I am Kevin Gallagher, United Nations’ Committee for Development Policy member. Ask me anything about the state of international economic affairs between the U.S. and China and the world economy.

Thanks for taking questions! Given the inability of national governments or intergovernmental organizations to seriously address climate change, and, given rising inequality within and across countries, do you think your children's lives will be more difficult than your own? What about your grandchildren?

Haven't given up hope yet. On a national level China is doing a lot to address climate change, as is Chile, Mexico, and many European nations. Even though the US is going in the wrong direction, many states and localities are working hard. Globally however, as our work at the GDP Center (www.bu.edu/gdp) shows, China is exporting carbon intensive industry overseas and the US is pulling out of the Paris Accord. THat said, the World Bank will stop financing oil, gas and coal, and many other development banks have made similar commitments. Last week the UN said we really have a 12 year window. There is momentum and we need your help. Ask again in 12 years!

Where do you get all the watermelons you smash with that big hammer?

From the greatest living jazz musician alive, Herbie Hancock the WATERMELON MAN https://www.youtube.com/watch?v=ZbHJHPTikQA

What can be done to ensure that China recognizes intellectual property rights?

We have to remember that American capitalism was built on the blatant theft of intellectual property rights. Francis Cabot Lowell stole the designs of the power loom from the UK. Then, after the war of 1812 (which naturally blocked trade with the UK) the US blocked tariffs so we could develop textiles and many other industries. Now the US is saying 'Do as we say, not as we did'. The economist Ha Joon Chang's book KICKING AWAY THE LADDER really calls out these contradictions.

China has not been that blatant and there are actually fewer cases than the press would have us believe. China, like most successful Asian economies such as South Korea and Japan before them, negotiate technology sharing as a condition for foreign entry of firms. For the first few decades of Chinese reform foreign firms were happy to make such a trade in order to gain access to China's market and more so the export platform China provided. Now they are more reluctant. China is getting a bit more aggressive for sure, but from a development perspective when poorer countries see that the US built its industrial prowess on loose intellectual property rights and that over 90 percent of world patents are in the West--nations need ways to get access to technology in order to develop.

You wrote in China Watch that China is the world's leader in combating domestic climate change. Do you think that title could be at risk in the future, if current trends as shown in the UNEP Emissions Gap report (US Greenhouse gas emissions falling, China's rising) continue, especially if Trump loses reelection?

Yes. China's seat at the top may be temporary but it is too early to tell. China has committed to decreasing the emissions intensity of its economy, not total emissions. There had been a plateau but the recent figures are concerning for sure. We at the GDP Center have also shown that there is an inconsistency with China's domestic and global policies, with the majority of its foreign investment in carbon intensive industries http://www.bu.edu/gdp/initiatives/gci/.

Thank you for the AMA. I'm not sure if this is related but anyway:

Can you provide some credible sources about China that is acceptable to English-speaking casual readers? As Chinese myself I regularly see accusations of shills and brainwashing against comments from Chinese in discussions about China. What sources do you know that can avoid this problem while giving accurate information?

A straight shooting un-biased and accessible account of China--on the economic front--is Arthur Kroeber's China's Economy: What Everyone Needs to Know. https://www.amazon.com/Chinas-Economy-Everyone-Needs-Know%C2%AE/dp/0190239034

Hi Kevin,

In the financial community, there is a lot of talk of China planting devices in technology exported to the US with the goal of spying and the reporting of interns from China coming to the US with the goal of stealing intellectual property. Being that I haven't seen a question this so far, I wanted to ask what the significance of this is and what danger this poses on the US. Some recent memos from the CIA name it a non-threat, but many folks in the community claim that this is a tactic to calm the public. What do you know and what can you share about Chinese spying on US and their potential development of disablement technology that could impact remote devices like satellites and drones?

