[inaudible] excuse me, we have a one-vote you need 60. we need 10 votes. wait, wait! you cannot do it through an executive order. [inaudible] can we do one question at a time? the children can be taken care of. quickly, beautifully and immediately. the democrats forced that law upon our nation. i hate it. i hate to see separation of parents and children.the democrats can come to us as they actually are, in all fairness, they are talking. they can change the whole border security. we have to get rid of catch and release. he catch a criminal, take his name release it and he never shows up again. he goes into society. we end up getting him in different ways. often times after he has killed somebody. we have to change our laws.

democrats have control because we do not have the votes. republicans need more republicans frankly. i think that is why we will do so well in the midterms. that and because we have the strongest economy in history of our nation. we have the best jobs numbers in the last 44 years. top, the best job numbers in 44 years. >> a leading house republican said the chamber will not tackle immigration legislation unless the president supports it. congressman mchenry is house republican second ranking vote counter. he made a comment today after the president told reporters he will not sign a moderate bill. politico reported that trump administration says 2000 children have been separated from their families at the border over a six-week period. in this update the white house clarified the presidents comments this afternoon saying he in fact, supports both the house republican immigration bill, the white house is the president misunderstood the question.

>> tonight, the house energy and commerce subcommittee hearing on how prepared the u.s. is to respond to a biological attack pandemic and infectious disease outbreaks. watch 8 pm eastern here on c-span2. this weekend on c-span. saturday to name eastern, justice and homeland security officials testify on defending against foreign interference in u.s. elections. sunday at 10:30 am highlights from the u.s. north korea summit between president trump and the north korean leader, kim jong-un. on booktv, c-span2 saturday 9 pm eastern, former house speaker newt gingrich talks about his book, trump 's america. some -- 7 pm sunday, sharing experience and become a social justice activist in the book,

-- on american history t, c-span3 saturday 8 pm eastern on lectures and history. duke university professor laura edwards on public land and the law. examining westward expansion and the laws role in taking over native american land. sunday at 4 pm eastern on reel america, the 1944 film, memphis belle, story of a flying fortress. which documents one of the first b-17 bombers to complete 25 missions in europe without being shot down. watch the c-span networks this weekend. >> the trump administration is announcing a 25 percent tariff on $50 billion worth of chinese imports. before today's announcement, the peterson institute for international economics and china finance 40 form came up with cost and impacts of trade wars to the world economy.

hosted this one hour and 15 minute discussion with policy analysts from u.s. and china. [inaudible conversations] >> good morning. welcome back to the peterson institute for international economics.i am adam posen, the institute president. it is my pleasure today to welcome friends back to our joint event with the china finance 40 form. conflict and solutions. we want to get right into substance. but a couple of words about the cf-40, our working relationship with today's event. as many of you know it is a

challenge in any b country to set up an independent think tank and have independent serious forces outside of the government. my friend and the host of very distinguished people including -- former china -- came together 10 years ago to create an independent form for chinese economists to come together in a reality-based and honest economic research. it started out as a network and has since evolved into being a actual think tank as well as a network. we just completed one month ago, our seventh i believe it was, annual conference jointly with cf-40 in beijing. they become our preferred

partner and close friend in china. and they remained a source as you will see today, of truly independent thinking. we are delighted to have them here with us. we're going to be presenting the results of a joint report that we did on this issue of us/china economic relations. several authors from p.i.e., and several from cf-40. to be clear, this is not a joint report in the sense you sometimes see where everybody has to sign off and get one document. frankly where usually says nothing. the g-7 communiquc managed to avoid that fate because they did not have everybody sign off on it, apparently. anyway, we have a lot of common themes and common approaches but no one unified message.

except that there has to be much more constructive approach to u.s./china relations. delighted to have with us today, -- secretary-general to cf-40 i will ask him up in a moment. reminding people this is completely on the record. we are web streaming is live. we have the benefit of a number of cameras here for which we are grateful for the attention and cover in both china and the u.s. and of course across the web globally.all of the papers from the joint report as well as specific presentations today, are now available on the peterson institute website. i believe also on the cf-40 website. our first panel will be on the specific issue of u.s./china trade tensions. i will speak, my colleague of cf-40 who like me, try to summarize and pull together some of the themes will also speak.

and our senior fellow, chad bown will present his latest thinking on how the u.s. can work together with other countries to deal with china conflict. in poorly, he gave testimony on this in the china economic commission in the u.s. recently. after brief lunch break, we hold a second panel on the issue of financial opening. where we of course, we have done so much work starting with nicholas lardy and others. and cf-40 has a special strength. -- forgive my pronunciation, the executive director for the imf will be speaking along with nicholas lardy. we have the first senior fellow of cf-40 and a former official will be speaking. finally, we have joseph gagnon from the institute. let me ask for opening remarks.

