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James Green: Welcome to the U.S.-China Dialogue Podcast from Georgetown University. This podcast series explores diplomacy and dialogue between China and the United States during the four decades since normalization of relations in 1979. We'll hear from former ambassadors, cabinet secretaries, and White House advisors -- who will share how they shaped the course of the most complex relationship in international diplomacy today.
I'm your host, James Green.
Today on the podcast, we talk with Ambassador Charlene Barshefsky. Since the 2016 Presidential election, few words have become as toxic together as "China" and "trade." China is accused of stealing U.S. jobs, U.S. intellectual property, and U.S. technology -- even of undermining the U.S.-created global trading system in place since World War II. In a high-profile report in 2017, the Trump Administration proclaimed publicly that the U.S. made a mistake in admitting China into the World Trade Organization in December 2001. Well, did we?
Charlene Barshefsky was the United States Trade Representative at the end of the Clinton Administration and, therefore, the senior-most official in charge of the negotiations to have China join the WTO. She and her team at USTR spent thousands of hours at the negotiation table setting detailed industry-by-industry requirements for China to open up and accede to the WTO. Chinese Premier Zhu Rongji visited Washington in April 1999 with the expectation of concluding a bilateral agreement. At a press conference with President Clinton, Zhu explained what reform efforts would require from China:
Premier Zhu Rongji: [Thru an interpreter] Because if China wants to join the WTO, wants to be integrated into the international community, then China must play by the rules of the game. So, China cannot do that without making concessions.
James Green: But an agreement proved elusive during that visit -- postponed, then finally consummated by a trip Barshefsky took to Beijing later in the year. In her conversation with me, Ambassador Barshefsky describes her no-nonsense style of negotiation, how the WTO agreement opened up China in a comprehensive way, and how tools in the accession protocol that -- for some reason -- subsequent U.S. administrations never deployed to curb troublesome Chinese economic behavior.
Ambassador Charlene Barshefsky, thank you so much for joining U.S. today. Real pleasure and honor to talk to you. Before getting to your time as the U.S. trade representative and the accession protocol, I wanted to go back a little bit to, you were in private practice, you joined USTR as deputy USTR working on Asia on both Japan and China. Japan at that time was the kind of trade challenge and you were at the forefront of trying to open up the Japanese market and there was the Japan Framework Talks in '94, '95 on autos. I wonder if you could just think back to that time and see what lessons you learned about kind of what worked and what didn't as we look forward to how the negotiations with China went, went forward.
Charlene Barshefsky: Well, first of all, it's a pleasure to see you again of course, and to chat about this. Negotiating with Japan is very different from negotiating with China, which is very different from negotiating with Brazil, which is very different from negotiating with Europe.
Countries have a kind of personality and DNA if you will, that is reflected in negotiating style. Both, not only tactically and strategically, but also interpersonally. So, dealing with Japan requires an inordinate amount of patience and precision. It requires great care because the Japanese are extraordinarily adept at parsing every word, and in finding the seam through which they can, run.
James Green: And I assume the Japanese are always very well prepared for all of these discussions.
Charlene Barshefsky: The Japanese are very well prepared, which of course teaches you, you have to be better prepared, more agile. The Japanese are quite painstaking, and they are also not terribly pragmatic when it comes to the solution sets. The Chinese by contrast are highly pragmatic, very practical, also very well prepared and tough, but, are innate deal makers. They are innately entrepreneurial, innately can see benefit to themselves even if you also benefit. And so in that regard, they evidence a kind of flexibility and fluidity that the Japanese typically don't evidence. At the end of the day of course deals were struck with them and with many other countries around the world, all of which are different, but the Chinese are particularly noteworthy for being highly practical, highly pragmatic and, relatively non-ideological, at least in a negotiation.
James Green: Are there rules of thumb or ways that you thought about, "Okay, this issue should really be," you know, "I need to tell the president and then I'm going to be public about it, and this issue, I'm kind of not gonna do that." How did you balance the kind of public/private negotiation?
