Latest / Trumponomics / The Consequences of the US-China Blame Game Have Arrived

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The Consequences of the US-China Blame Game Have Arrived · Trumponomics

• 0:00
  Speaker 1: You know, in five years we've gone from trade war
• 0:02
  Speaker 1: to tech war to early stages of a new Cold war.
• 0:06
  Speaker 1: That high octane fuel can be easily ignited by a spark, Taiwan,
• 0:13
  Speaker 1: South China, Sea, China's unlimited partnership with Russia, global recession.
• 0:18
  Speaker 1: Any one of those are sparks that when you are
• 0:21
  Speaker 1: embracing increasingly intense false narratives, could lead to an accidental clash. Hello, Stephanomics,
• 0:34
  Speaker 1: here the podcast that brings you a new year in
• 0:36
  Speaker 1: the global economy and a new year's aspiration that we
• 0:41
  Speaker 1: end twenty three in better shape than we've begun it.
• 0:45
  Speaker 1: Maybe I'm sitting on the wrong side of the Atlantic
• 0:47
  Speaker 1: looking at the wrong kind of gray sky. Everything's just
• 0:51
  Speaker 1: feeling a bit grim. But we're going to break out
• 0:54
  Speaker 1: of that gloom now to offer you some fresh insight
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  Speaker 1: into the central issue of our time. One. I make
• 1:00
  Speaker 1: no apologies for returning to on a regular basis China's
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  Speaker 1: place in the global economy and its relationship with the US.
• 1:08
  Speaker 1: Stephen Roach is a long time contributed to the China debate.
• 1:12
  Speaker 1: He has a new book out, and you just heard
• 1:14
  Speaker 1: a taste of my conversation with him. But before we
• 1:18
  Speaker 1: get to that lofty discussion. Our senior US economic policy editor,
• 1:23
  Speaker 1: Chris Anstey, wants you to look inside the box your
• 1:26
  Speaker 1: new trainers came in. You've probably never given much thought
• 1:33
  Speaker 1: to desiccants. Not many have, But last year, those little
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  Speaker 1: packets you find in a box with a new pair
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  Speaker 1: of shoes were at the center of an international trade route.
• 1:44
  Speaker 1: So in descad desiccand is m the little packet that
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  Speaker 1: is included in products that are shipped, and it's intended
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  Speaker 1: to take moisture out of the air. So, for instance,
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  Speaker 1: it prevents small build up or humility getting to a
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  Speaker 1: point where it can cause damage to the product. That
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  Speaker 1: was Bruce Main, president of a small safety consulting firm
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  Speaker 1: in an Arbor, Michigan. It turns out that China proposed
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  Speaker 1: a new production standard for descants last year that critics
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  Speaker 1: like Main say would have created a huge burden on
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  Speaker 1: manufacturers around the world. Suddenly, anyone making anything with a
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  Speaker 1: desiccant inside would be forced to worry about those little
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  Speaker 1: gel packets complying with a new standard. Shoemakers for sure,
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  Speaker 1: but also producers of food, electric products, textiles, artware, and
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  Speaker 1: leather goods, among others. The battle over this most obscure
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  Speaker 1: packaging item illustrates China's growing ambitions not just to dominate manufacturing,
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  Speaker 1: but to have a much stronger say in how products
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  Speaker 1: are made and traded around the world. Put in another way,
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  Speaker 1: the next round in the great global trade war between China,
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  Speaker 1: the US, and Europe may be waged by Wangi, government
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  Speaker 1: bureaucrats and design engineers over global standards. Here is Emily Taylor,
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  Speaker 1: an intellectual property lawyer who now heads Oxford Information Labs,
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  Speaker 1: a cyber intelligence consultancy. The Chinese approach which seems very daunting,
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  Speaker 1: very organized, long term and patient, and in response, you know,
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  Speaker 1: it can feel like we need to up our game
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  Speaker 1: in the West that China has understood that in many
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  Speaker 1: standards organizations it's a numbers game, is about putting people
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  Speaker 1: on planes or sticking people in the zoom room and
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  Speaker 1: having lots and lots and lots of submissions. And you know,
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  Speaker 1: in response to that, the West really seems to be
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  Speaker 1: scrabbling around at times and lacks that coordination. When most
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  Speaker 1: people use products and services, they don't give much thought
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  Speaker 1: to standards that govern how they're made. You might use
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  Speaker 1: the term gold standard or substandard but what are standards?
