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A
I'm Scott.
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I'm Bill and we're the Trade Guys.
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You're listening to the Trade Guys, a podcast produced by CSIS where we talk about trade in terms that everyone can understand.
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I'm Alex Kisling and I'm here with
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Scott Miller and Bill Reinsch, the CSIS Trade Guys.
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Welcome back to the Trade Guys. This is Trade Guy Scott. On this week's episode, we're delighted to be joined by Victor Cha, distinguished university professor at Georgetown University and the president of the geopolitics and Foreign policy department at csis. Our colleague Victor is going to talk about his new book, China's Weaponization of Trade. We have a fine discussion. We hope you enjoy it. Thanks for listening to the Trade Guys. Welcome to a special edition of the Trade Guys. This is Scott. Bill and I are delighted to be joined today by a CSIS colleague, Dr. Victor Cha, and he's going to talk about his new book. Victor is a distinguished university professor at Georgetown University. He's president of the geopolitics and Foreign policy department here at CSIS as well as the Korea Chair. He's the author of nine books and has just produced a new one called China's Weaponization of Trade Resisting Through Collective Resilience with Ellen Kim and Andy Lynn. Victor's a delight to work with. He's a great colleague. Over the years. One of the early days of the Trade Guys, I think may have been our first live appearance was done at Georgetown University in Victor's class. He invited us over and Bill and I were sort of the skeet that Victor's students took shots at for 45 minutes or so. But we had a wonderful time and we thank you for that. We still remember it. We know you as a teacher and as a researcher and writer. You have many other credits. I won't go into the whole resume because we won't have time for the book then. But I do want to note that Victor is one of the few CSIS experts who has an IMDb credit. He was in the movie Red dawn. And importantly, it's a cameo appearance, but he plays Victor Cha. So thought that was just a superb note and we're delighted you heard Victoria, and the book is right up the trade guy's alley. So we want to hear what you have to say.
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And he's the first of many celebrities we anticipate. Yes. Wait and see.
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Yes, exactly. So tell us about the book.
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Sure. Well, first, thanks, Scott and Bill, thanks for having me on the Trade Guys. This is, as you said, we have our. Actually Two of our own podcasts. But the podcast I listen to every weekend is the Trade Guys. And so it's a real pleasure to be on with you. So the basic idea behind the book is that we have known China for really the last three and a half decades to use trade as a weapon. And it's not a weapon simply in terms of protectionism or protectionist tariffs, which many countries do, but it's using trade for a particular political purpose to essentially infringe on the sovereign choices of other states around a very finite subset of issues that often have to do with Taiwan, territorial disputes, Hong Kong, human rights, Xinjiang, Tibet, the ccp, Xi Jinping. There were very sort of finite set of issues. And we know many anecdotal cases of China using coercion. So, you know, stopping the export of rare earth minerals, preventing Chinese group tourists from going to a country, preventing, preventing Chinese students to go to Australia, tariffs on Australian beef, barley and wine. There are all sorts of things that we know anecdotally. And so what me and my co authors decide to do based on the open source was to try to collect as much data as we could on all the known cases of Chinese economic coercion. And we think in this book we've assembled what we believe is the most comprehensive data on every known case of Chinese economic coercion. I think it's known cases that total almost 600 cases and 470 known cases against companies. There's coercion that's used against companies and there's coercion that's used against governments.
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B
Well, this is remarkable because most of the research that's been done in this area focuses on governments. And we'll. I think we'll get to that because you've got some case studies that look at governments. But the individual company thing is kind of interesting because I hadn't thought about that they would stoop to that level. I guess it might be the best way to put it. Can you give us a story or two or an example of what they've done to individual companies? What has a company done that merits the attention of Xi Jinping, for example?