Charlene Barshefsky: There's no formula. A lot of negotiation, is intuitive. You just know. You have a sense of when you have to be publicly vocal. You have a sense when it's best left unsaid publicly. You develop a very fine honed sense, what to say to the press and what to withhold, in part to protect your own position, in part to protect the position, and therefore the flexibility, of the other side. You don't want to put the other side in a corner from which neither they nor you can emerge. And so a lot of this is, is the way the picture looks at the moment, the subject being discussed, the personalities involved, and the overall sensitivities, that need to be taken into account.
In the case of Bill Clinton, of course, President Clinton, is notorious for his desire for information to learn, knowledge, to be involved, to be a part. But of course, he was president of the United States and one does not bother the president of the United States, unless it's really important or unless you're looking for specific guidance that really only he can provide.
James Green: So that was Japan. Then you also worked on China just before the, accession protocol negotiations. There was a lot of concern about Chinese IPR protection, protection of intellectual property.
Charlene Barshefsky: Mm-hmm (affirmative).
James Green: Was there anything from that time and the number of trips that you took to Beijing and, was that the first time that you went to China was under, when you were deputy working on the IP issues? Is there any time from that that you could have informed the way you thought about dealing with the broader WTO issues? And I'd love just your first impressions of kind of going to Beijing in the, in the mid 1990s.
Charlene Barshefsky: One of the advantages to being a negotiator is that you're always learning, and you're always seeing how you can improve. You can see more clearly the mistakes you make. You see more clearly what works most of the time, and you see more clearly what tends not to work. And all of that knowledge of course builds upon itself as you go from country to country, situation to situation, subject matter to subject matter, because after all, when you're negotiating something like WTO, you are negotiating, in effect, the entirety of the tradeable economy of a country: goods, all services, all agriculture, all of the basic rules of commerce, all of the basic rules of international interchange, other than currency.
And so this is really, an extraordinarily complex situation, and bringing to it a substantial body of knowledge is extremely helpful. I'm a believer in learning by doing. I preferred not to think about other people's views of China or Japan or any other country. I certainly wasn't ignorant of their views, but I don't think as a negotiator, one is maximally effective by learning through indirection. One is maximally effective, I believe, by learning through direct experience, the ups and the downs.
James Green: Meaning sitting down across the table with a counterpart talking to the issue, seeing exactly what they say.
Charlene Barshefsky: Exactly right. Exactly right. So, a couple of basic rules obviously as a negotiator. You have to know what you need, but of course you also want to know what you want. We all want the moon and the stars. What we need is a one bedroom apartment and a car. And the gap between what you need and what you want is the negotiating space. Less than what you need, you walk, and what you want, well, the sky's the limit. So, the only gating factor on what you want is the red face test, right? So if I asked for the moon and the stars, the negotiator on the other side would know immediately I wasn't remotely serious. So, you have to know going in what you need and build up from there into what the ideal position would be. You have to know what the other side needs and what their maximalist position is. You have to be prepared, not just for your side, but you have to know or understand or take an educated guess as to what they'll say to what you say. And in advance, what you'll say when they say what you know they will necessarily say, and then in advance what you will respond yet again.
And you gain this out in your mind. Sometimes you write it down in outline form, but often it's in your mind if, if you can be agile enough, so that the conversation keeps moving in the direction you want it to move. And these are all critical features, and with China in particular because the Chinese are very agile, and quite adept. You have to get better, faster than, than you were before, and that skill builds on skill and you keep improving that ability.
Likewise, you have to know what is not being said. And in that regard, of course the body talks before the mouth ever opens. So, talking less and watching more is I think the single most important lesson there is in negotiation. Americans especially talk way too much and watch quietly way too little. But if you watch quietly and not talk as much, you know when you've connected, you know when you've missed, you know when the other side is genuinely taken aback, and you know when it's pure theater. You know when you've offended, you know when your negotiating party is just out of sorts that day, is just not feeling very well or is upset about something else having nothing to do with the negotiation. And all of these factors are important as well.
And last I would say, and perhaps this is my favorite rule, it certainly became my favorite rule, the only word for no is no. And sometimes no, doesn't mean no. And so the only word for no is no. My favorite example is Lisa Simpson and Bart Simpson of the show The Simpsons. And she says to him, "can we go out to dinner?"
He says, "No."
"Can we go out to dinner?"
"Can we go out to dinner?"
"Can we go out to dinner?"
"Can we go out to dinner?"
"Can we go out to dinner?"
