The U.S. is entering multiple bilateral trade agreements with the world’s largest economies, will the entire international trade system change with it?
“What Mr. Trump is doing now is to rebuild the world trade platform, reshape U.S. foreign trade relationships and the U.S. economy strategically.”
Is the U.S. economy strong enough to hold up against the stress from the trade war?
Tom Del Beccaro（《分裂的时代》作者）：“由于税改法案从根本上改革了公司税，我预测经济会持续增长。”
“ because there’s an actual fundamental change in the corporate tax code, I expect to see sustained growth.”
Is President Trump’s maximum pressure strategy against China working?
“Based on my analyses, if China plans to engage in the so-called ‘a tooth for a tooth’ retaliatory trade war against the U.S., it will definitely lose ungracefully.”
What happens if the World Trade Organization gets marginalized?
萧茗（Host/Simone Gao）: 欢迎收看《世事关心》，我是萧茗。美国的GDP在今年第二季度实现了4.1%的高增长。第三季度GDP增幅预计将达到更高的4.4%。在贸易战的背景下能有这样的成绩实在令人惊讶。而就是贸易战本身，也出现了积极的变化。上周美国和欧盟同意就实现零关税展开协商。虽然这只是一个初步构想，但是大多数人事先都没想到，贸易战也会带来新的机遇。那就是，它可能会催生一套新的贸易规则，一个更加自由的市场，一个更高的保护知识产权的标准，从而建立一个新的国际贸易秩序。 这个新秩序可能会摒弃现有的多边贸易体制，代之以主要经济体之间的双边贸易体制。在这个新秩序下，美国将以经济实力为后盾重建对外贸易关系。在过去很长的一段时间里，美国的精英阶层以为美国国力会持续衰退，中国会崛起成为下一个超级强国。但是在不久的将来，人们可能就会改变这种观念，“让美国从新变得伟大”这句话，不见得只是一句口号。在这一期里，我们将探讨这一系列变革。
Welcome to《 Zooming In》, I am Simone Gao. The U.S. Gross Domestic Product, GDP grew at a solid 4.1% for the 2nd quarter. The forecast for the 3rd quarter growth is 4.4%. These are spectacular figures especially against the backdrop of the trade war which also took a drastic turn last week when the U.S. and EU agreed to work towards zero tariffs. Although more things still need to be worked out between the U.S. and EU, a new opportunity most people did not see coming from a nasty trade conflict might have emerged. That is, the birth of a new set of trade rules, a freer market, a higher standard for intellectual property rights protection, and frankly, a new world trade order. Under this order, bilateral trade relations between major world economies might replace multilateral trade organizations. Also under this new order, America will assume a new role, a role that will allow this country to negotiate from a point of strength. For a long time, the American elites have accepted the perception that America is in a long term decline. China will be the next superpower. That perception might be proven wrong in the near future. Make America Great again, after all, may not be just a slogan. In this episode, We’ll explore how all of these changes came about.
The zero-tariff agreement between the U.S. and the EU last month is the latest in a series of global trade negotiations favoring freer trade. A week earlier, Japan and the EU signed a trade deal that will eliminate nearly all tariffs. The United States, Canada, and Mexico are likely to update the North American Free Trade Agreement soon, and the U.S. and Japan are also likely to sign a free trade agreement.
If you consider the European Union as one unit, it surpasses America to be the largest economy in the world. The United States and Europe combined account for more than half of the world’s economy. Japan is the third largest economy, and Canada is No. 10. According to Chinese senior political commentator Wen Zhao, when the U.S. signs bilateral trade agreements with the world’s biggest economies, the international trade system will change significantly. The old WTO-centered system, which China has been relying on for accessing foreign markets and attracting foreign investment, will likely be marginalized. More importantly, the members of the new system are free-market economies that fundamentally agree on a set of rules that value capitalism, openness, and fairness.
But the story doesn’t end there. Last week, Secretary of State Mike Pompeo announced the U.S. will invest $113 million in the Indo-Pacific region.