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  Speaker 1: There are scores of different standard setting bodies for everything
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  Speaker 1: from pharmaceuticals to electronics. These global standards organizations were developed
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  Speaker 1: over the past century and war by company representatives, technical
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  Speaker 1: specialists representing big buyers, and civic groups basically insiders that
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  Speaker 1: got together and settle on the most efficient, cost effective
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  Speaker 1: way to make things. Of course, the whole process has
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  Speaker 1: been dominated by the West, with an outside presence of
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  Speaker 1: American and European representatives. Now enter China, which unsurprisingly wants
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  Speaker 1: a say in setting global standards rather than simply accepting
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  Speaker 1: what others have decided. Last year, the Chinese his government
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  Speaker 1: put out a game plan for strengthening China's hand in
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  Speaker 1: standards setting. It's been dubbed China Standards, which gives a
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  Speaker 1: clue of the target date that they are aiming at.
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  Speaker 1: Bruce Mayne, the Michigan safety consultant, shared concerns about China's
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  Speaker 1: designs on the lowly desiccant. Those of us that were
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  Speaker 1: involved said, not certain. It really matters what the desiccant
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  Speaker 1: is made of or it just doesn't work. Is it
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  Speaker 1: effective in uh doing what it's supposed to do in
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  Speaker 1: terms of pulling moisture out of a package or preventing
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  Speaker 1: humidity from building up, and the size of the shape.
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  Speaker 1: The testing of the desiccating isn't necessarily something that we
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  Speaker 1: need a standard on. We certainly don't want to spend time,
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  Speaker 1: our time and energy trying to write those kinds of standards,
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  Speaker 1: so that's why we did not support it. That Ever,
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  Speaker 1: in the end, US representatives helped to kill off that
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  Speaker 1: desiccant proposed l but it illustrates concerns for standards to
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  Speaker 1: potentially become used as a tool for influence, and it
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  Speaker 1: reflects broader worries in places including the US and Europe
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  Speaker 1: about China's intentions. Probably the most contentious area of standard
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  Speaker 1: setting is the field of technology. Taylor, the intellectual property lawyer,
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  Speaker 1: has looked closely at China's rising role in standards development organizations.
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  Speaker 1: Last year, she set up a group called the DNS
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  Speaker 1: Research Federation to shine a light on standard setting as
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  Speaker 1: it applies to the Internet. Among the group's concerns is
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  Speaker 1: the way China is trying to push a new set
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  Speaker 1: of Internet Protocols or new i P that differs significantly
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  Speaker 1: from the open approach that underpinned the original structure of
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  Speaker 1: the Web. The fear is it could be a cyber
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  Speaker 1: security risk. Although surveillance takes place on the Internet today,
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  Speaker 1: absolutely it does. There are many human rights violations, but
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  Speaker 1: the Internet was not designed for surveillance. What we see
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  Speaker 1: with new i P is a network that is actually
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  Speaker 1: designed and optimized for surveillance, whether of a domestic population
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  Speaker 1: or through data sharing laws domestically perhaps internationally as well.
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  Speaker 1: Some of the tactics deployed by China in standard setting
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  Speaker 1: bodies have alarmed many observers, like when Chinese representatives show
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  Speaker 1: up in numbers in an effort to boost the chance
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  Speaker 1: of Chinese proposals winning adoption. But not everybody is convinced
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  Speaker 1: that China is wielding undue influence and standards. After all,
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  Speaker 1: Western nations do want China to continue to participate so
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  Speaker 1: that global companies don't have to deal with China standards
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  Speaker 1: being different from other markets. Al Kanyevsky is a fellow
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  Speaker 1: at Stanford Law School with a forthcoming book on standard
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  Speaker 1: setting in information and Communication technology. She argues that Western
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  Speaker 1: stakeholders are a little bit premature in their dire assessments
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  Speaker 1: of China's recent forays into standard setting, given that Western
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  Speaker 1: nations still dominate the process. Standardization system that is open,
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  Speaker 1: that is consensus base that doesn't exclude stakeholders is the
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  Speaker 1: system that we need for the technology to work. So
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  Speaker 1: I would be very worried if such initiatives to exclude
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  Speaker 1: particular stakeholders bait China BA or hawaigh bet particular European
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  Speaker 1: or American companies, if such initiatives would actually make it
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  Speaker 1: to standard setting bodies and would be adopted by them.
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  Speaker 1: But especially when it comes to technology, there's increased danger
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  Speaker 1: of two separate economic spheres developing on one side, the
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  Speaker 1: West with its own set of standards, on the other,
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  Speaker 1: China and other non democratic regimes. The US and European
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  Speaker 1: Union last year set up a new cooperation forum called
• 9:18
  Speaker 1: the treat and Technology Council. One of the items on
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  Speaker 1: the agenda, you guessed it coordinating on standards. Nothing dry
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  Speaker 1: about this subject, In fact, maybe it needs a des second.