So, no didn't mean no at all. But the only word for no is no. So when confronted with, "If I do that for you, I'll lose my job," that may be a shame, but that's actually not no.
Or, "That's impossible." The words “that's impossible” is actually not no. You just have to find a way to make it possible. So, you learn these bits and pieces as you move forward, and as I said, they're all extremely useful. All of them came into play with respect to every negotiation I think that I've ever done, and most assuredly with China.
James Green: So on your first visit there as deputy USTR, it must have been about '95, is that right?
Charlene Barshefsky: I think it was '93. Roughly. Well, certainly there were a lot of bicycles still, not a lot of taxi cabs or things of that sort. You could always tell official cars because they were the only limousines around. And perhaps not even limousine, but fancier than what one might have expected. People were very friendly and kind. Government officials were, welcoming, but perhaps a bit stiff. Certainly, the city of Beijing, while it doesn't look anything like today, didn't look as one might have expected when one simply said the word China. Of course, there were still, many, examples of the past, the Hutong, the alleyways, and so on. But it was a very interesting city and it was clearly a genuine city, not less than a genuine city. It's much more modern now, much glitzier. I miss a lot of the old feel.
James Green: Me too, yeah.
Charlene Barshefsky: Very much. And this unfortunately is a fate of most major Asian cities, having been to most major, major Asian cities, numerous times. The old is not very well preserved, but instead swept away.
James Green: How did you focus on what issues were kind of most important to the United States? Everything of course is important, the U.S. is a dominant economy.
Charlene Barshefsky: Well, first of all, I think the political decision to proceed was made in Beijing by the leadership around 1995 or 1996. There had been talks for perhaps 10 years before that with the Chinese to join the forerunner of the WTO. It was called the GATT. And those were, talks, those, those were talks characterized by ships passing in the night. The Chinese at that time were very under-educated about the GATT, even though it had been a founding member of the GATT, before, before, it became a communist country. And so talks simply went along in an essentially directionless manner.
The United States provided China with, I think a, a much better, more detailed education as to what being in the WTO would mean by way of a, an entire revamp of China's economy. And China was still resistant in the early years of the Clinton administration, believing that it could get a political deal, a political accession, and argued for it on the basis of China's size and general importance in Asia.
James Green: And when you say a political deal, you mean not make the hard choices of reforming parts of the economy?
Charlene Barshefsky: Correct. Correct.
James Green: Just kind of be allowed in WTO because China's a big country?
Charlene Barshefsky: And, of course, we made it clear and I made it painfully clear, there would be no possibility of a political accession that, the accession would have to meet not only all of the requirements of the WTO, but additional requirements that would be China specific in nature, in order to protect U.S. interests. In any WTO accession, the U.S. solicits public comment as to what its objective should be. In the case of China's, in the case of any major accession of course, there are thousands of comments that are filed and one can see in the different areas of an economy where the problems are and how to fix them, how to make them better, how to improve the situation. And what you're trying to do is ensure that you have access to that foreign economy on grounds that are fair, that that foreign economy understands its obligations so that implementation occurs, and that the commitments made are fully enforceable.
In the case of China, because its economy was statist in nature, the sheer number and magnitude of change, obviously had to be digested by the U.S. side, and remedies had to be, proposed that made sense from the U.S. side and the access needs the U.S. had. And from the China side in terms of being able to implement. It's all well and good to ask for something substantial, but if the other side can't implement it, it won't be implemented. You can enforce away but you won't get what you initially wanted to get.
So, this took quite a while. The Clinton administration started on this process in '93 and the deal was struck at the end of 1999. So this was a six-year, process. The U.S. negotiating team was large and we organized ourselves by subject area so that we could cover a maximum amount of ground at a very expert level with respect to each of the subject areas. And in that sense, nothing became more important than anything else, which is to say, we had a very even distribution of subject matter experts. We had a pretty even distribution of team size and heft. And, everyone fought for their issues.
James Green: The most important issue, yes.
Charlene Barshefsky: But if you don't treat every issue as important, two things happen. Number one, you drop off issues that in retrospect you realize were important but you didn't see it at the time. And number two, you leave yourself no flexibility to give up stuff you actually don't care about in exchange for stuff you do care about. So you fight away on the full range of issues as though everything is as important as everything else.
