tv Brookings Institution Discussion on Trade CSPAN October 8, 2018 2:02pm-3:32pm EDT
and it is a pleasure to welcome all of you to today's program. a new dawn for protectionism, question mark, between the trade war, and the mega trade agreement. you have probably noticed that we have a lot of panelists in the room today. so this program will be broadcast later on by nhk world and the global agenda. i would like to take a moment to thank nhk for the generous support to help make this possible and to the commitment to independence and underscore that the views represented here today are of the speakers only. so we have a terrific group of experts today willing to share their expertise. they come from very different fields, so i think it is going to be a very rich discussion, from economics, from political science, law, journalism. let me introduce them briefly for all of you. tosedo nakimaya, japan.
edward alden, a senior fellow at the council on foreign relations here in town. a professor at the university of luven in belgium. and mark lewis, professor at harvard law school in boston. camebridge, actually. sorry. let me take a couple of minutes to set the scene, to highlight some of the important trends and issues that the speakers will be discussing in much more detail and we will certainly be taking questions from the audience so we can engage with you as well. i don't think it is too much of an exaggeration to say that we live in extraordinary times. and frequently, we don't know where the world is heading, and certainly we don't know where the international trading system is going. due to negotiation paralysis in the world trade organization, the wto, you can say that the route book on international trade and investment has not been updated for the last almost
25 years. at the same time, there is concern that the actions and qualities are the two largest economies in the world could actually undermine the multi-lateral trading system. china's rights has not seen the emergence of a market economy, quite the opposite, many of the market-restoring policies have created very specific irritants in trade. when talking about industrial, state-own state-owned enterprises, over-capacity, the list of intellectual property. the list is long and i'm sure we are going to get into that in today's discussion. at the same time, the trump administration is calling for a complete reset of u.s. trade policy. it is skeptical of multi-lateral trade agreements, arguing that negotiating one-on-one is best for the united states and also has been very critical of the world trade organization, making the case that it has not been
fair to the united states. the trump administration has reverted to what we call managed trade tactic, and that is, trying to set outcomes, to try to reduce bilateral trade deficits. and it is very clear that the tool of choice is a tariff. so there is going to be a lot of discussion today i think on tariffs and quotas. and of course, we all know that the u.s./china trade war has escalated very, very rapidly. now, while all of this is going on, while we see quotas and tariffs increasing, it is also true that governments are very actively negotiating trade agreements. so japan and the european union have made the case that they still believe that multi-lateral trade agreements are best. and they have actually negotiated some very large, what we call mega trade agreements. we have the comprehensive tpp, and of course, japan, the trade agreement. the trump administration was not
very happy with the u.s. trade agreement or the north american free trade association but renegotiated them and we will discuss what has changed or not changed. and there is much more discussion about reform. so there is a lot happening in the world of international politics and we are going to try to address here some of the most important issues and what do we expect going forward. now, having laid out that background, let me then turn to the panelists and first, i think it is important to take stock as to how come we are at this juncture in international trade politics. why is protectionism on the rise? now, when you say protectionism, what first comes to mind are tariffs and quotas. and president trump is very fond of tariffs. he talks about them often. and in a positive way. so i would like to first get a sense from the panel here about
what is president trump trying to accomplish, and do you agree that tariffs are an effective powerful tool to bring about that re-setting of u.s. trading relations? so who would like to get us started? why does president trump like tariffs so much? >> i think tariffs could be an important instrument in this negotiation, because size matters in this respect. the u.s. has a very large internal domestic market. the chinese experts go for 20% to the u.s. the u.s. is importing 20% of its imports from china. the other way around, china is less reliant in terms of the u.s. for its imports but the u.s. is very reliant on china for its imports. in terms of export market, the u.s. is not so reliant on china. so i think that sets the scene where the u.s. is a larger market, and in that respect, i
think retaliation through a tariff could bring about the changes that the u.s. is asking for. meaning to level the playing field. i think that is why they also ask for the reforms at the wto. there have been some occasions where the chinese have not been respecting some rules regarding lax enforcement of intellectual property rights, or some subsidization in industrial policy, mechanisms that the u.s. has not been happy about. they have been asking for reforms for the past decade already. so i think it is something that did not start with the trump regime but actually occurred already earlier under obama and so forth. and the eu and the japanese have given it a lukewarm welcome so far. i think the bargaining positions for them ve a ve the chinese are also something different. and the u.s. is in a position saying well, we will use the tariff instrument as a way to pressurize the reforms that we want at the level of the wto and leveling the playing field with
respect to china. >> i just think we all need to be clear that this is an historic gamble by the trump administration. the u.s. government made the decision, and it came after many years of heading in that direction, the mid 1990s, to push for the creation of binding dispute settlement in the world trade organization. a belief that u.s. interests were better served within a system where market power wouldn't determine outcome. where all countries, regardless of size, would behave by a common set of rules. that ann was an amazing thing for a country like the united states, the largest and most powerful economy in the world to support. we have now changed direction on that. and gone back to an earlier notion that because we are the biggest kid on the block, because we have the largest market, we can push others around to our benefit. that may well be true. but we shouldn't underestimate what a radical change that is from where the u.s. essentially spent 45, 50 years after the second world war arriving at. >> i would just like to share my
experience of sometimes people, people come to me, and they explain to me that what the president wants is tariffs. he just wants tariffs. and then 20 minutes later, someone else will come up to me, and they say, you see, the president really likes deals. and so i think we need to bear in mind that when thinking about the president's objectives or the president's strategy, that can be volatile, it can be changeable, but also just remember, always, when we are having this kind of debate that the trump administration is a collection of individuals, each of whom is vying for influence, and at the moment, it seems like the china hawks are in the ascendancy, and lighthizer, with the more tactable process, it
seems like their dominance in terms of the trump administration's agenda, but previous instances when we saw the steel tariffs, that reflects a slightly different side, and that could become more important at a later time. >> well, i guess, at the hart of it, this is political, i guess. because the maga, you know, make america great again, this trade, going against trade is at the heart of president trump's message. and of course, trade, many of the trade graemts is multilateral, and he is extremely skeptical and even antagonistic about the multilateral trade agreement. and it is not just the u.s. so i think going against trade is at the heart, at the core of the trump agenda. so we would have to somehow try to sort of tame mr. trump, sort of the political agenda, and try to treat this beyond just the
trade issue. and i guess we have to see the political side of it as well. >> thank you. >> i will just add one last thought here. i think what has been most shocking, probably to many people, has been the willingness of the trump administration to go after stallwart u.s. allies. so imposing tariffs against japan, the eu, canada, and so forth. and the one thing i will add here is certainly i agree with everyone that has been said here, where part of this is political, part of this is competition against china, but the other thing going back to your opening comments, part of this is also just frustration that u.s. allies have not been pushing a reform agenda quite the same. and as we mentioned, eu interests, japanese interests are different, vis-a-vis china, but also in terms of how they con figure their supply chains. and i think part of what tariffs are designed to do is to get allies on board, with the u.s.
