WEBVTT - China-U.S. Relations Out of Balance, Schell Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's a power 0:00:08.080 --> 0:00:12.360 of global connections. Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:27.400 Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:49.080 of course on the Bloomberg Jim Glassman Joints. We were 0:00:49.120 --> 0:00:52.839 both off on Friday for Jobs Day. Perhaps we were 0:00:52.840 --> 0:00:54.400 both at the Super Bowl. Tom, I don't know, but 0:00:55.960 --> 0:00:58.200 let me let me just get your sense of what 0:00:58.240 --> 0:01:00.080 we saw in those numbers on on Friday. Hi, you 0:01:00.120 --> 0:01:02.520 reacted to the headline number, and I know you've dug 0:01:02.520 --> 0:01:05.040 into the numbers. You know, I'm I'm more interested in 0:01:05.040 --> 0:01:08.120 in the employment picture because weights trends which got everybody 0:01:08.360 --> 0:01:11.360 threw everybody off. We're are very volatile. So this month 0:01:11.360 --> 0:01:15.120 they're very soft. But uh, the fact, when you're saying 0:01:15.160 --> 0:01:17.560 steady job growth month after month, here we are eight 0:01:17.600 --> 0:01:19.720 years in recovery and we're still seeing this, it tells 0:01:19.760 --> 0:01:21.480 you we still have a lot of momentum. You would 0:01:21.520 --> 0:01:24.560 think that if we're getting close to full employment, these 0:01:24.560 --> 0:01:26.480 trends are gonna start slowing down, and just it's a 0:01:26.480 --> 0:01:28.560 reminder that we still have a lot of people out 0:01:28.600 --> 0:01:31.399 there looking for jobs, and it makes me feel like 0:01:31.640 --> 0:01:34.080 we're not yet up to our full potential to So 0:01:34.160 --> 0:01:35.880 that means to me there's more good news to come. 0:01:36.319 --> 0:01:38.360 So I was more focused on that now that The 0:01:38.400 --> 0:01:40.200 other thing is really interesting in the background. What you 0:01:40.200 --> 0:01:43.199 see going on is as the job market is doing better, 0:01:43.240 --> 0:01:47.119 there's more opportunities opening up. And what's happening is people, 0:01:47.120 --> 0:01:51.680 particularly in the thirty five year bracket, the participation rates 0:01:51.720 --> 0:01:53.880 coming back. So a lot of these guys dropped out 0:01:53.960 --> 0:01:57.360 during the recession, maybe they had support from family, but 0:01:57.440 --> 0:02:00.440 with the job market doing better, there's more compelling reason 0:02:00.480 --> 0:02:01.960 to come back in look for a job. And I 0:02:02.000 --> 0:02:05.280 think that's that's a healthy sign that this hidden unemployment 0:02:05.280 --> 0:02:09.640 that's been going on is really we're addressing it, and 0:02:09.680 --> 0:02:12.160 we're seeing lots of signs of this. So I I 0:02:12.280 --> 0:02:14.960 take more. I take comfort in the trends that we 0:02:15.000 --> 0:02:17.640 see in the employment numbers and that but by the way. 0:02:17.760 --> 0:02:20.040 The other thing that's interesting in this For the last 0:02:20.040 --> 0:02:22.519 couple of years we've been dealing with the the oil 0:02:22.560 --> 0:02:25.760 sector has been going through some major cutbacks and you're 0:02:25.760 --> 0:02:29.280 seeing it showing up in mining, utilities, and manufacturing and 0:02:29.320 --> 0:02:32.840 capex bending down. Well, uh, it looks to me like 0:02:32.880 --> 0:02:35.720 we're mostly working got through that because now you're starting 0:02:35.760 --> 0:02:40.160 to see job growth in mining, in manufacturing, and construction. 