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  Speaker 1: I'm Chris Ansty for Bloomberg News. So having had that
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  Speaker 1: brilliant micro level example of the way China's role in
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  Speaker 1: the world is changing, We're going to go extremely big
• 9:51
  Speaker 1: picture now with Stephen Roach, who will be a familiar
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  Speaker 1: figure to anyone listening. Who's taken an interest in the
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  Speaker 1: global economy and especially Asia for the past few decades.
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  Speaker 1: An economist, former chairman of Morgan Stanley. He is now
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  Speaker 1: a senior fellow at the Paul Si China Center at
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  Speaker 1: Yale Law School. He's written a lot over the years
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  Speaker 1: about the future of the US and China, and that's
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  Speaker 1: the subject of his new book, Accidental Conflict, America, China
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  Speaker 1: and the Clash of False Narratives. Stephen, very nice to
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  Speaker 1: have you on the show and to see you again,
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  Speaker 1: if only virtually. We are seeing a lot of books
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  Speaker 1: about potential conflict between America and China. But what what's
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  Speaker 1: your specific take. In the past five years, Stephanie, We've
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  Speaker 1: gone from a trade war to a tech war, to
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  Speaker 1: the early stages of a new Cold War, a ominous
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  Speaker 1: escalation of conflict that did not have to happen had
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  Speaker 1: it not been for the false narratives, and both nations
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  Speaker 1: embrace towards the other. So I guess we should digging
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  Speaker 1: into that a little bit. How do you see those
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  Speaker 1: false narratives developing and and how do they affect their
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  Speaker 1: relationship going forward? Do you think Okay, let me let
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  Speaker 1: me just answer that question in two parts. One, why
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  Speaker 1: do both UM nations have this UM penchant to embrace
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  Speaker 1: false narratives? And what are some of these key false
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  Speaker 1: narratives UH? My thesis and answering. The first one is
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  Speaker 1: that both nations are surprisingly vulnerable UH in terms of
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  Speaker 1: their economic prospects as well as there the stature as
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  Speaker 1: leaders in the world and the politics at play in
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  Speaker 1: both nations. And for example, you know, Joe Biden gets
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  Speaker 1: elected UM a couple of years ago, razor thin majority
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  Speaker 1: in the Congress but a strong bipartisan anti China view
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  Speaker 1: that allowed him no wiggle room to disengage from Trump's
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  Speaker 1: China policy. So UH, he on his first day in
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  Speaker 1: office repudiated a number of Trump's most unpopular policies, like
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  Speaker 1: the border wall construction in Mexico the Muslim travel ban,
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  Speaker 1: but he did nothing to change in China because if
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  Speaker 1: he had done that, he would have been skewered by
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  Speaker 1: his own party, let alone the Republicans. Hi Jinping has
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  Speaker 1: a similar political calculus, aspiring for great power status UM.
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  Speaker 1: The US is viewed as the greatest impediment to his
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  Speaker 1: um UH political objectives of this nationalistic China dream. So
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  Speaker 1: both nations have strong motives to blame others for their
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  Speaker 1: own vulnerabilities. The second part of the question is what
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  Speaker 1: are some of these false narratives. I have eight chapters
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  Speaker 1: in the book that detail false narratives, split evenly between
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  Speaker 1: both sides of the conflict. The one I'll focus on
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  Speaker 1: from the U S side is um we blame China
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  Speaker 1: for our trade deficit. Nations have trade deficits because they
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  Speaker 1: don't save uh and the US right now has the
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  Speaker 1: lowest domestic savings rate of any leading nation in history.
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  Speaker 1: And when you don't save and you want to grow,
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  Speaker 1: you import surplus savings from abroad, and you run massive
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  Speaker 1: current account or balance of payments deficits that drive multilateral
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  Speaker 1: deficits with many nations. In the last year, we have
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  Speaker 1: full data for the US RAN trade deficits with a
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  Speaker 1: hundred and six nations. China was the largest, but by
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  Speaker 1: no means the only one. But by blaming China for
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  Speaker 1: our trade deficit, just as we blamed UM Japan thirty
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  Speaker 1: years ago for very similar reasons, I might add, we
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  Speaker 1: are ducking the big issue that we need to address
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  Speaker 1: to fix our own vulnerable economy, and that is a
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  Speaker 1: shortfall of domestic saving a classic false narrative. The Chinese
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  Speaker 1: side is, you know, equally if not even more culpable.
