>> what we seek to do is to tell the story through the lives of people, ordinary people, men and women, volunteers as well as those who served in the armed forces from all sides. >> for our complete american history tv schedule go to , c-span.org. >> examining the u.s.-china economic relationship and how future changes in trade policy could affect the relationship. this event was hosted by the colorado springs world affairs forum. it is about an hour and 20 minutes. >> i met our speaker a few months ago at the world affairs council and putting aside the comments we heard from senator george mitchell, i thought he was one of the highlights of the conference. i am happy to have you here today. for two decades, jeremy haft has

been building companies on the front lines in china. he has overseen export programs between american and chinese enterprises in a wide variety of industries and agriculture, spanning shipbuilding and refineries to auto parts, medical supplies, people sarabande cow hi -- maple syrup and cow hides. jeremy's current startup is a public-private partnership funded by a grant from the empire state development corporation to build export markets in china for new york agriculture. prior to his china work, jeremy was a founder of one of the first internet ad agencies in new york city, which was ranked as the country's top five in 1997. he is an adjunct professor and he is the author of all the tea in china, a primer on how to do business in china, and the recent, "unmade in china." he has conducted many briefings

about chinese trade and u.s. competitiveness to members of congress, senior military officers and the business community. his analysis has been featured in the wall street journal, the financial times, u.s. news & world report, npr, bbc, and other cable and other media news outlets. with that said, please help me to welcome jeremy haft. [applause] jeremy thank you very much. : thank you all for coming today. thank you for the world affairs council of colorado springs for hosting us. i confess that i was the one who voted for no podium. i tend to get lost. it's the darndest thing. when i started doing business in china 20 years ago i was 6'4". , part of the thing i want to talk to about, the view on the ground in china is very different from what we hear in our politics.

the topic today is timely. we have president xi arriving to trump meet with president to talk about a host of pressing issues. and so doing, i want to bring your attention to a study that was referred to in a book. it is called "unspun." it is about a science experiment done during the kerry-bush election where they took a focus group of partisan democrats and

partisan republicans and they wired their crania up to these electrical wires where they are going to measure waves. in front of these people they flashed very political statements, so one statement might say "guns should be allowed in schools." democrats, no. republicans, yes. and they watched to see what activity was being activated in the brain by these statements. they watched the centers of the brain to see what activity was being activated by these political statements. one amazing outcome of the study -- this partisans had was an amazing outcome. in second outcome was looking at the centers of the brain that led up, the centers of the brain that lit up were not the centers of reason. they were the centers of emotion. which makes sense.

as we talk about an emotional a front topic, i implore you to read through your emotions. what i would like to try to do is look at policies from the point of view of outcomes. if a policy is intended to protect jobs, no matter how that policy may feel to us, the way we evaluate that policy is working is whether that protects jobs. that is where i want to get to but i want to start farther back a little bit. want to start with a quiz which my kids at georgetown always hate. who can remember mitt romney's campaign slogan? anyone remember? the slogan was believe in america.

semantically similar to make america great again. sameg to get at the feeling that the sun has set on the american empire. -- notnext generation doing as well as previous generations and this is something that gets reflected back to us in the polls. when we were moving into the obama and romney election, there was $80 million of exercising spent on negative china ads focused on trade in cleveland alone. that would be the site of the republican national convention. contentiousen a issue but i would argue that in this election something more deep resonated in the electorate. if you look at the primaries,

over 20 million voters chose to ignore their party favorites and vote for the upstarts. over 20 million went for trump then went for sanders. and a big -- and a big reason why i think is trade. the two of them were very much aligned on trade. in the thinking goes like this. the once great middle-class of the u.s. has been hollowed out by globalization and trade. and the way to bring american jobs back from overseas is to start enforcing trade rules and raising tariffs. we hope that as we heard that from sanders and donald trump. we also heard from both of those candidates the desire to exit the transpacific partnership. we are out in the electorate.

ormatter what you voted for who, some of these arguments hit home. i do not care if prices at walmart go up a little bit. these guys are stealing from america and are taking american jobs than darn right we should retaliate. , very look at the polling interesting polls from the pew poll. there was an attitude survey that look that what is the world's number one economic superpower. they asked for response from all over the world. a majority of americans said china, then abort -- the world's number one economic superpower. the majority of the british said china. interesting,? right? the majority of respondents from 26 countries said china. the only country that did not

say china was china. there is a reason for this. but we can understand why we feel this existential angst about china, because all the economists echoed this point of view. anybody that reads the newspaper sees china, the world's largest economy. now, we have been told it is -- it is the world's largest economy. anybody reading vanity fair in the summer of 2015, there was an article by joseph stiglitz, called "the chinese century," where he said china just surpassed the united states as economy. how could we not feel existential angst? how could you whether you voted for trump are not somehow feel a yearning that the best days of america are behind us and we should somehow try to make ourselves great again question mark china is the thematic

ground to this desire. doeso we get this, where joseph stiglitz say china is the world's number one economy? it is based on a number, all the stuff is based on numbers and this is why it is difficult to get this across in sound lights and bumper stickers but it is important. economies are sized and compared today using a number called gross to mastic product. developed in a time of fdr. developed astric they were trying to get their arms around the economic recovery, to figure out how much output this country was producing. over the years there are many metrics and ways to calculate gdp. the one is by adding of spending from the economy, consumption. how much did consumers spend, how much did the government spent, how much did businesses

invest in access. we added up spending and we add the value of exports, what we sell other countries and we subtract the value of imports. we will get back to that in a second. it -- in terms of the notion of spending as the metric to gauge the national economy this is a metric that may have been applicable in the 1930's but today is absurd and i will tell you why. if we were trained to compare our economic household size among for example, would we tell you how much we spent last year and compare that? i have two girls and one of them wasbraces and -- there summer camp. you spent 400 so you are the larger household economically. that is absurd. we could -- we would compare balance sheets.