This is a big topic of discussion in academia here and everyone has to become more aware, especially in sensitive science and tech areas. We also have to remember that the US has one of the biggest spy operations going as well. The Hoover Institution just did a big report on all this and I'm with Susan Shirk who agrees that we need to be more aware by the hype is way overblown: https://www.hoover.org/sites/default/files/research/docs/15_diamond-schell_dissent_web.pdf

There is a common argument in popular Chinese analysis of the trade war, that the US is divided. Dem vs. GOP, Media and IT coalition vs. Energy and Manufacturing coalition, Globalists vs. Nationalists, 99% vs. 1%. The naming and division of camps vary in different theories, the judgment on the hostility of different camps are different as well, however, the analysis all agree that while the camps have consensus in launching the trade war, they have different objectives in the trade war, and are competing with each other. On the US side, people talk China as a whole, the opponent is China or Xi or Vice premier Liu He. Interestingly, both people in China and people in States believe the United China doesn’t want a trade war. Do you think the US is divided in the US-China trade dispute? And if so, can we suggest the trade war is more of a civil war in the States as China is apparently dragged into the war?

I know the Global development policy in your title means development policy in the world not for the world, however, the US is apparently playing against China 2025 on the world stage proving that it does have a development policy for the world in mind. Is the US role-playing the USSR, asking China to focus on consumer goods manufacturing like the USSR asking NK to focus on advanced machinery? There was no market economy between the socialist countries, but the USSR did provide NK everything else it needed. Today, China is still under technological embargo in the capitalist world market. Can we say the US’s global development policy is more coercive, abusive and predatory than the Soviet Union’s?

Thank you.

Thank you. You are asking two things. First, are Americans divided over the trade war and second, why is the US seemingly against Chinese development.

1). Americans are very divided on the trade war. There is an odd coalition in favor of the trade war of big firms and an elite that are having a tough time competing with China and workers and communities that have been hurt by decades of poor economic policy in the US in general, and trade deals in particular. Against the trade war are also two camps--one that wants to go back to the old US trade policy of things like NAFTA and the TPP, and another that wants to reform trade policy so that it can work for development in the US and abroad and recognizing that both political parties have failed a lot of people in the US and abroad through bad policy over the past three decades. I wrote about this in October: https://prospect.org/article/trade-strategy-we-need

2) On trade and development policy I do believe that the US has changed its stance and that the Trump administration sees China 2025 as a threat. This stands in stark contrast to decades of US bipartisan support for helping China and other nations rise. The US governments new policy is unwise and unfounded. I wish the US has a 2025 plan. The world has one with the Sustainable Development Goals and the Paris Agreement. The international economic order should be calibrated toward those broader goals.

In July of 2017, China's bond yield curve inverted. Is China in a recession?

Not yet but the trade war, rising debt, and political uncertainty (and the yield curve) all point to tight times...

I know most of these questions are related to the US and China economy, but Canada has taken a few hits this year from super powers like Saudi Arabia, and currently China. US and Canada have historically been on good economical terms, but it seems like they are no longer on the same page, as the US has continued to fail to back Canada. The US administration has put Canada in a tough positions with the request to extradite Huawei's CFO, the renegotiation around NAFTA and not backing them when calling out Saudi Arabia's human rights record.

How do you see the economical relationship between Canada and US evolving in the coming years?

The US 'America First" approach hurts Americans and our allies. It is on American citizens and our allies to demand change. I can not endorse or defend our currentpolicy.

A XP from worldpolitics:

China's economic development is to me very startling and impressive. They have bad pollution as a result of massive industrialization, but they seem to be starting to address that.

My question to you Kevin is 2-fold:

1. To your knowledge, how does China's industrialization and development compare to other (obviously smaller) countries over the past few decades?

Are there comparable (again, obviously smaller countries compared to huge China) countries that have developed as fast as China under its communist party?

2. Is China addressing its massive pollution problems?

I'm old enough to remember when the US Great Lakes used to literally catch on fire because they were so polluted; but today in comparison the US Great Lakes are cleaner. Is China following a similar path? In other words, is China making substantial headway on addressing its pollution problems?

