Listen to Audio
Also available on Stitcher
How does the United States address unfair trade with an Asian economic powerhouse? Combat technology transfer rules? Limit the role of state enterprises? What works in negotiating trade frictions with China?
Wendy Cutler spent nearly three decades as a career trade negotiator at the Office of the United States Trade Representative (USTR) handling Asia, including many years on China. She is an expert in negotiating the rules and enforcement of binding trade agreements. Here, former acting deputy USTR Cutler explains the expectations around China's entry into the World Trade Organization (WTO) in 2001, the failure of the WTO Doha round to further open markets, and how manipulating the negotiating room itself can affect the outcome of a discussion with senior Chinese leaders.
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 Wendy Cutler.
By the time Wendy Cutler retired from the Office of the United States Trade Representative in 2015 as the acting deputy of the agency, she had spent nearly three decades negotiating some of the most intractable trade issues with the powerhouse economies of Northeast Asia: Japan, Korea, and yes, China. As the Assistant USTR covering Japan, she tackled market access barriers U.S. companies faced in the world's second largest economy from autos to agriculture. Cutler was the lead negotiator for the landmark 2007 U.S.-Korea Free Trade Agreement; that agreement is so well known there that she continues to receive a paparazzi welcome whenever she visits Seoul.
And with China, Cutler began working on that country shortly after it joined the World Trade Organization in December 2001. The nominee to head USTR at the beginning of the George W Bush Administration, Bob Zoellick, had this to say during his Congressional confirmation hearing in 2001 about China joining the WTO:
Bob Zoellick (audio clip): As we've had an opportunity to discuss,China right now is negotiating the details of its various bilateral agreements as part of its overall protocol with the working parties. And even prior to the nomination for this position, I've urged the Chinese to follow through on their commitments because this is clearly going to be a challenging implementation. As a number of you have mentioned, it's going to have to be monitored and enforced closely. I was pleased to see that the last Congress gave some additional resources to the executive branch to do that. But this will not be successful for China or the rest of us unless we do that.
In her discussion with me, Cutler talks about the internal deliberations of the U.S. Administration in the early 2000s on how to enforce China's WTO commitments. She also details the mechanics of how the make the most of a senior government meeting to ensure specific commitments are made. An experienced trade practitioner, Cutler sees the challenges of China's WTO entry as wrapped up in the larger failure of WTO members to liberalize trade in what’s known as the Doha Round -- launched in 2001 and declared dead by 2015.
James Green: Wendy Cutler, thanks so much for coming in and talking today. I wanted to start our discussion about your background. You were at USTR for over two decades and one of the most accomplished negotiators on the U.S. side. We've chatted earlier about how U.S.TR has had a number of very prominent women trade negotiators, and I wanted to just ask you, why is it that, in the U.S. system, the probably most prominent government agency dealing with foreign policy that has women in leadership roles has been at USTR.
Wendy Cutler: So, I was at USTR 28 years and probably one of the best jobs in the world. Over the course of the 28 years, I worked for nine USTRs. Three were women, so that's a third of the USTRs that I worked for, were women. When I was, in my early years, I worked for Ambassador Carla Hills, then Charlene Barshefsky, then Susan Schwab. But, as I rose through the ranks at USTR, there are just a lot of women at senior level positions.
And a lot of us have asked the question, "why does USTR attract so many women?" I don't think there's any hard answer to that. I mean some of the theories are that women bring special skills to the negotiating table, such as being able to build consensus, being able to listen more closely, being able to work with others more constructively to come up with a negotiated solution.
James Green: Interesting. Yeah.
Wendy Cutler: I think it's also a profession, frankly, that attracts lawyers, and there seems to be a lot of females in law firms and a lot of people in law firms are unhappy. So, I think it attracts those people.
But what's so fascinating for me is that, in the USTR world, you're working with a lot of women in USTR, but then when you start working more and more with our stakeholders or with the Congress, at least when I first began my career, it was almost all male. And even more striking was during my negotiating career, basically being across the table from men all the time. Except perhaps in my early days when I worked in WTO issues. After that, negotiating primarily with Asian countries, there were very few women as counterparts.
James Green: And you're not just talking counterparts. What about farther on on the bench? Were there women in kind of more junior support roles or was it really mostly no?
Wendy Cutler: There was some, and by the time I left, you saw more and more. And I was struck, just about two years ago, when I was in my Asia Society job, I went to speak at the Diplomatic Academy of Korea, South Korea, which is largely the equivalent of their Foreign Service Institute. And 70 percent of the class was female.
Wendy Cutler: So, it's amazing, but the when before the Asian countries as well, they can attract women, and they are, is that once women get into the family years, they tend to leave these jobs. So, they're-
James Green:And then there's no way for them to come back in.