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  Speaker 1: The one I'll single out for you is China recognized
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  Speaker 1: now nearly twenty years ago that it needed a restructure,
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  Speaker 1: rebalance its economy, and shift from an economy that was
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  Speaker 1: reliant on exports and investment a one that drew increasingly
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  Speaker 1: on consumer demand. They haven't done that. They blame that
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  Speaker 1: on America's stated policy to contain China's peaceful rise. Uh.
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  Speaker 1: The US does have a containment policy UM that has
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  Speaker 1: aimed directly at China, and that's a UM, you know,
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  Speaker 1: a key theme in many aspects of my book. But
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  Speaker 1: America's efforts to contain China have literally nothing to do
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  Speaker 1: with China's own inability to rebalance its economy to be
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  Speaker 1: driven more by internal private consumption. China's dropped the ball
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  Speaker 1: on this for a number of reasons that I detail
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  Speaker 1: on the book. But by fixating on US containment, they're
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  Speaker 1: guilty of an egregious false and narrative with respect to
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  Speaker 1: the US. I think as an economist, you've you do
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  Speaker 1: more in this book. I think that most people to
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  Speaker 1: to show the interconnections between that great power rivalry and
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  Speaker 1: the macro economic imbalances that opened up between US and
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  Speaker 1: China once China's growth took off, and as you've just explained,
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  Speaker 1: you end up with this sort of what you call
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  Speaker 1: a codependency, with the insufficient savings by the US being
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  Speaker 1: being matched by this massive trade deficit and if you like,
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  Speaker 1: excess exporting U by by China. And you've just highlighted
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  Speaker 1: there in a sense that was what each side has
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  Speaker 1: done wrong in failing to kind of get to grips
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  Speaker 1: with that. But I'm interested going forward. I mean, there
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  Speaker 1: is obviously an element of this which is just about
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  Speaker 1: China getting stronger but continuing to be very different from
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  Speaker 1: the US in terms of its values and the kind
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  Speaker 1: of global order that it wants to participate in, and
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  Speaker 1: the US increasingly thinking it should try and thwart that development,
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  Speaker 1: having kind of given up on the China becoming a
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  Speaker 1: more like the US. So I just wondered, how does
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  Speaker 1: that that sort of classic view which says, you know,
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  Speaker 1: the US tried was hoping that the China was going
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  Speaker 1: to become, you know, like Europe, and it's not like Europe.
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  Speaker 1: So now it has to just stop it being a
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  Speaker 1: prevent providing a rival economic system for the world. Not
• 17:05
  Speaker 1: so sure that the US wanted to China to be
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  Speaker 1: like Europe. I think the US wanted China to be
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  Speaker 1: like America. UH. And this is a I think a
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  Speaker 1: hopelessly naive expectation that was framed around the time of
• 17:22
  Speaker 1: China's push for w t O membership UM that took
• 17:29
  Speaker 1: over a decade to negotiate. Finally UH culminated UM under
• 17:35
  Speaker 1: President Clinton in late two thousand one h and his
• 17:42
  Speaker 1: argument that he made to the Congress is, UM, you know,
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  Speaker 1: if we don't allow China to to join our system,
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  Speaker 1: than others are going to benefit from China's extraordinary rise.
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  Speaker 1: And by finding China to an American centric trading system
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  Speaker 1: under the w t O, UH, it's compliance with those
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  Speaker 1: rules would pretty much turn it into a system that
• 18:14
  Speaker 1: mirrored hours that was that was just hopelessly naive. And
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  Speaker 1: this is a Washington failure as well as a European failure,
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  Speaker 1: and probably a Chinese failure as well. Lies at the
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  Speaker 1: heart of this conflict. The notion of coexistence, which is
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  Speaker 1: something that UH Henry Kissinger still as he's nearing a
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  Speaker 1: hundred years old right now, continues to stress as the
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  Speaker 1: ultimate um UH resolution for the U. S. China conflict
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  Speaker 1: um needs to be much more open than it has
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  Speaker 1: been under this sort of false premise of mirroring one
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  Speaker 1: systems values with the other. I was baking at the U. S.
• 19:01
  Speaker 1: Treasury just as that deal was being finalized at the
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  Speaker 1: end of end of the nineties, and I guess the
• 19:06
  Speaker 1: debate was had about whether it was realistic um to
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  Speaker 1: expect the China to be on anything like that trajectory.
