --> 00:03:22,716 Speaker 1: States and understanding international trade and a long term strategy 50 00:03:22,716 --> 00:03:25,876 Speaker 1: that they were pursuing quite successfully, how do they think 51 00:03:25,916 --> 00:03:29,756 Speaker 1: about the wild card or the curveball that is Donald Trump? 52 00:03:30,156 --> 00:03:31,676 Speaker 1: And you talk to all of these people on a 53 00:03:31,716 --> 00:03:34,076 Speaker 1: regular basis or don't violate any confidences, but give us 54 00:03:34,076 --> 00:03:37,756 Speaker 1: an overview picture. Well, I think over the last decade 55 00:03:37,836 --> 00:03:44,356 Speaker 1: or so, the Chinese increasingly became more sophisticated in their 56 00:03:44,476 --> 00:03:49,756 Speaker 1: what they call American studies. So they thought they had 57 00:03:49,796 --> 00:03:52,476 Speaker 1: the US more or less figured out, and they had, 58 00:03:52,636 --> 00:03:56,036 Speaker 1: to the extent that we're talking about conventional what goes 59 00:03:56,076 --> 00:03:59,276 Speaker 1: on within the Beltway, right, they thought there are these 60 00:03:59,276 --> 00:04:02,116 Speaker 1: structural issues, but they can be managed. Was an example 61 00:04:02,156 --> 00:04:04,556 Speaker 1: of the structurature they thought they could. So, for example, 62 00:04:05,036 --> 00:04:09,396 Speaker 1: they know that there are job losses happening in the US. 63 00:04:10,036 --> 00:04:12,916 Speaker 1: They know that some of that is due to the 64 00:04:12,956 --> 00:04:17,156 Speaker 1: fact that jobs are moving to China because of offshoring 65 00:04:17,196 --> 00:04:19,476 Speaker 1: and so forth. They know that there's going to be 66 00:04:19,516 --> 00:04:22,836 Speaker 1: a political backlash against that. But they thought they could 67 00:04:22,836 --> 00:04:27,716 Speaker 1: control that because you can certainly align the US business 68 00:04:27,796 --> 00:04:31,876 Speaker 1: community in a way that they have gains from the 69 00:04:31,916 --> 00:04:36,276 Speaker 1: growing Chinese market. You have farm purchases from certain states 70 00:04:36,676 --> 00:04:40,676 Speaker 1: they're politically important. You have ways of trying to win 71 00:04:40,716 --> 00:04:43,836 Speaker 1: over our hearts and minds by making certain types of 72 00:04:43,876 --> 00:04:49,276 Speaker 1: investments and states that are the industrializing. So they thought, 73 00:04:49,316 --> 00:04:52,236 Speaker 1: you know, people can sense that there's a China threat, 74 00:04:52,596 --> 00:04:55,956 Speaker 1: but that threat doesn't have to seem as ominous. And 75 00:04:55,996 --> 00:04:59,716 Speaker 1: they were making friends and creating a certain type of alliances. 76 00:04:59,756 --> 00:05:03,796 Speaker 1: But they hadn't anticipated, much like most Americans hadn't anticipated 77 00:05:04,116 --> 00:05:07,356 Speaker 1: the scale of the populist backlash and that it would 78 00:05:07,356 --> 00:05:09,236 Speaker 1: take the form of Donald Trump. So I think it's 79 00:05:09,276 --> 00:05:11,316 Speaker 1: really thrown them for a loop. Is that because they 80 00:05:11,596 --> 00:05:13,996 Speaker 1: overplayed their hand. I mean, as you said, they had 81 00:05:13,996 --> 00:05:17,396 Speaker 1: a strategy and during the Clinton Bush and Obama administrations. 82 00:05:17,556 --> 00:05:20,396 Speaker 1: It worked pretty well. There were people who were mad 83 00:05:20,396 --> 00:05:23,876 Speaker 1: at China, but they were peripheral. China wasn't identified publicly 84 00:05:23,916 --> 00:05:26,996 Speaker 1: as the great threat to the United States, and then, 85 00:05:27,036 --> 00:05:29,996 Speaker 1: as you say, we got Donald Trump. I mean, there 86 00:05:30,076 --> 00:05:31,756 Speaker 1: was one sort of cosmic way of looking at it. 87 00:05:31,756 --> 00:05:34,116 Speaker 1: It says they couldn't have gotten away without forever, and 88 00:05:34,316 --> 00:05:36,756 Speaker 1: they didn't. I think it'll be interesting to see how 89 00:05:36,796 --> 00:05:41,076 Speaker 1: history judges this. You could look to say that that's 90 00:05:41,076 --> 00:05:43,276 Speaker 1: the case, and maybe they tried to push too far, 91 00:05:43,396 --> 00:05:45,476 Speaker 1: too fast. But I think this is a bit like 92 00:05:45,596 --> 00:05:49,756 Speaker 1: asking the questions the Democratic Party not do enough after 93 00:05:49,756 --> 00:05:52,876 Speaker 1: the two thousand and eight financial crisis. It's hard to 94 00:05:52,916 --> 00:05:55,636 Speaker 1: say with hindsight. Right, on the one hand, the economy 95 00:05:55,676 --> 00:05:57,636 Speaker 1: got better, I mean, one hand, the economy got better. 96 00:05:57,716 --> 00:06:00,676 Speaker 1: On one hand, right, China created a lot of win 97 00:06:00,756 --> 00:06:03,876 Speaker 1: win situations, especially for US business. It helped keep the 98 00:06:03,916 --> 00:06:07,236 Speaker 1: global economy afloat after the financial crisis. It became the 99 00:06:07,316 --> 00:06:11,156 Speaker 1: largest market for many goods. Lots of people did well, 100 00:06:11,516 --> 00:06:14,476 Speaker 1: either directly through their businesses in China or more indirectly 101 00:06:14,476 --> 00:06:18,636 Speaker 1: through through their pension funds investing in certain firms that 102 00:06:18,756 --> 00:06:21,756 Speaker 1: made quite a bit in China, and there are displaced 103 00:06:22,076 --> 00:06:25,316 Speaker 1: pockets of people who suffered tremendously as or resolved this. 104 00:06:25,436 --> 00:06:27,916 Speaker 1: But they thought they had that under control. Right. So 105 00:06:27,956 --> 00:06:32,156 Speaker 1: now you're sitting there in Chinese government circles, You've got 106 00:06:32,156 --> 00:06:35,236 Speaker 1: this Trump phenomenon to deal with. We're struggling here to 107 00:06:35,356 --> 00:06:37,396 Speaker 1: make sense of it. How do they make sense of it? 108 00:06:37,436 --> 00:06:39,076 Speaker 1: Do they think of it as on the whole, as 109 00:06:39,116 --> 00:06:42,276 Speaker 1: a temporary phenomenon of temporary deviation, or do they think, no, 110 00:06:42,476 --> 00:06:44,196 Speaker 1: this is the way of the future, at least with 111 00:06:44,196 --> 00:06:48,116 Speaker 1: respect to US China relations. So, on the one hand, 112 00:06:48,316 --> 00:06:51,196 Speaker 1: I think they're struggling to figure out the same question 113 00:06:51,276 --> 00:06:53,436 Speaker 1: that we're struggling figure out here in the United States. 114 00:06:53,756 --> 00:06:57,156 Speaker 1: They're trying to figure out is this just another couple 115 00:06:57,156 --> 00:07:01,516 Speaker 1: of more months until sanity returns or are we going 116 00:07:01,596 --> 00:07:04,516 Speaker 1: to have another four years of Donald Trump? And so 117 00:07:04,596 --> 00:07:06,516 Speaker 1: that's the same question that we're sitting here in United 118 00:07:06,556 --> 00:07:08,276 Speaker 1: States trying to figure out. So you don't think they 119 00:07:08,356 --> 00:07:10,476 Speaker 1: have a better or a clearer or more thoughtful of 120 00:07:10,476 --> 00:07:12,716 Speaker 1: you than we do. No, But I think what the 121 00:07:12,836 --> 00:07:16,276 Speaker 1: recent trade war has made much clearer to them is 122 00:07:16,316 --> 00:07:19,036 Speaker 1: that this is surfaced earlier than they thought it would 123 00:07:19,636 --> 00:07:22,556 Speaker 1: but sooner in that's what has surfaced earlier, the fact 124 00:07:22,596 --> 00:07:25,116 Speaker 1: that the US would see arising China as a threat. 125 00:07:25,316 --> 00:07:28,996 Speaker 1: I see. I think many of them thought, evankfully, sooner 126 00:07:29,076 --> 00:07:32,996 Speaker 1: or later the Americans war going to come to some sense. 127 00:07:34,116 --> 00:07:38,716 Speaker 1: They would feel uncomfortable with the fact that the US 128 00:07:38,916 --> 00:07:42,556 Speaker 1: is being pushed out of parts of the Western Pacific 129 00:07:42,796 --> 00:07:45,756 Speaker 1: or being displaced as the most important. But they thought 130 00:07:45,756 --> 00:07:48,316 Speaker 1: they had five or ten more years before before it happened. 131 00:07:48,596 --> 00:07:50,836 Speaker 1: So let's talk about the content of the trade war now. 132 00:07:50,876 --> 00:07:52,396 Speaker 1: And I want to start by asking you a question 133 00:07:52,476 --> 00:07:56,636 Speaker 1: that troubles me very much. So if you move in 134 00:07:57,836 --> 00:08:02,596 Speaker 1: mainstream democratic circles, then for many years, the background assumption, 135 00:08:02,716 --> 00:08:05,036 Speaker 1: certainly through let's say the Bill Clinton years and into 136 00:08:05,036 --> 00:08:09,756 Speaker 1: the Obama years too, the background assumption of thoughtful making 137 00:08:09,796 --> 00:08:15,036 Speaker 1: liberal democrats was international trade is good. They basically thought 138 00:08:15,116 --> 00:08:19,916 Speaker 1: that on the whole, more open trade rules served the 139 00:08:19,996 --> 00:08:24,156 Speaker 1: United States made our economy more competitive, that the rising 140 00:08:24,196 --> 00:08:26,996 Speaker 1: tide lifted all boats. If you ask them about countries 141 00:08:27,236 --> 00:08:29,916 Speaker 1: that were raising people out of poverty by virtue of trade, 142 00:08:29,956 --> 00:08:32,396 Speaker 1: like China, they would say, well, that's great. It's nice 143 00:08:32,436 --> 00:08:36,596 Speaker 1: that people are being brought out of poverty. Now, in 144 00:08:36,676 --> 00:08:41,516 Speaker 1: the last cycle of election, certainly going back to twenty sixteen, 145 00:08:41,876 --> 00:08:44,276 Speaker 1: Democrats and especially the more left wing of the Democratic 146 00:08:44,316 --> 00:08:48,876 Speaker 1: Party started rethinking that question quite seriously. They began to 147 00:08:48,956 --> 00:08:51,996 Speaker 1: question NAFTA in various ways. They began to question the 148 00:08:52,036 --> 00:08:57,276 Speaker 1: expansion of US liberal trade treaties with Asia. And that 149 00:08:57,316 --> 00:08:59,996 Speaker 1: didn't bring in the Hillary Clinton wing of the party initially, 150 00:09:00,036 --> 00:09:01,756 Speaker 1: but it did bring in the Bernie Sanders bring of 151 00:09:01,796 --> 00:09:03,996 Speaker 1: the party. Donald Trump got elected, and now the Democratic 152 00:09:03,996 --> 00:09:07,516 Speaker 1: Party is moving even more in the direction of greater protectionism. 