0:02:40.320 --> 0:02:42.720 So for so these are the three areas that have 0:02:42.760 --> 0:02:46.560 been kind of soft, and this report showed maybe the 0:02:46.600 --> 0:02:49.800 beginning of some return to something more normal. You mentioned 0:02:49.800 --> 0:02:51.960 the volatility of those those wage trends. If you take 0:02:51.960 --> 0:02:54.080 a step back, what are we seeing in terms of 0:02:54.080 --> 0:02:56.959 wage growth from a from a broader perspective, Well, these 0:02:57.040 --> 0:03:00.520 numbers show sort of the wage growth is shifted up 0:03:00.520 --> 0:03:03.120 from two percent annual growth forever to about two and 0:03:03.120 --> 0:03:05.760 a half percent. We're still doing a little better of 0:03:05.760 --> 0:03:08.840 an inflation but frankly, we would I would expect this 0:03:08.880 --> 0:03:10.079 is going to do a little better. It looked to 0:03:10.120 --> 0:03:12.639 me like we were heading our way towards three percent growth, 0:03:12.639 --> 0:03:15.560 which would be quite decent given where inflation is. And 0:03:15.600 --> 0:03:17.120 it may be that we're there. And the thing that's 0:03:17.120 --> 0:03:19.200 surprised everybody is there were a bunch of states that 0:03:19.280 --> 0:03:23.240 implemented minimum wages when minimum wage hikes in January that 0:03:23.240 --> 0:03:26.480 didn't show up. So I think you don't really know 0:03:26.600 --> 0:03:29.000 what's going on here until you see a couple of 0:03:29.040 --> 0:03:31.760 months behind you. Because these numbers are so volatile, they 0:03:31.760 --> 0:03:34.240 swing around a lot, and it wouldn't be surprising to 0:03:34.280 --> 0:03:36.320 me if by spring you see the trend is back 0:03:36.320 --> 0:03:38.560 to where we were thinking before two and a half. 0:03:38.680 --> 0:03:42.080 Heading toward three, I want to ask you about retraining. 0:03:42.120 --> 0:03:43.520 I was looking at your most recent note, and you're 0:03:43.520 --> 0:03:45.800 at there are five point five million unfilled job openings 0:03:45.800 --> 0:03:47.640 today compared with three point five to four million job 0:03:47.640 --> 0:03:50.280 openings the last time unemployment stood at the current level, 0:03:50.600 --> 0:03:52.280 implying that quite a few new jobs could be created 0:03:52.280 --> 0:03:55.280 by retraining folks. So people taking that more seriously, Yeah, 0:03:55.320 --> 0:03:58.120 you see moving towards them. You see in action businesses 0:03:58.600 --> 0:04:01.520 talk about this a lot. Uh. It's it's very difficult 0:04:01.560 --> 0:04:04.280 for small business to train people because what happens is 0:04:04.320 --> 0:04:06.320 you train them and then they jump. You can't you 0:04:06.320 --> 0:04:08.520 can't be sure they're gonna stay your job. So where 0:04:08.560 --> 0:04:11.040 I see it as more in the community college system, 0:04:11.280 --> 0:04:14.600 that's where go to Miami Day Community College. It's massive system. 0:04:14.880 --> 0:04:18.200 They've got a lot of specialized skill programs that tons 0:04:18.200 --> 0:04:20.160 of kids are going into. And I think, I think 0:04:20.200 --> 0:04:22.479 it's just a matter of time people figure out that 0:04:22.760 --> 0:04:25.440 where the opportunities are. You just can't turn yourself into 0:04:26.200 --> 0:04:29.680 a technician overnight. It takes time, and you've gotta get 0:04:29.720 --> 0:04:32.320 some skills that we used to get in shop class, 0:04:32.440 --> 0:04:35.120 or you're gonna have some interest in math. So I 0:04:35.120 --> 0:04:37.440 think it just takes time. And my guess is we 0:04:37.520 --> 0:04:40.520 won't be talking about this five years from now. But 0:04:40.600 --> 0:04:43.520 that's that's why to us economists, this is music to 0:04:43.600 --> 0:04:46.400 our ears because when we hear people complaining but they 0:04:46.440 --> 0:04:49.440 can't find people, that tells me there's opportunities there and 0:04:49.480 --> 0:04:51.160 it's not gonna be long before someone figures that out. 0:04:51.440 --> 0:04:54.040 Strike me as a successful public private partnership. When you 0:04:54.080 --> 0:04:55.760 look at the where the companies are working with these 0:04:55.760 --> 0:04:57.680 communic college yeah, you know what that The thing is 0:04:57.839 --> 0:05:00.719 what used to happen is you're union. Used to have 0:05:00.760 --> 0:05:02.520 a union as a shop that would set or set 0:05:02.560 --> 0:05:04.240 these up. Well, we don't a lot of people don't 0:05:04.240 --> 0:05:06.720 work in unions anymore, particularly manufacturing so we do. We're 0:05:06.720 --> 0:05:09.280 