CSIS Press Briefing on President Xi's Visit to the United States

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COLM F. QUINN: All right, folks. I think it’s eight on the dot, so I want to thank the people who are here on time. So I think it’s time to begin.

First of all, I want to thank you all for coming. It’s an absolutely miserable day. Makes you appreciate why someone would want to have a meeting in Mar-a-Lago this time of year. I want to just first say that we are recording this and we will be sending out a transcript of this later in the day today, and so just check that in your inbox.

I’m Colm Quinn. I’m the deputy director for strategic communications here at CSIS. We’re going to hear from our experts and then we will open up to questions.

First, to my left is Chris Johnson. He’s a senior adviser and Freeman Chair in China Studies.

Bonnie S. Glaser is our senior adviser for Asia and director of the China Power Project.

And Scott Kennedy is deputy director in the Freeman Chair, and the director of the Project on Chinese Business and Political Economy.

So, without further ado, I’m going to hand over to Chris Johnson.

CHRISTOPHER K. JOHNSON: Thank you, Colm. And welcome, everyone. Thanks for coming by today.

I’ll just do a brief overview comment, kind of give our sense of how we’re seeing the meeting that’s upcoming and some things to think about. And then we’re going to have Scott talk about some of the economic and trade issues, which obviously are very important in the relationship, and when Bonnie will follow up with some thoughts on the security side of things, most particularly North Korea and so on.

I think –

(Audio break due to technical difficulties.)

MR. JOHNSON: There we go. Is it back? Yeah.

So, you know, it was nice that they did, you know, finally announce that we were having a summit, so that’s good. It wasn’t quite clear why it took so long, but glad that we’ve got it going.

You know, obviously, it’s a great opportunity for these two very important leaders to sit down. Our sense is that this is going to be probably a fairly consequential meeting, but I think it’s equally fair to say that it’s pretty unclear exactly what’s going to happen and what they’re going to talk about, and even in some cases what some of the main issues will be. I mean, I think we can say with some surety that, obviously, North Korea was going to factor prominently in this discussion. Economics and trade are going to factor prominently.

You know, there is often the sense that what we’re looking for in this kind of a meeting is for the two leaders to begin developing some kind of a personal relationship. I’ve been sort of thinking about that a lot lately. It’s an overused meme as far as I’m concerned that they need to do this. In fact, it’s pretty rare, actually, for Chinese leaders – Jiang Zemin maybe aside – to care that much about, you know, these sort of personal relationships. So I can’t think we should expect to see too much on that side. And the fact that President Xi doesn’t play golf sort of limits their ability to do some of these extracurricular activities, so we’ll have to see what they choose to do there.

I think, you know, one of the main questions, certainly from the Chinese side, is why would President Xi take what appears to me to be a fairly significant risk in coming here at this particular time? Obviously, at home he’s got an economy that is doing pretty well right now, but obviously is still up and down. He’s got a major domestic political event coming, which is the Party Congress in the fall, where he has a very ambitious agenda for what he would like to achieve. And my own sense – and somewhat affirmed when I was in Beijing recently – was that, you know, no matter what the two sides may agree to before the meeting actually takes place, there’s no accounting for what happens when they’re face to face in Mar-a-Lago. And President Trump, I think it’s fair to say, has shown something of a penchant for going off-script every once in a while. And so that must be concerning to a group that typically likes to have everything very, very scripted.

So why is he doing it? Well, one, I think, obviously, we can see on the Chinese side Xi has mapped out a very clear series of events between now and the Party Congress that will help him burnish his credentials as a leader, also his international credentials. He’ll have the summit here, then there will be a large exercise related to their Belt and Road Initiative in Beijing in May. That will follow with what looks to be a very major military parade in July, on the anniversary of the People’s Liberation Army in August. And then we’ll have a large BRICS-oriented event. So a series of these sort of events, and this is obviously a key one.

Two, in a Party Congress year, obviously President Xi, and even more so now that he’s been designated as core leader, must show that he can manage the most important bilateral relationship – frankly, not just manage it, but do his best to control it. And obviously, we’ve seen some ups and downs in the relationship, most prominently over the “one China” issue, since President Trump has come into office.

Third, I suspect that Xi is a very confident fellow, and probably thinks he’s going to come in and sort of get one over on President Trump. I suspect President Trump thinks he’s going to get one over on President Xi. (Laughs.) So it’ll be interesting to see how that dynamic plays out.

Lastly, though, and perhaps most importantly, I do think it’s – the Chinese are very fearful about the trade and economic shoe dropping sooner rather than later. And I’ll leave a lot of that to Scott, but I would just say that one sense I’ve gotten as to why he’s keen to get in front of the president and, you know, start to have that leader-to-leader discussion is that a character like Lighthizer, the incoming USTR, makes them very nervous. And he makes them nervous for a number of reasons, but one is if you want to describe his approach, it’s let’s call it defensive – in other words, keeping things out – rather than an offensive approach to trade, which would be opening Chinese markets.

