Setser on US-China Trade, Lessons from USTR, Economics of Great Powers, and Panda Diplomacy
Dec 12, 2023
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Brad Setser, fellow at CFR and former USTR member, discusses China's growth trajectory, trade policy lessons, panda export controls, and debt negotiations in Zambia and Argentina.
China's export controls on pandas hinder global happiness and diplomacy, and sharing their genetic blueprint would benefit conservation efforts.
While China's GDP may reach the same level as the US, it is unlikely to surpass it by a large margin due to various factors such as slowing convergence and demographic challenges.
Trade agreements like TPP have limited impact on trade flows, and the focus should be on fostering domestic capabilities and coordinating subsidized sectors among allies.
Deep dives
China's Pandemic Policies and Global Supply of Pandas
China's export controls on pandas are seen as a threat to global happiness and human diplomacy. The speaker believes that China should share the genetic blueprint of pandas and allow other countries to keep baby pandas born on their soil. The importance of obtaining a Chinese panda's genetic blueprint for second-generation American pandas is emphasized.
China's GDP and Global Economic Primacy
There is a debate about whether China will surpass the US in GDP and achieve global economic primacy. While China's GDP may reach the same level as the US, it is unlikely to surpass it by a large margin due to slowing convergence, demographic challenges, and the United States' continued growth. However, in certain measures like manufacturing production and commodity import demand, China already plays an important role in the global economy.
Trade Deals, Tariffs, and Actual Impact on Trade Flows
Trade deals, such as TPP, do not always have a significant impact on trade flows. The growth of trade is influenced by various factors beyond trade agreements, including demand growth, tax competition, and changes in global production networks. While some sectors may benefit from protectionist policies, the focus should be on fostering domestic capabilities in strategic industries and coordinating subsidized sectors among allies. The discussion also emphasizes the complexity of trade disputes, the challenges in settling them, and the limitations of trade policy in influencing overall trade flows.
Complexities of Debt Restructuring in Zambia
Zambia faces challenges in its debt restructuring process due to the involvement of multiple creditors, including China. The IMF insists on debt reduction, which should also include local currency foreign-held bonds. However, complexities arise due to the different cash flow mechanisms and the need to adapt rules for debt sustainability in low-income countries. Negotiations have been ongoing for three and a half years, with issues remaining around cash distribution and the involvement of different Chinese entities.
Argentina's Financial Situation and the Desire for De-Dollarization
Argentina's economic plan includes a desire to fully dollarize, but this presents challenges given the lack of usable dollars and existing peso debt. The government has been borrowing extensively and faced default, using Chinese swap lines and SDR allocations to pay off some of its debts. The new president expresses interest in de-dollarizing, but it remains uncertain whether this is feasible given the limited dollar reserves and peso debt that need to be addressed.