missing an institution that really used to do this. Jim, 0:05:09.320 --> 0:05:13.680 do you just presume a stronger dollar? No, I I 0:05:13.680 --> 0:05:16.560 don't think it makes I think the reason we've seen 0:05:16.600 --> 0:05:18.680 the dollar stronger in the last couple of years is 0:05:18.680 --> 0:05:22.159 because the FETE stopped doing quantitative easing, and the Europeans 0:05:22.160 --> 0:05:25.160 and the Japanese stepped in and and just emulated with 0:05:25.240 --> 0:05:28.359 the FETE was doing. So I don't think it's obvious 0:05:28.800 --> 0:05:30.720 that the US dollars should be stronger. The dollar is 0:05:30.800 --> 0:05:32.640 kind of on a trade weighted basis about where it's 0:05:32.640 --> 0:05:35.599 been on average over the last forty years, so to me, 0:05:35.720 --> 0:05:39.560 unless the US is able to sort of fundamentally change 0:05:39.600 --> 0:05:42.120 the amount of energy in the economy and generates all 0:05:42.080 --> 0:05:46.360 of this new optimism about productivity or something that's unique 0:05:46.400 --> 0:05:48.560 to the US and not others, I don't think there's 0:05:48.560 --> 0:05:50.840 a reason to expect the dollar to keep going up, 0:05:51.360 --> 0:05:54.640 And particularly now that we're seeing more signs maybe not 0:05:54.680 --> 0:05:57.520 in Greece, but in Europe, European and Japanese economies are 0:05:57.560 --> 0:05:59.880 doing a little better, so central banks are getting a 0:06:00.000 --> 0:06:02.279 little more You get the sense that people are thinking 0:06:02.279 --> 0:06:05.240 more about maybe slowing down the asset purchases, and that's 0:06:05.240 --> 0:06:08.200 why the Europeans are doing starting March. So that to me, 0:06:08.760 --> 0:06:11.520 that prospect is what kind of limits the upside for 0:06:11.560 --> 0:06:13.440 the dollar. Get trade balance date of here at eight 0:06:13.560 --> 0:06:15.880 thirty and you've written about trade deaths. That's how we 0:06:15.880 --> 0:06:18.440 should regard trade deaths. That's saying that you should seem 0:06:18.440 --> 0:06:23.120 as paid forward story. I think, so okay. So here 0:06:23.120 --> 0:06:25.400 here is that here's the US. We are among the 0:06:25.520 --> 0:06:28.240 richest of the economies in the world. Right America is 0:06:28.279 --> 0:06:31.160 already great, and and so is Europe. And in terms 0:06:31.200 --> 0:06:34.119 of living standard, much of the world is very poor. 0:06:34.720 --> 0:06:39.279 So to me, trade deficits symbolize an effort on our part. 0:06:39.360 --> 0:06:42.520 It allows companies that are countries that are allowed to 0:06:42.720 --> 0:06:45.400 access our consumer markets, means they can sell to us, 0:06:45.760 --> 0:06:49.080 means they can they can generate their own economic development. 0:06:49.600 --> 0:06:51.799 And so trade deficits are a sign that the world 0:06:51.880 --> 0:06:54.160 is all out of balance. There we're trading with people 0:06:54.200 --> 0:06:57.279 who are poor, but as they do better, they're going 0:06:57.320 --> 0:06:59.320 to be buying more of our stuff. And so to me, 0:06:59.480 --> 0:07:04.599 trade death there's a temporary dislocation that is uh is 0:07:04.600 --> 0:07:06.360 a reflection of a world that's out of saying it's 0:07:06.400 --> 0:07:09.440 not a reflection of countries manipulating their currency to take 0:07:09.440 --> 0:07:12.800 advantage of the US. It's a it's a sign of 0:07:12.960 --> 0:07:15.720 countries waking up. And you know, if you're if you're 0:07:15.720 --> 0:07:19.960 Bangladesh or India or China, you're living standards ten the 0:07:20.040 --> 0:07:22.320 US level. You're not going to be buying the same 0:07:22.400 --> 0:07:24.920 things that we're buying from them. So to me, this 0:07:25.000 --> 0:07:28.280 is a stepping stone to a world where we're all 0:07:28.320 --> 0:07:31.120 going to be doing better and we benefit from that 0:07:31.200 --> 0:07:35.920 process because as these as Asia in particular, continue to develop, 0:07:36.160 --> 0:07:38.679 there's vast new consumer markets that are gonna be