>> okay, thank you very much. for your introduction. ladies and gentlemen, good morning. it is a great honor to join your today. this is the seventh year of the collaboration between p.i.e. and cf-40. it has been -- between the two countries. cf-40 is a professional think tank in china. we began from platform for the members around 40 years old.

in them we had p.i.e. and held a economic forum -- report on financial openings. at the time, we also realized the risk of the companies. so, in the -- the topic on -- in the last month we had a report and items are tested

from all fields in china. today please adam, give us your latest resource.thank you. >> thank you for those kind words. again, for those just tuning in we usually do not introduce each other and go back and forth. but you know, there are certain things we learn from the party in china that are very helpful. so, what in part was with all of our colleagues on each side involved, tried to distill down 10 economic truths toward

resolving u.s. /china trade conflict. actually wrote down a list and then after that realized it was 10. maybe i was divinely inspired. i don't know. but essentially, our premise going in was that there is an economic reality that should be guiding u.s./china relations. and the empirically based economists, both here in washington and in beijing wanted to get us back to that. but this becomes even more pressing when we have seen the basic failure and self-defeating nature of the approach the trump administration seems to be trickling down on at the moment. this is not an economically rational behavior. it doesn't even make sense as a negotiating tactic that i think has become apparent. and so, if at some point, the members of congress and the senate and the u.s. wake up and reassert their control over trade, which you have the legal

right to do, we are hopeful that these are the kinds of things that you will keep in mind going forward. this is a joint statement of what i will call reality based economists with china and the us. we came together, reality-based not so much of an attack on any one party but the fact that we are real-world, not theoretical economists. i want to be clear, we not say economic peace at any price. peter navarro, the president trade advisor made a number of statements in the last 48 hours. possibly some in the last 48 minutes. that struck a very national security, warlike tone with regard to economic matters. we are not pacifists. neither us on the s side or the colleagues on the chinese side. there are disputes worth having

discussion over. but it is a bizarre, incorrect telling of the world to say that there is a problem that is so large right now. the china/us economic relationship is hugely beneficial to both sides. the millions of people in china who came out of poverty is a moral and foreign policy consequence to the us. it is not solely about whether or not americans get rich. and moreover, if we ask the economic conflict further from where we are now, there are real costs along economic growth to financial stability and potentially peace. it is not worth it. it will stop, the path we are on is just not worth it. there are however, in general economic dispute that has to be addressed. this is not about us just standing up saying both sides have a point. no, there are some genuine disputes. not everyone is pleased on each side with where the disputes are. want to emphasize, the bullying

threats as a matter of tactics, nor the u.s. government, trumpet ministration getting bought off with some kind of purchase agreements for selected industry. nor the gain that they seem to be playing to force as much u.s. production home quote - unquote. none of that will serve the u.s. interest or the world economy and none of it will resolve true underlying areas of dispute between china and the us. so what should be done? first, the real issue underlying everything is slowing growth in both countries. don't make it worse by blaming trade. we have a situation in the u.s. where along with all the other economies we see magnificently large slow down in productivity growth. in magnificently not to say it's good but make you aware. in china, china's government has recognized that cannot sustain a plus percent growth. definitely probably the demographic reasons. if we blame trade for problems

it will get worse rather than better. we have to acknowledge this is not about subdividing shrinking, this is about making realistic choices given what we have. second, the trump administration unilateral threat-based approach is already proving self-defeating and already harming growth. we can see the fact that even if you are a national security type scared of china, that the u.s. is now losing allies left and right in terms of how to approach issues with china. notably technology transfer. an area where reformers have an interest in being -- governments in europe, japan, australia and other allies, canada, have an interest in collaborating. this is being thrown away if not trump we can see a tax cut bill has done almost nothing to promote investment in the reality in recent months, part of the reason for that is there is so much uncertainty over

what is happening to global supply chains, what is happening to cross-border investment and what is happening to the ability of american companies to make decisions on a market. rather than a political basis. the trump administration approach is already self-defeating. it is time to stop it. third, this economic disputes that can be addressed using the wto and other multilateral mechanisms, should be addressed using those mechanisms. this would be something taken for granted by most people until the rise of the current administration in the us. they believe apparently, the wto is encouraging on sovereignty and his bias against the usp they believe the u.s. is in some sense, a sucker. her china and others. there is a real issue here that my colleague and others have written about. about china's market economy

status. with it should be granted that in fair terms. there are other issues at work. but, in those areas where wto dispute settlement as applicable, china has obeyed almost all of the decisions against them. notable exception is the union pay and payment system. for the most part, wto rulings is the most efficient and most fair and most legitimate way to deal with issues that are within the wto. it is both in the u.s. and china interest to have a go forward. this is perhaps the most important point. chad will pick up on this. some current real disputes such as technology transfer in intellectual -- just like issues in other areas like slave trade, trading illegal goods, chemical weapons,