Wendy Cutler: Right. And so, they're working harder to try and retain these women, and also to promote them. And there's so much the government can do there and in a lot of these countries you really need societal changes as well. You need the daycare availability. You need the husband who's going to do the housework and things like that, and so it's a work in progress. And I think certain Asian countries are making important progress in this area. Others, I think could stand more improvement.
James Green:Before we get to the negotiating history, you're a, a rockstar in Korea because you were the lead negotiator for the U.S.-Korea Free Trade agreement. But I wonder if you could just step back and explain a little bit what USTR is, and what its role is in the U.S. government and the inter-agency and what it tries to accomplish as an agency, a small, but a very important one.
Wendy Cutler: Sure. So USTR was created largely because there was a sense that all the other big government agencies brought their own biases to the table, and so it was very difficult to come up with negotiating positions that were really in our national interest. When the State Department led trade negotiations, for example, the sense was that they were just so focused on keeping the other countries happy that they weren't really looking after our stakeholder interest.
Wendy Cutler: Conversely-
James Green:And by stakeholders, sorry, just who do you mean generally stakeholders?
Wendy Cutler: I mean businesses, labor, the whole concept of stakeholders expanded dramatically since I started at USTR. But then you look at on the other side of the equation was the Commerce Department, where the feeling was, they just did whatever industry wanted. And so, they weren't really looking after our national interest.
So, the notion and the idea behind creating a USTR was to kind of have this kind of objective, lean agency that could work with the other agencies, coordinate trade policy, listen to all the views of the other agencies and come up with policies and negotiating positions that really were in our national interest.
James Green:So, China joins the WTO in December of 2001 and then 2002, it's your problem. So, all the issues of implementation, all the deep schedules of changes that China had to put in place was yours, as well as Korea, Japan and these other, as you said-
Wendy Cutler: It’s interesting, because I did join, the China team, led the China team, right, at the time of implementation of the WTO, and one thing to remember, and I've seen this not only with China, but with other countries as well is that there's so much high level attention from governments when a negotiation is going on, particularly in Asia. It's kind of all-hands-on-deck. Very senior level involvement. And typically, the trade ministries then are emboldened, or empowered, or they just totally redo their trade functions to put them as a separate entity or reporting directly to the leadership.
But once implementation comes along, people lose interest, and they lose- they don't have the same senior level attention. And a lot of the implementation then falls on all the different ministries and agencies. And a lot of these other ministries and agencies, particularly those that are very domestically focused in countries, they tend not to be very enthusiastic about implementing these agreements.
So, it is not uncommon that once a negotiation successfully concludes and everyone's saying all these positive things, that implementation problems arise. Some of it is just learning pains. Some of it is a result of agencies not wanting to implement what was agreed upon.
James Green: That is the Trade Ministry has agreed to something, but the actual implementation agency is not on board.
Wendy Cutler: Right. A lot of times these other ministries felt like they were forced to do this, either by the trade agency or even by the leadership of the country, and this is kind of their payback and they're going to find a way-
James Green: Is to drag it out or-
Wendy Cutler: And find a way around the commitment, or come up with a different regulation, or try and just go through with something that was clearly in violation, but they claim they didn't know, and particularly if you look at all the commitments China made in its accession, frankly it's remarkable that there weren't more implementation problems.
James Green:Now, on that, you had those years right after entry. I guess stepping back, how would you assess the WTO accession protocol agreement? You negotiated a lot of agreements. As I said, you were the lead negotiator for the Korea FTA. You were one of the most senior people dealing with the Trans-Pacific Partnership. You've dealt with Japan and other large economies. How would you assess, kind of broadly speaking, the WTO accession package compared to other negotiations that you've led and had to deal to deal with on the implementation side?
Wendy Cutler: I mean it was a tremendous package. And it was amazing that so many solid commitments were agreed upon by China under the accession package. Was it perfect? No. But no deals are perfect. And when I look back on those years, and particularly in light of the current administration saying it was a mistake to let China into the WTO, there were two expectations at that time that weren't fulfilled.
And one was that everyone expected China to continue to reform and open, and so it seemed that China was on this trajectory and not only was it not going to stop and continue in the reform and opening direction, but by being part of the WTO, and being part of this global community, it would just accelerate the reform process, and clearly that hasn't happened.
But second, there was also the expectation that the WTO would keep negotiating new agreements. And the Doha Round had just been launched then, and people expected that there would be new commitments that would also apply to China. And so, it wasn't the feeling that when China's car tariff was locked at, what, 25 or 30 percent, that that was the end of it. It was the expectation that there would be further rounds. And China, like other countries, would reduce their tariffs, and that new rules would be negotiated in areas like subsidies let's say, or like state-owned enterprises, areas that would discipline Chinese practices more effectively.
James Green:And what happened?
Wendy Cutler: And what happened there was-
James Green: What happened to the Doha Round?