Mike Pompeo（US Secretary of State）: “I speak for President Trump when I say every nation and business can have confidence that the United States will continue to create the conditions for mutual prosperity in a free and open Indo-Pacific. It is clearly in America’s strategic interest to deepen engagement in the region – more than one third of the global population is there, four of the world’s six largest economies are there as well – in China, Japan, and India. And of course the United States. ”
印度洋、 太平洋的定义不包括美国的大陆，但夏威夷被包括在内。它包括印度洋的热带水域、西太平洋和中太平洋、以及连接印度尼西亚附近的海域，将美国纳入印度洋、 太平洋区域具有战略（印太战略）意义。Mike Pompeo和商务部长Wilbur Ross将印度洋、太平洋投资与中国的“一带一路”（BRI）进行了对比， BRI的“道路”是指从中国东南沿海城市泉州，经过西南太平洋和印度洋的海上丝绸之路，它从东南亚、印度一直延伸到欧洲，它主要与美国新的印度洋、 太平洋投资计划重叠。“一带一路”倡议因含有控制和攫取参与国资源的内容，一直为人所诟病。
The definition of Indo-Pacific does not include the United States’ mainland; only Hawaii is included. It comprises the tropical waters of the Indian Ocean, the western and central Pacific Ocean, and the seas that connect them near Indonesia. The inclusion of the U.S. in the Indo-Pacific region is strategic. Mike Pompeo and Secretary of Commerce Wilbur Ross both contrasted the Indo-Pacific investment to China’s Belt and Road Initiative, or BRI. The BRI’s “Road” refers to the ocean-going Maritime Silk Road that starts from China’s southeast coastal city Quanzhou, via the southwest Pacific Ocean and Indian Ocean, and it goes all the way to southeast Asia, India, and Europe. It largely overlaps with America’s new Indo-Pacific investment program. The Belt and Road Initiative has been criticized for dominating and seizing resources from the countries it invests in.
与“一带一路”倡议相反，国务卿Mike Pompeo强调，美国将让印度洋、 太平洋地区变得更安全和自由。
In contrast to the Belt and Road Initiative, Secretary of State Mike Pompeo stressed that the U.S. will help enhance security and freedom in the Indo-Pacific region.
Mike Pompeo: “We stand ready to enhance the security of our partners and to assist them in developing their economies and societies in ways that ensure human dignity. We will help them. We will help them keep their people free from coercion or great power domination.”
Wilbur Ross（商务部长）: “有不止一条经济带，而且路也不止一条。印度洋、太平洋地区有许多经济带和许多途径。”
Wilbur Ross: “There are more than one belt, and there’s more than one road. There are many belts and many roads to Indo-Pacific. ”
When President Trump exited the Trans-Pacific Partnership (TPP), he was criticized for leaving an economic and power vacuum for China to take advantage of. But the newest Indo-Pacific investment might be an answer to that: The U.S. is not exiting the world stage, it’s creating its own platform to counter China’s Belt and Road Initiative.
A day after the Indo-Pacific initiative was announced, an editorial in Chinese state-run media warned the U.S. against “imperialism” and“power games”.
It started with President Trump’s steel and aluminum tariffs, and now it seems like the world trade order is being reconstructed. Is this really President Trump’s end goal? I had a discussion with former Peking University professor of economics, David Xia.
“ Recently, the US signed or plan to sign bilateral or trilateral trade deals with EU, Japan, Canada and Mexico. Do you agree that the US plans to obsolete the multilateral trade platform established by the WTO and build a new model of international trade? Why does he do so? What are the potential outcomes? ”
David Xia: “On his campaign trail, Trump made it clear that the U.S. did not benefit from globalization. Free trade has helped several developing countries, especially China. However, the U.S. suffered significant loss because of it. According to his estimate, the U.S. trade deficit, plus the loss of intellectual property, is about $800 billion annually. That’s why he promised to fix the problem once elected. The trade platforms Mr. Trump inherited, whether unilateral or multilateral, and the WTO, appear to be politically correct, but are actually detrimental to the U.S. economy. What Mr. Trump is doing now is to rebuild the world trade platform, reshape U.S. foreign trade relationships and the U.S. economy strategically. His actions are very clear, and the steps he’s taken are reassuring. Let’s take NAFTA as an example. As the first step, he wanted out. Under the threat of U.S. withdrawal, Canada and Mexico made concessions and are willing to come to the table, which paved the way for a new trade agreement. Although the framework still involves the original three North American countries, the specific clauses would be quite different from the previous version. In the meantime, the U.S. is engaging with Japan and the EU to negotiate new trade agreements. There had been trade frictions between Japan and the U.S. in the 1980s and 1990s. It’s a significant step for Japan to renegotiate willingly with the Trump administration. Once the U.S., EU, and Japan — the biggest economic entities — can reach better agreements, the world trade platform will be remodeled. It’s just a matter of time when the old WTO framework will become practically meaningless.”