reform agenda. whether or not this is effective, we will see in the coming months. >> great. so this is a wonderful beginning. now i am a little bit surprised when i asked you all, what does the president want to achieve with tariffs that two of the most standard explanations did not come up, were not at the center of the conversation, and one was to reduce bilateral trade deficits, and where that is actually, whether that is actually doable or not, trade agreement, or meaning. we are talking about the bilateral trade deficit and then closer to what you were saying, really an agenda of economic nationalism, to bring home the supply chain, to be a force that is not an advocate of globalization but of re-nationalization. it could also be, as mark was saying, it is about pushing allies to be more, to take a side, and the thing is for them to really be serious about the wto reform. now my opinion is that the president is not really doing this because he believes that he needs to be tough, to get others
to be fair and to open their markets. he is not pushing for free trade, it seems to me, because i look at the outcome of the u.s. mexico canada agreement, and i see the ties remain. and it is not really about eliminating the protections. so reactions of this? >> another objective, to raise, which is tax revenue, which he seems very excited about, and is probably not going to be a primary result of the tariffs. so on the trade deficit point, i think there, it is possible that the trade deficit was helpful in terms of identifying, not helpful, but it was the thing that led to him identifying the trading partners that we go for. rather than it being a result that he is hoping to get out of the trade negotiation. so i think early on, in the nafta negotiations, it looked like there may have been, it looked like they were going to
go, like the trump administration was going to argue for something in the deal that would relate to the bilateral trade deficit, some kind of clause that would specifically reference that, and that isn't in the final deal. so it almost seems as though in a practical negotiations, perhaps some within the trump administration have realized that it is not something that you can write in to the trade deal. famous last words. maybe they will try to put it in some of the other trade deals. you about but i think it leds to identification for people to pick on. >> i mean i think this is, there is no question about economic nationalism, i think this is certainly in part about increasing production in the united states. i think you have to look at the tariffs and the trading partners as part of a larger tragedy that includes the tax cut. the center part of the tax cut is a bigger cut on corporate taxes and makes the united states potentially a more
attractive investment place. and it makes it cheaper and better to invest in the united states. so i think there is a strong economic nationalist agenda here. i think the administration believe that the scales have been tilted against the united states, to attractive to outsource and export back to the united states. i think they are trying to push the scale in the other direction. >> i think there is a sense that the u.s. is being ripped off, and especially among people who support trump, and he came to washington and said that i am going to fix things. and that is what he was precisely saying during the election. and that's what he is supposedly doing in the white house today as well. so it is an important political message to his supporters that i am going to reduce the deficits. i think he will keep on saying. that i think it will be a
symbolic message but whether it turns things better, i think that is a totally different story. >> let me build from. that because it is true there was a political instinct behind the trump campaign in the sense that the trade message resonated with enough people who are a part of his style of governing, how he is going to move along u.s. foreign policy and what i am trying to get at here is president trump might not be an outliar, and actually a combination of a longer-term plan, and we know that trade has become a more divisive issue in the united states. i think, you had remarked in the past, that trade agreements and trade was approved on a bipartisan basis and that seems such a remote world today. but the striking issue also is you think about one country that helped shape the trading system is the united states and the united states now seems to be willing to step out.
there has been a very, very important shift, that the united states will not be constrained as much by the mechanism, that the market size will determine the outcome. so for, you know, audiences here, but also abroad, i think they are trying to understand why has the united states gotten cold feet? why is no longer backing its own creation, and why it is now perhaps the country that very actively now is trying to shake things around and disrupt the way in which we have been conducting business? so what is happening in the united states that makes the trump administration seem less of an outliar and more of a combination of the threat? >> i think there are two things, especially for an overseas audience, it is important to realize, one is that while advanced economies have been hit by the technological changes in the offshoring of jobs, the domestic support policies in the united states, when it comes to
particularly health care, but also redistribution, retraining, and so forth, the united states is really an outlier, compared to many advanced economies, and that has led to a much larger sizable portion here that is upset, for the reasons ted was talking about, right? not just necessarily us, but looking and feeling as though they are being left behind. i think the other thing that has changed though of course is the impasse at the wto. it used to be global trade rules were updated at least every roughly decade or so. the dispute settlement, at least in the united states' view, was not quite as aggressive about pairing back trade revenue rules. and from where the u.s. sits, that has been a major change as well. so i think those are the two major shifts if i look at what has changed today from say the 1990s when the u.s. was really a leader in multilateralism that happened. that might not be quite apparent
to folks overseas because in terms of where the wto body has been trading back trade remedy, other than europe, other countries have not necessarily felt the brunt of that to quite the same extent as the united states. >> go ahead. >> i was also thinking protectionism is a very possible tool. we know this. with protectionism, you can create domestic manufacturing. you can pull in inward fdi. you can bring in manufacturing, you know, business, back home. so for a politician to use protectionism to their advantage is something we know as economists works. so i'm pretty sure that the u.s. will be in a bit better shape on the books within just a couple of years, because of the protection policies. it is very difficult for a general audience to understand the benefits of free trade. if you see people losing their jobs, especially specific areas being targeted. and well, this is, i think, due by and large, a number of issues, but mr. trump is pinpointing china as one of the
guilty actors in this play. and so protectionism vis-a-vis china will bring certain benefits. it is just these are short-run games. we know as economist, again, in the long run, there is a lot of risks involved. which is why we are having the debate today. so i think getting re-elect and using protectionism to advantage as a politician, i think it is definitely part of the agenda. >> yes, i mean, let me add, i think in the long run, as you said, we have seen this erosion of support for trade agreement, over the years in the united states, you go back to 1979, when the tokyo round agreement was voted on by the congress, it passed in the house of representatives by a vote of 395 to 7 and in the senate a vote of 90 to 4. that's how popular trade was. even in the 1970s when we had begun to see the impact of trade. and there was a steady erosion. and i think the other thing that
happened was the 2000s, the great recession, and its aftermath. if you look at manufacturing jobs in particular, manufacturing is a shared u.s. employment, haz been declining steady for years. that is mostly an automation story. but the actual numbers fell off the cliff in the 2000s, 17 million jobs to 11 million jobs and the places that got hardest hit, ohio, pennsylvania, michigan, north carolina, wisconsin, that's the places where, because of the pecularities of our electoral college system, donald trump won the 2016 election. so a lot of that i think was a delayed reaction to the economic impacts of the 2000s. >> on that point, it reminds me sort of, the relations, between the nra and gun control. because basically, the u.s. public is for some sort of gun control. but nra is politically really effective. and if you see the recent global affairs poll, people are basically for trade, but there
is intense opposition being organized, i think. and mr. trump was very effective in sort of organizing and making that into his political power. so i think that is the reason why, you know, there is, we feel like the protectionism is on the rise, but generally speaking, people are for it. but it is the same logic that sort of the nra prevents gun control. >> i am glad you bring that up. my reading of what has happened in the united states is that the united states basically embarked on globalization on the cheap, and that is it opened markets, but did not provide that safety net to allow people to cope with the faster pace of change, because of technology, and because of trade, and it is very clear, you look at the numbers and the united states does not invest in what we call active labor market policy, does not invest in work force training, and it is true that we this huge economic shock, the global