Wendy Cutler: Yeah, the Doha Round basically collapsed, and one of the reasons it collapsed was that there was a real difference of views between developed countries and particularly the advanced developing countries, not only China, but countries like Russia and India and Brazil, who still viewed themselves as developing countries. And their view was "We don't have a lot more to give. But the developed, advanced economies should keep giving more and more.”
And politically that was unsustainable.
James Green: For the United States and for Europe and for Japan.
Wendy Cutler: Exactly. So that wasn't going to happen, and those differences really couldn't be bridged. And it's not like there wasn't enough effort wasn't put into it. There was a lot of effort put into it.
James Green: And the Doha Round launched in 2001?
Wendy Cutler: 2001. Right, right. Around the same time as Chinese final accession.
James Green:And when, when did the U.S. finally declare that it was a corpse? That it was no longer a living item?
Wendy Cutler: I would say about five or six years later. But I think earlier than that it became clear that the odds of this really leading to more market opening, the odds were becoming pretty slim. And that's one of the reasons there was a real drive then to pursue both bilateral and regional trade agreements with smaller groups of countries, and particularly countries that were like-minded and wanted to do more to agree to WTO, what we call WTO-plus rules.
James Green: And that's allowed under the WTO, countries are allowed to conduct either bilateral or plurilateral free trade agreements.
Wendy Cutler: They are. There's certain rules about how, how these negotiations need to be conducted, and really the core rule is that substantially all trade needs to be covered. So, you can't just do agreements in certain sectors. A free trade agreement needs to have what we call comprehensive coverage.
James Green: So, you couldn't just have an auto-focused trade agreement.
Wendy Cutler: Right.
James Green: That would bring tariffs to zero for just that one sector.
Wendy Cutler: Exactly. Exactly. Yeah.
James Green: So, on the session protocol, and getting to the implementation part of China's joining the WTO, what struck you or what do you think was significant in the accession protocol and what were then the challenges of getting that, kind of in place-
Wendy Cutler: So once again, the challenges were that there were a lot of startup problems in China and we'd get a lot of calls from companies and from our embassy in Beijing, pointing out problems where companies would say, "Well didn't China agree to get rid of this restriction?” Or, “we're looking at this new regulation that they agreed to promulgate based on WTO rules. This doesn't look like this is in line with it."
What we were confronted with, and once again, this is not just a China-unique problem, is that typically in trade agreements, you have people in a government that are really pro the agreement, and as I mentioned earlier, people in the government who feel that this goes against their domestic interests, and they really didn't want to be part of it.
And so, you always had, particularly right after an agreement was reached, an implementation, as you face implementation with any country, the challenge was: do you want to be very aggressive and kind of pursue every infraction aggressively and threaten? You're going to take them to dispute settlement or you're going to close your market, or whatever? Or do you want to try and work more cooperatively with that country?
And one of the key considerations is if you are too aggressive, then you risk playing into the hands of those in the government who thought this was not a good agreement, and they work against the agreement, and then you can the whole thing kind of starting to unravel.
James Green: And you think that works in both, say more closed political systems like China's, as well as more open ones that are kind of democratic in which you have kind of popular forces.
Wendy Cutler: Absolutely. I've seen it in both.
James Green:Mm-hmm (affirmative).
Wendy Cutler: The difference with China was China undertook so many obligations, by definition you were just going to have more startup problems. I mean what, they agreed to change, amend, or promulgate new regulations and with respect to like 10,000 issues, and made all their tariff reductions and quota reductions, and there was just a lot going on in 2002.
James Green: So, without naming every single part of the accession protocol agreement, just to give people a sense of what is in a, what did a country have to, or an economy have to sign up to join the WTO? There's tariff reductions so that imports are cheaper. What are the other kinds of sorts of things that countries agree to when they join the WTO?
Wendy Cutler: Okay. So, for example they need to make their import licensing procedures transparent and fair. Like you can't just give out an import license to your friends anymore, or to someone who's given you a lot of money. Transparency's very important. Kind of the whole rule of law, you need to be able to read the regulations, to be able to comment on them, and to assume that they're going to be followed that government ministry, and if not there will be recourse if there's a violation.
There's an expectation that you will have transparent and effective customs procedures, and that your products will be valued correctly. The customs official won't kind of jack up the price and therefore charge you a higher tariff based on that value. And there's obligations in areas from intellectual property, having to have a system in place that protects the rights of patent holders, of copyright holders. And once again, if the rules are broken, that your domestic system will have enforced effective enforcement procedures to deter infractions on intellectual property.
And the list goes on and on, I mean, I don't know how many pages the WTO accession deal was, but I- hundreds, if not thousands.
James Green: Yeah right.
Wendy Cutler: Of pages. Yeah. Yeah.
James Green: So, these are obligations not only on what a tariff rate, which is relatively simple. You can see what the rate is because it's published.
Wendy Cutler: Exactly.
James Green: But also-
Wendy Cutler: Right in year three, you're going to reduce that rate from five to three percent. It's kind of, you can figure that out pretty quickly if they've done that.