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C
So it's a wide range of things. And basically we have a list of 470 companies that basically cover every continent on the globe except Antarctica. And there are things that you would expect to see. So there's been lots of sanctions and coercion against US Defense companies that are involved in arms sales to Taiwan. I guess the level of discrimination that they will go to in terms of writing what they See, as an offense, I really did not appreciate until we pulled together this data set. So one example was a campaign that they took out against airlines because the US national carriers, but also others were listing in terms of their destinations, places like Taiwan and Hong Kong, just as Taiwan and Hong Kong and not as Taiwan, PRC or Hong Kong, PRC, where they threatened to boycott Chinese usage of all those airlines. There was another case against one specific airline in the Middle east where their flight attendants, as a matter of practice would wear on their lapels the country from where they were from. So if they were working for, I don't know if it was Qatar, if they were from Canada, they would wear a small Canadian maple leaf. And one of these flight attendants had a Taiwan flag. And somehow that got back to the prc. They started a extensive social media doxing campaign and they demanded that the airline have anybody wearing a Taiwan lapel pin remove that lapel pin. And in the end the company caved and it just got rid of all the lapel pins. Perhaps the example most known in the United States is the action that China took against the NBA team, the Houston Rockets, where Daryl Morey, who is not a player, a manager for the Houston Rockets, retweeted on his then called Twitter account, basically a statement about democracy protests in Hong Kong. So this is one individual tweeting something out, Retweeting actually not even tweeting something out. And that led to a massive campaign to remove all Houston Rockets merchandise from online NBA sales in China. The blocking of streaming of Houston Rockets games and then NBA games for almost two years. That's the extent to which these things go. So it's actually quite extraordinary.
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A
Well, I would just make. Well I'm familiar with this because we had operations in China and it's first strikingly petty, usually a small issue entirely unrelated to your company or your products. And you just become sort of the whipping boy. And, and when you do now that can happen in the US as well. It can happen anywhere around the world. You accidentally offend a government official or something, something happens that you get something to clean up. In the United States you have guys like Bill Ranch who had one time headed the National Foreign Trade Council. And these trade associations operate within the rules of antitrust policy, but operate in a way to speak for the entire industry. When these issues come up, when you're a company and you get targeted by the government in China, your only resort is to what they call a gango is a government operated non government organization. That's what trade associations are Essentially run by the ccp. And so you're really a tall poppy at that point. You're on your own completely. And Victor's got 72 pages, the appendix that covers corporate incidents. 72 pages in the book. So it's impressive. Yeah.
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C
And in virtually every one of those cases, like you said, that China exercises this coercion bilaterally and these companies really have no choice. So there are extraordinary examples of how quickly they do their absolute best to find out what the problem is and then apologize profusely to China. We have in the book some of the statements by, you know, companies like big designer companies like Versace, Kodak Film, the apologies that they provide to China look as though they were written by the ccp. They, you know, talk about not offending the feelings of the Chinese people and all this sort of stuff. So they are quite isolated and quite vulnerable.
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B
I ran into the flag problem once, although I didn't fold. When I was teaching globalization, I had a slide that ranked countries by per capita GDP and there were two columns, one nominal GDP and one purchasing power parity gdp. The chart was easy to read because next to each country was a little flag that was that country's flag. And the point of the lesson, the point of the chart was in nominal terms, USA was number one and China was number two. But in PPP terms, China was number one and the USA was number two. That was the lesson. However, one eagle eyed student who was from China noticed that on the PPP side, number 18 was Taiwan and there was a little flag right there. And immediately this hand goes up in the classroom and says, wait, this is wrong, the chart is wrong. Taiwan is not a country. Taiwan is a province of China. It should not be on the list. I have to confess, I did not apologize. I just said, well, I deflected. I said, not my chart and not the point.
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It's good to be the. Prof. That's right.
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But they have a low bar for being offended, I think.
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Yeah. I mean, just that reminds me of another case we have in the book that has to do with a Korean TV drama where there was a family. The scene, the family was sitting in a room and they were playing a board game and it was like something comparable to Risk, you know, the game Risk. And so they had different flags in different countries. And one of the flags there was a, the Taiwanese flag. And it was like a just a split second on the screen in this Korean television drama. And again, it led the Chinese government to sort of boycott, to call this out, to demand that, that be erased from the show, to boycott the show, all these sorts of things. So yeah, a great deal of sensitivity to what are seen as, you know, very petty offenses.