financial crisis, there are many, many who feel they are vulnerable and that's why they are going to respond this way. and we also know that protectionism can gain traction, politically, because it promises, you know, short-term gains, because the costs, you know, in terms of how much consumers pay, in terms of competitiveness, it takes longer to be realized, and it is harder to make the case for why free trade matters for the competitiveness and for the consumer welfare. and then people look at the popularity levels of the precedent. and they hear the -- precedent. and they hear the president say in the inaugural speech, that protection leads to prosperity. and in my travels abroad, i do hear this question to what you were referring to and i would like to bring to the rest of the panel. the question is, does the american public support protection nix? is the american public on board with the tariff war? or, we know about this, we know
about that in the last two years, actually, the support for trade has gone up. but then how come the president is not experiencing high heat, because he is pursuing the tariffs, actually seems to be pleasing a lot of people in doing this. so how do we explain the discrepancy between what polls tell us and what is happening politically, in terms of being supported by his base. how do we square that up? >> i'm not 100% up to speed with the polls with the latest trade actions but i think there is a big difference between people's answers when you say do you like trade, and do you like trade deals. and so people are much more skeptical of trade deals than they are of trade. so interestingly, there was a recent pew poll that found that republican voters are now more in favor of trade than democrats, which is very surprising. and it is essentially because people like trade whenever their guy is in power, where as if you
look at people's attitudes towards past trade deals, that is much more republicans, republican voters are much more skeptical relative to democrat voters. so that is one of the kind of circles squared. >> we live in such a polarized country today that i think it is so hard to disentangle what the president is doing on trade with support for the president overall. but i recognize i live in cambridge, massachusetts, which is not anywhere close to the idea of the rest of america, but i will point out two things i think on this point. i think one, there is a difference of attitude among the american public about actions on trade generally. and whether or not there is a need to get closer vis-a-vis china. and so i think when the polling doesn't sort of disentangle that, there is some of that is
captured there. the second point that i will just add is that i think when it comes to looking at the president's actions, there are many people, particularly in the heartland, who believe getting tough is part of the tactic to eventually getting us toward a deal. and right now, it is too early to tell whether or not a deal is going to happen, but for the general public, they just saw two deals that were just done in the last month, so they think this tactic is doing, even if it is hurting them. if more deals are not forthcoming, they might look at it differently. but at least on your question, why is this message resonating, because people are seeing a tactic and are seeing results and they don't go into greater details on that, than to think this is a president who got tough, who got more done vis-a-vis others did not. and i think that is driving om of it. but at the end of the day, it is a polarized view of do you like trump or do you not. >> thank you. i am so glad you brought china up because we need to move just
from talking about united states to talking about china. and frequently, china's integration into the trading system is described as shock. and in town, we hear more and more voices saying that it was a mistake to let china join the wto. so what are your views from that? what kind of opportunities? what kind of challenges has the im mersion of china seen on the export powerhouse, and also for large foreign investors and so forth, had on the system? and was a deal made, the deal made at the time a good deal or not? >> trade policy is not a substitute for competition policy. and i think the world trading order has come to realize that. what do i mean by that? when china entered in 2001 wto, there were no guarantees on the competition policy. you have to understand the world trade organization is an organization about trading rules. let me just give you an example of the european integration.
not to say that european integration doesn't have any flaws. but one thing i did, they did very well, was before they entered the ex-communist countries of central and eastern europe, into the single market, they made sure that these countries re-wrote their competition policies. so they made sure that the rules on competition these countries had were in line with what brussels was having, and all of the other countries was having. it is only after that they could enter the single market. and now a day, to be honest with you, we hear very little about, you know, some conflict with former eastern european countries which were also communist countries. what happened with the china case, china got access to a club, a club of free trade country, called the wto, but there were no guarantees on how it would handle its competition policy. and the notion was that open markets would bring this about. trade policy will be a substitute for competition policy. but now, we are 20 years down the road and we are seeing that china is still subsidizing its companies. and i think that is the heart of
the problem, where it lies of the world trade organization is not a world competition authority. so by and large, you have competition policies that are still very much on the national government. and the trade partner does not have any instrument to tackle it. because it is under the national policy of these countries of the only thing by construction the wto would allow you to do is to use tariffs to counter veil that. so if you are finding out that china is subsidizing on very particular products, you can use an anti-dumping tariff, for example, to counter that. but you have to know that anti-dumping is only 1 or 2% of our trade. all of the products covered by anti-dumping case, which the u.s. is using, which the eu is using, but is only 1% of trade. so i think what the traiks ump administration is doing we are going for a larger basket of goods and we will look at subsidization policies and hope it starts leveling the playing
field and we hope you stop doing that and that's my understanding of what is going on. >> do you want to jump in? >> i will say, and i will defer to mark on the china end of it. it has been interesting to watch the debate in the united states, which i have done quite closely going back to tiananmen square and bill clinton and the aftermath. the united states made an historic gamble with respect to china. the decision was made to welcome china into the existing trading order, on the hopes that china would embrace it, and over time, in a way become more like us. this was bob zelik's notion as china as a responsible stake holder. if you go back to the debates over china's entering the wto, and the debates in congress about whether to give china normal permanent trade relations. clinton officials talked openly. and there is a new book out about the challenge of integrating rising powers into the system. they were all quite conscious of this. and if you look at the debate now, there are a lot of folks in washington who feel like gilted
suitors. we reached out to china. we offered china a stake in this wonderful system. and china has rejected it. they have become less like us. they have become less of a market economy. they have become more state dominated. less of a civil society. less free. and there is a real -- it seems to me quite sudden but it has been going for a long time, shift in the opinion in the official washington. this is not republican versus democrat. this is quite wide. that china just didn't pan out the way we expected. and that's where you get the debate over, was it a mistake even to encourage them to join the wto in the first place? i think the united states had no choice but the fact that that question is even asked tells you sort of the depth of the angst here in washington over what transpired. >> go ahead. >> i guess in 2001, there was a hope that we could sort of shape the rise of china. but this notion i think is collapsing. in a very rapid speed. and i think just last week,
larry kudlow, here in dc, used this term, trade coalition of the willing to contain china. so i think there is this emerging consensus here in washington that of course, before that, you know, people were talking about china being different from the soviet union, that yes, in terms of security, there are some threats, but in terms of the economy and trade, it is a possibility. and we can use that leverage, and then sort of shape china, in a positive way. i think that notion is collapsing at a rapid speed. and the trump administration is sort of jumping on that. and it is not just like you said, it is not just a republican thing. i see sort of a consensus there, of course difference in nuance but an emerging consensus about being tough on china, and trade is a very important component of that. >> i think that the debate that is playing out is, at least in
