National Committee President Stephen Orlins shares his thoughts on the recent high-level U.S. visits to China, the lingering impact of tariffs, and how both countries should repair ties in an interview with Nancie Zhu. Watch the interview here or read the full transcript below.
Interviewer: Hello, Steve. It’s great to have you with us at Phoenix Center, and thank you for joining us today.
Steve: What a pleasure to see you in person. It’s been way too long.
Interviewer: And, Steve, what are the characteristics would you say of Secretary Yellen’s fiscal policies after she’s become the Treasury Secretary of the United States?
Steve: She’s been a fairly traditional Secretary of the Treasury. She obviously used to be chairman of the Fed, so she has a lot of understanding of monetary and fiscal policies. She’s had to deal with the first time, in many years, of an inflationary environment, and has done a good job of that in conjunction with Chairman Powell of the Fed. So, she’s been very traditional, I think very competent. She assures markets because of her background. I think people in the United States, in the world, I should say, have great confidence in her.
Interviewer: Now, Steve, last time you came on the show that was at Zoom connection, you mentioned we really need the officials from China and the officials from the U.S., the senior officials to resume exchanges and dialogue in person. And I think over the last six months, we’ve seen quite a lot of exchanges between the two sides. Do you think things have improved?
Steve: Absolutely. On the leadership exchanges, and you can date it, Wang Yi met with Jake Sullivan, our National Security Advisor, and set in motion these high-level exchanges. So, we’ve seen Secretary Blinken, Secretary Yellen, we’re gonna see Secretary Kerry coming with a climate change delegation. Then we’re gonna see Secretary Raimondo. And then, we’re probably gonna see President Xi meeting with President Biden at the G20, then we’re gonna see President Xi come to the United States in mid-November. We hope he has bilateral meetings with President Biden.
Interviewer: Do you think the bilateral meetings will happen between the two leaders?
Steve: I certainly hope they will, and I think that these high-level meetings that are occurring are laying the foundation for that. So, what it’s really, at this point, it’s about communication. What my great hope is we begin to see substantive outcomes. Even if the substantive outcomes are delayed until President Xi and President Biden meet in November, I just hope we can see real improvements in U.S.-China relations
Interviewer: Are you saying there’s hasn’t really been substantive outcomes?
Steve: Certainly, there hasn’t been yet. There’s so many easy things that the two sides can do, and I really hope that they do it. So, if we can’t have wholesale reductions in tariffs on both sides, at least have reductions in tariffs with respect to goods and services that relate to the environment–that relate to climate change. So, a partial reduction in tariff. The closing of the consulates was… I haven’t talked to anybody who’s worked in diplomacy who thinks that was a good idea. So, okay, let’s reverse it. It was done during the Trump administration. It hurts Chinese and Americans in southwestern United States and in southwestern China. So, reopen those. Make life easier for Americans and Chinese so they don’t have to fly to Washington or fly to Beijing to get a visa or to deal with the diplomatic representation of each country in the Capitol rather than in the provinces.
Agree on issuance of visas and entry of citizens of China into the United States and Americans into China. Again, something… This should not be hard. Agree on a definition of national security. So, if we’re gonna restrict, if China or the United States are gonna restrict investment or exports, okay, but agree on a definition of what national security is and say, “Okay, that’s off limits, but the rest of this is okay.” In effect, almost create a white list, things which are allowed, and that would make for much more predictability for the businesses, and then our trade and investment would increase again. So, there’s these things, in truth, are not that hard.
Interviewer: Well, Steve, after the Blinken visit, the two sides now I quote both said they had a candid in depth and constructive conversation about the important issues concerning the two countries. But now we’ve seen that Secretary Blinken also said in an interview after he’s left Beijing, that the U.S. is gonna continue to do things that China doesn’t like. I mean, how do you see these statements?
Steve: China would like there to be no export controls, would like there to be no entity lists and other things, that from a national security point of view, that is not gonna happen. So, he has to balance this opening to China, this beginning of cabinet-level communications between China and the United States with the statement to those who don’t even like that. You have to realize there are people in the United States who criticize Secretary Blinken just for coming, just for being in China. He was criticized, I think he was called, “An appeaser.” So, he needs to make sure that those who don’t like communications between the United States, at least understand that the policies of protecting America’s national security will continue.
