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Coercion and Countermoves: The US-China Economic Rivalry · China Considered

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[MUSIC]
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>> Elizabeth Economy: Welcome to China Considered, a podcast that brings fresh
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insights and informed discussion to one of the most consequential issues of our time,
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how China is changing and changing the world.
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I'm Liz Economy, Hargrove Senior Fellow and Co-director of the U.S China and
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the World Program at the Hoover Institution at Stanford University.
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Today I have with me, Dr. Melanie Hart,
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who who just stepped down from her position as the Senior Advisor for
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China and the Indo Pacific in the Office of the Undersecretary for Economic Growth,
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Energy and the environment at the U.S. department of State.
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And she's now the Senior Director for the Global China Hub at the Atlantic Council,
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Melanie, thank you so much for joining me today.
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>> Melanie Hart: Thanks for having me, Liz.
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>> Elizabeth Economy: So you were instrumental at the State Department in
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designing and driving forward a number of the agency's most consequential
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China initiatives, particularly around combating Chinese economic coercion.
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Can you start by just telling us a little bit about what is economic coercion?
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Why did you decide to focus on this particular issue at this particular time?
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As you know, it's been around for a long time, but I've never seen a U.S
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strategy to combat economic coercion, what made you take on this issue?
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>> Melanie Hart: Sure, so I joined the State Department in January 2021,
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when the Biden administration was coming in.
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It was the thick of when China was targeting Australia, Australia called for
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an independent investigation into the origins of the COVID crisis, and Beijing
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hit them with a wide array of ridiculous trade measures, economic coercion.
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And as I was going around the department talking to the really great
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career diplomats saying, what should the Biden team focus on?
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Because the Biden team came in with our own priorities but a really important part
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of the process is going to the people who've been in the trenches and
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hearing from them where they think we should focus.
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Economic coercion just kept coming up again and again,
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there was a real desire across the department and across the interagency to
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find a way to do more than just be there diplomatically, to be there economically.
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And by happenstance, my boss, Under Secretary Jose Fernandez,
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was confirmed finally by the Senate in August of 2021 and
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that was the exact time that Beijing decided to go after Lithuania.
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And what Jose told us was, look, here we go let's use Lithuania as our test case.
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Their GDP is only 2% dependent on China, if we can't win this one,
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we all know we have a problem.
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Let's throw the toolkit,
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let's figure out what our toolkit is by digging around the interagency and
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finding every possible mechanism that we can use to directly support Lithuania.
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And I think that case was really the game changer on the one hand for other
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nations who had been targeted by China or were targeted by China afterwards.
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When they looked at Lithuania, they saw a model for
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how you can stand up for yourself.
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Not back down in the face of bullying and not just stand up, but
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actually turn it into a win for your own economy.
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Lithuania replaced all of the China trade that they lost with new
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partnerships in Asia.
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They started new embassies in Australia, South Korea and Singapore.
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They're laser exports to South Korea doubled so
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a lot of countries looked at that and said, hey, that's not a bad deal actually.
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And we were really shocked actually after the Lithuania case that other
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countries started knocking on the door and saying we want the Lithuania package,
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is that an option if Beijing gets mad at us too?
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So that was just really the game changer and that was I credit Lithuania for
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inspiring a lot of us for how we can really step in and succeed.
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>> Elizabeth Economy: So let me take you one step back and just ask.
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I mean when you look across the universe of Chinese economic coercion,
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is there a certain issue or
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set of issues that China tends to get particularly upset about and
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then tries to use the leverage of its market to change countries policies.
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What prompted for example, the Lithuania case?
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>> Melanie Hart: In Lithuania's case they were allowing Taiwan to open
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a local representative office and to use the name Taiwan in the title,
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that doesn't violate Europe's one China policy.
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But Beijing didn't like it but
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some people assume that this is a Taiwan thing, it's not.
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You see cases on commercial issues look at Australia that was because Australia
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called for an independent investigation of the COVID crisis with Canada.