the west, a realization, to use your language, that the international rules, international law is not going to con strain or re-shape the rise of china. and i think from my travels overseas is that especially in asia, people sort of look at you to say how naive of you to have ever believed that that could have ever been the case. but there is a difference now in terms of tactics as to what to do now that this realization has dom fore. and most of aish, i think no one has ever expected that was going to be the case and there was a much longer time horizon and there was much more of a sense of this type of engagement. but caution. and sort of hedging against a china supremacy. that's the right type of approach. and they would like for the u.s. to maintain that type of hedge. and i think here in the u.s., there is a debate as to whether that is correct or not, or whether the u.s. is just being played by others, where at the
end of the day, the u.s. does not want to return to a sovereignty-based trading order, or if it is going to return to that, inevitably, the sense in the u.s. here is while, we might as well play our cards while we still have the upper hand. so i think that is the debate that is being played out here. but what i sense from my own travels, that overseas, there was not that same type of recognition that china was going to somehow engage in this type of economic regime change. simply because they have joined the wto and a rules-based system could do that. i think in the u.s., we are just coming to terms of that. and my sense is also in europe, there is, as you mentioned, also a sense of now that the chinese are moving up the supply chain, into actually innovation-driven industry, and using these types of policies, what does that mean for europe's own security as a whole as well? that europe never debated vis-a-vis china, only vis-a-vis
russia. >> i want to move into the confrontation or the economic tension between the united states and china that preoccupies us so much. but before i do, that mark, i know that you have written extensively on this and that's why i wanted to bring it to the discussion here. the china challenge for the wto, and the sense that, if i remember correctly what you wrote, that there have been other nonmarket economies that were incorporated into the multilateral trading system, and the system could cope with them. but that the nature of the chinese challenge is different. and therefore, the wto is particularly challenged in trying to bring discipline to china's policies. could you elaborate a little bit on your argument? >> sure. so as was mentioned, the wto has been part of a lot of different types of economy, but the last major time they faced a challenge of this sort was when the soviet economy started to enter into the system, and creating this duality in terms of market economies and
nonmarket economies. market economies being that like ourselves here in the u.s., but also even more corporate economies where at least market forces are dominant. and then you had this nonmarket economy, which is basically a command and control, or soviet-style types of economies. and that was the duality. that was more than 50 years ago. what we have seen is the emergence of a third ark type. that doesn't quite fit market forces. market forces are at play but the state retains key control over the trading structure and now the trading system is struggling over what to do with the third archetype that can't quite fit in the rules so tight limit and that's why i think the tensions are here and why the rules can't work with it. there are a lot of other flaws with the structures of the rules but these can be managed over the course of time. but that's what i see at the heart of the tension, is that there is a third type of economy that has emerged that the rules haven't really anticipated. >> and just quickly, it is
important not to miss the big picture here. china is really large. and therefore, if you can't incorporate china, the potential for disruption of the global trading system is so much bigger than with any other country that we've ever dealt with. >> and when you have the two largest economies in the world now locked into a trade war, we are trying to figure out what is going to come out of it. tactics, clearly, the tariffs, and they have escalated very, very quickly. sometimes it feels like the trump organization will tell them we will impose this tariff and if you retaliate, we will escalate this much and a tariff materializes in just a few months and it is very hard to make sense of what is happening because it is moving so fast. it is hard also because for a time there was no clarity as to what was the end goal. president trump talked about bilateral trade deficits because he cared about them and the ustr and the investigation into china's theft of intellectual
property. he talked about industrial possible run amock. and now, we've talked about his remarks, about kudlow saying we are trying to build a coalition, of willing to contain china and now we seem to be talking about disengagement. engagement has been a policy that the united states has pursued vis-a-vis china for decades, and now perhaps we may be at that critical juncture. so are we there on the verge of a cold war, an economic cold war with china? i mean if that's the case, there won't be any talks forthcoming. is this the new normal? >> there was a speech by vice president pence at the hudson institute which came very tough on china and some people say this is the full curtain moment. it might be. and so if the target is china, i think it is more effective to do it multilaterally. so tpp in a sense was a more effective tool. but i guess for the trump
administration, these multilateralism framework would not work. so what is emerging is a sort of new type of consensus arm on china policy within the trump administration and that concerns a strategic component, a protectionism component, the religious freedom, which vice president pence is interested in, and sort of the basic hawkish attitude, represented by john bolton. and what mike pence laid out last week at hudson, sort of represents this tough policy on china. so i think this is a consensus. i think we would have to deal with it for a certain period of time. >> can i point out that the wto's problems is not just related to china. even before china's entry in 2001, there were already issues. because look how long it took to
conclude the uruguay round. it took about ten years to conclude the trade talks in geneva. so we have to look deeper into what are the institutional things that are not working at the wto. part of the reason is i think about 50 years ago, there were about five players around the table that countries that participated in the global trade arena. you had the european union, the u.s., and you had japan, and maybe australia and canada. it was relatively easy to strike a deal with five countries. but then you have other players that were also sitting at the table and having their demands. those that newly entered the world trade arena like brazil, india, china, they all wanted a fair say, they all warranted to have the rules favorable for them. we know from public theory to strike a deal with a much larger number of players around the table is muchmore difficult. which is why it take an individual of concluding the talks took so long.
there are some people who say we maybe should be looking into a different model of trade talks all together. we are looking at the multilateralism but there is a alternative and people have suggested steppingstone theories where you first build trade agreements with the largest players in the world, say the largest ex porters and then you slowly take on board other countries that are sort of less important in terms of their trade share. is that a good alternative or not? i don't know. but i think we should ask ourselves the question, is multilateralism still viable today, being the case that every country, u.s., but also eu and other countries, are doing a lot of free trade agreements on their own. we just concluded one with japan. we have concluded one with south korea not so long ago. so we are all doing that. so it is called the spaghetti bowl of agreements. so basically the multilateralism has been under stress for a long time. it is not just the fault of
china. i think china is seeing what is wrong with the rules and using it to their advantage. but i think there are deeper issues to consider. >> that is a very good point. we should not assume as i was perhaps doing in this conversation, when you talk about tensions in international trade, it is just the united states and chooirn. it -- china. it is a larger context. and it is very hard to negotiate beyond the border regulatory matters and when you're talking about 160-plus countries and when you have a settlement mechanism that does matter and it therefore means you have to abide by the rules. but nevertheless i think that the fact that the two largest economies are pursuing this trade tension and in a way eroding confidence in the multilateral trade system is significant. particularly we think that this is evolving into a longer-term conflict, of adversaries, looking at each other in that manner. what do we know about how china is thinking about this?
how is china responding to the trump administration's messaging, starting with trade, starting with deficits, and favors, and now after the hudson speech, it is a different thing all together. so how is china responding to this? >> i mean i can talk a little bit about the trade piece, which has been very interesting, because i think china's response out of the box was to retaliate equally against the united states. and target their retaliation. because of the agriculture sector. in ways that they thought would create some political pressure on president trump to change direction. that led to the scandal of the advertisements in the des moines paper about it. so that is what all trading partner does when they retaliate. the chinese were not unusual there. i think it did not have the effect that they had hoped for. mark had talked about even in the farm country in the united states, it fair for the support of the president, being tough?
