I wanted to start by recognizing the range of experiences that you’ve had in government, from Governor of Washington to Secretary of Commerce to US Ambassador to China. From your experience, could you share some of the practices that you’ve found key to effective management?
When I first started in government as a state legislator, it was just myself and a secretary. But, as I achieved higher positions and had a larger staff, I learned that effective management began first with having talented personnel – people who are bright, energetic, creative, ethical and hardworking. I also look for people who don’t necessarily fit the mold for a particular position, or don’t have a background in that field but who are quick learners who can bring a fresh perspective to the agency or issues faced by the agency. I’m very proud of the teams I’ve been able to pull together in my various positions.
I’m also very proud of the many management accomplishments my teams have been able to achieve, such as bringing stability and effectiveness to troubled agencies or operations; bringing projects in under budget and thus saving taxpayers money; and streamlining tasks, from shortening the decision-making time on grants for economic development at the U.S. Department of Commerce to speeding up visa processing times at our Embassy and Consulates in China.
We did this by adopting a management philosophy of setting very high goals – almost impossible goals – then motivating employees to think creatively to meet the goals, but also praising them and supporting them if they tried but failed to meet the goals. We sent a message that as long as they worked hard, diligently, and ethically, one could not expect perfection or success every time – that they might not reach their goals on the first effort.
Your most recent position was a little different, in that it was far more international than domestic. In a previous interview, you mentioned that when asking you to become the next US ambassador to China, President Obama called the US-China relationship “the most important relationship in the world” to manage. Could you elaborate a little on why that was?
First, our economies are the two largest in the world and are so intertwined. For instance, China is America’s number one export destination for everything we grow on and process from our farms. Millions of jobs in America depend on selling made-in-USA goods and services to China. China also manufactures and sells low-cost goods to America, leaving more money in the pockets of American consumers for other expenditures, whether vacations, education of their children, automobiles, home repair, or savings and retirement.
Second, our joint actions affect the entire world. For example, we are the world’s two largest emitters of greenhouse gases. China emits more greenhouse gases than any nation in the world, but America emits more greenhouse gases per person than any other country. It is incumbent upon both China and America to work together to reverse the disastrous effects on climate change. Our scientists are also working hand-in-hand to find cures for cancer and to battle the latest strain of drug-resistant TB. We’re also partnering together to prevent North Korea from developing a nuclear weapon. The world is looking to China and the U.S. working together to address the toughest issues facing our globe.
Despite differences in many area, the US-China relationship is much closer, stronger, and intertwined today than ten years ago, or even thirty years ago when diplomatic relations were reestablished by President Carter. It’s certainly stronger today than when President Nixon went to China forty years ago.
One of the first aspects of the US-China relationship that you mentioned was the extent of our economic codependency. China is currently implementing reforms to transition from a low-cost manufacturing economy to one based more on high-tech and skilled workers. How far along that transition would you say China is, especially given its current struggles with the troubled stock market and slowing growth?
China very much wants to move away from a low-cost, low-wage, export-driven manufacturing economy, to one of more domestic consumption and high-technology. It’s going to take a while. Even as it tries to make the shift, it will still depend disproportionately on low-cost, low-wage exports. Many of the necessary reforms to the Chinese economy – trying to break up the state-owned enterprises and making those enterprises more efficient, or trying to consolidate them because there are too many, for example, in the steel coal sectors – will take some time.
Obviously, the economic slowdown in China will pose headwinds to the reform effort, because the reforms will mean fewer jobs in various sectors. If the economy is already slowing down with rising unemployment in China, pushing too far or too aggressively on the reforms would only exacerbate the unemployment situation. That could lead to instability and domestic problems for the Chinese leaders and the Chinese people. It’s clear that some of these reform efforts will be slowing down.
Are there unique opportunities for American businesses, given the transition, in spite of the recent slowdown?
The middle class is exploding in China. Whereas ten, fifteen years ago, only a small percentage of the urban households were middle-class, today more than fifty percent are middle-class. There’s also a super wealthy class developing in China, with a million millionaires and more billionaires in China than in the United States. Along with a rising middle class in China comes a greater appetite for high-quality, made-in-the-USA goods, from medical products to cosmetics to clothes to machinery to food, especially since the Chinese people have little confidence in the safety and the purity of the food they consume. This demand for more made-in-USA goods means more jobs for the American people.