we compare our assets and liabilities, how much do we own and minas how much do we owe. is net worth. we compared the national wealth ,f the united states and china we see that the u.s. is $45 trillion wealthier than china. debt,ncludes our national the famous $20 trillion debt. china has a lot of debt, too. we subtract that from the balance sheet at all told, the u.s. is 45 train dollars wealthier than china and if you look at the household level, the gap is even more. the federal reserve and credit suisse measures how hold wealth. -- household wealth. the gap is growing, not shrinking -- shrinking. america is becoming wealthier while china is stagnating. this is a more relevant metric

economists --al economies than gdp which is looking at an arbitrary spending but we are taking the chinese gdp numbers which all chinese officials now is absurd. china's officials do not believe their own numbers. statisticsad of the bureau is on trial for corruption and part of the reason is chinese statistics are done at the local level. imagine if all 50 states in america each had their own statistical bureau. imagine if there was one party rule, and if you are in official you are promoted based on how much gdp growth you have. so each province overstates and why we know this, if you add up the numbers of the province in terms of gdp, they always at up to the national -- add up to more than a national number. it is a lot.

that number is growing. it is like a trillion dollars worth of delta between the national state and in the provinces. and the provinces are growing faster than the national poll as well, which is a statistical improbability. so the producers, you cannot sell more than 100% of anything, but in china you can. and when officials do not believe these numbers, they say it is man-made, it is for reference only. so the imf hates these numbers. but they for the put them with another metric called purchasing power parity, where you are trying to compare a unit of currency in beijing to a unit of currency in new york and that is how joseph stiglitz and the world bank arrived at the conclusion that china is larger than us. using made-up books, that are i just did -- adjusted further with you calculate and that does not reflect how economies really operate.

so taking it that that, if we look at national wealth, the u.s. his still far and away the world's number one economic superpower. no country is even close. if you win the debate about jobs and trade, what has been called the imbalance in trade, right? the fact we buy more from china than we sell to china, has been labeled a huge crime against the u.s. in fact, it was called rape several times during the election. we also heard several circuits with jeff sessions on the stump repeating that the trade imbalances kill jobs. again, we go to the numbers.

amazing thing is that the world has accelerated so fast that very few of the products around us were made by one country. if you have looked around, look around the room, this chandelier, those grills, these chairs, my shoes, etc. in the old days, when basic trade theory was espoused by a guy like david ricardo in the 1830's, it was the wine and clock paradigm -- cloth paradigm. we trade and we both benefit. these days, the wine was probably made by countries a, b, c, d, e. and the cost shared among countries. yet our numbers have not kept up with globalization. so astoundingly we still tout 100% of the value of the stuff we import from the last guy that shipped it to us. that is wine for cloth, but that is not how the world works today. let me give you an example. we have something like this.

um, in our pockets. now, because china was the last country to ship it to us, this is counted 100% as a chinese value import to america. yet, if you break down the actual value added of the parts that go into the thing, you see that china actually does only represent 10% of the value of it. 10%. for assembly and noncritical opponents -- components. so we are magnifying it, making it look much bigger. it is called gross trade balances. and what we need to get to is something call value added trade balances. when you look at those, you start to measure the value of the stuff that goes into products and when you do, you start to see what an important role, a vital role the u.s. has in the global supply chain.

and these numbers eliminate whole dynamics -- illuminate whole dynamics of regional trade and global trade. so we can see this in many things but if you look at -- many things. if you look at the steel that went into these, chances are the steel came from a recycling plant, probably in the rust belt. it could've been the plant donald trump was speaking in front of during his speech on trade. if you look at these shoes, chances are the hides came from america. so when you actually break it down, the value of imports, you see hidden inside the numbers is u.s. value. and the united states tends to add value at discrete parts of the value chain. at the beginning, with design and intellectual property.

to the creation of input, like raw materials and semi finished goods. and kind of like a smile, they are sucked into china where they are assembled and then re-escorted to us where we support it with the transportation and retail, etc. looking at the value added trade you measure all those jobs in the supply chain and you start to see that of every dollar that we import in mexican goods, it leaves -- means $.40 is going to u.s. firms in making the ingredients that went into the goods. and when you look at chinese imports you see that at least $.50 if not more goes to u.s. companies for the emperor that also, -- for the firms that also got these to market. so in fact, a large share of

that goes to supporting u.s. jobs. the whole basis of the trade and a valid argument, that trade kill jobs, is based on the notion that a dollar spent on imports is not a dollar spent on u.s. content and in fact there is a single think tank in d.c. that specializes in the scholarship around trade balances. and if you start to open your eyes and look around, you will see that no matter where you fall on the political spectrum, if you are a proponent of tariffs, chances are you will be using this think tank's research to support your conclusions that tariffs will protect jobs.