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It was over Meng Wanzhou and that that detention issue, it really varies by case.
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We've seen them target Philippine bananas in the past over South China Sea.
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When you look at the empirical record,
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there is almost no issue that Beijing won't use as a trigger for
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economic coercion, so unfortunately there's really no safe space.
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>> Elizabeth Economy: Yeah, I remember back when Daryl Morey,
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who was the general manager of the Houston Rockets for
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the NBA when he tweeted fight for freedom, stand with Hong Kong.
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And then the Chinese began to target the NBA and
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have the all their gear removed from the shelves and particularly went off
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after the Houston Rockets, but also stopped televising the games in China.
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And I remember seeing on CCTV that it wasn't just you're exactly right it wasn't
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just about Taiwan or the South China Sea or what China called its core interests.
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What they said was any issue related right to sovereignty or
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social stability does not fall within the purview of free speech.
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And I think at that moment, just as you said, it's kind of like there's,
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there's no issue really around which China doesn't feel that it has the,
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the right to try to pressure other countries using their market to get
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them to align with Chinese interests.
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All right, so Lithuania became the case and what did you do in particular,
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what did the US do to support Lithuania?
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But beyond that, then how did you develop a kind of bigger strategy around
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countries that were being targeted for economic coercion?
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>> Melanie Hart: Sure, so the US rolled out a really innovative package to support
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Lithuania, which was all in direct response to what the Lithuanians
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were telling us China was targeting and where they need assistance.
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So for example, lasers are really critical for the Lithuanian economy
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their laser industry is a big source of pride and China had been buying them.
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As I just mentioned, their laser exports to South Korea have now doubled.
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But also the U.S. defense Department signed a bilateral procurement agreement
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with Lithuania that would allow them to sell lasers and
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other products to the US Military on equal footing with US companies.
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The US Military sees some value in a PRC free supply chain,
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also Lithuania had been in the pipeline to export eggs and
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other agricultural products to the United States.
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And the State Department helped them move through that process to get some
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those regulatory process moving and
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their ag exports to the US went up 19%, which is pretty significant.
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The US ex IM bank gave them a $600 million MOU to buy products from
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the United States they had previously been buying from China but
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China was blocking both exports and imports with Lithuania.
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And the great thing about that is Lithuania was telling us Beijing has
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canceled around 300 million in export credits that
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our companies were depending on.
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And US ex IM bank said we'll not just match that, but we'll double it and
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the important thing about that is the.
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Those are numbers.
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Those are real, concrete economic numbers.
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And the US can't replace China and anybody's supply chain, nor
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should that be our objective.
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That's not how markets work.
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But the US and other countries can help bridge the gap as
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companies are looking for and finding new opportunities.
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And to Lithuania's credit, their foreign minister and other members of their
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cabinet were all over the Asia Pacific making new friends, opening new embassies.
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And where they went diplomatically, commerce followed.
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And I think there was a great capstone on this Lithuania
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crisis turned into opportunity.
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In May of this year,
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the Lithuanian government held an economic coercion forum in Vilnius.
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Representatives from 30 different governments were there.
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The US was there at the vice ministerial level.
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Japan was there at the vice ministerial level.
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Costa Rica was there, the Koreans were there.
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30 different countries sent representatives to Vilnius,
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which is a bit of a trek from the ROK or Costa Rica,
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to hear from Lithuania what their lessons learned were.
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And I think they are now seen as kind of a shining example that other countries
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are interested to follow and learn from.
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>> Elizabeth Economy: So do you think now that there's a kind of playbook that
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the United States, and
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its allies and partners have developed that can be deployed?
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Is this something that the EU and
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the US have come to some kind of here are the rules of the road.
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Is there a formalized mechanism in any way to address these kinds of cases?
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>> Melanie Hart: So in terms of formalized mechanism, I'll leave that to the current
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State Department colleagues to comment on what they have going on.
