John Blomster: Welcome to 红桃视频. I'm John Blomster. And today we have a truly special guest here with us today. We are honored to be joined by Governor Gary Locke. Governor Locke is the 21st governor of the state of Washington, a position he held for two terms. And he went on to serve in the Obama administration where he filled two major roles, first serving as the United States Secretary of Commerce before becoming the 10th U.S. ambassador to China. Today Gary is a senior advisor and consultant at Seattle law firm Davis Wright Tremaine, where we are currently on location taping and he commands a deep understanding of the U.S.-China political and economic relationships that today are reshaping the world鈥檚 sociopolitical landscape. So, there's a lot we can talk about, but today we're going to focus on the U.S.-China trade conflict and what it means for the future of Washington state. So, Governor Locke, thank you very much for joining us here.
Gary Locke: My pleasure, John.
Blomster: So, generally speaking, what roles does the U.S. ambassador to China play in terms of foreign policy and trade relations in general?
Locke: Well, the U.S. ambassador and the U.S. embassy and all of our staff have a variety of different roles. First of all, representing the views of the president and the U.S. government, to the Chinese leaders. Also, we're there to advocate on behalf of U.S. interest, whether it's U.S. companies, U.S. citizens on trade, economic issues, and we're also there to help promote the sale of American goods and services, which therefore creates jobs here back home in America. We鈥檙e also there to protect the interests of American citizens. So, if a student gets sick or is arrested or detained or a tourist passes away, loses a passport has a medical problem. We're there to provide assistance to Americans who are traveling abroad, but by and large, it's really to advocate for and protect and watch out for the interests of America and Americans in China.
Blomster: So, during your time as U.S. ambassador to China, you're credited with a number of accomplishments, some of which include opening markets for U.S. goods and services, improving the visa application process for Chinese applicants, fostering accessibility of accurate air quality information. But since we're focusing on trade specifically, how did you approach and what is the process for working with the Chinese government on trade relations in terms of advancing the administration's goals? So if, for example, if your goal was to open up the markets for U.S. goods and services, where do you start?
Locke: The Chinese economy is highly regulated by the government. Many sectors of the Chinese economy are off limits to foreign investment, even a minority ownership by a U.S. or foreign company in a particular business in China. And where investment is allowed or where participation is allowed, oftentimes, the U.S. foreign company has to have a Chinese partner in order to do business, and that's where you also get the issue of forced technology transfer. If you're a U.S. company with a 45% share of a business and you're partnering up with a Chinese company, you're going to have to share your technology. That's where a lot of the forced transfer of technology occurs. And which is a concern because 5, 10 years later, when the partnership comes to an end, the Chinese partner will have gained all the knowledge of the U.S. company and therefore able to go off on its own and compete against the U.S. company. And sometimes the Chinese government just has a blanket policy. In order to do business, you have to share the technology with the government. And of course, then they'll share it with other companies. So, that's a major concern.
So, what we're oftentimes doing in China is advocating on behalf of those US companies applying for a license seeking approval to do business in China, even if they don't have to have a Chinese partner, making sure that they're being treated fairly, that their applications are not languishing for years and years and years, while the Chinese applicants are getting their licenses approved within a few months. We're also advocating on behalf of opening up the sectors of the Chinese economy to foreign investment because, quite frankly, American companies offer great products and services that are highly valued, in great demand by the Chinese people and can actually help the Chinese leaders achieve their vision of a greater prosperity, a higher quality of life for the people of China. And of course, if American companies are able to sell their products and services in China, it means more work for people back here in America. We always had this saying at the Commerce Department, 鈥淭he more American companies export to China or anywhere around the world, the more workers they need. That means more jobs for the people of America.鈥 We have in America and all around the world, some very deep-seeded, strong concerns about the economic and industrial policies of China. The fact that so many sectors are off limits to foreign investment, whereas in America, Chinese companies, Brazilian companies, German companies can do just about anything here. They don't have to have an American partner. We're very concerned about the forced transfer of technology. We're concerned about the enforcement of intellectual property. Your trademarks, your copyrights, your trade secrets, your patents. We鈥檙e very concerned about the undue amount of government subsidies in China to favored sectors, whether it's artificial intelligence, whether it's electric automobiles, whether it's bio pharmaceutical research, and the list goes on and on. Subsidies that violate international rules, because then it gives a distinct advantage to these Chinese companies, to the detriment of American companies, our companies trying to develop all around the world. And so we have these very legitimate concerns. But the Trump administration is trying to attack these issues, very legitimate, very deep-seeded, very serious concerns, using tariffs. And basically we now have tariffs, which are taxes on all goods coming from China 96% of all goods coming from China are facing a tariff anywhere from about 15% to 30%. That's going to cost the American household on average, about $1,000 extra per year. And with some of the new tariffs that have been announced, that will take effect right after the Christmas shopping season, that impact on the American consumer household is going to be even higher. I think that tariffs are the wrong way to go to address these legitimate concerns about China's trade industrial policies.