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  Speaker 1: I guess the question arises of what's the alternative if
• 19:16
  Speaker 1: you're Donald Trump or indeed some in the Biden administration
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  Speaker 1: that was the sort of original mistake was to let
• 19:22
  Speaker 1: China into the World Trade Organization. But I'm not I'm
• 19:25
  Speaker 1: not sure that you're saying that was a mistake. You
• 19:27
  Speaker 1: just think we should have told ourselves a different story
• 19:29
  Speaker 1: about it. I don't think it was a mistake at all,
• 19:31
  Speaker 1: because you know, by engaging China and bringing China into
• 19:36
  Speaker 1: the w t O, that was a powerful driver of
• 19:41
  Speaker 1: of Chinese economic growth at that time and really powered
• 19:45
  Speaker 1: its export led momentum. And from those exports, you know,
• 19:50
  Speaker 1: income constrained American consumers are able to expand their purchasing
• 19:55
  Speaker 1: power over low cost and increasingly high quality Chinese goods. UM.
• 20:02
  Speaker 1: China became the largest purchaser for a long time of
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  Speaker 1: the U S treasuries to enable US to fund our
• 20:10
  Speaker 1: budget deficits, and the Chinese market as our America's third
• 20:15
  Speaker 1: largest and most rapidly growing export market over the last
• 20:20
  Speaker 1: twelve or fifteen years. So there were huge benefits that occurred.
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  Speaker 1: And I think the mistake we made is that we
• 20:28
  Speaker 1: wanted more. We expected China to transform uh it's system
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  Speaker 1: in a way that uh matched not just our economic needs,
• 20:41
  Speaker 1: but are political and social value system. And you know,
• 20:47
  Speaker 1: there there was reason to hope that that was occurring,
• 20:51
  Speaker 1: UM under the sort of dunk shopping model of a
• 20:55
  Speaker 1: market based socialism, where China was certainly taking on an
• 21:00
  Speaker 1: opening up to a lot of Western values. But then
• 21:04
  Speaker 1: along came Shi jin Ping ten years ago who reverse
• 21:08
  Speaker 1: course on virtually all of that counter and we've taken
• 21:13
  Speaker 1: enormous exception to that. Listening to you the way you
• 21:16
  Speaker 1: describe China's motivations and it's different outlook on the world
• 21:21
  Speaker 1: and indeed talk about coexistence, UM. You know, many would
• 21:26
  Speaker 1: say that the title le Ville book sounded a bit
• 21:27
  Speaker 1: odd because it doesn't sound like the conflict is accidental
• 21:30
  Speaker 1: at all. I mean, you have a new rival power
• 21:32
  Speaker 1: in the world which has very different views of kind
• 21:38
  Speaker 1: of basic notions of whether it's press freedom or human rights, democracy,
• 21:47
  Speaker 1: any of these things. I mean, it's sort of inevitable
• 21:49
  Speaker 1: that they will come into conflict with the West broadly speaking,
• 21:54
  Speaker 1: who believe that these values are important? Isn't it? Well,
• 21:58
  Speaker 1: certainly to very powerful nations, you know, one the ruling
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  Speaker 1: hedgemon if you want to call it, for lack of
• 22:06
  Speaker 1: a better term, and the other arising superpower, there was
• 22:10
  Speaker 1: always the possibility of of conflict UH and friction. The
• 22:17
  Speaker 1: concept of accidental conflict says that that by embracing false impressions,
• 22:24
  Speaker 1: false narratives of the other, we build on these mistaken
• 22:30
  Speaker 1: views that we harbor their politically expedient for our own purposes,
• 22:35
  Speaker 1: and the false narratives UH collide, they duel with one another,
• 22:41
  Speaker 1: and they have the potential to become the high octane
• 22:45
  Speaker 1: fuel of conflict escalation. And again back to the to
• 22:50
  Speaker 1: the first sentence I I uttered to you today, and
• 22:54
  Speaker 1: that is, you know, in five years, we've gone from
• 22:57
  Speaker 1: trade war to tech war to early stages of a
• 23:00
  Speaker 1: new Cold war, that high octane fuel can be easily
• 23:04
  Speaker 1: ignited by a spark. Taiwan, South China, see China's unlimited
• 23:11
  Speaker 1: partnership with Russia, who is now waging an unconscionable war,
• 23:15
  Speaker 1: America's own vulnerabilities, global recession, which is a distinct possibility
• 23:20
  Speaker 1: this year. Any one of those are sparks that when
• 23:23
  Speaker 1: when you are embracing increasingly intense false narratives, could lead
• 23:30
  Speaker 1: to an accidental clash. I mean, just a few days ago,
• 23:35
  Speaker 1: um I saw a report I'm sure as you did,
• 23:38
  Speaker 1: of a fighter jet over the Chinese fighter jet over
• 23:42
  Speaker 1: the South China. See that came uh extraordinarily close to
• 23:49
  Speaker 1: an American aircraft. Uh. Accidents can happen, and big wars,
• 23:55
  Speaker 1: world wars have been started by accidents in the past,
• 23:58
  Speaker 1: and so I shows that title to express that potential
• 24:04
  Speaker 1: in the context of this conflict. But those are genuine
• 24:09
  Speaker 1: reasons why we might conflict with China, they're not They're
• 24:13
  Speaker 1: not false reasons. China wants to take back Taiwan, which
• 24:18
  Speaker 1: as far as we could see, does not want to
• 24:20
  Speaker 1: be back in as part of China. Um it wants
• 24:24
  Speaker 1: to have an unrivaled supremacy in East Asia, where we
• 24:29
  Speaker 1: have and the US has powerful allies and security relationships.