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But I will say, when you look at economic coercion cases, they are always different
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because every country's relationship with China is different.
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So for Australia, it was wine and barley and lobsters.
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For Lithuania, it was lasers and these other agricultural products and
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components.
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So every economic coercion case will involve different goods,
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with Canada, it was canola oil.
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So what we will really need to respond effectively is a broad coalition.
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And if shrimp is being targeted, the most important partners
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will be countries who have space to buy and eat more shrimp.
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>> Elizabeth Economy: I think this isn't necessarily something that you worked on
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when you were at the State Department, but I'm curious, was there discussion,
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consideration given to the targeting of just US companies?
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Because, again, there's been a long tradition in terms of China targeting our
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industries, whether it's the travel industry, the airline industry.
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I mentioned the case of the NBA.
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China frequently says, if you don't align with our government policy for
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example on Taiwan or the South China Sea, we are going to punish you, right?
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So are there lessons learned that you think are applicable for
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the United States in terms of supporting our companies that end up being targeted
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by the Chinese government, or they're sort of two separate things.
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>> Melanie Hart: This is a really tough one and
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timely given that Invidia was targeted this week, right?
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And I believe possibly intel as well.
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I mean, I'm of two minds about it.
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On the one hand, we always have to be honest with US Companies
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that China's a tough market, it's not a normal market economy.
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The risks are astronomical.
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And we don't want to see US Companies be dependent on the China market in
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such a way that when they are targeted.
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Because it's not, if it's a win when they are targeted,
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that that would have an outsized impact on their bottom line.
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But of course, at the same time, when China goes after US Companies,
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there should be a response.
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And I think the response to that should be based on what
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the companies are asking for, because it's the US Government's job
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to be a representative on behalf of the citizens that elect it.
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And that includes the companies that the US Government represents as well.
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Some companies might say, you know what, just let us work this one.
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Don't bring more heat to it, all you will do would bring heat.
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And I think that the US Government should listen to that.
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Other companies are going to say, that's it.
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We want the full package and they should get the full package.
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We should really defer to the companies who are deferring to their own workers,
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their employees, their shareholders.
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We should represent their interests, and that might vary case by case.
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>> Elizabeth Economy: Yeah, fair point.
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And so the issue that you just raised,
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which is an issue of over dependence on China, particularly by companies.
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I think is another one that you worked on very directly at
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the State Department in terms of trying to educate.
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I think, US Companies and provide a framework for them globally to think about
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how to diversify their supply chains, how to develop more resilient supply chains.
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And for the US government, right for our basic needs,
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around things like critical minerals like semiconductors.
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Talk about that work, and was that something that was of special interest to
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you, or is that something that was kind of mandated from on high?
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What sort of effort did you personally undertake
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around this supply chain diversification issue, which has been, I think,
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a very central issue for the Biden administration.
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>> Melanie Hart: Yeah, so I'll focus on critical minerals and
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chips because they're different in terms of the mandate for critical minerals.
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I really credit my boss from the State Department, Undersecretary Jose Fernandez.
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When he came in, he looked at the critical mineral issue and
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recognized that our best advantage in competing with China when we go out and
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bid for mines and processing facilities to bring new supply to market is not cash.
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The US government doesn't have boatloads of cash to bankroll mines, unfortunately.
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But we do have allies and partners who all share the same interest in
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having access to supply that's not controlled by Beijing.
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Since Beijing has demonstrated they will all cut all of us off from that supply
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whenever they choose to make a point about something.
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So to his credit, Under Secretary Fernandez pulled a lot of experts
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together, and came up with a very innovative idea that he then got allied
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buy in for, which was the Mineral Security Partnership.
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The Mineral Security partnership brings together 14 US-allies,
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including the European Union, to jointly identify projects of interest and
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pull together companies from allied governments.
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Might be US, might not be US financing from allied governments and
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just get projects moving.