And domestically, China has what they are sort of referring to internally as a six-month tailwind in the economy. The economy is stronger than they have expected. And, encouragingly, they’ve chosen, rather than just opening the stimulus taps further to have a very frothy growth year to welcome the Party Congress, they’re actually concentrating somewhat on this idea of financial risk – you know, debt, wealth-management projects, et cetera. And so this means that we will probably see less fixed-asset investment than was initially suspected, and therefore they’ll be more dependent on exports to achieve the growth they want to achieve. So, if you’re concerned about someone who’s going to keep things out of the United States, obviously you’d like to get that sort of tucked in as quickly as possible.

From the administration’s side, I think it’s totally unclear, frankly – (laughs) – what exactly we’re going to see. Obviously, Secretary Tillerson had a good trip to Beijing. Our sense is that he did do a lot on North Korea behind the scenes. Leave it to Bonnie to elaborate on the status of those discussions. But, obviously, that’s going to feature prominently in the discussion and would be one of the areas, frankly, where I would expect President Trump to feel, when they are face to face, that he’s going to try to get something from President Xi right there, right now on that subject, and how Xi will react to that will be – will be very interesting.

And so just in summary, I think what we’re seeing is a couple different potentialities. My own view is the likelihood of let’s call it sort of more risk-prone outcomes is somewhat increased because there has been a lot of confusion. One risk-prone outcome is what I described, which is that the president is in his dealmaker mode and decides to push hard on some particular issue, and Xi balks, and, you know, things could unwind from there. If we are too aggressive, I could see a situation where Xi would feel for political reasons domestically he has to go on the defensive and push back hard. He might gain domestically, actually, by doing that. If it looks like the atmosphere is going to be negative, he has a reason to almost double down on the negativity.

But on the other end of the spectrum, I do worry a little bit about a risky scenario where, frankly, we – the United States – get rolled by the Chinese because we are unprepared, I think it’s fair to say, for the summit. We’re understaffed. And this is a very unusual approach, with so few sitting people in. And, you know, rumors of a fourth communique possibly being on the table, which I personally always felt were bunk when they did circulate briefly, would suggest that – you know, that that was even considered would suggest that we may not quite be ready for this. So I think any – it would come out any which way but loose, and will be an interesting and exciting meeting.

Let me stop there and turn it over to Scott.

SCOTT KENNEDY: Good morning. Thanks for coming.

Let me make one general point about the meeting and then two points about economic issues.

The first, which Chris already touched upon but I want to just expand on, is how rushed this meeting is. If you look at every first meeting between a(n) incoming U.S. president and a Chinese leader since President Carter, this is about as fast as they have ever gone, except for two small exceptions.

President Obama met with Hu Jintao in April of 2009 on the side of the G-20 summit in London, and that was strictly a photo op, and they were both there simply to deal with the global financial crisis. But there wasn’t a substantive meeting until much later that year.

George H.W. Bush, in February of 1989, went to China, one month after assuming office. But that was only because he went to Japan to attend the funeral of Emperor Hirohito, and so already being in the neighborhood he continued on. And having been the chief representative for the United States at the unofficial embassy in the mid-’70s and then vice president, he had a lot of experience as an old – quote/unquote “old friend” of China.

So this is – this is quite unexpected and quite early to have such a meeting. Usually you would expect it to happen later in the year. The more natural time would have been at the G-20 meeting in Hamburg in July or later at the – or APEC or the U.N. General Assembly. So this is quite early.

And I think that suggests that we shouldn’t over-expect what’s going to happen, particularly on economic issues, in terms of outcomes. I expect for the most part this to be an effort at framing the story and the narrative, which is going to be different on both sides, not detailed negotiations. Of course, you can’t foresee what could possibly happen. They could go for a walk and try and settle everything, the way Reagan and Gorbachev almost did in Reykjavik in 1986. But I don’t think that’s likely here.

From President Trump’s side, you’ll – I’m sure, for the most part, he’s going to hammer away at this issue of unfairness and how the U.S., in his view, has been fleeced, and that China’s view of win-win means China wins-China wins, which is not a relationship built on reciprocity. So he’ll probably talk about market access problems for American companies in terms of our exports and investment, Chinese industrial policy, which is not only an issue for China’s market, but for third markets, as well as intellectual property rights and Chinese efforts in high tech.

Xi Jinping, probably his first response would be: Tell me how we can help you. Tell us what your ask is. We’ve heard about these complaints. We feel your pain. Tell me – tell us what we can do. And I’m sure that he’s got lots of suggestions, including encouraging greater Chinese investment in the United States, encouraging U.S. exports of high tech to China. But he’ll also bring up the bilateral investment treaty, which was negotiated extensively under President Obama but didn’t quite get over the line. If he’s pushed very hard, as Chris suggests is a possibility, then I think he’ll fight back with regard to he’ll show a little bit of ankle on the way China could potentially retaliate against U.S. businesses in China or toward American exports.

But I still think, you know, this is going to be relatively quiet, because Lighthizer is not in place. I think the Trump administration is – wants to set things up gradually to make the – build the case. They started to build the case earlier this week by announcing that they’re going to –that going through a review of China’s status as a non-market economy, that the Commerce Department is undertaking, and then later today you’ll see the issuance of two executive orders related to trade, which are direct – which impinge directly on issues of China.

So, you know, it could – something crazy could happen, unexpected certainly. You know, one tweet could change the trajectory of the meeting to some extent. But I expect we’re going to – it’s going to be a lot of complaining without a lot of negotiations specifically, and then the Chinese will leave nervous, anxious, and eventually the other shoe will drop. But that shoe is probably not going to drop for another month or so. I think actually most of the hot action is going to be in Bonnie’s space in security, where there does – where are facing very urgent problems. So let me turn it over to her.