Blomster: What other tools are there to use other than tariffs? Obviously, that's not the only way. So what other mechanisms are there to gain leverage or to negotiate?
Locke: The tariffs are a tax on the American consumer, it's an extra cost that's assessed on the goods coming in, when they land at the ports. They're paid for by the American purchaser, whether it's the Home Depots or the Walmarts or the Nordstroms of the world, and they are passed on to the consumer. They're paid for by the American company that needs that component. It's a higher price component because of that tax, which then is passed on to their customers. It makes that American product more expensive. And so when that American companies trying to sell that product, competing against a German product, Canadian product, a Chinese product, they're going to lose out, or they're going to absorb the cost and have less profits and maybe not raise the wages of their employees as much. So, it really hurts American workers and ultimately hurts the American company and hurts the American consumer.
So, I think instead of using tariffs, as many people have said, we need to have a coalition of all the other countries around the world who have the same concerns about Chinese industrial and economic policies and really force the Chinese to abide by the WTO rules. We can for instance, say, 鈥淗ey, China, if Microsoft and Amazon have to have a partner in China to do business, well, maybe your industrial high tech giants like Alibaba or Baidu have to have a partner to do business in our countries.鈥 And if we were all united around the world, I think we could quickly get the attention of the Chinese government and would really push them to modify their policy. So, I think we need a coalition of other countries, we cannot do it alone. Unfortunately, we've slapped tariffs, taxes on products coming from Canada and from Germany and from Japan and Korea and every other place and so many of our normal political and economic allies are not happy with the United States and really say, 鈥淥kay, you know, you're imposing a tax that your consumers are having to pay. We Germans don鈥檛, aren't paying that tax. So, hey, we're now kind of benefiting from the trade war, and we wish you good luck, but we don't have to pay the consequences of it. Our people are not being hurt by it. But since you have attacked us with your tariffs on our products being sold to United States, we don't need to really help you.鈥
Blomster: How did this escalate so quickly? It just seemed once it started it鈥檚 snowballing downhill. And now we're at a point in the conflict where it really is, like you're saying it's impacting Americans in ways that it hasn't before. So, just how did this escalate so quickly?
Locke: Again, American companies and the American government and foreign companies and foreign governments have very legitimate concerns about the trade economic policies of China. The Trump administration, I think, just felt that okay, well slap some tariffs on some Chinese goods coming in the United States, really industrial goods, manufactured components for U.S. manufacturers, it really won't, you won't really feel it by among the consumer households. But China retaliated. I mean, that's, that's what happens when you slap tariffs on another country. And that's how you get into a trade war. You slap tariffs or taxes on their goods coming into your country. They will turn around and slap tariffs on your goods going to their country. And then the United States says, 鈥淲hoa. We鈥檒l slap some more tariffs.鈥 And then the other country retaliates and responds and slaps more tariffs. It's gotten to the point where since beginning or the middle of 2018. Every few months, the president tweets and says, I'm going to raise, impose tariffs, or I'm going to raise the tariffs from 10% to 15% to 25%. And now the tariffs that were imposed in May to virtually half of all Chinese goods coming in the United States will be raised from 25% to 30%. And then, all the other half of the goods are being slapped with tariffs beginning September 1. Some of them are delayed until just after the Christmas shopping season, but it will cover virtually 96% of all Chinese goods coming into the United States and that covers sporting goods. It covers clothing, it covers shoes, almost 50, 60% of all shoes that people buy in the stores in America come from China, virtually all socks and nylon stockings all come from China. Your iPhones, your iPads are made in China. A lot of your laptops are made in China. Some of your Microsoft, Xbox games and consoles. They're all made in China. So those things will take effect starting the middle of December, and we're all going to pay for it.