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Because from a US perspective, we don't necessarily have companies that
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are working in all of these mining sectors or in all of the processing sectors or
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that want to.
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But if Australia does and they bring new capacity online that supports US national
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security, and if the US brings something online, that's good for
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Australia as well, and that's been wildly successful.
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They announced two deals so far this year, one on germanium.
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A Belgian-based company teamed up with the DRC-based company to
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develop germanium in the DRC.
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And the other one's graphite,
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a graphite mine in Tanzania that's a joint project between a South Korean company or
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South Korea's Posco and Australia's blackrock Mining.
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Those are real deals that are coming to market with allies coming together.
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I think it's a tremendous success and something I I really hope to see the Trump
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administration continue because it's a winner, and
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I hope to see Congress put some money behind it.
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>> Elizabeth Economy: So you mentioned gallium or germanium and- Germanium and
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graphite.
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Germanium and graphite, which just happened to be two
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metals that the Chinese have put export controls on.
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Is that why in fact we pursued those projects?
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Or does this happen to be luck of the draw?
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>> Melanie Hart: So the US and China both look at the same trade data.
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So before China even started with the export controls,
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we were looking at the same trade data and seeing these are our vulnerabilities.
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So let's get moving now.
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China was looking at the same vulnerabilities and
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that's where they decided to hit us.
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But before they even went down that road,
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the US Was already working on alternative supply.
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>> Elizabeth Economy: So is the process then basically to look at those minerals
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and metals where we have the greatest dependence on China, or
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is it a function of our national security that we're most concerned about?
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How do we make the determination about where to go?
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>> Melanie Hart: It's both, so when the MSP started up,
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it focused specifically on the critical minerals for the energy transition.
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And it's expanded over time.
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On the other side, you mentioned semiconductors.
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In the chip sector,
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there are specific critical minerals that we need to make a semiconductor chip.
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So when Congress passed the CHIPS Act, which gave the State Department a $500
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million fund to do both 5G security and semiconductor supply chain and
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semiconductor security, which is a lot for that amount of money.
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State immediately looked at that and said one of our priorities has to be going
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out and finding the critical minerals that are needed to make a chip and
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invest in capacity that's free from PRC control.
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Because we cannot allow there to be a situation where your colleagues at
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Commerce, Liz,
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are doing such a great job bringing new fabs online here in the United States.
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We cannot have a situation where those fabs have to go get on their knees and
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beg Beijing for the gallium and
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their germanium that they need to make a semiconductor chip.
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So recognizing that there is a need for specific chip for
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specific minerals where China had a stranglehold on global supply,
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State had a specific effort under the CHIPS Act focused on semiconductors.
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>> Elizabeth Economy: And the semiconductor effort was broader,
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too, right?
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There was more, there was educational component.
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I mean, I think State Department really created, along with European and
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Asian allies, a pretty full bore program for investment and
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training in some emerging and middle income economies.
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Can you talk a little bit about that work?
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>> Melanie Hart: Yeah, absolutely, so the semiconductor side of
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the State Department CHIPS Act program focuses on three big priorities.
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The first is the one that I mentioned.
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Well, and all of these priorities nest under one big objective,
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which is provide the domestic US fabs with the international environment they
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need to succeed.
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So the international effort is in service of the domestic effort and
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domestic US jobs.
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It has three parts, one, get the critical minerals needed to make a chip,
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make sure we have access to supply that the PRC can't cut off.
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Two, work with allies and partners to get to a degree
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of coordination on policy, particularly subsidy policy.
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You don't wanna see a situation where Commerce Department here in the US,
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the Europeans, the Japanese,
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the Koreans are all trying to subsidize the same companies to come and build fabs.
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And we're pricing each other out of the market by having to bid and
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compete with one another.
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So we wanted to do what we could to align subsidy policy among nations.
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And that required having some kind of early warning system so
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that Europe could be dependent on chips from the United States and have early
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warning if a shortage is is likely or a supply gut and the same supply glut.