it is called the epi, and you will see it referred to numerous times in donald trump's speeches. and also if you look at the schumer graham bill over the years and every time a senator starts to grandstand about a level playing field, epi tends to be the think tank that is referred to. the reason why it is interesting is because the epi's numbers have been discredited by the bureau of labor statistics. they said, the models whenever into -- and tended to be used this way. and it assumes for every dollar spent on imported goods is a dollar not spent on u.s. value. so epi is based on gross trade and balances, not value added, therefore it gives a false picture of the relation between trade balances and jobs. and it gets us into trouble with bad policy decisions. so if you are looking at gross trade numbers, you say, we are getting barraged by solar panels. they raised tariffs on imported

solar panels. if we were looking at the gross trade numbers between china and the u.s. and we see that we are getting creamed by the solar panels, but if we take a step back and we look at the value added content of the panels, you realize there is a lot of u.s. content inside. america is a net exporter to china in solar. not in the panels. but if we go upstream, america does the design and engineering. we also produce and export the raw materials that goes into the panel, it is made here. made in washington state. and the capital equipment that the chinese used to make the solar panels is made here. we ship the raw materials to china, the capital equipment to china, and then the panels are fabricated and sent here.

when we raise tariffs on the solar panels you decrease the demand for the solar panels, they become more expensive, and you decrease demand for the upstream american value. so, less orders for raw materials this year, for capital equipment, and that is why the solar panel tariffs were a net job loss for the solar industry. but this is not unique to solar. every industry hires -- industry, steel -- it kills at least three american jobs in other parts of the supply chain. it is no longer wine for cloth. we participate in many parts of the global supply chain and by directing tariff on one part you inadvertently kill a lot of other jobs. now why is it relevant for

today? we are talking about tariffs, we are talking about a border adjustment tax. that would essentially be a tax on imports at the border. but not on exports. so, we hear this is great for exports. and tax them as they should be. the problem goes back to the solar panel case. look at cars, the auto industry. the typical car crosses the border about 6-7 times during manufacturing. and a typical car that is imported from mexico or canada, usually canada, has at least 60% auto parts in it. 60% of the content is u.s. made. think about it, if you raise prices on autos by using the border adjustment tax, you will be depressing the demand for the

auto parts that go into the cars from the u.s. companies. those firms are mostly in ohio, michigan, pennsylvania. the rust belt. so we need to think about these policies less in terms of, does it feel good? are we getting back at quote, unquote, bad trading partners? or are we doing what we say we are doing, protecting jobs? i would argue that these tariffs do the opposite of what they say they are going to do. the way we think about

.hina needs to be on the ground where you have in china is not so much a boom economy orra sta. so we have three aspects of the economy that make it stagnated, one is bad demographics. so you have decades of the one child policy that have tipped the balance of demographics and now china has more elderly than working age population, which happened in japan and which was one of the drivers of the lost decade. so folks that do business on the ground in china say that labor prices are going up in part of

it is because the labor pool is shrinking and the qualified labor pool is even smaller than that. the second aspect is china's manufacturing platform, it is very different from ours. we assume that it is a flat world and we can push a button and china can make anything we can, but cheaply. but that is not the case. tell that to the people who buy the san francisco bay bridge from the chinese. it is not so easy to run stuff through equipment. when you look at the actual value chain, the way that china makes things, you see that china has a highly primitive, highly risky production platform. so what might take us 3-4 players to make a product, will still take china 16-17 players to handle those goods and materials and each player adds the risk. this is why you have seen thousands of safety stories coming out of china. in the paper every day. in food, drugs, toys and tires,

every corner of the a comment print we see these things -- every corner of the economy. we see these things every day. risk is in their platform and for them to fix it may need 400 years of evolving, as we have had. you need role of law, and you need well-run companies in order to make things safely and reliably again and again and again. china money to renovate their entire political economy before it can fix the problems. the third issue for stagnation is an environment of catastrophe that they are going through today. you look at china and you think, big country and a lot of people. 20% of the worlds population. you can put their arable land on the state of texas and it is shaking every year to the tune of 1900 square miles, because of climate change, urbanization. so china lacks arable land, and

the land they have has been poisoned by acid rain and the dumping. the chinese government found at least 20% of all the grains in china have been contaminated but we know the number is much higher. they already have a major water catastrophe, most of the cities do not have a month -- do not have enough water. so, as we move into the next century, what will drive trade is not trade deals, but scarcity. scarcity. china will be driven by the needs of feeding and powering and caring for the population. and scarcity plays very well, not just in the united states, but also to colorado. the u.s. is a highly diversified

economy. the sweet spot of manufacturing is advanced manufacturing. if you look at places we participate in the global supply chain, it tends to be the value added, the innovative, the difficult. there are companies like caterpillar and john deere who have castings made in the u.s. that cannot be made anywhere else. and looking at nuclear power facilities, where do you suppose they are storing the nuclear >> china will be reddicken by of feeding, powering and caring for its population. plays very well not just in the united states competitively but also in competitively. diversifieda highly economy. the sweet spot of our manufacturing is advanced at facturing so if you look the places we participate in the global supply train it tends to added, advanced,

