China to Governors: A Trade War 'Brings Mutual Destruction'

As the curtain rose on the National Governors Association’s Summer Meeting, foreign delegations from China and Japan warned governors that national trade policies threaten prosperity in the United States and could have larger effects throughout the world.

A trade war "brings mutual destruction and is in nobody’s interest,” Los Angeles Consul General Zhang Ping told the assembled audience during a discussion on Thursday titled “Rebuilding a Silk Road to Economic Development.” Ping’s remarks focused on the “great difficulty and unprecedented challenge” of escalating trade conflict between the two countries.

“Its further impact remains uncertain,” Ping said, questioning “whether it will spill over to other areas” and “how much of our businesses and our livelihoods will be effected.”

The remarks were part of a daylong series of conversations put on by the National Governors Associations’ NGA Global initiative, which seeks to support the governors’ efforts to lead on international trade. The general tone of the conversations made clear that international partners were concerned enough about the national trade policy to be blunt about its impact with governors, and to seek their voice as partners in trade opposing the administration’s protectionist policies.

For their part, the governors who participated in the discussions were supportive of building on existing trade relationships, and generally avoided direct criticism of Trump administration's trade moves, though both escalating tariffs on China and the lack of U.S. participation in the Trans-Pacific Partnership were key issues discussed by others. Most governors acknowledged issues with the trade deficit, but seemed wary of how the administration was approaching the concern.

Utah Governor Gary Herbert said that the uncertainty that the ongoing trade tensions created were the biggest issue and made the case for greater engagement. 

“It’s a matter of us working together and developing trust; having better communication, having mutual understanding," said Herbert, a Republican. "The concerns on all sides of this debate are legitimate – we need to find a common ground and come together to find the proverbial win-win and I think we’ll do that if we have a good attitude.” 

Colorado Governor John Hickenlooper said in his state they are "already seeing the impact" of deteriorating trade relationships in terms of investment and it added to the “challenge of building a long-term expanding economic relationship.”

“We recognize trade is complex and not always fair," Hickenlooper said, referring to the ongoing trade deficits. However, the Democratic governor said a tit-for-tat approach of escalating tariffs was the wrong way for nations to proceed. Rather, he said we should focus on mutually beneficial ways to reduce tariffs. 

"Find ways where we are reducing the barriers and thereby incentivizing an expansion of trade,” he explained. 

Later, Hickenlooper would point out that next generation smart transportation technologies, such as autonomous vehicles and sensors integrated into infrastructure, would suffer from trade barriers, as those products require international companies across the world to collaborate.

"This is the sort of stuff that is going to happen most successfully when you have a unity of purpose," Hickenlooper added.

Only a few governors participated in the Chinese delegation's meetings, while seven governors were present for some or all of the Japanese delegation's presentations. The governors who participated in the conversations—including Herbert, Hickenlooper, Kentucky Governor Matt Bevin and New Mexico Governor Susana Martinez—emphasized not only the economic value of the relationships for their citizens, but also how trade relations improve broader relationships between nations. 

One interesting twist on the conversation was that the Chinese and Japanese delegations made the sort of free-trade arguments that previous U.S. administrations often made for decades before the Trump administration. In light of recent tensions, they seemed to take on a different patina.

“Twenty years ago when GM went to China, very few Chinese people could have bought a car,” said Qi Bin, executive vice president of the China Investment Corp. “Now today GM sells more cars in China than they sell in the U.S. and they’re making more money in China than the rest of the world combined.”

Members of the Chinese delegation admitted there was more their country could do to improve the trade relationship, especially around intellectual property. Most made optimistic comments about the potential for “sub-national” relationships to create greater economic and cultural ties. However, the movement away from the current global free trade trends by the current administration hung over the entirety of the day.

“Raising tariffs is clearly a step backwards from a market economy model that Americans value deeply,” said Chen Xu, chairman of the China General Chamber of Commerce for the United States and President and CEO of Bank of China USA. He went on to say the recent tariff policies were harmful to "the existing world trade order” and “causing serious damage to its own economy.”

Xu said the U.S. multinational corporations would lose chances at growth in the Chinese market as a result. “I assure you there are ten German, French, or Japanese companies standing willing and ready to take its place,” he said.

The Chinese deleglation, while perhaps the most direct in their warnings, was not alone. Japan’s delegation also expressed direct concerns about the trade relationship and its potential impact.

Japan’s delegation, like the Chinese, also highlighted the economic benefits to the United States of a free and active trading relationship. However, their arguments played more to the shared democratic ideals between the two nations.

Kentaro Sonoura, special advisor to Japanese Prime Minister Shinzo Abe, made a case for the U.S. to participate in the Trans-Pacific Partnership. He and others in the Japanese delegation pointed to the “fundamental values” that the United States and Japan, one of its closest allies, share.

The Japanese Ambassador to the United States, Shinsuke J. Sugiyama, emphasized his role in increasing trade relations between the countries, saying that his role is to increase Japanese companies’ investment in the United States. “This is my goal. This is what I’ve been instructed by ... my prime minister,” Sugiyama said.

Ticking off a long list of states he has visited since arriving to the post three months ago, Sugiyama said he intends to visit all the states “and not simply once” because “the more I know your states, the more, I believe I can help.”

During the Japan discussion, Bevin emphasized that trade with the country is a particularly important issue for Kentucky. The Republican governor pointed out that more than 200 Japanese companies employ over 45,000 residents of the commonwealth, amounting to about three percent of his workforce.

“Only Hawaii has a greater percentage of its working population working for Japanese-owned companies," he said.

Bevin also pointed to the traditional alliance between the nations beyond trade.

“The Kentucky state motto is ‘United we stand, and divided we fall’ and that’s very true. It's true for us as a people, it’s true for us as states, it’s true for us as partners," he said.