Painting a somewhat ominous picture of the potential for an agreement in the protracted trade talks between the U.S. and China to end their tariff-fueled trade war, Dr. Michael Pillsbury cast doubt on the possibility of the turmoil reaching a successful outcome.
At a speech Wednesday at New Jersey’s Rider College, Pillsbury, director for the Center on Chinese Strategy at the Hudson Institute and the author of “The Hundred-Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower,” gave his insight as an advisor to President Trump on China affairs and a long career in similar roles for several administrations.
Pillsbury contends that, for decades, the U.S. has played a vital role in helping the Chinese government build its economy in the belief that China’s rise would bring bilateral cooperation, diplomacy and free trade. However, Pillsbury said his experience has him believing that the “China Dream” is to replace America as the world leader, not cooperate with it.
Contrary to popular belief over the years, China never intended to have a capitalist economy, Pillsbury told the audience. He said today “at best only half of China’s economy is free market” and that is limited to sectors such as restaurants and deemed “not the commanding heights” of the economy, which include areas such as electrical power, electronics, control of the Internet and all vital business segments.
Pillsbury noted that the Chinese Communist Party runs the top companies in the Chinese economy, selecting the CEOs, subsidizing them, providing “stolen intellectual property and intelligence ideas,” and creating what is called “national champion” companies.
“Now this is a violation of World Trade Organization rules,” Pillsbury said. “One of the rules is ‘no subsidies for your companies.’ The very essence of the ‘national champions’ idea is subsidies.”
A key problem in devising a strategy for dealing with China—for Trump or any president—is the dichotomy between what economists and political pundits have promulgated over the years. One is that China’s economy is always on the verge of collapse for a variety of cultural, economic and political reasons that Pillsbury said that have been “secretly” pushed by China for decades to “deceive the world.”
The other narrative is that China is on pace and perhaps already has surpassed the U.S. as the leading and most influential economy and country in the world.
“So, what’s a president to do?” he asked.
Pillsbury believes the U.S.-China trade war was brought on in great part by China’s commercial relationships with the world, which he contends are often not above board and meant to elevate only Chinese companies.
“The trade talks themselves are kind of a mystery,” he said. “First of all, they’re secret. Has anybody here seen a copy of the 150-page trade agreement? This is what’s known about the trade agreement: it’s a 150-page agreement, it has seven chapters, it has an enforcement mechanism, it has three layers of appeal and it’s not signed. And the president revealed some level of anger that the Chinese had reneged on May 2 to some parts of the 150 pages. So, here are the two largest economies in the world…in this negotiation, with no clear outcome in sight.”
Chinese leadership was ready to make the deal, he contended, but some hardliners in the Communist Party had vetoed it.
“I think the trade talks are terribly important,” Pillsbury added. “I don’t know the outcome.”
What he does know is that Trump has vowed that China will not surpass the U.S. economically “on my watch.”
The bottom line for Pillsbury is that the U.S. does not have a strategy or government structure in place to deal with the Chinese geopolitical and economic threat, and without that, any trade deal might not be worth the paper it is written on.