environmental damage, refugees. if you try to get a problem stopped by yelling at another country, a sovereign country, and saying to them, you must fix this problem. nothing happens. the only way you get around the global public issues is to create a mutually agreeable regime that does not have leakage and involves multilateral standards. and that has verifiable conditions. this is the kind of agreement which should be looking to be moving towards as for a mutual respect for intellectual property rights, mutual respect on technology transfer. importantly, the fact that china is more advanced and working its way up the international value chain, means there is more in common between china, the u.s. and other economies, not less. there is more competition sector by sector. there is a greater interest than ever in china and its own

interest to have proper protections of intellectual property. proper protections of intellectual investment, proper protections of supply chain. because increasingly it is not going to be a low-wage radio producer. it will be a developer of intellectual property itself. >> fifth, bilateral trade deficits are not reasonable useful goals for trade policy do targets. my colleague wrote a good piece on this months ago. with nafta and others have weighed in. with this audience i will not belabor it. not because it is unimportant but because there are only so many ways you can explain when apple falls from a tree that it falls down. the more important part is six. we should not be looking for managed trade. this is key. if we are moving into a rules-based system and people

are doing things we do not like, you did not assess it by what happened. you assess it by what they are trying to do. the problem, there's a very big difference in whether you are trespassing because you happen to wander across a line or whether you go in with intent to break into someone's house. we've seen this very effectively in the area of currency. when my colleagues have made a huge contribution with some encouragement for me and others at the institute. the focus should be not on what is the level of the exchange rate, the focus should be on whether or not you are manipulating the exchange rate. similarly, the focus should not be on what is the state of a bilateral trade relationship. in terms of bilateral balance or specific industries. the focus should be on, are you doing unfair subsidies? are you stealing ideas?

we have to shift the discussion in that direction. number seven, where china wants to open its economy, subject to verifiable rules, not just empty statements. it will benefit both china and the united states. my colleague in his next presentation will talk about some of these issues. as wells present some of the issues china really has with the us. but the key point is, we saw this in mexico, japan and in country after country. we saw this in china in the past. when china wants to reform, china's leadership wants to reform, it is making international commitments, that is the biggest way to advance its agenda because it locks in the reform. it gives aspiration and a standard. it creates competitive pressure. this is what globalization does peter may have some cost for some people. but you get something for it. you get something profound for it. and so, there should be win-win

deals with the u.s. and china that they should be able to agree on where china wants opening for its own reasons and should help the u.s. as well. number eight, by the same token, chinese companies have a right to compete with u.s. companies and succeed in any sector. including in high tech. they do not however, head of an entitlement to u.s. technology. some of that was probably like code to you. let me spell it out. there's a great deal of concern in the u.s. around the world about so-called made in china 2025 policy. there's a lot of reasons to worry about it. a lot of reasons not to worry about it. but the point is, it is unreasonable for the u.s. or any country to view another country trying to compete in industry per se as being a threat. china must be allowed to

develop and develop in whatever industries it is capable of doing fairly. and of course, people in the trump administration will say that is all they want. but that is not really what they're saying. they are saying that it is inherently a threat to china was to be a leader in this industry or that industry or the other. let's be clear, the u.s. has made proclamations of that at various times as well. there is nothing inherently evil about a country aspiring to be the leader in a given tech industry. the question is again, what behaviors you undertake to do that. but there is a point where i think my colleagues would like to push back on some of the chinese government and corporations. you sometimes get the sense there is this entitlement that technology must and should be shared. that if the u.s. is a high-tech industry, as a particular technology or japan does, china should be able to buy it and be able to get it. that is not how the world works. release that is not how the

world should work for continuing innovation and fair treatment. china does not get to say you're in that, why don't you give us that technology? that's not how it works. the last two points. denies they should not try to block china's increasing role in international economic governments. the trump administration should not withdraw from the institutions of those systems predecessors. the second half of this paragraph is i assume, no objection to anyone, especially since you all read my foreign affairs article explaining why this was in the u.s. interest not to withdraw. joking aside, the key point is the first. as a number of us is this is that you have been arguing for over one decade, china is the reality. it is huge in economic terms, population and the world does not need to be run among a

small group of people in brussels, new york and washington. in fact, the world is to be run including others from other parts of the world. governance has to shift. you allow the following are trying to pose a creation of the aai b. by the previous administration, we all spoke publicly on this room against trying to oppose that. not because we wanted to undercut the multilateral system. but because of china wishes to get out there and do something constructive it should be allowed to do so. similarly, the imf deserves a much better deal from the us in terms of getting recognition for quarter review, funding as our colleagues have argued several times. there is a host of areas and of course questions of governance. but the bottom line is that bias should be the u.s. should welcome china in subject to china playing by the rules.

