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


15 comments on “Paulson Plays the Rude Card Against Chinese: No Windfall Expected

  1. super390 says:

    China vs US scorecard:
    Korea – China entered when US forces had nearly conquered all of Korea. China got half of it back.
    Vietnam – Definitely a Chinese win, with relatively small casualties.
    Does anyone here want China spending its hard-earned pile of US dollars on nukes? How many big city-busting deterrent h-bombs can they buy for a trillion $?
    Any more rednecks want to spout racist slogans like “Whitey shall prevail”?


  2. Matthew says:

    Paulson used to brag about America being a huge venture capital fund. That’s another way of saying we don’t make anything. A nation that runs deficits in spending, trade, and resource import/export is living on borrowed time–and money.


  3. billy says:

    Bobby Mo’ forgets,
    We are more intelligent than them!
    We are the land of the free and home of the brave!
    Hell -ooh
    We can kick China’s ass in a thrown down, dawg!
    God Bless America & Ron Paul!


  4. me says:

    “helloooooo, China is a POLICE STATE.”
    No, it’s a capitalist state without democratic accountability. It’s the kind of capitalism that makes Walmart great.
    “Helloooooo, we don’t have to kiss their butts.”
    Of course not. But it’s usually to the underdog’s advantage to do so.
    “Helloooo, we have a superior country”
    Ah, but how? So many ways to choose from: More coast? Longer roads? Less torture per capita?
    “and way of life than they do.”
    Do they hate us for our freedoms? Or our choice of hats? Or our SUVs? No wait, they’ve got the SUVs; they sell them to the US.
    Hellooooo. HELLOOOOO. McFly? McFly?
    Ah, the voice of Republican America.
    America made itself great, and it’s unmade its greatness. It’s far from axiomatic. Capital doesn’t care about America now its utility is nearing exhaustion.


  5. Robert Morrow says:

    helloooooo, China is a POLICE STATE. Helloooooo, we don’t have to kiss their butts. Helloooo, we have a superior country and way of life than they do. Hellooooo.


  6. erichwwk says:

    Folks might remember the Asian meltdown, when the IMF advocated a rapid response and the adoption of free market voodoo; those that caved, sucked and those that opted for a slower, controlled response came out ahead. Does anyone think the rapid approach to incorporating market advantages ala Russia as advocated by the US and the IMF was superior to the slower approach [especially as relates to financial markets] than the slower approach of China?
    As far as currency float is concerned, a useful question to ask is why would one opt for a fixed rate, essentially giving away the fruit of one’s labor at below cost? To stimulate exports? Really?
    If one wishes to maximize exports to “stimulate” local production why not either just give the product away, or give the product away domestically? Could it be that the exchange rate is out of balance mostly from the point of view of the U.S.? That China could have a reason for “pegging the rate”, to position itself to compete for hydrocarbons by accumulating the means by which these assets are currently traded? How can one argue that the exchange rate is too low, if that is the intent?
    Perhaps we have forgotten how we responded to the Chinese [CNOOC] submitting the low bid on Unocal, but i doubt the Chinese have. [BTW, most of those assets were in Indonesia, and the Chinese offered to unbundle assets that were purported to have strategic military characteristics].
    The US is indeed between I-raq and a hard place. Germans in the 1940’s were also astonished at how quickly they went from world leader, to a trashed country.
    As someone who was pretty much in on the ground floor of the privatization revolution, it dismays me to see how science has turned into ideology, how little the role of government institutions is appreciated, and how the limits of markets are forgotten.


  7. JohnH says:

    If the Bushies were really serious about the dollar and free market economics, they would open up the US market to Chinese investment, and let the Chinese work off their huge dollar reserves by buying any US corporation they wanted. Let’s see, Exxon Mobil is worth half a trillion, Chevron 175 billion. It gets cheaper after that–Lockheed is a bargain at $40 billion. Selling of the commanding heights of the economy is not pretty, but these kind of sales are what Washington foisted on third world debtor nations after massive devaluations and IMF sanctions made them available at bargain basement prices.
    Fact is, the Bushies are only free marketeers when it suits them and protectionist when it doesn’t. Their “free trade” policies got us into this mess, and they need to figure out a way to get us out without gutting the US economy. Bluster and arrogance won’t make it any easier.