difficult. the there are companies like john caterpillar that say castings u.s. can't be made any other place in the world. here do you suppose china is sourcing its nuclear island. all the high end extremely into the arts that go come from the united states. jobs in the rustbelt. we e take a step back realize that the portrayal in america in of decline and the rustbelt as an failure of e globalization, it's just not looking closely enough. yes, we have lost jobs. rustbelt. but we've also created jobs. here are tens of thousands of

advanced manufacturing plants in the rustbelt that export. of that support thousands jobs in the rustbelt. we trust fisherman fisherman

and it for example, when we eat the m gordon fisherman's. chances are it was shipped to china to be deboned and sent back. that happens with 80% of our seafood that is processed. soon it will be taken. -- will be chiken. think about all the carbon miles generated from that transaction. um, ships are spilling -- they urn the dirtiest fuel. traveling thousands of miles, burning the most dirt of fuels, so we can save a few pennies. i believe that we need to price in the cost into the goods. that means a carbon tax. ah! burning the most dirty of fuels, so we can save a few pennies. i believe that we need to price in the cost into the goods. that that we trade. the only way we tpp was starting to get at some safety. countries like japan are

we let anybody export, just offenders. so china's scarcity true threats. but the good news make a ballpoint pen. look at preparation, power the colorado's industries are the last 10 years, the colorado look at the country as a hold districts overnighted percent of are selling goods and services with scarcity, i believe electronics capitalized last colorado to china over the past is in the number. firms that are some of them coming from beef, which is beginning to think about the next century, agree with him. we do. we are software of a great nation, the and the challenge will be to see how they impact politics and the

look it up. there is a fanfare, they just figured out how to make the nub of a pen. as they struggle to feed their preparation, power the population, they wanted what america makes in terms of goods and services and agriculture, but specifically colorado. colorado's industries are well-positioned to support jobs through trading with china both through exports and down investments. and if you look at the last 10 years, the colorado exports have increased to china, growing about 30% over the last 10 years. it is not bad if you

look at the country as a whole of, america has more than doubled exports to china over the last 10 years. and if you look at the level of congressional districts over 90% have doubled exports to across the country, we are selling goods and services to china hand over fist. the reason is because china needs what we make. as china deals with scarcity, i believe colorado is ideally positioned, not just in terms of agriculture and advanced manufacturing, right now it is electronics. electronics capitalized last year. increasingly, they are selling services to china. goods increased 30%, services

increased almost 300% from colorado to china over the past 10 years. so part of that is tourism. when the chinese are coming to ski, that is in the number. firms that are helping china with infrastructure building, with cleaning up the environment, some of them coming from colorado springs. so if anything i feel like a colorado could be doing more of the same and as china opens their market for beef, which is beginning to happen, colorado is ideally positioned to be selling beef into the chinese market. in closing, think about the next century, yes there are problems all over the world, but when donald trump said that the u.s. is moving from a position of strength, i agree with him. we do. we are $45 trillion wealthier of a country and we are growing. we are light years ahead of china technologically. and we have the software of a great nation, the dna of a great nation. openness, the rule of law, these are the dynamic drivers of innovation. and the challenge will be to see

how policies that may fly in the face of these pillars of american openness and democracy, how they impact politics and the economy. it is an object lesson and we will see how it plays out. thank you for your attention today. [applause] >> ok, we will start with questions. anybody? >> can you, for the benefit of the audience, speak about ip theft and how it might add or detract from the chinese economy? jeremy: the question of ip theft is the one that we are reminded a lot about. cyber spying is in the news quite a lot these days and we heard about two kinds of chinese hacking. one is of personal data, and the office of personal management and government worker files that

were stolen. the other kind of ip theft is industrial. and that is the kind i want to address. underlying the issue is a lack of rule of law. there are plenty of laws in china, but enforcement is sketchy. china is evil being in the of rule of law.

evolving in the department of ip. most cases are chinese company's against chinese companies, so china knows that and they need to compete by bolstering ip. in the meantime, what do we do in america? here is my thinking. if you are, if you are thinking that china can make whatever we can make at the press of a button, look at chinese safety standards. look at the thousands of scandals over there and the hundreds over here. so a recent one was the san francisco bay bridge, where the football field long plates were sourced from a chinese enterprise and they were cracking. and rather than fixing the problem, california transportation authority decided to fire the inspectors and loosen regulations. avoid the bridge in an earthquake. it is not an outside case.

if you look at the high-speed rail industry, a perfect case study of china copying ip for the high-speed rail technology from hyundai and kawasaki. if you look at that infrastructure project, it has been an example of corruption and lack of safety. so, you know, the crashes you have had is because of systemic failures, failures happening up and down the system, not a single point. and what it shows is that just because you download data on how to make something, does not mean you can make it reliably, safely, again and again and again. you need more than just advanced equipment. you need a value chain that is transparent and will run, with good corporate governance and a foundation of rule of law. so while the ip issue is a problem, i tend to look at it with less breathlessness than colleagues, because i believe that while many secrets are being stolen, it needs to go through the chinese platform to be executed and therefore china cannot just