and what has happened is, the u.s. has repeatedly not given china a chance to play by the rules and tried to block their ascension. that to me is wrong. finally, if we can ever get out of the current conflict, expanded two-way cross-border direct events should play a role in improving china u.s. economic relations over the long term. now, there are people in the room who will remember, i can see some x officials. the attempt to negotiate between the u.s. and china at the end of the last presidency. in the us, and it failed the effort and the effort failed probably rightly because my understanding is the chinese negative list was unbounded lee wrong. and it could not be workable. nonetheless, studies from the peterson institute should repeatedly in general and with respect to china, u.s. is a

two-way direct investment. this is economic benefits in terms of transfer of expertise. this has direct job benefits in terms of creating new jobs in the areas of highest pay and est comparative advantage. as a political benefit as we saw from japan's investment in the u.s. trade difficulties of the 80s and early 90s. we're not going to turn around and do a bid tomorrow. bilateral investment treaty tomorrow. but the responsible parties on both sides should be realizing that is the goal we should be moving towards. in the future. thank you very much. [applause] >> thank you, very much.

my colleague now -- please. [applause] >> good morning everyone. my presentation consists of the, some of the takeaways from the articles that will contribute to joint report. i don't try to be exhaustive but the presentation focus on the causes of the trade friction and possible impact on the two major economies. my colleague, professor lou highlighted a few factors that he sees behind the chinese, the trade frictions. one is the relative change. the change in the power of the

two economies. the chinese economy grew in the past half-century, accelerated growth from almost six to almost nine or 10 percent of more recent years. also, during the same time the u.s. economic growth slowed around two percent in the past 20 years on average. as a result, china's contribution to global growth, to surpass the u.s. by a very wide margin. so that is number one. there are a few other. one is the difference in the economic system between the u.s. and china. the chinese economy is still

quite relying on the states. at least it is viewed by many u.s. economists or politicians. and the third is also adam mentioned that the 2025 program, it sort of makes it an easy for politicians in the u.s.. but personally, i think that this made in china 2025 initiative is just a very vague objective china tries to achieve but i do not think there are, we should read too much into it. it is a document issued by, mainly prepared by one single ministry. of course, you can also see the state council sort of endorsed this initiative.

but it is -- anyway, of course, the trade friction between the two countries, professor lou said should be understood, in a broader context period. for example to make china a strategic competitor. several documents, u.s. documents, issuing documents also made the same definition for the china. this is in contrast to the previous definition of china. to the us. of course, the u.s. has his own issues. for example, the u.s. is going to have a midterm election coming soon. so politicians need to do something in order to win the election.

within the administration, their personnel changes. so you know that better than i do. it turns out that the hardliners are now taking more important positions when they pro-trade officials either the left voluntarily or involuntarily. now let me focus on the factors. and that trade imbalance. if you look at the overall imbalance of payment china's surplus stood at 1.4 percent of the gdp from last year. however, on a bilateral basis, china's trade surplus against the u.s. account for 46 percent of the overall u.s. trade deficit. this is greater than the

largest trade partners involved. like mexico number two, malaysia number nine, but all of this combined account for 44 percent of u.s. trade deficit. so politicians will deftly pick up china. you need to reduce your deficit, your surplus. i think there are a number of factors behind the bilateral trade imbalances. and also, the u.s. overall trade imbalance. one is the role of the dollar. this shows that before 1971, the u.s. did not have much trade deficit. but after the dollar was -- from gold, the u.s. monitoring

policy was no longer constrained by the pack.and we end up seeing trade deficits in the subsequent years. and in some years, there are various -- those countries that are earned dollars through trade surplus, were very much willing to invest in the u.s. bond or stock market. so this is the recycling of the dollar made the u.s. more able to have trade deficits. the second factor is the so-called world factory status of the chinese economy. particularly since china joined in 2001. they import a lot of intermediate goods and raw materials from other countries. but produces the final consumer goods to be exported to the us. and the eu. as a result, china has a lot of

trade deficits with respect to those countries like korea, australia, for example. so, this is the reason why china has a huge bilateral trade surplus against the u.s. peer but overall it is pretty much balanced. a factor is, china has huge savings rate. savings rate, is now still around 25 to 30 percent. that is probably the highest in the world. if you add corporate and government savings, it is not 44 percent. compared to the high teens in the u.s. and the uk. that is probably why u.s. and uk always had trade deficits.

china and countries like singapore and japan, hong kong seemed to enjoy huge trade surplus. by looking forward, i do think china savings rate will go down. alongside population aging. it is just a matter of time. china will probably end up in a trade deficit. sectoral wise, china! a lot of consumer goods to the us. cell phone, furniture, clothing, toys. the bad news now is the u.s. is still planning to impose 25 percent tariff on 500 million -- chinese exports. the good news is, these products probably do not include much of the major exports. china's exports to the us.

