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BBC World News
New Tariffs — Trade War
Robert Lawrence Kuhn, September 18, 2018
HOST: China imposes another
$60 billion of tariffs on US
imports a day after President
Trump announces tariffs on $200
billion of Chinese goods. Well,
let's get more on that story now.
We're joined from Beijing by
Robert Lawrence Kuhn who
advises China's leaders and
multinational corporations. He's
also the author of "How China's
Leaders Think". How do they
think about this? It's difficult to
know where this might end.
RLK: Let's look at what just
happened. China retaliated with
$60 billion worth of U.S. goods
that it was putting tariffs on, but
half of it was five percent, half
was 10 percent, which is less
than the American side, which
was 10 percent on all. And the
$60 billion is proportional in the
sense that it is about 40 percent
of the total US exports to China.
Just as the $200 billion was
about 40 percent of the little bit
more than $500 billion that
China exports to the US. So
that's the proportionality.
RLK: There's a lot of talk there
might have been more
countermeasures like selling
treasury bonds or disrupting
American companies. That hasn't
occurred yet. China is sending
signals that it's ratcheting down
the escalation, not trying to
escalate it. China has to
respond. The government of
China, the Communist Party of
China, the leading Party, the
ruling party here, has two big
facets that justifies its
legitimacy.
RLK: One is the economic
growth. This is the 40th
anniversary of reform and
opening up — China's economic
miracle. Increasing GDP per
capita is almost 50 times,
making the standards of living of
the vast majority of people quite
decent. Second area is national
rejuvenation, national pride. And
so the trade war affects both.
You have economics, and the
pride: the economics, the tariffs,
are certainly suboptimal in all
respects for all countries, but
China must respond because it
has to maintain the dignity of
the country, but it does so in a
way to signal that it wants this
to resolve.
RLK: It won't resolve soon. No
one expects it before the midterm
elections. But it's very
important to understand from
the US point of view what the
real issues are and where we
seek the solution.
HOST: What are the real issues?
RLK: There are five real issues
and I do not include the trade
deficit — because, obviously the
trade deficit is complicated. You
have components coming from
other countries that is counted
as part of the trade deficit, but
China gets no benefit from them.
An iPhone for example. Maybe,
China gets 6 or 10 percent of the
cost of roughly $350 for a $1000
retail price. China has also
service purchases that's not
included in the trade deficit,
something like $40 billion per
year — tourists, students.
RLK: But there are five big
issues that are really critical.
Opening up of China's markets
which have been closed. They're
making some progress, not
enough. Intellectual property:
this is an area that China really
has made substantial progress.
Again, not enough, need to do
more, but they've made
substantial progress. This is
affecting Chinese companies and
China knows it needs to improve
IP protection.
RLK: Third is industrial
espionage, a very sensitive area.
Cyber theft: China has decreased
it. It's a complicated area. It
needs to do more. Hard to know
what the government does and
doesn't do, but everybody knows
that's looked at.
RLK: Fourth is technology
transfer. And then government
support of new technologies.
The last is the most sensitive
one.
HOST: Robert Lawrence Kuhn,
we’re going to have to leave it
there. Lots to talk about. We do
appreciate your time.