Charlene Barshefsky on Trump’s Trade War

This week on the Sinica Podcast, we are happy to share a live recording from the third annual SupChina Women’s Conference. Jeremy and Kaiser sat down with Ambassador Charlene Barshefsky, now a senior international partner at the law firm of WilmerHale, and a former United States Trade Representative under the Clinton administration. She came to New York for a candid discussion on her views regarding the recent deterioration of trade talks, her own experiences in the office of the United States Trade Representative, Huawei’s role in the dispute between the U.S. and China, and more possibilities in the trade war moving forward. What to listen for on this week’s Sinica Podcast: 3:42: What caused the trade deal to go up in smoke? The tariff hikes? The executive order banning Huawei? Chinese negotiators reneging on previously agreed-upon wording? Charlene provides her opinion — noting a misjudgement on Trump’s negotiating style, among other factors: “First of all, a continued and persistent misapprehension on the part of Xi Jinping about Donald Trump…coupled with seeing a text in full. Which, when one sees constituent parts, might not seem too overbearing, but when one sees in full relief, looks exceptionally overbearing, making China look, perhaps, small. Coupled with a sense on the part of China that certain of the provisions, in total, either impinged on China’s sovereignty with respect to changes in laws, or were unrealistic with respect to the extent of purchases the U.S. wanted China to make, or were themselves not emblematic of the negotiations that took place.” 14:37: How can leaders preempt the common criticism of trade deals that the final agreement erodes the sovereignty of their country? Charlene suggests an interesting rhetorical strategy to take during the negotiating process: “Let’s suppose I say to you: I will never agree to a deal that puts in question the sovereignty of my country. Never. I will never do that. And then you do a deal. Which, actually, puts in question the sovereignty of your country. But because you’ve said, quite convincingly, you’d never do a deal that does that. Whatever it is you did over here, by definition, is not that. So, you’ve covered yourself.” 22:44: What is the Trump administration’s approach to macroeconomic policy, and how could this view affect the bilateral relationship with China and other U.S. trade partners? Charlene offers some perspective on the bigger picture: “I think the Trump administration is quite interested in managed trade. I think this is really the calling card — that is to say, ‘We want you to buy more from us. And if you don’t buy more from us in the following quantity over the following time frame, well, we’re just going to have to impose tariffs on you to even out the score.’ Whatever score is being kept in his mind.” She continues: “One of the difficulties with these kinds of solutions is that they’re often very costly to consumers. They’re intended to divert trade from the existing suppliers to your suppliers…it just takes the hunk that was Brazil’s, or Argentina’s, or Europe’s, or South Africa’s, and gives it to the United States. Those countries, most assuredly, will not stand still for it as their industries, who are trading fairly, suffer from the repercussions of what is a managed trade approach.” 30:07: Attacks on Huawei via public denunciation and executive orders seem to have hit China in a way that tariffs and other escalatory measures have not. Jeremy asks, “How does this sledgehammer approach to Huawei complicate China’s negotiating position?” Charlene acknowledges national security concerns regarding the company but also underlines the importance of interchange in the 21st-century tech ecosystem: “Huawei is just stuck in the middle. There’s a security aspect, and a highly positive, innovative, and economic aspect. So, could there be a better way to protect the security aspect, or mitigate that aspect, while not losing this other very important part of the Huawei equation? I don’t think the administration was interested in trying to thread that course, at least not at the present time. But at some point, it will be necessary to thread that course, or we will see not just Huawei disadvantaged, but most of our major tech companies highly disadvantaged as well.”