153 00:09:08,316 --> 00:09:10,996 Speaker 1: So the question that troubles me is is Trump a 154 00:09:10,996 --> 00:09:14,276 Speaker 1: little bit right? Is there something to be said despite 155 00:09:14,316 --> 00:09:17,516 Speaker 1: all of our I think justifiable horror at Trump on 156 00:09:17,636 --> 00:09:20,156 Speaker 1: moral grounds, did Trump get something right? Or is he 157 00:09:20,196 --> 00:09:23,476 Speaker 1: getting something right something which is overlapping with some parts 158 00:09:23,476 --> 00:09:27,516 Speaker 1: of the Democratic Party with respect to the significant downsides 159 00:09:27,756 --> 00:09:31,556 Speaker 1: of the US China trade relationship as it is currently configured. 160 00:09:32,116 --> 00:09:34,476 Speaker 1: I think the answer to that is yes, I think 161 00:09:34,996 --> 00:09:41,156 Speaker 1: there is something to be said about the diagnosis of 162 00:09:41,676 --> 00:09:46,196 Speaker 1: structural tensions in this relationship is accurate. The question is 163 00:09:46,196 --> 00:09:50,196 Speaker 1: whether or not the prescription that the doctor is offering 164 00:09:50,596 --> 00:09:52,916 Speaker 1: is the right prescription. Well, let's start with the sickness, 165 00:09:52,916 --> 00:09:54,636 Speaker 1: before we get before we get to the cure, let's 166 00:09:54,676 --> 00:09:56,836 Speaker 1: dive into the sickness. I mean, it's it can't just 167 00:09:57,036 --> 00:10:00,116 Speaker 1: be Donald Trump's formulation, which is, oh my goodness, there's 168 00:10:00,116 --> 00:10:02,756 Speaker 1: a trade deficit. I'm not even totally clear that Trump 169 00:10:02,756 --> 00:10:06,556 Speaker 1: gets what a trade deficit actually is. So what is 170 00:10:06,556 --> 00:10:09,676 Speaker 1: the thing that's the problem for you? So I think 171 00:10:09,716 --> 00:10:12,236 Speaker 1: we should be clear about this, right. I think most 172 00:10:13,116 --> 00:10:16,596 Speaker 1: people think the deficit is not the right barometer. So 173 00:10:16,636 --> 00:10:20,076 Speaker 1: to the extent the Trump white House is talking about that, 174 00:10:20,396 --> 00:10:23,516 Speaker 1: I think that's not correct, right. I think also to 175 00:10:23,556 --> 00:10:25,836 Speaker 1: the extent that what Trump is just to be clear 176 00:10:25,836 --> 00:10:29,556 Speaker 1: for listeners, that the Trump white House is basically saying 177 00:10:29,996 --> 00:10:33,476 Speaker 1: we buy more Chinese stuff than China buys our stuff. 178 00:10:33,756 --> 00:10:36,556 Speaker 1: And that's, after all, what a trade deficit amounts to. 179 00:10:37,236 --> 00:10:41,636 Speaker 1: And most mainstream observers of trade, economists, scholars and others 180 00:10:42,116 --> 00:10:44,596 Speaker 1: think that who buys more stuff is not the only 181 00:10:44,676 --> 00:10:48,116 Speaker 1: or the most relevant measure, right, And that's because supply 182 00:10:48,196 --> 00:10:50,996 Speaker 1: chains are complicated, the accounting isn't quite correct. All this 183 00:10:50,996 --> 00:10:54,596 Speaker 1: stuff we can nerd out about, but more importantly, this 184 00:10:54,676 --> 00:10:56,356 Speaker 1: is deepackground you're allowed to hern out for a bit, 185 00:10:56,436 --> 00:11:00,236 Speaker 1: but more importantly, right, the deficits and reflections of different 186 00:11:00,236 --> 00:11:04,556 Speaker 1: types of saving traits. And so the fact that you know, 187 00:11:04,636 --> 00:11:07,716 Speaker 1: we are the reserve currency and the fact that we 188 00:11:07,836 --> 00:11:12,036 Speaker 1: have instance savings rates means that inevitably, right, this is 189 00:11:12,036 --> 00:11:13,956 Speaker 1: going to show up in this type of account. So 190 00:11:14,516 --> 00:11:18,396 Speaker 1: we save less money on the average than many Asian 191 00:11:18,636 --> 00:11:22,276 Speaker 1: Increasian countries save. And yet many people all over the 192 00:11:22,276 --> 00:11:26,236 Speaker 1: world put their earnings into dollars because dollars a reserve currency, 193 00:11:26,516 --> 00:11:28,596 Speaker 1: and so that's always going to turn up looking like 194 00:11:28,716 --> 00:11:31,156 Speaker 1: a trade deficit. Yeah, and just a question of whether 195 00:11:31,196 --> 00:11:33,876 Speaker 1: that deficit is with which country, and it could be 196 00:11:33,956 --> 00:11:37,356 Speaker 1: artificially larger with one country than another, because say, for example, 197 00:11:37,396 --> 00:11:40,676 Speaker 1: with an iPod, right with the last place it gets 198 00:11:40,676 --> 00:11:43,236 Speaker 1: assembled is in China and it gets shipped over the US. 199 00:11:43,436 --> 00:11:47,236 Speaker 1: Think they made the iPod anymore? Mark? Sorry, iPhone, let's 200 00:11:47,236 --> 00:11:49,196 Speaker 1: retape that part. I thought it was funny. Go ahead, 201 00:11:50,116 --> 00:11:53,356 Speaker 1: So let's take the iPhone right, the last place that 202 00:11:53,476 --> 00:11:57,396 Speaker 1: they assemble all that is in China. When it gets 203 00:11:57,396 --> 00:11:59,516 Speaker 1: shipped over the US. All that is going to count 204 00:11:59,556 --> 00:12:02,676 Speaker 1: against the trade deficit there, even though many of the 205 00:12:02,716 --> 00:12:07,476 Speaker 1: component parts come from Korea. Taime one, Japan, parts of Europe, 206 00:12:07,476 --> 00:12:09,556 Speaker 1: even parts of the United States, rights, and even though 207 00:12:09,596 --> 00:12:13,236 Speaker 1: Apple is an American company exactly right, which is presumably 208 00:12:13,276 --> 00:12:16,956 Speaker 1: gaining a huge percentage of the profits relative to anybody 209 00:12:16,956 --> 00:12:19,236 Speaker 1: else in the supply chain. So I think the way 210 00:12:19,316 --> 00:12:23,396 Speaker 1: the administration is talking about how to measure this trade 211 00:12:23,396 --> 00:12:25,436 Speaker 1: wars are easy to win and all that, that's not 212 00:12:25,516 --> 00:12:27,396 Speaker 1: quite right. But let's talk a little bit about some 213 00:12:27,436 --> 00:12:29,836 Speaker 1: of the things they did. I think get right. Please. 214 00:12:29,956 --> 00:12:33,076 Speaker 1: So I think there's two parts that we should disagreeate here. 215 00:12:33,476 --> 00:12:39,236 Speaker 1: One is it's a widely recognized truism amongst economists right 216 00:12:39,356 --> 00:12:44,916 Speaker 1: that free trade does expand the pie makes everybody better off. 217 00:12:44,916 --> 00:12:47,276 Speaker 1: And the basic theory is, if we're trading, it's to 218 00:12:47,316 --> 00:12:49,396 Speaker 1: make us each better off. Otherwise, if I didn't think 219 00:12:49,396 --> 00:12:51,036 Speaker 1: it would make me better off, I wouldn't trade with you. 220 00:12:51,116 --> 00:12:52,356 Speaker 1: If you didn't think it was making you better off, 221 00:12:52,396 --> 00:12:54,476 Speaker 1: you wouldn't trade with me. And presumably you do some 222 00:12:54,556 --> 00:12:56,836 Speaker 1: things better than I do. I do certain things that 223 00:12:57,116 --> 00:12:59,756 Speaker 1: better than you do. So we each take advantage of 224 00:12:59,756 --> 00:13:03,396 Speaker 1: our comparative advantages and then we trade this with each other. 225 00:13:03,436 --> 00:13:06,956 Speaker 1: So thank you, Adam Smith. That widely recognizes as truism. 