BONNIE S. GLASER: Thank you. Good morning.

From the perspective of the Trump administration, just to ask a few – just to add a few framing comments to the overall meeting, I think that there is a desire by the president to size up Xi Jinping, to talk about what the big problems are in the relationship, set priorities, and to see whether they can be addressed in a cooperative manner, or whether the United States is going to have to rely more on unilateral meetings to address these problems. I understand that there will be an attempt to discuss some timelines. So whether it be economic issues or North Korea, which are the two top issues at this upcoming meeting, there will be a discussion of some timelines.

One quick comment on Secretary Tillerson’s visit to Beijing, and the fact that he did carefully and deliberately repeat the phrasing that is usually used to describe, or has been used to describe, the relationship under the Obama administration – this is, of course, Xi Jinping’s phraseology of no conflict, no confrontation, mutual respect, and win-win cooperation. And from the administration’s perspective, what I’ve been hearing is they are playing down the significance of this formulation. It is not an embrace of Xi Jinping’s new type of great power relationship, but rather Secretary Tillerson has his own interpretation of these individual words.

So, turning to North Korea, the Trump administration is emphasizing that his is now not simply a regional threat, it is a global threat. And it is, indeed, an increasingly urgent and imminent threat to the United States, and to our allies. As you know, a policy review was initiated early on. I don’t think there has been a final conclusion, but there have been some preliminary conclusion about ways forward. Nothing is off the table. So nobody is ruling out military options. But generally speaking, an administration has three tools to use to deal with North Korea. They are diplomacy, sanctions, and deterrence. I think this administration has not ruled out diplomacy, but it is not turning to diplomacy as the first option.

And so like several administrations that have preceded the Trump administration, there is an early attempt to try and get China to do more, to put more pressure on North Korea. This should not be surprising, because China is key. I would highlight the report that was released several weeks ago by the U.N. panel of experts, which goes into detail about the ways in which China is an enabler and a facilitator of North Korea’s access to the international financial system. And this is the area where I think the Trump administration is going to turn its attention to. Chinese banks, particularly small banks, have been enabling North Korea to gain access to the international financial exchanges, as well as Chinese front companies.

The first Chinese front company and individuals that are part of that company that was actually sanctioned, it was under the Obama administration, that was the Dandong Hongxiang Group. And there are many, many others. So I think there really is a determination on the part of the Trump administration to make Kim Jong-un far less comfortable than he has been in the past. There are things that Xi Jinping can do. The question is, what the ask will be. If the ask is to shut down energy supplies to North Korea, I think the answer will be no. China’s policy, in my view, has not fundamentally changed. That is, there is a willingness to pressure North Korea under the condition that it does not cause instability within that country.

And so there is certainly more that China can do. And I think that Xi Jinping is looking for an issue to cooperate with the Trump administration on. After all, climate change is no longer the glue of this relationship. And there needs to be some areas that can cushion the friction that is inevitable, in my view, across a range of issues. My guess is that Xi Jinping looks at this perhaps from even a short-term or a medium-term perspective. That is, he wants to get through the 19th Party Congress knowing that the U.S.-China relationship is mostly positive and stable. And so, if he can do a few things now to satisfy the Trump administration, then there may be more friction later, but at least he can get through this year.

South China Sea, my understanding, is not urgent. It is important. But it is – it is likely to be on the agenda. But I am hearing, once again, economics and North Korea are definitely the front and center. But given the fact that the presidents will have plenty of time, and my understanding is that there’s meetings the first afternoon, the evening at dinner, and then the second day, and that there is a walk that is scheduled. This sounds very much like the Sunnylands agenda. There appears to be a model here. And so – but I do think maritime issues and South China Sea in particular will come up.

The question, of course, can the Trump administration achieve what the Obama administration could not: A halt in the militarization. For example, a pledge to not continue with land reclamation. I doubt that President Trump will be getting into much more details than that. For Xi Jinping, again, I think this is an easy one if you look at it in a short timeframe, because China’s priorities this year are to improve relations with neighbors, to try and achieve this framework code of conduct agreement, to take advantage of the change in the leadership in the Philippines and improve that relationship, and use that to improve China’s overall relationship with ASEAN.

If you ask our Asia-Maritime Transparency Initiative and our recent analysis and ongoing satellite images, you will know that China has basically finished what might be termed phase one – although the Chinese don’t call it that. And the real question, in my mind, is whether or not they will move eventually to actually land forces and assets really – aircraft – on those – on those islands, and deploy surface-to-air missiles and perhaps cruise missiles. And so I think perhaps one goal of the Trump administration will be to try to get a pledge to sop the militarization here. But again, this is a less-urgent priority.

So I will stop there.

MR. QUINN: OK, folks. Just – (audio break) – Q&A. If there’s anyone still standing at the back, there are a few more seats here just beside me. And without further ado, anyone with questions? Yes, George.

Q: George Condon with the National Journal.