leapfrog over us. do we need to harden defenses? you bet. industrial, absolutely. government, especially. but industrial, absolutely. we could be doing more to harden defenses, but the feeling that china has already leapfrogged over the u.s. in terms of economy, based on the fifth of ip -- based on the theft of ip actually fuels a lot of animosity toward china. but i don't see it as the secret sauce for china to beat america in the next century. >> hi, i'm an instructor. it sounds like you are advocating for freer trade, provided that we incorporate the negative -- externalities, talking about

health and safety. how do you sell something like that in a global environment where populism is against free trade and the market you lead is against incorporating those negative externalities? jeremy: i think you have a rising tide of sentiment among both conservatives and liberals for reform and carbon tax, especially as we are evolving attacks, so james baker being one of the many people who are speaking out in favor of a carbon tax. we did just do paris accords, so it is in the realm of possibility to do multilateral agreements based on intangible externalities, like the environment. how likely it is in the current political environment, there was

an off mike conversation captured between donald trump and wilbur ross a couple weeks ago, which was reported on in politico trade, where wilbur ross said, look at the japanese on food, they do not accept anything. and you know what, if they are looking at japan as a model for not just food, the calculation of trade, because japan is trying to use value added trade accounting, then they will do well to look at that again. i find it encouraging. but in terms of kind of the broader landscape for trade deals, not so optimistic at the moment. nobody seems to have the appetite to stand up and say what is good about these things. and there was a question right here. >> thank you. i would like to

explore what your thoughts are on the purpose for protection, what i would define, by china toward north korea. and is that all the trade function? and the potential loss of trade and could you comment a little bit about that. what seems to be the strategy to reduce the volatile government by the u.s. and others -- but with china it seems, at least what i have been heard reported, is that china has a lot of workers that come from there and

and that means there are a lo9t of plants that are there. how do you reconcile this with china? jeremy: china with north korea are on the heels of, i should say the horns of a dilemma, although it could be after mar-a-lago, we will see. you have a country that is teetering on the brink of collapse and starvation, yet they are the buffer between china and a nuclear south korea

with u.s. troops. they are walking a tightrope. for example, the recent cut off in energy. they do not want to go too far, because if you topple that regime you wind up with a humanitarian disaster on the border. also, straight to your point, china is embedded with north korea in terms of trade. this is, this is china's dilemma that i do not feel much optimism that chit chat at palm beach will solve. we will see. i mean, ultimately it is up to the chinese president, how he wants to play his part. and we can certainly exert pressure in many ways. but ultimately this is china's neighbor and china is going to need to play a leadership role

in solving the problem. sort of punching china in the face on a world stage is probably not going to help when you need their help. yes, a follow-up? >> i find it hard to believe that humanitarian concerns are one of the major reasons why china has a feeling of concern for north korea. jeremy: the humanitarian reasons? yes. >> it is all a bluff. i'm doubtful. jeremy: i am doubtful as well. >> china holds significant amounts of u.s. government debt which will presumably have to be repaid at some point, how does that debt impact your view of a challenged china, and it kind of healthy america? jeremy: great question. we often hear about this as a national security issue. what if china, on any given day, fiddling decides to sell and dump the $1.2 trillion worth of treasury bills into the market? and we heard about this in the last election, the romney-obama election, sarah palin talking about how we were slaves to a foreign master. so we have heard about this for a bit in

politics. the interesting thing is that the nightmare scenario that we have been talking about actually happened this past year. so, we have been told if china dumps treasury bills, suddenly the dollar would collapse and interest rates would go through the roof. in fact, china sold billions of dollars worth of those bills last year. of the $3 trillion. and what happened? nothing. the reason is, our market is a $30 trillion market, it is the deepest bond market in the world, no country is even close to the size of the bond market. so when the pentagon did a study on whether the ownership of the bills proposed a risk to america, depending on china, it

did not. other countries would buy them. that is what happened. they sold the bills and there was not a ripple in the bond market. i do not see the ownership of the bills a threat or giving china any leverage whatsoever over our policies. and in fact, their buying of the bills during our currency manipulation helped to keep our interest rates low. when china start selling $800 billion worth of t-bills, the reason why they do it is to keep the currency from falling too fast. what you have is china has a closed currency. and there is a special administrator that guards the currency. and last year, they loosened up the outflows and inflows of currency and what do you know, a trillion dollars worth of capital flowed out of china,

most of it to the u.s. people would see it on the ground, this is a stagnating economy. but we hear from politics is that they are treating on their currency and they are actually doing the opposite, trying to sell the bills to keep the currency from falling too fast. in terms of negotiating posture of our administration, we hear them addressing a problem that is actually not a problem at the moment. china is not trying to keep the currency cheap, they are doing the opposite, trying to keep it from falling too fast. so the larger t-bills issue is one where, when the americans look at the market, we have $70 trillion worth of assets. although china may own about $100 billion of assets in the country it is still kind of a blip in terms of $70 trillion. so even though, that bill money is going out of debt and into assets like mergers and

acquisitions, and some of the money is coming here to colorado in investment, at the end of the day that investment is supporting jobs. now when it goes into areas that are sensitive like the internet backbone, there is a reason to push back on chinese investment. with most industries that are not sensitive, i welcome the jobs support it has been a positive for the economy. >> going back on trade, the original tpp, the agreement purposely excluded china. with the current administration pulling out of that, do you have a sense for china's capacity to fill the void? jeremy: that is a good question and one that policymakers are thinking about these days.

