Former US Treasury secretary Henry Paulson calls for ‘targeted reciprocity’ in US-China trade

·4-min read

Henry Paulson, a former US Treasury secretary long known as one of Washington’s strongest proponents of dialogue with Beijing, said President Trump’s tariffs on Chinese goods should not be lifted without the US getting something in return.

“The American administration is about to change. But the clock will not simply be rewound,” Paulson said in a speech at the Bloomberg New Economy Forum on Monday. “We should look to a punitive toolkit built on targeted reciprocity that includes jointly withholding access to our markets.”

His remarks were the latest sign that the dramatic, bipartisan, and negative shift in American attitudes toward China during the Xi Jinping era will not necessarily soften after Trump leaves office.

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Tensions between the two countries have rapidly worsened in recent years over trade policy, human rights, and most recently the coronavirus. As Xi has tightened his grip on power in Beijing, both parties in Washington have increasingly come to see China as a destabilising and aggressive threat.

“The Trump administration was responding to real concerns of American people about China, and real failures of China to act as responsible global citizens,” said Paulson, who served as US Treasury secretary under George W Bush and in 2011 founded a think tank aimed at fostering the US-China relationship.

“The question is how we respond to these legitimate issues,” Paulson said, suggesting the Biden administration use a policy he called “targeted reciprocity”.

“Instead of President Trump’s emphasis on outdated, ineffective purchase agreements, we need to focus on the future by opening key areas to investment and export,” he said. “We must tackle the market distortions of China’s state-owned firms. And we’ll need to deal with structural and process issues that include services, not just goods.”

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“The agreement should be done in phases with regular deliverables, beginning with easier issues that build momentum to tackle the tough ones,” he continued. “In return the US should be prepared to open its own markets.”

Paulson’s remarks came just a few minutes after a separate speech at the event from Wang Qishan, China’s vice-president, who presented China as a benign nation eager to help the world.

Chinese Vice-President Wang Qishan delivers a keynote speech at the New Economy Forum via video link on Monday. Photo: Xinhua
Chinese Vice-President Wang Qishan delivers a keynote speech at the New Economy Forum via video link on Monday. Photo: Xinhua

“I want to stress once again that China will always be a builder of world peace, a contributor to global development, and a defender of the international order,” said Wang.

It is unclear if his words will have any sway in Washington now or after the Biden administration takes office on January 20.

Paulson’s shift in tone about China shows just how far US-China relations have fallen, said Wendy Cutler, vice-president of the Asia Society Policy Institute and a former official in the US Trade Representative’s office.

“It’s quite telling on how much our relationship with China has declined when even one of its most ardent supporters is now talking about employing a ‘punitive toolkit’ and pursuing ‘targeted reciprocity’,” said Cutler.

Trump plans new hardline moves against China in coming weeks: official

Another speaker at Monday’s event, former secretary of state Henry Kissinger, warned the two countries to come back from the brink, or else risk stumbling into a war with each other.

“I’m not saying that we and China will live with a consciousness of harmony. It will always be stresses and tensions,” Kissinger said. “But unless there are some places for some collaborative actions, it will slide into a catastrophe comparable to World War I.”

Paulson said that climate change is one area where the US can work with China, but added that it is also an area ripe for “targeted reciprocity”, to pressure Beijing to do more to help solve the crisis.

“We need China to solve its massive environmental problems at home and adopt better practices abroad,” Paulson said.

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