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tv   U.S.- China Economic Relations  CSPAN  May 22, 2017 3:54am-5:22am EDT

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to the world. we need to look, we need to care .nd we need to contribute >> don't ever let anyone tell you that your dreams are silly. if you have to look back on your life, regret the things you did and not what you didn't do. >> nothing stay still. things will change. the question for you is whether and how you will anticipate in the process of creative change. >> just a few past commencement speeches from the c-span video library and watch more on saturday, may 27, monday, may 29 and june 3 on c-span and -- potential changes to u.s. trade policy that affect relations. from colorado springs world
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affairs for him, -- forum, this is just under one hour and a just one hour and 20 minutes. karen: i am happy to have him here today. for two decades, jeremy haft has been in china and he has overseen export and import programs between american and chinese enterprises. spanning shipbuilding and refineries, to auto parts and medical supplies, to maple syrup and cow hides. jeremy's start-up is a private and public partnership funded by a grant, to build export markets in china for new york agriculture. prior to his china work, he was the founder of one of the first
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internet ad agencies in new york city, ranked in the top five and acquired in 1997. he is an adjunct professor at georgetown. and he is the author the recent "unmade in china" which examines competitive advantages over china. he has spoken to members of congress, ambassadors, and the business community. his analysis has also been featured in the wall street journal, the financial times, u.s. news and world report, npr, bbc, and other cable and media outlets. with that said, please help me welcome jeremy haft [applause] jeremy: thank you. thank you so much. thank you, karen.
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thank you for coming. thank you for hosting this. i confess that i was the one that voted for no podium. i tend to get lost. when i started doing business in china, 20 years ago, i was four -- i was 6'4". here is the thing i want to talk about. it is different in china from what we hear from our politics. the topic today is very timely. we have the president arriving today to meet with president trump to talk about a host of pressing issues. i have to admit, this was good timing. karen and i put our heads together several months ago and we thought, do think the fifth? the sixth? we picked well. i want to talk to about a topic that is not only timely, it is fraught, it is emotional. we will talk about china and we will talk about jobs.
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and so doing, i want to bring your attention to a study that was referred to in a book. it is called "unspun." it is about a science experiment done during the kerry-bush election where they took a focus group of partisan democrats and partisan republicans and they wired their crania up to these electrical wires where they are going to measure waves. in front of these people they flashed very political statements, so one statement might say "guns should be allowed in schools." democrats, no. republicans, yes. and they watched to see what activity was being activated in the brain by these statements. one amazing outcome of all the
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study was partisans on the left and right actually have brains in their skulls. this was one amazing outcome. another one was at looking for the center of the brain that lit up when looking at these statements and low and behold they were not the centers of reason. they were the centers of emotion. which makes sense. so today, as we talk about an emotional topic, a fraught topic, i implore you to breathe through your emotions. what i would like to try to do is look at policies from the point of view of outcomes. if a policy is intended to protect jobs, no matter how the policy may feel to us, the way that we evaluate the policy is whether it protects jobs. so that is what i want to get to come up i will start further
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back. i want to start with a little quiz, which my kids at georgetown hate, but it is easy. who can remember mitt romney's campaign slogan? hm. anyone? [inaudible] jeremy: maybe that is why he lost. [laughter] it was, believe in america. thematically similar to, make america great again. trying to get the same feeling that the sun has set on the market empire and the next generation will not do as well as previous generations. and this is something that gets reflected back to us in poll after poll after poll. when we are moving into the obama and romney election, there was at least $80 million of
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advertising spent on negative china adds focused on train and in cleveland alone -- on trade, in cleveland alone. so trade has been a contentious issue in elections, but i would argue in this election something more deep resonated in the electorate. if you look at the primaries, over 20 million voters chose to ignore their party favorites and a vote for the upstarts. over 20 million went for trump and sanders. and a big reason why, i think, is trade. the two of them wear very much aligned on trade. and it goes like this. the once great middle class of the united states has been hollowed out by globalization and trade. and the way to bring american jobs back from overseas is to start enforcing trade rules and raising tariffs. we heard in both from bernie sanders and from donald trump. we also heard from both of those candidates the desire to exit
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the tpp.
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prepresmity. and the majority in 26 countries said china. the only country that did not say china is china. there's a reason for this. we e can understand why feel this about china because all the economists echo this.
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how could you whether you voted for trump or not mow feel a yerning that the best days of america are behind us and we should somehow make ourselves great again?
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how much do consumers spend? how much does the government spend?