Are there specific challenges that American businesses face in expanding into China?
Different companies will face different challenges when trying to do business in China. If they are shipping their products to consumers, via Amazon or Alibaba, they may not have much to worry about. For many US companies selling directly to the Chinese people, the challenge is to meet the tastes of the Chinese customer. Of course, any company whether American, Japanese, French, or German operating in China will have challenges. It’s no different from foreign companies operating in America. Foreign companies have to become familiar with the people, the laws, the customs, and language of the new country.
Past familiarity with culture and local customs, are there also structural barriers, especially in terms of controversial trade issues such as intellectual property rights regulations?
These are critical issues. Many American companies are concerned about cybersecurity, vigorous intellectual property rights enforcement, strong rule of law and fair treatment of foreign firms – ensuring a level playing field. Foreign firms are constantly worrying about theft of trade secrets. In addition, many sectors of the Chinese economy are off-limits to foreign investment, ownership, and even partnership. There are numerous barriers to foreign companies doing business in China. Hopefully the bilateral investment treaty being negotiated by the U.S. and China will remove these barriers.
Recently, China has been investing in regional economic infrastructure, such as the Silk Road Project and the Asian Infrastructure Investment Bank (AIIB). The US, on the other hand, just signed the Trans-Pacific Partnership (TPP), which China was not a signatory of. Is this a sign of economic fragmentation, in the sense of more regionalism rather than globalism?
No, not at all. The Asian Infrastructure Investment Bank is an international project led by China to provide more funds for infrastructure projects throughout the Asian-Pacific region. That could greatly benefit the region. The US is also helping out, through institutions like the Asian Development Bank, the IMF, and others. China is trying to reach agreements with Japan and Korea on trade, along with other countries. That’s all to be expected and very natural.
And, of course, there is the overarching Trans-Pacific Partnership trade agreement that awaits ratification. China is not a part of the TPP because it chose not to join in. It’s not a US-initiated effort; the US actually joined after several other countries had already started the process. There are many people in China who want China to be part of the TPP, but they also know that China is not ready and cannot meet the very high standards on intellectual property rights, environmental protection, or even health and human safety in manufacturing and agriculture. Perhaps in time, China will want to join, but it would first have to meet these high standards.
Many of the protections written into the Trans-Pacific Partnership could be considered controversial issues. Do you believe the promise of more open markets and trade is an effective way to incentivize nations like China to adopt certain standards? Or will trade agreements with protections like this just fail to gain signatories such as China?
Trade agreements with stronger protections and higher standards are increasingly being negotiated. These high standards are necessary to ensure a level playing field. Competition among businesses ultimately benefits consumers with better products and services or lower prices. But effective competition depends on a level playing field. If an American company has to follow high environmental or health and safety standards in making a product, but a competitor in a different country does not, the cost of the American product will be higher. That puts the American company at a disadvantage. Trade agreements must ensure there is a level playing field and fair competition.
I just wanted to touch on one of the human rights crises that occurred under your tenure, when the dissident Chen Guangcheng requested temporary refuge at the American embassy. Given that the US was actively trying to rebalance foreign policy towards Asia at the time, and seeking China support for its interactions with Iran, Sudan, and North Korea, how did policy considerations like these play out alongside human rights concerns?
At the time Chen Guangcheng came into the US embassy, top-level US officials were about to arrive in Beijing for high-level talks with the Chinese government. The talks are called the Strategic and Economic Dialogue; the location alternates between the US and China each year. While there was a strong desire to have the case involving Chen Guangcheng resolved before those talks began, at no point did the U.S. government feel any pressure to reach a resolution for the sake of a resolution.
We were very firm in upholding the rights and desires of Chen Guangcheng, while adhering to our own values and principles. Human Rights is part of the DNA of America. We will never compromise our principles while seeking greater cooperation with China on other issues.
Considering the upcoming election, there will probably be some changes in the US-China relationship, especially given the current frontrunners. Do you have any ideas on what the next president may prioritize or consider with regards to the US-China relationship?
I have no idea of how Mr. Trump would conduct U.S. policy with regard to China. Mr. Trump constantly contradicts himself and utters blatant falsehoods. But his stated desires to impose huge tariffs on all Chinese products entering the U.S. would only lead to retaliation by China and ultimately a trade war. In a trade war, no one wins; everyone loses.