so, i would say, i believe that those that designed the tpp, and hillary clinton who later disavowed it was one of the credible architects, did so as a pivot to asia. this is not just economic, this was a pivot of hard power as well. so a considerable part of the tpp was designed as a security agreement, setting the rules of the road for the region without china. a especially on environment and labor, and to some degree health and safety. so by pulling out of the agreement i do feel we have shot ourselves in the foot in terms of trying to put together a solution for that region, which is, we see militarization in the south china sea, north korea, and we see a lot of nervous southeast asian nations.

part of the tpp was to say we have your back. when we step away from that, we leave more of a geopolitical vacuum. in terms of trade, i actually feel that the notion that china will sort of step in and become the global hedge and trade is overblown. the reason lies in the numbers. if you look at gross trade flows, china looks huge. but if you look at value added trade, you see that with trade for the last 25 years, the footprint in trade with asia has not changed at all, it has just moved into china. so essentially china is sucking

in flow from all over the world putting it together and sending it to the rest of the world. so in regards, the value added numbers, if you look at the actual supply chains you will see that most of the major supply chains that have gone through asia, and china, are actually owned by american companies. so china may be the last stop on the supply chains and it may make them appear larger in the statistics, but you will see that most of those supply chains are mostly u.s. and european owned and that is not going to change whether there is a tpp or not. so i do not believe that suddenly we are advocating the next century on trade, not at all. where i feel like we have really hurt ourselves is with security and geopolitics. >> ok. yes, thank you. i have a quick statement at the beginning

of my question, then the question. contrary to mr. trump, i favor multilateral trade deals as opposed to bilateral trade deals. my question is, multilateral trade particularly the tpp, gets criticized or there is a vulnerability when it comes to retraining workers that get displaced. can you comment on how we could come up with a more effective retraining effort so that if we do a better job of retraining people who lose their jobs, we would have the vulnerability. a way to attack those contracts and programs. the german country has an effective program. can you comment on how to retrain workers. jeremy: it is at the center of policy for the next century, especially when you think about automation, there are some scary ideas coming out of think tanks,

they think as much as 50% of american jobs could be eliminated by automation in the coming century. so this is a challenge to society beyond retraining from dislocation, training for the next century, what does that look like? i would say, i would say this. we have more than a dozen retraining programs right now. i think there are more than 14. including taa. [inaudible] jeremy: that is the issue. they are ineffective. they are stovepipes and silos, they do not work together. they are underfunded. we spend less per capita on worker retraining than any other advanced economy. so we are trying to throw a bunch of policies and budgets against the wall and nothing is sticking. we need to step back and we need to have a national policy that looks not just at dislocation from trade, but just worker

dislocation. capitalism is a disruptive system. when we look at the job numbers every month and it says we created 200,000 jobs this month and we think, that does not sound like much, those are net jobs, on top of --churns. america turns millions of jobs a month. four million jobs are lost and four million are created and on top of that is the net. we are still a highly dynamic, highly disruptive economy. think about all those jobs being lost on a month-to-month basis. most are not going overseas. they are lost for a variety of reasons. what happens to those workers? whether they lost their jobs to trade or not, what happens?

think about what our leaders have done, they have done a lousy job on this policy wise. we have seen the net effect of this where folks are angry and they say you need to listen to our needs. i do not have the answer for this, but i think the framework would be creating a national policy of where we want to be in the next 50 years, in terms of workforce. if we look at daily expenditures, the fed measures how much we spend every day, 80% of what we spend is on services. so training people for health care and the next generation services is important. guess how much we spend on made in china goods? 2.5%. but, we need to set a framework nationally for where we want to be and we really need to create state level marriages of capital, education and government. you see some states doing this. the state of alabama, for example, doing a good job in

marrying community and tech colleges with local capital and government grants. that is creating the labor pool that works for exports in alabama, and at the air base. at the state level, localities need to figure out how to best marry the private sector and investment with grants and loan guarantees, and also i think -- but without the national vision, you cannot just rely on states to put these together. you need a national vision and kind of a statewide implementation on how to fix that. >> next question. >> question about your business experience in china. i understand it may be a delicate one to answer. when you

do, when you have done business in china you have to comply with american law as well as chinese law, yet you are probably running into a fair amount of corruption in china. can you comment on how did you deal with that, and to what degree you found it a great this advantage to be an american doing business in china? jeremy: next question? [laughter] jeremy: i'm getting. thank you. i will say this, 20 years in business in china and not one bribe. not one bribe. now, um, i am not a big enough company to get to the point where i might need to start bribing. kumbaya complaint when they

reach a certain size -- companies complain when they reach a certain size in china is start to be a shakedown. we have seen these with the provincial governor who was involved in a money laundering operation and was arrested on charges and there was murder, that kind of racket has been run. so corruption is so endemic in china. to the point where you are a student graduating from school and you are bribing to get your diploma, you are waiting in the hospital and bribing a doctor. and it is in every aspect of chinese life. as an american firm, again, we did not fall to those practices and we have not bribed anyone and we have not found it too much to our disadvantage yet. for example, i am selling american agriculture at a higher price than local prices, because

my buyers perceive the quality to be better coming from the u.s. and for it to be safer. and for that reason, i -- a, i do not need to race to the bottom on price. b, i do not need to bribe my way through. what you do need to establish is relationships, because this is a relationships, because this is a culture that runs on relationships. it is not a country run on contracts. when you sign a contract, that is, when the negotiation begins, not ends. so beyond contracts it is about the relationship and over the years the folks that you build friendships with at the local level are the ones that will help you when you have a rainy day. yes, the silver bullet, the guys on the standing committee are important to know, but it is the local people, the local people, those officials are the ones that help you.