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no. we would compare balance sheets, like a business. we would compare our assets, and our liabilities, how much we owe. otherwise known as net worth. we compare the national wealth of the united states and china, we see that the u.s. is $45 trillion wealthier man china. -- than china. that includes national debt, the famous $20 trillion national debt. china has a lot of it
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too. we subject -- subtract that from the balance sheet. and the u.s. is $45 trillion wealthier than china. the federal reserve and credits, the u.s. household wealth totaling about $82 trillion. china is about $62 trillion. and the gap in national wealth is growing, not shrinking. merica is becoming wealthier while china stagnates. i would argue that this is a more relevant metric to size of the national economies than gdp, while china stagnates. i would which is not only looking at arbitrary metric spending, but we are also taking the chinese gdp numbers -- which all chinese officials know is absurd. the officials do not ven believe their own numbers. it is true. the last head of the bureau was on trial for corruption. part of the reason is chinese statistics are done at the local level. imagine if all 50 states in america each
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had their own fiscal bureau. imagine if there was one party rule, and if you are in official you are promoted based on how much gdp growth you have. so each province overstates and why we know this, if you add up the numbers of the province in terms of gdp, they always at up to the national -- add up to more than a national number. it is a lot. it is like a trillion dollars worth of delta between the it is true. the last head of national state and in the provinces. and the provinces are growing faster than the national poll as well, which is a statistical improbability. so the producers, you cannot sell more than 100% of anything, but in china you can. and when officials do not believe these numbers, they say it is man-made, it is for reference only. so the imf hates these umbers. but they for the put
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them with another metric called purchasing power parity, where you are trying to compare a unit of currency in beijing to a unit of currency in new york and that is how joseph stiglitz and the world bank arrived at the conclusion that china is larger than us. using made-up books, that are i just did -- adjusted further with you calculate and that does not reflect how economies really operate. so taking it that that, if we look at national wealth, the u.s. his still far and away the world's number one economic superpower. no country is even close. if you win the debate about jobs and trade, what has been called the imbalance in trade, right? the fact we buy more from china than we sell to china, has been labeled a huge crime against the u.s. in fact, it was called
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rape during the elections of a times. we also heard several circuits with jeff sessions on the stump repeating that the rade imbalances kill jobs. again, we go to the numbers. may amazing thing is that the orld has accelerated so fast that very few of the products around us were made by one country. if you have looked round, look around the room, this chandelier, those grills, these chairs, my shoes, etc. in the old days, when basic trade theory was espoused by a guy like david ricardo in the 1830's, it was the wine and clock paradigm -- cloth paradigm. we trade and we both benefit. these days, the wine was probably made by countries
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a, b, c, d, e. and the cost shared among countries. yet our numbers have not kept up with globalization. so astoundingly we still tout 100% of the value of the stuff we import from the last guy that shipped it to us. hat is wine for cloth, but that is not how the world works today. let me give you an example. we have something like this. um, in our pockets. now, because china was the last country to ship it to us, this is counted 100% as a chinese value import to america. yet, if you break down the actual value added of the parts that go into the thing, you see that china actually does only represent 10% of the value of it. 10%. for assembly and noncritical opponents -- components. so we are agnifying it, making it look
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uch bigger. it is called gross trade balances. and what we trade balances. and what we need to get to is something call value added trade balances. when you look at those, you start to measure the value of the stuff that goes into products and when you do, you start to see what an important role, a vital role the u.s. has in the global supply chain. um, and these numbers eliminate whole dynamics -- illuminate whole dynamics of regional trade and global trade. so we can see this in many things but if you look at -- many things. if you look at the steel that went into these, chances are the teel came from a recycling
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plant, probably in the rust belt. it could've been the plant donald trump was speaking in front of during his speech on trade. if you look at these shoes, chances are the hides came from america. so when you ctually break it down, the value of imports, you see hidden inside the numbers is u.s. value. and the united states tends to add value at iscrete parts of the value chain. at the beginning, with design and intellectual property. to the creation of input, like raw materials and emi finished goods. and kind of like a smile, they are sucked into china where they
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are assembled and then re-escorted to us where we support it with the transportation and retail, etc. looking at the value added trade you measure all those jobs in the supply chain and you start to see that of every dollar that we import in mexican goods, it leaves -- means $.40 is going to u.s. firms in making the ingredients that went into the goods. and when you look at chinese imports you see that at least $.50 if not more goes to u.s. companies for the emperor that also, -- for the firms that lso got these to market. so in fact, a large share of that goes to supporting u.s. jobs. the whole basis of the trade and a valid argument, that trade kill jobs, is based on input, like raw materials and the notion that a dollar spent on imports is not a dollar spent on u.s. content and in fact there is a single think tank in d.c. that specializes in the scholarship around trade balances. and if you start to open your eyes and look around, you will see that no matter
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where you fall on the political spectrum, if you are a proponent of tariffs, chances are you will be using this think tank's research to support your conclusions that tariffs will protect jobs. it is called the epi, and you will ee it referred to numerous times in donald trump's speeches. and also if you look t the schumer graham bill over the years and every time a senator starts to grandstand about a level playing field, epi tends to be the think tank that is referred to. the reason why it is interesting is because the epi's numbers have been discredited by the bureau of labor statistics. they said, the models whenever into -- and tended to be used this way. and it assumes for every dollar spent on imported goods is a dollar not spent on u.s. value.