But how about if a country has agreed to, for example, protect patent rights. And they agree to an obligation and then they come out with a ten-page regulation. It's very hard to go through the regulation and really, to understand what the country's doing. Let's just say it's very hard for the- forget it, it's hard for the country to develop these regulations, particularly a country like China, which was just becoming introduced into the global trading system to really promulgate the types of regulations that rest of the global trading community expected.
So you have this dilemma on implementation, and looking back on it, I think it demonstrated, very early on to the U.S. was that there was some practices that China was continuing to follow, and the question was, "Should we, should we take, or should we sue, China under the WTO dispute settlement procedures? Should we initiate those procedures?"
And in those- at that point, some people in the government argued, "No, because that will be viewed, as kind of a very hostile action. And it will undermine the authority of those in China that were really trying hard to get all the ministries on board to implement their obligations. Because if the feeling was, "Look, we did this, and no one appreciated it. And now we're going to-
James Green: The U.S. still took us to litigation. Then why should we bother?
Wendy Cutler: Right. Why should we even do this? This is a losing proposition. And so that was a dilemma early on. And I remember being in discussions where we discussed whether to go forward with WTO dispute settlement. We eventually did, and I think the first case that we ever raised the possibility of dispute settlement procedures with China was with respect to their value-added tax. And the way it was applied, and how it was applied in a very discriminatory manner, and if my recollection-
James Green: By discriminatory, you mean domestic enterprises and foreign enterprises were treated differently, or domestic goods and foreign goods were treated differently?
Wendy Cutler: Correct. Correct. It gave preferences to domestic interest and worked against foreign interest. So, our foreign exports and imports were basically disadvantaged. Eventually we did, if my recollection's correct, we raised the issue with China, and maybe even requested consultations in Geneva, but then the issue was quickly resolved and never had to go through the full panel deliberations, which could take a year to two years.
But that was kind of a threshold decision. By the time I left the administration under the Obama administration, I think the feeling was that the WTO litigation was just very routine. And that's the way, frankly, over time you should view it with any country. It's not a hostile action.
James Green: I could say on my side, from having worked in Beijing and having to call up my counterparts at Ministry of Commerce to say, "Hey, tomorrow in Geneva, we're going to bring litigation." It was treated as extremely routine by that point. That was-
Wendy Cutler: By that point. But in the beginning, as you can imagine, it was viewed as like-
James Green: I'm sure the Chinese offensive to 1.3 billion Chinese people, I'm sure it ended up being seen that way.
Wendy Cutler: Right. And the other kind of enforcement action we had to deal with early on related to the unique safeguard provision that was given under the accession, excuse me, I don't know if we gave it to China. We agreed with China that we would be able to take import actions against Chinese imports if they were coming in too quickly and in very high quantities as to cause injury to our domestic producers.
And we did get a number of petitions that first year. And that was also a threshold question; how do we evaluate this position? Do we take action? Do we then, I think, one of the remedies was, we could reimpose our tariffs against China, and again, we had to really think through those cases very carefully; what would be the signal? What would be the sign? And did our domestic industry, could they really demonstrate they were being injured according to the law?
James Green: Right, so this was a special part of the accession protocol that because China was a large economy and there was concern that Chinese products would flood some markets, there was a special allowance that the companies in- other WTO member companies would have some process to say, "Last year there were X number of desks, and this year there are ten times that number, and that's injuring my domestic industry," and so would have some ways to deal with those special cases.
Wendy Cutler: Right. Now, the WTO has a general safeguards provision that applies to everyone, but the feeling was, because of the size of the Chinese economy, and probably a fear that particularly in the lower end manufacturing items, there was a real fear that certain industries and sectors would be flooded with imports.
We agreed to the special safeguard provision, which basically made it easier, and at a lower legal standard for our domestic interests to be able to petition the government.
But even given that, under the Bush administration, decisions were made not to take action under the number of cases that were brought to the United States for consideration.
James Green: So other than litigation, which you talked about, I think very well, and safeguards, how would you deal with problems that would come up when-
Wendy Cutler: Yeah.
James Green: Industry associations or companies or someone else would say, “Hey, China was supposed to do this, and they didn't, and now my company or our industry is hurt.”
Wendy Cutler: Yeah.
James Green: What did you, how did you address those problems?
Wendy Cutler: Yeah, and this is what we do with all countries. I mean the first step in the process is to get the other country on the phone. So, either you do it through their embassy in Washington, or we work with our embassies in Beijing and elsewhere and ask them to go into the government and to raise and issue to the authority's attention.
And it is incredible how many issues just get resolved very quickly along those lines. And a lot of times, we'll find out that the Trade Ministry had no idea that another ministry was doing this, and following a meeting with our embassy, they would make a call and get things resolved. And that's, that's the way you wanted all these things to work. That was the ideal situation. There were other times where the issue-
James Green: Did you find the Chinese embassy here in Washington helpful or knowledgeable in that regard, or did you mostly use our embassy in Beijing to reach out to the ministries?
