Chatting with China


Staff & Wire Reports

In this Dec. 18, 2018, photo, a surveillance camera is mounted near the Huawei headquarters in Shenzhen in south China's Guangdong province. The U.S. Justice Department unsealed criminal charges Monday, Jan. 28, 2019 against Chinese tech giant Huawei, a top company executive and several subsidiaries, alleging the company stole trade secrets, misled banks about its business and violated U.S. sanctions. (AP Photo/Andy Wong)

In this Dec. 18, 2018, photo, a surveillance camera is mounted near the Huawei headquarters in Shenzhen in south China's Guangdong province. The U.S. Justice Department unsealed criminal charges Monday, Jan. 28, 2019 against Chinese tech giant Huawei, a top company executive and several subsidiaries, alleging the company stole trade secrets, misled banks about its business and violated U.S. sanctions. (AP Photo/Andy Wong)

For US-China trade talks, hopes are high, expectations low


AP Economics Writers

Wednesday, January 30

WASHINGTON (AP) — U.S. and Chinese negotiators start two days of high-level talks Wednesday aimed at settling a six-month trade war that has weakened both sides, shaken financial markets and clouded the outlook for the global economy.

Yet the odds seem stacked against any substantive resolution this week to the standoff between the world’s two biggest economies. Perhaps the best that might be hoped for, analysts say, is for the two sides to agree to keep talking.

The differences between Beijing and Washington are vast. The United States is essentially demanding that China downsize its economic aspiration to become a supreme world leader in such fields as robotics and electric cars.

“A comprehensive deal that fundamentally changes their system — I don’t think that’s possible,” said Christopher Adams, a former U.S. trade official specializing in China and now a senior adviser at the law firm Covington.

Earlier negotiations flamed out. And this time President Donald Trump might be inclined to drive an especially hard bargain after being forced to cave in a dispute with congressional Democrats that partially shut the federal government for 35 days.

Moreover, a new complication injected itself into U.S.-China relations on the eve of the talks when the Justice Department brought criminal charges Monday against the Chinese tech giant Huawei, accusing it of stealing technology secrets and violating sanctions against Iran. Beijing shot back by demanding that the Trump administration pull back from what it called an “unreasonable crackdown” on the Chinese maker of smartphones and telecom gear.

“We are anticipating no big outcomes this week,” said Erin Ennis, senior vice president at the U.S.-China Business Council.

A deadline looms. On March 2, the Trump administration is scheduled to escalate its tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent.

The American delegation to this week’s talks is led by Trade Representative Robert Lighthizer, a longtime critic of aggressive Chinese trade practices and of U.S. policies that failed to blunt them. Heading the Chinese team is Vice Premier Liu He.

The core of the U.S. allegations against China is that Beijing systematically steals trade secrets, forces foreign companies to hand over technology as the price of access to the Chinese market and subsidizes its own tech companies.

But compelling China to reform its trade policies and treatment of foreign companies will be difficult.

“The idea of just grabbing (technology) however they can is kind of ingrained at this point,” said Amanda DeBusk, chair of the international trade practice at Dechert LLP and a former Commerce Department official. “You can’t just flip a switch” and expect China to drop long-established practices.

The administration has imposed tariffs on $250 billion in Chinese imports; Beijing has retaliated with import taxes on $110 billion in U.S. goods.

President Donald Trump has threatened to extend the tariffs to an additional $267 billion in Chinese goods. If he did, Trump’s import taxes would cover virtually everything China ships to the United States.

Last spring, it looked as if the two sides might avoid a full-blown conflict. Treasury Secretary Steven Mnuchin declared the trade war “on hold” after China had agreed to step up its purchases of U.S. goods, especially in agriculture and energy, and narrow America’s huge trade deficit with China. The cease-fire didn’t last. Critics dismissed Beijing’s commitments as vague, and Trump backed away from Mnuchin’s deal and decided to proceed with tariffs.

The trade war has magnified uncertainties for businesses, raised priced in some sectors and unsettled investors. Pointing to the U.S.-China conflict, economists at the International Monetary Fund, the World Bank and the Organization for Economic Cooperation and Development have downgraded their forecasts for global growth. The Dow Jones Industrial Average is down more than 8 percent since early October, though it has rebounded since Christmas.

The Chinese economy is decelerating, having expanded last year at its slowest pace since 1990. U.S. officials and some analysts say they believe its weakening economy will pressure the Chinese into making concessions.