the impact on employment because these sectors are mainly labor-intensive. the impact on employment as of now looks like still manageable. but, if you're interested in a major investment in the possible tariff on china, here are provided some estimates. that is 24 percent tariff on 50 billion u.s. dollars chinese goods. do not seem to have a negative impact estimated at .1 percent of gdp. but trade friction escalates, so that the china export growth decelerates sharply. say by us$100 billion. then it could have a much more

significant impact on the chinese economy. .8 percentage points were estimated so china could still grow 5 to 6 percent. but i tend to be looking forward to a better scenario. in which both countries were not impose sanctions against each other and china would further expand this domestic by importing more products from the us. at the same time by opening up its services sector to the us. in this scenario, it impacts are very small. the question is, does china have capacity to increase imports from the u.s.? my answer is, yes. if you look at the consumption

in china gdp, it is probably the lowest amount in the major economies around the world. at only 39 percent household consumption in relation to gdp. this is much lower than the 69 percent in the u.s. even compared to developing countries like india. they have 59 percent. also china imports of consumer goods in relation to gdp is way below major economies. no matter you compare it with developed countries or developing countries.that is a second -- yes? three minutes, okay. i think i need to accelerate. china does have a huge room to increase imports from the us. particularly consumer goods. agricultural products and energy products, actually a lot

of chinese tourists when they visit the u.s. or they visit europe or hong kong, they buy a lot of goods. chinese spend like 25 percent of their budget on shopping. compared to 15 percent by other countries tourists. given that, i have only two minutes. i think i need to talk a bit about this. i think china imports of technology products and china's receipt of foreign direct investments, are the two important drivers behind the chinese economy. i think it shows that these two factors have significant contributions to china's economic growth. and they are, by the way, statistically very significant. there are some other drivers or you know, negative contributors to china's economic growth.

i don't want to talk too much about that but i think imports of technology products and -- are the most important factors. behind china's growth. china also imports a lot of products from the u.s. peer but they may focus, concentrate in machinery, automobile, aircraft and soybeans. it is not surprising when china announces retaliatory policies. it tends to have focus on these sectors. but i think from a macro economic perspective, if the trade waistcoats, china's retaliatory policy could impact u.s. inflation. actually inflation the u.s. is already on the rise due to many domestic factors. but for the increase in

inflation could prompt them to increase rates more than what was envisioned. it may not be helpful for the chinese for the u.s. economy. this particularly for the stock market. thank you very much. ...

what i'm going to try to do in this piece is talk about state owned enterprises. this is one of the areas of particular conflict at the moment between china and the united states, but it's one of many. i think it provides a useful lens for helping to walk us through why the current set of policy tools with the united states in particular hasn't worked. the issue isn't going away. and yet why new longer-term and more operative and systemic approaches are needed. basically i will do for things. i will focus on why and when and when not, why the current approach doesn't work and a two-pronged approach to fix it. what we can do today and how to adapt the wto for the

future. the first is just to make the point that china state owned enterprises are going away. the first decade after china's entry was obsoleted time of tremendous growth. there was continued reform of the chinese economy. my colleague has documented extensively how the role of the private sector grew enormously as a share of industrial output, exports, all of the major contributors during that time, nevertheless the role of the state of the chinese economy didn't entirely go away. it has transformed a bit. we've also seen a bit of a resurgence of the state and economic activity. this is clear that is just a feature we have to address. we have to think through how

and why it matters for trading partners like the u.s. and think about adapting the wto to recognize that. why might it matter from economist perspective? i listed four points why i think it might matter or for certain industries or sectors or relationships to keep an eye on. when there are global shocks, think of a negative demand shock in the world that should affect all suppliers around the world equally. if the chinese system is an accommodative of that because they refuse to lay off workers or allow for bankruptcies, then if adjustment is costly and there's some evidence during the past ten years that adjustment has been

particularly costly, then that would simply mean china isn't bearing its fair share of the cost and this is a reason why we need to think about this to allow our systems to coexist. there could be instances like boeing and airbus where there are high fixed costs with very few firms allowing for state owned enterprises receiving subsidies to be strategic behavior or prophet shifting behavior that might give unfair advantage but we might also be concerned about the global concentration of activity especially examples of when china has market power

, when it is a global supplier , it will exert market power. we might be concerned about that as well if too much activity is being concentrated in a market where firms are innovative because their state run. the wto needs to be accommodative. what i want walk-through is how the u.s. existing approach has not worked. i think this is important because folks are too dismissiv dismissive. i will use the example of steel but it also holds for aluminum, solar panels and more. the steel industry in the u.s. has received production from imports for decades under a variety of tools.

this is data through 2017 but before the national security tariffs that were just imposed in march. you can see the u.s. imports from china and the rest of the world here. it's covered by those types of import restrictions. by 2009 the imports had already been stopped because of those policies by the end of 2017, 95%. these tools have stopped the imports from china from coming directly into united states market but they don't address the underlying issue. instead, what you see happen since 2015 you start to see the u.s. expanding the use of these trade restrictions beyond china to other trading partners, europe, brazil.