My question is more of an overview. I mean, the Chinese are accustomed to American presidential campaigns being filled with a lot of anti-Chinese rhetoric. But I don’t think they ever saw anything like this campaign, where, you know, Trump called them the – what was it – the single greatest currency manipulator that’s ever been on the planet. He threatened a 45 percent tariff. It really was beyond anything we’ve seen. He also showed, not to be flippant, but sort of an ignorance of a lot of things on the Chinese agenda. How much – do the Chinese want to use this meeting to educate him, to express concern, or to warn him not to do things like a 45 percent tariff?

MR. JOHNSON: Yeah. Thanks. Good question.

You know, my own sense is that one thing we have to understand is that while China’s sophistication in understanding our unique political process is – has increased dramatically over the years – you know, they now understand, I think, that what – there’s a difference between what candidates say and what presidents do. But you’re right to say that this was certainly like nothing they’d ever seen before. I think that concern was amplified by the fact that, you know, certainly had it been a Clinton administration, or arguably an anybody else administration, China would have had some previous dealings with someone around that person, with whom then they could try to get some reassurance, you know, and so on, that this was indeed campaign rhetoric, or it wasn’t in areas where they need to work, and et cetera. They had nothing on that. You know, my sense is they have developed some of those communications channels now, but it certainly wasn’t the case at the time.

I think one risk that we face in that is that when they did not then have a sense of how to frame that, yet their – and I’m talking mainly about their diplomats here – and yet their leadership was saying: I need to know what this guy’s all about. There was a bit, in my mind, of a rush to an assessment to in some ways caricaturize him as, you know, a businessman with whom we can deal. And, oh, by the way, he’s a Republican, and we like Republicans because of Nixon. There was this very sort of almost cartoonish-looking thing. And then we had the one-China disruption, which blew that out of the water, I would say, and increased Chinese concern.

I’d say now they’re feeling a little better, but I worry that they do still somewhat look at him as someone akin to an Asian businessman, you know, a Southeast Asian potentate, somebody like that, with whom they can sort of have a very transactional relationship, without perhaps fully understanding that certain of these – of these issues – and I think we’ve seen this not just on the China relationship but broadly, you know, exhibit A, Chancellor Merkel’s visit here – he has certain core things about which he has a very firm belief. And trade balance and things like that are definitely one of them. And I’m not quite sure the Chinese have still yet understood how to manage that process. So they’re learning. But I do worry a little bit that they’re still have sort of a caricature-like assessment of him, which could be unsettled during the actual interactions.

MS. GLASER: I think that there will be an effort by Xi Jinping to educate President Trump. I think that Xi Jinping has done this with past presidents. We had the Yingtai summit in Beijing, where my understanding is that Xi Jinping spent quite a bit of time talking about Chinese history and the century of national humiliation. So I think that there will be a discussion about, for example, the domestic challenges that he faces, the message being: Don’t put too much pressure on me. I’ve got a lot of problems here to. So I think that that will be part of it.

Second comment that I wanted to make was that when President Trump was first elected, and the Chinese were trying to come up with a way to deal with him to get what they wanted, and this was before the inauguration, and the first person who met with some of President Trump’s key advisors and family members was the State Councilor Yang Jiechi. And this meeting took place in New York. And my understanding is that the Chinese took a bit of an aggressive posture. This is probably partly a function of the personality of the state councilor.

But it turned out, that wasn’t very effective. And the Chinese rethought their approach and decided that a charm offensive, and working particularly directly through the family members, would be more effective. So different personality, the Chinese ambassador. And they did make some headway, they have, having gotten the president to say that he would honor the one China policy and probably having played a role in encouraging and successfully persuading Secretary Tillerson to say those very important words when he was at the press conference in Beijing.

So I think the Chinese now feel more confident than they did that they can potentially manage this relationship. But now they’re going into a meeting for the first time with the man himself. And they have to be able to ensure that this is – that this has a successful outcome for them and for the relationship. And so I think they’re still uncertain. But I think probably Xi Jinping, being a very confident leader, he probably has a game plan of things he’s going to give the Trump administration and the few things that he wants to get out of this meeting. And my guess is that Chinese expectations are not that high.

MR. KENNEDY: I would just add that, you know, everyone is – whether you’re in China or the United States or elsewhere, people are trying to educate the Trump administration, including on this issue. And I think it was Kellyanne Conway who said: Don’t focus on the specific things he says. Focus on what’s in his heart. And that I think applies to trade issues. A lot of the specific facts about currency manipulation or the bilateral trade deficit, those things are challengeable. But if you look at the underlying relationship and policies, there is a genuine unevenness and lack of reciprocity in many aspects of the economic relationship. They aren’t measured or reflected in these specific types of things, most likely, but they are reflected in other things.

And if Hillary Clinton had won, she – the relationship on trade would have gotten a lot scratchier. If President Obama had had a third term, the relationship would have gotten scratchier. So I think there’s a wide consensus within Washington, D.C., sort of the new Washington consensus, that the relationship needs to be rebalanced. Now, whether it’s through shock and awe or some mix of carrots and sticks, I think that’s what’s still being debated here. But I don’t think Xi Jinping would be persuasive in trying to educate President Trump that nothing is wrong with the relationship and that it ought to go on as business as usual.

Q: Scott Horsley from NPR.