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Vikra, you talk about cooperative action and collective action and I think that's right. I think that's the place you wind up. Which action in concert or for like minded companies or in your case, the companies. I don't think it really happens, at least not in China. But for economies it's entirely possible. And in some ways that's what a trade agreement is, is action in concert on a set of specific problems. And in most trade negotiations like forget the treaty, look at the table. If the right people are at the table, if the big traders are there and they're willing to compromise, willing to negotiate to resolve problems that are irritating them, then you can get somewhere. So how do you think this will play out practically in a world where trade ministers don't cooperate all that well? I mean if we were asking central bankers to work together, it's pretty straightforward. I think treasury officials and finance ministers understand international coordination, not so much trade ministries. So how do you think this will play out?
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C
I don't think there really is a single solution for dealing with this sort of economic bullying, as you guys know. Well, what we see is a lot of protection of supply chains, de risking supply chain protection, friend shoring, these sorts of things. These are all important, they should be done. But as I like to say, these things in many cases are responding to the last act of Chinese economic coercion. They're not responding to the next act. So when China hits a particular supply chain and everybody tries to secure that supply chain, but that doesn't stop China for going after the next supply chain. But de risking undeniably remains important. The alternative is just to decouple, right? I mean if we just decouple trade from China, we don't have to worry about their economic coercion. But like that's not feasible and it's hard to get a group of countries to all agree, let's just decouple trade from China. Just can't, you can't do it. I mean we're choosing to do it in certain areas, whether it's chips or AI or quantum, the so called small yard, high fence, but it's really hard to do on everything else. So this idea of cooperation, collective economic cooperation that we put forward in the book is about creating some form of deterrence with regard to China leveraging the things that these other countries targets of Chinese economic coercion, trade with China that China is highly dependent on. We can get into more of the details about it. But on the question of whether this is like trade ministers cooperating, like we don't really see this strategy coming together unless there's a commitment at the very top that there is an agreement among leaders that they need collectively organize to stop Chinese economic coordinate, not just to de risk from Chinese economic coercion, but to stop Chinese economic coercion. And I think we made an important first step in that direction in the 2023 G7 meeting in Hiroshima, where there is explicit language that the leaders adopted to say we don't want to just de risk, but we want to stop Chinese economic coercion. So that's an important first step.
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Let me go back a step. I want to pursue the remedy issue, but go back a step. Does this stuff actually work? I mean, what is their record on this? I mean, does it work with companies? You've listed some apologies. Does that work all the time? And is there any difference in the way governments react? I don't hear a lot of governments apologizing.
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C
Yeah, it definitely works on companies, at least in the data we looked at, every single company basically removed whatever the perceived offense was by China. Again, everything from taking their lapel pins off to changing their websites so that it says Taiwan comma, prc. The companies have all sort of responded. Some governments haven't all responded uniformly. The famous case is Australia after the Morrison government called for an independent investigation into the origins of COVID outside of the World Health Organization, which China dominated, as you guys know. Well, China slapped huge tariffs on Australian beef barley and wine. And Australia didn't relent. Right? It did not relent. The it did trade diversion, it was able to bear the brunt of China's action. So governments have responded in different ways. The question of whether this actually works is important. But at the same time, often what China is doing is in trying to intimidate in such a way that even if they don't get what they want initially, they have created an environment in which future targets, in order not to be targeted, will self censor. So future actors, whether it's on Taiwan, human rights, allowing Huawei into their 5G market, they basically self center and relent in advance of any action China would take in order to prevent being targeted again. So even if the initial action is not successful, and something I did not mention yet is that China often does this unannounced. So they take these actions unannounced, so there's plausible deniability and they Also won't be seen whether they're successful or not. But they know that they're creating a dynamic around the world where countries kowtow in advance to China because they do not want to be targeted.
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That's a very important point to make. I'm glad you did it because it really demonstrates how they're playing a long game here. And it's not really about the immediate incident. I think it is about creating an intimidating climate so that in the future you don't have these problems recur.
