Trump Administration Talks Trade With China

May 5, 2018
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President Trump told reporters his administration is, quote, "going to have some incredible trade deals announced." But reports from the talks that just ended yesterday between the U.S. and China, which include U.S. Treasury Secretary Steve Mnuchin, say that the U.S. demanded China change some of the basic elements of their economy and that China refused. Is there even a basis for future talks?

Philip Levy joins us. He was a senior trade economist under President George W. Bush. He's now at Northwestern University's Kellogg School of Management. Mr. Levy, thanks so much for being with us.

PHILIP LEVY: It's a pleasure to be with you.

SIMON: Is it too simple a question to ask what this administration wants from China?

LEVY: No. That's the core question. But now, we didn't really get an answer to that question over the last couple days, but that's the question that needs asking. They presented a long list - there's a lot of candidates for the answer, but we don't know which one they really prioritize.

SIMON: What about - the point that, I guess, seemed to particularly unnerve and aggravate some of the Chinese participants in the talks, according to reports, is that the United States wants China to change its core economy.

LEVY: Yeah. I think a number of these requests really did get down to the fundamentals of China's economic approach. China is facing a transition that they no longer can count on being the low cost, low wage leader. And so they're looking to sort of advance on several technological fronts. They have long-run plans to do this, and they're trying to promote domestic industries. The U.S. has taken exception to some of the measures they're using.

SIMON: Like what?

LEVY: Like subsidies for key industries and, like, blocking out foreign investments or foreign exports in those sectors to give their domestic industries a leg up.

SIMON: Is this just President Trump's negotiating style? A lot of people have quoted "The Art Of The Deal" in recent months, where he says, my style of deal making is simple. I aim high, then I just keep pushing, pushing and pushing.

LEVY: The other possibility, of course, is it was a large group of advisers, each of whom comes from a somewhat different ideological position. The list of demands they put forward sounded like it had something for everybody.

SIMON: And so is it a case of everybody has to kind of make a show of those ideas that are important to them or those ideas that got them placed at the table before real negotiation can begin?

LEVY: Or it could be that nobody really feels empowered to prioritize and to say, this is the one key issue that we care about the most. I think that kind of prioritization would be much more likely to lead to a successful outcome with the Chinese.

SIMON: I think we need to ask you about NAFTA, too - the free trade pact with Canada and Mexico. Hours before some steel tariffs are going to begin against Canada and Mexico, the president offered those countries an exemption. But is it possible that they will not have any kind of deal negotiated by the deadline that had been set?

LEVY: It is absolutely possible, and it's worth remembering that the initial notional deadlines had these NAFTA renegotiation talks initially concluding at the end of 2017. Then, it was at the end of the first quarter. And so we've seen them steadily get pushed back. We have very few results where the distinctive Trump approach to trade has led to a full conclusion.

SIMON: Mr. Levy, what do you think was accomplished at the China trade talks? Or - was it what you can expect from a first round?

LEVY: I think it was probably less than what we ought to have expected from a first round. Each side sort of beat their chest a bit and, you know, brayed about their demands. It didn't seem like they made a lot of progress either in setting priorities or moving towards a conclusion.

SIMON: Philip Levy at the Kellogg School of Management, Northwestern University, thanks so much for being with us.

LEVY: My pleasure.

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