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And the same thing from the United States with Europe and Japan, and Korea.
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We can be more confident with some friends shoring if we have good transparency and
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information on those supply chains.
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So that was the policy pillar with allies.
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And then the third and final piece was when chips come off the factory line
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in Arizona and Texas, the fabs being built in the United States.
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The model is you do a lot of the processing, the downstream processing,
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the test testing, packaging,
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assembly, getting it ready to plug into your iPhone or to your laptop.
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A lot of that happens in middle income countries.
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That keeps cost lower for the fabs here and
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keeps the higher income jobs in the United States.
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And that capacity was concentrated in a few places, Malaysia,
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particularly during COVID when Malaysia had COVID, outbreaks, you couldn't
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make a car in the United States because the chip supply line ground to a halt.
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So that third piece of the chip strategy was identifying some clusters of nations
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that were ripe to either expand their downstream processing capacity or
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become a downstream processor.
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And state selected a group in the Americas and a group in Asia.
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And the group in the Americas was Costa Rica, Mexico, and Panama.
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And in Asia it was the Philippines, Vietnam, Indonesia, India.
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And it was shocking to see how powerful it was to give those nations
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a ticket to enter into a US-centric supply chain as sparkly and
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exciting as one rooted in the CHIPS Act as an alternative
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to the lower value-added China supply chain.
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And the way the program works is it's not suitcases full of cash.
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It's not the Beijing model.
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State deployed the OECD to go into these countries and
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do a deep assessment of why isn't TSMC building a plant right now.
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Why isn't Intel building a plant right now and get a punch list of the things
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that needed to be done to move them up and make that market more attractive?
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As you said, a big need was workforce development.
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So State funded Arizona State University to go in and
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train workers to work in some of these facilities.
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And the reception has been tremendous.
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The most exciting thing at State was about a year after rolling out this program,
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we started being deluged by other countries that would say,
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I want to be the next Costa Rica, or I want what the Philippines has.
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And so we created something that had been missing, which is this pull factor,
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kind of a the pull of an opportunity that countries wanted to opt into.
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So we weren't just going around saying, China, bad move away from China.
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We had something to offer.
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>> Elizabeth Economy: No, that's exciting.
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Of course, at a certain point, I guess that $400 million that
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State Department got to do this kind of work also runs out.
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Is there still money left to be deployed or are we kind of at the end of the sort
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of the gravy train, or is it being picked up in different ways by private
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institutions, universities and companies that can keep moving it forward?
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What's the sort of sustainability of this program?
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>> Melanie Hart: So State and Commerce had different rules from Congress.
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You guys had it easy, I think Commerce,
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they just gave you 52 billion and you could run from there.
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>> Elizabeth Economy: 39 billion, because the science part never got funded, but
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yes, okay.
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>> Melanie Hart: 39 billion is a lot at state was 100 million year for five years.
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And every year, Congress would approve the next year's budget, and
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they would one by one approve each of the countries and
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activities that we would want to partner with.
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The great thing about that is that Congress was
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deeply supportive and wonderful to work with.
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The Republicans were as supportive as the Dems on SFRC when we would do our
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briefings.
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So they got it because they had written the CHIPS Act.
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So they got what we were trying to do, they were deeply supportive.
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They have been with the State Department every step of the way, so I have pretty
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high confidence that that would not change going into the new administration.
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I think what Congress should do is give State more money,
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because if you actually care about 5G security and
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rewiring the entire global semiconductor supply chain,
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$100 million a year to do both is a bit sad.
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I think we can do better, I think given that this is something the US has never
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done before, it makes sense to start out where they started out and
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not overload the finances in the beginning.
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But at this point, the success speaks for
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itself and there is clearly room and need to ramp up.
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And I think in particular, that critical mineral piece would be a great way,
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a great place to build in more funding, because now that the program has
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moved from identifying where the minerals are and where we should invest.