You mentioned that climate’s no longer the glue. Is that a relief for China, or is it a concern? And more broadly, does China see an opportunity here with the U.S. stepping back from TPP and American First-ism, or do they see a threat?

MS. GLASER: Well, the climate change issue does cut two ways. It was a very important issue on which the United States and China were cooperating. And so I think it was very important to China in that regard. I think if China had had its way, then it would have preferred that that cooperation continue. But when that became impossible, then of course China will seek to capitalize on that opportunity, and has done so fairly effectively in the same way that it has with TPP and the fact that the Trump administration is widely seen as very protectionist and not supporting globalization.

So we saw Xi Jinping at Davos, for example, portray China as the champion of free trade. And so I think that these decisions by the Trump administration to back away from these Obama administration commitments do provide opportunities for China to present itself as the stabilizing factor in the global economy, the responsible country who is going to continue to deal with global warming. And so I think that these are things that China can certainly use to its advantage. On TPP, this went their way. On climate change, I think really is they’d had their choice they would have kept it as a positive in the relationship.

MR. JOHNSON: Just a couple of amplifying points, the first being that, you know, China’s approach to climate change, you know, it’s important for us to remember, there’s a huge domestic component. You know, in other words, they want to do this anyway, because it has tipped over now into a social stability issue. January was awful. You know, and in a year where growth was slower, than the initial smogageddon of 2013, this really alarmed officials. We’re seeing some efforts in that direction. So they would have wanted to kind of proceed along that path anyway.

I think they do feel the loss of – you know, amplify Bonnie’s term a little bit – I call if the soft glue in the relationship, because they need something that’s sort of a gimmie. You know, North Korea can, in my assessment, never replace climate change, because if you look at the U.S. and China as concentric circles on the North Korea issue, there’s a very small space, actually, where our interests align, and very massive space where they do not align in terms of our respective assessments about what need to happen there.

And I just want to amplify the Davos point as well. Xi Jinping really had no intention to go Davos until President Trump was elected. And the process behind his speech that he delivered, which was unusually current and colloquial and so on for a Chinese Communist Party general secretary, was very much mean to amplify this notion of China as a force of stability and so on. And the basic realty is that with us off the trade playing field they’re going to try to, you know, have as much success as they can in filling that void.

The challenge for them is on something like the RCEP, which is sort of the competitor to TPP, Japan’s not real happy with having China – (laughs) – sort of bully everyone else into that agreement, and neither is India and so on. And so it’s not a – it’s not an open field for them. But certainly they’re going to try to take advantage.

Q: Thank you. Leah (sp) from VOA.

A couple questions. I heard that a senior military official from the Chinese side will be coming to Mar-A-Lago. I’m wondering, do we know who are going from the U.S. side? And on the North Korean – this is for Bonnie – you mentioned that Xi Jinping is willing to, you know, do something at least short term of medium term. Can you be a little bit more specific? Like, what are the things the Chinese side would be willing to compromise? Are they willing to cut down – I mean, or cut off the financial chain or whatever? The other thing is, you know, Taiwan is very nervous about – they’re very concerned that it might become a bargaining chip. But at the same time, we also have reports saying that the Trump administration is willing to sell military weapons to Taiwan. So can you talk a little bit about the Taiwan issue. I mean, how is it going to be framed during this summit meeting? Thank you.

MS. GLASER: Taiwan is raised by every Chinese leader when they meet with a U.S. president. And indeed, after the inauguration of Tsai Ing-wen in Taiwan in May of last year, Taiwan became the first issue raised between the two presidents. Before that, it was raised quite late in any meeting, in a somewhat perfunctory way, conveying long-held positions. But I do expect that Xi Jinping will raise Taiwan. It could be the first issue raised. And I think that Xi Jinping will seek to have President Trump reiterate what he said on the phone call, that he will honor the one China policy.

I’m told that for President Trump, that those are not just words, that he does understand what they mean. And that there will be no use of the one China policy as a bargaining chip. And let’s remember, that it was not really the potential of using Taiwan as a bargaining chip, but the one China policy. And there is, in my view, a difference. I would expect that there might be mention by President Trump about the Taiwan Relations Act. Most presidents have said the definition of the one China policy, it is based on our three U.S.-China communiques and the Taiwan Relations Act. I don’t know whether he will go into that kind of detail.

On the question of arm sales, I think we could go back to President Trump’s tweet that he made several months ago about – and this was just after the phone call with Tsai Ing-wen – noting that Taiwan buys arms from the United States. And obviously was phrased in a way that was seen as a positive for the United States and American companies. And so I expect that these arms sales are going to continue. The only question is what is sold and the timing. There have been some reports about a package that’s still on the table that was actually approved by some departments in the Obama administration but did not go forward.

On North Korea, as to what the Chinese side will do, as I mentioned I think that the priority will be trying to shut down North Korea’s access to the international financial system. This appears to be a gaping hole in the effort to really inflict pain, if you will, on Kim Jong-un and on the elite. So a lot of this is compliance with existing sanctions. There may be also discussion about nailing down the commitment on coal, to adhere to China’s statement that it will not import any additional coal for the remainder of this year.