it has properties that are somewhat commoditized. stopping the imports from coming into the united states does not stop the exports from going to third markets. china's export go into third market cement squeezes other producers on those markets and into the very attractive u.s. market because it has higher prices because of import restrictions already in place. they don't tackle the underlying problem. the trade restrictions start to expand on other countries as well through antidumping or what we've seen recently which is the use of a national security tariffs on steel we see the same story for aluminum were under different laws and solar panels as we see in the global safeguard case. so, what happened is china's growth is now exporting a greater share of its production and certainly in the case of steel, but the

u.s. tariff legacy creates incentives for china to export more to third markets and move quicker into downstream products in the u.s. application of import tariffs on the country exacerbates the problem with countries that haven't contributed to overcapacity concerns. now the u.s. is targeting its economic ally. economic allies in the sense of being more market oriented, having the same sort of concerns the united states does with state owned enterprises and other market activity. same story with aluminum. the main point here is that the policy approach to date hasn't worked. in doubling down on it, whether through antidumping, additional enforcement, we can talk about things the administration is doing on transshipment, utilizing a particular market situation, none of these things are going to work to get at the underlying issue. okay. so, these enterprises aren't going away. we have to accept them as

reality. we have to think about accommodating the wto system to address them. how do we do it? here's my new approach. you will see it will look a lot like other approaches that have been used and would be beneficial to heading down this path. the second is to use the existing settlement features systems to take on the subsidy programs that exist where there are rules in place to do so. i will argue this will both be useful for a lot of reasons,

one is that it might shed light, the wto dispute in particular might shed light or will shed light on where current roles are in sufficient. that will incentivize the creation of new roles. it will also incentivize china's participation in this process and to the extent that we have been concerned about the round of negotiations, we could get this to change. where should we start. were thinking about new rules for state owned enterprises. if we look around at a lot of new initiatives on the free trade agreements that have been proposed in recent years the united states the ttp agreement and has a state enterprise chapter. they were all proposals. the eu agreement, the oecd program it has a work program and they had been tasked already with developing this overcapacity form to deal with steel. at the g7 readout for the communiqués of the g6 that

came out over the weekend there is acknowledgment of this issue also applying to aluminum and other high-tech sectors so there is seemingly an engagement by the other advanced economies to get on this issue or to address this issue. finally, the european commission has been dealing with the concerns raised by its differing member states levels of enterprise for decades. there is lots of institutional materials and experiences that we can draw on. if you don't remember the agreement this is the sod chapter that's there. we can go back and read it and learn from it. obviously transparency, this is one of the big concerns with having government officials, communist officials sitting on the board of companies. indirectly promoting certain nonmarket behavior.

we need to understand if there's going to be in us so we, if it has nonmarket motivations you need to know what those are. it may be perfectly legitimate. it may be that they're worried about employment concerns or they're worried about servicing underserved populations that they might have nonmarket non- profit motives but you have to know what those are. these agreements have principles to guide behavior on nondiscriminatory treatment but finally this thing will need to be enforceable. will need to stick it into trade agreements which will mean the rules get abided by. now, could this happen if the wto immediately? probably not. the trump administration has triggered a bit of a crisis in geneva along a number of different dimensions. they're holding up appellate body judges. the rhetoric in terms of the body and jurisprudence has

delegitimized a number of rulings and threaten the independence of the organizatio organization, and obviously the recent behavior, the trade policy decisions that have been taken so far on steel and aluminum, the potential national security tariffs on automobiles, the section 301 investigation, all these things are working at the outer limits of the rules. trading partners have filed dispute, but equally concerning his trading partners are themselves engaging in retaliation or rebalancing, especially in the context of the steel and aluminum tariffs that are, that is in in itself pushing at the boundaries of acceptable behavior. it's not as if the wto separate from these issues isn't already under stress. that being said, let's put it under more stress. how are we going to do so? i would propose, in addition

to this wto set of negotiations for rules on state owned enterprises, and again here i don't necessarily have in mind a single undertaking approach. i think you could do this as a plural lateral. a group of like-minded countries, the united states, europe, japan, canada, market oriented economy, but negotiating this with china would be important. at the same time, filing a set of wto disputes against china on this issue, state owned enterprises, subsidies, in conjunction with another critical issue that adam identified which is intellectual property or force technology transfer, all of these should be put on the table. agree it would put stress on the w tao system that it's already under stress. even where we don't think there are clear rules on the

wto, i would argue there is a clause in there were your allowed to bring non- violation complaints under article 23. again, even this process would be useful, ao from china's perspective. it not only puts the spotlight on the concerns that the united states, europe, other countries have with what's going on in china, but it would help china understand specifically what those concerns are. when negotiations take place for the rules, they better understand what the perspective is of the other side. then, two things, disputes, negotiations with a plural lateral agreement, what with that process look like, critical mass of country, not the entire membership, but i would argue includes china early on. what's the strategy there? i think china would be incentivized to participate

because it has this potential of the wto dispute action sort of out there hanging over its head. if you're not at the table, negotiating in good faith and engaging propert cooperatively in this, the rest of the membership through this collective dispute could get authorized as retaliation. have we seen examples, i would argue yes, we seen these back in the 1970s. again, last slide we need both short and long run approaches to deal with these concerns. i would argue a lot of the work, a lot of the groundwork has certainly already been done and is out there for us to make legitimate assessments of this to see if these are the right approaches. we can look at these in great detail and assess whether or not they will do the job, but again i think this needs to be part of a longer-term grand bargain between the u.s. and the western china on all of these issues. thank you.