when you need it. if you invest the time and build a relationship. not one of those guys has ever shaken us down for a bribe, so it is possible to do business in such a culture of corruption and not fall afoul to those foreign practices. >> a little bit off the subject, but is a myth, maye it's a myth, that the chinese have superiority?

do you sense that at all? jeremy: innate sense of superiority? i have not sensed that. if anything i have seen something that we might recognize as an innate sense of warmth and hospitality, and hard-working values. now, at a national level, you know, there is a long memory. we came out of a century of humiliation, every time china opened up foreigners took advantage of them. and we have in recent memory, generationally, an unimaginably horrific turn in history in terms of the famines and the cultural revolution, where my business partner, her dad relocated to a camp and was

eating bark. so this is in the national memory. imagine if our parents or grandparents went through something like that nationally. so i do believe that china understandably has a deep sense of grievance from the world, and distrust of the world, which i think if you look at their contacts in history makes sense, but i do not see the sense of superiority. you know, the only country that said china was not the economic superpower was china. they have a real sense of their own fallibility. when the 2000-safety law was being revised in china, they went out on the street and spoke with folks. do you think these laws will make the food safer? and they got laughter. i think the chinese have a

pragmatic sense of their own position in the world. but it is undergirded by a sense of grievance, which i think is actually justified. >> i have an observation in question. -- and quite a bit i get what you say about value added, but as lawson products is made in china, the question is, i don't know how you say to joe sixpack who has a very basic job in automation that it is ok that i lost it to a robot, it is somebody else's fault. i will rush out and get retrained. what is the message to somebody like that who voted the way somebody like that voted this last time? >> if you look at the history of this country and you see with each animation, the disruption

it causes. we imagine that the buggy whip guys had a powerful political force. i do not wish to imply that we can tell people who lost their job that it was someone else's fault. at the local level, losing your job is devastating. we see now, social aspects tied in such as opioid addiction and mortality rates in white males. they are lower than they have been in a long time. firstly, you need to fix the system for training. then, what you tell those people in the context of vision for america and your state -- for example, and coal country, like in saudi arabia, look where oil is. oil is not $100 a barrel.

once it was, they were living large. now because oil is where it is, saudi is scrambling to fix its economy. how do you diversify west virginia? is that a project akin to the wpa? how much federal support needs to happen in coordination with local? the state needs to form its own syndication strategy. how do we train coal people to do other stuff? some of that stuff might not be manufacturing. i have met many people who are in those years of 50-60. they are out of a job, they need a job, they are not ready to retire.

they are not re-trainable. they are resistant to being retrained. especially if you look at automation. these are not easy pieces of equipment to man. it is not an easy fix. i do believe the diversity of america's economy can absorb folks. the agricultural sector is a booming sector. agriculture is a major export factor in this country. it will continue to be. if it is someone between 50 and 60 who need a paycheck to put food on the table and benefits, if that is milking a cow, i don't mean to seem heartless. i'm just trying to think of what is in the realm of the possible. we hear from think tanks all the time about retraining but what does that mean? we have been trying to do it for decades and we failed. i think we need to go back to the drawing board on what it means to be retraining in the near term.

getting people steady paychecks right now as opposed to long-term. to your point, what do you say to these people? what do you say to people in the rust belt devoted a certain way? in the old days, we had home at -- and shop. the two classes that i looked at, our civics and the global supply chain. where is stuff made? how does stuff get made? who makes it? what is america's role in the global supply chain? what is china's? what does it mean for local populations and local environments? that is a long-term project.

talking to people politically about this, i think you need to present the competitiveness of the american worker. if you look at ohio, look where they are clamoring loudest. those people are exporting the most. they are the most competitive in terms of advanced manufacturing. those are the states that have the most to lose. i think you need to point to where america is strong. i think defeatist rhetoric that depicts america in decline is defeatist and gets us into trouble with huge blocks of the population. they believe that america has truly seen its last days. i think it needs to start with the chief executive presenting a positive vision for america. good morning america and the city on the hill is something we would do well to your right now. there is a lot that is going on that is great going on with this country. we need to communicate that to

people who have lost their jobs to say that there is opportunity out there, it is what fdr did. there is hope. obama tried to instill that hope. toward the end of his term, not so much. there is a lot of hope out there. that has to enter into the political rhetoric as well. we need to hear the other side of it as well. >> any other questions? >> the cost of living is much higher in the united states than what you are talking about, is that correct? >> it depends on the country. lacks -- >> is that a problem that will get worse? >> yes, it is a problem if you happen to be one of the people that is doing the job and then is sent to mexico. the answer is yes. the problem is that we are a capitalist country. we run on competition. we run on dislocation, disruption and job loss. that is the engine of innovation, that is the engine

of how we grow. that shot may be lost to someone in mexico with lower wages and lower skill. another job in the u.s. was created to make the advanced auto parts that went into that car. if you look at the rust belt, it is a perfect example. we created all of these advanced manufacturing jobs. selling into automotive, aerospace, bio, pharmaceutical, it is all coming out of rust belt companies. the point is not to erect tariffs that stifle the innovation but to support the people who have lost their jobs. that is where we have fallen down as a country.