For the US, what was most important of course, market access across the board. China's economy, while it had embarked on internal domestic economic reform beginning with Deng Xiaoping in the late 1970s, was still quite closed, quite rudimentary in nature, unsophisticated. , and so market access across the full range of goods, services, agriculture and so on, became very important. Second of all, a series of rules that allowed for quite fundamental change in China, not just for the U.S. but for the Chinese people. And I'll give you only one of many examples.
In China at the time, individuals did not have a right to trade. Individuals had to go through a state trading entity, which decided if it was interested in trading with whatever it was you wanted to trade. So, under WTO rules, you can get the best treatment a country citizens get. So, China offered U.S. the same trading rights as Chinese citizens, but you see, they had no individual trading rights. They had to go through state trading companies, which meant that the U.S. could only go through state trading companies. Well, that's no bargain whatsoever.
So we had to get rules that allowed the Chinese people the right to trade so that the U.S. and its companies would have the same rights to trade without going through state trading entities. It's one example of how complicated the situation became and how broadly arrayed the issues were. Access on services was very important, but WTO rules in that regard were already quite weak. So we did better than WTO rules at the time, which unfortunately, except for telecom and financial services haven't changed much since.
James Green: Right, right.
Charlene Barshefsky: And that's an area that of course needs continued, work. And then of course access for agricultural products, where I think we did, quite well. In all of these areas, one can do better over time as an economy becomes more sophisticated, but at the time when the deal was finally made public, I think it's fair to say that virtually every company in the United States and virtually every member of Congress was astonished at what had been accomplished by the United States' side.
James Green: I've heard you say that not one senator or member of Congress asked for anything additional when the deal became public.
Charlene Barshefsky: Correct. It's the only trade deal I can think of in my many years in this field where someone in Congress didn't say, "Go back, get more." No one asked U.S. to go back to get more because people were astonished at what China was willing to do.
James Green: Where do you think the Chinese government was in communist party, Zhu Rongji coming to power with Jiang Zemin. How do you think they saw the WTO negotiating process and then the United States relationship as part of that?
Charlene Barshefsky: I think Zhu Rongji saw the WTO process as the way in which China's then ongoing but relatively modest reforms would continue, and China's development would continue and hopefully accelerate. Zhu Rongji looked at Western economies, he looked at the Russian economy -- at that time still the Soviet Union -- and the difference was quite clear. He was extremely was -- is -- extremely farsighted, quite brilliant and a person of great conviction, which in the Chinese system takes a lot of guts.
And Zhu Rongji, I think it's fair to say was a genuine reformer. So after all these years of the U.S. having prodded China, "Open up more, open up more, open up more," you finally have a premier who says, "Yes," and says yes with great meaning and intention, and follow through.
I think for many others, in the Chinese government, the notion of further economic reform was quite threatening. And one of the biggest fears of course, and you see this in many countries whose economies are relatively close to then may want to open, was a fear of their own economy being destabilized, and disintermediated, if you will, with the country at issue, unable to regain its own economic footing. And so for many countries and for China in particular, which had no experience with Western market economics, undertaking WTO accession, undertaking the range of reforms was quite a risk.
James Green: I think it's, it's hard to remember that it was only a few years after the Tiananmen crackdown, which there are different causes for it, but one of them was inflation that was over 20%.
Charlene Barshefsky: Correct.
James Green: And so those kinds of economic fears were, you know, only a few years after the-they were kind of considering what is it about the economy that we need to control as a communist party and which parts can we let go?
Charlene Barshefsky: Exactly right.
James Green: And the market was not seen as particularly trustworthy. So that's a very good point.
Charlene Barshefsky: Exactly right. I think Zhu Rongji when you look at his record of course, saw something very different. He saw state enterprises that were bloated, that were killing off what could have been positive economic growth. He saw a financial system skewed towards supporting state enterprises, which were either less productive or entirely unproductive, but large employers in the country. And he undertook the process of massively rationalizing state entities, state enterprises, millions of people laid off, lost their jobs as a result. But he was, and is, a modernizer and a forward thinker, with a decided vision, and a quite sophisticated economic outlook.
James Green: I wanted to ask about Zhu Rongji's visit in April, 1999.