developing, 0:07:38.720 --> 0:07:41.680 and our our businesses are gonna be benefiting from that. Americans, 0:07:41.760 --> 0:07:43.840 American jobs are going to be created by that. Is 0:07:43.880 --> 0:07:46.240 this conversation too colored by politics, in other words, to 0:07:46.240 --> 0:07:48.680 be focused too much on China and Mexico because of 0:07:48.720 --> 0:07:52.240 the debate over the border or about who is wh 0:07:52.240 --> 0:07:54.000 who is wielding a heavier hand in the age of 0:07:54.040 --> 0:07:56.920 Pacific region for instance. You know, I can understand the 0:07:56.920 --> 0:08:00.000 focus on China Mexicans. That's where the that's the most 0:08:00.000 --> 0:08:02.360 amic that there's were the biggest changes have taken place 0:08:02.440 --> 0:08:06.520 right in China is big, but it really is a 0:08:06.560 --> 0:08:10.200 mistake to think that China and Mexico are stealing our jobs. 0:08:10.520 --> 0:08:14.240 China and Mexico, as they develop, are creating jobs for us. 0:08:14.280 --> 0:08:17.800 We don't see them every day. Honestly, in my company, 0:08:17.840 --> 0:08:20.160 I don't know how much of JP Morgan's revenues are 0:08:20.160 --> 0:08:23.840 being generated by economic the economic pie growing, but I 0:08:23.880 --> 0:08:26.920 know it's true, and I know that I'm benefiting from 0:08:26.960 --> 0:08:29.280 what's going on around the world. Jim Glastman with US. 0:08:29.280 --> 0:08:33.760 He's economist for Commercial Banking and JP Morgan. Jim Blastman, 0:08:33.760 --> 0:08:38.680 you had a great phrase earlier this morning, bogged down. Well, 0:08:38.720 --> 0:08:43.040 you're bogged down by distractions, whether it's Mr Putin or 0:08:43.240 --> 0:08:48.520 the New England Patriots. We are bogged down. How do 0:08:48.600 --> 0:08:51.520 we get out of this boggedness. It's lovely to be 0:08:51.559 --> 0:08:55.520 bogged down by the patriots, but the problem is we're Yeah, 0:08:55.600 --> 0:08:58.880 it's just it's distracting from the issue that has been 0:08:58.920 --> 0:09:03.480 helping the market, which is focusing on economic initiatives to 0:09:03.600 --> 0:09:08.800 get the economy moving. Regulation, tax reform, infrastructure spending that's coming. 0:09:08.880 --> 0:09:11.240 We know that's percolating in the background. But I think 0:09:11.520 --> 0:09:13.520 all of this other stuff is really kind of worrying 0:09:13.600 --> 0:09:16.880 people that maybe if we're not careful, that can start 0:09:16.920 --> 0:09:21.720 fragmenting the team that's trying to put this together. So 0:09:21.920 --> 0:09:24.959 it's you know, the market, the markets holding on to 0:09:25.080 --> 0:09:27.560 the hope because we have not really seen where they're 0:09:27.559 --> 0:09:29.559 going to go on some of these things. And that 0:09:29.679 --> 0:09:32.360 doesn't have to happen tomorrow. But as long as we 0:09:32.400 --> 0:09:36.000 see that there there's reform coming their actions and we 0:09:36.040 --> 0:09:38.719 know it takes time to get a tax reform put 0:09:38.760 --> 0:09:41.560 in place, but as long as um it looks like 0:09:41.600 --> 0:09:44.960 we're moving in that direction, the you know, it doesn't 0:09:45.000 --> 0:09:47.000 disrupt the market, and I think the benefits from that 0:09:47.200 --> 0:09:50.360 we're sort of already been monetized. We've already seen the 0:09:50.360 --> 0:09:53.160 market move up a lot, and the benefits of the 0:09:53.240 --> 0:09:55.920 higher stock markets created a couple of trillion dollars of wealth. 0:09:55.960 --> 0:09:59.360 So that's going to be affecting consumer spending. But but 0:09:59.360 --> 0:10:01.559 but it's true, we really need to get we were 0:10:01.600 --> 0:10:05.559 hoping that the debate gets refocused on the economic issues 0:10:06.160 --> 0:10:08.400 and we get away from some of these other things 0:10:08.440 --> 0:10:10.840 that are distracting. How much do you pay attention to 0:10:11.040 --> 0:10:13.880 readings of sentiment when you're looking at capex, when you're 0:10:13.880 --> 0:10:17.080 looking at the inventory investment. What does sentiment tell us 0:10:17.120 --> 0:10:20.920 about that? You know, Normally, like consumer sentiment, I never 0:10:20.920 --> 0:10:23.800 really pay much attention to it because you can't spend sentiment. 