Wendy Cutler: I think with respect to China, we worked more with our embassy in China to pursue these issues. I think the feeling was that they could understand the issue quick, could understand the issue and also that they had access to Chinese government officials, so it can move quicker, in that regard.
But in certain issues we did work through their embassy. If that approach didn't work, what we would typically do then would be to try to elevate the issues to bring into more senior levels within our government, meaning they would raise it with their more senior counterparts in the Chinese government, and sometimes issues had to be elevated to get resolved.
But again, many issues got resolved that way. And almost- some of them got resolved in the fear that we would elevate the issue and that, particularly with China, their trade minister would have to learn about certain infractions. There were certain trade ministers, and this isn't just unique to China, the bureaucrats were so afraid of their boss knowing about such certain problems or being so frustrated that they would have to spend their time talking about these detailed issues.
So almost the threat of escalation could work effectively with China and other countries. So, we had a lot of tools short of litigation.
James Green: And the U.S., in the U.S. system, escalation went to whom usually?
Wendy Cutler: It could start, for example, it could from a Director to an Assistant USTR to a Deputy USTR to the USTR to the President.
James Green: And at that time other cabinet officials, what was the USTR's view of using, say the Secretary of State or other government officials for these WTO accession kind of frictions?
Wendy Cutler: I think initially, with respect to all countries, USTR likes to try and resolve the issues on its own, because the problem is when you bring other agencies into the equation, sometimes it gets more complicated. But that said, there are many times where you really, you want the weight, you want the voice of the other Cabinet official. And some of these issues really fall under the jurisdiction of the other Cabinet officials, as well.
So, it would depend issue by issue. And we'd always come up with the best strategy. Our interest wasn’t solving the issue less than how to protect our bureaucratic turf.
James Green: So, you would have to go to China sometimes and meet with counterparts. Can you describe what that was like and how you'd get on the ground and the embassy would set up meetings with Chinese counterparts of different ministries. How did that process work from your point of view, and did you feel like that was an effective way to address issues? And can you just talk through your experience of doing that?
Wendy Cutler: Yeah. Sure. I think with China, the challenge, there were a number of challenges. One was always trying to get the meeting scheduled that you wanted in China. And I was shocked, having worked with other countries, that I'd be flying to China and meetings weren't nailed down in my schedule. And then I quickly learned that that was just par for the course.
Second, when I think of negotiating, in working with Chinese officials versus officials from other countries. Excuse me. I think the challenge with China was that it was very difficult to develop personal relationships with our counterparts. For the most part, they didn't socialize with us. I think that was frowned upon in their society, and particularly working in the Asian world, those dinners, the side conversations without their counterparts around were always useful in exploring solutions.
So, I did feel with my Chinese counterparts that that was an area where they were uncomfortable putting themselves in those environments or were not allowed to, and I think that kind of made it more difficult to solve issues.
James Green: And so, you would meet with largely the Trade Ministry folks as a kind of first touch points.
Wendy Cutler: Yeah.
James Green: And then other ministries if the issue involved regulatory issues on health or say, agriculture.
Wendy Cutler: Agriculture.
James Green: And you’d meet with them. And how did you find those interactions with the trade officials, presumably knowledgeable about the WTO obligations and what the issue was? We would, I'm sure, in asking for the meeting, have to tell the Chinese side what we were worried about and why we were worried about it.
And when you went to other ministries, when you went to other ministries, how did you find your reception as a USTR negotiator?
Wendy Cutler: Well, so I can't remember in detail, but basically for all countries, once you start meeting with the other ministries, the Trade Ministry always looks better and better.
James Green: So, would you say at that point, would you go to China every quarter? Every six months? Once a month? What was your kind of schedule of?
Wendy Cutler: So probably in those years, I probably went quarterly. But you need to keep in mind that we used to meet with Chinese officials, like other trade officials, at a lot of these international meetings, whether it be APEC meetings or WTO meetings, or other regional meetings.
So, you didn't need to go to the capital necessarily to keep meeting and working through issues with them.
The other thing I noticed with in negotiating with the Chinese unlike other countries, a lot of time there was less conversation and I felt that we were-
James Green: You mean at the negotiation table?
Wendy Cutler: At the negotiating table.
James Green: So-
Wendy Cutler: Less back forth and more speeches and more-
I mean particularly senior levels you'd go; I'd be with the USTR and they'd be meeting with the minister and often these meetings were really late at night. And the USTR would let the Chinese officials start the meeting and forty minutes later his opening remarks were done.
James Green: Could you just set the table on both your meetings but also the USTR meetings? What would it look like?
Wendy Cutler: Yeah.
James Green: That is, you'd go into a coffee bar and have a coffee or what was the set up for these sorts of things?