226 00:13:07,036 --> 00:13:11,316 Speaker 1: Then there's a question of amongst that pie that's grown, 227 00:13:11,596 --> 00:13:15,196 Speaker 1: are we sharing this fairly with our fellow countrymen. So 228 00:13:15,236 --> 00:13:18,276 Speaker 1: I think this is a part that both Donald Trump, 229 00:13:18,756 --> 00:13:23,396 Speaker 1: as well as the progressive wing of the Democratic Party 230 00:13:23,796 --> 00:13:27,276 Speaker 1: and increasingly much of the Democrat Party is now saying no, 231 00:13:27,476 --> 00:13:31,076 Speaker 1: or it's certain greedy bastards took too big a slice 232 00:13:31,076 --> 00:13:33,276 Speaker 1: of that that they may and they aren't distributing it. 233 00:13:33,556 --> 00:13:36,196 Speaker 1: But the solutions that Donald Trump has for how to 234 00:13:36,276 --> 00:13:38,236 Speaker 1: deal with this, right, we need to have more tax 235 00:13:38,236 --> 00:13:41,476 Speaker 1: cuts to stimulate growth to sort of filter all this down, 236 00:13:41,516 --> 00:13:44,116 Speaker 1: compared to the solutions that Bernie Sanders has and all 237 00:13:44,156 --> 00:13:47,036 Speaker 1: that are very very different. But so I think there's 238 00:13:47,236 --> 00:13:49,236 Speaker 1: but I mean, just to be clear, Mark, are you 239 00:13:49,276 --> 00:13:51,916 Speaker 1: saying that the income inequality piece is one of the 240 00:13:51,956 --> 00:13:53,996 Speaker 1: things that Trump is getting right? I mean, I don't 241 00:13:54,036 --> 00:13:56,396 Speaker 1: dispute that income in equality is a hugely important issue, 242 00:13:56,436 --> 00:13:58,676 Speaker 1: but I also don't really hear that from Trump. No. 243 00:13:58,836 --> 00:14:01,716 Speaker 1: I think the part that I'm talking about is I 244 00:14:01,756 --> 00:14:04,596 Speaker 1: think both the left and the right are saying the 245 00:14:05,436 --> 00:14:10,196 Speaker 1: free trade right expanded the overall national GDP, but it 246 00:14:10,356 --> 00:14:14,196 Speaker 1: made only some richer than other, A small fraction of 247 00:14:14,236 --> 00:14:18,516 Speaker 1: Americans much wealthier than others, and it made a very 248 00:14:18,596 --> 00:14:22,076 Speaker 1: small portion much wealthier, right, And did it make some 249 00:14:22,116 --> 00:14:24,836 Speaker 1: people much worse off as well? It made it certainly 250 00:14:24,876 --> 00:14:28,396 Speaker 1: made some people worse off. Some people it's just marginal, right, 251 00:14:28,436 --> 00:14:30,076 Speaker 1: because it made you a little bit worse off in 252 00:14:30,156 --> 00:14:32,956 Speaker 1: terms of putting downward wage. Pretty sure. By the other hand, 253 00:14:32,996 --> 00:14:35,716 Speaker 1: you got cheaper consumer goods so that you could buy, 254 00:14:35,916 --> 00:14:38,436 Speaker 1: So it's a bit of a wash. But for some people, 255 00:14:38,476 --> 00:14:40,756 Speaker 1: they lost their jobs, and they were in communities that 256 00:14:40,916 --> 00:14:43,796 Speaker 1: lost a large portion of their jobs, and then that 257 00:14:43,916 --> 00:14:47,596 Speaker 1: then turned into different types of spillover effects onto the 258 00:14:47,596 --> 00:14:51,276 Speaker 1: service economy that then had certain effects into an OPII crisis. 259 00:14:51,316 --> 00:14:53,476 Speaker 1: And so far then these are quite concentrated communities and 260 00:14:53,556 --> 00:14:56,636 Speaker 1: made those communities much worse off. So then one point 261 00:14:56,756 --> 00:14:59,116 Speaker 1: on which you're giving Trump credit is identifying the idea 262 00:14:59,156 --> 00:15:01,356 Speaker 1: that there are some parts of the United States, you know, 263 00:15:01,476 --> 00:15:03,276 Speaker 1: we can imagine them as being in the rust belt 264 00:15:03,356 --> 00:15:07,276 Speaker 1: or other de industrialized places where the spiral of destruction 265 00:15:07,796 --> 00:15:11,036 Speaker 1: really was generated by relatively free trade between the US 266 00:15:11,076 --> 00:15:13,876 Speaker 1: and China. Yes, but I think we should be clear 267 00:15:14,116 --> 00:15:17,996 Speaker 1: to say the effect of technology on that is actually 268 00:15:18,076 --> 00:15:21,116 Speaker 1: as large if not much larger than trade, right, But 269 00:15:21,196 --> 00:15:23,956 Speaker 1: there is this phenomenon that's happening, and it's this double 270 00:15:23,996 --> 00:15:28,636 Speaker 1: whammy of technological change as well as globalization that's expanding 271 00:15:28,716 --> 00:15:31,396 Speaker 1: the pie for everyone. Just like technology right increases all 272 00:15:31,396 --> 00:15:35,076 Speaker 1: of our productivity, but it's having a concentrated cost. And 273 00:15:35,116 --> 00:15:37,156 Speaker 1: so I think that part is correct, and we haven't 274 00:15:37,236 --> 00:15:40,116 Speaker 1: quite figured out how we're going to deal with those 275 00:15:40,156 --> 00:15:43,596 Speaker 1: types of concentrated costs, as well as the fact that 276 00:15:43,796 --> 00:15:46,716 Speaker 1: for some people it's really been just a wash or 277 00:15:46,796 --> 00:15:49,756 Speaker 1: a slight negative cost. And so I think that's one 278 00:15:49,796 --> 00:15:52,676 Speaker 1: part that's great. There's another part, which is to say, 279 00:15:52,836 --> 00:15:56,076 Speaker 1: even though we're trading with one another and it's expanding 280 00:15:56,116 --> 00:15:58,516 Speaker 1: both of our pie, are we each getting our own 281 00:15:58,516 --> 00:16:02,356 Speaker 1: fair share? And I think here's another part where both 282 00:16:03,276 --> 00:16:07,636 Speaker 1: the Trump folks in the White House today as well 283 00:16:07,676 --> 00:16:11,436 Speaker 1: as many mainstream Democrats or Republicans would also agree to 284 00:16:11,476 --> 00:16:17,316 Speaker 1: say that even though it's lifted both sides, overall, the 285 00:16:17,476 --> 00:16:21,436 Speaker 1: Chinese are getting unjust desserts. So this is the China 286 00:16:21,596 --> 00:16:25,356 Speaker 1: is not playing fair version of the story. I'm fascinated 287 00:16:25,356 --> 00:16:28,676 Speaker 1: by this and I want to go deeply into it. So, 288 00:16:28,836 --> 00:16:31,396 Speaker 1: first of all, you're saying you think you do buy that. 289 00:16:31,436 --> 00:16:36,516 Speaker 1: In part, I think there is definitely a mere cantilist, 290 00:16:37,316 --> 00:16:41,436 Speaker 1: beggar thy neighbor type of policy. Those are fancy words. 291 00:16:41,516 --> 00:16:43,396 Speaker 1: Part of it goes a little bit like this. Right, 292 00:16:43,436 --> 00:16:46,676 Speaker 1: So there's too much steel all around the world in 293 00:16:46,676 --> 00:16:50,316 Speaker 1: the free market system, some of those would go bankrupt. 294 00:16:50,516 --> 00:16:52,036 Speaker 1: Some of the companies that make that steal would go 295 00:16:52,036 --> 00:16:54,236 Speaker 1: bankrupt yep. Over the course of time, some of that 296 00:16:54,276 --> 00:16:57,356 Speaker 1: production was shut down. People would lose your jobs overall this, 297 00:16:57,676 --> 00:17:00,716 Speaker 1: but eventually you get to a stable level steel production yep. 298 00:17:01,156 --> 00:17:05,876 Speaker 1: Basic theory of capitalists. So overproduce, lose your shirt. So 299 00:17:06,076 --> 00:17:10,356 Speaker 1: this all works a certain way, but some and the 300 00:17:10,476 --> 00:17:12,356 Speaker 1: thing this is what the Chinese government has done is 301 00:17:12,356 --> 00:17:17,036 Speaker 1: to say, well, we want to manage the flow of unemployment. 302 00:17:17,196 --> 00:17:20,316 Speaker 1: And part of this is for domestic stability purposes. Right 303 00:17:20,356 --> 00:17:22,956 Speaker 1: If you have all of a sudden, a couple hundred 304 00:17:22,956 --> 00:17:27,276 Speaker 1: thousand steelworkers of work right away, they're going to be disgruntled. 305 00:17:27,276 --> 00:17:29,076 Speaker 1: This is going to be constrained certain parts of the country. 306 00:17:29,076 --> 00:17:32,036 Speaker 1: So we want to manage this flow. So we can 307 00:17:32,236 --> 00:17:35,116 Speaker 1: because we also control the banks, we can direct the 308 00:17:35,156 --> 00:17:39,476 Speaker 1: banks to continue lending to some of these firms even 309 00:17:39,556 --> 00:17:44,156 Speaker 1: though they aren't all that profitable and so forth, they 310 00:17:44,156 --> 00:17:46,636 Speaker 1: don't have to fire their employers. They're engaging in certain 311 00:17:46,676 --> 00:17:50,876 Speaker 1: types of subsidies. So if that's the case, well, eventually 312 00:17:50,916 --> 00:17:53,516 Speaker 1: this is a hydro system. It has to equalize itself out. 313 00:17:53,556 --> 00:17:56,916 Speaker 1: So these steel companies aren't going out of business, then 314 00:17:57,116 --> 00:17:59,156 Speaker 1: more steel companies in the rest of the world are 315 00:17:59,236 --> 00:18:02,956 Speaker 1: going out of business. And so this is where the market. 316 00:18:03,196 --> 00:18:07,036 Speaker 1: If everyone behaved according to market principles, it would spread 317 00:18:07,076 --> 00:18:11,076 Speaker 1: this pain equally. But if one party is not behaving 318 00:18:11,076 --> 00:18:14,676 Speaker 1: in quarities market principles and other sides are absorbing much 319 00:18:14,716 --> 00:18:18,076 Speaker 1: more of this. So we're seeing this type of effect, right, 320 00:18:18,116 --> 00:18:20,196 Speaker 1: This is a begger than neighbor type of effect than 321 00:18:20,236 --> 00:18:22,236 Speaker 1: the Chinese will say, well, it's begger than neighbor, just 322 00:18:22,276 --> 00:18:25,276 Speaker 1: to be clear, because if there's too much steal, someone's 323 00:18:25,316 --> 00:18:27,236 Speaker 1: got to lose jobs in a steel mill. The question 324 00:18:27,276 --> 00:18:29,636 Speaker 1: is in which country will that happen? And if it 325 00:18:29,676 --> 00:18:32,836 Speaker 1: doesn't happen in China, then you're they're beggaring their neighbors 326 00:18:32,836 --> 00:18:35,196 Speaker 1: in other countries exactly. So let me let me push 327 00:18:35,196 --> 00:18:36,796 Speaker 1: back a little bit here. Maybe push back is the 328 00:18:36,796 --> 00:18:40,396 Speaker 1: wrong word, but just to ask Mark, isn't this what countries, 329 00:18:41,356 --> 00:18:44,876 Speaker 1: including the United States, have often done in crises. I mean, 330 00:18:44,916 --> 00:18:47,076 Speaker 1: if you think of the Great Depression, you know, the 331 00:18:47,156 --> 00:18:50,196 Speaker 1: United States tried to engage in interventions to try to 332 00:18:50,276 --> 00:18:52,916 Speaker 1: keep people in work because people were losing jobs at 333 00:18:52,916 --> 00:18:55,676 Speaker 1: a rate that was devastating to the overall economy. Or 334 00:18:55,676 --> 00:18:58,276 Speaker 1: even to think much more recently, think of the bailout 335 00:18:58,276 --> 00:19:00,916 Speaker 1: of the big banks after the two thousand and eight 336 00:19:01,036 --> 00:19:04,796 Speaker 1: financial crisis. I mean, isn't that really isn't bailing out 337 00:19:04,796 --> 00:19:09,316 Speaker 1: a big bank the same thing as bailing out the 338 00:19:09,796 --> 00:19:13,436 Speaker 1: steel mill. So knowing there, you're sounding exactly like what 339 00:19:13,756 --> 00:19:17,436 Speaker 1: the Chinese response to this is, right, They're sort of saying, well, 340 00:19:17,636 --> 00:19:19,996 Speaker 1: we did this, but if you thought this was a 341 00:19:19,996 --> 00:19:23,076 Speaker 1: good policy, you could do it yourself too. And but 342 00:19:23,196 --> 00:19:24,996 Speaker 1: if everyone I'm not just saying you could do yourself, 343 00:19:25,036 --> 00:19:27,876 Speaker 1: I'm saying we have done it. I mean, why wasn't 344 00:19:27,916 --> 00:19:30,196 Speaker 1: the bailout of the banks in this sense of those 345 00:19:30,196 --> 00:19:33,996 Speaker 1: REUS based banks. The first the w Bush administration and 346 00:19:33,996 --> 00:19:36,716 Speaker 1: then the Obama administration thought that if those banks went 347 00:19:36,716 --> 00:19:38,836 Speaker 1: down there would be huge knock on effects for the economy. 