Interviewer: Now, we’ve seen in April the U.S. greenlighted the transit of Tsai Ing-wen who’s the leader of the Taiwan region to the U.S., and she had a high-profile meeting with the U.S. House Speaker, Kevin McCarthy. At the same times, we’re seeing the U.S. has repeatedly said it does not support Taiwan independence. How do you look at these facts?
Steve: I think the transit is… I can’t recall. It’s the 24th, 25th time that a leader of Taiwan has transited the United States. It’s not particularly a precedent setting. I don’t agree that it was a high-profile visit. It actually was a fairly low-profile visit. Speaker McCarthy did it in a very low-profile way. It was…
Interviewer: But the fact that he did meet with her.
Steve: Yeah, he did it but it wasn’t… It’s not like he went to Taiwan…
Interviewer: And he’s number three in the U.S. government.
Steve: It was much, much lower profile than it could have been. It’s consistent with what has been done before when Taiwan leaders are going to other places. They transit the United States and that this was consistent. I think you were quite fair…
Interviewer: But does it not contradict…
Steve: You were quite fair.
Interviewer: The three China-U.S. joint communique?
Steve: We talk about unofficial relations, and obviously you’ve studied in the United States, you know that there are three separate but equal branches of government: the executive branch, the congressional branch, and the judicial branch, and the executive branch could not have restricted contact between Taiwan and the congressional branch. So, it did not violate the Communique, and, in fact, we’ve seen then Secretary Blinken restate our support of the One China policy, and we do not support Taiwan independence, which is a reaffirmation of what we’ve been saying since 1979.
Interviewer: Steve, I want to ask about the Taiwan Policy Act of 2022. Now, this is an act that was passed…
Steve: Didn’t pass. Didn’t pass.
Interviewer: Passed by the Senate, hasn’t passed the Congress yet.
Steve: Didn’t pass.
Interviewer: What do you think this is going to happen next? I mean, this authorizes armed sales and so on to Taiwan from the U.S.
Steve: I don’t know what the election in 2024 is gonna bring to the United States. In November of 2024, we will have an election. It could bring… I don’t know how the House will divide, I don’t know how the Senate will divide, and I don’t know who’s gonna be our new president. I think between now and then, it’s unlikely that that would become law. It would be very disrupting to U.S.-China relations. It’s not in the security interests of the United States to make that law.
Interviewer: Does it contradict the three China-U.S. joint communique?
Steve: It depends what the laws will get amended. The process of passing a law is very complicated and it will get amended, and I highly doubt that it would be in violation of U.S. commitments.
Interviewer: Do you think there’s a risk of more serious conflict in the Taiwan Strait?
Steve: Depends on what both governments do. The U.S. view is that China’s escalating and the Chinese view is the U.S. is hollowing out its One China policy. It’s best that both sides sit down and make sure that there’s no misunderstanding, and in addition, it’s important that we reestablish military-to-military communications, that we’ve now done a good job of restarting communications between the governments. So, Blinken, Raimondo, Yellen, Kerry, etc. Minister of Agriculture is also gonna go to the United States, I believe. So, those are good, but what we’ve not restarted is the mill-to-mill channel. And that’s important because if something should happen, we need to have those channels of communication reestablished. So, I urge both the Chinese and the U.S. governments to restart that channel.
Interviewer: Now, you’ve mentioned on various occasions that decoupling is bad for the interest of both the U.S. and China. We’ve heard a lot of this rhetoric of de-risking U.S., de-risking with China and decoupling. What’s the key difference between the two terms?
Steve: Well, decoupling is a full-scale kind of breaking of the relationship. It’s finding ways, whether they’re economic or not, to make sure that the U.S. and China are not working together. De-risking is basically deciding that you are not gonna have, in effect, a sole source supplier, so you reduce the risk of doing business in the future. So, if you have a Chinese company or a Chinese natural resource that is the sole supplier to a U.S. company, well, the U.S. company says, “Well, what if things go bad? We need to find alternative suppliers.”
Similarly, if a Chinese company decides that they can’t have a U.S. company as the sole source supplier, then they need to de-risk it. They need to find other sources of supply. So, it’s not really splitting, it’s more minimizing the risk. We need to find ways not to be completely dependent on foreign imports for certain components. And that’s what happened, so now both sides are taking that, but it is not truly decoupling, which would be a wholesale breaking of the economic relationship between the United States and China.
Interviewer: I think the worry with a lot of people is that this rhetoric of de-risking is really just another way of saying decoupling. It just sounds better.
