A former senior negotiator on President Donald Trump’s trade team says he thinks the United States is trying to help empower reformers in China, who want to open up the country’s economy.
Clete Willems, who served as one of the lead negotiators in trade talks with China until mid-April, told Yahoo Finance On the Move that the diverse range of views among Chinese President Xi Jinping’s advisers was one of the things that surprised him during negotiations.
“I think there’s a perception that everyone is generally in lockstep, that politics doesn’t influence things. But I found that that wasn’t the case at all — and that you had a broad array of folks both reformers as well as hardliners, but that each put pressure on President Xi at different times during the negotiations,” said Willems, a former deputy assistant to Trump, former deputy director of the National Economic Council and is an incoming partner at Akin Gump Strauss Hauer & Feld LLP..
Willems said reformers are the people who recognize that a trade deal will benefit China.
“Deeply embedded within China’s businesses and within those who speak with the president are those who think it’s going to be better for China to open up — to make the structural reforms in the kind of way the U.S. is trying to achieve in the negotiation,” said Willems.
Willems said while he was serving in the Trump administration, China had pushed back on several negotiating points throughout the process — but he was taken aback by just how much China’s delegation retreated from its commitments after the most recent round of talks.
Willems’ comment on the internal power struggle inside China’s cabinet is echoed by Max Baucus, who served as the U.S. ambassador to China during the Obama administration. In an April interview with Yahoo Finance, Baucus said while China knows opening up and reform could benefit the country, there is very strong resistance inside the party. “They don't want the reform and they can stop it,” he said.
Baucus said the diversion is often overlooked by Americans, who believe the authoritarian region with a one-party system enables Xi to make all the calls. But just as the U.S. has hawkish negotiators including Robert Lighthizer and Peter Navarro, and free trade supporters like Steve Mnuchin and Larry Kudlow, China has their own reformers and hardliners who can affect Xi’s decisions.
When Yi Gang, the governor of China’s central bank, spoke at the China Development Forum in March, he admitted that financial sector reform faces opposition from people who worry that opening China’s doors to foreign players could pose more risks to its financial system.
A U.S.-China deal is inevitable
Still, Willems said he thinks the two countries will eventually get to a deal, though it may take time.
“I think it’s good that some of the most aggressive actions haven’t been taken yet. I think both sides want to leave space for a potential deal,” said Willems.
In fact, Trump told reporters on Thursday that China wants to make a deal.
“We had a deal and they broke the deal. I think if they had to do it again, they wouldn’t have done what they did,” said Trump.
Trump insists the tariffs are having a “devastating effect” on China because companies are leaving China to avoid tariffs. And he argued that U.S. taxpayers are paying “very little” of the increased costs from tariffs on Chinese goods.
“I think that it’s clear that this continued tension hurts both of our economies. I think the President’s perspective is that the U.S. is in a better position economically to be able to sustain this,” said Willems.
Overnight, a Chinese official accused the United States of “economic terrorism.”
As the rhetoric ratchets up, Willems said he thinks both countries are trying to signal to each other where they may be able to negotiate and where they refuse to compromise. He said the two countries are in a “holding pattern.”
“How things play out in the lead up and at the G20 is really going to be, I think, determinative here,” said Willems.
Relief for farmers during trade negotiations
Willems said the administration is trying to mitigate the impact on American consumers and farmers, to make the situation more sustainable over the long term.
He cited the exception process for the increased tariffs on Chinese goods and the lifting of steel and aluminum tariffs for Canada and Mexico.
“I think that’s going to make things better for farmers and better enable the U.S. to continue its strategy,” said Willems.
Though farmers are suffering from continued trade tensions — Willems argues American agriculture has had room to improve in China for years.
“Soybeans, yes. We were selling some amount. Not as much as we should because of their restrictions on bio-technology,” he said. Bloomberg reported Thursday that China put new purchases of U.S. soybeans on hold amid escalating tensions between the two countries.
“If you look at chicken — China had a total ban. You look at beef — we were selling almost none. Even on pork — we weren’t selling very much into China. Those should all be billion dollar markets,” said Willems. “We need to take care of the agriculture sector in the short term where we can, but at the end of the day if there is a deal it’s going to be much better for them over the long term.”
Krystal Hu contributed to this article.
Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.
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