0:10:23.880 --> 0:10:25.640 You have to spend your not to get money yet, 0:10:25.760 --> 0:10:28.240 you know, and the thing is, we're seeing car sales 0:10:28.320 --> 0:10:30.520 off the charts, so that tells you that the consumer 0:10:30.559 --> 0:10:33.080 is feeling pretty good about things. I think in the 0:10:33.080 --> 0:10:36.199 business area, sentiment does matter a lot because there's a 0:10:36.240 --> 0:10:39.920 lot of activity businesses do. Business investment, for example, in 0:10:39.960 --> 0:10:42.600 cap X, that requires that you have some confidence in 0:10:42.640 --> 0:10:45.560 the future. So sentiment can sometimes tell you if there's 0:10:45.559 --> 0:10:48.800 a mind a change in the mindset, and you know, 0:10:48.840 --> 0:10:50.840 if a business has has to put in place a 0:10:50.840 --> 0:10:53.959 project that requires confidence that things are gonna be better 0:10:54.000 --> 0:10:57.040 in the future. Business sentiment can tell you something about 0:10:57.080 --> 0:10:59.640 what's going on. And we are seeing an improvement in 0:10:59.760 --> 0:11:03.840 cap picks surveys, for example, that's probably more about sentiment 0:11:03.920 --> 0:11:06.480 than it is about real plans. That's what that's that's 0:11:06.480 --> 0:11:07.959 what we're gonna have to sort of watch to see 0:11:08.000 --> 0:11:10.640 whether in fact we do get follow up on some 0:11:10.760 --> 0:11:13.560 of this improvement that we've seen in the sentiment numbers. 0:11:14.760 --> 0:11:17.040 When you look at we've talked about energy and energy 0:11:17.080 --> 0:11:19.320 in the labor market. How big of a driver is 0:11:19.320 --> 0:11:21.400 the energy sector right now when you look at the 0:11:21.480 --> 0:11:22.760 US kind of how important is it to get it 0:11:22.800 --> 0:11:25.480 back online perhaps to where it was. Well, it was 0:11:25.520 --> 0:11:29.559 a big deal because you know, as of two thousand fourteen, 0:11:30.000 --> 0:11:33.439 employment was growing about two fifty thousand a month. It 0:11:33.640 --> 0:11:37.720 just kind of slowed down quite significantly to under two 0:11:38.080 --> 0:11:41.000 thousand as that industry was going through its cutback. So 0:11:41.440 --> 0:11:43.640 I don't know that, and it's a it's a big 0:11:43.640 --> 0:11:45.839 deal for the U. S. Economy. We still use more 0:11:45.920 --> 0:11:47.559 energy than we produced, but it's a real big deal 0:11:47.600 --> 0:11:50.920 for the economy. And it's hard to tell all the 0:11:51.160 --> 0:11:53.200 all the impact its seat of indirect I mean, it 0:11:53.240 --> 0:11:57.160 affects transportation, capex, oil servicing, and there's a lot of 0:11:57.240 --> 0:11:59.600 jobs to spin out of this. And now, folks, at 0:11:59.640 --> 0:12:02.360 seven twenty three oh seven on a Tuesday morning, we 0:12:02.440 --> 0:12:05.520 begin a discussion the Jim Glassman and I have done 0:12:05.520 --> 0:12:09.840 a few times tax reform. Greg Velier this morning in 0:12:09.880 --> 0:12:13.520 his travels is tax reform is front and center and 0:12:13.559 --> 0:12:16.680 even goes to the idea Jim Glassman back dating when 0:12:16.720 --> 0:12:20.280 we back date back to the advantages of tax reform, 0:12:20.640 --> 0:12:23.080 do you and does JP Morgan and your team do 0:12:23.120 --> 0:12:27.160 you do actually feel we'll see tax reform? We do 0:12:27.320 --> 0:12:30.000 because this seems that this is an important part of 0:12:30.040 --> 0:12:33.520 the program, and it seems to be supported by folks 0:12:33.520 --> 0:12:36.400 in the Senate and the House and the President, so 0:12:37.000 --> 0:12:38.600 it would be I mean, we do. We do have 0:12:38.679 --> 0:12:42.920 issues because our companies are not competitive on the global landscape, 0:12:42.960 --> 0:12:46.760 so we know that our corporate tax rate rate is 0:12:47.360 --> 0:12:50.920 