“The economic circumstances are a powerful bargaining tool,” DeBusk said.

But she added that “the Chinese slowdown also impacts the United States.” Indeed, U.S. heavy equipment maker Caterpillar reported Monday that its China sales were slowing — news that sent its stock price tumbling.

Deepening the challenge is the U.S. view that China has pledged in the past to curb cyber-theft and forced transfers of technology — and then failed to do so. Lighthizer is sure to insist that any agreement be enforceable.

“The odds of them stonewalling and rope-a-doping in this meeting are close to zero,” said Robert Atkinson, president of the Information Technology and Innovation Foundation think tank. “What are they going to put on the table? Are they going to put tidbits on the table, or they going to put something meaty on the table?”

The Justice Department’s decision to charge Huawei, meanwhile, “has thrown a curveball” into the talks, said Patrick Chovanec, chief strategist at Silvercrest Asset Management Group.

U.S. officials insist that the Huawei case is entirely separate from the trade negotiations. But Atkinson said he thinks the Huawei indictment was meant to send a signal to the Chinese.

“This is about power politics,” he said, “to get them to do what they should be doing.”

Pope in Panama blasts corruption as he prays for Venezuelans


Associated Press

Thursday, January 24

PANAMA CITY (AP) — Pope Francis insisted Thursday that public officials live simply, honestly and transparently as he opened a visit to a Central American region that has been rife with corruption scandals and is now coping with political upheaval in nearby Venezuela.

Francis didn’t mention the Venezuela crisis during his first remarks in Panama after a meeting with President Juan Carlos Varela at the presidential palace. But his spokesman said he was following the situation closely, was praying for the Venezuelan people and supported “all efforts that help save the population from further suffering.”

Francis stuck to his script in Panama, celebrating the country’s place as bridge between oceans and cultures and holding up the region’s newest saint, slain Salvadoran Archbishop Oscar Romero, as a model for a humble church that accompanies the poor.

He thanked the Panamanian government for “opening the doors of your home” to young pilgrims who have flocked here for World Youth Day, the Catholic Church’s big youth rally and the reason for his visit.

But he warned that those same young people are increasingly demanding that public officials live lives that are coherent with the jobs entrusted to them, and build a “culture of greater transparency” between the public and private sectors.

“They call upon them to live in simplicity and transparency, with a clear sense of responsibility for others and for our world,” Francis said. “To lead a life that demonstrates that public service is a synonym of honesty and justice, and opposed to all forms of corruption.”

Transparency International estimates that as much as 1 percent of Panama’s GDP, approximately US$600 million, may have been lost to various corruption schemes during the presidency of Ricardo Martinelli, who governed Panama from 2009 to 2014. Martinelli was extradited to Panama last year from the United States to face political espionage and embezzlement charges.

In addition, two of Martinelli’s sons have been detained in the U.S. and are being sought on corruption charges in Panama. They are suspected of receiving more than $50 million in “undue payments” from Brazilian construction giant Odebrecht, which is at the center of one of the largest graft scandals in history.

Odebrecht has acknowledged paying nearly $800 million dollars in bribes in a dozen Latin American nations in return for favors and works contracts.

That includes at least $59 million in Panama, although authorities say the real figure is likely much higher. In addition to the Martinelli sons, the scandal has already implicated former government ministers under the elder Martinelli as well as people linked to the party of the current president, Varela.

The Martinelli family has denied involvement by the sons in the bribery scandal and alleges persecution by political foes. The former president also denies any wrongdoing and says he is being targeted politically.

Francis’ visit is taking place against the backdrop of both the turmoil in Venezuela and the ongoing migrant standoff in the United States, where the government is partly shut down over President Donald Trump’s demand for congressional funding for a wall at the U.S.-Mexico border.

History’s first Latin American pope, who was born to Italian immigrants to Argentina, has made the plight of migrants a cornerstone of his papacy and denounced how fear of migrants was driving populist and nationalist sentiment across the globe.

Speaking Thursday to Central American bishops, Francis urged church institutions from dioceses down to individual parishes to welcome and integrate migrants and serve as models for the rest of society to overcome fears of foreigners. And he urged them to look to Romero as inspiration for being a humble church that listens to the poor and accompanies them as a father accompanies his children.

