In an interview with VOA reporter William Gallo, White House trade and economic adviser Peter Navarro says he remains optimistic about U.S.-China talks, but warns that the Chinese government has a long record of breaking its promises on trade.
QUESTION: "There was obviously big news last night. It was reported that the CFO of Huawei was arrested. How does this fit within the bigger plan of U.S.-China trade talks?"
NAVARRO: "Well the biggest problem the United States faces with China is a massive effort, both legal and illegal, to take technological crown jewels of America, and this takes place through actions like forced technology transfer which is illegal, cyber intrusions into our business which is facilitated in some ways by companies like Huawei and ZTE and others, but also legally but dangerously by Chinese state-directed investment in places like Silicon Valley. So what we're grappling here with China is a very serious threat to our economy and our national security through China's aggression against our technology and our intellectual property. So that's the big picture and so what we're trying to do here with China, President [Donald] Trump leading the way in Argentina at a historic session. It was a dinner but there wasn't a lot of food eaten. Really it was more of a working session. I mean what happened there was China, for 45 minutes Chinese president laying out all the things that they would agree to do to address our concerns and by implication acknowledging that they were engaged in these illegal activities. I mean one could glean that from the presentation, so if we complain about intellectual property theft, if we complain about forced technology transfer, and cyber intrusions and they offer relief. So it's a serious matter. We're hoping that we can get to the other side of it."
QUESTION: "When you say 'it' what do you mean by that? The U.S.-China trade deal in general?"
NAVARRO: "Say again?"
QUESTION: "You said 'it's' a serious matter. You're talking about the U.S.-China trade deal?"
NAVARRO: "No. No. The whole problem identified in the United States Trade Ambassador, Robert Lighthizer — his report — the Section 301 Investigation. An exhaustive analysis of China's attacks on our technological crown jewels. That is the most serious matter facing us with China economically and to a certain extent geo-politically because what China is doing with its China 2025 initiative is basically targeting artificial intelligence, robotics, block chain technology, advanced manufacturing, new energy vehicles, autonomous driving vehicles. These are the kind of industries that will not only provide the jobs of the future, but also offer whichever country dominates those a military edge. So we as a country cannot allow China to do what it is doing, particularly when a lot of what it is doing is outside the lines of the law and the rules of international trade."
QUESTION: "Sure. I understand that, and you've been very optimistic publicly in your comments about the direction of these talks. Are you still confident that the U.S. and China will agree to something within this 90-day period? Has nothing changed for you? Are you still very publicly optimistic?"
NAVARRO: "The extraordinary event of that dinner, which I don't believe has ever happened before in history, is the Chinese president himself spending 45 minutes presenting a deal to the American president. It's very unusual and unprecedented, I believe. Usually what happens with these things is that there's a deal worked out beforehand and the minions, the Chinese bureaucracy, somebody would present it. But to have the president himself offer just a long list of things makes it clear that China is signally that this is a high priority for them."
QUESTION: "Do you trust that Xi Jinping will do what he says? I mean do you have a reliable negotiating partner here?"
NAVARRO: "You're anticipating my 'but,' which is we're clear eyed about this and we understand the long history of China's failure to honor its commitments — a very long history. If you go back simply to China joining the World Trade Organization in 2001, I mean China made a mockery of those rules and if you fast forward to 2015 the two key promises that China made to the American president at the time is not to militarize the South China Sea and to stop cyber intrusions into American business networks, and both of those promises have been shattered. Not just broken but shattered. So you're clear eyed about this. So what we need here is a focus on structural change that can provide verifiable actual results in real time, results on market access issues which will involve purchases of products from America, but nobody on the team is really interested in simply like a cash-for-products deal and then sweep under the rug the structural issues, because the structural issues in this negotiation are pre-eminent. If we don't deal with China's attacks on our technology and innovation base we have not done our job."
QUESTION: "OK, and on that point I kind of had a related question. You've repeatedly said that China's unfair trade practices are sort of structural or fundamental. Are you asking China to fundamentally dismantle their core economic strategy, and if so, how realistic is that? I mean, can China agree to do these things without being perceived at home as weak?"
NAVARRO: "Well, that's two separate questions. What we're demanding not asking. What we're demanding is that China obey the rules of the international road, and become a fair actor in international trade, and surely that will require a restructuring of the model that's now predicated on state-owned enterprises, protectionism, mercantilism, and a whole range of acts, policies, and practices documented by Robert Lighthizer of the USTR that are outside the bounds of the rules. So, yea, they're going to have to restructure. Now, that doesn't mean that they lose face with their own people. The fact is their own people should welcome that because if you have a more democratic market in some sense, a market that more reflects the values of the rest of the world in terms of free-market economics, that will be a good thing for China as well. So this is going to be a tough negotiation. The biggest problem will be the ability to actually verify things rather than just being strung along because we've seen that movie before. So, we'll see what happens."
QUESTION: "So President Trump and yourself have also said that if it doesn't work out in 90 days, you will increase tariffs. Do you get a sense that U.S. businesses and Wall Street are prepared for a standoff with China over these fundamental issues you're talking about, and we're seeing some volatility in the markets now, but presumably if things did not work out in 90 days, and you were committed to seeing this through — fundamental changes in the Chinese economy — is the U.S. and is Wall Street prepared to deal with that?
NAVARRO: "Well, first of all, my own view of the markets is that a lot of the volatility is driven by interest rate policies which have been disruptive to investment, particularly with the housing sector, and we're still kind of working our way through that. If you look just broad brush, the tariffs that have been imposed and the additional tariffs that might be imposed affect a very small part of the American economy and the flow of trade. So they're not market-moving events, per se. I think that one of the problems we face politically is that the Wall Street wing of America that basically wants to maintain a status quo of shipping our jobs offshore to China, wants to create a bit of uncertainty and hysteria to pressure this administration to back down from what is a necessary response to China's aggression against our technology and innovation base. So I think that if we're able to affect structural change in China, that's the most bullish thing for the global markets that you can ever imagine, because it means that we can move forward on the next leg of growth in a way where the free trade model actually works. Right now, it doesn't. Right now, free trade is not fair trade, free trade is not reciprocal trade. Free trade basically is offshoring American jobs, factories to China. And we know what the data is. Since China joined the WTO in 2001, 70,000 factories gone, over 5 million manufacturing jobs, stagnant wages. Now this administration is turning that around, for the first time in a long time. We've got wages going up significantly in real terms and helping, disproportionally, the lower end of the income stream which is basically the people that work with their hands that the Trump administration cares deeply about. So we'll see what happens, but at the end of the day, the economy right now in America is extremely strong. All the fundamentals are strong and markets, you know there's volatility right now, but I don't think people should be blaming it on the president's tariff policies, because those are working."
QUESTION: "OK, one last question for you and this question is, I think, particularly important to VOA's Chinese audience and many in the overseas Chinese community. China, of course, is currently detaining up to a million Uighurs in a system of secret prisons. It's of course rolling out an Orwellian system of social credit. It jails dissidents, doesn't allow freedom of speech. You've mentioned some of these issues in your book, Death by China. You have been quite outspoken on this. Is the Trump administration willing, you think, to use human rights in this trade discussion as sort of a pressure point?"
NAVARRO: "That one again is outside my lane. I would just refer you to one of the most important speeches that's been given during this administration, which is that of vice president Mike Pence at the Hudson Institute where he not only went through the wide range of aggressive economic practices China engages in, but also mentioned the persecution of people in China. So, it's clearly on the radar screen of this administration. These practices are abhorrent, but it's not my place to discuss how they might affect any negotiation on trade."