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Yeah, I mean, I think that's right. You know, there is a body of literature out there in this so called new economic interdependence literature that says China doing these things, it's self defeating because they're not successful, they make lots of enemies, they shoot themselves in the foot. And you know, that may in one sense be true, but at the same time it can also be true that they are able to intimidate all those countries from taking actions that are contrary to China's interests.
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You know, this collective resistance probably works best if you can create enough scale that it matters to China. But by creating scale, you've got to have the right partners who have the habits of cooperation. Otherwise the prisoner's dilemma kicks in and essentially the ability to coerce with this resistance group falls apart. How do you do that practically?
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It's a good point. Like again, the data we collected on the response side was basically to catalog all of China's trade dependencies on the countries that it trades with. Normally the narrative we know is that everybody's dependent on the Chinese trademark and to what extent we all are. But at the same time, you know, China engages in trade, they become dependent on certain countries for certain things. And what we found from the data is that they're surprisingly dependent on a number of countries for hundreds and hundreds of items worth tens of billions of dollars. Some of these are not so important, but some of them are quite important and for which they don't have easy domestic substitutes and where alternative sources of supply also happen to be like minded countries of the West. And so when we think about sort of collective economic deterrence model, you have to bring together countries that sort of have similar views and similar concerns. So we cut the data one way where we looked at, you know, the 18 governments that have been coerced by China to see if they could cooperate in terms of trying to resist Chinese economic coercion. There are 18 governments, they have one thing in common. They've all been targeted by China, but they're not all necessarily like minded partners. Right. The group that we landed on that we thought was actually quite interesting was to look at G7 countries because they are all advanced industrialized democracies. They have all been targeted by China, both governments and companies. And they did come together in the G7 2003 summit to say that they want to stop China's economic coercion. And so we cut the data that way and looked at sort of the high dependence items that China trades with them. And there's quite a lot, there's quite a lot of leverage there. If you add in South Korea and Australia, two other non G7 countries, but ones that have been invited as observers consistently and that are like minded, then the leverage gets even stronger.
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B
I'm interested in one of the case studies because it was kind of a David and Goliath thing and that's the Lithuania case. Give us just a little bit of background about that but also talk about how the rest of the EU reacted to that because Lithuania is by itself at one level but not alone at another level. And did the rest of the EU rally or did they leave it up to them?
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C
Yeah, this is a very interesting case. So the story basically is that Lithuania has always had a relationship with Taiwan and that has been going on for some time. China has always been competing to try to woo Lithuania away from Taiwan into the Chinese orbit. Lithuania is one of on two hands full of countries that still have some sort of substantive political relationship with Taiwan. And the sort of trigger for all this was that a representative office for Taiwan was going to open in Lithuania and it in particular was going to be called like the Taiwan Representative Office which is a red flag for China. We have a Taiwan representative office here in the United states in Washington D.C. but it's called the Taipei Tech Row. Right. Taipei, not Taiwan. So this led China to carry out massive economic sanctions against Lithuania that I can't remember the exact numbers but like had a substantive effect on gdp. But in addition to that, China also threatened the broader European market that they might also sanction any products that had Lithuania in their production chain. So basically a secondary sanction against the European market.
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B
Were they able to implement that?
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So they weren't. They threatened it. And in the end, to make a long story short, the Europeans organized something that eventually came to be known as the Anti Coercion Instrument unveiled in December of 2023 in which they said that the Europeans would come together if China used more economic coercion against any one of their members and that they would respond that they have a toolkit. They didn't publicize what that toolkit was, but they have a toolkit of actions they would take in response in retaliation to any further economic coercion by China against Lithuania or against anybody else. They also took actions to try to help Lithuania, what we call impact mitigation. The United States also took actions to try to help Lithuania bear the brunt of China's economic sanctions. But it was important from our perspective because it was a very concrete example of countries coming together to try to collectively deter further acts of Chinese economic coercion.