Francis said that young people today have few opportunities and face dangerous, difficult challenges, citing “domestic violence, the killing of women – our continent is experiencing a plague in this regard – armed gangs and criminals, drug trafficking, the sexual exploitation of minors and young people, and so on.”

Francis has frequently urged young people to resist easy temptations of drug dealing and gang membership, and to especially avoid the lure of corruption. It is a message that will likely resonate with the youth of the region.

Transparency International’s latest index of perceived corruption ranks the entire Central American region poorly, with the exception of Costa Rica. Panama ranked 96 out of 180 countries surveyed globally in 2017, better than many in the region including Nicaragua, El Salvador, Honduras and Guatemala, but still far from clean.

In Guatemala, President Jimmy Morales has hamstrung the U.N.-sponsored International Commission against Impunity in Guatemala, which has pushed many high-profile investigations that have swept up politicians, public officials and businesspeople during its decade-plus of existence.

In El Salvador, former President Mauricio Funes is wanted for alleged corruption and is currently a fugitive granted asylum with several family members in Nicaragua. Another ex-president, Tony Saca, was sentenced in September to 10 years for embezzlement and money laundering.

In Honduras, former President Porfirio Lobo’s wife has been suspected of diverting $700,000 in public funds and his brother accused of pocketing about $300,000 in government money. His son Fabio was sentenced in the United States to 24 years for drug trafficking.

Mexico has seen a number of scandals involving purported graft or conflict of interest during the recently ended presidency of Enrique Pena Nieto. In perhaps the most high-profile case, Mexicans were shocked to learn that a mansion dubbed the “casa blanca,” or white house, was being sold to the president’s wife by a favored government contractor. Multiple governors have been accused of bilking millions from state coffers.

Pena Nieto’s successor, Andres Manuel Lopez Obrador, made fighting corruption a cornerstone of his 2018 presidential campaign but has largely taken only symbolic steps against it since taking office Dec. 1.

Associated Press writer Peter Orsi contributed from Mexico City.

The Conversation

What 3 economists say about the state of the union

January 30, 2019


David Bishai, Professor of Health Economics, Johns Hopkins University

James Lake, Associate Professor of Economics, Southern Methodist University

Steven Pressman, Professor of Economics, Colorado State University

Disclosure statement: The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

Partners: Colorado State University provides funding as a member of The Conversation US.

The State of the Union is back on after Speaker of the House Nancy Pelosi said she invited President Donald Trump to address Congress and the nation on Feb. 5.

Earlier, she had disinvited the president from giving the speech in the House on the scheduled date of Jan. 29.

While we await Trump’s address, we asked three economists to give us their own assessments of the state of the union, as well as the president’s performance so far. Each picked a theme.

State of the national debt: Sky’s the limit

Steven Pressman, Colorado State University

As a candidate, Trump promised to eliminate America’s national debt in eight years through faster economic growth. How’s he done so far?

Not so good. The debt has climbed from US$20 trillion when Trump took office to $21.5 trillion at the end of 2018.

The budget deficit – or the difference between government revenues and spending – is what changes the national debt. After falling continuously from $1.4 trillion in 2009 at the end of the Great Recession to $585 billion in 2016, the U.S. budget deficit has risen during the Trump presidency. It hit $779 billion in 2018, the highest level since 2012, and is expected to reach $900 billion this year.

The two main forces driving this are greater spending on the military and disaster relief and the 2017 tax cut, which reduced corporate income taxes by $92 billion.

The Trump administration, and the Republicans who pushed for the tax cut, promised that economic growth would increase tax revenues and offset the losses. Most economists, including me were skeptical that corporate tax cuts would substantially increase investment and economic growth. So far, the data supports the skeptics.

The greatest problem, however, is that budget deficits should fall during economic expansions. This provides more policy flexibility whenever the next recession hits.

During recessions, tax receipts fall and government spending rises, pushing up the deficit. The appropriate fiscal policy response – increase the budget deficit even more – becomes harder the larger it already is.

State of trade: Uncertainty and trade wars

James Lake, Southern Methodist University

American trade with the world is crucial to the U.S. economy, exceeding 25 percent of gross domestic product. But with uncertainty over tariffs, trade wars and trade agreements keeping U.S. businesses on their toes, the state of trade is in flux.

The raw numbers tell a mixed story. After increasing for six straight quarters, the brunt of strong foreign retaliation over Trump’s tariffs pushed U.S. exports down 1.24 percent in the third quarter of 2018, the latest data available. It’s the biggest fall since the depths of the Great Recession in 2009.