china's reaction to the second round of tariffs was very interesting. they did not respond in equal measure. the proportion of tariffs was much smaller. >> and they also sent quite a deliberate message to u.s. companies. we want to you stay invested in china. there was a fear that they were going to go after u.s. companies in various ways and instead they began to send the opposite message, we want to you stay here, we want foreign investors to stay here. think there is a lot of worry about investors in china leaving to escape the tariffs. the chinese changed direction quite interestingly the second time and they put out a signal they want to negotiate. they are floating ideas all the time. will this satisfy the americans. will this satisfy the americans. the chinese do not want this fight, but it is not clear there is any way out of it at this point. i certainly at the moment don't see one. >> mark? >> i think there is a debate that is playing out in beijing over what are the americans after. and the debate that the chinese
are asking themselves is pretty much this, are the americans out for economic regime change? because if that is what the americans are asking, that is just the first step that what they seek here is political regime change. so there is a group that i think thinks, if that is the case, there is no point to negotiate. we should just stand firm, and we should try to drive wedges between the u.s. and its allies, and also at the end of the day, china benefits from a stable rules-based system to try to maintain that. so i think there is that group in china. and then there is another group that worries, to use your language, that this is the new normal. and if this is the new normal, even if china stands firm, this is going to constrain china's ability to carry out its own absolutely vital economic reform agenda. particularly in terms of contain can its step levels but also driving movement away from the investment, led, to consumption-led growth model. and you can see that that group
then says we need to nepg. because if we -- need to nepg. because if we don't do so, that will cripple our lon-term ability to sort of stay on task with the economic agenda. between those two debates the point that shouldn't be lost is right now, the amount of trade, even at the levels of 10 pshs, even if this antes up to 25%, even if this third tranche comes on board, that is still, the chinese economy is quite not as dependent on exports and particularly on the u.s. market as it once was. so it can stomach this in the near term. but the bigger question is, what is the u.s. out after? and what impact is this going have on china's own reform agenda and to carry through what it needs to keep its economy charging ahead. >> thank you, mark. and i think the key question is the time horizon. as you said, this is perceived as a short-term, you know, before the midterms, for maximum political message is one thing. if you think that the tariffs are now going to be in place for a long term, then you start
talking about changes to the supply chain. and the question is, does this mean that these companies will come back to the united states? or will they just relocate somewhere else in southeast asia? and the coal -- goal of the trump administration to try to bring the certainty of that domestic manufacturer, it may be harder to achieve. so my question to all of you, it is truly, i don't have the answer to this, and i find it puzzling, is why is the language, that the language now is so hard, and the competition is highlighted on so many different fronts, from the u.s. side, why is the stock market discounting the impact of this rising tension between these two very large actors in the system? not that i'm wishing for the stock market to react. but i think it is puzzling that despite the fact that we keep hearing how this is going south, markets are fine. does anybody have an idea of what is happening here?
>> well, first of all, caveat when reading the stock market, it is tea leaves. so so first there's the -- i'm going to pivot slightly and talk about the way that there seems to be this disagreement among economists that you actually need -- you need to hit the economy with fairly severe assumptions before you start to see a macrmacroecoc effect of your trade war. there's a bunk ch of papers tha say if you have tariffs of 1,000%, you'll get growth. the trade talks seem to be much more extreme than anything that is going to be put into place yet. whi china is a fraction of american trade. you know, so in the big -- in
context of the u.s. economy, just a simple point that chinese trade is not that large. the kind of the -- the counterpoint to that is to say, well, so far, if this stays as a tariff war, if this stays as a kind of conventional war of tit for tat tariffs, then make the downside isn't so bad in the long run. the big uncertainty is whether things start to become more dangerous and whether you see -- so imagine if the chinese said we're going to restrict, you know, sales of medicines, or supposing they put bans on exports. at the moment we're thinking in terms of conventional tariff tax war, where things become a little bit more expensive. if this changes into something where you have binary, you know, on/off switches, then -- then i
think it is possible that particularly some companies could be worse affected than the markets are assuming. but, yeah, that's -- >> i'll just add one thought here. i mean, our stock markets are doing fine here in the u.s., in europe, and elsewhere, right? if fan in fact, we're seeing ne records hit. the amount of the share of the economy that's being affected isn't that large yet. what business really dislikes is uncertainty. if you look at many other key emerging economies, right, anyone here who's holding an index fund primarily toward emerging economies, right, those are being hit by this. that's where these shocks are playing themselves out in the supply chain. what we're really seeing are two different effects playing out in different parts of the world. >> question for all of you.
allies have been hit by tariffs. articulating national security risks and they impose tariffs on metal and aluminum. there's a potential that they could even be imposed on automobiles. we're talking about very high economic stakes. that creates some division. i think that japan is working closely with the united states in codifying new rules to address china's market-disto market-distorting policies and there's an effort that looks at industrial subsidies, state-owned enterprises. so they want to work on the rule side, but they might not necessarily buy into a tariff war, they might not necessarily buy into war that's about containing china and not just addressing the market-distorting policies, and, you know, everybody's talking about, at least here, about the u.s./mexico/canada new trade agreement, or revised trade agreement, having this clause
that has been described as an anti-china clause, basically making e ining it harder for ch mexico to consider negotiating with china. japan and the eu, they don't have yet an agreement with chin f china. they're negotiating with the united states. the united states will tell them hands off on trade negotiations with china. are they going to say yes, given that they're being hit by tariffs, given that they may not want this larger geopolitical struggle, given they may want to protect autonomy in the trade policy? >> so i think the tariffs are very much part of this trilateral initiative. so the european union, the japanese governments, would never say that they support the policy of tariffs, but the european union and japan have wanted changes in it the rules to address their issues with china for a while. the problem is that the chinese, there's been nothing to get the chinese to the table. the tariffs are the thing that gets them to the table. so while they might not endorse
that policy, themselves, they are a helpful instrument in making that plan get any results. >> when it's the metal and aluminum -- >> sure, but so far, we've seen, it's been impressive the level of compartmentalization, those issues. so far the eu and japan managed to separate those things out. i don't think it's been helpful. i don't think it's interfered at a practical level. i think if there were to be tariffs on autos, that could change. that would be a blow of a magnitude of a different order of magnitude, and, but i think so far, it has been an irritant rather than a block. >> very good. other views on how allies are looking at the u.s./china trade war? >> i guess so far, japanese government has dealt with the trump pressure quite effectively. in terms of tariffs on cars,
we've sort of, you know, managed to sort of marginalize the issue for now. so, and also, since we're direct neighbor to china, think the threat perception, not just in terms of, you know, trade and economy, but in terms of security, the threat perception is larger than other countries. so when vice president mike pence reacted in a very tough manner last week, there was a sense of welcome in japan. and, yes, whether the tools that mr. trump is utilizing is that effective or not, we're not sure, but there's a sense that at least now in the white house, you see a tough president who's trying to sort of deal with china in a very serious way. and a very different way as the other leaders used to. so it's a very ambivalent sort
of feeling, but there's a certain sector, especially in the security and diplomatic community, that is quite comfortable, although there are worries about the coming issues on tariffs and bilateral negotiations on trade. >> quite quickly on canada and mexi mexico, the right language would be the coalition of the unwilling. i think canada and mexico came to feel they had no choice but to do a deal with the united states. they send upwards of 75% of their exports to the u.s. i think they would prefer not to have to choose to try to be able to maintain a broader network of relationships including with cs like the case, their choice is a pretty obvious one. >> is one thought, i think the three sides in the trilateral share a common diagnosis of the problem but a disagreement as to how that problem should be addressed.