putting companies out a disadvantaged compared to others. We would 0:12:50.920 --> 0:12:52.960 like to see the tax coach shift more to a 0:12:53.000 --> 0:12:55.800 consumption based tax and that's part of what's going on. Yeah, 0:12:55.800 --> 0:12:58.840 come on, we were you know, we were children when 0:12:58.840 --> 0:13:02.120 we were talking about know, yeah, we were. We were 0:13:02.120 --> 0:13:04.160 at one time they were trying to turn the tax 0:13:04.200 --> 0:13:08.560 code into a consumption based income tax code. Well diminish, 0:13:08.559 --> 0:13:10.439 you know, there was some bivirus and effort to do that. 0:13:10.920 --> 0:13:13.520 But I think it's I think it's reasonable to assume 0:13:13.520 --> 0:13:15.760 we're going to get some measure of tax reform here 0:13:15.800 --> 0:13:19.320 because it's an important part of the program. Jim Blastmo, 0:13:19.480 --> 0:13:34.240 thank you so much, greatly appreciate it. With Jim, what 0:13:34.360 --> 0:13:37.280 a perfect time to talk to Orville shall, David, why 0:13:37.280 --> 0:13:40.760 don't you bring in Mr Shaw? Absolutely few Americans know 0:13:40.840 --> 0:13:42.360 China as well as our next guests have as much 0:13:42.360 --> 0:13:45.360 experience focusing on the country. Orbit Show, co author of 0:13:45.440 --> 0:13:47.880 Wealth and Power, China's Long March to the Twenty Free Century, 0:13:47.960 --> 0:13:50.520 editor of The China Reader, and many other books. Now 0:13:50.559 --> 0:13:53.000 he is co chair of a task force the Asia 0:13:53.040 --> 0:13:55.520 Society convene to look at U. S. China relations. They're 0:13:55.520 --> 0:13:58.040 out with a new report just this morning. He's former 0:13:58.080 --> 0:13:59.800 dean of the Graduate School of Journalism at You see 0:13:59.800 --> 0:14:02.240 Burke now the Arthur Ross Director of the Center on 0:14:02.360 --> 0:14:04.520 US China Relations at the Age of Society. And Orville 0:14:04.520 --> 0:14:07.360 Shell joins us now from our bureau in Washington at 0:14:07.480 --> 0:14:08.920 d C. Great to have you with us, and why 0:14:08.960 --> 0:14:11.920 don't we start just by talking about the relationship, the U. S. 0:14:12.000 --> 0:14:16.360 China relationship that this president inherited. What does it look like? Well, 0:14:16.400 --> 0:14:20.240 I think he inherited one of the most important relationships 0:14:20.280 --> 0:14:22.600 in the world between two countries, but one that was 0:14:22.680 --> 0:14:26.560 increasingly out of balance. I think that China has been 0:14:26.600 --> 0:14:30.320 pressing in myriad ways in the South China see East 0:14:30.400 --> 0:14:33.720 China see has been somewhat of a laggered in terms 0:14:33.760 --> 0:14:40.000 of pitching into help constrict North Korea and keep them 0:14:40.040 --> 0:14:45.520 from gaining nuclear weapons. I think you see increasingly repressive 0:14:46.520 --> 0:14:51.720 environment within China itself, very level, unlevel playing field in 0:14:51.800 --> 0:14:55.120 terms of trade and investment within China itself. So I 0:14:55.160 --> 0:14:58.600 think Trump comes in at a time when already the 0:14:58.680 --> 0:15:02.200 sort of Chinese side, the equation was out of balance, 0:15:02.280 --> 0:15:06.400 and now he has in effect, uh thrown the puzzle 0:15:06.480 --> 0:15:09.000 on the floor on the American side as well. So 0:15:09.080 --> 0:15:13.640 we have a very curious situation where there are very 0:15:13.680 --> 0:15:16.800 few constants and everything is in the up for grabs 0:15:16.840 --> 0:15:19.880 and in the process of being kind of reinvented, if 0:15:19.920 --> 0:15:23.200 you will. We've seen North Korea amp up it's it's 0:15:23.240 --> 0:15:26.960 testing regime, testing more ballistic weapons. And one of the 0:15:26.960 --> 0:15:28.680 things that this report concludes is there needs to be 0:15:28.680 --> 0:15:31.360 more engagement between the US and China on that issue. 