So, that's how it happens. And for President Trump to think with this last round of tariffs that he imposed on 50% of Chinese goods coming into the United States, to think that the Chinese would not retaliate is kind of the height of arrogance or naivete. Everybody predicted that anytime you slap a tariff, the other side will respond. It's like a snowball fight. You throw a snowball, do you expect the other side just to sit there and take it and not fire back a snowball? Well, we're not talking about snowballs. We're talking about tariffs on consumer goods. And in a trade war. There are no winners. Both sides lose and it's really the consumers and the workers on both sides.
Blomster: Yes, pretty soon those snowballs are turning into rocks all of a sudden. So, you're trading blows tit-for-tat, going back and forth retaliating against one another. Where is the opportunity to deescalate? What role does the U.S. ambassador to China play in that de-escalation in terms of advancing the administration's goals, but still maintaining those relationships in Beijing as you're doing.
Locke: This trade dispute is so serious and encompasses so many, virtually all Chinese products coming to the United States and China has imposed tariffs on a little more than half of all U.S. goods going to China. It is so serious and so consequential that the negotiations are actually headed up by the top officials from Washington D.C., the U.S. trade representative, the U.S. secretary of treasury, and some of the president's key internal White House advisors. The U.S. ambassador, of course, is presenting intelligence and views information collected in Beijing and passing it on to the administration when the discussions are held in China, the U.S. Ambassador is there to offer support and advice and information. But when the discussions are being held in D.C., then the ambassador is probably not there, but in a supportive role coming out of Beijing.
Blomster: So, you were born in Seattle, you're a part of the state鈥檚 history as governor and much more. What is the unique connection between Washington state, specifically in China, because many would characterize that relationship as particularly important for Washington both, you know, for consumers and for businesses. So, why is that considered a unique relationship?
Locke: Well, we are a huge trading partner with China. In fact, Washington state exports more to China than any other state in the United States. If you just count Washington-produced goods and services from Boeing airplanes to agriculture to services to technology, we鈥檙e one of the highest exporting states to China. If you include all the things that come through our ports, whether it's the soybeans grown in the Midwest, or other products that come through our ports, we are the number one exporting state to China. So many hundreds of thousands of jobs in the state of Washington depend on trade with China. Both inbound, you know stuff coming from China, you know, the stuff that's unloaded on the docks, going into your supermarkets and going into your department stores or your Targets and Costcos and Home Depots to things that we sell and produce, whether it's wheat, cherries, to airplanes. For instance, 25% of all Boeing airplanes sales are to China. So, think about it. Twenty-five percent of those tens of thousands of Boeing workers depend on airplane sales to China and so if we didn't have those sales to China, we鈥檇 have maybe 25% fewer employees. But all of those Boeing employees, shop in malls, eat in restaurants, buy cars, remodel their homes, eat out, go to shows, so they're supporting so many other tens of thousands of jobs. Washington state has had perhaps the longest trading relationship with China right after Nixon first visited China almost 50 years ago. We have had all the different Chinese presidents pay a visit or stop off in Seattle on their way to Washington, D.C. The very first ship that ever came from China after diplomatic relations were reestablished between the United States and China, that ship called on the port of Seattle. And we're seeing right now a huge drop of cargo, and therefore jobs through all of our Washington state ports because of the trade dispute. Fewer exports of U.S. goods and services, U.S. goods going to China and that means you don't have, need as many dock workers and longshoremen, loading or unloading stuff. And also a drop in stuff coming from China to the United States. And, so, that's having an impact on jobs in our region. And we're seeing that already.
Blomster: So, where do you see the end to this conflict? And I know we can't predict in this very unpredictable political landscape in the United States right now. But how could one, imagine the end in sight? And more importantly, what measures can be taken to prevent this from happening, again, long term from administration to administration? Is that even possible?