to go back to hylke's point, what's shared by the trilateral is not necessarily shared by the rest of the world. so i think in the u.s., there's a sense, or this very realist recognition that that's the case. so why bother to work through the wto when you know that this is going to be held up hostage over a time horizon, right? and i think japan and eu have both been much more committed toward a
system of -- >> at the discretion of the -- the trump administration retains. tariffs can go up regardless of the deal that was struck with this different partners. and related to these, the european union reached a cease-fire, that's how it's called, where the trade -- people who follow trade, with the trump administration in july to avoid precisely this dynamic of tariffs and countertariffs and so forth. japan also recently agreed to launch the t.a.g., trade agreement on goods, although the american side likes to call this a full-blown trade agreemenagreo there's an important discrepancy there. i wubder if hylke, toshi, and others, who aat are the prospec. those negotiations? because of the sizes of the
economies involved. if there's going to be pushback against this watering down of this settlement, or using export quotas that violate wto rules, all these things that are now being weaved into this template of trade agreements, it might be up to the europeans and the japanese because they are larger players. are they up to the task, are they going to say, well, no, to these things, or ydo you think because they don't want to have that friction with the united states, they'll make concessions? how are things looking up for these negotiations from your point of view? >> before this agreement, t.a.g., you know, japanese government was seen as engaged in a sort of a delaying tactic. because we wanted u.s. to return to tpp. so, and japanese government is pretty good at it. so that's what we were seeing. now that we're engaged with the u.s., however you want to term it, on some sort of trade deals,
we do not want to sort of -- we do not want it to be a complex, you know, and show there's a friction, a difference between the u.s. i would imagine that both government would want to sort of finish up, you know, in a quick manner. japan can open up its agricultural market at a tpp n standard. sort of emphasize creating jobs within the u.s. that kind of, you know, agreement and then sort of focus more on the security side, preparing for china's rise. i think that's what the japanese government intended to do. and in a much more longer term, i think we're interested in providing a sort of, like, a re-entry pod where u.s. can come back in the tpp, hopefully, but the difficult thing is that if we sort of agree on t.a.g. with the u.s., it would sort of de-emphasize the tpp. >> yeah. >> so that's the dilemma for us.
that dilemma is going to remain, i think. >> yes. especially from what i hear from in tokyo is that people are thinking let's wrap the negotiations with the united states quickly, and that's why they insist that the scope is limited, it's a trade agreement on goods, it's a time discussion because they don't want to have a protracted conversation that stems between the two countries and they want to move past that so they can focus on areas where there's more common view. certainly the trilaterale effor we've been discussing on rules and certainly the security agenda. but there are issues like currency manipulation that the united states may put on the table. this clause that tries to discourage countries to negotiate with nonmarket economies. japan is negotiating with china as part of the regional comprehensive economic partnership, as part of the trilateral south korea/china. in general, i would imagine that larger countries don't want to be told with who they can negotiate. even if they share the diagnosis
on china, it would strike to me as a major concession to agree to something like that. i think those are the intentions. whether it actually plays out, i think the u.s. and japan have a history of very protracted negotiations and i agree with you that the japanese are very good at deflecting, but it's a very different geopolitical context, again, because of the rise of china. h h hylke, how do the negotiations wi look from your point of view? >> size matters. size matters for your bargaining position. my own research has shown you'll never trigger a trade war with a country that's bigger than you. meaning you know retaliation can hurt you which is why the eu has not moved, i think, because it's simply too small vis-a-vis the u.s. and too small vis-a-vis china to make that point. you were asking earlier about the coalition of the willing. i think in a wider coalition, and, again, we don't know what's going to happen, but i think this could be the outcome that the eu is turning to its old
allies because i do believe the european union considers the u.s., despite the trump regime, so to speak, to still be an old ally. i do think they want better outcomes than currently today but they're not in a position to bargain as much. because if we look at the, for example, german trade to china, germany's exporting 6% to china, but it's importing 10% from china. so, and then vis-a-vis the u.s., about 10% of german exports are going to the u.s., and about 4% are coming back. so the u.s. is a very important export market for the european union. china's a very important sourcing country. so that puts you in if a situation somewhat in the middle of the bed, i would say. like i said earlier, the u.s., different situation. the numbers are much more in s disequilibrium and in position to start a trade war. if you're looking for a coalition, i think it's easier to go with the coalition for the eu than to sort of take the lead in a coalition of your own. so i'm kind of hopeful that what we are seeing today is not going
to result in a cold war with china. i think it's going to be leverage. leverage to try and ensure that the loving playing field is restored. aisle pret i'm pretty sure once that occurs, chances are, there's a lot of benefits we have from china entering the global trade arena as well. we should point that out, too. it's not all bad news. i mean, we have a lot of cheap consumer goods now especially for incomes with low -- people with low income have access to goods they never had before. you know, china's a big potential export market for our firms as well. so we want china to some extent to be part of that world order. it's just we want it also to play by a good set of rules. and maybe it's their history. maybe it's path dependent. they come from a communist background. but that's been lingering on for the past 20 years. it's time to, as was mentioned earlier, they grow up and become more like we and play according to a set of rules that we think are the right set of rules. once they do, i'm quite hopeful that, you know, much of this
will pass. hopefully, because as you said, for global value chains, this is what we want to happen. >> i'd just like to remind everyone that ttip wasn't the most popular thing that the eu ever did. and just to, you know, suppose there's some kind of negotiation, just to think about the process of getting that passed and to think about how easy it would be for european politician to stand up and say, i'm taking a stand against donald trump. >> and with all of those elements on the table, how will these play in wto reform? i think it has been striking that in the last few months, we have now much more focused energy on having to, you know, on really changing the way in which the wto is working because i think that there's a very widely-shared perception that it started with a stalled
negotiation process, but now it has moveded to also a crisis in the settlement mechanism and the united states has felt that the board has overreached and, therefore, it's blocking new appointments. i think we have now reached a level where barely the board will continue to function and it may not in the near future. now, there are different proposals out there. and there are different countries involved in the conversation. the european union has released a blueprint. japan, the eu, and the united states, are now talking about wto reform. can darks canada, i think, also had a paper and is convening some countries. the question i think is, what do you change, and who should be leading the effort? is this a conversation where china's part of changing the rules or would that be difficult and, therefore, you have other countries, draft rules and then china accept those rules? how do we think realistically about a new wto?