• 24:36
  Speaker 1: So is that a false narrative to be that China
• 24:41
  Speaker 1: does want to take over these things and we don't
• 24:43
  Speaker 1: want to let them. That seems to be the sort
• 24:45
  Speaker 1: of uncomfortable truth. Those are Those are legitimate areas of
• 24:49
  Speaker 1: dispute one s I believe strongly in and as does
• 24:52
  Speaker 1: the other. I'm not arguing that those are false. But
• 24:57
  Speaker 1: what I'm saying is that the confluent of these false
• 25:01
  Speaker 1: narratives makes dispute resolution over legitimate issues all but impossible.
• 25:07
  Speaker 1: I do end the book, you know, with a prescriptive
• 25:12
  Speaker 1: approach to resolve disputes UH in the context of a
• 25:18
  Speaker 1: conflicted relationship. The current architecture of engagement between these two
• 25:26
  Speaker 1: UH leading superpowers is completely dysfunctional. The nations don't talk
• 25:32
  Speaker 1: to one another. When they do talk, it's you know,
• 25:35
  Speaker 1: it's zoom calls or There was a three hour plus
• 25:38
  Speaker 1: meeting in Bali ahead of a G twenty meeting in
• 25:45
  Speaker 1: November that accomplished nothing. And I make a fairly detailed
• 25:50
  Speaker 1: proposal for a new organization that I call a U
• 25:54
  Speaker 1: S China Secretariat, a permanent organization located in a neutral
• 26:00
  Speaker 1: venue that is empowered to address all aspects of the relationship,
• 26:09
  Speaker 1: from trade and economics to technology, cybersecurity, human rights, health
• 26:17
  Speaker 1: fully staffed by equal complements of Chinese and American professionals
• 26:22
  Speaker 1: working full time seven on all these and other aspects
• 26:28
  Speaker 1: of the relationship. Two frame problems AH provide mutually authored
• 26:38
  Speaker 1: UH policy white paper, sometimes with dissenting views from one
• 26:44
  Speaker 1: from from one side or the other, but stressing a
• 26:48
  Speaker 1: collaborative approach toward dispute resolution rather than the current contentious
• 26:54
  Speaker 1: approach that we have right now. This relationship needs a
• 26:59
  Speaker 1: far more role bust platform for engagement. And this may
• 27:03
  Speaker 1: not be the perfect suggestion, but it sure as heckt
• 27:07
  Speaker 1: beat what we've gotten now. Well, it's interesting that I,
• 27:10
  Speaker 1: you know, we've talked to quite a lot of people
• 27:12
  Speaker 1: about this issue over the months, and they all whatever
• 27:16
  Speaker 1: whatever direction they come from, they all end up with
• 27:20
  Speaker 1: a version of what you're talking about. There's a way
• 27:23
  Speaker 1: of starting to rebuild trust, because that's one of the
• 27:26
  Speaker 1: things that we worry has really gone by the wayside.
• 27:29
  Speaker 1: I had we're going to run out of time, but
• 27:31
  Speaker 1: I had two more questions for you and one of them.
• 27:34
  Speaker 1: And it will sound a bit self interested since I'm
• 27:36
  Speaker 1: sitting in the UK asking this, but I wonder whether
• 27:38
  Speaker 1: you did think there was a role for Europe in
• 27:43
  Speaker 1: UM helping to reduce the false narratives and potentially rebuild trust.