And I think those are – those are really the top areas. You know, trade – normal trade is not part of U.N. Security Council sanctions. I doubt that that’s something that the administration is going to try to shut down. The Chinese have said that this is humanitarian. But the real issue, as Chris said, if you look at the Venn diagrams, the area of overlap in our interests is very limited. And China’s goal in using sanctions is to get North Korea back to the table, to the negotiating table, and I think ultimately to ensure that there is no military option that is used, because the Chinese don’t want to see the ratcheting up of tensions. So even the reasons why we’re using sanctions may not be exactly the same.

MR. JOHNSON: I’d just add one brief comment, which is that I think if I were the administration, what I would like to see in addition to those specific steps is actually something that’s even a little more broad, which is just a general recognition that China perceives the problem in North Korea in terms of the security threat presented in somewhat the same terms we do, in terms of a budding existential threat to the United States, rather than what seems to be their persistent kind of internal monologue view about collapse and refugees and, you know, all the things that they – buffer zones – all the things that they tend to focus on. I think some signal from the Chinese that they’re reorienting how they think about that and are more, therefore, attuned to the U.S. concern on the issue would be very helpful.

MS. GLASER: I’ll just add one sentence, that I think China – that President Trump will want China to be seen as – to say that it will be part of the solution and no longer be part of the problem. And that’s probably the way he would phrase it.

Q: Yeah, good morning. Stefan Grobe, Euronews.

You’ve mentioned the sharp anti-Chinese rhetoric on trade and other things. I think the question is, what leverage does the Trump administration have? What does any U.S. administration have over China? I mean, there’s always the question how tough can you talk to your banker, right? Coming from a man who had his fashion collections of ties and shirts built in China, how serious can he talk to – how serious to the Chinese perceive Trump?

And, second, how do the Chinese perceive the – you know, the first two months of chaos in Washington? Does that play into a sort of changed narrative? Do they realize that Trump is, after all, just another U.S. politician? Or do they still fear him?

MR. KENNEDY: So I think that the United States has a lot of leverage in the relationship and the Trump administration thinks they do. Chinese exports as a percentage – to the United States as a percentage of their total exports is far higher than the reverse. Chinese investment in the United States is now higher than in the reverse. So, on a day-to-day basis, they depend much more on the bilateral relationship than the United States. It is not an unimportant relationship for the United States, given that we trade somewhere around 600 billion a year, and there are – and every Fortune 500 company is in China, and China is part of your global supply chains. But if you come down to brass tacks, it’s extremely important for both.

There are lots of tools that the U.S. could use to inflict pain on the relationship, from across-the-board tariff increases to Section 301 investigations, more anti-dumping and countervailing duty cases, WTO cases, just stricter enforcement of CFIUS, expanding CFIUS. So there’s lots of ways. The question is, just about everything that the U.S. could do would involve the U.S. also accepting some pain, and so – because it is such an interdependent relationship. And so the real political question for the Trump administration is, how much pain are they willing to accept in order to try and readjust the relationship? And so that’s an – that’s an unclear question, and I think they want it to be unclear because that level of uncertainty gives them what they think additional leverage in a year when Xi Jinping wants the relationship to remain stable and may be more willing to compromise. I think that’s their interpretation.

In terms of the chaos, my sense is – and what’s going on – is that not that they see Trump as a typical politician, but as actually someone who led a small business that is unprepared to manage a very large government with many issues, each of which is quite complicated, and that the establishment is gradually rising up – Congress, the media, the intelligence community, business – to check him in, to keep him in place, from going in places where he otherwise would have gone. And therefore, I think that also gives them some reassurance that coming here they may hear a lot of rhetoric, but the final deliverable may not be as horrible as they assume. I think that that’s wishful thinking. And there’s also – there’s always some amount of wishful thinking in Chinese foreign policy.

I think on the trade issue, as Chris said at the beginning, this is something that Xi Jinping – or that Donald Trump has felt for a long time. And so, regardless of the specific facts or the specific pain, they’re going to push this pretty hard.

MS. GLASER: I would just add one quick point, and that is that I would not be surprised if President Trump believes that he’s already given some things to Xi Jinping, and that now Xi Jinping is coming to his second White House in Florida and that it’s Xi Jinping’s turn. Let’s remember that President Trump did tweet that he said that he would honor the “one China” policy at the request of Xi Jinping. And, of course, the decision by Secretary Tillerson perhaps to state that formulation in Beijing is also something that China wanted very much. This is something that has been important to President Xi Jinping. So there is a possibility that this meeting is set in the mind of President Trump as time for Xi Jinping to pay back, to pony up, to make some concessions. That may not be the way Xi Jinping sees it.

MR. QUINN: Just going to try this side of the room here.

Q: What kind of role do you think the president’s daughter, Ivanka Trump, and son-in-law, Jared Kushner, will play in this meeting?

MR. JOHNSON: I think it’s fair to say that both of them seem to be playing a pretty integral role across the board in the administration, and this relationship really isn’t any different. You know, certainly Ivanka Trump’s appearance at the Chinese embassy for the spring festival celebrations, obviously it’s pretty clear that Ambassador Cui, among others, is – has a regular dialogue with Mr. Kushner, and I would expect, therefore, they would continue to play that role. I think probably in terms of policy loop how this seems to be working is there’s some sort of general discussions amongst the president and his – you know, the appropriate Cabinet or White House officials on issue X, that whatever comes out of that – and sometimes not always so clear – is then transmitted, I think, to the Chinese side for looping back to Beijing. So there has been sort of this sort of wheel, so in part I think to avoid unpleasant surprises. But to Bonnie’s point, which I think is an excellent one, there may be more of an attitude of, OK, it’s our home turf, so it’s our opportunity to receive something.