348 00:19:39,036 --> 00:19:41,356 Speaker 1: They were worried about the consequences of that, and so 349 00:19:41,436 --> 00:19:45,556 Speaker 1: the government engaged in a bailout to prop up those 350 00:19:45,836 --> 00:19:49,116 Speaker 1: those banks. I mean, from an economist perspective, is there 351 00:19:49,156 --> 00:19:51,876 Speaker 1: a meaningful difference between that and the propping up of 352 00:19:52,076 --> 00:19:54,756 Speaker 1: steel mills. So the difference is this, if you look 353 00:19:54,796 --> 00:19:58,276 Speaker 1: at just amb right, they might look very similar, but 354 00:19:58,356 --> 00:20:02,956 Speaker 1: the difference is they're at least amongst the Western liberal economies. 355 00:20:02,996 --> 00:20:06,236 Speaker 1: There's a sense of we only do this in times 356 00:20:06,236 --> 00:20:10,596 Speaker 1: of dire financial crises, and when we do, we only 357 00:20:10,676 --> 00:20:13,836 Speaker 1: do it on a very small, temporary basis, and when 358 00:20:13,876 --> 00:20:16,796 Speaker 1: we've consulted with everyone else around the world to sort 359 00:20:16,796 --> 00:20:18,676 Speaker 1: of say we all need to engage in this type 360 00:20:18,676 --> 00:20:22,436 Speaker 1: of thing to sort of keep the global economy afloat, right. 361 00:20:22,596 --> 00:20:24,436 Speaker 1: I think we asked the Chinese. I don't think we 362 00:20:24,436 --> 00:20:28,076 Speaker 1: asked the Chinese. Well, we certainly did have a G 363 00:20:28,596 --> 00:20:33,516 Speaker 1: seven and G twenty coordination process financial crisis. We're trying 364 00:20:33,556 --> 00:20:36,076 Speaker 1: we actually we're trying to So we were trying to 365 00:20:36,116 --> 00:20:38,956 Speaker 1: sort of say, like, what the difference here is what, 366 00:20:39,316 --> 00:20:42,636 Speaker 1: or at least what Americans and Europeans and Japanese would say, 367 00:20:42,716 --> 00:20:45,516 Speaker 1: is we're not trying to do this on a day 368 00:20:45,556 --> 00:20:50,116 Speaker 1: and day out basis in the interest of getting ahead 369 00:20:50,276 --> 00:20:53,516 Speaker 1: faster and catching up with you and getting our share, 370 00:20:54,116 --> 00:20:56,436 Speaker 1: getting more of our share, And there is no we 371 00:20:56,516 --> 00:20:57,876 Speaker 1: only do it when we look like we're going to 372 00:20:58,076 --> 00:21:00,316 Speaker 1: fall desperately. I mean, if I were the you know, 373 00:21:00,356 --> 00:21:03,796 Speaker 1: the Chinese responding here, my reaction would be, that doesn't 374 00:21:03,796 --> 00:21:05,796 Speaker 1: make it better, that makes it worse. You're saying, you 375 00:21:05,836 --> 00:21:08,636 Speaker 1: guys only do it on a large scale, in a 376 00:21:08,716 --> 00:21:11,476 Speaker 1: coword needed way when you really have to do it. Well, 377 00:21:11,516 --> 00:21:13,476 Speaker 1: we're going to do it on a much softer, smaller 378 00:21:13,516 --> 00:21:15,476 Speaker 1: scale and a consistent basis so that we don't have 379 00:21:15,516 --> 00:21:17,836 Speaker 1: a crisis like you had. I mean, that sounds a 380 00:21:17,836 --> 00:21:21,116 Speaker 1: lot more prudent, doesn't it. Well, they even say this, right, 381 00:21:21,156 --> 00:21:24,596 Speaker 1: they'll say, well, look, we spend the same amount of money. 382 00:21:24,796 --> 00:21:27,676 Speaker 1: It's just better we spend it keeping people going to 383 00:21:27,716 --> 00:21:32,516 Speaker 1: work every day and they feel meaningfully productive. Right. You 384 00:21:32,596 --> 00:21:34,596 Speaker 1: spend it on the back end, you lay them all off, 385 00:21:34,636 --> 00:21:36,396 Speaker 1: and then you have to deal with it through higher 386 00:21:36,396 --> 00:21:41,916 Speaker 1: healthcare costs when they're yeh. And we gave it to 387 00:21:41,996 --> 00:21:43,956 Speaker 1: rich people because we gave it to on the whole, 388 00:21:43,956 --> 00:21:46,476 Speaker 1: because we gave it to investors and large financials. So 389 00:21:46,836 --> 00:21:49,916 Speaker 1: I think the Chinese feel as though, in some ways 390 00:21:49,956 --> 00:21:52,676 Speaker 1: for the West is pointing its fingers and saying, right, 391 00:21:52,756 --> 00:21:54,796 Speaker 1: will you have one model of dealing with it, we 392 00:21:54,876 --> 00:21:57,476 Speaker 1: have a different model of dealing but they're both equally 393 00:21:58,276 --> 00:22:01,676 Speaker 1: Just why are you pointing fingers at us? But I 394 00:22:01,716 --> 00:22:04,436 Speaker 1: think there is a sense here in the US and 395 00:22:04,476 --> 00:22:09,076 Speaker 1: elsewhere that what they're engaging in is a wholesale attempt 396 00:22:09,316 --> 00:22:14,716 Speaker 1: to take more than they deserve based on the competition principles, 397 00:22:14,876 --> 00:22:17,876 Speaker 1: and this ties in not just the subsidies, is one 398 00:22:17,916 --> 00:22:20,076 Speaker 1: part of it, right, But there's another type of begger 399 00:22:20,116 --> 00:22:23,036 Speaker 1: than neighbor, which is, just if we give you access 400 00:22:23,156 --> 00:22:26,076 Speaker 1: to our markets, but you don't give us access to 401 00:22:26,156 --> 00:22:29,036 Speaker 1: your markets that we can sell more in and you 402 00:22:29,076 --> 00:22:31,436 Speaker 1: can't sell as much out, and you have as protected 403 00:22:31,436 --> 00:22:34,836 Speaker 1: domestic market that you have outsize profits from and so forth. 404 00:22:34,916 --> 00:22:37,276 Speaker 1: So that's a different right. So this argument seems more 405 00:22:37,316 --> 00:22:39,916 Speaker 1: powerful to me. So say another word about this. I mean, 406 00:22:40,076 --> 00:22:42,836 Speaker 1: in the context of the bailouts, you know, they bail 407 00:22:42,876 --> 00:22:44,796 Speaker 1: out one way, we bail out one way. I guess 408 00:22:44,796 --> 00:22:47,436 Speaker 1: we'd have to compare the total amounts of those bailouts 409 00:22:47,436 --> 00:22:50,476 Speaker 1: to try to make a comparison. But I'm not super 410 00:22:50,476 --> 00:22:52,876 Speaker 1: sympathetic to the argument that there's a big difference between 411 00:22:52,876 --> 00:22:55,316 Speaker 1: our bailouts and theirs. On the other hand, access to 412 00:22:55,516 --> 00:22:58,356 Speaker 1: this thing you're talking about now, access to markets, There 413 00:22:58,596 --> 00:23:02,476 Speaker 1: should be symmetry, right, If we give access, we should 414 00:23:02,476 --> 00:23:06,916 Speaker 1: get access that seems symmetrical and fair in some deep way. 415 00:23:07,516 --> 00:23:10,036 Speaker 1: Is there in fact truly different ential access at this point? 416 00:23:10,036 --> 00:23:12,236 Speaker 1: I mean, is it true, as one would think just 417 00:23:12,316 --> 00:23:15,876 Speaker 1: from thinking about it casually, that there's plenty of access 418 00:23:15,876 --> 00:23:17,396 Speaker 1: to our markets, but we really can't access a lot 419 00:23:17,396 --> 00:23:21,476 Speaker 1: of Chinese markets. Absolutely, our average tariff rights are much 420 00:23:21,516 --> 00:23:26,076 Speaker 1: lower than theirs, even before, even after the trade war started. Well, 421 00:23:26,116 --> 00:23:29,156 Speaker 1: I think certainly before the trade war. Now it depends 422 00:23:29,196 --> 00:23:31,436 Speaker 1: on whether we go up to twenty five percent tariffs 423 00:23:31,476 --> 00:23:35,436 Speaker 1: and how large a vass were. That difference is quickly narrowing, right, 424 00:23:35,436 --> 00:23:37,996 Speaker 1: And part of the Trump message has been look, it 425 00:23:38,076 --> 00:23:41,596 Speaker 1: should be reciprocal. And if you're the same as your text, 426 00:23:41,676 --> 00:23:43,156 Speaker 1: if you're not going to lower, then we're going to 427 00:23:43,276 --> 00:23:46,316 Speaker 1: raise ours. Right, It's not just this, it's that's good 428 00:23:46,436 --> 00:23:50,876 Speaker 1: in your opinion, that's not so unreasonable. Well, there's a 429 00:23:50,916 --> 00:23:52,956 Speaker 1: different way of looking at it, which is the Chinese 430 00:23:52,956 --> 00:23:54,716 Speaker 1: way of looking at it, which is to say, look, 431 00:23:54,756 --> 00:23:59,116 Speaker 1: we all