Sunday, 3 June 2007

Paulson Plays the Rude Card Against Chinese

An fascinating post on the state of US-China relations from a US perspective. The linked article comments on a Chris Nelson report (posted below).

Nothing is particularly surprising but what is of interest is whether we believe this to be a deliberate snub or simply misplaced (or not misplaced) US arrogance. Cock-up over conspiracy is my reading of it. My bold.

Perhaps the most telling quote in the article is:
Are we discovering that when China considers itself an equal, does that change the whole "negotiating game"?

I suspect this statement is a true representation of the facts - a little surprising that this is only now being contemplated.
Paulson Plays the Rude Card Against Chinese: No Windfall Expected

The Nelson Report by Chris Nelson, 23 May 2007

It may be that we are cranky because the meds are wearing off from our root canal this morning (just a swell way to start the workday) but it doesn't sound like the US-China cabinet level SED "dialogue" went all that well. In fact, there is some evidence it was a disaster.

So you have to ask if it will end up being the end. Barring some major breakthroughs at the JCCT, it doesn't sound like there will be any point in meeting again, as scheduled, in December.

This morning's session was called early. . .the game was stopped in what would normally have been the 6th inning. As one experienced China-hand asked, rhetorically, "you telling me Wu Yi came over here with 14 of her cabinet members and they couldn't find things to talk with us about?"

"Results", with one or two exceptions, either were minimal, or not what Secretary Paulson seemed to expect. And at the closing press conference, the Chinese didn't even pretend they had had a good time. Madam Wu Yi read her statement, and walked off. No pretence of a friendly hug for the US side.

At yesterday's press briefing, journalists were urged not to see the SED as an negotiating "event", but, rather, as a "discussion". Negotiations and "results", it was argued, are for the JCCT process chaired by Commerce.


Today, an impertinent ink-stained scribbler asks, privately, "if Treasury chairs the SED, and Paulson isn't allowed to press his case on currency, and to get a Chinese response, what's the point?" In fact, sources indicate there was some "heated dialogue" on currency. But the bottom line is the same...after all the US pressure, all it got was last week's very minimal "float", increasing the maximum daily trading band by 0.2% to 0.5% total. . .exactly half what Bretton Woods defines as a "fixed rate".

So you have to wonder if this time, Paulson's patience has worn out, and the still-delayed Treasury report to Congress on undervalued currencies will. . .finally. . ."cite" China. Since that would formally kick-off mandated "negotiations", you have to wonder how Beijing would react, given its clear public heartburn over the IPR and other WTO cases.

Finally, you have to wonder how long it will take Ways & Means chairman Charlie Rangel to decide that maybe moving some China currency legislation is a small price to pay for Democratic Caucus approval of his Labor and Environment deal.

One normally hesitates to ascribe too much to the theater of body language, but here's something that just bashes you right between the eyes: Paulson, the guy with 72 private trips to China, all that hands-on experience, he who told the White House, State and USTR not to worry, that he would be the China Guy in this the closing press conference, Paulson stalked in, well ahead of Wu Yi, and then started reading his statement before she even reached the podium.

Excuse me? An American or European would have cold-cocked the President for such calculated rudeness! In China (Japan, Korea, etc.) you watch older married couples walk into someplace. . .the husband is 10 feet in front, and the subservient wife is dutifully plodding behind. You think for one minute that elderly maiden lady Wu Yi didn't catch the insult here?

Or, are you telling us Paulson didn't mean it, that he was so focused on reading his prepared statement he didn't think? NONSENSE. This was a calculated act of rudeness which told everyone in the room, and anyone watching on TV, that a major failure had taken place.

Further evidence of a Paulson snit. . .he seemed to go out of his way to be rude to an Asian journalist, who had to ask him four times, in very good english, something about the N. Korea/Macao money problems Treasury is having with State (see separate item in tonight's Report). Paulson pretended not to be able to understand what everyone else in the room got the first time.

Is there a less personal problem going on? Perhaps Labor Secretary Elaine Chao, speaking to reporters last night, sensed today's result, when she said that from what she'd seen so far, even though she herself is of Chinese descent, "it's much harder than anyone thinks for the two countries to communicate". "Maybe", she mused, "we just have very different styles. . ."

Even if you discount Paulson's rudeness to his alleged friend as somehow unintentional, witnesses agree that something definitely was "missing" today. Commented one, privately, "it was as cold as ice in there. The Chinese just looked like they wanted to get off the stage quickly. They really didn't bother to put on a show for the cameras back home."

Maybe that was the point? Certainly, Chinese officials had made very clear their displeasure at the Administration's decision to start those three WTO cases at the beginning of April. . .that was a major point of Wu Yi's "frank" opening remarks yesterday.

And perhaps that explains why Paulson got nothing on something which he had already, in a sense, "leaked" to the press. . .China lifting it's 25% foreign ownership cap on domestic bank investment. Nope. . .not this time.

And even with yesterday's OIE announcement of "controlled risk" clearance of US beef exports, no one hinted if the US asked China to at least agree to talk about its continuing ban later on. . .much less did anyone say something specific today, despite the obvious political importance for pro-trade/pro-China trade senators like Finance Chair Max Baucus, and former chair Chuck Grassley.

OK, OK, so Paulson & Co did get a few things. . .the airlines deal is useful; China said it would remove its moratorium on allowing new foreign securities firms into the market. . .something it had hinted about last December; and the Chinese said that US insurance firms can get into the brokerage and property trading business, as US companies had been asking (although an insurance source said, basically, "nice, no big deal").

So. . .step back a few feet. What happened? Is Chao right? Have we run into a clash of negotiating cultures? Are we discovering that when China considers itself an equal, does that change the whole "negotiating game"? Does that mean that when the Administration. . .finally. . .pulled the trigger on some narrowly drawn WTO cases, that when it also asked China for "deliverables" at the SED it was giving self-destructive offense to Beijing?

Somehow you think that by now, Chinese officials and negotiators are a lot more sophisticated than that. So maybe it was the substance, and capacity of the US negotiators?

Who knows? But one thing for sure, dressing up this SED as something which really moved forward the "responsible stakeholder" concept is delusional.

A final, frankly nasty thought: getting nothing on currency was not a surprise, of course, given the Chinese movement last week (Nelson Report, May 18). . .but this then raises a rather embarrassing question for Paulson personally: We noted in our coverage of his performance at a CSIS/PIIE currency conference (Nelson Report) that when unscripted, he has trouble putting two coherent sentences together. A friend in Beijing said he noted the same thing when Paulson was there last December. You have to ask if this guy is rich, tall, tan. . .and. . .and. . .

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