Q: (Name inaudible) – working for Politico.

And, Bonnie, you said you thought there might be some discussion about timelines in regards to both economic and security issues. I’m mainly interested in the economic aspect. I mean, like, Trump is obviously very focused on the trade deficit with China, like some sort of timeline for – to bring that under control. Do you think that that’s the sort of thing that he’s talking about? And then just more generally, you mentioned – one of you mentioned the bilateral investment treaty and how far has that got in the Obama administration. Is there any indication that the Trump team wants to pick that up and – (off mic)?

MS. GLASER: I’ll make a brief comment and then ask Scott to add his thoughts. I think that there might be some effort and perhaps even in the run-up to the meeting for the Chinese to gain the understanding of the United States, that this is the year of the 19th Party Congress and that Xi Jinping might want to postpone some of the steps that he might be willing to take until after that Party Congress. So perhaps Xi Jinping will be willing to reaffirm his commitment to move from an investment export-oriented economy to one that is more consumption-driven and – but yet say I need to have your understanding that this is not something we can do overnight and that many of the steps that we will take will be done next year rather than this year. I don’t know if that conversation has actually taken place, but I’ve heard some hints that that has been conveyed by the Chinese side to the U.S. side.

MR. KENNEDY: No problem. I think there’s things underway which have their own timelines which the Trump administration can use as markers, as opposed to setting out some new ones at the meeting. The executive orders that will be issued today have timelines or goals in them, so for reviewing the existing trade agreements we have an analyses of the sources of our bilateral trade deficits. Those are things that can be ongoing.

The other issue that’s ongoing are the global discussions over steel overcapacity in the global forum, and certainly the Trump administration can say if there’s not progress in these multilateral discussions, that there will have to be other avenues to address this problem. Also the Obama administration and China had the Strategic & Economic Dialogue, and so one outcome of this meeting might be a discussion of how that might be continued, reformed, extended. And if there’s an economic component of that dialogue at the strategic level, that will be an initial place where there could be cooperative solutions sought.

But my – on the BIT, there was – I don’t know if it was in Politico or someplace else reported that originally – there was an executive order teed up to announce the U.S. and China were not going to continue negotiating a BIT, but that was put aside. They may – I don’t – I don’t think they’re going to – the Trump administration is going to announce that they’re not interested, but I think it’s going to – it’s going to be a slow roll on that compared to just about anything else.

MR. JOHNSON: I just want to add one point quickly on that, which is that, you know, it’s – on the trade side, especially with China, I think it’s how does the administration recoup the loss of TPP – (laughs) – and the pressures that it provided on China, the very real pressures it would provide on them. And I think the answer is to watch the space of our bilateral negotiations with Japan. You know, obviously that’s going to really infect how the Chinese think about the issue, and I would expect we will lean in there first, and very heavily, while keeping BIT alive but perhaps on life support for a while – for the combination of reasons that both Bonnie and Scott made. And I think it’s particularly important, Bonnie’s point about the political atmosphere in China, because, you know, internally, very serious things they need to do in their domestic economy, they’re not doing because of this problem. So obviously the external one is secondary to that, and we can expect even less emphasis there, I think.

Q: Hi. Eunjung Cho with the Voice of America Korean Service.

The issue of terminal high altitude, the missile defense, the THAAD, would that also be brought up on the discussions? Will China ask to reconsider the deployment? Will the U.S. ask China to stop the retaliation against South Korea?

MS. GLASER: It’s certainly possible that this issue would be raised. I think that the Chinese are still in the mode of trying to pressure South Korea to not proceed with the deployment, but of course we’re moving towards elections in South Korea, and there are some indications that at least some people in China – scholars that I talk to, for example, hard to say whether they reflect any opinion at higher levels – that recognize that China has used a very heavy hand on this issue and that it might be counterproductive to continue it. So at some point I think that China begins to turn on this issue towards adjusting to a new reality. Therefore, in my view, it would be unwise for Xi Jinping to make this a central issue, to make demands on this issue that increasingly are unlikely to be met.

So I doubt that this is something that President Trump would raise. If Xi Jinping raises it, my guess would be that President Trump will say we face an increasingly urgent existential threat from North Korea. We need you to be part of the – as I said, the solution, not part of the problem, and we have obligations to our ally and to defend, of course, our own assets in South Korea, and this is a very unreasonable demand. If Xi Jinping, which I believe he will, and his staff will brief him on some of the outcomes of other leaders who have met with or talked on the phone with Xi Jinping – many people talk about the Prime Minister Abe model. That was a successful meeting. And some people talk about the less-than-successful Prime Minister Turnbull phone call. And so if Xi Jinping accepts that frame, then he might not make a big push on THAAD, because this could provoke a very negative reaction from President Trump. I think that’s something he wants to avoid. So that would be one potential trigger where President Trump could get angry.

So I personally think it would – it’s an unwise idea. Besides, I think this is a done deal.