[applause] >> thank you very much. we have a q&a setting. any questions? we have about 30 minutes. >> fred hear from the institute. thank you all very much for coming. a question to professor haas. in your slide that talks about the economic impact of a trade war, you suggested china's trade surplus would drop by

$100 billion and cost china 0.8% of gdp. i was puzzled by that. my understanding is that china plans to retaliate dollar for dollar against u.s. restrictions. if that was the case, i don't see why there would be any change in the trade balance, but you seem to be referring to a paper from one of your colleagues and i would like you to explain that. >> okay. >> first, that $100 billion is a very ad hoc assumption. we really don't know if the situation worsens to what extent it will worsen. so it's an arbitrary figure.

but, one dollar of retaliation for u.s. trade policy in china is not possible because the u.s. exports to china is much smaller than china's exports to the u.s. u.s. export last year was about 130 billion-dollar with china exports at $500 billion to the u.s. so dollar for dollar only to a limit. we are thinking about an arbitrarily bad situation. president trump once mentioned china should reduce surplus by $100 billion. that's probably a number that we use as a reference in this hypothetical numerical

analysis. >> the trade war would have to go well beyond. >> of course. yes. >> just for the record, i don't want to get into a back-and-forth but the numbers he gave on inflation coming out of the trade war between the u.s. and china, for the u.s., at least in my opinion would be vast exaggerations. just as the scale is different on that issue, i think the idea there would be significant inflation in the u.s. from this is not something i would rely on. >> thank you. >> other questions? >> okay. >> my name is joe i am with

new rules for global finance, a nonprofit organization in the u.s. thank you. this is very enlightening. i did want to ask adam, in your ten points of summary, there was a gap that i hoped you would discuss at some point which was what about the unintended consequence of increased trade or changing trade patterns and what it does to labor policies in the united states and who is put out of work and who benefits as well as i could say the distribution of wealth within the country. many of these side effects, we are now recognizing were not addressed previously and i'm wondering if your team had considered those red ink you. >> thank you. we of course consider those, but the continued linkage of job displacement and distressed community to trade

or to china as opposed to other developments in u.s. economy and society is mistaken. even if you take seriously the china shop paper, they talk about somewhere between one and 2 million people being displaced over a ten-year period. as you well know, millions of people are displaced every month in this economy. i don't know why trade people, people displaced by trader any different or any more or less deserving than other working people in the u.s. the other point remains that the amount of dislocation and suffering in the u.s., as you well know and you've spoken about in the past, for any given shock to the economy remains infinitely worse in the u.s. than any european economy or australia, canada, new zealand, arguably even japan and this goes directly to the perversions of u.s.

politics, the lack of a welfare state, the lack of union representation. all of these are failures of the u.s. society and the u.s. government. they make every economic adjustment in the u.s. worse than a have to be in human terms. there is nothing specific to china or trade about that. the same is true when the trump administration pursues anti- labor policies that further reduce labor bargaining power, labor ability to have minimum wage and ability to organize. all of those are terrible things in my personal view. they will cause horrible harm to people in the society. far greater than any trade deal. there is always the claim that being globalized makes it impossible to respond to these things, but that of course is simply based on the facts and the every other g12 economy does more trade, is more open than the u.s., and we know

that every other g20 economy is at least three quarters as rich as the u.s. and has a far wider welfare state. so yes, we are feeling are working people, it has nothing to do a trade or china. the fault here lies not in the stars but in ourselves. >> okay. >> thank you. my question is for professor. what is your response to the presentation on sle and negotiating space and how much negotiating space juicy in terms of subsidies in this regard? >> the last part of your question? >> how much negotiating space do you see in sle with rules

and board members control. >> i don't have much research in this area, but i think sle reform in china is taking place at its own pace. : : : which i did not talk too much about is the, when the size of an soe can grow so big you can have a negative contribution to the economy. i think the chinese government has already determined to

pursue soe reforms. it was stated in the six years ago in the congress and reasons have been repeated a number of times. i think the direction is correct. but i just, we need to see the outcome i hope we don't have to wait too long before some encouraging outcomes are being seen. but when soe participates in international markets competition, certain rules, i do agree with that certain rules need to be modified. to have a level playing field for every participant. private companies and soe 's

are different in nature. i think china over time, needs to develop its private sector so that the private sector could play a dominating role in the economy. that is what many people anticipated many years ago when china accessed the wto. i think china should move to that direction and a delay that china will go in that direction. thank you. >> okay, please. >> thank you. the agency of hong kong, tomorrow, the summit will be held with donald trump and kim, we also see the upcoming june 16 as a deadline of u.s. initiating the tariffs on

chinese goods. so how do you particularly approach the trump administration in terms of the trade issue if the summit goes well or did not go well? >> is a great question. i do not predict with the trump administration. i think it is a fools errand. but i do think we need to recognize that regardless of what happens with the summit, the trump administration shows it will impose tariffs. when extended the deal on aluminum tariffs on the national security law, especially on canada, mexico, europe, two weeks ago, american allies. especially in the case of canada. these are part of north

american supply chains that will really hurt. this shows the trumpet ministration is serious about imposing tariffs. and we need to understand they could very well impose this on june 15. >> just a small additional point. people, at times, have talked about whether or not the u.s. trump administration feels it needs china one way or the other and north korea. i think they will rationalize that either way. if they have a success, what they deem a success at the summit, they will say look, we do that without china. we get all the credit. and if they have a failure, they will say look, it must have been china's fault. so i do not, i am in line with chad. my results is -- i don't think the result will have --