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so epi is based on gross trade and balances, not value added, therefore it gives a false picture of the relation between trade balances and jobs. and it gets us into trouble with bad policy decisions. so if you are ooking at gross trade numbers, ou say, we are getting barraged by solar panels. they raised tariffs on imported solar panels. if we were looking at the gross trade numbers between china and the u.s. and we see that we are getting creamed by the solar panels, but if we take a step back and we look at the value added content of the panels, you realize there is a lot of u.s. content inside. america is a net exporter to china in solar. not in the panels. but if we go upstream, america does barraged by solar panels. they the design and engineering. we
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also produce and export the raw materials that goes into the panel, it is made here. made in washington state. and the capital equipment that the chinese used to make the solar panels is made here. we ship the raw materials to china, the capital equipment to china, and then the panels are fabricated and sent here. when we raise tariffs on the solar panels you decrease the demand for the solar panels, they become more expensive, and you decrease demand for the upstream merican value. so, less orders for raw materials this year, or capital equipment, and that is why the solar panel tariffs were a net job loss for the solar industry. but this is not unique to solar. every industry hires -- industry, steel -- it
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kills at least three american jobs in other parts of the supply chain. it is no longer wine for cloth. we participate in many parts of the global supply chain and by directing tariff on one part you inadvertently kill a lot of other jobs. now why is it relevant for today? we are talking about tariffs, we are talking about a border adjustment tax. that would essentially be a tax on imports at the border. but not on exports. so, we hear this is great for exports. and tax them as they should be. the problem goes back to the solar panel case. look at cars, the auto industry. the typical car crosses the border about 6-7 times during manufacturing. and
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a typical car that is imported from mexico or canada, usually canada, has at least 60% auto parts in it. 60% of the content is u.s. made. think about it, if you raise prices on autos by using the border adjustment tax, you will be depressing the demand for the auto parts that go into the cars from the u.s. companies. those firms are mostly in ohio, michigan, ennsylvania. the rust belt. so we need to think about these policies less in terms of, does it feel good? are we getting back at quote, unquote, bad trading partners? or are we doing what we say we are doing, protecting jobs? i would argue that these tariffs do the opposite of what they say they are going to do. now, briefly as we wrap up, what are we to
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think of china? if the u.s. is the number one power by a loss talked -- economic superpower by a long shot, what are we to make of this power that is militarizing the south china tosea? and in that seems to be the key to so many foreign policy puzzles around the world. so, the way that we think about china needs to be on the ground. and it needs to put aside the notion, the myth of the chinese manufacturing iracle. what you have in china is not summative boom economy or a bust economy, all indicators point to a stagnating economy. so we have three aspects of the economy that make it stagnated, one is bad demographics. so you have decades of the one child policy that have tipped the balance of
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demographics and now china has more elderly than working age population, which happened in japan and which was one of the drivers of the lost decade. so folks that do business on the ground in china say that labor prices are going up in part of it is because the labor pool is shrinking and the qualified labor pool is even smaller than that. the second aspect is china's manufacturing platform, it is very different from ours. we assume that it is a flat world and we can push a button and china can make anything we can, but cheaply. but that is not the case. tell that to the people who buy the san francisco bay bridge from the hinese. it is not so easy to run stuff through equipment. when you look at the actual value chain, the way that china makes things, you see that china has a highly primitive,
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highly risky production platform. so what might take us china has a highly primitive, 3-4 players to make a product, will still take china 16-17 players to handle those goods and materials and each player adds the risk. this is why you have seen thousands of safety stories coming out of china. in he paper every day. in food, drugs, toys and tires, every corner of the a comment print we see these things -- every corner of the economy. we see these things every day. risk is in their platform and for them to fix it may need 400 years of evolving, as we have had. you need role of law, and you need well-run companies in order to ake things safely and reliably
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again and again and again. china money to renovate their entire political economy before it can fix the problems. the third issue for stagnation is an environment of catastrophe that they are going through today. you look at china and drugs, toys and tires, every you think, they country and a lot of people. 20% of the worlds population. you can put their arable land on the state of texas and it is shaking every year to the tune of 1900 square miles, because of climate change, urbanization. so china lacks arable land, and the land they have has been poisoned by acid rain and the their arable land on the state dumping. the chinese government found at least 20% of all the grains in china have been contaminated but we know the number is much higher. they already have a major water catastrophe, most of the cities do not have a month -- do not
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have enough water. so, as we move into the next entry, what will be -- next century, what will drive trade is not trade deals, but scarcity. scarcity. hina will be driven by the eeds of feeding and powering and caring for the population. and scarcity plays very well, not just in the united states, but also to colorado. the u.s. is a highly diversified economy. the sweet spot of manufacturing is advanced manufacturing. if you look at places we participate in the global supply chain, it tends to be the value added, the innovative, the difficult. there are companies like caterpillar and john deere who have castings made in the u.s.
