Speaking to the South China Morning Post on the sidelines of the China Institute Executive Summit in New York, the Nobel Prize-winning economist and Columbia University professor said: “We have a demagogue who’s a president.”
Trump, for political reasons, is trying to reverse a 70-year process of international agreements that have created an industrial chain “where borders don’t matter”, said Stiglitz, a member of the Democratic Party who served many years in the Clinton administration.
“Any prudent manager or CEO thinking about the construction of a supply chain would have to ask the question, ‘What if?’
“That’s a fundamental change to the way the global system operates and it is adding a significant extra cost, and those extra costs are borne by ordinary citizens,” the economist said. “Eventually they get reflected in prices.”
Stiglitz’s views, broadly critical of the trade actions the Republican president has announced against China, run counter to momentum building among some US lawmakers looking to punish Beijing for policies that seek to create “national champions” in advanced technologies such as artificial intelligence and 5G telecommunications networks.
On Wednesday, ranking US Senators, including John Cornyn of Texas and Chuck Grassley of Iowa, both Republicans, called China “immoral” and “coercive” in the way their investment regulations force foreign companies operating in the country to transfer intellectual property to joint venture partners.
Chinese officials are “laughing at Trump” for his “primitive” approach to the trade action he is taking against China, Stiglitz said in a panel discussion at the China Institute conference.
The US has not filed any World Trade Organisation complaints against China, even though Trump and his cabinet members, including commerce secretary Wilbur Ross, have cited Beijing’s violations of WTO rules because Beijing is availing itself of the special treatment the country received when it acceded to the international bloc, Stiglitz explained.
The US should have demanded that WTO members abide by a multilateral investment treaty, which never happened because US companies were keen to get China into the WTO so they could take advantage of the country’s huge markets, he said.
The lack of such an investment agreement has allowed China to keep in place rules that force foreign companies operating there to form joint ventures, arrangements which usually involve technology transfers.
Not all participants at the conference agreed that the US should accept what was agreed to when China joined the WTO in 2001.
Steven Witkoff, CEO of New York-based real estate investment firm Witkoff Group, said in a separate panel discussion: “I’m not sure why we have to accept that the WTO protocol has to be the protocol for the next two centuries.”
Former US treasury secretary Henry Paulson applauded the Trump administration’s effort to put “a big emphasis on technology and intellectual property”.
“We’re an innovation-driven society, so to ask companies to give up their hard-won innovation really puts us at a basic comparative disadvantage,” said the former treasury chief in the administration of President George W. Bush.
While Paulson said he did not expect China to abandon its industrial policy, he said he believed there was “plenty of room to change the competitive landscape” and “make things more favourable in terms of market access”.
Witkoff said Trump is working quickly to reform a trading system that has benefited US investment brokerages to the detriment of manufacturers, farmers and other constituencies in the US because the surplus capital in China resulting from the US-China trade imbalance often gets parked in expensive US assets.
“Of course he is pushing hard. He only has eight years in office. He is not the president for life, so he needs to get things done quick,” Witkoff said.
Last month, Trump announced his decision to impose punitive tariffs on US$50 billion worth of annual imports from China and has threatened to target US$100 billion more following an investigation by the US trade representative.
China has announced reciprocal action on more than US$50 billion of imported American goods.