Wendy Cutler: Yeah, we always would go into a government ministry. You'd be at a long table. Each country's officials on different sides of the table with the head delegate in the middle. At least with, particularly with China, you'd have at least ten people on each side if not more and particularly with Asian countries you'd have what we called a back bench of kind of the junior people listening, taking notes and probably learning-
James Green: Reporting back-
Wendy Cutler: Reporting back. And typically, other ministries would be included among each delegation, but there would be for the most part the head of the delegation speaking and once in a while the head of the delegations would defer to someone else at the table.
James Green: So, was this done in English or with interpretation and how did that compare with dealing with other countries?
Wendy Cutler: Interpretation. And so, that always made a meeting, typically was consecutive interpretation, meaning every-
James Green: Meaning you speak English then-
Wendy Cutler: Every meeting was twice as long. So, if you can imagine, particularly at more senior levels, and I'm sure this was a tactic of the Chinese Ministers. You would go to a meeting, maybe 10 o'clock at night. With translation, it'd be an hour. It would take an hour for the Chinese Minister to make his points and it was hard to keep going and to spend hours and hours with them.
I always remember counseling U.S. trade representatives that, "Don't let them start or make sure not to fall into this trap. Don't ask them an open-ended question. Don't raise four issues at once because they will go on and on and on, and by the time the meetings over, you haven't accomplished anything.” (laughs)
James Green: And you had started by saying at your level the table with each side squaring off like a knife fight around a table. For the more senior meetings um it often was not a negotiation table. It was something else.
Wendy Cutler: Yeah.
James Green: How was that? How did you find U.S. officials adjust to this kind of somewhat unique way of Chinese-
Wendy Cutler: So, you're talking about the two lounge-
James Green: Yeah.
Wendy Cutler: Too comfortable chairs, right.
James Green: The horseshoe shape, right, where the-
Wendy Cutler: The horseshoe, with the interpreters right behind you and then your delegation is basically in a long line not close to you.
James Green: Yeah, right.
Wendy Cutler: First of all, for my counterparts- for my bosses, for the first time that they would see the setting you could always kind of ... They'd look at you strangely and go, "Okay."
James Green: Am I supposed to sit there? Is that my seat?
Wendy Cutler: Right. Exactly. And what made them uncomfortable and actually would often make me uncomfortable for a different reason is that it was very hard to pass them a note if they were sitting there. You'd physically have to stand up and walk over to them. If you're sitting at a table next to them, you just slip it under the table. And believe me, these issues are so detailed. And also, with China a lot of it was tactics, too. You wanted to pass a note on tactics...
James Green: Meaning you should raise this issue first and then this issue or-
Wendy Cutler: Right.
James Green: Address it in this way.
Wendy Cutler: Exactly, or you need to cut 'em off, or-
James Green: How many times have you stopped them talking?
Wendy Cutler: -we only have thirty minutes left, so if you can only raise one more issue, I suggest I'll raise the other two we had on your list and then, if need be, you should leave the door open to reconnect with your counterpart. But once again, in those settings, you physically have to get up and so you-
James Green: In the horseshoe kind of couch-
Wendy Cutler: In the horseshoe thing. So, you had to make sure that what you were passing on to your boss was really worth that because it was very awkward.
James Green: It was obvious that you were standing up. You were walking over to him or her at the big seat and giving him or her something. Sometimes an effective way to say like, "This conversation's not going well," but depending on who the leader is on both sides they might take offense. Like, who is this staff person who is kind of-
Wendy Cutler: Correct.
James Green: Interrupting meeting to give me a note.
Wendy Cutler: Correct and I have to believe in the Chinese, in their culture, the bar for getting up and bringing a note is a lot higher than in the U.S. culture. (laughs)
James Green: A military invasion or something.
Wendy Cutler: Right. Like we tend to be more informal. With other countries, we would always meet just across the table or just in their office kind of in a round table, without a table, but just chairs around a room.
James Green: What Americans might find a more comfortable meeting situation in an office.
Wendy Cutler: Yeah. Right.
James Green: As opposed to that kind of formality of-
Wendy Cutler: Very formal.
James Green: Doilies and pouring of tea and all those other kinds of things.
Wendy Cutler: Right, right, exactly.
James Green: Moving on to your APEC experience, what year did you acquire the Asia Pacific Economic Cooperation Forum post?
Wendy Cutler: I started working on APEC in 2005 and that's when we created a separate office for China at USTR. So, in the APEC context, I worked a lot with the Chinese, and it was very interesting for me to see China and work with China in a multilateral setting or regional setting with a lot of countries versus in a bilateral context.
What I liked about APEC, and working with China, was the fact that there were issues that we saw eye to eye on so we could work cooperatively. And now you're going ask me which issues and now I obviously can't remember any, but I know there were some. (laughs)
James Green: Very important issues.
Wendy Cutler: They were very important. (laughs)
James Green: Critical.
