Paulson Plays the Rude Card Against Chinese: No Windfall Expected


paulson wu yi.bmp
(Secretary of the Treasury Henry Paulson and China Vice Premier Wu Yi perform the US-China hit, Strained Smiles.)
Wow. Secretary of the Treasury Hank Paulson just about did everything wrong but spit on Chinese Vice Premier Wu Yi today at the premature wrap-up of the Strategic Economic Dialogue (SED) meeting in Washington.
Chris Nelson’s Nelson Report — which I’ve attached in full below — has a scathing critique of the Treasury Secretary’s performance today.
Now maybe Paulson had a reasonable beef with what was happening behind closed doors in the sessions attempting to coordinate broad strategic economic policy — particularly currencies — between the rapidly rising China and the U.S. But Paulson should know that you don’t just let the world know that you can barely stand being in the same room with your negotiating partner.
Before all this, Paulson wanted to be “Mr. China” in the Bush administration and take over the responsibility for serious management of the China portfolio from the only other person in the administration who gave much attention to US-China affairs, former Deputy Secretary of State Robert Zoellick. He got the game — but today, he seems not to have played well.
After more than 70 trips to China during his life, Paulson can’t really get away with an “I was tired” or “I didn’t understand that anyone would be upset that I began my formal statement when Wu Yi hadn’t even walked in the room yet.” He knows China too well. He understands the importance of nuance.
But again — maybe Paulson was just pissed off by something really, really big.
But HELLLLOOOOOO — was it as big as our brewing trouble with Iranian and North Korean nuclear pretensions?
In an arena that truly does matter, Iran’s and North Korea’s nuclear gaming, we desperately need China and Russia to maintain their collaboration with us. And to engage in gratuitous tit-for-tat rudeness is exactly the kind of posture that loses America the support it needs when it really has important priorities.
Chris Nelson’s Nelson Report has a
great treatment of this meeting. Others have already confirmed his take:

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 Administration…at 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. . .

For the record, I think Hank Paulson is very smart — but Chris Nelson is on to something here with this mess today– particularly if there is any truth at all to America tilting towards a new round of intensified saber-rattling with Iran.
This tiff may seem small then when we need China — but then we should be asking ourselves the question of how exactly we got into this position of needing China so badly.
— Steve Clemons


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