Derek Scissors: We can’t trust China to become a fair trading partner

Channel: Fox Business
Published: 04/30/2019 08:35 PM

China Global Investment Tracker author Derek Scissors gives his take on the U.S.-China trade negotiations. FOX Business Network (FBN) is a financial news channel delivering real-time information across all platforms that impact both Main Street and Wall Street. Headquartered in New York — the b...

We have this breaking news: white house, chief of staff, mick mulvaney, is making all kinds of waves after he spoke at the milken conference in los angeles and firmly announced china. Trade talks will not go on forever. I think at some point in any negotiation you realize. Okay, we're close to getting something done, so we're gon na keep going. On the other hand, at some point you just throw your ...
ands up, so you know this is never going to get anywhere and i think you'll know one way or the other in the next couple weeks deal or no deal with china two weeks and time is Up now, whether that is the case day, two oftrade talks are starting shortly in beijing, where top us officials are plotting their next move according to insiders. Here, one of the biggest sticking points is getting rid of the tariffs that the us and china had slapped on each other, but our next guest says this trade deal is the wrong way to go about fixing our relationship with china. Instead, the us should quote: focus on fixing itself aei resident scholar and china global investment tracker author, derek sissors - is the man behind this theory he's also the china beige book chief economist. Are you saying, sir, that we should not try to pursue and push china to become a fair global partner and instead focus onsome types of issues we have here? Oh, we should definitely push china to become a fair partner. We just can't trust them to do that by signing an agreement, they have very strong incentives, maybe to keep the agreement for a year year and a half then break it in the next term. So that's why the u. s. also has to be moving on our own policies, which we're not doing stephen venusian, the treasury secretary literally just said he is very hopeful that a good quality deal will come about very soon.

I two weeks: do you think the two week level is viable for a good deal? Well, i don't think we can get a good dealuntil. The us has the right policies in place here, but i do think we're gon na get a deal announced toward the end of next week. That'S where we've been heading for about the past month and when we get that deal we're gon na get the administration saying the chinese are gon na, buy a lot of goods they're going to protect ip. A lot of people are gon na, be skeptical about that, because that china's track record is so poor and they're going to be right. The the deal will hold, as i said, for about a year and a half, and then it will fall apart in what way do you believe it will fall apart? Well, the twomain parts of the deal are chinese: more chinese purchases of u. s. goods to balance the trade relationship and better chinese protection of ip on the purchases. The chinese just don't have the money. People aren't used to thinking that way, but they ran a four hundred and ten billion dollar merchandise trade surplus with the us last year, and they still saw a net outflow of dollars. You cut a couple hundred billion dollars off that they have a balance of payments crisis. They can't afford it on ip. China has a huge set two dozen large state monopolies, where there's no innovation, because state-owned monopoly companies don't innovate, that's right, which means they need to steal and coercethat intellectual property where they have state monopolies, which means they're not going to protect american ip in those areas.

So the way the chinese system is set up, they're not gon na be able to afford to buy us goods for very long and they're not going to be able to afford to protect us ip for very long but derek. You know you say the us should put the talks on hold. You know the president has has really staked his flag and his claim on this saying that it is time to hold their feet to the fire, or at least shine, a very harsh spotlight on all that the chinese do to steal our ideas. You'Re rightthey do have a lot of trouble innovating on their own. They could certainly replicate they're very good at copying, but don't you think that this is something he should go gangbusters on which he has been doing with his own team? Well, i i don't see him going gangbusters. I see this this negotiation going on for a long time, but there's been one major american action against chinese ip theft during the trump administration is which is now over two years old one. The administration itself says china steals. Maybe two hundred and twenty five billion dollars worth a year of u. s. ip. It'S taken action against one company, we're relying on negotiating with china to stop bypia theft. That, to me, is a really bad bet.

Okay, i i am with you. I do not trust that china will be very upfront and honest and then come through with it. You know you need that aggressive verification. Well, we at least get some ability to get on the ground in china to have our people verify that, and there are people here too, to verify the president said two-way street here, but we need to make sure they're not doing that. Well remember: what kind of country china is secretary minutiae has talked about an enforcement office? I mean what what does this enforcement office going to do? Is it going to have free ability totravel in china, where chinese citizens don't have free ability to travel? Will it be able to surprise bad chinese actors who are probably under orders from the chinese government to steal ip? I find that very, very hard to believe. The administration's other response is that it will keep tariffs on china until we see better ip behavior. That'S a better bet if the us has an enforcement mechanism in hand that i would trust a lot more than sending us experts to beijing when they're not going to be allowed to do their job. It has happened since the beginning of trade and time they steal. Our ideas, but we'll be watching it an interesting perspective, derek thankyou, very much, derek scissors. Thank you of the aei.

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