Charlene Barshefsky: Yes. Well in April, Zhu Rongji came to the United States. I had told him before he came that, at the end of the day, it's the president of the United States who says yay or nay, and then Zhu Rongji and I could finish every single issue. And the president of the United States could always say no, and that he needed to know that before he came. I did that because there were a number of advisors, at the time who were urging the president not to do a deal while Zhu Rongji was in Washington. And there was lots of reasons for that, I won't go into them, but largely political.
James Green: Domestic political reasons.
Charlene Barshefsky: Domestic political reasons. So Zhu Rongji understood it was only President Clinton that could say yay or nay. Certainly the deal could have been finished at that time. The number of issues outstanding was small, and I think each side knew where we were coming out on them. But, the president decided, not to move forward at that time. Even though forewarned, that was very difficult for Zhu Rongji and left him in a difficult position, certainly back home, where, his political support was in any event weak, because of his position on reform and opening up of the economy.
So that was a difficult period, and as I said at the time, an ill-advised decision, because it delayed the deal we did get, but weakened the key reformer in the process. Subsequent to that, of course, the President suggested Zhu Rongji return to Washington, as had been reported at the time, and realizing that, that, the deal should have been concluded. Zhu Rongji could not, at that time. And then three or some number of weeks later, the U.S. mistakenly bombed a Chinese embassy in Yugoslavia, the plane apparently having had the wrong coordinates. So, the Chinese broke off relations with the US. On everything. Not just on this but on everything.
James Green: Yeah, not just on trade.
Charlene Barshefsky: Ultimately, that got straightened out, and the Chinese accepted the U.S. explanation, which was, a sincere explanation.
James Green: I don't know if they ever accepted it but they listened to it.
Charlene Barshefsky: ... listened to it, and relations resumed. So that, November, the following November, the deal was finally, finally concluded. And that was, after again, substantial negotiation on the remaining issues. Of course, the Chinese side wanted to reopen issues that had, long since been resolved. And I told them that that was going to be entirely a no, that's a real no. And that was that.
James Green: There was, there's been a fair amount of press reporting on those kind of last couple of days. There was a reported threat that you guys were going to get on a plane and leave. Does that kind of drama work in your opinion in negotiating with all countries, but kind of in China.
Charlene Barshefsky: I'm not a dramatic negotiator because I find that it, it really is just a silly distraction. It never works. I mean, trade negotiators have a bit of the actor or actress in them, but quite honestly, you could always tell.
And so it's just sort of silly, silly stuff. I decided, after we had been there for what I thought was long enough, that if we stayed longer, the U.S. would look weak. And so I talked to the president the night before and said, "I think if they're not ready, we ought to leave," and Bill Clinton being Bill Clinton and trusting his cabinet said, "If that's how you feel, then do it."
James Green: Mm-hmm (affirmative).
Charlene Barshefsky: So, I had my staff send their luggage to the airport early.
James Green: Standard protocol for embassy visitors.
Charlene Barshefsky: And let the Chinese know that I would stop by to doff my hat early in the morning if they had anything else they wanted to say, but we were leaving because enough was enough. There wasn't that much outstanding, and we all had better things to do with our time, and so we were in, MOFCOM, which is their commerce ministry, MOFCOM building, meeting, early that morning with, with the counterparts. Not much was happening and then, someone burst into the room and said, "Premier Zhu Rongji has entered the building." And so that's when I knew we would conclude, because he certainly would not have met with U.S. to say no.
James Green: He's just not hanging out at MOFCOM. Right, exactly.
Charlene Barshefsky: And he wasn't hanging out for coffee. And the negotiations, concluded.
James Green: Can I ask a, stepping back a little bit about vice minister Long Yongtu. One of the key parts of getting any agreement is kind of working with someone who's conscientious and aware of issues-
Charlene Barshefsky: Yes, yes.
James Green: ... and you're able to interact with.
Charlene Barshefsky: Yes.
James Green: Um, could you just talk a little bit about what that relationship was like-
Charlene Barshefsky: Sure.
James Green: ... and over many, many hours at the negotiating table?
Charlene Barshefsky: Sure. Well, I had, I had three, really four principal counterparts at varying times. Long Yongtu, Madame Wu Yi. Of course, who had been commerce minister, and then, vice premier, Shi Guangsheng, who was the commerce minister at the time. The deal was done. Zhu Rongji of course. Long Yongtu was the constant all the way through; an extremely, sophisticated, quite urbane. His English is probably better than yours and mine.
