What can we say about this key relationship in light of the 2016 Presidential election? What changes should we anticipate? How do we work together to ensure trade and investment between the two countries continues to grow?

1. The US-China Relationship
What can we say about this key relationship in light of the 2016
Presidential election?
What changes should we anticipate?
How do we work together to ensure trade and investment between the
two countries continues to grow?
Benjamin Shobert
December 9, 2016

2. Some Additional Context
 Born in Plymouth, Indiana.
 Raised in the Midwest.
 Undergrad in Indiana.
 Graduate school at Duke.
 After college, lived in Boston,
Nashville, and Indianapolis.
 Lived in Seattle last 6 years.
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3. Some Ground Rules
1. Dispassionate Non-Partisan Analysis.
2. Emphasize Economic Issues.
3. Identify the Actors.
4. Let Them Speak for Themselves.
5. Establish Economic, Cultural & Political Context.
6. Develop Scenarios.
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4. "I'll clamp down on the cheaters, and China is the worst example of that.”
“There's one going on right now, which we don't know about it. It's a silent one. And they're winning … you can't keep on holding
down the value of your currency, stealing our intellectual property, counterfeiting our products, selling them around the world,
even to the United States.”
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5. “Let’s be clear: one of the major reasons that the middle class in America is
disappearing, poverty is increasing and the gap between the rich and everyone
else is growing wider and wider is due to our disastrous unfettered free-trade
policy.”
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6. “Our politicians have aggressively pursued a policy of globalization – moving our jobs, our wealth and our
factories to Mexico and overseas … Globalization has made the financial elite who donate to politicians very
wealthy. But it has left millions of our workers with nothing but poverty and heartache.”
"We can't continue to allow China to rape our country, and that's what they're doing.”
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7. “I will stop any trade deal that kills jobs or holds down wages — including the Trans-Pacific
Partnership … I oppose it now, I’ll oppose it after the election, and I’ll oppose it as president.”
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8. Rhetoric versus Reality
American
Political
Rhetoric
Actual
Policy
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9. Rhetoric versus Reality
American
Political
Rhetoric
Actual
Policy
What happens if &/or when these start to actually overlap?
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10. Is Yesterday’s Rhetoric, Today’s Reality?
“What’s happening is a zero-sum game between China and the U.S. where
their gain is our loss.”
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11. Establish Context
 Four Uniquely American Insecurities
1. Economic … revising the American dream down.
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12. About Those Economic Insecurities …
66%
34%
Is globalization mostly good or
mostly bad for Americans?
Mostly Good
Mostly Bad
 No significant differences
between Clinton & Sanders’
voters (76/75%).
 In the 20 years of this poll,
highest (D) support for
globalization.
 Over 20 years, (D) support
has increased, while (R) has
decreased.
Source: Chicago Council on Global Affairs, 2016 survey.
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13. About Those Economic Insecurities … (cont.)
59%
41%
Republicans & Globalization
Mostly Good
Mostly Bad75%
25%
Democrats & Globalization
Mostly Good
Mostly Bad
61%
39%
Independents & Globalization
Mostly Good
Mostly Bad
Only 50% of (R)
Trump supporters
were “Mostly
Good.”
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14. About Those Economic Insecurities … (cont.)
70%
30%
Globalization - Good or
Bad?
Good
Bad
64%
36%
Globalization - Improved
Standard of Living for Me
Personally?
Yes
No
40%
60%
Globalization - Does it
create jobs in America?
Yes
No
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15. Establish Context
 Four Uniquely American Insecurities
1. Economic … revising the American dream down.
2. Aging Hegemon … inability to impose our will globally.
3. Political … a corrupt system that doesn’t work for us.
4. Terrorism … anytime and anywhere exhausts everyone.
 Globalization’s Upside Potential
1. New Markets.
2. Deflationary Prices.
3. Expand the Pie.
4. Multiculturalism.
5. An Alternative to Revolution & Instability.
 Downside Risks
1. Affluence Breeds Policy and Political Complacency.
2. Free Markets for Labor and Capital Destabilizes Status-Quo.
3. Accelerates Return to Capital versus Return to Labor.
4. Lack of Clarity On Re-Training & Re-Location.
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16. Scenario 1: Status Quo Maintained
 Same old, same old.
 Nothing really changes in US-China relationship.
 No currency manipulator designations to China.
 No 45% tariff of all Chinese-made products.
 US more or less fully occupied with domestic politics.
 Conservative led re-design of American healthcare, social benefit, immigration and
regulatory systems.
 Big domestic fight isn’t about trade, it’s about the conservative versus progressive ideas
about the role of government.
 More of the same around international affairs.
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17. Scenario 2: Optics Over Substance
 Symbolically important moves over substantive
changes in policy.
 US-China relationship enters a new volatile period.
 Kill TPP.
 Label China currency manipulator.
 Re-negotiate terms of NAFTA.
 Look for symbolic win(s).
 “Feelings” about globalization slowing down
translate to increased job security.
 Re-position military assets.
 Double-down on culture war.
 Added rhetoric about the 1% (from President-Elect,
not GOP).
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18. Scenario 3: An Introverted America
 America’s economic malaise and political
dysfunction cause it to turn inwards, no longer
looking to defend globalization.
 US-China relationship no longer sustainable by either
countries’ MNCs.
 Cross border investment dramatically decreases.
 Formal and informal withdrawal from global matters
(Iran Deal, Paris Accords, NATO commitments to
Baltic states, etc.).
 Traditional (D) and new (R) constituencies support
diminishing of free trade.
 Risks of a multi-polar world emerge.
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19. Scenario 4: The Perfect Storm
 US-China relationship degenerates initially due to equal pressures from both countries’ domestic economic problems
and increasing global strains that are perceived to have been set in motion by globalization.
 Within China:
1. Debt fueled financial crisis versus stagflation.
2. Increasing autocracy (third term for Xi).
3. Additional suppression of dissent.
4. Excessive nationalism.
 Within the APAC Region:
1. Regional militarization.
2. Withdrawing American military presence.
3. Instability in the Korean peninsula.
 Within the United States:
1. Political extremes disenfranchise moderate middle.
2. Tearing down becomes easier than building up.
3. Cultural rejection of globalization.
4. MNCs sour on market access issues in China.
 Globally, a new political economy that is hostile to globalization, immigration and post-Enlightenment pluralism.
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20. Is This a Moment of Creative Destruction?
 Is now a much needed reset?
 Should we view this all as painful, perhaps, but necessary?
 Do ideologues need to get their way so pragmatists can again
govern?
 Is a bit of tending to our respective domestic economies over
lofty ideas about globalization good and necessary?
 “Black cat, white cat … as long as it catches mice.”
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21. A Failure of Imagination
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22. What We Can Do
 Engage – don’t allow extreme views to take up the conversation.
 Emphasize integrative activities.
 Do not take free trade, globalization, or healthy US-China relations for granted.
 Differentiate between national and local politics.
 Ask local politicians to be full throated defenders both of the US-China relationship as
well as to clearly advocate for policies designed to help the American middle class.
 Be specific about programs you believe build scalable and sustainable US-China
relationships.
 Be specific in terms of programs that help American workers.
 Tone and temperament matter now more than ever.
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