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that cannot be made anywhere else. and looking at nuclear power facilities, where do you suppose they are storing the nuclear island, the advanced parts going into reactors -- from the united states. supporting jobs in the rust elt, by the way. so, if we
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take a step back. we realize hat the portrayal in our politics of american decline and the rust belt as an emblem of the failure of globalization isn't just not looking closely enough. yes, we have lost jobs in the rust belt. but we have also created jobs. tens of thousands of advanced manufacturing plants in the rust belt that support thousands of jobs. so, the betrayal of the united states -- portrayal of the united as ne in decline and two, a victim of china, if and when not true. so trade deals at the
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end of the day, to fix trade, and i will end with this. i believe you need multilateral deals and not bilateral deals. here is the reason why. i do believe that trade and global trade supports millions of jobs in this country. is trade fair? no. trade has dislocated some jobs and i think the number is highly overstated. if you look at manufacturing today the output is twice as much as it was in 1980 with half the workers, so we're producing more than we ever have, but with less. it is not the jobs have gone overseas, we are just getting better at it and doing it with fewer workers. the answer is not to tariff exports. the answer is to look at negative -- caused by trade. economists call this basically tuff that happens outside of a transaction and not by the company. and there are all kinds of abnormalities that we transaction and not by the company. and there are all kinds of abnormalities that we as consumers subsidize and we have the businesses subsidize. for example, when we eat the gordon fisherman's. chances are it was shipped to china to be deboned and sent back. that happens with 80% of our seafood that is processed. soon it will be taken. -- will be chiken. think about all the carbon miles generated from that transaction. um, ships are spilling -- they bring the dirtiest fuel, traveling thousands of miles, burning the most dirt yof fof fuels, so we can save a few pennies. i believe that we need to price in the cost into the goods. that means a carbon tax. ah! i am in favor, not just with the stuff that we consume, but the stuff that we trade. the only way we can have a global regime on carbon is it through multilateral trade deals. the tpp was starting to get at some of these environmental standards. another that we do not pay for his health and
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safety. countries like japan are wise, they make a hard for china to export food and drugs into their country. we, not so much. we let anybody export, just about. so 80% of the active ingredients in our drugs re coming from china and india. these are the two worst safety offenders. so china's carcity is good news and bad
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news. bad news because of health, safety and environment. these are the true threats. but the good news is jobs, because as china struggles to make things safely, they just figured out how to make a ballpoint pen. look at up. there is a fanfare, they just figured out how to make the nub of japan -- of a pen. as they struggle to feed their preparation, power the population, they wanted what america makes in terms of goods and services and agriculture, but specifically colorado. colorado's industries are well-positioned to support jobs through trading with china both through exports and down investments. and if you look at the last 10 years, the colorado exports have increased to china, growing about 30% over
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the last 10 years. it is not bad if you look at the country as a hold of, america has more than doubled exports to china over the last 10 years. and if than doubled exports to china you look at the level congressional districts overnighted percent of all districts --districts, over 90% have doubled exports to china. across the country, we are selling goods and services to china hand over fist. the reason is because china needs what we make. as china deals with scarcity, i believe colorado is ideally positioned, not just in terms of agriculture and advanced manufacturing, right now it is electronics. electronics capitalized last year. increasingly, they are selling services to china. goods
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increased 30%, services increased almost 300% from olorado to china over the past 10 years. so part of that is toryism. -- tourism. when the chinese are coming to ski, that is in the number. firms that are helping china with infrastructure building, with cleaning up the environment, some of them coming from colorado springs. so if anything i feel like a colorado 0 years. so part of that is could be doing more of the same and as china opens their market for beef, which is beginning to happen, colorado is ideally positioned to be selling the into -- fthebeef into the chinese market. in closing, think about the next century, yes there are problems all over the world, but when donald trump said that the u.s. is moving from a position of strength, i agree with him. we do. we are $45 trillion wealthier of a country and we re growing. we are light years
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could be doing more of the same ahead of china technologically. and we have the software of a great nation, the dna of a reat nation. openness, the rule of law, these are the dynamic drivers of innovation. and the challenge will be to see how policies that may fly in the face of these pillars of american openness and democracy, how they impact politics and the economy? it is a lesson and we will see how it lays out. thank you for your attention today. >> ok, we will start with questions. anybody? >> can you, for the benefit of the audience, speak about ip
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theft and how it might add or detract from the chinese economy? jeremy: the question of ip theft is the one that we are reminded a lot about. cyber spying is in the news quite a lot these days and we heard about two kinds of chinese acking. one is of personal data, and the office of personal management and data, and the office of government worker files that were stolen. the other kind of heft is industrial. and that