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To doing some, being ready to do some of those investments, there's a lot of
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space and they can, for example, maybe a lot of that money can flow through DFC,
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who can go in and finance some deals in some of these places.
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But, you know, I mean, the question I always ask Congress is,
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do you want the US Fabs to have to get on their knees and
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beg Beijing for some for critical minerals or not, it's really their decision?
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>> Elizabeth Economy: Right, I mean, and I think because it so directly serves
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our national interest and because the Chinese have developed a retaliatory
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toolkit now that directly targets these kinds of critical minerals and metals.
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I think maybe Congress will be more receptive to more funding for the DFC and
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for these kinds of investments moving forward.
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So, I think the major theme and not surprisingly,
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since you were at the State Department of your work and
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of your comments today, has been on the partnership with our allies.
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You've talked a lot about what I think have been amazing successes that you've
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had in the work that you've done.
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Have there been any, if not failures, let's say,
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any efforts that maybe didn't come fully to fruition things
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that the U.S tried to pursue with our allies and partners, but
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just somehow didn't get the kind of pickup that you would have liked to have seen?
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>> Melanie Hart: Well, let me say this,
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it is no accident that I have come to the Atlantic Council to do China work here.
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I think we have a lot of work to do in the transatlantic partnership and
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approaching the China challenge together.
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It was pretty frustrating to watch the dynamic play out when Europe
27:01
was assessing making the decisions about tariffs on PRC EVs.
27:06
The US tariffed PRC EVs at 100%, Canada did the same thing,
27:11
Brazil has tariffs on PRC EVs, Turkey has tariffs on PRC EVs and
27:16
the German Chancellor, German autos, more than any other stand
27:22
to lose by China's predatory market tactics in the EV sector.
27:27
And Germany voted against any kind of tariffs on Chinese EVs that really,
27:33
to me tells us that we have more work to do there.
27:37
And we have great as you know,
27:39
there are really amazing China experts across Europe and America and elsewhere.
27:46
So what I'm most excited about leaving the US Government is coming to
27:50
the Atlantic Council, which has a transatlantic focus and
27:53
doing China work here.
27:55
We're looking at standing up some really interesting things on the de-risking
28:00
front, at digging in on what US de-risking should look like going forward and
28:05
trying to find the Venn diagram of where that overlaps with Europe,
28:09
where that overlaps with Latin America and other partners.
28:13
And I understand that Europe has a different system it's not one country,
28:17
it's a group of countries that have to work together and
28:20
the Commission has trade policy and the capitals have foreign policy and
28:24
that's complicated, but we have to get it right.
28:27
>> Elizabeth Economy: Yeah, no, I think that's a really good point and
28:30
I know we both met with the same European delegation recently.
28:34
And I think one of the things that I spoke with them about is, is how, you know,
28:39
the U.S government, and certainly at the Commerce Department, but
28:44
I think also at the State Department, how we worked to educate US business
28:50
about the risks inherent in being too dependent on a China market.
28:54
And that this really did have, I think, a pretty profound impact,
28:59
I think business really did move up pretty aggressively.
29:02
A lot of business on a learning curve when it comes to this,
29:06
the idea of de-risking and so I think your work to educate more,
29:11
I think will be very welcomed and as you say, I think probably pretty necessary.
29:17
So let me ask you one last touch to touch on one last area,
29:21
which is Taiwan, because you also worked on the sort of
29:25
US Taiwan Economic Prosperity Partnership dialogue.
29:30
Everything you did had a big, like, mouthful of words,
29:35
I have to say [LAUGH] but Taiwan obviously is a really was a very
29:40
important part of US Strategy over the past four years and
29:46
talk a little bit about what this was and what came out of it.
29:52
>> Melanie Hart: So a lot of the State Department programs do have really long
29:55
names and so they all have acronyms.
29:57
So we call the Taiwan dialogue the EPPD, look Taiwan is our seventh
30:02
largest trading partner, our tenth largest export market and our,
30:07
the sixth largest market for U.S. food and agricultural products, that's huge.