Wendy Cutler: But over time, and I worked on APEC from basically 2005 to 2015, more and more you would see kind of the competition, rivalry, contention, disputes between the U.S. and China in APEC. And that was really unfortunate.
James Green: So, you didn't see a convergence as China became a larger economy and a-
Wendy Cutler: No.
James Green: A larger trading nation? Their issues were not more aligned with ours? You just saw the more conflict, or they were speaking up more in a way that was contrary to U.S. interests?
Wendy Cutler: I think both they were comfortable, and they were more assertive. I think second, we were trying to move issues and raise issues in APEC that, let's be honest, the issues that related to our concerns with China.
And even by the end of my tenure working with China in APEC, it wasn't usual for other countries and economies to kind of sit at the sideline and see whether the U.S. and China could reach an accommodation so then they would come on board.
James Green: I know one of the things that you've said earlier about the benefits of APEC was there's a number of ministerial meetings and there are a number of sub-ministerial meetings that happen and you get to know the other twenty member economies well over years and you did it for almost-
Wendy Cutler: Ten years.
James Green: A decade, right. Could you talk about how that, in the China context, but also, you've met a lot of counterparts in the region through that, about what you saw as the benefits of APEC? I think it's often derided as a funny shirt wearing place or endless meetings. But could you talk about what you saw as some of the benefits?
Wendy Cutler: I was very skeptical off APEC before I started working on it, but over time I became a real true believer in APEC. And, this is because APEC really played a useful role in helping lay the groundwork for issues to be discussed, to be understood, and eventually make their ways into binding trade agreements. And so, by holding seminars, by developing best practices, by bringing in experts to talk about these issues, a lot of times countries' nervousness and concern about issues would be allayed. And they would also recognize that moving on certain issues was really in their domestic interest. And APEC, through the way it operated, and particularly it found a role for the private sector to be more involved.
I found that certain issues which could be so contentious in a bilateral negotiating setting could be a lot less contentious in an APEC setting. Now that said, a number of countries including China were very suspicious of the United States because they thought, "Oh, your plan is to start an APEC and then you're gonna turn around and make us do this in a binding trade agreement. So, we're gonna try and slow down the work in APEC." Or, you're gonna try and use APEC to actually negotiate. And we tried to do that successfully on environmental goods, but that's an area where we really were at loggerheads with China. As we work with China the other APEC countries to agree to reduce their tariffs on environmental goods.
And what shocked me here was that this was an area where China had so much to gain from this agreement in terms of the products it made and the export opportunities that it would have if other countries lowered their tariffs substantially on environmental goods. But nevertheless, China actually was driven a lot more by its import sensitivity interest than its export interests. Meaning that its stakeholders or its ministries did not want to lower their own tariffs which made China really be in a strange position where it had so many, once again, potential export benefits but allowed its import concerns to really dictate its position.
James Green: I think you hinted at the APEC way, which is a consensus way. It's generally not a kind of trade negotiation in which in the end you're getting a legal binding document. But the issue mentioned there, the environmental goods agreement under the World Trade Organization, which had this goal of reducing tariffs to zero on a range of environmental products. I think the Chinese government made a miscalculation in how they handled it and, as you said, their stakeholders were not so interested in reducing tariffs to zero even though it would have benefited their industry more than any other country's, any other-
Wendy Cutler: But remember this was in APEC. We had an agreement before the WTO and that was the tariffs that had come down to at least 5%.
James Green: For these fifty-four-
Wendy Cutler: Five percentage points for-
James Green: For these fifty-four items?
Wendy Cutler: Yeah, and then we spent a year deciding which products should be on the list and it was amazing how in the weeds China got about those products it did not want to include on the list. And you knew that they were under incredible pressure not to allow certain products on the list, how intense that pressure was from China. And as a result, then other countries were like, "If China can X out all these products, then we want to X out other products." So, in a trade negotiation, particularly a regional one or a multilateral one, the way you succeed is everyone has to put something on the table. And when a big country-
James Green: You mean there has to be some compromise of, "I don't want this, but I want that."
Wendy Cutler: Right, there has to be give and take. There has to be some give and take and particularly from the large countries. People expect that from you. And it was a little disappointing to see China really didn't show leadership not only in that negotiation but also, I would say, on the information technology agreement, the second phase of that agreement that I also worked on, where you saw, once again, China just working hard to take products off the list.
James Green: And these are products where the tariffs are supposed to be going to zero, and if you take a product off the list it means the countries will keep their tariffs in place.
Wendy Cutler: Right, they'll keep their tariffs. But at the same time China wanted to kind of select the products where it wanted to keep its tariffs on, and then expect everyone else to get rid of their tariffs on the products that it had export interest in. So, it was, I don't think it was China at its finest moment in a trade negotiating setting.