negotiated to a certain level, and you agreed 432 00:23:59,236 --> 00:24:03,476 Speaker 1: to this level in exchange for letting us in sore. 433 00:24:03,676 --> 00:24:06,756 Speaker 1: You negotiate it to this deal, and now you're reneging 434 00:24:06,836 --> 00:24:08,756 Speaker 1: on it. So is that the way it is an 435 00:24:08,756 --> 00:24:11,956 Speaker 1: Internet negotiations? I mean, nothing is forever, right, Well, you 436 00:24:11,996 --> 00:24:14,396 Speaker 1: and I negotiate a contract and then the contract doesn't 437 00:24:14,476 --> 00:24:17,516 Speaker 1: work for one of us, we renegotiate the contract. Yeah, 438 00:24:17,516 --> 00:24:20,276 Speaker 1: but the Chinese view is right. The Chinese view here 439 00:24:20,396 --> 00:24:24,076 Speaker 1: is there's a way to renegotiate that that doesn't involve 440 00:24:24,116 --> 00:24:25,796 Speaker 1: once I sort of tearing it all up. But I 441 00:24:25,836 --> 00:24:28,676 Speaker 1: think regardless of whether you agree with the Chinese view 442 00:24:28,716 --> 00:24:31,116 Speaker 1: on this, which is to say you have legal obligations, 443 00:24:31,156 --> 00:24:34,516 Speaker 1: we had legal obligations. You're negotiators, just didn't negotiate this 444 00:24:34,636 --> 00:24:37,196 Speaker 1: right level. And the US view of is saying we expected, 445 00:24:37,236 --> 00:24:40,316 Speaker 1: over the course of time, as you became more powerful 446 00:24:40,756 --> 00:24:44,676 Speaker 1: that you would right unilaterally lower some of these as 447 00:24:44,716 --> 00:24:47,036 Speaker 1: other countries have done, and you have it right. So 448 00:24:47,276 --> 00:24:49,476 Speaker 1: there's differently different, two different points of view on this. 449 00:24:49,516 --> 00:24:52,196 Speaker 1: But I do think here right there is an asymmetry 450 00:24:52,276 --> 00:24:55,356 Speaker 1: in terms of the market access and then, particularly when 451 00:24:55,396 --> 00:24:59,076 Speaker 1: you think about investment restrictions, there are many more industries 452 00:24:59,076 --> 00:25:02,316 Speaker 1: that are open right to China in the US. In 453 00:25:02,356 --> 00:25:04,876 Speaker 1: the US, China can come and buy a business or 454 00:25:05,076 --> 00:25:07,236 Speaker 1: invest in a business, and we can't do the same 455 00:25:07,396 --> 00:25:09,596 Speaker 1: in China. And I think when you come part with 456 00:25:09,676 --> 00:25:13,036 Speaker 1: other countries Brazil, India and so forth, right, the Chinese 457 00:25:13,036 --> 00:25:16,236 Speaker 1: market is much more close than even those countries. So 458 00:25:16,236 --> 00:25:18,716 Speaker 1: it's not even one of those they desire to say 459 00:25:18,716 --> 00:25:20,956 Speaker 1: it's one of the most closed markets in the world. Yes, 460 00:25:21,196 --> 00:25:24,956 Speaker 1: I think certainly the OECD investment restrictions would suggest this is, 461 00:25:24,996 --> 00:25:28,756 Speaker 1: but it's very asymmetrical. It's not to say all industries 462 00:25:28,756 --> 00:25:32,436 Speaker 1: are closed, right, And this is one difference between China 463 00:25:32,436 --> 00:25:34,996 Speaker 1: and Japan. You go to China, you see foreign brands 464 00:25:35,076 --> 00:25:39,276 Speaker 1: all over the place. You see right people driving foreign cars, 465 00:25:39,596 --> 00:25:43,196 Speaker 1: buying foreign luxury goods and so forth. But there is 466 00:25:43,236 --> 00:25:45,596 Speaker 1: this difference when it comes to the strategic industry that 467 00:25:45,676 --> 00:25:50,876 Speaker 1: they're interested in capturing. Right, there are formal and informal 468 00:25:50,916 --> 00:25:53,396 Speaker 1: restrictions in place. And what are examples of that high 469 00:25:53,436 --> 00:25:58,556 Speaker 1: tech so cloud computing for example, Right, this is an 470 00:25:58,596 --> 00:26:01,196 Speaker 1: industry that Amazon is which is a dominant player in 471 00:26:01,236 --> 00:26:03,316 Speaker 1: the US is not able to get in your or 472 00:26:03,356 --> 00:26:05,556 Speaker 1: if you are able to getting you've got a partner 473 00:26:05,596 --> 00:26:08,316 Speaker 1: with a joint venture with a Chinese company, right, And 474 00:26:08,356 --> 00:26:10,636 Speaker 1: this is part of the concern on the technology front, 475 00:26:10,716 --> 00:26:12,876 Speaker 1: is if you have to engage in the joint venture, 476 00:26:13,356 --> 00:26:16,356 Speaker 1: then eventually some of that technology is going to leak 477 00:26:16,356 --> 00:26:19,156 Speaker 1: over to your joint venture partner. Sometimes they're going to 478 00:26:19,236 --> 00:26:21,676 Speaker 1: then eventually dissolve the joint venture they get what they want, 479 00:26:21,716 --> 00:26:23,476 Speaker 1: and so on and so forth. So that leads me 480 00:26:23,516 --> 00:26:26,436 Speaker 1: to the next the next big Trump point that it 481 00:26:26,476 --> 00:26:29,236 Speaker 1: also sounds like you're the generally sympathetic too, or that 482 00:26:29,276 --> 00:26:30,796 Speaker 1: we ought to be generally sympathetic too, which is the 483 00:26:30,836 --> 00:26:35,316 Speaker 1: claim that when it comes to intellectual property the technological 484 00:26:35,356 --> 00:26:37,996 Speaker 1: secrets that give you an advantage and get you ahead, 485 00:26:39,196 --> 00:26:42,836 Speaker 1: that China is also not playing fair. Well. Again, here 486 00:26:42,916 --> 00:26:45,996 Speaker 1: it depends on what your view affair is, right. But 487 00:26:46,196 --> 00:26:49,236 Speaker 1: if your view is that, you know, if you've got 488 00:26:49,276 --> 00:26:51,996 Speaker 1: big size and you can play one player off of 489 00:26:52,036 --> 00:26:55,796 Speaker 1: another in order to get more of their technology and 490 00:26:55,836 --> 00:26:59,876 Speaker 1: so forth, that's a view affair, right, then yeah, the rules. 491 00:26:59,956 --> 00:27:01,516 Speaker 1: But let's take a more intuit let's take a more 492 00:27:01,516 --> 00:27:04,196 Speaker 1: intuitive vie affair, I mean the more intuitive view affair. So, well, actually, 493 00:27:04,236 --> 00:27:07,676 Speaker 1: what about theft properly? I mean, I assume that China 494 00:27:07,756 --> 00:27:10,916 Speaker 1: doesn't say publicly we deny that there is such a 495 00:27:10,956 --> 00:27:14,516 Speaker 1: thing as intellectual property rights. They don't say that they 496 00:27:14,756 --> 00:27:16,996 Speaker 1: in principle acknowledge that there is such a thing as 497 00:27:17,276 --> 00:27:20,876 Speaker 1: intellectual property rights. Of course, so if we take that 498 00:27:20,916 --> 00:27:23,276 Speaker 1: as our starting place, I mean, you know, we could 499 00:27:23,316 --> 00:27:25,836 Speaker 1: have all property as theft argument and say that there 500 00:27:25,876 --> 00:27:28,556 Speaker 1: shouldn't be rights in intellectual property. But let's just assume 501 00:27:28,596 --> 00:27:30,876 Speaker 1: that there are such rights. Since the United States says so, 502 00:27:30,956 --> 00:27:35,276 Speaker 1: China says so, most countries say so. Is China systematically enabling, 503 00:27:35,396 --> 00:27:37,996 Speaker 1: either to the government or through private actors, there the 504 00:27:37,996 --> 00:27:41,916 Speaker 1: theft of intellectual property rights from foreign and especially American businesses. 505 00:27:42,116 --> 00:27:48,436 Speaker 1: I think there is definitely theft occurring from China. The 506 00:27:48,556 --> 00:27:52,516 Speaker 1: question is how much of that is simply the government 507 00:27:52,796 --> 00:27:56,076 Speaker 1: actively encouraging this versus turning up line I when it 508 00:27:56,156 --> 00:28:00,396 Speaker 1: knows that the phenomena exists versus this is what Chinese 509 00:28:00,876 --> 00:28:04,516 Speaker 1: would skillfully do. Regardless that division, I think is more 510 00:28:04,556 --> 00:28:08,716 Speaker 1: difficult to discern, but certainly there is or if you 511 00:28:08,756 --> 00:28:11,636 Speaker 1: look at right, where are most of the counterfeit goods 512 00:28:11,676 --> 00:28:14,556 Speaker 1: made in the world today. Where are many of the 513 00:28:14,596 --> 00:28:19,436 Speaker 1: cyber intrusions happening that commercial firms and so forth that 514 00:28:19,516 --> 00:28:24,356 Speaker 1: we know about, right, Where is their greater pressure made 515 00:28:24,476 --> 00:28:28,396 Speaker 1: on foreign companies to actually transfer technology? Now you can 516 00:28:28,516 --> 00:28:31,796 Speaker 1: argue whether that a business choice that certain companies are 517 00:28:31,836 --> 00:28:35,556 Speaker 1: making or not, but certainly with regards to the first two, right, 518 00:28:35,676 --> 00:28:38,276 Speaker 1: that is active theft, and that's a thing that is 519 00:28:38,276 --> 00:28:40,916 Speaker 1: a phenomena that is happening. So let me ask you 520 00:28:40,956 --> 00:28:43,396 Speaker 1: about that, because it's been a lot in the news 521 00:28:43,476 --> 00:28:47,236 Speaker 1: because at the moment when it looked as though, at 522 00:28:47,316 --> 00:28:50,596 Speaker 1: least to many outside observers, a deal to end the 523 00:28:50,676 --> 00:28:57,156 Speaker 1: trade war was imminent, the Trump administration insisted on the 524 00:28:57,276 --> 00:29:03,356 Speaker 1: Chinese government enacting into law stronger intellectual property protections than 525 00:29:03,476 --> 00:29:06,636 Speaker 1: currently existed, and that appeared to be I mean, we're 526 00:29:06,636 --> 00:29:08,916 Speaker 1: obviously only going from the outside, but that appeared to 527 00:29:08,956 --> 00:29:14,876 Speaker 1: be the leading reason the Chinese government balked and said, no, 528 00:29:14,996 --> 00:29:18,436 Speaker 1: we're not ready to sign a deal. So I guess 529 00:29:18,436 --> 00:29:20,796 Speaker 1: I have several have a sequence of questions about that. 530 00:29:20,796 --> 00:29:22,636 Speaker 1: The first is, do you buy I mean, I'm just 531 00:29:22,676 --> 00:29:24,676 Speaker 1: giving you the standard New York Times version of what's 532 00:29:24,676 --> 00:29:27,196 Speaker 1: supposed to have happened. First question is do you buy 533 00:29:27,236 --> 00:29:29,876 Speaker 1: that story that that was actually the leading stumbling block. 