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is the kind of want to adjust. -- adredress. underlying the issue is a lack of rule of law. there are plenty of laws in china, but enforcement is sketchy. china is evil being in the enforcement of -- evolving in the apartment of ip. most cases are chinese company's against chinese companies, so china knows that and they need to compete by bolstering ip. in the meantime, what do we do in merica? here is my thinking. if you are, if you are thinking that china can make whatever we can make at the press of a button, look at chinese safety standards. look at the thousands of scandals over there and the hundreds over here. so a recent one was the san francisco bay bridge, where the football field long plates were sourced from a chinese enterprise and they were cracking. and rather than fixing the problem, california transportation authority decided to fire the inspectors
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and lucent -- lossenosen regulations. avoid the bridge in an earthquake. it is not an outside case. if you look at the high-speed rail industry, a erfect case study of china opying ip for the high-speed rail technology from hyundai and kawasaki. if you look at that infrastructure project, it has been an example of corruption and lack of safety. so, you know, the crashes you have had is because of systemic failures, failures happening up and down the system, not a single point. and what it shows is that just because you download data on how to make something, does not mean you
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can make it reliably, safely, again and again and again. you need more than just advanced equipment. you need a value chain that is transparent and will run, with good corporate governance and a foundation of rule of law. so while the ip issue is a problem, i tend to look at it with less breathlessness than colleagues, because i believe that while many secrets are being stolen, it needs to go through the chinese platform to be executed and their form -- therefore china cannot just leapfrog over us. do we need to harden defenses? you bet. industrial, absolutely. government, especially. but industrial, absolutely. we could be doing more to hardened defenses, but the feeling that china has already leapfrogged over the .s. in terms of economy, based on the fifth of ip -- based on the theft of ip actually fuels a lot of animosity toward china. but i don't see it as
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the secret sauce for china to beat america in the next century. >> hi, i'm an instructor. it sounds like you are advocating for freer trade, provided that we incorporate the negative -- talking about health and safety. how do you sell something like that in a global environment where populism is against free trade and the market you leads are against incorporating those negative externalities? jeremy: i think you have a rising tide of sentiment among both conservatives and liberals for reform and carbon tax, especially as we are evolving attacks, so james baker being one of the many people who are speaking out in favor of a carbon tax. we did just do paris accords, so it is in the realm of possibility to do multilateral agreements based on intangible externalities, like the environment. how
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likely it is in the current political environment, there was an off mic conversation capture between donald trump in wilbur ross a couple weeks ago, which was reported on in politico trade, where wilbur ross said, look at the japanese on food, they do not accept anything. and you know what, if they are looking at japan as a model for not just food the calculation of trade, because japan is trying to use value added trade accounting, then they will do well to look at hat again. i find it encouraging. but in terms of ind of the broader landscape for trade deals, not so ptimistic at the moment. nobody seems to have the
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appetite to stand up and say what is good about these hings. and there was a question right here. >> thank you. i would like to explore what your thoughts are on the purpose for protection, what i would define, by china toward north korea. and is that all the trade function? and the potential loss of trade and could you comment a little bit about that. it was seems to be the strategy -- what seems to be the strategy to reduce the volatile government by the u.s. and others -- but with china it seems, at least what i have
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been heard reported, is that hina has a lot of workers that come from there and in the plans better are there. how do you reconcile this with china? jeremy: china with north korea is on the heels of, i should say the horns of a dilemma, although it could be after mar-a-lago, we will see. you have a country that is teetering on the brink of collapse and starvation, yet they are the buffer between china and a nuclear eyes -- nuc learized south korea with u.s. troops. they are walking a tightrope. for example, the recent cut off in energy. they do not want to go too far, because if you topple that
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egime you wind up with a humanitarian disaster on the border. also, trade to your oint, china is embedded with north korea in terms of trade. this is, this is china's dilemma that i do not feel much optimism that chit chat at palm beach will solve. we will see. i mean, ultimately it is up to the chinese president, how he wants to play his part. and we can certainly exerts pressure in many ways. but ultimately this is china's neighbor and china is going to need to play a leadership role in solving the problem. diplomatically, sir of -- sort of punching china in the face on a world stage is probably not going to
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help when you need their help. yes, a follow-up? >> i find it hard to believe that humanitarian concerns are one of the major reasons why china has a feeling of concern for north korea. jeremy: the humanitarian reasons? yes. >> it is all a bluff. i'm doubtful. jeremy: i am doubtful as well. >> china holds significant amounts of u.s. government debt which will presumably have to be repaid at some point, how does that debt impact your view of a challenged china, and it kind of healthy america? jeremy: great question. we often hear about this as a
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national security issue. what if china, on any given day, fiddling decides to sell and dump the $1.2 trillion worth of national security issue. what treasury bills into the market? and we heard about this in the last election, the romney-obama election, sarah palin talking about how we were slaves to a foreign master. so we have heard about this for a bit in politics. the interesting thing is that the nightmare scenario that we have been talking about actually happened this past year. so, we have been told if china dumps treasury bills, suddenly the dollar would collapse and interest rates would go through the roof. in fact, china sold billions of dollars worth of those bills last year. of the $3 trillion. and what happened? nothing. the reason is, our market is a $30 trillion market. it is the deepest bond market in the world, no country is even close to the size of the bond market.