who's going to deliver it? and what it will look like. >> i think there's a distinction between how the rules are written and then how they're enfor enforced. and so the dispute settlement body is -- so i guess one way to think about it could be to think about this philosophical difference in in a way that europeans think about law, americans think about law. i'm going to allow mark to correct any hideous mischaracterizati mischaracterizations. the american way of thinking about it is much more contra contractu contractual. you can enforce whatever we signed up to and no more than that. whereas the european style is much happier to interpret what, you know, the intent when the people wrote the law. and that, if you're an american, you start to think that the way that the decisions have been enforced is this european-style way of thinking that eventually is imposing obligations on them. all the proposals that have been
released so far, they're a mixture of procedural fixes. there are some issues that you can change, if you want to. i haven't seen a fix to this disagreement about rights and obligations and this idea that the dispute settlement body is imposing new rights and obligations on america, because, of course, when you lose a dispute, you're annoyed. right? so what -- what is raw relative to what you signed up for is in the eye of the beholder. i don't see that there exists a procedural fix to that. which is worrying if you want a longtime dispute settlement with the americans involved. >> yes. and if i understand correctly, so the united states wins far more than it loses. right? the record isn't -- >> so in the wto, you take a case against someone else, you tend to win. the u.s. has lost a particular subset of cases on something called zeroing that is very
painful to quite a few people working in trade policy. i'm going to let mark add some more to that. >> i think when it comes to wto reform, we're still in very, very early stages. and i think there's the appellate body issue, but really this is an issue about how do you enforce the rules. and particularly the thing that's important to remember about wto law, this is not a normal court where if someone causes you this amount of damage, you go to the court, you recoup that. right? this is a court where you go and basically if they apologize, then we call it a day, and they stop doing it. right? but only when they don't stop doing it are you allowed to take action. i think that really limits the amount of what you can do vis-a-vis a trading partner that you believe is acting unfairly. and so that resorts to these other types of unilateral measures involving tariffs
traditionally done through trade remedies, right? countervailing duties, anti-dumping duties, for the trade wonks here. i think the u.s. is concerned that particularly vis-a-vis china, based on the history of this dispute settlement, this is going to get pared back. we have two live cases the chinese are bringing against the europeans and americans about how they use the tools against chinese exports into those markets. that's one of the issues. we shouldn't lose track of the fact there are two other ones. there's a whole bunch of developing countries that felt like there was a negotiation agenda set out in 2001 that people haven't delivered on. so until you deliver on that, we're going to block everything. what's in it for us? not just the big powers trying to build up the rules. the last thing, even if you get the if first two pieces worked out, the americans and europeans to bridge the difference, even
if you could address the development issues, at the end of the day, put yourselves in the shoes of the chinese. the chin naese are going say are talk bing about the 19th century where they're going to come into beijing and tell us what to do? so put yourself in in that domestic political situation. so unless all sides really ratchet up, i don't see wto reform carrying itself out at least in the next two or three years. the process of discussion, in every crisis, there's an opportunity, the process of discussion deliberation is much h more a more active these days in geneva than the last five years. >> quickly, it won't be a popular opinion, in march when president trump announced the steel and aluminum tariffs, i wrote that was the day the wto died. i think i was right. i think the wto is dead. i think it's going to be very hard to revive it. doesn't mean trade rules are
gone. i think bipdi ibipd binding dis settlement was essentially a utopian notion and i think it's over. >> that made my heart stop because we're transitioning to our market power rules kind of scenario. so then it's the laterals within the wto. again, we talk about coalitions of the willing. like-minded countries. a subset of countries within the wto or outside the wto that carry the day. the same time that we see countries now resort to tariffs to try to bring about change. with this escalation of tariffs and countertariffs, it can be a bumpy ride. which last point, if the united states is taking this very different role, if china might not be interested in reform, there's a lot of attention now on what other countries do. i mean, japan and the european
union, in particular, with these mega trade agreements. big, big surprise was japan rescued the comprehensive and progressive tpp and japan and the eu managed to deliver a trade deal that covers a tird thi third of the world. do we see that leadership potential or are there significant obstacles along the way? after that, i'll bring the audience up for q&a. >> i think it's going to be extremely difficult without the u.s. japan sort of took the driver's seat on the tpp. it was welcome. it was sort of a surprise for us because we were not really used to sort of taking and praised for taking leadership. and we would continue. the epa with eu is another. not just that. jcpoa, paris accord. many multilateral forums that japan is doubling down because it's important for us and we think it's important for the world. but that is premised on the u.s.
coming back at some point. we don't think we can carry the burden alone even with the u.s. so somehow, what we're trying, at least, to maybe, be difficult in the short term, but in the midterm, our sort of thinking is that u.s. has to return. and without it, it's going to be extremely difficult and very bad times for the multilateral situation corporation. >> other comments on this? about who carries the torch. >> i think the difference, you know, there are certain things that will probably -- there are certain policies that the trump administration will probably expire with his presidency, and one of those is his willingness to alienate allies and rip up the diplomatic playbook. the tension between the u.s. and china is unlikely to expire, but the idea that we're going to have an american president in the future who is going to see the value of these partnerships,
i think that will happen. >> great. all right. so you have been very, very patient, and it's time to then take your questions. please, there's a microphone. wait for the microphone. identify yourself. and a very concrete question so that we have time to entertain ma many. i saw two gentlemen here. i'll take two questions at a time. then the gentle mman behind him >> thank you. this is for all the panelists. anyone who chooses, cares to answer. in view of the pence speech, and broader tensions, the recent claims of election interference, tensions in south china sea, concerns about human rights in if western china, the larger geostrategic implications, do any of the panelists see the trump administration, perhaps, moving beyond just tariffs and into a broader sanctions regime? similar to that on russia or iran. and i think there is legislation pending in congress to that
effect. thank you. >> thank you. should we take one more or do you want to answer that? okay. we'll go to the gentleman behind you then we'll -- >> thank you. my name is matthew perry. i'm in the parliamentary office here in d.c. one day, presumably the trump administration will no longer be there, be in power. and it's easy to see the many ways in which they could do lasting damage to the global trade order. i wondered if the panel thought they could in some way leave something positive, have some sort of positive effect on the global trade order? i think of the political legitimacy of trade, i think of enforceable labor, environmental standards in if trade agreements, isds, for example. >> all right. some positive legacies in trade from the trump administration, or perhaps a broader set of sanctions vis-a-vis china. any comments on that? >> i can take the second one, if you want. i do think there could be some
positive legacy. there has been a serious breakdown in any bipartisan support for trade. it's been years and years in the making. one of the -- to me, the most interesting things about the new u.s. mca agreement, almost all of the initiatives are aimed at the complaints we've heard from organized labor, the democratic left, dispute settlement, the weakening of that, rules of origin aimed very much at domestic manufacturing workers. provisions on currency manipulation. again, organized labor pushed those very strongly. i think there could be some elements there that would help rebuild some domestic consensus. i think the other potentially good point is these conversations on china needed to take place. we were in a holding pattern that wasn't going to stay held for very long, and i have criticisms about the tactics, but i think the conversation about how the u.s. and china are going to get along economically was a long overdue one that wasn't being conducted all that effectively. and so, you know, this has definitely shaken the tree. jack ma of alibaba said there's
going to be a 20-year negotiation. those could potentially be positive outcomes from this. we'll cross our fingers. >> very much. i think the path we're on is not a sustainable one. it was going to clash at some point. maybe this is the language that china umpbs nderstands. the chinese economy works in different ways than in democratic societies. there, the leader is really the leader, and, you know, if a leader that's tougher and stronger than you tells you something to do, maybe that goes down better in their stoociety than in truly democratic societies where you do not accept too much interference from the outside. that's one of the observations. the second observation, maybe what we're observing is also some cultural shift and this is maybe an opinion that's a bit adverse or maybe not shared at all. at least when i look in europe, in the younger generation, there's clearly a cultural shift going on. people have explored the world. the curiosity is somewhat down. so people are valuing much more now than before.