• 27:49
  Speaker 1: And the reason I say that is although obviously the
• 27:52
  Speaker 1: European Union has been, if you like, on the U
• 27:55
  Speaker 1: S side of many of these disputes, it's also been
• 27:58
  Speaker 1: much more reluctant than the US to see this as
• 28:02
  Speaker 1: a zero sum conflict, and somewhere like Germany is obviously
• 28:07
  Speaker 1: very torn about and very concerned about the possibility of
• 28:11
  Speaker 1: a decoupling of the global economy. How do you see
• 28:13
  Speaker 1: Europe's role? Is it completely just a bystander in this
• 28:17
  Speaker 1: and how this relationship evolves, or could there be something
• 28:20
  Speaker 1: more constructive that Europe could contribute. Europe is certainly not
• 28:24
  Speaker 1: a bystander. It's a uh, you know, an important actor
• 28:28
  Speaker 1: in the global economy, in the geopolitical arena, and does
• 28:34
  Speaker 1: have i'd say more mixed feelings about its relationship with
• 28:41
  Speaker 1: China right now than as evident certainly the United States UM.
• 28:46
  Speaker 1: The US administration, however, has been putting a lot of
• 28:49
  Speaker 1: pressure on its European allies to take sides in this dispute,
• 28:53
  Speaker 1: and that's an uncomfortable place for Europe to be. But
• 28:59
  Speaker 1: I think UH Europe has ample leeway to chart its
• 29:03
  Speaker 1: own course with respect to China and to point out
• 29:07
  Speaker 1: that some of the UH the issues that the US
• 29:12
  Speaker 1: takes UM is such a close to an existential threat
• 29:18
  Speaker 1: in the technology arena, for example, are things that Europe
• 29:22
  Speaker 1: is handling very differently. And I would cite UH the
• 29:29
  Speaker 1: the Huawei centric US fixation on the Chinese technology threat.
• 29:35
  Speaker 1: Huawei has UH still has a significant presence in many
• 29:43
  Speaker 1: European UH telecommunications sectors. Huawei has been investigated assiduously by
• 29:51
  Speaker 1: the UK, by Italy and by other European economies, and
• 29:55
  Speaker 1: the egregious threats of espionage that the US just takes
• 29:59
  Speaker 1: for ranted through Huawei's UM the state of the art
• 30:04
  Speaker 1: five G telecommunications infrastructure have never been validated. There was
• 30:10
  Speaker 1: one instance of a backdoor leak UH in Italy a
• 30:14
  Speaker 1: number of years ago that Huawei was quick to resolve.
• 30:20
  Speaker 1: The Italian telecommunications providers have actually increased their reliance on
• 30:26
  Speaker 1: Huawei since then. So I think that technology which is
• 30:30
  Speaker 1: such a a major aspect of the growing conflict between
• 30:35
  Speaker 1: the US and China is one that the Europeans could
• 30:39
  Speaker 1: play a very constructive role in mediating and pointing out.
• 30:42
  Speaker 1: I would hope a more constructive outcome. That's fascinating because
• 30:46
  Speaker 1: of course there'll be lots of people very focused on
• 30:49
  Speaker 1: this issue, clamoring as they listen to this to say
• 30:52
  Speaker 1: that that's a that the European position that presents a
• 30:55
  Speaker 1: naive view of of Huawei and the is always that
• 31:00
  Speaker 1: point that's made that even if it's not happened yet,
• 31:03
  Speaker 1: you know, there is a legal requirement for any Chinese
• 31:05
  Speaker 1: company if if asked to provide information to the government,
• 31:10
  Speaker 1: especially under sieg ng Ping. That's been quite clear. Yeah.
• 31:13
  Speaker 1: I think the idea of trying to wall off one nation,
• 31:18
  Speaker 1: one systems platform for from another because of the difference
• 31:26
  Speaker 1: in systems that we've addressed earlier is the taking decoupling
• 31:34
  Speaker 1: to its most destructive endpoint, and I think we need
• 31:38
  Speaker 1: to avoid that. My final question is a bit more personal, Stephen.