30:13
So it's natural that the US should have economic mechanisms for talking to Taiwan,
30:18
commerce has a semiconductor supply chain dialogue with them.
30:22
USTR has a trade more than dialogue now, 21st century trade process with them and
30:28
State I think about the State Department's EPPD as the US Taiwan Dialogue,
30:33
where economics meets foreign policy.
30:37
It's kind of the economic security,
30:39
economic statecraft dialogue with Taiwan and State.
30:42
Under Secretary Fernandez and the team just had the fifth EPPD with Taiwan
30:46
in October and they shared the list of things that they covered.
30:50
It's economic coercion, working together to do infrastructure investments
30:55
jointly in third countries it is addressing bilateral taxation.
31:00
I know Secretary Raimondo was really focused on that,
31:04
we were encouraging TSMC to come here into the United States and
31:08
invest and that the taxation burden is real there.
31:12
So supply chains, all kinds of things, I mean it's a, it's a great, it's a great
31:17
dialogue for figuring out how to align on the economic security side of the coin.
31:23
>> Elizabeth Economy: Okay, great,
31:24
if only we could have productive dialogues these days with the PRC as well but
31:28
I guess that's gonna have to wait for some point in, in the future.
31:33
Okay, so lightning round, let me just ask you a couple of quick final questions.
31:39
What's your must read booker article on China?
31:44
>> Melanie Hart: So this is a little bit out of the box, but the book that I've
31:49
read over the past year that has stuck with me the most and
31:54
really helped me put some of what I see with China in a broader context.
32:00
Is a book by a historian, Calder Walton's book called Spies,
32:05
Epic Intelligence War between East and West.
32:09
And it is a fabulous detailed history of how Russia approached
32:14
the West before, during, and after the Cold War.
32:18
And it has great source material, but really shows how the Soviets and
32:23
then the Russians always perceive themselves as being
32:27
weaker than the West economically weaker, weaker military.
32:31
They didn't have the tech edge, and so they felt that espionage, coercion,
32:37
subversion, everything was on the table to catch up and to even the playing field.
32:43
And in their eyes, that was just the legitimate way to do business.
32:47
I see some really big parallels with China, both in the way so
32:51
many Chinese counterparts over the years, when you are talking to friends and
32:56
counterparts in Beijing, you can kinda tell what's total talking points and what.
33:01
When they keep saying it for ten years, even after drinks and
33:05
late at night, you figure this one might be real.
33:08
And one thing that always stuck out to me is a lot of people I deeply respect and
33:13
admire and like talking to in China,
33:16
they just can't conceive of what our problem is.
33:19
Given that we're always stronger than them,
33:21
of course they're going to use these other tactics.
33:24
And I felt that this put that in context in a way that nothing else has.
33:29
And in terms of articles, there was one article that I kept on my desk at
33:33
the State Department and my colleague Jonathan Fritz did as well, and
33:37
that's Xi Jinping's November 2020 article in Qiushi where he just says blatantly,
33:43
our aim is to make international supply chains dependent on China.
33:47
We kept that there as a reminder of what our job was.
33:51
>> Elizabeth Economy: That is a particularly, I think, telling quotation.
33:55
It's good that he's always basically signaling exactly what he plans to do and
34:00
what he sees his mission as being.
34:03
I think it helps us a lot.
34:04
Okay, what do you miss most and least about your time in government?
34:12
>> Melanie Hart: I had a unique opportunity because the things I was
34:16
working on, there was no playbook.
34:19
After 911, the US built up a whole counterterror apparatus and
34:24
reoriented the government for counterterror operations.
34:30
I see the Biden administration as a time when we were reorienting
34:34
the government for economic statecraft and
34:37
figuring out how to operate in this post COVID economic security space.
34:43
And working for Under Secretary Fernandez, he would just say,
34:46
achieve the objective don't let bureaucracy stop you.