The other thing I'll remember about the ITA negotiation was that, I think it was we concluded our deal with China during their APEC year, a bilateral deal with China on what the ITA Agreement would be. And then what China wanted was to put the responsibility solely on the United States for selling the steel to all the WTO members, not all the members but all the members of this negotiation. And China wanted to have no responsibility for that. And that's not leadership. I always say, people say, "Well, can China be a leader in international trade?" And one of the things about being a leader that's so important is you need to lead by example, but you also need to kind of take the responsibility of convincing other countries that this is in their interests.
James Green: This was at a time when you were the Deputy USTR responsible for all of Asia. Could you just talk a little bit how the TPP negotiations were going on and how China fit into that? China was not a member of the TPP negotiation, yet I can say from my time in Beijing during those years there was a lot interest in the Chinese Trade Ministry, the Commerce Ministry, as well as other kind of trade circles as to what was happening. Could you just kind of untangle? You were very active in those days.
Wendy Cutler: Yeah, I mean the first thing to clarify: the TPP wasn't about containing or isolating China. That was China's initial take on the agreement. It was more about working with like-minded countries to come up with rules that would go beyond the WTO rules that would kind of govern trade and investment flows in the region. It was very interesting that over time China's position on TPP evolved and they seemed to be more open as the negotiation went forward. I think a pivotal point for China in the negotiation was the entry of Japan into the negotiations because I think that gave the negotiations a lot more value and a lot more heft and was kind of a wake-up call to China.
I will never forget that soon after TPP was concluded and I left USTR, in my new Asia Society role I traveled to Beijing and meeting with government and non-government people, and the interest, not just general interest in TPP, but we're talking about people who had actually read these chapters and were asking me, "Could we get an exception here if we were to sign up for this?" Or, "What does this provision mean?"
And so, I think there was a moment in time where they did see this as a really successful endeavor. They also had to notice that upon conclusion of TPP a number of other countries were expressing interest in joining, including some key southeast Asian countries: Indonesia, Philippines, and Thailand, as well as Korea. And so, I think they were taking this deal somewhat seriously. And so, it was quite unfortunate when we made the decision to exit from the deal.
And I don't think this story is over yet. But the deal now is coming into effect among the other eleven TPP countries, and I don't think that China feels the same drive or interest in the agreement, although just about a month ago there was some press in China that maybe China would reconsider the TPP. My view is that was largely to kind of stick it to the United States that, “You're not interested. You left it. We want to work with other countries constructively and we're going to consider this,” to kind embarrass us further in the global trading system.
James Green: I'd like to conclude just by asking you, since you've had so much time across the negotiating table with many countries in the Asia Pacific, as we kind of look forward, how do we interact with a very large economy, a large trading economy, which has rules that are sometimes similar to ours and often times not. What advice would you give us on what works in kind of dealing with Chinese officials or kind of trying to put U.S. issues forward and advance U.S. interests?
Wendy Cutler: Well, number one I think that if we're gonna sit at the table and insist that China just change its whole system, I think that's just a non-starter. I think their system is what it is and our goal in any trade negotiation should be to make sure that whatever policies and practices they follow are in align with international trading rules, but also that they don't impact and hurt foreign interests and their foreign trading partners. And so, I think that's more constructive.
But from a more general point of view, I think when I look back at my negotiating career, one of the things that I learned was that according respect across the negotiating table is extremely important. Listening to the concerns of the other countries and just being patient and really trying to problem-solve are all important attributes for dealing with China and other countries as well.
I mean there are times when there's no deal to be reached and frankly it's better to call a spade a spade and get up and leave the table, and that's fine. But I think overall, we're in a better place in the world if we find a way to work with China on these really difficult issues. It doesn't mean ... Not every issue lends itself to a negotiated solution, but I think many do. My view is it's much better to be talking to China and to other countries versus really cutting off channels of communication and delivering ultimatums. I don't know really where that gets you.
I just wonder about the current administration's strategy of trying to increase negotiating leverage through increasing tariff action. I think if you watch China and you see how they're responding to these measures; they take a much longer view of history. And I think they've got tools at their disposal that will allow them to get through this so-called trade war with the United States in ways that we can't imagine. I think they can marshal resources. I think they can really get their citizens riled up to do certain things. They control the media. And I think they're in for the long haul here.
I think they would prefer a deal and they're making those kinds of overtures now, but it's not a deal at any expense. And it's not a deal at any cost. I don't see the deal being that China now announces it's gonna be a market economy and get rid of all of its state-led policies and practices. So, I think we need to find a way to work around those, and I think there are ways to do that. And I think China would be open to that. I think they're taking the administration's actions seriously. I think they are hurting from these tariffs. But it's one thing to say they're hurting. It's another thing to say therefore they're going to change their whole system. I don't think that's an appropriate U.S. objective or one that's going to allow us to achieve success with them.
James Green: Thanks so much, Wendy. Always a pleasure.
Wendy Cutler: Okay. Thank you.
James Green: Deputy United States Trade Representative Wendy Cutler, 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.