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so when the pentagon did a study on whether the ownership of the bills proposed a risk to america, depending on china, it did not paid because -- did not. other countries would buy them. that is what happened. they sold the bills and there was not a rebel in the bond market -- ripple in the bond market. i do not see the ownership of the bills a threat or giving china any leverage whatsoever over our policies. and in fact, their buying of the bills during our currency manipulation helped to keep our interest rates low. when china start selling $800 billion worth of t-bills, the reason why they do it is to keep the currency from falling too fast. what you have is china has a closed currency. and there is a special administrator that
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guards the currency. and last year, they loosened up the outflows and inflows of currency and what do you know, a trillion dollars worth of capital flowed out of china, most of it to the u.s. people would see it on the ground, this is a stagnating economy. but we hear from politics is that they are treating on their currency and they are actually doing the opposite, trying to sell the bills to keep the currency from falling too fast. in terms of negotiating posture of our administration, we hear them addressing a problem that is actually not a problem at
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the moment. china is not tried to keep the currency cheap, they are doing the opposite, trying to keep it from falling too fast. so the larger t-bills issue is one where, when the americans look at the market, we have $70 trillion worth of assets. although china may own about $100 billion of assets in he country it is still kind of a blip in terms of $70 trillion. so even though, that bill money is going out of debt and into assets like mergers and acquisitions, and some of the money is coming here to colorado in investment, at the
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end of the day that investment s supporting jobs. now when it goes into areas that are sensitive like the internet backbone, there is a reason to push back on chinese investment. with most industries, i welcome the jobs support it has been a positive for the economy. >> going back on trade, the original tpp, the agreement purposely excluded china. with the current administration pulling out of that, do you have a sense for china's capacity to fill the void? jeremy: that is a good question and one that policymakers are thinking about these days. so, i would say, i believe that those that designed the tpp, and hillary clinton who later disavowed it was one of the credible architects, did so as
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policy for the to asia -- pivot to asia. this is not just economic, this was a pivot of hard power as well. so a considerable part of the tpp was designed as a security agreement, setting the rules of the road for the region without china. especially on environment and labor, and to some degree health and safety. so by pulling out of the agreement i do feel we have shot ourselves in the foot in terms of trying to put together a solution for that region, which is, we see militarization in the south china sea, north korea, and we see a lot of nervous southeast asian nations. part of the tpp was the say we have your back. when we step away from that, we leave more of a geopolitical vacuum. in terms of trade, actually feel that the notion that china will sort of step in and become the global hedge
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along in trade is overblown. the reason lies in the numbers. if you look at gross trade flows, china looks huge. but if you look at value added trade, you see that with traded for the last 25 years, the footprint in trade with asia has not changed at all, it has just moved into china. so essentially china is sucking in flow from all over the world putting it together and sending it to the rest of the world. so in regards, the value added numbers, if you look at the actual supply chains you will see that most of the major supply chains that have gone through asia, and china, are actually owned by american companies. so china may be the last stop on the supply chains and it made -- may make them appear larger in the statistics, but you will see that most of those supply chains are mostly u.s. and european owned and that is not going to change whether there is a tpp or not. so i do not believe that suddenly we are
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advocating the next century on trade, not at all. where i feel like we have really hurt ourselves is with security and geopolitics. > ok. yes, thank you. i have a quick statement at the beginning of my question, then the question. contrary to mr. trump, i favor multilateral trade deals as opposed the bilateral trade deals. my question is, multilateral trade particularly the tpp, gets criticized or there is a vulnerability when it comes to retraining workers that get displaced. can you comment on how we could come up with a more effective retraining effort so that if we do a better job of retraining people who lose their jobs, we would have the vulnerability. a way to attack those contracts and programs. the german country
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has an effective program. can you comment on how to retrain workers. jeremy: it is at the center of policy for the next century, especially when you think about automation, there are some scary ideas coming out of think tanks, they think as much of -- as 50% of american jobs could be eliminated by automation in the coming century. so this is a challenge to society beyond retraining from dislocation, training for the next century, what does that look like? i would say, i would say this. we have more than a dozen retraining programs right now. i think there are more than 14. including taa. jeremy: that is the issue. they re ineffective. they are stovepipes and silos, they do not work together. they are
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underfunded. we spend less per capita on worker retraining than any other advanced economy. so we are trying to throw a bunch of policies and budgets against the wall and nothing is sticking.we need to stovepipes and silos, they do tep back and we need to have a national policy that looks not just that dislocation from trade, but just worker dislocation. capitalism is a disruptive system. when we look at the job numbers every month and it says we created 200,000 jobs this month and we think, that does not sound like much, those are net jobs, on top of --churns. america turns illions of jobs a month. formally a jobs are lost -- 4 million jobs are lost in 4 million are created and on top formally a jobs are lost -- 4 still a highly dynamic, highly disruptive economy. think about all those jobs being lost on a of that is the net. we are
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month-to-month basis. most are not going overseas. they are lost for a variety of reasons. what happens to those workers? whether they lost their jobs to trade or not, what happens? think about what our leaders have done, they have done a lousy job on this policy wise. we have seen the net effect of this where folks are angry and they say you need to listen to our needs. i do not have the answer for this, but i think he framework would be creating a national policy of where we want to be in the next 50 years, in terms of workforce. if we look at daily expenditures, the fed measures how much we spend every day, 80% of what we spend is on services. so training people for health care and the next generation services is
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important. guess how much we spend on made in china goods? 2.5%. but, we need to set a framework nationally for where we want to become and we really need to create state level arriages of capital, education and government. you see some states doing this. the state of alabama for example, doing a good job in marion community and tech colleges with local and government. you see some capital and government grants. that is creating the labor pool that works for exports in capital and government grants. that is creating the labor pool that works for exports in alabama, and at the air base. at the state level, figure out how to best marry the private sector and investment with grants and loan guarantees, and also i think -- but without the national vision, you cannot just rely on states to put these together. you need a national vision and kind of a capital and government grants. statewide implementation. on how to fix that. >> next question.
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>> question about your business experience in china. i understand it may be a delicate want to answer. when you do, when you have done business in china you have to comply with merican law as well as chinese aw, yet you are probably running into a fair amount of corruption in china. can you comment on how did you deal with that, and to what degree ou found it a great this dvantage to be an american doing business in china? jeremy: next question? eremy: i'm getting. thank you.