萧茗（Host/Simone Gao）:“如果世界贸易组织被边缘化？对中国会产生什么样的影响？ ”
“ Is it possible that the WTO would eventually be marginalized? How would it affect China?”
David Xia: “It took China 13 years to join the WTO. China made a lot of promises when it was accepted by the WTO in 2001. China was given a 5-year grace period to fulfill all unmet conditions. Seventeen years have passed since then; most of what China had promised has not materialized yet. Starting this year, Beijing has made some new policies. One of them is the expansion and relaxation on conditions for foreign investment in mainland China. However, I think the efforts are too little and too late. The best time was missed a long time ago. If China had moved forward gradually and steadily starting 17 years ago to keep its promises, China would be enjoying more freedom in trade and the market economy. Although the CCP’s rule would not allow a fundamental change, it’s impossible to achieve complete marketization and free trade, but at least it wouldn’t be so backward as it is today.”
萧茗（Host/Simone Gao）:一个强大的美国经济是（川普）重组世界贸易秩序，同时打赢贸易战的决定因素。那么美国经济在未来几年前景如何呢？我采访了税务专家Tom Del Beccaro，他是《分裂时代》的作者，下面是他从税收改革的角度所说的。
Engaging in a trade war while reconstructing world trade order is only made possible because of one important factor- a strong U.S. economy. So how will the U.S. economy do in the next few years? I spoke with Tom Del Beccaro, a tax expert who is the author of the Divided Era. This is what he has to say from the tax reform point of view.
Tom Del Beccaro（《分裂的时代》作者）：“ 我在去年协助现政府通过税改法案的时候，就预计到一旦它获得通过，就会促成今年第二，第三季度的GDP增长率超过4%。我们确实看到今年第二季度的GDP增长了4.1%。亚特兰大联邦储备银行估计，今年第三季度的GDP增长率将接近5%。这是从根本上进行结构调整的结果。税改分两种。一种是从前福特和卡特政府搞得短期减免，结果是收效甚微。另一种是小布什政府搞得小规模减税，或者是柯立芝总统在1920年代，肯尼迪总统在1960年代，里根总统在1980年代搞得大规模税改。我们的税改在规模上接近于肯尼迪、柯立芝、和里根搞的税改。我认为它会促成长期经济增长，其增速将超过过去20年里的平均水平。这里边的部分原因，是因为税改将吸引海外资金回流。川普总统以前讲过，美国公司为了避免被双重征税，把5万亿美元资金留在了海外。取消双重征税以后，在2018年第一季度，就有3千亿美元海外资金回流。这和2017年第一季度的3百亿形成了鲜明对比。这是真正的刺激经济的举措，就这一条就足以加快经济增长。不仅如此，由于税改法案从根本上改革了公司税，我预测经济会持续增长，只要不出现国际金融危机，或灾难性事件，经济会长期增长。”
“Yes, when I was assisting the administration last year with the passage of the tax reform bill, I predicted if it passed, that we would see growth above 4 percent in the second and third quarters of this year. Certainly the 4.1 percent we saw for the second quarter has come true, and the Atlanta fed says we’re on track to closer to 5 percent for the third quarter. And the reason why this is occurring is there’s been a fundamental restructuring. There’s two types of tax reforms: one time giveaways, which the United States did under the Ford administration and the Carter administration, which has very little effect. Smaller tax reductions, like which occurred under Bush 43, or the really large reforms that occurred under Coolidge in the ‘20s, under Kennedy in the ‘60s, and reagan in the ‘80s. And we’re closer – this reform package is much more like the major reform of Kennedy, Coolidge, and Reagan. And I expect long-term growth to occur, increases, much better than what we’ve seen in the last 20 years. And we know this is possible, in part because of the money that’s coming home. President Trump talked about the fact that there’s 5 trillion U.S. dollars overseas that wouldn’t come home because of double taxation. That’s been removed. In the first quarter of 2018, over 300 billion came home. That’s a marked contrast from the first quarter of the year before when it was only 30. That kind of stimulus alone, that’s true stimulus, would increase growth in the economy. But because there’s an actual fundamental change in the corporate tax code, I expect to see sustained growth, barring some sort of international security incident or calamity, I expect long-term growth. ”
Coming Up,Is the World Trade Organization dead, and how would it impact China?