Very studious, tough, worked very, very hard, very hard. I think at great personal cost. And was an extremely able, counterpart, we both, took similar positions as you can imagine. We each represented the interests of our country. So it never became personal, but it became very tough and very grueling. I think the agreement is probably better for it.
James Green: I just wanted to ask about MOFTEC, which was the predecessor of MOFCOM-
Charlene Barshefsky: Right.
James Green: ... the ministry of commerce, a lot of these issues were theirs, that is trading rights and some distribution, but some issues were kind of outside their purview. How was that in the, at the negotiating table to kind of see that inner agency process, or how much of that window did you see from, from the U.S. side?
Charlene Barshefsky: So, the WTO process necessitated for the first time in China an inter-agency process, because some of the issues were discreet, many were crosscutting, but in the whole, if one looked at the economy, it all had to somehow fit together. So, many ministries were involved. I mean, as you know, in China, nothing is, linear, right? There is no one agency, one authority, you have to go up and down and round and sideways and bring in ministries whose very title suggests they have nothing to do with the issue at hand, but who are critical actually for whatever reason, either political or for some odd-lot reason, substantive. and because of that, the state council, the Chinese cabinet, became actually quite a bit more, consultative, if you will as a body of the whole than it had been previously. I would say we had some window into that-
James Green: Mm-hmm (affirmative), at the table?
Charlene Barshefsky: At the table, but not an extraordinary window. And indeed, one of the reasons, that, that last week, of negotiation in November, in Beijing, took so long was that there was this constant stream of interagency meetings being called to sort of review the bidding one more time.
James Green: So you guys would put something on the table, MOFTEC, Long Yongtu, or someone on their side would take it and say, "We need consultation."
Charlene Barshefsky: Exactly right.
James Green: And then four hours later or the next day, the next day-
Charlene Barshefsky: And four hours later or the next day they, they'd come back. And we got to the point where we thought basically there was really not much more for them to talk about. They either will go, we-we're going to have the political will at the end of the day or not.
And that takes but a minute to evidence, right?
James Green: Mm-hmm (affirmative). Mm-hmm (affirmative).
Charlene Barshefsky: So, when I suggested to President Clinton that we leave because really there wasn't much else to do, and he smartly agreed, that was the end. And of course they had called their hand. They couldn't talk about it anymore. They either finally had to say yes or no.
James Green: Oh, yeah.
Charlene Barshefsky: And of course, they said yes.
James Green: One of the provisions that I've heard you talk about and, a curious review these days is the safeguards provision. Can you just introduce what it is and then why it was or wasn't used and how it was envisioned as you saw it.
Charlene Barshefsky: Yes. Well, among other provisions, there were three in particular that bear on the current China debate, and these were special to China accession only. They've never, they never appeared before in anyone else's accession. They've never appeared since. One was on forced technology transfer, prohibiting it. Neither the George W. Bush administration nor Obama administration, or Trump administration has ever used it as a basis for suit. This is a complete mystery to me. Second provision also not used by any of those three administrations was a provision on state enterprises. Not only that they had to act in a commercial manner if they were in business, but that the government couldn't directly or indirectly influence what they did commercially. That provision has never been the subject of suit. Both of those provisions, absolutely should have been a long time ago. These were inserted in 1999 when these issues were already of, I would say, small concern on the tech transfer side, very small concern. But looking ahead, I thought at best we have something in the agreement on tech transfer.
James Green: So that's when you put it in and it's towards the end of the US-China bilateral consultations?
Charlene Barshefsky: Yes.
James Green: You guys put it on the table and talked about the text and the Chinese accepted?
Charlene Barshefsky: Yes, yes, yes, yes. The third U.S. provision, and this is one of the greatest mystery was called the safeguard provision. And basically, what it said is this, "If your imports into the U.S. are disrupting the U.S. economy, then the U.S. president, after receiving a recommendation from the appropriate agency, can do whatever he wants." Tariffs, prohibitions, bans, bars, tariff rate quotas, anything. Period of implementation of that relief, four years -- indefinitely extendable. Now, there's a quite good economic study that was done by Eric Auder and several other people who said that the U.S. in the period 2000 roughly, plus or minus two, 2011-ish, lost somewhere ... a million, a million and a half jobs, which they attribute to trade with China, which they attribute to the import flux that occurred. This special safeguard provision, which we inserted, again in 1999, was there because it was predictable that there could be a surge of Chinese goods in any area of the economy, which might disrupt the U.S. economy.