>> thank you. this is a question for -- >> can you identify yourself? >> i am from the university of pennsylvania. this is a question for the doctor.when you openopen you sa there needs to be addressed between the wto negotiations. following up on what was said i felt like to emphasize some of the advantages that soe could give. but soe itself come with a large cost. and the soe has been showed to be efficiency and investments and so on. i'm a little bit surprised that you put so much emphasis on dealing with soe as an issue in china and u.s. in negotiations.

i just want to hear some of your additional thoughts. thank you. >> again, i would go back to the idea that in areas where china's soe 's are exceptionally large, the inefficient decisions impact global markets. that matters to the united states. they are able to impose costs on other countries. if we think adjustment costs are important, for example, it is really the dislocation of resources, labor firms going bankrupt in the nicest, is it costless for them to move to different sectors of the economy? then china, by not allowing the same costs in his own country is imposing extra cost on others. it is essentially what i think the argument is. but you have to buy into this argument that there are adjustment costs out there. and the other issues essentially on concentration.

it may not be a great example but if we talk about soe 's and commercial aircraft in high-tech industries are more concentrated. that would be a concern as well. i do think it needs to be thought about. not all soe 's are what you need to worry about in the united states but you can use economic criteria to justify where and when need to be worry about those and help those write down rules that you would need to have these different systems of economy being able to get along. >> the last question. >> thank you. if i can quickly, always china trade disputes. the information presented before us including those negotiating documents in beijing and also the development -- and china's offer to buy u.s. products. do you think that of the two sets able to reach a trade deal

before the deadline of friday? and second question, do you think that u.s. congress has a few methods to actually stop the administration moving forward on the deal which was announced by the secretary? thank you. >> i think what you have to remember with the trumpet mistress and again, you cannot predict. but what you have to recognize about the administration is, it likes to go to these laws and give executive authority. to change things. for national security law, section 301 law, these are areas where it does not have to go to congress. it does not have to go through an investigation process with our decision-makers and judges at the international trade commission to tell them they can or cannot impose tariffs.

even if you come to greenwich on the law still exists to provide the president with the authority to change his mind at any moment in time. and that is not going to go away unless congress takes the power away from him.and so they have been some discussions about that. it has not materialized yet. we will have to wait and see. but under each of these laws, section 301 potentially national security case on automobiles. the president is doing this under authority that gives him tremendous amount of discretion. once you've open up pandora's box is hard to negotiate with a partner because a partner knows even if you promise me today not to impose tariffs, you may change your mind and do it tomorrow. the law still give you the authority to do so. >> okay. thank you very much. >> about the zte -- >> will not comment on any specific company. >> okay.

thank you very much. -- thank you. [applause] >> for our friends online and around the world, we will be back in 15 minutes. for our friends and house, there is free lunch. please go ahead. >> tonight the house energy and commerce subcommittee hearing on how prepared the u.s. is to respond to a biological attack pandemic and infectious disease outbreaks. watch at 8 pm eastern on c-span2. >> this weekend, c-span city store takes you to new orleans louisiana. on its tri-centennial year. with the help of our medications cable partners, we

explore the literary theme and history of the city. today at noon eastern on booktv, here about the life and influence of tennessee williams. best known for his plays the glass menagerie, cat on a hot tin roof and a streetcar named desire. then author cody roberts with his book, voodoo and power. on sunday at 2 pm eastern, american history tv, explore the exhibit new orleans, the founding era. >> new orleans is celebrating its tri-centennial this year 2018. with 300 years old. historic new orleans collection has decided that for the tri-centennial expedition we wanted to look back at the cities earliest years and what it was like when the city first developed. >> then, a visit to two jax. one of the cities oldest restaurants. >> food here takes a much larger piece than it does

anywhere else. we live to eat in new orleans. >> watch c-span city tour today at noon eastern on c-span2 booktv and sunday at tpm on american history t.v. on c-span3. working with our cable affiliates as we explore america. >> while is fairly certain the house will take up immigration bills in the coming week, but the debate will look like is less certain. joining us with rafael burnell with the hill latino covering immigration policy? were some key details to know about the two immigration bills the house is likely to take up? >> your these two bills. one of them is a more conservative bill and one is a deal between conservatives and moderates in the republican congress. they both conform to the president four pillars approach. and the more conservative bill is sort of the four pillars plus.