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i will say this, 20 years in business in china and not one bribe. not one bribe. now, um, i am not a big enough company to get to the point where i might need to start driving. kumbaya complaint when they each a certain size -- companies complain when they reach a certain size in china is start to be a shakedown. we have seen these with the provincial governor who was involved in a money laundering operation and was arrested on charges and there was murder, that kind of racket has been run. so corruption is so endemic in china. to the point where you are a student graduating from school and you re bribing to get your
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diploma, you are waiting in the hospital and bribing a doctor. and it is in every aspect of chinese life. as an american firm, again, we did not fall foul to those practices and we have not bribed anyone and we have not found it too much to our disadvantage yet. for example, i am selling american agriculture at a higher price than local prices, because my buyers perceive the quality to be better coming from the u.s. be better coming from the u.s. and for it to be safer. and for that reason, i -- a, i do not need to race to the bottom on price. b, i do not need to bribe my way through. what you do need to establish is relationships, because this is a culture that runs on relationships. it is not a country run on contracts. when you sign a contract, that is
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when the negotiation begins, not ends. so beyond contracts it is about the relationship and over the years the folks that you build friendships with at the local level are the ones that will help you when you have a rainy day. yes, the silver bullet, the guys on the standing committee are important to know, but it is the local people, the local people, those officials are the ones that help you. when you need it. if you invest the time and build a relationship. not one of those guys has ever shaken us down for a bribe, so it is possible to do business in such a culture of corruption and not fall afoul to those foreign practices. >> a little bit off subject, but -- uh, there is a muthyth that the chinese have -- superiority? do you sense that t all? jeremy: innate sense of
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superiority? i -- so that, i have not sensed that. if anything i have seen something that we might recognize as an innate sense of warmth and hospitality, and hard-working values. now, at a national evel, you know there is a long memory. we came out of a century of humanity -- of humiliation, every time china opened up foreigners took advantage of them. and we have in recent memory, n unimaginably a horrific turn in history in terms of the famines and the cultural revolution, where myn business partner, her dad relocated to a camp and was eating bark. so this is in the
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national memory. imagine if our parents or grandparents went through something like that nationally. so i do believe that china understandably has a deep sense of grievance from the world, and distrust of the world, which i think if you look at their contacts in history makes sense, but i do not see the sense of superiority. you know, the only country that said china was not he economic superpower was china. they have a real sense of their own fallibility. when the 2000-safety law was beingwhen the 2000-safety law was being revised in china, they went out on the street and spoke with folks, do you think these laws will make the food safer? and they got laughter. i think the chinese have a
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pragmatic sense of their own position in the world. but it is undergirded by a sense of grievance, which i think is actually justified. >> i have an observation in question. -- and quite a bit i get what you say about value added, but as lawson products is made in china at the >> the question is, i don't know how you said to joe sixpack who has a very basic ob in automation that it is ok that i lost it to a robot, it is somebody else's fault. i will rush out and get retrained. what is the message to somebody like that who voted the way somebody like that oted this last time? >> if you look at the history of this country and you see with each animation, the disruption and causes. we
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magine that the buggy whip guys had a powerful political orce. i do not wish to imply hat we can tell people who lost their job that it was someone else's fault. at the ocal level, losing your job is devastating. we see now, social aspects tied in such as opioid addiction and mortality rates in white males. they are lower than they have been in a long time. firstly, you need to fix the system for training. then, what you tell those people in he context of vision for
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america and your state, -- for example, and coal country, like in saudi arabia, look where oil is. oil is not $100 a barrel. one it was, they were living large. now because oil where is -- oil is where it is, saudi is scrambling to fix its economy. how do you diversify west virginia? is that a project akin to the wpa? how much federal support needs to happen in coordination with local? the state needs to form its own never syndication strategy. how do we train coal people to do other stuff? some of that stuff might not be manufacturing. i have met many people who are in those years of 50-60. they are out of a job, they need a job, hey are not ready to retire.