• 31:41
  Speaker 1: I mean, as long as I've been thinking about the
• 31:43
  Speaker 1: global economy and sometimes and writing or reporting about it,
• 31:47
  Speaker 1: um you have been an observer and an analyzer of
• 31:53
  Speaker 1: of the global economy, but also US and China particularly,
• 31:57
  Speaker 1: and having spent a lot of time in Asia, obviously,
• 32:01
  Speaker 1: I just wondered whether they were looking back. I mean,
• 32:03
  Speaker 1: what have you changed your mind on? I mean, when
• 32:05
  Speaker 1: you see how the world has evolved relative to what
• 32:08
  Speaker 1: we might have thought, say in the early nineties, Um,
• 32:12
  Speaker 1: how have you been surprised? Have you changed? I mean,
• 32:16
  Speaker 1: you obviously have changed your view in some important ways,
• 32:19
  Speaker 1: both with regard to US and China in light of events. Yeah. Yeah,
• 32:24
  Speaker 1: it's been a journey for me. Um. You know, I
• 32:27
  Speaker 1: would say, um, you know, the perch I had at
• 32:30
  Speaker 1: Morgan Stanley for thirty years was really, um, you know,
• 32:34
  Speaker 1: a great um sort of learning experience from me. For
• 32:38
  Speaker 1: the first half of that I was US based, focused
• 32:42
  Speaker 1: on the US economy, which is something I did at
• 32:46
  Speaker 1: the Federal Reserve prior to coming to Wall Street, and
• 32:51
  Speaker 1: I was heading up the global economics team. And then
• 32:54
  Speaker 1: along came the Asian financial crisis the late nineties. Uh.
• 32:58
  Speaker 1: And you know, I'd been to Asia a lot, and
• 33:02
  Speaker 1: I've been to China a few times, but I had
• 33:04
  Speaker 1: no idea really what was going on inside. I had
• 33:07
  Speaker 1: a hunch that China would really shape the endgame of
• 33:11
  Speaker 1: what was then the worst and first crisis of globalization.
• 33:16
  Speaker 1: Little did we know, but that's the way we thought
• 33:18
  Speaker 1: of it then, and UM it quickly became evident to
• 33:21
  Speaker 1: me that China was cut from a different cloth and
• 33:24
  Speaker 1: would come out of the crisis um uh much better
• 33:27
  Speaker 1: than the rest of Asia, especially Japan, which had been
• 33:32
  Speaker 1: the leader. And so I switched my my role. Then
• 33:36
  Speaker 1: I became a global economists fixated on Asia, especially on
• 33:41
  Speaker 1: rising China, and eventually moved to Hong Kong and headed
• 33:46
  Speaker 1: up Morgan Stanley's Asian businesses. And you know, I was
• 33:50
  Speaker 1: really convinced that China's transformation along the lines of the
• 33:54
  Speaker 1: dunk shopping model was really going to UH lead to
• 33:58
  Speaker 1: a powerful unstopp of bowl engine, of a new engine
• 34:02
  Speaker 1: of of global growth that UH could could benefit the
• 34:07
  Speaker 1: West as well as itself. And then, as I indicated earlier,
• 34:12
  Speaker 1: long term chijin Pain who has reversed much of that
• 34:16
  Speaker 1: with this fixation on ideology and control that has had
• 34:22
  Speaker 1: limited UM has limited the consumer and rebalancing at a
• 34:27
  Speaker 1: time when China needs it the most. China has an
• 34:30
  Speaker 1: aging population UH and the working age population is already contracting,
• 34:35
  Speaker 1: and so when you have a contracting working age population,
• 34:39
  Speaker 1: to stay the course of growth and prosperity, you need
• 34:42
  Speaker 1: an acceleration of productivity growth. That's the economist in me.
• 34:47
  Speaker 1: And under Shijing pain, productivity growth is going the other way,
• 34:51
  Speaker 1: and so China is in trouble. Uh. And that has
• 34:55
  Speaker 1: really been a tough pill for someone like myself who
• 35:00
  Speaker 1: has been a die hard China optimist, A swollen Stephen Roach.
• 35:04
  Speaker 1: That's a hell of a note on which to end,
• 35:06
  Speaker 1: but I think we will try to do that. Thank
• 35:09
  Speaker 1: you very much for your time and thanks for your book.
• 35:11
  Speaker 1: Thank you, Stephanie. Great talking to you. As always. That's
• 35:21
  Speaker 1: it for Stephanomics. We'll be back next week. In the meantime,
• 35:24
  Speaker 1: please rate us wherever you get this podcast, and check
• 35:26
  Speaker 1: out the Bloomberg News website for more economic news and
• 35:30
  Speaker 1: views on the global economy. You should also follow at
• 35:33
  Speaker 1: economics on Twitter. This episode was produced by Yang Yang,
• 35:37
  Speaker 1: Summer Saddi, and Magnus Henrickson, with special thanks to Stephen
• 35:41
  Speaker 1: Roach and Chris Hadsty. Mike Sasso is the executive producer
• 35:45
  Speaker 1: of Stephanos