the local, you know, the local world, local sourcing patterns, it's there. some signs are suggesting people are a bit fed up with globalization, meaning globalization to them has brought good things but also some bad things. there seems to be some cultural shift going on which, personally, i think is a dangerous thing because we should not forget all the good things that globalization has brought us. but when i think of cultural shift, it's also having to do with evolution of societies. . you can only think about the higher values, intangible values, when all your material values have been satisfied. it's okay to care about, you know, softer values in life, as long as your material values have been satisfied. you have a job, you have all the consumption goods in the world at a price that you can afford. you've discovered and traveled the world. there's nothing more to discover. well, then you sort of retreat and say, well, it's not so bad at home, after all. so maybe that's the state where the younger generation tends to go toward, but i think what they should not forget is all the wealth and the growth we've seen today is thanks to the global
value chains and thanks to globalization. so to leave that and to say, oh, let's just go for world order, in which every country will do protectionist policies at the favorism of their own producers i think would be the wrong way to go about it. i think that is a path that is in some people's mind, at least. at least in europe. i can't speak for the u.s. that is something i think we should realize. >> very interesting. toshi? >> not addressing the question, itself, but has to do with the cultural aspect of things. you know, we've been talking about trade. of course, quite naturally, in terms of the economy. but i think at the heart of it, this is an identity issue. when people think about trade, especially in, like, youngstown, ohio, you know, the jobs are going abroad. their community is sort of collapsing. jobs are being lost. their sons and daughters are not coming back. their community, their comfortable spaces. so at the heart of it, it's an
identity issue more than a trade issue, to a certain degree. so there would be a competition of these two totally different cultures. you know, one sort of aspiring for a more global community. but then, again, this economic nationalism based on identity is, i think, quite strong, and i don't think we should under estimate the strength of the identity-oriented politics issues. >> just to add to this. sorry, mike. can't help myself. the question, i think, is globalization rejected or taken for granted? right, because a lot of these, you know, youngsters who may be thinking, well, it's local sourcing is best, but everybody, all of us, are carrying our iphone. and we would not want to buy three or four times more for they gadget. right? it would also be that we don't see how embedded we are in this.
it worries me a little bit that we might not realize the profound costs of protectionism as well. in terms of jobs lost, there have been a number of studies that, you know, estimate if partners retaliate, say, the auto issue explodes, and counterpart -- there's a counterretaliation, there are going to be a lot of jobs lost in this country as well. and this inward-looking policies i think that one of the things that really drove the desire to create a rules-based system was to try to diminish state friction, and i don't think we should lose sight of that. so that inward-looking economic nationalism, i agree, is powerful, but also worries me tremendously. but, sorry, mike, you had a -- >> i was going to try to attempt to answer the first question. >> thank you. >> so i think with anything, there's always a chance, right, this war could get worse, but your question is, could it bleed over into the noneconomic realm? and i think that possibility economists so far. all sides have been very
cautious to do so. but what might trigger it is one of the questions you asked. basically if we see some of the cooperation in the other noneconomic but particularly security elements deteriorate, then i think we'll start to see, right, the issue linkages play themselves out. the korean peninsula, nuclear proliferation, and the like, along those lines. on the second question, one last thought that i want to adhere is, obviously, the rosy optimistic version would be to say we all step to the brink but then we realize what's at stake before we collectively jump, right? wh and we might hope that's the case, but these are complicated political economies. i think there's a sense, well, it's not really a cliff, let's walk down a little bit. let's give them a little shove to see what's at stake. the one thing i think we should all keep in mind is there is a generation of chinese that have grown up that did not experience the cultural revolution.
right? for whom they've taken globalization for granted, and i think how this crisis plays out will affect their view of what type of stakeholder they want to be in the global system, and so i think that will be as critical toward determining the shape of 21st century global governance. their attitudes. i think their attitudes are going to be shaped by this trade war that i expect will carry itself out for several years. right? this will be the defining moment where they think about what's china's relationship to the world? >> we have time for two more questions. these two gentlemen. in the front and then in the middle. >> hello. my name is max. i'm a student at the george washington university. i'm curious if you could comment on emerging markets and how emerging markets play into this trade war and global trend and any vacuum that might be left from less u.s. trade globally,
particularly regarding the briks summit this past year, they were very much staunch defenders of international trade. i'm curious if you could just comment on that. thank you. >> one more question in the back. >> stanley cober. recently, christine lagarde said at the imf meeting, quote, if the current trade disputes were to escalate further, they could deliver a shock to a broader range of emerging and developing economies. what is the danger of that precipitating another global recession? >> we're ending with all the perfect notes. questions -- answers from the panelists? >> on the first one, i had this memory of being in buenes aires for the last wto ministerial meeting and hearing every leader in the world fall over themselves to name themselves as the new champion of free trade.
don't worry, they were going to step into the void and it was all going to be fine. and there was a bit of a gap between the rhetoric in some cases and then, you know, what does it mean too be be a leader the global trading system? it means to be putting in a bit more than you're getting out. it means kind of making compromises for the good of the system. and i think in practical terms, looking at statements, i think people are -- people are still thinking of their own national interests. >> so i'll name two, to just get the conversation at it. for the near term, i think for some economies, it's really a capital flows issue. particularly if they have large amounts of dollar denominated or foreign exchanged, euro denominated debt, particularly dollar denominated debt. we expect the dollar to strengthen with trade tensions. as that happens and you see
emerging economies' currencies collapse because their position isn't quite skus tustainable fo currency levels, that's one danger. a danger could happen in turkey, filter into oather areas and started seeing warning signs with argentina, south africa and the like. the second danger is a slow-motion type. really if you're talking about lots of uncertainty, underinvestment in light of the uncertainty over what this means for supply chains, demand is going to go down. if you're a supplier to the upstream parts of the supply chain, demand wise, this is going to deliver a shock and particularly for the commodity. driven types of export growth market markets but countries looking to embed themselves into supply chains. the supply chains are expanding and investing. i think there are some countries that are well positioned possibly to benefit from this, right? vau vietnam, cambodia, and others are essentially taking an
aggressive stance to take advantage of the tensions to reconfigure supply chains. really depends on the particular unique situation of each emerging market. >> thank you so much. this has been a very rich discussion. i want to thank all the panel t panelists for theiring sha ings expertise. thank you all for your questions and joining us today. thanks. and a bit later here on c-span3, the organization for security and cooperation in europe's high commissioner on
national minorities delivers remarks on conflict prevention at the johns hopkins school of advanced international studies. that's at 4:30 eastern live on c-span3. online at c-span.org and on the c-span radio app. at 7:00 p.m. today, president trump hosts the ceremonial swearing in of supreme court justice brett kavanaugh in the east room of the white house. that's live on c-span. "american history tv" is in primetime this week on c-span3. tonight, at 8:00 p.m. eastern, the supreme court historical society looks at the lives and legacies of chief justices warren berger, jon jay, and john marshall, as well as associate justices robert jackson and thurgood marshall. tuesday, federal appeals court judge douglas ginsburg on the history and evolution of the nation's highest court, and the debate over originalism.
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