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they are not re-trainable. they are resistant to being retrained. especially if you ook at automation. these are not easy pieces of equipment to an. it is not an easy fix. i do believe the diverse city of america's economy can absorb folks. the agricultural sector is a booming sector. griculture is a major export factor in this country. it will continue to be. if it is someone between 50 and 60 who need a paycheck to put food on the table and benefits, if that is milking a cow, i don't mean to seem heartless. i'm just trying to think of what is in the realm of the possible. we hear from think tanks all the time about retraining but what
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does that mean? we have been trying to do it for decades and we failed. i think we need to go back to the drawing board on what it means to be retraining in the near term. getting people steady paychecks right now as opposed to long-term. to your point, what do you say to these people? what do you say to people in the rust belt evoted a certain way? in the old days, we had home at and shop. the two classes that i looked at our civics and the global supply chain. where is stuff made? how does stuff get made? who makes it? what is
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america's role in the global supply chain? what is china's? what does it mean for local populations and local environments? that is a long-term project. talking to people politically about this, i think you need to present the competitiveness of the american worker. if you look at ohio, ook where they are clamoring loudest. those people are exporting the most. they are the most competitive in terms of advanced manufacturing. those are the states that have the most to lose. i think you need to point to where america is strong. i think defeatist rhetoric that depicts america in decline is defeatist and gets us into trouble with huge blocks of the population. they believe that america has truly seen its last days. i think it needs to start with the chief executive presenting a positive vision for america. good
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morning america and the city on the hill is something we would do well to your right now. there is a lot that is going on that is great going on with this country. we need to communicate that to people who were lost their jobs to say that there is opportunity out there, it is what fdr did. here is hope. obama tried to nstill that hope. toward the end of his term, not so much. there is a lot of hope out there. that has to enter into end of his term, not so much. the political rhetoric as well. we need to hear the other side of it as well. >> any other questions? > the cost of living is much higher in the united states than what you are talking about, is that correct? >> it depends on the country. lacks --
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>> is that a problem that will get worse? >> yes, it is a problem if you happen to be one of the people that is doing the job and then is sent to mexico. the answer is yes. the problem is that we are a capitalist country. we run on competition. we run on dislocation, disruption and job loss. that is the engine of innovation, that is the engine of how we go. -- grow. that shot may be lost to someone in mexico with lower wages and lower skill. another job in the u.s. was created to make the advanced auto parts that went into that car. if you look at the rust belt, it is a perfect example. we created all of these advanced manufacturing jobs. selling into automotive, aerospace, bio, pharmaceutical, it is all coming out of rust belt companies. the point is not to erect tariffs that stifle the innovation but support people -- to support
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people who lost their jobs. that is where we have fallen down as a country. if we need to make a new -- renewed ontract with america, -- i don't need to whitewash over our economic problems. the fact that our national wealth is $45 trillion will be than china, that is nice to know that china is not ready to run over our local economy but if you are a family whose wages have not gone up in 20 years, who cares? we have had wage stagnation, growing disparity, the 1% owns more and more of the world. >> aren't we handicapped because the cost of living is so high? jeremy: i don't believe it does. if you look at the things
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we sell to china, we are not selling china shoes. we are selling china airplanes. that is with our own cost structure built in. we are selling china pork and soybeans. that is with our health and insurance dates in. the fact that we pay our work is more doesn't mean we are on a race to the bottom of quality life and wages because of scarcity. china needs and we have supplied, more so than other countries. yes, we destroyed some jobs, we also create other well-paying manufacturing jobs. the point is to do a better job helping the people who of been dislocated and not to hurt those who are making money. remember, trade is only a piece
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of our economy. most of our economy is so sufficient. trade is a piece of it. we are a large economy that consumes what we make. as trade the client with china, maybe we will see a trade work with china, do i think this could impact america negatively? could we lose jobs? definitely. do i think it will be armageddon? no, i don't. i think we need to fix those economic inequalities -- inequalities that are not solved. trade is not to blame for those economic inequalities. i think it is our own policies that created these issues, not the chinese currency policies. >> in terms of gdp, economics,
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how do you factor in the walmarts and the kfc's and mcdonald's and haagen-dazs and all of those? how does that fit into >> interesting question, if you ook at the engine of china's manufacturing economy, it is the export factor. if you look at the composition of the ownership of the companies and the export factor, the majority of the company is in china's export factor. really, the engine of china's growth is a partnership with the united states. yes, many companies -- i don't know -- in terms of
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gdp, they say that walmart imports as much product as if it were a small country. if that gives you any idea of the level of gdp of a walmart. gdp looks at spending. their trade flows are akin to a company in terms of how much the import from us. many companies have gone to china and stuck it out and done well. many more companies did not. they have bit the dust in china. they failed. ultimately, china is reach and its economy toward state ownership. recently, we have seen more privatization, now we are seeing more state coming back. the issue going forward is how do you negotiate with china on trade harms that -- if it abandons, it hurts
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itself. it is trying to keep these uncompetitive companies afloat essentially. these dinosaurs of the command driven economy. -- demand driven economy. what president trump needs to negotiate with president she about -- president xi about is the tarriffs. the level of subsidization that china ndustries go through. from cheap to free raw materials, cheap loans, debt and equity slots, on and on. -- sloths, on nd on. the answer is no, it is creating uncompetitive ompanies. when shell oil wanted to build an offshore rig in china, they inspected china's biggest, brightest, most modern shipyard. mostly because they lacked very basic logging and tackling. they lack china's biggest, brightest, the ability to handle hazardous materials, to do quality
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control on their suppliers, to monitor for health and safety. these subsidies are creating uncompetitive and unsafe companies. china is looking for maximum employment to keep its country secure and keep the government in power. as long as people are employed, not taking to the streets, that is what they are looking for. to have president xi off of this, it is against his national interest. that is where the economic issues will arrive. health and afety issues. it will be interesting to see if these were talked about an palm beach -- in palm beach this weekend. thank you.
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[applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2017] >> april 17, russia and the rest, thank you so much for everybody being here today.
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>> our hearts should be open not just to falling in love but to the world. we need to look, we need to care, and we need to contribute. >> don't ever let anyone tell you that your dreams are silly. and if you have to look back on your life, regret the the things that you did and not what you didn't do. >> nothing stays still.
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things will change. the question for you is whether and how you will participate in the process of creative change. >> just a few past commencement speeches from the c-span video library and watch more of this year's commencement speeches on saturday, may 27, monday may 29, memorial day, and june 3rd n c-span and >> on the second day of his trip to saudi arabia, president trump addressed leaders at a meeting in reyad. the president's remarks are about 35 minutes.
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pres. trump: thank you. i would like to thank king salman for his extraordinary words, and the magnificent kingdom of saudi


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