In legal terms, the word disruption is the lowest legal hurdle one could possibly have to prove a case. It's a nothing burger. Right? Of a hurdle.
James Green: That's a legal term too, you know. (laughs)
Charlene Barshefsky: That's a diplomatic term too. Um, so, the provision was in existence for 12 years. It became effective in 2001 when China formally joined the WTO and expired the end of December 2013. It was used, five times; four times before the George W. Bush administration, and he denied relief in all four cases. Once in the Obama administration on tire imports from China, he granted relief. There were three additional cases that were filed and were thrown out by the underlying administrative agency because they were essentially frivolous.
So here was a provision in effect for 12 years, used almost never, but had it been used, would have stemmed the import surge that occurred. And why is that pertinent today? Because I don't think you would see the degree of vitriol and political posturing today that would have been possible had those import surges not occurred, not been allowed to occur along the way.
James Green: So your sense is if the imports had, tariffs put on them or some quotas or something like that, Chinese exports in those products would have been reduced and U.S. industry would have been able to recover and be more competitive?
Charlene Barshefsky: Maybe, maybe not. At the least, it gives you leverage to get other things. And the advantage to doing it this way as opposed to the way the current administration's handling this is, when you take action like that, to which China has already pre-agreed, it has no right to counter-retaliate. It has an illegal claim against the United States, unlike the current situation.
James Green: I just wanted to kind of read a quote from President Clinton in which he spoke at SAIS about the PNTR legislation. And kind of get your reaction about how if that was an overselling of what WTO was bringing. Um, and he said at that speech, "By bringing, by joining the WTO, China is not simply agreeing to import more of our products. It is agreeing to import one of democracy's most cherished values, economic freedom. When individuals have the power not just to dream but to realize their dreams, they will demand a greater say." I think some of the criticism of people who are not China people or who are not following this particularly close to us, "Hey, you," broadly policy community, "You promised us, democratizing China when China joined the WTO." Bill Clinton said it, and I picked that one quote, but there are other kind of similar sorts of things, and that didn't come to pass. How do you react to the kind of that sort of argument?
Charlene Barshefsky: If you looked at China today and you looked at China in 1999, this is not the same country. People are prosperous, better and better educated, much more savvy consumers of information than most are led to believe, have many more options, are wealthier. And as Bill Clinton said, those kinds of things help make people more discerning and give them the ability to be more discerning, because they are more independent. And I think that that is the case. Bill Clinton also said something else, but not quoted, but he said it many times, "We can't determine the direction China will go in. The Chinese people will determine that direction. Economic freedom helps to give them the ability to make that choice. Poverty often doesn't."
So to me, that's exactly the situation. Which is to say no one will ever impose democracy or any other political system on China from the outside. If the Chinese people want change, there will be change, but it will be up to them. Economic freedom gives them one more, one more variable in their own calculation.
James Green: I just want to tell my one little WTO vignette story that I love telling. When I was at the embassy in '99 through 2001. I remember one time going to the ministry of public security, kind of national police, and I would say until that time, Chinese police had these kind of baggy green uniforms, kind of generally speaking, developing country kind of paramilitary sort of uniforms, not well fitting.
Charlene Barshefsky: Sure.
James Green: So one time I went in there, this must have been about 2000, 2001, and they were wearing very smart blue uniforms that were tailored and they looked like, police. And so I said, "Hey, really nice uniforms. What, what was that about?" And this is the, must have been their foreign affairs office at the ministry of public security. He said, "Oh yes, WTO." And I was like, "I didn't realize that that was one of the requirements of the accession protocol."