Great questions. China's economic path is a variant of Japan, South Korea, and Taiwan's that blended industrial policy, regulation of financial markets, and trade openness in a sequential manner. Vietnam is another more recent example. To you r second question, yes China is starting to address its pollution problems, as the people are demanding it. Noting your Great Lakes memory, we need to learn how to grow economies in a more sustainable and socially inclusive manner.

Do you think that the human rights atrocities the country is continuing to perform will get to the point where the US may have to impose sanctions or some other form of economic discipline? Or is the relationship simply too big to fail now?

China's recent repression of human rights are a blow to their ability to be a global economic superpower, regardless if the US puts sanctions in place. If they want to attract economic activity, and make their currency global, the repression causes a lack of confidence in the global market place that is more powerful than smaller economies' sanctions.

Hi Mr Gallagher,

The United States has been quite worried about China's increasing influence on their allies. For example, it openly denounced the UK's decision to join the Asian Infrastructure Investment Bank. Should the USA be worried?

I am of the view that the US and China should work together in a variety of institutions to address common goals and engage on our differences. Whenever we exclude China it hurts us. The AIIB is off to a good start, learning many lessons from the beleaguered World Bank and other institutions. The TPP is another example. While not a good trade deal to begin with, because the US consciously excluded China, China created the Belt Road Initiative, that the US is not a part of...

Hi Professor Gallagher,

You recently wrote about China not matching its domestic climate progress in its foreign investments. Beyond reputation costs, what types of incentives are necessary for China to expand investments in clean technologies?

Thanks!

Thanks. China has the perfect model for globalizing its clean energy policy at home. At the moment, China is financing its large fossil fuel and hydroelectric companies to go abroad because they are strong companies ready to go global. China's solar and now wind companies are also now among the best in the world. In a recent study we showed that China there is over $1 trillion in potential overseas investment potential in country 'Nationally Determined Contributions' under the Paris agreement. That opportunity revealed is one incentive. Beyond the reputational risk China will also face stranded asset risks as the rest of the world divests in coal --which will not be a cheap alternative anywhere in just over a decade.

Thank you for doing an AMA, Professor Gallagher!

Given that China is involved in ASEAN, and has been investing in infrastructure projects in countries like Myanmar, should we expect to see the country pursue more projects involving the implementation of clean and efficient energy in Southeast Asia? Would this be a worthwhile use of resources in getting these countries to “favor” China over other countries (e.g. the US) or gain more support within the international community?

Our newly launched GLOBAL CHINA INITIATIVE features a study on Myanmar. Chinese investment has great potential but is often very pollution intensive and adverse to local communities. https://www.bu.edu/gdp/initiatives/gci/

Do you think that a plan for a complete rework of the global economy, if the US economy does crash, is underway? Or what do you think would be the most mutually beneficial rework for the global economy?

PS

If you could give advice to the Millenials and Gen Z or the newest generation what would it be?

I'm not sure such a plan is in place but I do think that the global financial crisis of 2008 and now the backward policies in many places in the world have started key conversations about how to reform.

Kevin, in your opinion, how much of an impact, if any, does the current 21 trillion dollar U.S national debt have on international trade and investment policy?

Big question. In a nutshell I think the emphasis on debt and the financial sector has hurt the 'real economy' in the US and globally. UNCTAD's Trade and Development Reports https://unctad.org/en/Pages/Publications/TradeandDevelopmentReport.aspx. In the US we have turned finance into an 'end' rather than a means to finance productive and exportable industry.

Also, the debt has a big impact on interest rates that has a negative impact globally, causing instable capital flows and debt that causes booms and busts globally. Free book by Central Bank Governor Jose Antonio Ocampo on all this: https://oapen.org/download?type=document&docid=640315

Since the Chinese Yuan is pegged to the USD does the Chinese government have an interest in U.S. FED rates?

Has the trade war caused any externalities that the common American wouldn't know about?