if we need to make a renewed contract with america -- i don't need to whitewash over our economic problems. the fact that our national wealth is $45 trillion more than china, that is nice to know that china is not ready to run over our local economy but if you are a family whose wages have not gone up in 20 years, who cares? we have had wage stagnation, growing disparity, the 1% owns more and more of the world. >> aren't we handicapped because the cost of living is so high? jeremy: i don't believe it does. if you look at the things we sell to china, we are not selling china shoes. we are selling china airplanes. that is with our own cost structure built in. we are selling china pork and soybeans. that is with our health

insurance rates in. the fact that we pay our workers more doesn't mean we are on a race to the bottom of quality of life and wages because of scarcity. china needs and we have supplied, more so than other countries. yes, we've destroyed some jobs, we've also created other well-paying manufacturing jobs. the point is to do a better job helping the people who have been

dislocated and not to hurt those who are making money. remember, trade is only a piece of our economy. most of our economy is so sufficient. trade is a piece of it. we are a large economy that consumes what we make. as we trade with china, maybe we will see trade work with china, do i think this could impact america negatively? could we lose jobs? definitely. do i think it will be armageddon? no, i don't. i think we need to fix those

economic inequalities that are not solved. trade is not to blame for those economic inequalities. i think it is our own policies that created these issues, not the chinese currency policies. >> in terms of gdp, economics, how do you factor in the walmarts and the kfc's and mcdonald's and haagen-dazs and all of those? how does that fit into it? >> interesting question, if you look at the engine of china's manufacturing economy, it is the manufacturing economy, it is the export factor. if you look at the composition of the ownership of the companies and the export factor, the majority of the company is in china's export factor. really, the engine of china's growth is a partnership with the united states.

yes, many companies -- i don't know -- in terms of gdp, they say that walmart imports as much product as if it were a small country. if that gives you any idea of the level of gdp of a walmart. gdp looks at spending. their trade flows are akin to a company in terms of how much the import from us. many companies have gone to china and stuck it out and done well. ey have bit the dust in c. they failed. ultimately, china has reached and its economy toward state ownership. recently, we have seen more privatization, now we are seeing more state coming back. the issue going forward is how do you negotiate with china on

trade -- if it abandons, it hurts itself. it is trying to keep these uncompetitive companies afloat essentially. these dinosaurs of the demand driven economy. what president trump needs to negotiate with president xi about is the tariffs. the level of subsidization that china industries go through. from cheap to free raw materials, cheap loans, debt and equity slots, on and on.

on and on. the answer is no, it is creating uncompetitive companies. when shell oil wanted to build an offshore rig in china, they inspected china's biggest, brightest, most modern shipyard. mostly because they lacked very basic logging and tackling. they lacked the ability to handle hazardous materials, to do quality control on their suppliers, to monitor for health and safety. these subsidies are creating uncompetitive and unsafe companies. china is looking for maximum employment to keep its country secure and keep the government in power. as long as people are employed, not taking to the streets, that is what they are looking for. to have president xi off of this, it is against his national interest. that is where the economic issues will arrive.

>> remember where you came from. hold on to the way so many of you reached out to mentor young persons through the cares about kids. hold on to the way you engage in this community. make sure to bring that can admit to whenever walk of life you choose. bravery, not perfection was the key to unlock every door to walk through since. it took me 33 years to figure out that brown girls can do white guy things too. >> you are here because of a lot of help. you understand that now is the time to help others. that is what this is all about. >> tonight at 8:00 eastern, 2017 commencement speeches. include arnold

schwarzenegger at the university of houston, joe biden at colby college in include arnold maine, scripps college in california, doug ducey at aeronautical university, javier gonzales, and missiod the michigan governor. saidducey i'd at 8:00 eastern ad c-span.org. afterwards, on examinest chris hayes how the criminal justice system is divided in the country in his book, the colony in the nation. he is interviewed by elizabeth hinton. >> it seems like ferguson and like an anchor in many ways in the book. --onder how your excoriates

experience illuminates how you grew up there? >> i think, if you grow up in the city, in the bronx, you have the conception of cities. in cities, there are racial frictions. bad neighborhoods, good neighborhoods. all kinds of loaded ways in which police committed borders under finlayson top of each other and create december river. that was tied deeply either to the bronx, to the new york's or cities. i lived in dcn that pertains. of 20,000unicipality people. anywhere, usa . between st. louis and the like anywhere.ks

it is just parking lots, strip malls, -- the idea that what i experienced like, the level of level ofion and the racial oppression and friction, the level of policing, the intensity of the humiliation -- anonymous. that blew my mind. 9 p.m. eastern on c-span2 k tv. >> next, a discussion about the g-7 summit in sicily that president trump is attending k this weekend. from washington journal, this is 30 minutes. beginning 9:30 a.m. history t.v.erican on c-span 3.