Charlene Barshefsky: (laughs)
James Green: But it had so infused so many parts of the Chinese bureaucracy that joining the WTO was China joining kind of the world community. So whatever the global norms were, even if it wasn't actually in the protocol, but yeah, that, that's what the ministry of public security should do-
... and now you see Chinese police that actually wear normal looking uniforms. But it, it had, i-it's hard to remember. I was also in Beijing when China was awarded the 2008 Olympics and that's the first time I really saw a lot of Chinese people really happy. Everyone went streaming to Tiananmen Square. They were very kind of pleased that they would be able to show off their capital city to the world in the Olympics. But it's hard to remember that time in the kind of late '90s, early 2000s, in which there really did seem to be some momentum that China joined the world and global norms was changing the way China was interacting.
Charlene Barshefsky: Well certainly, i-if I could just say, it ... if you looked at China in those early years of accession, China was, and I suspect this is where you were going when you mentioned 2006, 2007, China's economy was on a more convergent course with Western market economics. And there's no question about that. This notion that China has always cheated is -- a lie. China's implementation of its WTO commitments was no better than most and no worse than most. The country against whom the most WTO cases have ever been brought is the United States. So, let's be clear, when we talk about words like "cheating," no country has a perfect record in this regard, the United States included, and the United States had less far to go than most other countries in implementing the rules it itself wrote. So, having gotten that, bit of information out there.
I would say this, China began on this more convergent course, really beginning with Deng Xiaoping in a very unsophisticated way, if you will, a nascent way. But that sort of convergence, continued, that slope sort of continued, slow and steady, until you hit about 2006, 2007. And here then you have a new regime, and this is when the notion of, among others, indigenous innovation began to gain credence. And the notion was, China should be more self-sufficient. It should indigenize, Sinicize its economy so that it would never again be dominated by foreign powers.
A lot of the old, sort of, language of imperialist aggression and so on came back into being, not quite those words, but similar in attitude. And so rather than continue on this more convergent course, all the sudden you saw, the beginning of a U-turn, and you saw the beginning of a divergence from Western, market norms and a divergence from WTO standards. That divergence accelerated appreciably under Xi Jinping. Encapsulated now in the notion of a China Dream, the great resurgence of the Chinese people and of the Chinese nation, Made in China 2025, and many, many, many other programs that seek to put China on an independent course, a course very much aligned with what it perceives to be its own interests and a course, often entirely misaligned with WTO norms or general, Western market economics.
And this is really why you see the trade tensions, as large and substantial as they are, because, China's notion of reform and opening, which had always been a kind of one word phrase, "reform and opening," reform and opening.
Then became the Chinese notion of "reform." The word opening dropped off, and the word reform has actually been taken to mean reform of the party, of the communist party, not so much reform of the economy and most assuredly not reform and opening as that phrase had been used for the 30 years before.
James Green: I've heard someone use, the term "re-form" as the new forward for reforms, so that you're kind of reforming something which kind of takes away the idea that you're making progress to just saying you're moving the chess pieces around a little bit, but not actually changing the underlying issues.
Charlene Barshefsky: Exactly right. Other than I believe with respect-
James Green: Yes.
Charlene Barshefsky: ... to the communist party and its primacy-
James Green: Mm-hmm (affirmative).
Charlene Barshefsky: ... over all other organs of state and of the economy. And, and this too is the course that has been set by the current leadership in China.
James Green: Yeah. And I think the 2008 financial crisis kind of only accelerated in the Chinese leadership's mind that the Western model was kind of not for them particularly as the role of financing the economy, but also other parts that they did well on the financial crisis. And it's because they had state banks that could use state lending and float the economy. So it had only kind of, reaffirmed in their mind that their system, you know, fits where they are today.
Charlene Barshefsky: I think that there's no question about that. It also created the opening for China to become more muscular, more aggressive. It is the point at which China believed it saw a declining United States and a resurging China, with Xi Jinping demonstrating that muscularity in the South China sea, the East China sea, Belt and Road Initiative, many other initiatives, some benign, some not so, which emanated in part from what China saw as a global vacuum and a U.S. that was no longer, or potentially, no longer the hedge amount of power.
James Green: Ambassador Barshefsky, thanks so much for talking through all these issues. These are issues that are not going to be long away, so I really appreciate you taking the time.
Charlene Barshefsky: My pleasure. Thank you.
James Green: Ambassador Charlene Barshefsky -- speaking with me from Washington, DC. You’ve been listening to the U.S.-China Dialogue Podcast from Georgetown University. I’m your host, James Green.