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A
Now, is there anything in the toolkit for remedying this other than sort of fighting fire with fires, sanctioning their products, restricting access to critically needed imports? In politics, there's always things like ridicule. I mean, your political opponent, whoever he or she might be, the last thing they want to do is look dumb. And so there are tools like that that don't cost a lot and, but can leave a mark. Anything you found that works in this context.
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C
Yeah. So, I mean, certainly one of the most important and first things to do is collective recognition of the act of economic coercion. Right. So China right now is coercing Japan. Right. They are coercing the new Japanese government over the new Japanese prime minister's statements about defense of Taiwan. And so they are stopping tourists from going to Japan. They're no longer importing Japanese seafood. They're taking a number of actions like this, all of course, undisclosed, unannounced. And this is a case where, like, I find fault with the United States, South Korea, Australia, others, who all should be recognizing and acknowledging what China is doing and calling China out for the actions that they are taking. That is not happening. But that's certainly one very important action. In addition to sort of retaliating fire for fire, for example, on trade, you know, there probably are other things that could be done on the investment side in other sorts of areas. But when we think about it, the problem there is that I think it's harder to do. It's harder to do when we're talking about investment. But on merchandise trade, whether we're talking about intermediate goods, finished goods, or even luxury goods which have a high political cost, there's, you know, more potential to organize. I think the ACI toolkit, the anti coercion instrument of Europe, has a variety of different things that we would consider de risking export controls, investment. There may be investment screening. There are a number of different tools that you can use. But what we had the most data on was on the merchandise trade site. And so we decided to start there. But, yes, there are other potential tools that one could think of. But as you say, Scott, I mean, the key is being able to have the political will and political leadership for countries to organize in this way. Yeah.
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You've got to hang together once you start this, otherwise.
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Yeah.
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Could turn into a paper tiger very quickly.
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Right. And the first thing that China will do if you pull together a coalition like this, the first thing they will do is target the weakest link and who they see is the weakest link in that coalition. And so that's why it's important that the bigger countries in this really be committed to it and be willing to take action, even if China's bullying is not directly affecting them.
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B
So perhaps an inappropriate question, Victor, right now, why hasn't the United States stood up for Japan on this immediate issue?
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I mean, frankly, because part of the problem is we're too busy tariffing our
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allies or bombing Iran.
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Yeah. Too busy tariffing our allies and looking
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a lot going on out there. Yeah.
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Looking for the big trade deal with China. As you guys know, we've been doing this research for several years now, and in advance of President Trump's trip to the region for APEC last fall, which he did not go to. He went to apec, but he didn't go to the APEC meeting. He met with leaders. Our basic message was that the United States should stop tariffing our allies and partners and should be pulling them together in a coalition to deal with really, the biggest economic bully in the global trading order for the last three decades, and certainly under Xi Jinping, which has been China.
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A
Fair enough. Well, Victor, thank you for joining us. This has been a terrific discussion, and I want to give you the opportunity for a shameless plug. Like we offer that to all our guests. But where can people find the book and anything else you'd like to tell us?
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C
No. No. So thanks. The book is available. It was published at the end of January, so It's available on Amazon.com or Columbia University Press. It was doing really well for a while. It was like the top in political economy for a while on Amazon. And it makes a great Easter gift, I guess.
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A
There you have it.
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I would just say it is not in the doorstop category. We have a few of those. But what I think is one of its great assets is what Victor referred to, which is the really, really impressive collection of data. I mean, there's a really good analysis and narrative that accompanies it. But the bulk of the book is really data that has not been previously assembled as comprehensively as this. And that makes it a wonderful tool for people that want to, you know, follow this stuff professionally and very thoroughly researched.
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A
Congratulations, Victor.
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Thanks. Thanks very much. Thanks for letting me be on the trade, guys.
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A
Well, we're delighted to have you. Then. Join us again anytime you'd like.
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B
We'll have you back the next time you're on TV or the next time you write a book. We'll bring you back, whichever comes first.
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C
Thanks very much.
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B
You've been listening to the Tray Gods, a CSIS podcast.
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C
For more audio content, visit csis.orgpodcasts thanks for tuning in.