  8. wang says:

    I tell you what happened, what happened behind the closed doors! As matters came to a head, Madam Chinawoman literally grabbed Paulson by the balls and said “you know where I’ve got you!” and Paulson to his horror of this impolitic gesture could not go on and it was only the bottom of the sixth inning, but an official game nonetheless. It was the old Chinese maiden who was first rude! and all you blame America firsters above are once again showing your unpatriotic true colors. Yu don’t go around grabbing, and squeezing (I might add, for it was not a caress by any means) your counterpart’s balls to get your point across, and anybody after that would react with a rudeness of their own, you know, like a Frenchman would after being grabbed by the balls by some old maiden Chinawoman by whom he expected to be treated with more respect.


  9. Chris Marlowe says:

    When you owe your major creditor nation one trillion dollars in order to keep inflation down and sustain Americans’ unsustainable standard of living and expensive foreign wars, it’s about time that China told the US who is in charge.
    Congress and Paulson can throw all the hissy fits they want; that basic fact is not going to change. If they don’t like it, they can find someone else to buy US treasuries which are denominated in sinking US dollars.
    And if they think that the Chinese government is going to open up all the Chinese markets so that the companies they have worked with in their investment banking days will get a free ride in China, then they should think again. Say what you like about the Chinese government; they aren’t dumb.
    Welcome to the Chinese century (and the Indian century). Americans are going to have to learn how to play second fiddle.
    Tough but real…


  10. Zathras says:

    I have no insight into Paulson personally. I understand politics well enough to know that he is between a rock and a hard place. China having conceded so little on currency and other matters means he will shortly have to deal with a Congress determined to be seen taking a stand against China.
    By unfortunate coincidence, the Chinese government appears to be facing a similar situation in its own domestic politics. Having raised expectations after years of very rapid growth heavily dependent on exports, the Chinese seem, to me, to be deathly afraid of tapping on the brakes too hard. That some of that growth is not sustainable is probably as clear to at least some of the Chinese as it is to us, but this knowledge isn’t enough to generate a consensus for really weakening the yuan or making another major change in Chinese trade policy, not now.
    Incidentally, being the “China guy” is really a matter of understanding American interests, and the limits of possibility, in our relations with China. It isn’t a matter of knowing Chinese or having been to China a lot. All that enables one to do is avoid obvious cultural blunders. The greatest successes in our modern relations with China were achieved by Nixon and Kissinger, neither of whom had ever seen the place before the opening to Beijing in 1971.


  11. Carroll says:

    One clown exits he stage, another comes on.
    Seriously, what is Paulson’s problem? Is there some back story to this with China or just more US showing we have no damn manners?
    We have been swagging around like a broke drunk sailor and China has been financing us with their nose to the grindstone, eye on the prize enterprizing.
    The US is now in the position with China where we are damned if we do and damned if we don’t trade and money wise…what next?… there is no easy way in, or out, of our China syndrome.


  12. EEK says:

    POA- I’m with you on expecting a ‘bushie’ to fumble a significant event. And I fully expect there was a basic misunderstanding as to who is in the drivers seat these days. Bushco goes in there with some directives about how things are going to play out, and they run head-on into the the revived Middle Kingdom. We may be about to find out who the real power is in the 21st century.


  13. Pissed Off American says:

    Is this supposed to be a suprise? By now, isn’t it a bit naive to think a Bush Administration official would act with any degree of competence?
    BTW, is this particular thread from Steve or Scott? It really doesn’t matter I guess. Its just that I have never seen an uncredited post here.


  14. brat says:

    Could it be that the Bushies see China as “uppity hired help” not realizing they own us?
    What a mess.


  15. JohnH says:

    You think the Bushies would admit that China deserves respect just because they lent us a trillion dollars? Think again! American hubris is such that when you borrow that kind of dough, you call the shots!


Add your comment

Your email address will not be published. Required fields are marked *