Susan Schwab, chair of the board of directors of the National Foreign Trade Council and former United States Trade Representative, sat down with Borderlex’s Iana Dreyer in Washington to discuss US-China and EU US relations.
How are US views on China evolving and how is it affecting trade?
China is very much a focus for the Republican party, the Democratic party, the executive branch and the legislative branch.
There is very much a concern that China does not mean well, that it is a threat. Recent events related to China – such asthe balloon incident – only strengthened the view.
The Covid-19 pandemic brought home to everyone the fragility of supply chains. China’s lack of transparency over Covid-19 has reinforced over and over and over again the view in Washington that there are allies and trading partners that you can trust and some that you can’t trust.
That is a challenge for all of us, because we have had for decades very good people-to-people and business relationships with China.
There have of course always been bad experiences with Chinese protectionism, intellectual property practices and digital trade practices. These have gotten worse since about 2005-2006, and especially since Xi Jinping came into office.
Yet there are still US and international companies and producers, farmers, service providers that that are doing well in China. And there still are Chinese companies that are doing very well in the United States. Last year’s US trade deficit with China is the largest ever in history.
This is a challenging position to be in for policy makers.
Is this a new Cold War? Is the US decoupling from China?
The situation is different from the Cold War, where there weren’t meaningful economic relations with the Soviet Union.
As to the US debate about economic decoupling with China: I would argue the decoupling process clearly started on the Chinese side, not on the US side.
There is a consensus in Washington that there is a real problem with China. But at this point there is no consensus about what to do about it.
There’s clearly a consensus that that we should not be selling to China the rope to hang ourselves. That explains US export control policies and the debate about controlling inward and outbound investments from and to China. The situation will become even more challenging the longer the Russia-Ukraine war goes on.
There is also a recognition – but, I would argue, not sufficient action – on engaging friends and like-minded friends and allies. We may be doing a fair amount diplomatically. We’re not doing as much economically and in the trade arena as I think we could and should be doing.
What is your assessment of EU-US trade relations and of the Trade and Technology Council?
We ought to focus on talking about issues of mutual concern. We really need to figure out how we’re going to work together on transatlantic standards, on 6G, on how we’re going to make sure that the digital world remains an open system.
When you look at the agenda for the Trade and Technology Council, there are some really critical issues left out of it, such as digital regulations. How can we be talking transatlantic technology and not be talking about digital policies?
We shouldn’t be sniping at each other or taking actions that aren’t going to make a big difference to business.
The fundamentals in the EU-US relationship I think are very good. But there is a perception that Europe risks choosing pocketbooks over national security in its relationship to China. This could create a rift.
The EU wants to reform the WTO and restore the appellate body – what’s your view?
I am comfortable with the approach the current US administration has taken on the appellate body reform issue: a bottom up approach to try to rethink WTO dispute settlement more broadly.
A bigger issue is that there are areas where the WTO isn’t addressing the problems of today, such as digital and subsidies. Together with the EU and Japan, we ought to be able to figure out solutions on Chinese overcapacity in steel [and bring these to the table at the WTO].
