Mark Wu

On Tuesday, Danny Diaz, who ran former Florida Gov. Jeb Bush’s ill-fated 2016 presidential campaign, told POLITICO’s Tim Alberta that if there’s an “October surprise” in this election, “it’s something abroad. It’s a foreign policy-oriented development.” We asked the experts: if it’s China-related, what might it look like? A Phase One trade deal collapse is the most likely China-related event to upend the U.S. election. Harvard Law School’s Mark Wu says President Donald Trump could declare China “off track in meeting the purchase commitments.” Eurasia Group’s Paul Triolo says Trump “has become progressively less interested in the trade deal,” while E14 Fund’s Calvin Chin says ditching the deal is the “easiest to pull off [with] good electoral bang for the buck.” The Bay Area Economic Council’s Sean Randolph tells China Watcher that “while this might look like a failure at one level, Trump could try to show that he's in control, tough on China, and looking out for U.S. interests.” The deal would be (bureaucratically) easy to unwind, according to Asia Society’s Wendy Cutler. “Legally, the agreement requires a 60-day advance notification period before withdrawal,” she tells China Watcher, “but as we’ve seen to date the legalities would be overshadowed by a surprise announcement.” Trump can get the electoral pop from an announcement his administration intends to leave, even if it’s not official until after the election. U.S. and Chinese multinational companies could be frozen out. Heritage Foundation’s Klon Kitchen says China could block a TikTok sale and possibly remove “one or several industry leaders” among U.S. tech companies in China. Schmidt Futures’ Christopher Kirchhoff says Chinese ruler Xi Jinping could “move to ban Apple products in China.” Syracuse University’s Mary Lovely says a Trump move against WeChat could see Beijing retaliating against U.S. firms in China.

How far has the diplomatic relationship between the United States and China sunk? It’s gotten to the point where China watchers are increasingly invoking a fuzzy but extreme concept: “decoupling.” In its purest form, the term refers to a halt in the flows of information, money, ideas, and people between the world’s two powers. And there’s plenty of evidence the two countries are headed in that direction...But how realistic is a pure decoupling – and what does decoupling, in any form, mean for our collective future? To help answer this question, I gathered a group of China experts with backgrounds in finance, trade, government and technology...Joining me for the virtual discussion...[is] Mark Wu, Vice Dean and professor of international trade at Harvard Law School... "When we use the term decoupling, we have to think of it as a spectrum. There are a range of options and it will differ depending on which sector. What's the nature of that company? It will also differ based on where that company earns its revenue globally. One possibility is definitely the zero-sum choice that Samm alluded to. But for other companies, this is a question about simply not putting all your eggs in one basket. So you've seen some companies depend overwhelmingly on either Chinese or American suppliers. And now [they are] thinking, we better have other sources in case unexpected developments happen. Then there is another alternative, which is to say nothing's going to change about how we operate currently, but we may have to change our future plans. Chinese companies right now who operate with a 'China for China' type of strategy may now be thinking about going towards a 'China for the world' strategy."

President Trump said he would sign the recently negotiated phase-one trade deal with China in Washington on Jan. 15 — marking a formal truce in the U.S-China trade war — and would later travel to Beijing to negotiate a broader pact...Mr. Trump has focused most of his attention on the Chinese farm purchases. According to U.S. negotiators, China has agreed to buy an average of at least $40 billion annually in agricultural goods starting in 2020...In addition, the U.S. has claimed, China has agreed to increase overall imports of U.S. goods and services by $200 billion over the next two years — a growth spurt that China hasn’t come close to reaching in the years since it joined the World Trade Organization in 2001...Both sides say that any purchases must conform to WTO rules — a requirement that could give China a way to argue that it can’t meet purchase goals. For instance, soybean purchases diverted from Brazil to the U.S. could violate WTO rules. “The trick is for the agreement to be crafted in a manner that’s ambiguous enough so as not to raise WTO challenges, but is clear enough to satisfy the U.S. that the Chinese government will use the tools available to it to direct farm purchases to the U.S.,” said Mark Wu, a WTO expert at Harvard Law School.

Hours after China announced retaliatory tariffs on U.S. goods on Friday, President Donald Trump ordered U.S. companies to “start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”...Trump could treat China more like Iran and order sanctions, which would involve declaring a national emergency under a 1977 law called the International Emergency Economic Powers Act, or IEEPA...Invoking IEEPA could also trigger legal challenges in U.S. courts, said Mark Wu, a professor of international trade at Harvard Law School...A far more dramatic measure, albeit highly unlikely, would be to invoke the Trading with the Enemy Act, which was passed by Congress during World War One. The law allows the U.S. president to regulate and punish trade with a country with whom the United States is at war. Trump is unlikely to invoke this law because it would sharply escalate tensions with China, said Wu. “It would be a much more dramatic step to declare China to be an enemy power with which the U.S. is at war, given the president has at times touted his friendship with and respect for President Xi (Jinping),” said Wu. “That would amount to an overt declaration, while IEEPA would allow the Trump administration to take similar actions without as large of a diplomatic cost.”

