1.
The Trump model is the U.S.-Japan trade negotiations of the 1980s and early
1990s, what model will work better in your judgement?
They are difficult
to compare because they are two different approaches for two different
relationships, under two different historical circumstances. I would argue that
the US-Japan negotiations probably will wind up as having worked “better.” Let
me explain.
The United States
faced then, as now, a major economy in ascendance. However, the US economy was
widely seen to be in relative decline vis-à-vis Japan, an economy led by a
private sector over which the government had limited control. By comparison, it
is confidently riding the crest of a near-decade recovery from a global
financial crisis and is seen at the forefront of a new industrial
revolution—with China, a state capitalist economy if ever there was one, as its
main competitor. In addition, the United States had a robust security alliance
with Japan that remained unshaken throughout the trade friction years. The
security relationship with China, by contrast, is at bottom one of antagonism
between two hegemons. The latter point is particularly significant because the
Trump administration is explicitly linking one of its most important its
security goals—denuclearizing DPRK—to the bilateral trade relationship. At a
minimum, this complicates any deal because
the economic and security issues move on different timelines and
trajectories. At worst, resolution on both fronts become impossible because of
the complications. It certainly doesn’t help that Trump’s negotiating team is
hopelessly divided, while Trump himself does not have the expertise, knowledge,
or temperament to resolve the contradictions in a coherent manner. Also
complicating the calculations is the fact that the Chinese authorities, with
some justification, appear to believe that Trump’s business interests can be
leveraged to bring about a favorable resolution (for China). That, again, could
backfire.
2.
The White House convinced Japan to accept export quotas in the 1980s when
President Ronald Reagan carried out a strategy of “managed trade.” It didn’t
happen this time with China. What is your take on this?
First of all, it’s
still early in the game regarding China. They’ve only had one round of
high-level talks. The relationship is set to worsen before it stabilizes,
hopefully in a way that is beneficial to the Japanese economy.
Second, the Trump
administration has a cluster of demands, some that are connected to the trade
deficit, some that are connected to security, and still others that are
connected to investment in China, which arguably would worsen the trade
deficit. But it does not appear to have a coherent strategy. At worst (from the
global perspective), China could end up buying more commodities (agricultural
products, natural gas, etc.) from the US at the expense of China’s other
trading partners who would then seek to make up the difference by increasing
exports to other markets, while the more important microeconomic issues, mostly
technology- and IP-related go largely unaddressed. It would be ironic if the
only outcome was a rearrangement of trade patterns while trade and investment
balances remain virtually unchanged.
3.
Many Japanese elites tell Chinese policy makers, they “should learn lessons
from Japan,” especially over the Plaza Accord. if you give suggestions to
Chinese policy makers, what lessons you believe China should learn from Japan?
I wasn’t aware
that “many Japanese elites” were in the business of advising the Chinese
government and, frankly, the Chinese government surely has enough expertise and
experience to weigh the Japanese experience to determine its course of action
without outside help.
4.
How do you compare the trade tension then to the current US-China one?
The trade tension
felt stronger then, but that’s surely because we were the other party to the
conflict and I had a role, albeit quite minor, in it. The current tension is
more worrisome because it is part of a
geopolitical conflict that should long outlive the end of President Trump’s
current term.
5.
If any suggestions to Chinese, what would you say on how to deal with America?
Well, obviously, I
want China to yield on investment and IP issues while standing firm on
quantitative targets. It’s an economic win (US)-win (China)-win (WTO) outcome.
But the decisionmakers surely do not see it that way. Beyond that, if someone
is willing to pay me to help devise a negotiating strategy, I’ll be happy to
oblige as long as I don’t find the objectives and the means morally
unacceptable.
If we are to
believe what orthodox economists tell us, imposing no quotas, freely investing
in each other’s economies, and protecting IP under commonly-acceptable
standards—basically national treatment under market economy rules—would
maximize economic welfare for all the economies, and equity concerns could be
taken care of by national laws and regulations. And I also want a pony. But I’m
aware that sovereign states have different, politically-informed goals, China
dramatically, but the United States as well, particularly under the Trump
administration. So the pony should be the easiest part.