Six days after the U.S. and the EU announced they will work towards zero tariffs, President Trump indicated he’s planning to increase tariffs on the 200 billion dollars of Chinese goods from 10 percent to 25 percent. The new tariff increase could affect fish, petroleum, chemicals, handbags, etc., but a final decision won’t be made before September. Beijing responded two days later by threatening to slap levies on 60 billion dollars of U.S. products if Washington moves ahead with its tariff increase.
Why did President Trump move so quickly?
Narration: On top of China’s refusal to acknowledge intellectual property theft, forceful transfer of technologies, etc., there are many other possible reasons, including trying to ally with Europe against the U.S, Renminbi’s sharp depreciation, China’s possible manipulation of soybean prices, and China’s regulatory hurdles that undermine business practices of U.S. firms. Whatever the reason, this new tariff increase reveals Trump’s overall strategy toward the U.S.-China trade war –– maximum pressure.
On the same day President Trump announced possible tariff increases, the U.S. Senate approved a defense-policy bill by 86 to 10 that tightens U.S. national-security reviews of Chinese corporate deals and revamps export controls over which U.S. technologies can be sent abroad. The bill also restricts Beijing in areas ranging from cultural activities to military exercises. The same bill passed in the House a week earlier and is expected to be signed into law by the president.
Is president Trump exerting maximum pressure on China and will it work? Here is David Xia again.
“ President Trump announced last week that he planned to raise tariffs from 10% to 25% on $200 billion of Chinese goods. Last year, the senate passed a 700 billion military budget bill, which was also a major deterrence to China’s ambitions. Do you think Mr. Trump’s strategy of maximal pressure would succeed? How would China respond? ”
David Xia: “Trump is now pressing really hard and not allowing China a break. Although China deployed a trick to let the Renminbi depreciate by 10% to cancel the effects of tariff increases, the U.S. made a new move to increase the tariffs to 25%, making it extremely difficult for China to further depreciate its currency correspondingly. Some calculated that if the Renminbi were to be devalued by 40%, 50% or even more, it’d then be possible for China to offset the impact of the 25% U.S. tariffs. In this scenario, a drastic depreciation of the Renminbi would bring serious inflation and bring stress and negative consequences to all aspects of the Chinese economy. So I believe China doesn’t have any strong hands left in playing with the value of the Renminbi. Most people would think that the Sino-U.S. trade war is limited to trade itself, and Trump’s main goal is to gain more financial interests for the U.S. In my humble opinion, however, it goes far beyond the economy and trade. Trump made it clear that he’d like to “Make America Great Again,” and his policies center around “America First.” It’d be natural for Mr. Trump to want to restore the United States as the beacon of the free world. His childhood idol was President Reagan because Mr. Reagan kept the Soviet Union in check during the Cold War. It appears to me that the trade war is a contemporary Cold War. The 44-year Cold War ended in 1991; the new Cold War just started. In the new Cold War, the U.S. will have a fundamental war of ideologies with its new rival, China. So I believe that Mr. Trump is not only looking after trade itself, he has long-term national interests and security in his mind.”
Coming Up，Manufacturers move production out of China amidst trade war tensions.
Amid the U.S.-China trade war, overseas manufacturers are starting to move their production lines out of China. Among them are Taiwanese firms that are crucial players in the global supply chain.
据彭博社报导，向苹果公司供应电源组件的Delta电子公司正以21.4亿美元的价格收购其泰国子公司， 这是在泰国扩大生产的前奏。为Bose等公司生产耳机的Merry Electronics Co. 也可能将其部分产能从中国转移到泰国，未来的具体发展还要看目前贸易战的走向。
According to Bloomberg, Delta Electronics Inc., which supplies power components to Apple Inc., is making a $2.14 billion offer to buy out a Thai affiliate — a precursor to expanding production there. Merry Electronics Co., which makes headphones for companies like Bose, may also move some of its production to Thailand from China, depending on how the trade conflict pans out.