The US-China trade war rages on and dominates conversation ahead of the G20 summit this week. A US veto of appeals judges at the World Trade Organisation threatens to bring that cornerstone of the global economic order to a standstill by December, a month out from its 25th anniversary...Harvard Law School professor Mark Wu says the complexity of negotiations will delay any potential agreement. "The frustration that the US and possibly others have faced in relying upon the WTO to deal with its China-related trade challenges stems, in part, from the lack of a thorough updating of WTO rules over the past two decades," he says.

Earlier this year, Chinese President Xi Jinping addressed a crowd gathered for the second summit of his signature infrastructure policy, the Belt and Road Initiative (BRI)...With the BRI, Xi is signaling China’s readiness to reprise a more proactive geopolitical role, according to Harvard Law professor and international trade expert Mark Wu. “President Xi, much more than his predecessors, is assertive of this idea of the China dream — part of [which] is about national rejuvenation and China rightfully stepping back onto the global stage,” he said.

The U.S.-China trade blowup was a long time coming. And it won't be easily resolved, not even if U.S. and Chinese negotiators reach a truce in the next few weeks that reassures jittery financial markets. Tensions between the world's two biggest economies intensified over the last week. The Trump administration more than doubled tariffs on $200 billion in Chinese imports and spelled out plans to target the $300 billion worth that aren't already facing 25% taxes. The escalation covers everything from sneakers to toasters to billiard balls. ...Critics now say the Geneva-based WTO, which sets trade rules and mediates disputes, was ill-equipped to handle China's unorthodox blend of capitalism and state control. In the Chinese system, it is tough to tell whether a company is seeking profits in the conventional way or is acting with the support and on behalf of the government to achieve China's strategic goals. The U.S., for example, says that the telecommunications equipment supplied by China's Huawei can be used to spy on foreign countries. "China's economy is fundamentally different— even unique," Mark Wu of Harvard Law School wrote in an influential 2016 paper. "The WTO rules, as written, are not fully equipped to handle the range of economic problems associated with China's rise."

China held back from immediate retaliation for higher U.S. tariffs, unlike in past rounds, taking time to weigh its options amid uncertainty over how the Chinese economy would weather a full-bore trade conflict. A failure to break an impasse in talks in Washington on Friday opened a new phase in the trade fight after more than five months of back-and-forth negotiations. This time, some economists and analysts said, Beijing is taking stock of potential economic damage from higher tariffs. “China doesn’t want to fan the flames,” Mark Wu, an international trade professor at Harvard University, says. “It wants to be seen as the reasonable party and open to compromise.”

The new hard line taken by China in trade talks—surprising the White House and threatening to derail negotiations—came after Beijing interpreted recent statements and actions by President Trump as a sign the U.S. was ready to make concessions, said people familiar with the thinking of the Chinese side. ... “The U.S. is correct to seek a multiprong approach of not relying solely on commitments but also actually changes to the laws, so as to ensure Chinese leadership intentions are fully conveyed down to all local levels of government,” said Harvard Law Professor Mark Wu.

One standard criticism of Trump’s emphasis on bilateral trade—and reducing the bilateral trade deficit—is that it’s leading China back toward a world of managed trade. ...Forget the formal structure of “trade”—tariffs, quotas and the like. They don’t matter much when the bulk of China’s imports are carried out by state owned companies, or by private companies that can only import with a license from China’s state. Go back and re-read Mark Wu's rightly celebrated article on China, Inc's challenge to the global trading rules.

In the 1980s, China was beginning a long economic boom that would transform the global trading system, and Michael Korchmar decided to go there to launch a joint venture. He quickly soured on the country. ... Consider this: China has more companies in the Fortune 500 than any country except the United States. More than half of those firms are controlled by a single government agency, the state-owned Assets Supervision and Administration Commission, wrote Harvard Law Professor Mark Wu, in a 2016 article, "The 'China, Inc.' Challenge To Global trade Governance."

The World Bank can be sued when its overseas investments go awry. And so can some other international organizations. That is the clear message from the U.S. Supreme Court, which last week issued a 7-1 decision in Jam v. International Finance Corporation, ruling for the first time that international financial institutions, including various branches of the bank and other U.S.-based organizations like the Inter-American Development Bank, can be subject to lawsuits in cases where their investments in foreign development projects are alleged to have caused harm to local communities. ..."This decision certainly opens the door for more lawsuits," says Mark Wu, an international trade law scholar at Harvard Law School, who was not involved in the suit. "It may cause [international financial institutions] to be more cautious in the operations of the projects themselves." Wu added that the new legal liability might make the World Bank think twice about whether to fund projects that could come with high environmental or social risks.

In the 1980s, China was beginning a long economic boom that would transform the global trading system, and Michael Korchmar decided to go there to launch a joint venture. He quickly soured on the country. ...Consider this: China has more companies in the Fortune 500 than any country except the United States. More than half of those firms are controlled by a single government agency, the state-owned Assets Supervision and Administration Commission, wrote Harvard law professor Mark Wu, in a 2016 article, "The 'China, Inc.' Challenge To Global trade Governance." ... "The closest analogue would be if, in the aftermath of the 2008 financial crisis, the U.S. Treasury Department set up a single government entity to act as the controlling shareholder of JPMorgan Chase, Bank of America, Citibank and Wells Fargo," Wu wrote. Even when a company has no explicit ties to the government or the party, executives must work hard to stay in Beijing's good graces, if they want their companies to have access to the best contracts, Wu says. "People understand what the objectives are and they'll operate within those confines," he says.