0:15:31.760 --> 0:15:33.640 When you look at President she does he strike you 0:15:33.680 --> 0:15:35.720 as someone who is willing to engage, wants to engage 0:15:35.720 --> 0:15:38.480 more with the US. At this point, I think that 0:15:39.080 --> 0:15:44.560 the Chinese government under Jinping has been quite distrustful of 0:15:44.640 --> 0:15:49.000 the United States, suspecting that deep down inside the agenda 0:15:49.440 --> 0:15:52.680 is regime change, because after all, they have a sort 0:15:52.680 --> 0:15:57.640 of a retrograde Leninist government. We have values differences, political 0:15:57.680 --> 0:16:00.640 system differences. On the other hand, I think President she 0:16:00.800 --> 0:16:04.400 is a realistic man. He knows that in this globalized 0:16:04.440 --> 0:16:07.920 world he has to get along with the major players. 0:16:07.960 --> 0:16:10.680 In the US is one of them. Uh. In Korea, 0:16:11.360 --> 0:16:15.120 we have a curious situation because we do actually share 0:16:15.200 --> 0:16:19.200 a very common interest with China. Neither country US or 0:16:19.280 --> 0:16:22.720 China wants to see Kim Jong un with nuclear weapons 0:16:22.800 --> 0:16:26.600 and and uh, you know, long range ballistic missiles. So 0:16:26.720 --> 0:16:31.760 the question is, is there any possibility with Trump the 0:16:31.800 --> 0:16:35.200 negotiator par excellence, of him coming to some sort of 0:16:35.200 --> 0:16:39.160 the deal was she on Korea where China agrees, yes, 0:16:39.240 --> 0:16:43.240 we'll cooperate with the US, will forge a better relationship, 0:16:43.360 --> 0:16:45.840 and will squeeze North Korea off, will shut off the 0:16:45.840 --> 0:16:49.640 oil pipeline, will close down the trading companies, will stop 0:16:49.680 --> 0:16:54.400 the banking that enables North koreata continue within the zero 0:16:54.520 --> 0:16:58.760 sum architecture and the certitude, which is very anti rable 0:16:58.880 --> 0:17:04.000 show within the certitude of our new administration, everyone vaults 0:17:04.040 --> 0:17:06.560 back to game theory. I think of an ode agerwal 0:17:06.640 --> 0:17:09.160 At Berkeley is someone who's really looked at the game 0:17:09.200 --> 0:17:12.520 theory of trade and diplomacy. What will be the game 0:17:12.600 --> 0:17:17.879 theoretic response of China to the possible actions of our 0:17:17.920 --> 0:17:21.760 new administration. Well, that's a very good question. I think 0:17:22.359 --> 0:17:25.280 you know. I'm here in Washington now, We've been talking 0:17:25.280 --> 0:17:29.840 with White House people and Senate Defense Department, State Department. 0:17:30.320 --> 0:17:32.520 As you go around, you find that nobody has an 0:17:32.560 --> 0:17:35.520 answer to that question. And Uh, this is sort of 0:17:35.680 --> 0:17:41.040 trumpion uh strategy at its sort of highest state of evolution. 0:17:41.320 --> 0:17:45.120 Now it's virtue is, of course, it does throw everyone 0:17:45.160 --> 0:17:48.400 off balance. It also throws the Chinese a little off balance. 0:17:48.440 --> 0:17:50.520 It puts them on notice that things are going to 0:17:50.600 --> 0:17:54.160 be different. So that's not in itself a bad thing. 0:17:54.520 --> 0:17:57.600 But you know, at some point you have to begin 0:17:57.800 --> 0:18:00.560 putting the thing, the puzzle back together. There. You have 0:18:00.680 --> 0:18:04.280 to have some new strategy to replace whatever it is 0:18:04.320 --> 0:18:07.040 that you've taken off the table. David, could I mention 0:18:07.840 --> 0:18:10.840 and I the professor, I can't believe I'm saying this. 0:18:12.400 --> 0:18:16.879 Forty years ago next year, you weren't cool unless you 0:18:16.960 --> 0:18:21.439 had in the People's Republic Orville Shell paperback. David, you 0:18:21.560 --> 0:18:23.880 had to be too cool for school if you didn't 0:18:23.960 --> 0:18:29.280 own a copy of that thirty nine years ago. Thirty 0:18:29.359 --> 0:18:31.280 nine years I mean you had to have it to 0:18:31.320 --> 0:18:35.880 pick up girls, professor, shall let me ask you. Let 0:18:35.880 --> 0:18:37.719 me ask you about who the point person should be 0:18:37.760 --> 0:18:40.280 on US China relations. There was there was a lot 0:18:40.320 --> 0:18:42.320 made of Terry Brandson being picked to be the ambassador 0:18:42.320 --> 0:18:44.399 to China. In actual fact, how much power does the 0:18:44.400 --> 0:18:47.080 ambassador to China have? In other words, is that the 0:18:47.080 --> 0:18:49.080 State Department who should be pushing for these relations to 0:18:49.119 --> 0:18:51.080 improve is at the Treasury Department. Where does that? Where 0:18:51.080 --> 0:18:53.760 does that come from? Well? I think the ambassador actually 0:18:53.800 --> 0:18:56.080 has very little power. And in the present scheme of 0:18:56.160 --> 0:19:00.360 things in China, our ambassadors lately have been completely got out. 0:19:00.359 --> 0:19:03.280 They can't even see a Vice minister, whereas the Chinese 0:19:03.280 --> 0:19:06.879 ambassador here is fetted at the highest levels, even gets 0:19:06.880 --> 0:19:09.680 into the White House to see the president. So here too, 0:19:09.760 --> 0:19:13.560 we are way out of balance. I think that, you know, uh, 0:19:13.680 --> 0:19:16.840 the president obviously has to set the tone, but I 0:19:16.880 --> 0:19:20.600 think in this administration it may well be that he 0:19:20.720 --> 0:19:25.359 sort of remands uh, more than day to day exercise 0:19:25.480 --> 0:19:29.000 of policy to his cabinet secretaries, as we've seen with 0:19:29.080 --> 0:19:33.040 Mattis just got back from Korea, Japan. Uh, and the 0:19:33.040 --> 0:19:36.240 President did kind of defer to him. Now, Tillerson is 0:19:36.280 --> 0:19:39.439 a smart, able man. Uh, He's got to get his 0:19:39.520 --> 0:19:42.600 sea legs and find out just exactly you know, where 0:19:42.600 --> 0:19:47.120 he's standing. But it's possible that he will be uh 0:19:47.280 --> 0:19:49.240 more and more in charge. And then we have people 0:19:49.560 --> 0:19:52.639 like in the White House Peter Navarro, who is an 0:19:52.640 --> 0:19:57.200 economist and who's staked his um, you know, his his 0:19:57.440 --> 0:19:59.760 future in the White House on trade. This is a 0:19:59.840 --> 0:20:04.280 very a delicate question, and he is um, I would say, 0:20:04.640 --> 0:20:08.679 quite neuralgic about China. You're you're being gracious. If you 0:20:08.720 --> 0:20:12.120 were to write in the People's Republican Americans firsthand View 0:20:12.520 --> 0:20:15.000 of China, if you were to rewrite it today, Orville Shell, 0:20:15.320 --> 0:20:18.320 how would you rewriting to explain to the Trump administration 0:20:18.760 --> 0:20:21.480 that it's not a zero sum America, it's not a 0:20:21.600 --> 0:20:25.320 zero sum system and in some way we need to 0:20:25.359 --> 0:20:28.080 work with China. How do you write that today? Well, 0:20:28.119 --> 0:20:32.480 that's the paradox. We absolutely have to work with China. Therefore, 0:20:32.800 --> 0:20:36.920 it doesn't make sense to meddle with the one China policy. Uh. 0:20:36.960 --> 0:20:38.880 You know, if you do that, you tear the whole 0:20:39.000 --> 0:20:42.760 edifice down on the other hand, it's also undeniably true 0:20:42.840 --> 0:20:47.240 that things need to change. Uh. The China has become 0:20:47.320 --> 0:20:53.480 much more assertive aggressive, uh, much less flexible, and you know, 0:20:53.960 --> 0:21:00.000 we cannot solve problems like nuclear proliferation, pandemics, climate change 0:21:00.600 --> 0:21:03.480 uh worth China as a partner if they have such 0:21:03.520 --> 0:21:07.360 a rigid posture. So this is the real question. Can 0:21:07.440 --> 0:21:11.600 we find some new grounds of of collective action or 0:21:11.880 --> 0:21:17.200 are the rather more negative retrograde uh uh tensions going 0:21:17.280 --> 0:21:19.800 to prevail. Do you foresee that we can have a 0:21:19.800 --> 0:21:23.399 conversation about trade with China without the bellicoast rhetoric. It 0:21:23.400 --> 0:21:25.520 seems like it's so imbued with that. It's been so 0:21:25.600 --> 0:21:28.160 imbued with that. Uh. Is there a chance we can 0:21:28.160 --> 0:21:31.560 put that aside? I think it's possible, actually, But the 0:21:31.680 --> 0:21:33.840