One big externality of the trade war is the lack of confidence in US policy and the broader impact it has on the international economic order. As Ken Shadlen from the London School of Economics points out (I cite him here https://prospect.org/article/trade-strategy-we-need) the World Trade Organization was founded on a 'deal' that the developing world would have access to rich country markets on condition that developing countries did things to their economies they didn't really like and that weren't optimal like adopt rich country intellectual property rights and deregulate their financial markets. By the US triggering this trade war we have gone back on this deal and threaten the system because of it.

Considering the amount of debt the U.S. owes to China, is there any chance china would call on the u.s. to pay it in a lump sum? If so, how would the u.s. manage to? How would China enforce it?

If china raises the costs for manufactured items and/or labor, how would that affect u.s. jobs and the u.s. economy.

Good article on China's 'nuclear option' here: https://www.nytimes.com/2018/10/09/business/dealbook/china-trade-war-nuclear-option.html

THe costs of Chinese manufacturing and labor are indeed rising. First, on some products the Trump administration is slapping tariffs on those goods. Across manufacturing however Chinese workers (unlike those in the US) are experiencing major wage gains--and are now about par with Spain and many Eastern European countries. While some argue that these forces will bring a lot of manufacturing back to the US I am more dubious. China has invested a lot in its production capabilities such that much more than wages are attractive to foreign firms--what economists call 'agglomeration effects' where firms get great infrastructure, research and development facilities, and beyond. The US just doesn't make such investments. What is more, there are other countries such as Vietnam and Malaysia that are more productive than the US in some sectors that would benefit before the US does. The US needs to take innovation and industrialization more seriously, as many Asian countries do.

Is there hope that the USA and China can become independent from fossil fuels? Our president seems to be doubling down on big oil being a good thing, even though everyone knows we can't live like this forever. Do you think we can transition our economic dependence onto renewable sustainable resources?

We were making some progress in the US but the current administration is going backward. As I said in a recent Financial Times column: Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour. https://www.ft.com/content/520ef0b0-fc94-11e8-ac00-57a2a826423e

Where Trump sees pain, China sees prosperity. Beijing has doubled down on a clean industrial policy that favours solar and wind power, electric cars and the batteries that power them.

China now produces 60 per cent of the world’s solar panels. EY recently put China’s PV industry and offshore wind industries at the top of their rankings, with offshore wind at number two.

Shenzhen-based CATL is the biggest producer of electric vehicle power packs in the world, raising more than $800m from its IPO in June of this year.

At the same time, China has put in place a policy to cap domestic coal production by 2020.

See full article here: https://www.ft.com/content/520ef0b0-fc94-11e8-ac00-57a2a826423e

What are your views on the future geopolitical situation between China, the US and the EU. More specified: what about the relations between the US and the EU as a result of current developments and how will it affect the classic western world versus china paradigm?

I don't think we want a West vs. China paradigm. I am old enough to have seen the Cold War divert attention away from human prosperity. The goal should be to get China and the West to reset our relationship to share and strive for common goals.

Do you think its possible that America, as well as the rest of the world, can and will develop alternative fuels and energy in the absence of direction from the U.N.?

It seems most people, entrepreneurs included, are already focused on trying to find cheaper, more efficient energy outside of coal and petroleum.

It may be taboo to suggest it, but could the oil and gas industry actually help toward these efforts as they have massive abilities to research and develop other forms of energy as well?

See my reply below. The UN won't trigger the US for sure. China saw the writing on the wall and sees alternatives as an investment and growth opportunity--the US was going in that direction but is on a (hopefully temporary) detour.

Is the US economy dropping soon?

ask alfa https://seekingalpha.com/article/4228492-u-s-recession-lurking-around-corner

Hi Kevin,

What’s your view on how Neoliberal free-trade policies have effected developing countries and, according to some scholars, have degraded the quality/responsiveness of democracy in these countries?

The record is pretty clear that those nations that have pursued balanced capitalism with the state and market on strong footing--have done better than those countries that have had a purely neoliberal approach. The stark difference is East Asia that has had a balanced approach and few trade agreements outside the multilateral system and Latin America that has been the most neoliberal. ALl this spelled out in annual UNCTAD Trade and Development Reports https://unctad.org/en/Pages/Publications/TradeandDevelopmentReport.aspx

Are you related to the Oasis Brothers?