534 00:29:30,036 --> 00:29:33,116 Speaker 1: I do, But I think there's a solid nuance behind 535 00:29:33,156 --> 00:29:38,636 Speaker 1: all of this. We're all about subtle Near is an issue, 536 00:29:38,676 --> 00:29:43,036 Speaker 1: But the issue is less a matter of are they 537 00:29:43,076 --> 00:29:46,676 Speaker 1: willing to make these changes in law or not? But 538 00:29:46,836 --> 00:29:49,836 Speaker 1: more are we willing to accept to have a foreign power, 539 00:29:49,956 --> 00:29:53,516 Speaker 1: especially given China's historical legacy? Are we willing to have 540 00:29:53,636 --> 00:29:57,196 Speaker 1: a foreign power? Comment and tell us exactly what needs 541 00:29:57,196 --> 00:30:00,596 Speaker 1: to get changed where in our own domestic laws. So 542 00:30:00,636 --> 00:30:03,596 Speaker 1: there's a sovereignty question. So there's a sovereignty question. Don't 543 00:30:03,596 --> 00:30:05,556 Speaker 1: tell us what laws to make. It's a question of pride, 544 00:30:05,636 --> 00:30:07,836 Speaker 1: it's a question of national strengths, question of being a 545 00:30:07,836 --> 00:30:10,756 Speaker 1: true sovereign We will. It's this question of saying, right, 546 00:30:10,876 --> 00:30:13,516 Speaker 1: we will make these changes. Right, but we're not going 547 00:30:13,556 --> 00:30:15,396 Speaker 1: to make it when you hold a gun to our 548 00:30:15,436 --> 00:30:17,836 Speaker 1: head and tell us you need to change this and 549 00:30:17,876 --> 00:30:20,596 Speaker 1: this and editing right. So it looks bad because it 550 00:30:20,756 --> 00:30:23,836 Speaker 1: looks bad, and especially it looks bad in the history 551 00:30:23,916 --> 00:30:27,316 Speaker 1: of having this century of shame and the message of 552 00:30:27,676 --> 00:30:31,556 Speaker 1: Chiji Pin's era being right China's rejuvenation and rebirth and 553 00:30:31,596 --> 00:30:34,436 Speaker 1: claiming it and the center. Shame refers to a long 554 00:30:34,676 --> 00:30:41,316 Speaker 1: period of Western attempts to dominate through imperial power on 555 00:30:42,116 --> 00:30:46,236 Speaker 1: all over the Chinese mainland, using navies, as the British did, 556 00:30:46,436 --> 00:30:49,636 Speaker 1: often trying to force changes in domestic law, most famously 557 00:30:49,996 --> 00:30:52,436 Speaker 1: trying to force China, which was banning opium because they 558 00:30:52,476 --> 00:30:55,076 Speaker 1: had their own opioid crisis in the nineteenth century. And 559 00:30:55,316 --> 00:30:57,916 Speaker 1: Britain's response to their attempt to ban opium was to say, 560 00:30:57,956 --> 00:31:00,756 Speaker 1: you must accept our opium. And in fact, we're gonna 561 00:31:00,836 --> 00:31:04,476 Speaker 1: invade you and force you to accept the opium, which 562 00:31:04,516 --> 00:31:06,916 Speaker 1: is deepening your crisis because it makes money for us. 563 00:31:06,916 --> 00:31:11,196 Speaker 1: So against the backdrop of that shame China saying no more. Okay, 564 00:31:11,276 --> 00:31:13,956 Speaker 1: that's super helpful, Mark. But now here's my question that 565 00:31:13,996 --> 00:31:17,356 Speaker 1: I've been dying to ask you. Imagine you're the Trump administration. 566 00:31:17,676 --> 00:31:21,236 Speaker 1: You understand that in China the rule of law is 567 00:31:21,276 --> 00:31:24,676 Speaker 1: a hit or miss game. Right. Sometimes when laws are 568 00:31:24,676 --> 00:31:28,236 Speaker 1: passed there listened to, but sometimes they aren't. More or less, 569 00:31:28,556 --> 00:31:31,516 Speaker 1: the Chinese Communist Party makes sure that when it comes 570 00:31:31,516 --> 00:31:34,516 Speaker 1: to the fundamental policy decisions, they will come out in 571 00:31:34,596 --> 00:31:37,236 Speaker 1: court magically the way the party would like them to 572 00:31:37,276 --> 00:31:39,196 Speaker 1: come out. And in fact, this is even enshrined in 573 00:31:39,236 --> 00:31:42,036 Speaker 1: the Chinese constitution, which puts the party above the law. 574 00:31:42,076 --> 00:31:44,436 Speaker 1: They're not hiding this fact. Okay, So that's the way 575 00:31:44,476 --> 00:31:47,756 Speaker 1: things work in China. Now you're the Trump administration and 576 00:31:47,836 --> 00:31:50,796 Speaker 1: you say, China, what we need you to do is 577 00:31:51,196 --> 00:31:54,996 Speaker 1: change your laws, and then the Chinese say, well, that 578 00:31:55,036 --> 00:31:58,436 Speaker 1: goes against our sovereignty. Why on earth, this is my 579 00:31:58,556 --> 00:32:02,076 Speaker 1: question to Mark, Why on earth would the Trump administration 580 00:32:02,156 --> 00:32:06,036 Speaker 1: insist on the change in laws when a the Chinese 581 00:32:06,036 --> 00:32:08,556 Speaker 1: don't want to do it, but be if they change 582 00:32:08,596 --> 00:32:11,836 Speaker 1: their laws, there's no reason to think that would work. 583 00:32:12,276 --> 00:32:15,076 Speaker 1: They could change their laws and just get around them. 584 00:32:15,756 --> 00:32:18,156 Speaker 1: So is this keeps me up at night? So tell 585 00:32:18,196 --> 00:32:21,636 Speaker 1: me to explain, explain what's happening. So this gets at 586 00:32:21,636 --> 00:32:24,236 Speaker 1: the second bit of the nuance, and I think this 587 00:32:24,356 --> 00:32:28,236 Speaker 1: is actually where the impast lies. And this is why 588 00:32:28,276 --> 00:32:30,676 Speaker 1: I was hitting at the issue with changing the laws 589 00:32:31,556 --> 00:32:34,556 Speaker 1: is not a matter of the Chinese saying we're not 590 00:32:34,716 --> 00:32:36,396 Speaker 1: willing to have these laws on the books, right, It's 591 00:32:36,396 --> 00:32:39,636 Speaker 1: a sovereignty issue. The issue for the American side is 592 00:32:39,796 --> 00:32:42,396 Speaker 1: I think they're not thinking of this as a magic 593 00:32:42,476 --> 00:32:45,316 Speaker 1: bullet that's going to solve the IP theft isssue, or 594 00:32:45,316 --> 00:32:47,956 Speaker 1: the market access issue and so forth. What they want 595 00:32:47,996 --> 00:32:51,596 Speaker 1: to do is to force this so that the Chinese 596 00:32:52,196 --> 00:32:56,556 Speaker 1: are publicly acknowledging this, because some of these problems are 597 00:32:56,676 --> 00:33:00,156 Speaker 1: not the central government right pushing this down. But it's 598 00:33:00,156 --> 00:33:03,956 Speaker 1: a huge country and so it's local governments right saying, well, 599 00:33:04,236 --> 00:33:06,796 Speaker 1: we're getting instructions that we need to develop a high 600 00:33:06,796 --> 00:33:08,676 Speaker 1: tech industry here. How do we do this? Right? And 601 00:33:08,716 --> 00:33:11,676 Speaker 1: so having this on the books is helpful for committing 602 00:33:11,716 --> 00:33:14,476 Speaker 1: to the local government. No, look, the central government explicitly 603 00:33:14,516 --> 00:33:18,196 Speaker 1: prohibits you from holding up a certain license in exchange 604 00:33:18,236 --> 00:33:21,436 Speaker 1: for right certain technology being transferred. So I think that's 605 00:33:21,476 --> 00:33:23,316 Speaker 1: where it's useful. But they're not thinking this is going 606 00:33:23,356 --> 00:33:25,156 Speaker 1: to be a magic bullet. Well, they think is a 607 00:33:25,236 --> 00:33:28,156 Speaker 1: magic bullet or the Democli sword hangover it is the 608 00:33:28,196 --> 00:33:30,516 Speaker 1: fact that there are still tariffs in place, and so 609 00:33:30,636 --> 00:33:34,436 Speaker 1: unless we see effects from this, the tariffs aren't coming off. 610 00:33:34,476 --> 00:33:37,276 Speaker 1: And the Chinese are saying, well, for giving you all this, 611 00:33:37,676 --> 00:33:39,516 Speaker 1: but you're not going to take off the tariffs until 612 00:33:39,556 --> 00:33:41,236 Speaker 1: we give you even more and even more, aren't we 613 00:33:41,276 --> 00:33:44,156 Speaker 1: just giving you something for nothing, and so the hang 614 00:33:44,236 --> 00:33:46,556 Speaker 1: up in the negotiations, right, it's not just it's not just. 615 00:33:47,116 --> 00:33:50,476 Speaker 1: It's about whether the signal will be sent and whether 616 00:33:50,596 --> 00:33:54,956 Speaker 1: the deal would involve the Trump administration keeping the tariffs 617 00:33:54,956 --> 00:33:59,516 Speaker 1: hanging over the heads of China until change camp. And 618 00:33:59,556 --> 00:34:02,556 Speaker 1: I think the fact is the Americans will have to 619 00:34:02,596 --> 00:34:05,756 Speaker 1: give something, so they'll take some portion of some tariffs off, 620 00:34:06,596 --> 00:34:09,316 Speaker 1: but they want to keep a significant portion, and the 621 00:34:09,396 --> 00:34:12,476 Speaker 1: Chinese want them all to come off, and then saying, well, 622 00:34:12,516 --> 00:34:15,156 Speaker 1: if we violate determine, then you could put it on, 623 00:34:15,236 --> 00:34:17,556 Speaker 1: but it needs to be a fair process that can 624 00:34:17,596 --> 00:34:19,956 Speaker 1: go both ways. So you're killing me, Mark, because what 625 00:34:19,996 --> 00:34:23,956 Speaker 1: you're leading me to is to wonder, you know, maybe 626 00:34:23,956 --> 00:34:28,076 Speaker 1: the Trump administration's approach of playing super hardball then is 627 00:34:28,436 --> 00:34:32,716 Speaker 1: not so unreasonable. You know. The Chinese government is saying 628 00:34:32,756 --> 00:34:34,636 Speaker 1: that it's a sovereignty issue, but really they don't want 629 00:34:34,676 --> 00:34:37,916 Speaker 1: to send a message to their provinces that they really 630 00:34:37,916 --> 00:34:41,156 Speaker 1: want to put an end to holding up of deals 631 00:34:41,316 --> 00:34:45,196 Speaker 1: or intellectual property theft or other problems. This is very 632 00:34:45,196 --> 00:34:47,596 Speaker 1: important to the US economy. It's a question of fairness 633 00:34:48,276 --> 00:34:51,516 Speaker 1: and without a hardball. Now, I'm going to sound as 634 00:34:51,516 --> 00:34:54,636 Speaker 1: trumpy as I can sound without hardball. China is not 635 00:34:54,636 --> 00:34:58,716 Speaker 1: going to blink. They play hardball, We play hardball. That's 636 00:34:58,716 --> 00:35:02,236 Speaker 1: exactly where we're at. The question is right now, both 637 00:35:02,276 --> 00:35:04,316 Speaker 1: sides are kind of saying like, well, who can be 638 00:35:04,356 --> 00:35:06,676 Speaker 1: more patient? Who's got more to lose here? And I 639 00:35:06,716 --> 00:35:09,476 Speaker 1: think the Trump administration is saying, well, you can play 640 00:35:09,516 --> 00:35:11,516 Speaker 1: hardball with you for a while, China, because we all 641 00:35:11,516 --> 00:35:13,596 Speaker 1: know that you're more dependent on us than we are 642 00:35:13,676 --> 00:35:16,476 Speaker 1: on you, and the Chinese ors for us saying well, 643 00:35:16,516 --> 00:35:19,596 Speaker 1: we know, you know, Americans, it just takes one dip 644 00:35:19,636 --> 00:35:23,236 Speaker 1: in the stock market before right you're gonna sort of say, okay, 645 00:35:23,516 --> 00:35:27,156 Speaker 1: we cry uncle now and we'll take off a greater 646 00:35:27,196 --> 00:35:29,236 Speaker 1: portion of these tariffs. And so, you know, I think 647 00:35:29,276 --> 00:35:30,796 Speaker 1: this is where we're at right now in terms of 648 00:35:30,796 --> 00:35:35,756 Speaker 1: the negotiations. There's a famous article by a political scientist 649 00:35:35,876 --> 00:35:40,636 Speaker 1: about why wars ever happened? And if I'm not mistakenly, 650 00:35:40,716 --> 00:35:45,036 Speaker 1: it's by a guy called James Furon, and the article 651 00:35:45,076 --> 00:35:48,436 Speaker 1: basically says this, why do we ever go to war? 652 00:35:48,596 --> 00:35:50,196 Speaker 1: I mean, we look at each other. I've got my army, 653 00:35:50,236 --> 00:35:52,916 Speaker 1: you've got your army. We should both know who's going 654 00:35:52,956 --> 00:35:56,236 Speaker 1: to win, and the fighting is going to be super bloody. 655 00:35:56,436 --> 00:35:58,756 Speaker 1: So once we figured out who's gonna win, why don't 656 00:35:59,396 --> 00:36:01,236 Speaker 1: if you've got a better army, why don't I just 657 00:36:01,276 --> 00:36:02,716 Speaker 1: give up? And if I've got a better army, why 658 00:36:02,716 --> 00:36:04,916 Speaker 1: don't you just give up? And what he says is 659 00:36:05,236 --> 00:36:07,956 Speaker 1: the reason people actually fight the wars is there's actually 660 00:36:08,516 --> 00:36:11,836 Speaker 1: information asymmetry. I don't know exactly how strong you are. 661 00:36:11,916 --> 00:36:14,156 Speaker 1: You don't know exactly how strong I am. And the 662 00:36:14,196 --> 00:36:16,396 Speaker 1: only way here's the brutal part, the only way we 663 00:36:16,436 --> 00:36:19,036 Speaker 1: can find it out is by actually fighting the war 664 00:36:19,396 --> 00:36:22,516 Speaker 1: and seeing who wins. And that's why wars are fought 665 00:36:22,516 --> 00:36:24,436 Speaker 1: according to this theory. I mean, it's a little simplified, 666 00:36:24,476 --> 00:36:27,676 Speaker 1: but it's if it's true, it's deep and profound. Is 667 00:36:27,716 --> 00:36:29,076 Speaker 1: that what's going on here? I mean, are we in 668 00:36:29,116 --> 00:36:32,436 Speaker 1: a situation where each side credibly thinks the US and 669 00:36:32,636 --> 00:36:35,436 Speaker 1: China each credibly think that they can win the trade war, 670 00:36:35,796 --> 00:36:37,956 Speaker 1: And the only way we can know who's got a 671 00:36:37,996 --> 00:36:41,276 Speaker 1: better negotiating position is by actually fighting the war and 672 00:36:41,396 --> 00:36:44,676 Speaker 1: paying the huge price that each side might pay along 673 00:36:44,676 --> 00:36:47,716 Speaker 1: the way. I think what's actually going on is both 674 00:36:47,756 --> 00:36:54,316 Speaker 1: sides realize we're engaged in a if not decade long, 675 00:36:55,036 --> 00:37:01,756 Speaker 1: then at least a generational strategic rivalry between the two sides. 676 00:37:03,996 --> 00:37:10,676 Speaker 1: But both sides are not quite sure about the others 677 00:37:10,796 --> 00:37:15,116 Speaker 1: ability to sort of persevere. Right, the Chinese look at 678 00:37:15,156 --> 00:37:19,636 Speaker 1: the Americans to say, the Americans aren't making the necessary investments, 679 00:37:19,676 --> 00:37:24,476 Speaker 1: they're overstretching their own resources. Clearly, re recognize their dominant 680 00:37:24,476 --> 00:37:28,476 Speaker 1: military power. Clearly they're technologically advanced over us, right, but 681 00:37:28,516 --> 00:37:30,836 Speaker 1: there we just have to be patient and over a 682 00:37:30,916 --> 00:37:33,316 Speaker 1: course of time we will catch up to them. So 683 00:37:33,356 --> 00:37:37,396 Speaker 1: they're looking at the we're the turtle or the tortoise, 684 00:37:37,676 --> 00:37:39,876 Speaker 1: they're the hair, and trying to say we'll wait them out, 685 00:37:39,996 --> 00:37:43,476 Speaker 1: and so histories on our side. So their goal here 686 00:37:43,836 --> 00:37:47,636 Speaker 1: is not necessarily to win a trade war, right, It's 687 00:37:47,676 --> 00:37:50,396 Speaker 1: to get back to a piece that will allow them 688 00:37:50,396 --> 00:37:55,636 Speaker 1: to continue to wait out the Americans. I think on 689 00:37:55,676 --> 00:37:58,756 Speaker 1: the American side, you're looking at the Chinese system, and 690 00:37:58,796 --> 00:38:02,036 Speaker 1: for many years people just believe there's no way an 691 00:38:01,996 --> 00:38:06,316 Speaker 1: authoritarian regime can have a growing middle class with greater 692 00:38:06,356 --> 00:38:09,996 Speaker 1: access to technology and still continue to this type of 693 00:38:10,076 --> 00:38:13,436 Speaker 1: system in place. Sooner or later, especially with the demographic 694 00:38:13,476 --> 00:38:17,636 Speaker 1: challenges that China has especially with some of the resource challenges, right, 695 00:38:17,636 --> 00:38:19,476 Speaker 1: not enough oil, not enough water, and so on, so 696 00:38:19,596 --> 00:38:23,396 Speaker 1: worth right, sooner or later this thing is gonna go 697 00:38:23,596 --> 00:38:26,356 Speaker 1: belly up, the same way we saw with Japan and 698 00:38:26,476 --> 00:38:28,916 Speaker 1: others and so forth. So we just need to sort 699 00:38:28,956 --> 00:38:32,956 Speaker 1: of constructively, impatiently engage and sooner or later China is 700 00:38:32,996 --> 00:38:35,556 Speaker 1: going to change. So profit is not part of your 701 00:38:35,636 --> 00:38:37,636 Speaker 1: job description, mark, but I'm going to ask you to 702 00:38:37,756 --> 00:38:41,356 Speaker 1: profit sign anyway. Who's right? Who's going to win this one? 703 00:38:41,636 --> 00:38:44,316 Speaker 1: So this is the this is the big question, and 704 00:38:44,596 --> 00:38:48,836 Speaker 1: it's not clear right now because it depends upon choices 705 00:38:48,876 --> 00:38:51,916 Speaker 1: that each side makes. Right. So if we can look 706 00:38:51,956 --> 00:38:55,356 Speaker 1: at the Chinese diagnosis of America's weaknesses, and we can say, 707 00:38:55,436 --> 00:38:58,236 Speaker 1: to some extent they're correct. Right, America isn't investing enough 708 00:38:58,436 --> 00:39:01,716 Speaker 1: in itself, it's overstructing into resources, and it's engaged in 709 00:39:01,796 --> 00:39:05,996 Speaker 1: all this domestic political turmoil between the two sides rather 710 00:39:06,076 --> 00:39:09,636 Speaker 1: than actually fixing its own problems. So it's question of 711 00:39:09,636 --> 00:39:12,276 Speaker 1: whether or not America can get back to work to 712 00:39:12,316 --> 00:39:17,236 Speaker 1: tackle its own economic and social challenges. Right. And on 713 00:39:17,276 --> 00:39:19,676 Speaker 1: the Chinese side, you know, you can look at the 714 00:39:19,716 --> 00:39:22,876 Speaker 1: American diagnosis of what's happening in China and say, you know, 715 00:39:23,476 --> 00:39:27,236 Speaker 1: these trends are all true, but can the party state 716 00:39:27,356 --> 00:39:30,876 Speaker 1: dynamically evolve over the course of time to deal with 717 00:39:30,916 --> 00:39:34,476 Speaker 1: these types of challenges. No one knows. So no one 718 00:39:34,516 --> 00:39:37,356 Speaker 1: really