The reason for the relocation is mainly wage increase. The trend started a few years ago and has been accelerated by the U.S.-China trade war. iPhone-assembler Foxconn remains in China for now, but the Taiwan manufacturer just opened its first U.S. factory in June. According to CBS news in Washington, this would be its first plant outside of Asia.
By opening a factory in the U.S., Foxconn’s owner Ted Kuo is definitely putting his apples in two baskets to minimize risks. Just how much cushion does the Chinese economy have to resist the negative impact from the trade war? This is what Professor Xia has to say.
萧茗（Host/Simone Gao）:“您认为中国现在的宏观经济形式怎么样？ 它有多厚的底子能和美国继续拼下去？”
“ What’s your opinion on the health of China’s macroeconomy? Is it healthy enough to continue fighting the trade war against the US?”
David Xia: “In the arena of economics and trade, the difference in power between China and the U.S. is quite dramatic, be it the trade structures or the level of technologies in the products or the technological gap, the difference is huge. It’s not a gap that can be bridged in three to five years. For example, China’s ZTE was temporarily banned from purchasing U.S. chips because of its sanctions violations. As a result, many important industries in China were badly hurt. China’s technological deficiencies were immediately exposed. In many high-tech categories, especially the military-related technologies, the transfer of technology is forbidden. Over the years, however, China has been stealing American technologies, including secrets for the most advanced fighter jets. To retaliate, the U.S. not only imposed restrictions on trade with China, but also put bans on technology transfer for the high-tech and military technologies to prevent further loss by Chinese espionage. When it comes to economic power, the U.S.’s dependence on trade (12%) is not as high as China’s (33.6%). That is to say, if trade ceases to exist between China and the U.S., the U.S. wouldn’t be badly hurt. China, on the other hand, would run into major difficulties in many aspects of its economic development, especially its foreign-exchange reserves. The main source of China’s foreign-exchange reserves comes from exports. With almost all Chinese goods subjected to high tariffs, China’s foreign-exchange reserves have fallen from over $4 trillion to a little more than $2 trillion USD. According to reliable insiders, there’s only about 1 trillion that can actually be counted on. Based on my analyses, if China plans to engage in the so-called “a tooth for a tooth” retaliatory trade war against the U.S., it will definitely lose ungracefully.”
萧茗（Host/Simone Gao）:8月3日，在新加坡举行的东盟外长会议上，中国外交部长王毅和蓬佩奥举行了会晤。王毅说中美已经达成协议解决贸易战。他说蓬佩奥和他一样，也不希望美中贸易战持续下去。这意味着什么？这是中共在退让之前为保留颜面的举动吗？我们目前还不能做出这样的结论。但是，一个简单的事实是： 中国的出口商平均利润率低于2％。那么25％的关税对他们来说意味着什么？请继续观看我们的节目。萧茗和《世事关心》将以独特的视角，带您关注贸易战的发展。感谢收看，我们下周再见。
On August 3, Chinese foreign minister Wang Yi and Mike Pompeo met at the ASEAN Foreign Ministers Meeting in Singapore. Wang said the two countries reached an agreement on the issue of how to resolve the current trade dispute. He said Pompeo agreed with him that America does not want to see the trade war continue. What does that mean? Is it a face-saving way to say China plans to concede? We won’t draw that conclusion yet. But a simple fact comes to mind: China’s export business has an average profit rate less than 2%. What does a 25% tariff mean to them? Stay tuned, Zooming In with Simone Gao will bring you the unique perspective on the ongoing trade war. Thanks for watching and see you next week.
Writer：Simone Gao, Jess Beatty
Editors：Julian Kuo, Frank Lin , Bin Tang
Narrator: Rich Crankshaw
Interview Overdub: Kacey Cox
Transcription: Jess Beatty
Translation：Greg Yang , Frank Yue, Michelle Wan, Guiru Zhang
Special Effects：Harrison Sun
Assistant producer：Sherry Chang, Bin Tang, Merry Jiang
Host accessories are sponsored by Yun Boutique
New Tang Dynasty Television