At the same time, imports jumped that quarter as U.S. companies wary of higher tariffs on Chinese goods stocked up. Imports from China surged 11.1 percent, the most since 2011.

As a result, America’s trade deficit with the world – one of the president’s most-cited metrics and a reason he’s fighting his trade wars – widened to a 10-year high.

The Trump administration has spent the better part of the past year escalating its war of words and tariffs with China, with tit-for-tat trade barriers being hurled back and forth. Trump’s tariffs on $200 billion of Chinese goods were set to ratchet up from 10 percent to 25 percent in January until he and Chinese President Xi Jinping agreed to a three-month truce to come to a deal. The deadline is March 1.

But rather than leading to Chinese concessions, Trump’s strong-arm negotiating tactics have led to a new suit this month against the U.S. at the World Trade Organization. And, despite continuing to push hard on Chinese telecom giant Huawei, there’s now talk that the Trump administration’s tariff stance may be softening.

All of this uncertainty together with the higher tariffs are starting to hurt markets as well as companies like U.S. manufacturing bellwether Caterpillar and iconic motorcycle maker Harley-Davidson.

Another major area of concern has been the renegotiation of the North American Free Trade Agreement, which lasted some 18 months and resulted in a deal that looked strikingly similar to the original. There were some modest changes for the dairy and auto industries, but by and large it was the same old agreement.

Nevertheless, Congress still needs to actually vote on the new deal, known as the U.S.-Mexico-Canada Agreement, and newly empowered Democrats are talking about reopening the deal to demand stronger labor and environmental protections.

And, unsurprisingly, Trump is once again threatening to withdraw from the pact altogether. So, more uncertainty ahead for U.S. business, workers and consumers.

State of health care: High mortality, higher costs

David Bishai, John Hopkins University

In his inaugural address, Trump vowed to end “American carnage.” If carnage is measured in American mortality, things are are not getting better, unfortunately.

U.S. life expectancy fell to 78.6 years at the end of 2017 – the latest data available. This continues a slide from 2015, the first time it has shown a sustained three-year fall in four decades, according to the Centers for Disease Control. Comparable countries like Canada,the U.K., France and Germany continue to see life expectancy climbing well above 80.

One of the big reasons is the opioid epidemic, which is estimated to have cost the economy $1 trillion from 2001 to 2017. Every state in the union is seeing epidemics of drug overdoses, suicide and alcohol related deaths despite better access to health insurance.

States that expanded access to health insurance showed slower growth of drug overdose mortality and increased access to rehabilitative treatment for addiction. The Affordable Care Act helped cut the share of uninsured Americans from 17 percent in 2013 to 10 percent in 2015, where they have remained.

Better insurance also brings access to services that have lowered death rates from congenital malformations, heart disease and cancer. Yet the ACA is not a panacea and has not prevented lethal epidemics from sweeping the nation.

This is especially frustrating because Americans spend 18 percent of GDP on health care, or $10,739 for every man, woman and child.

So the problem isn’t spending. It’s how we spend it. Research and real-world examples are showing how communities bringing together multiple groups outside of health care to pursue various approaches can lead to promising results. Examples include cutting overdose death rates in Dayton, Ohio, and Wilkes County, North Carolina.

That’s the best way to finally stem the flow of American carnage.

The Conversation

What would happen if hospitals openly shared their prices?

January 30, 2019

Author: Zach Y. Brown, Assistant Professor of Economics, University of Michigan

Disclosure statement: Zach Y. Brown has received funding from the National Science Foundation and National Institute of Health.

Partners: University of Michigan provides funding as a founding partner of The Conversation US.

Imagine there was a store where there were no prices on items, and you never knew what you’d pay until you’d picked out your purchases and were leaving the shop. You might be skeptical that the store would have any incentive to offer reasonable prices.

This exact situation has become the norm in U.S. health care, at least for those people who lack publicly provided health insurance. Meanwhile, American health care prices are, by many measures, the highest in the world.

Hospitals have resisted disclosing prices, leading policymakers to consider laws requiring price transparency. This issue has taken on increasing urgency, as patients face increasing out-of-pocket costs. In addition, prices vary widely across hospitals. The same lower limb MRI can cost US$700 at one hospital and $2,100 at another. This means that there are large potential savings if patients switched to less expensive options.