MR. KENNEDY: Yeah, I agree it’s a done deal, and I don’t think – it won’t feature centrally. Xi Jinping will raise it, because this is part and parcel of China’s style of diplomacy, where when you’re losing, you must still state your principled position on the issue. So –

MS. GLASER: (Laughs.) Until you’ve really lost.

MR. KENNEDY: Yeah, so he will – he will raise it, I am sure. And in fact, there’s been – on the other end, there’s been some interesting, let’s call it froth, here in town, in the Post and elsewhere, about will the president stand up for South Korea about Chinese bullying. So, you know, I think if anyone could kind of go to the hammer on it, it might be the president.

Q: (Off mic.)

The question about the human rights issue, I mean, is it safe to say that, you know, the Trump administration is not so much invested in human rights issue in China?

And the other question is also on the Strategic and Economic Dialogue, which Scott mentioned. I’m wondering how the Trump administration would like to reorganize the Strategic and Economic Dialogue?

MR. JOHNSON: On the – on the human rights issue, I think that’s going to be one to really watch. I don’t think we have a feel for how – there are certainly people in the president’s circle who believe the China human rights issue has been insufficiently attended to in the previous administration. How much impact that has on the president himself, I don’t know. I expect we’ll see something on it, and probably in any joint press availability, and so on. I mean, I think on S&ED, what’s striking about it is that you can argue this is almost an advantage of having a President Trump. A President Clinton would have been very wedded to S&ED, since she played such a fundamental role in it and helped define the ampersand of the S to go with the economic dialogue. I think President Trump is completely unconstrained, you know, on the issue, and that gives him a lot of flexibility to think about it.

I think the core issue is there’s two models. You know, one is institution to institution, dialogue and contact, which we’ve seen under the S&ED, and the other is high-level leadership engagement. And you can always have a blend of those, but I think President Trump’s style thus far seems to lend itself more to the high-level leadership engagement, and I expect that to have some impact on what the successor to S&ED might be.

MS. GLASER: I would just add that there’s the larger issue of the role of values, democracy, human rights being a part of that in our overall foreign policy, and I don’t think that that is clear yet from the Trump administration. Secretary Tillerson in his hearings did talk about the importance of values in American foreign policy. We don’t even know when he was in Beijing whether he raised human rights. I believe in the press conference that he mentioned the word, but I don’t think there was any emphasis on it. It was hard to say whether he attached importance to it or he saw it as a box that needs to be checked. And it’s to me at least totally unclear whether President Trump thinks this is an important issue – in particular, I would say not only human rights issues in general, dissidents that are being arrested, but also the treatment of NGOs in China, would – which became such a prominent issue in the Obama administration. And the NGO law did go into effect in January, and now we’re seeing some real results of how it’s being implemented. So I personally hope that this is something that is on the agenda, but I just don’t know.

MR. JOHNSON: I’ll just make one additional point, which is there’s a theme that could be woven through a lot of the issues that the United States has with China, which is about defense of the liberal international order on economic issues, human rights issues, the way we deal with security issues. And it’s to the U.S. advantage to provide that framing because of what that order has brought to the world economy and to societies. And it’s an – also an amazing amount of U.S. soft power. So to put that to the side I think would be a mistake. It’s not been raised in the – much early, and so – but to go back to it I think would be beneficial. And I think there are a lot of people within the administration who would see the utility of it. And as outside observers, there’s not just utility but there’s – it would be important to do.

MR. QUINN: All right, folks. I think we have time for one more.

(Audio break.)

MS. GLASER: I think that this was something that was in the minds of both the Chinese and Americans early on. After all, we have this Sunnylands model, the idea of having the two presidents to meet each other. For the United States, it’s particularly important when you have the kind of leader like Xi Jinping is, who is in charge of so many issues. There’s a real need to maximize the kinds of – the time we have with him, the face-to-face meetings and phone calls. The Obama administration found this to be important and effective, and so I think the Trump administration had the same view.

For Xi Jinping, he undoubtedly wants to size up the new president as well. I don’t think that there was ever a discussion about him actually coming to Washington. They wanted a working visit. They wanted a basically informal setting. And they – if they came to Washington, there would have been pressure to produce a joint statement, and I think frankly there is no real appetite at this point on the U.S. side for a joint statement.

MR. JOHNSON: Yeah, I think that’s right. I would just add two things. One, the Finland piece is very similar to the Sunnylands, where Xi Jinping manufactures a trip abroad to be able to come to the U.S. And then secondly, I think he’s ticked the box of the Washington state visit pomp and circumstance. He already did it, doesn’t need to repeat it. There’s risk in that. So he’s already had it, so why not have the special treatment?

I think there’s also frankly a very interesting parallel here between what he’s about to do in his Party Congress year and what Jiang Zemin did when he was still president in 2002, going to Crawford, George W. Bush’s estate in Texas, where – which Jiang then used very adroitly to leverage in the internal negations on policy, on personnel. I wouldn’t expect – I would be surprised if Xi is thinking similar.

MR. QUINN: I think with that we can wrap it for the day. Thank you so much again for coming. And if any of you did not get this email forwarded from a colleague or something like that, please get in touch with me and make sure you’re on our list so you can get the transcript when we send that later on.


Scott Kennedy
Senior Adviser and Trustee Chair in Chinese Business and Economics

Bonnie S. Glaser