34:50
And Secretary Blinken would just say, lean in.
34:53
And so our message was lean in.
34:55
Don't ask permission, just get things done.
34:58
And working with the amazing career diplomats at state in those trenches,
35:03
and my diplomatic partners from allies and partner countries as well,
35:08
where nobody has a rule book, we all have kind of a green light from our
35:12
leadership to work together and figure things out.
35:16
That was a, I think, tremendous opportunity and space for innovation.
35:21
And I'm just deeply humbled by the brilliance that I saw in my career
35:27
colleagues and what they can do when you give them the space to do that.
35:32
And in terms of what I miss least, man, it's great being back on the think tank
35:37
side and just saying, just speaking for myself and being really direct.
35:42
When you're speaking for a government, it's different, as you know.
35:46
So being China experts who say what we think without the weight or
35:51
the carefulness of a broader entity behind us is a lot of fun.
35:56
>> Elizabeth Economy: Yeah, I'm not sure I ever mastered the ability
35:59
to just say what the government was telling me to say, [LAUGH], but I tried.
36:03
Okay, quickly, what one thing do you wish that the administration had
36:08
done differently with regard to China?
36:11
>> Melanie Hart: This won't be a shock to you, but trade deals with other countries.
36:18
That's the missing piece of our toolkit.
36:23
We've done a lot, but that's the missing piece.
36:26
>> Elizabeth Economy: Yes, US no trade representative.
36:29
Yep, [LAUGH], anyway.
36:31
Okay, quickly, what China issue do we not know enough about?
36:36
>> Melanie Hart: That's a great question.
36:37
I don't know if you had the same experience, but for
36:42
me, this was my first government job.
36:45
And being on the inside and getting that deep understanding of
36:50
how the US policy process works really drove home to me how much I
36:55
don't know about the inner workings of China's policy process.
37:00
Is there an interagency policy committee?
37:04
If there is one, to what degree is it real?
37:08
Does Xi Jinping see different ideas or are they filtered before he gets to them?
37:14
To what degree is there still bottom up versus top down?
37:17
I think a great thing about the US system is there is a lot of space for
37:21
bottom up innovation.
37:22
I mean, how great was it to have Secretary Blinken say, lean in?
37:27
And the Under Secretary say, just don't let bureaucracy stop you.
37:31
I don't think that's what they're getting in Beijing for sure.
37:34
But we don't know enough about what's really going on inside that policy
37:38
process.
37:39
And I really wish we did.
37:42
>> Elizabeth Economy: Okay, last one.
37:43
On a scale of 1 to 10, how likely, and
37:45
I think I already know the answer to this one.
37:47
How likely do you think we are to see a breakthrough in US China relations over
37:52
the next decade?
37:54
>> Melanie Hart: Unfortunately, I'd say around zero.
37:57
There could be something short term.
38:00
President Trump has mentioned that he's had communication with Xi Jinping.
38:04
A lot of the folks going into the Trump administration are talking about trying to
38:08
do a deal that Trump's tariff threats are to gain leverage so
38:12
that they can do some kind of deal with China.
38:15
Unfortunately, there's nothing that Xi Jinping is willing
38:18
to give the United States in any deal that's in US national interests.
38:22
That's unfortunate.
38:24
So there could be short term blips, but
38:26
I think it'll be a while before there's anything real.
38:29
>> Elizabeth Economy: Okay, well, on that note, let me thank you so much for
38:33
taking the time to speak with me.
38:36
As always, Melanie, you are both incredibly articulate and
38:42
thoughtful and very much to the point.
38:45
So thanks again.
38:47
>> Melanie Hart: Great, thanks for having me, Liz.
38:48
>> Elizabeth Economy: If you enjoyed this podcast and want to hear more reasoned
38:51
discourse and debate on China, I encourage you to subscribe to China Considered via
38:56
the Hoover Institution YouTube channel or podcast platform of your choice.
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