knows. That's why I say it's not really about 719 00:39:37,396 --> 00:39:40,196 Speaker 1: this immediate trade war. And once I trying to one 720 00:39:40,276 --> 00:39:43,436 Speaker 1: up itself over the other, I think this immediate trade 721 00:39:43,436 --> 00:39:48,916 Speaker 1: war is just a skirmish in a decade. And then 722 00:39:49,116 --> 00:39:51,436 Speaker 1: what we're doing is setting the terms of this competition, 723 00:39:51,556 --> 00:39:54,396 Speaker 1: because once I want to say, well, we should still 724 00:39:54,436 --> 00:39:58,316 Speaker 1: continue to dance with each other, but see who makes 725 00:39:58,316 --> 00:40:01,396 Speaker 1: the right calls in the long term investments, and other 726 00:40:01,436 --> 00:40:03,116 Speaker 1: side saying well, if we're going to be rivals to 727 00:40:03,156 --> 00:40:06,196 Speaker 1: begin with, maybe we shouldn't be as closely integrated. And 728 00:40:06,316 --> 00:40:08,676 Speaker 1: that's a debate that's happening I think inside the US, 729 00:40:09,436 --> 00:40:12,396 Speaker 1: not just within the Trump administration, but within the US 730 00:40:12,516 --> 00:40:15,676 Speaker 1: palty overall, right, And on the Chinese side, they're looking 731 00:40:15,716 --> 00:40:17,636 Speaker 1: at this and saying, well, if this is going to 732 00:40:17,676 --> 00:40:19,956 Speaker 1: be a rival that's going to keep us down, why 733 00:40:19,956 --> 00:40:22,516 Speaker 1: are we so closely locked in with them? Yeah, So, 734 00:40:22,556 --> 00:40:24,756 Speaker 1: in that sense, this is a battle in what I 735 00:40:24,836 --> 00:40:26,436 Speaker 1: called a few years ago in a book that I 736 00:40:26,436 --> 00:40:28,596 Speaker 1: wrote on this very much with your guidance and help 737 00:40:28,876 --> 00:40:32,196 Speaker 1: cool war, a long term struggle between the US and China, 738 00:40:32,276 --> 00:40:37,396 Speaker 1: which is deeply about competing national interests, but at least 739 00:40:37,436 --> 00:40:39,756 Speaker 1: so far has been done more or less without firing 740 00:40:39,796 --> 00:40:44,116 Speaker 1: any shots, and which traditionally involved close cooperation on trade. 741 00:40:44,316 --> 00:40:46,236 Speaker 1: What's going on now in this latest phase is that 742 00:40:46,276 --> 00:40:49,396 Speaker 1: there's a lessening of that degree of cooperation and a 743 00:40:49,556 --> 00:40:52,476 Speaker 1: use of trade as a more active tool of a 744 00:40:52,556 --> 00:40:56,476 Speaker 1: more active tool of conflict between the countries. Let me 745 00:40:56,516 --> 00:41:00,436 Speaker 1: ask a question in another hypothetical form. Imagine that the 746 00:41:00,476 --> 00:41:03,116 Speaker 1: trade war continues to the rest of the Trump administration, 747 00:41:03,596 --> 00:41:06,956 Speaker 1: and the US does raise tariffs very significantly on China, 748 00:41:07,036 --> 00:41:09,516 Speaker 1: and we're up to a twenty five percent level, and 749 00:41:09,596 --> 00:41:15,276 Speaker 1: that continues, let's say, up through the twenty twenty election. Now, 750 00:41:15,316 --> 00:41:19,436 Speaker 1: imagine a Democrat is elected. Let's imagine that that Democrat 751 00:41:19,436 --> 00:41:23,196 Speaker 1: takes office in January of twenty twenty one. Is there 752 00:41:23,236 --> 00:41:26,516 Speaker 1: any way politically that a Democrat under those circumstances, who 753 00:41:26,676 --> 00:41:30,476 Speaker 1: wanted to end the trade war by making some sort 754 00:41:30,476 --> 00:41:33,596 Speaker 1: of concessions to China could do that even if she 755 00:41:33,716 --> 00:41:36,036 Speaker 1: wanted to or even if he wanted to, would that 756 00:41:36,116 --> 00:41:38,156 Speaker 1: even be an option? I mean, of course you might 757 00:41:38,196 --> 00:41:41,236 Speaker 1: also elect someone who wants to stay the course. But 758 00:41:41,356 --> 00:41:42,956 Speaker 1: you know, you run for office against Donald Trump, you 759 00:41:42,956 --> 00:41:44,316 Speaker 1: want to say what he's doing wrong. One thing you 760 00:41:44,396 --> 00:41:46,716 Speaker 1: might say by running is he's getting the trade war 761 00:41:46,796 --> 00:41:50,636 Speaker 1: all wrong. Could a Democrat credibly do that? Or would 762 00:41:50,636 --> 00:41:53,356 Speaker 1: that just look like, Okay, we're ending the war by losing. 763 00:41:54,436 --> 00:41:59,596 Speaker 1: I can't see it happening unless the Chinese really developed 764 00:41:59,636 --> 00:42:02,916 Speaker 1: such a deep grudge with Donald Trump that they say, 765 00:42:02,956 --> 00:42:05,356 Speaker 1: we've got more cards, more games, we're willing to put 766 00:42:05,396 --> 00:42:07,156 Speaker 1: on a table. We just don't want to give it 767 00:42:07,196 --> 00:42:09,556 Speaker 1: to this guy because we don't like them, but we'll 768 00:42:09,556 --> 00:42:11,076 Speaker 1: give it. They might want to give coverage to the 769 00:42:11,116 --> 00:42:14,236 Speaker 1: next person. Yes, they might say a new person is elected, 770 00:42:14,716 --> 00:42:16,276 Speaker 1: now we're going to be nicer to you, and then 771 00:42:16,316 --> 00:42:19,556 Speaker 1: offered some but nowhere near all of what you know 772 00:42:19,636 --> 00:42:22,556 Speaker 1: the U s should want. So we might see something 773 00:42:22,556 --> 00:42:24,556 Speaker 1: like that. But then you've got to ask your question, 774 00:42:24,556 --> 00:42:28,436 Speaker 1: if you're the new Democratic president, how big does that 775 00:42:29,316 --> 00:42:31,156 Speaker 1: pot need to be in order for you to take 776 00:42:31,196 --> 00:42:34,716 Speaker 1: the political risk to accept that. And so here's where 777 00:42:34,836 --> 00:42:37,796 Speaker 1: I think the structural issues really do come into play. 778 00:42:38,276 --> 00:42:41,076 Speaker 1: I just see that we are edited in past where 779 00:42:41,236 --> 00:42:44,836 Speaker 1: a lot of what the Democrats would want would be 780 00:42:44,876 --> 00:42:47,956 Speaker 1: the structural, transformational changes that I just can't see the 781 00:42:48,036 --> 00:42:50,996 Speaker 1: Chinese anteing up. But what I do predict will be 782 00:42:51,036 --> 00:42:56,516 Speaker 1: different in the Democratic administration is that Europe, Japan, others 783 00:42:57,036 --> 00:43:02,356 Speaker 1: will be more willing to cooperate with the Democratic administration 784 00:43:02,676 --> 00:43:05,596 Speaker 1: to greater extent than they have so far because those 785 00:43:05,676 --> 00:43:09,236 Speaker 1: processes are happening today. What about before the election? Can 786 00:43:09,316 --> 00:43:12,356 Speaker 1: Trump blink or can Trump not blink at all? He 787 00:43:12,436 --> 00:43:15,156 Speaker 1: can certainly blink and say that you know what he's 788 00:43:15,156 --> 00:43:18,036 Speaker 1: gotten more than anyone else ever gotten. It's incredible, It's 789 00:43:18,036 --> 00:43:19,716 Speaker 1: better than what anyone else has ever gotten. I mean, 790 00:43:19,796 --> 00:43:22,276 Speaker 1: I think it could be the case. Right he'll say, 791 00:43:22,476 --> 00:43:25,796 Speaker 1: you know, look, the Chinese now gave back what they 792 00:43:25,796 --> 00:43:28,556 Speaker 1: took away. We you and I don't know what he's 793 00:43:28,636 --> 00:43:31,996 Speaker 1: purporting was taken away at the table. So you know 794 00:43:32,116 --> 00:43:34,476 Speaker 1: that at some point he might just decide, oh yeah, now, 795 00:43:34,636 --> 00:43:37,196 Speaker 1: I'm back to remember a couple months ago he was 796 00:43:37,236 --> 00:43:39,676 Speaker 1: talking about this is the greatest deal ever. So I 797 00:43:39,716 --> 00:43:41,956 Speaker 1: think it's definitely possible that we could see a deal 798 00:43:41,996 --> 00:43:43,916 Speaker 1: going into the election. And then he'll say, look, my 799 00:43:43,996 --> 00:43:47,516 Speaker 1: hardball tactics got me more than anyone was ever able 800 00:43:47,556 --> 00:43:50,796 Speaker 1: to do with the Chinese, so I think it's possible 801 00:43:50,836 --> 00:43:54,516 Speaker 1: as well. Mark, Thank you, you, as usual made me 802 00:43:55,396 --> 00:43:59,156 Speaker 1: feel more scared about the potential for a longer range 803 00:43:59,436 --> 00:44:02,356 Speaker 1: conflict than I otherwise would have. But you've at least 804 00:44:02,356 --> 00:44:04,596 Speaker 1: given me the gift to the end of saying there's 805 00:44:04,676 --> 00:44:08,436 Speaker 1: some prospect of the resolution of the conflict. And above all, 806 00:44:08,916 --> 00:44:12,076 Speaker 1: thank you for educating me and for making me think. 807 00:44:12,076 --> 00:44:14,556 Speaker 1: I really appreciate your being here. Thank you, Thank you, Noah, 808 00:44:14,556 --> 00:44:22,996 Speaker 1: and the feeling is very much mutual. Deep Background is 809 00:44:22,996 --> 00:44:26,436 Speaker 1: brought to you by Pushkin Industries. Our producer is Lydia Gencott, 810 00:44:26,516 --> 00:44:30,516 Speaker 1: with engineering by Jason Gambrell and Jason Rostkowski. Our showrunner 811 00:44:30,556 --> 00:44:33,316 Speaker 1: is Sophie mckibbon. Our theme music is composed by Luis 812 00:44:33,396 --> 00:44:37,236 Speaker 1: GERA special thanks to the Pushkin Brass, Malcolm Gladwell, Jacob 813 00:44:37,236 --> 00:44:40,436 Speaker 1: Weisberg and Mia Lobel. I'm Noah Feldman. You can follow 814 00:44:40,436 --> 00:44:43,556 Speaker 1: me on Twitter at Noah R. Feldman. This is Deep 815 00:44:43,636 --> 00:44:44,156 Speaker 1: Background