There was a tiny step in this direction on Jan. 1, when all hospitals in the U.S. were required to post their charge prices. However, the list of over 15,000 procedures is notoriously incomprehensible, even for medical professionals. What exactly is a “HC PTC CLOS PAT DUCT ART,” a procedure listed by one Tennessee hospital? Perhaps more importantly, patients’ out-of-pocket costs often depend on the specifics of their insurance plan and the prices that are negotiated by their insurer, meaning the listed prices do not reflect what they actually pay.

For these reasons, many researchers and commentators, including myself, believe that this approach is unlikely to have a meaningful effect on health care costs.

Tools that patients can use

That does not mean that price transparency is hopeless. Recent research shows that price transparency tools that actually have useful, easy-to-use information can benefit patients and reduce health care costs.

Individual employers worried about increasing health care costs have started offering tools with personalized information, helping employees compare out-of-pocket prices. A study by Ethan Lieber at University of Notre Dame found that patients who use Compass, one of these price transparency tools, save 10 to 17 percent on medical care. A separate study of a similar tool, Castlight, also found evidence that using the tool led to sizable savings.

Given the limited availability of these tools, a few states have tried to forge ahead on price transparency available to all. New Hampshire provides a particularly well-designed website that gives all insured patients in the state personalized information about prices, letting them easily determine which are the low-cost options.

In an upcoming study, I analyzed the effect of this website using detailed claims data from the state. I found that the website not only helped some patients choose lower-cost options, but it led to lower prices that benefited all patients, including those who did not use the website.

Even though individual patients can save hundreds of dollars by comparing prices, these tools are not yet widely used. In addition, prices are often only available for a small number of procedures. Therefore, overall cost savings are currently quite modest. When I looked at medical imaging procedures in New Hampshire, I found overall savings for patients and insurers of about 3 percent. However, the savings appear to be growing as more people use the website over time and hospitals lower their prices in response.

Imagining a transparent system

Employer tools and state price transparency websites are a first step, but one could imagine going much further. Hospitals and insurers could be required to publicly disclose the rates negotiated with insurers, making it easy for governments or individuals to design innovative websites and apps using accurate data on prices and insurance policies. Currently, states such as New Hampshire use prices of medical claims in previous years to predict current prices.

Hospitals could also be required to provide a detailed price quote – with a single number summarizing what patient will actually pay – before scheduling any appointment. With the exception of a few medical procedures, such as emergency services, I see no practical reason why billing cannot be determined before a procedure rather than after.

Finally, it is important to note that even the best-designed price transparency initiatives are unlikely to reduce health care costs if there is not sufficient competition among hospitals. What good is knowing the price if a patient has no other options? Hospital mergers have been continuing at a rapid pace, and there is growing consensus among researchers that these mergers often increase prices by reducing competition.

If health care is to be left to market forces, then I believe that those markets should be transparent and competitive. Reining in health care costs will require bold solutions that lift the veil on prices.


Neil S. Grigg is a Friend of The Conversation, Professor of Civil and Environmental Engineering, Colorado State University: Good article, thanks. What we need is a set of performance metrics where the various cost inputs toward a particular healing goal are classified in an effective way such that the contribution of any procedure, like an MRI, can be measured and compared to other alternatives. In a centralized command-and-control setup, this might be possible, but with the dazzling array of providers and intermediaries, it isn’t possible. The rule to post prices seems too simple and not to address this need to associate procedures with outcomes. As long as so many providers can make independent choices that increase costs, this problem won’t go away. Maybe this kind of complexity explains why the ACA led to thousands of pages of rules and regulations..

In this Dec. 18, 2018, photo, a surveillance camera is mounted near the Huawei headquarters in Shenzhen in south China’s Guangdong province. The U.S. Justice Department unsealed criminal charges Monday, Jan. 28, 2019 against Chinese tech giant Huawei, a top company executive and several subsidiaries, alleging the company stole trade secrets, misled banks about its business and violated U.S. sanctions. (AP Photo/Andy Wong) this Dec. 18, 2018, photo, a surveillance camera is mounted near the Huawei headquarters in Shenzhen in south China’s Guangdong province. The U.S. Justice Department unsealed criminal charges Monday, Jan. 28, 2019 against Chinese tech giant Huawei, a top company executive and several subsidiaries, alleging the company stole trade secrets, misled banks about its business and violated U.S. sanctions. (AP Photo/Andy Wong)

Staff & Wire Reports