A Breakdown in U.S.-China Relations Would Damage Both Sides

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Scholars and business leaders discussed open trade, collaboration opportunities, and misinformation at a recent Stanford forum focused on U.S. and China relations. | Holly Hernandez

If the tariff dispute between the United States and China continues, U.S. businesses and consumers could suffer, warned top business leaders at the Stanford China Economic Forum on Monday. Consumer prices could surge, global supply chains could crumble and the U.S. could lose its competitive edge, they said.

Hosted by Stanford GSB, the Stanford Institute for Economic Policy Research and the Stanford King Center on Global Development, the forum brought together scholars and business leaders for discussions about the roles that the U.S. and China play in business, technology, and economic policy around the world.

Among the topics discussed:

• The importance of scholarship and social scientific research in helping to inform policy-makers about economic realities.
• The breakdown of trust resulting from inaccurate narratives and generalizations about global trade and the U.S. and Chinese economies.
• The mutual advantages of collaboration — for example, the U.S. can offer China global marketing while China can provide the U.S. with manufacturing.
• Warning about the risks that would arise from unraveling the interconnections between U.S. and Chinese economies was former U.S. Treasury Secretary Hank Paulson, who delivered the forum’s keynote address.

“If we cut ourselves off from the global innovation ecosystem and from the global supply chain and from collaborating with other innovative people and countries, we will give up our leadership, and ultimately this will really hurt the United States of America,” said Paulson, who served under President George W. Bush.

“In trying to isolate China, we isolate ourselves,” he said. Paulson said that open, international trade should be about finding win-win solutions.

Opportunities for Collaboration

Given the magnitude of global challenges today, cooperation with China can accelerate solutions, said Stanford President Marc Tessier-Lavigne in the forum’s opening remarks.

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Stanford GSB Dean Jonathan Levin, internet entrepreneur Jerry Yang, and Sequoia Capital China Managing Partner Neil Shen called for more trust and honest dialogue between the countries. | Holly Hernandez

“Many of the great problems facing the world — in energy and sustainability, in human health, in poverty and inequality — are so big and so thorny that we need the best minds around the world tackling them,” Tessier-Lavigne said. “We need as many of the best minds as possible to help us get to a sustainable future as rapidly as possible. We can’t delay.”

Global health issues offer one example of how mutually advantageous international collaboration can be, said John Oyler, chairman, cofounder, and CEO of the pharmaceutical company BeiGene.

When China and the U.S. come together to address a global health issue — such as cancer — the resulting mass market helps reduce the overall cost of research and development and makes treatment more affordable for patients, all while also offering billions more people life-changing therapies, Oyler pointed out.

“Cancer has no borders,” he said.

Advantage of Open Trade

Also emphasizing the importance of open trade was Walmart chairman Greg Penner.

International trade has been critical to U.S. and Chinese prosperity, creating jobs and alleviating poverty in both countries, he said. “Our belief is that trade is good for American and Chinese consumers.”

Penner stressed how open trade can drive competition and collaboration and leads to better prices for the consumer. While competition can at times be “uncomfortable,” it ultimately “makes us better,” he said.

Tariffs, on the other hand, lead to increasing costs that ultimately are passed on to consumers, Penner said. For a company that sources products from China — say, bicycles — a first round of tariffs might increase costs by a few dollars that the company could absorb, Penner said. But as tariffs continue to rise, so do costs and thus consumer prices.

As Chinese and U.S. policy-makers continue to discuss the impact of tariffs on trade, Penner said that specific real-world examples — such as the price of a bicycle — are crucial to informing those discussions.

Changing the Narrative

The forum also underscored the importance of data and scholarship, especially when it comes to informing foreign policy.

Missing from the current debate is fact-based research about China and the global economy, said Michael McFaul, director and senior fellow at the Freeman Spogli Institute for International Studies.

McFaul said he is concerned about the sweeping generalizations he reads about China and U.S. relations. He asked, what data supports those statements?

While disagreements are inevitable in any deliberation, disagreements cannot be based on “bad information,” said McFaul, who emphasized the value of social scientific research and fact-based data.

As Oyler warned, “Generalizations destroy trust.”

Jonathan Levin, the Philip H. Knight Professor and Dean of Stanford GSB, reiterated the damaging consequences of diverging and disparate accounts.

“The emergence of competing narratives — in China about the U.S., and in the U.S. about China — is emblematic of the loss of trust that has occurred in the last year between the two countries,” Levin said. He stressed the need to promote dialogue based on facts and different perspectives – and trust and understanding is critical to that.

Jerry Yang, cofounder of Yahoo, urged attendees to go one step further and to “be courageous to change the dialogue.”