Steve: It’s really not, that it is taking an action, which many businesses would take otherwise. So, the question really becomes does the government mandate that de-risking, or is it a decision which each business makes on its own to get multiple suppliers or multiple customers? And if that’s the case, I’m much more comfortable than government mandated. If the government is…
Interviewer: But the U.S. government is mandating de-risking.
Steve: In very minor instances.
Interviewer: I think the U.S. has announced a series of chip export control measures. I think we heard in the news that they’re going to increase and expand that in July. Have you heard of what’s going on?
Steve: Yes. So, my position is to the extent that the chips are used for the military, it’s okay to restrict them, but we need to distinguish between those that are military use and civilian use, and we need to be very careful that we don’t restrict those that are intended for civilian use. So, back in the days when I worked in government, we used to have something which was called end-use certification.
End-use certification, which would be the buyer would certify that this is what we’re gonna use the goods for, in this case, it would be the chip. If that end-use certification is violated, they then can never buy another product. So, there’s an enormous incentive for the buyer not to violate the end-use certification. So I say, “Why don’t we use that for chips?” So, if the chip is intended for the PLA, or if the U.S. wants to restrict it, that’s okay. But if it’s intended for a cell phone or it’s intended for a car, or it’s intended for a television, do we really want to be restricting those? So, my fear is…
Interviewer: Is this something that’s easy to implement, in your opinion? This end-use.
Steve: It’s implementable. People question whether it can be implemented. My view is, for instance, the public company accounting oversight board agreement, PCAOB agreement with the Ministry of Finance and the CSRC, allowed for an audit of Chinese companies and Hong Kong companies that are listed on the New York Stock Exchange and Nasdaq. And people for years said, “Well, that will never be possible.”
Well, guess what? It was done, and the audits are now occurring, and it’s fine. So, these companies remain listed on NYSE and Nasdaq. So, people say, “Well, these end-use certifications would require audit.” I say, “Sure. See if the customer, the buyer, is willing to have that audit. If it does, then we should move forward with it.” So, if there is any kind of amount of trust, the buyer and the seller and the two governments should be able to reach some agreement on how we can verify those end-use certifications.
Interviewer: I think the Netherlands on Friday also announced that they’re going to impose restrictions on semiconductor export to China. I mean, how do you look at this? There seems to be these concerted efforts from the U.S. government and other Western allies to cut China off.
Steve: That’s semiconductor manufacturing equipment. So, here, we’ve just talked about end-use certifications. If the equipment is in China, then it really is virtually impossible to have an end-use certification. So, I think that’s why the Netherlands ultimately decided to impose those restrictions. We haven’t talked about the relationship between Russia and China and how that’s affected the American perception of China and even more so the European perception of China. That the partnership between China and Russia has deeply impacted the view of Europeans and Americans in their view of the Chinese government. And that, in part, has led to restrictions on exports from Europe.
Interviewer: Now, I think your friend, Ray Dalio, also mentioned recently, over the next 18 months, it’s going to be getting even tougher for the relations between the two countries with the presidential elections coming up. Do you agree with him?
Steve: Well, I think the media focuses on the election. The American people are not focused on the election right now.
Interviewer: What are they focused on?
Steve: They’re focused on inflation, they’re focused on the economy, they’re focused on education. They’re focused on, are we gonna have another pandemic? All of the things that kind of disrupted life over the last three years, is their focus. The campaigning doesn’t start until the beginning of the year of the election. So, we have, between now and January, a period where we can make progress in an unpoliticized way on U.S.-China relations.
So, as I said, the window of opportunity exists between now and when President Xi comes to San Francisco in November to really make progress so that when President Xi and President Biden meet, we can have concrete outcomes that benefit the peoples of China and the United States. Not theoretical 30,000-foot kind of agreements, but things which have immediate benefits.
And I will urge the Biden administration to do that, and I will urge the Chinese government to do that. I’m always hoping that we will have flights that will back to millions of people traveling between the United States and China. That we have rational kind of lines where the United States and China can cooperate and areas probably where we can’t cooperate. But the people-to-people exchanges get going again, and that serves as the foundation of a much better U.S.-China relationship. That the president of China, the president of the United States, speak and meet every quarter, that they have real communications where we can kind of be deciding what is going on in the world. Where we can be combating climate change. Where we can be providing for the benefits of the Chinese and American people.