Locke: I think any possible agreement will not be the grand bargain, the very comprehensive agreement that people were hoping for, and actually, they were about to announce back in May. Since then, the tariffs have increased, many more tariffs, now covering virtually all Chinese goods. Since May, the president has imposed tariffs on half of all Chinese goods that had not yet been subjected to tariffs, resulting in virtually all Chinese goods being subject to the tariffs. The Chinese have retaliated. I think the atmosphere or the relationship between the negotiators has soured enough that we're not going to be able to have the grand big bargain and deal encompassing all the different issues that people were planning on announcing back in May. I think any agreement will be kind of little steps, addressing this or that. There'll be a commitment by the Chinese to buy more American products, whether it's soybeans or cherries or Boeing airplanes or liquid natural gas. They'll open up some of their markets to foreign investment, and not require a Chinese partner. They've already started to do some of that. They don't want to be in the position of looking to the world like they were forced by the United States to open up some of these sectors. So, they've already started doing that. They'll make some commitments on protections of intellectual property. Some of the tariffs will probably stay in place as a way of enforcement to make sure that the Chinese live up to their commitments. But some of the big issues of the subsidies that the Chinese government gives to some of their industries where they're trying to make them world class, whether it's artificial intelligence or electric automobiles, that's probably going to be harder to resolve. So, I think what you'll see is kind of a few agreements in a few areas as a first step, and a commitment to continue discussions, negotiations on the many other complex issues.
Blomster: Finally, as a former law student yourself, what is the biggest piece of advice that you would give to current law students coming up who would be interested in getting into international relations like yourself?
Locke: Well, first of all, I would encourage law students to travel the world and to experience the fascinating cultures and economies and environment of the rest of the world. For instance, just on U.S.-China policy, so many people in the United States Congress have never visited China. So, it's hard to enact policy if you have really no familiarity of the subject matter or the challenges, the culture, the history of China. I mean, China is an immense country with enormous needs and quite a land of big contrast. I mean, we see all the highest skyscrapers in the world, some of the world's tallest buildings in the major cities of China. And we see pictures of the hustle and bustle of the cities in which you know, there are dozens and dozens of cities with populations of 20, 25 million people. But that's only half of China. 40% of the people of China live in the countryside with the barest of amenities, where they still have cook using wood kindling or coal briquettes or maybe a little electric hot plate or something. They don't have running water and they still wash you by laundry by and. They don't have bathrooms or toilets, they use a community outhouse. And maybe they have a, you know, one light bulb hanging from the ceiling in each room. They obviously don't have washing machines or clothes washing machines or dryers, or electric stoves. So, where does China get all the electricity it needs just to provide the basic amenities for the Chinese people, because the average refrigerator in these rural homes is the size of the refrigerator you see in a college dorm or in a hotel room, which is why there's so much spoilage of food in China. So, where will China get the energy it needs to feed its people and to even power the new emerging technologies and industries. They can't build coal power plants fast enough or nuclear power plants or solar farms or wind farms fast enough. And so we need to understand the challenges faced by the Chinese people or the Chinese leaders as they try to raise the standard of living for 40% of the people and therefore, we have to understand the opportunities for American companies in clean energy, medical devices, technology, environmental cleanup, etc., etc., to things that can really help the Chinese people attain a higher standard of living. But again, you cannot make policy if you don't understand the country that you're dealing with.
And so I think that law students who have an interest in international relations should really travel the world as much as they can, and understand the complexities economically, politically around the world, culturally, understand what's going on in Europe with the growing nationalism. What is causing that? What's happening? Iis it caused by all these refugees flooding into Europe? What is happening in the Middle East, etc., etc.? I think having that bit of an appreciation and understanding can really help those law students be more effective as just in studies to help them decide what areas, what's subjects, courses they want to take, and also what career they want to pursue after law school. Is it working for a law firm? Is it working for an NGO, nongovernmental organization, involving other countries? Is it working in government signing up to be a foreign service officer in the State Department and being stationed in a country somewhere else outside America?
Governor Gary Locke is the 21st governor of the state of Washington, former U.S. Secretary of Commerce and the United States tenth ambassador to China. Today, he serves as senior advisor and consultant at Davis Wright Tremaine in Seattle.
Governor Locke, we could not be more grateful. Thank you so much for taking the time to speak with us.
Locke: Oh, my pleasure, john.