Nope. Nor the Watermelon Gallagher either. There are thousands of Gallaghers I wish I was related to!

What are your thoughts on Philippine-Chinese relations?

I'm pretty ignorant here. I follow the Belt and Road Initiative and know that China has financed some coal plants in that country. This may come home to roost for both China and the Philippines because coal will quickly become a stranded asset in the world economy.

What do you read or research on the a daily basis to keep up to date?

I read the Financial Times every day and follow other key news outlets and folks on twitter. What is important however is to have a critical eye when reading anything, and have a strong foundation of general knowledge. History, Philosophy...

With several international movements away from free trade deals;

Does the global economic community see this as a blip on the path to greater economic development or a major tonal shift on how global trade will continue going forward?

Have these movements effected/shifted the relations of the G-20 members?

See my reply to da da da. I hope that these movements--some grassroots and developing country led, some from far right nationalists are a wake up call that the global economic order needs reform. I do not support the reform agenda of the Trump Administration and Brexit, but am working with others to advance one that can make globalization work for all: https://prospect.org/article/trade-strategy-we-need

What are the chances the that the US will enter a recession soon?

IT may be around the corner: https://seekingalpha.com/article/4228492-u-s-recession-lurking-around-corner

That said, the only folks worse than predicting the future than social scientists are weatherpeople!

Is a shooting war possable with China in the future?

Above my pay grade. See new book by Graham Allison and I hope my friend Graham is wrong.

What's is your opinion on the Euro creating a situation in Europe where in low conjuncture countries don't have the devaluation of their own currency create competitiveness against other countries in the EU? The way the southern countries got in a shit situation but still had the same cost of living as the northern countries so their economies got messed up. I could be totally misinterpreting the situation though.

The Eurozone was not structured right, am in large agreement with this https://www.nytimes.com/2018/05/21/opinion/europe-euro-democracy-wrong.html

How difficult has our president made your job?

In many ways it has brought more urgency to the work we do. Our job is to bring evidence-based work to the policy discourse. There has been a lot of 'fake news' out there so we go in with a renewed since of purpose. That said, sometimes I want to: https://www.youtube.com/watch?v=gO17hN-YvBc

Thoughts on popular Netflix series “house of cards”?

No time for TV after work, chauffuering my kids, and watching the soon to be world champion Boston Celtics.

Hello there! Thanks for the opportunity. How do you see, specifically the grains market(soybean and corn)? Are there any troubles regards if China accepts any to consume their internal reserves making the market fluctuate and causing prices to act as buoyancy force ?

The global commodities market is very skewed, with deep levels of monopoly and oligopoly that make countries hoard, global investors speculate, and markets to be very imperfect and unstable. Its not only China. China was a boon to commodities markets from 2003 to 2013 or so. as UNCTAD has had in many trade and development reports, we need a discussion of global commodities markets.

How have we been doing on this adventure to "make America great again?" and do you feel like we were ever lacking in the "greatness" region?

America did have a 'golden age' between the late 1940s to the late 1970s were incomes, equality (wage and race), and democratization were on the rise. Since the 1980s we have pursued a set of domestic and international economic policies that have created windfall winners at the expense of many citizens in the US and abroad. With some big mistakes (like Vietnam!) globally. I want to make America great again too, but not at the expense of the rest of the world, but with the rest of the world.

Thank you for doing this! Do you think free trade is a good idea for developing nations?

Trade is an important part of any economic strategy, especially for developing nations. I'm 'for' a new multilateralism in the spirit of the Havana Charter and the International Trade Organization that set common principles for a set of trade rules that would let nations trade and grow. 'Free' trade deals such as the TPP were far from that, with too much protectionism and deregulation in them. All trade deals are not alike! Trade is good an essential, but the treaties that the US has been offering for a few decades have been harmful for developing countries.

Is Africa the next battleground in the trade war as China seems to be investing in manufacturing (textile), mining, and infrastructure?

The United States has long neglected Africa and China has now been providing incredible amounts of finance and investment. The US is wrong to tell African nations (as John Bolton did last week) to turn away from China--especially when we have nothing else to offer. Some of my colleagues have an institute doing the best work on these questions: http://www.sais-cari.org/

Do you think the trade deficit the US has with China is worth starting a trade war over? Are trade deficits really that bad for a country's economy?

I'm not as worried about bi-lateral trade imbalances and see no justification for the trade war. I DO worry about global imbalances, which are the aggregate of trade deficits and surpluses around the world, as Keynes was: https://www.ft.com/content/3e371bf2-7618-11e7-90c0-90a9d1bc9691

Hello Kevin, Thank you for taking the time to do this! I’m wondering what you expect to happen geopolitically as China continues to pay for development projects in Africa and South America. I’m especially curious about how they can pay for carbon-intensive development projects like dams and road/bridge building while still being a “leader” in green technology? Also, do you think there is potential for a marriage between the two where Chinese production of solar panels and other tech could either be exported to or made in Africa? I feel like there’s potential to skip traditional industrialization steps in some African countries by creating a green energy economy they can use both locally and as an export across the continent. Thank you again for doing this!

I think a key policy objective is to help China see the investment and political opportunity in greening its overseas investment. It will never be a 'global leader' until it does. The Global South has asked for 'additional' development finance for decades and China has delivered while the West has not. Because of rising wages and other factors in China, there will be incentives for China's firms to move. If they move to Africa and LAC--AND China allows those nations to require that China share some of the know how as China required when they were receiving FDI, Chinese trade and investment can be an engine for growth in the developing world. Lots of policy has to be constructed to ensure it will happen--in China and in host countries alike.

Hello Mr. Gallagher.

How do you predict China's famous belt and road initiative will be and do you think there's any chance that the US, EU, and any other countries will start similar projects in near or distant future?

Thank you so much!!

The BRI has great promise, but as we have discussed at our GDP Center at BU (www.bu.edu/gdp) it also has great risk. The world economy has never seen such an enormous level of public investment since the Marshall Plan. Private markets are skewed against infrastructure and poorer countries, so there is great potential. However, if China's investment locks countries in to stranded assets, carbon intensive infrastructure, and is not inclusive it will backfire on both economic and political grounds.

Hi, I’m a budding economics major, looking to start a career in economic policy, but the only next step I have down is “apply for a good school”. What are some things I can do that would put me in a better position to do things like you do?

First, double major or minor. Economics is an important toolkit but not the only lens for the world economy. Study history, political science, or natural science in tandem.

Second, have experiential learning outside of the US to see how things work on the ground. Often the world doesn't work the way we think it does in our textbooks and models. Policy oriented economics takes a real understanding of that.

Third, read things like the FInancial Times, follow the GDP Center and policy econonists like Dani Rodrik on twitter, and read 'old' economists like Albert Hirschman, Charles Kindleberger, Amartya Sen, and others.

Have you seen Shameless?

If so how similar is your home life and which character so you associate with the most?

Haven't seen it?!

Are you related to the guy that smashes watermelons?

I wish I was. I wish I was related to this Watermelon man even more!

https://www.youtube.com/watch?v=ZbHJHPTikQA

Why is everything on fire, Kevin?

Ask Bob Dylan and the Bank https://www.youtube.com/watch?v=-mlzUHxNMV8

[deleted]

Ask Alpha https://seekingalpha.com/article/4228492-u-s-recession-lurking-around-corner

why do you hate watermelons so much?

I love watermelons! https://www.youtube.com/watch?v=ZbHJHPTikQA

Do you think that a complete U.S. withdrawal from trade with China would be sufficiently catastrophic that the Chinese government would implode under the economic strain? The current regimes grip on power seems to be tenuous at best and supported by China's record growth.

I don't think it would have that effect nor would it be optimal. I'm for development, not imploding any country.