 Okay, we're back real live. I'm Jay Fidel. This is Global Connections on Think Tech Hawaii. You know, you might have thought that Thomas Friedman's flat world characterization, what is that, 10 or 15 or even 20 years ago, is of interest and value. But the world's gotten much flatter since then. And everything is interconnected. And we have an international trade lawyer, Ralph Winnie, here with us. And we're going to talk about the trade agreement, the trade deal that the Trump administration made, phase one with China after a long trade war. Welcome to the show, Ralph. Thank you, Jay. Great to have you here. You gave a great talk at the Bar Association at the Damon firm last week. We were there. We filmed it. And we we have that on our YouTube channel, by the way, if you're interested in seeing yourself. Wonderful. I'd love to share it with my colleagues. Yeah, please do. Now, the, you know, the we ordinarily we like introduce our guests, but your, your bio was so long that I got it, I got an ecedrin headache trying to read it. So I'm going to give you like 30 seconds to introduce yourself. Ready, go. I'm Ralph Winnie Jr. I'm a partner in the firm of Henson, the Pang and Winnie. We have an office located in China called IPO Pang that helps to promote reciprocal U.S. China business. And I run the China programs over at the Eurasia Center in Washington, D.C., a premier global think tank, where we study, write and report about emerging trends on the business financial between U.S. and China. Talk about being in the right time in the right place in the world and history of the world. How did you get into dealing with China? How did you get into international trade? Well, I worked for a boutique trade law firm in D.C. that had a rep office in China. So I would go over to China periodically with firm clients that had interest in doing business and then just maintain the relationships and started with the Eurasia Center and engaged with people at IPO Pang. And they were looking for someone that could help based in the U.S. to promote reciprocal U.S. China trade business. And the most wonderful thing about this is your local, right? Absolutely. Born and raised in Kailua, went to Punahou, was on the wrestling team. I'm actually on the board of the U.S. Wrestling Foundation. Is that right? Great. Yeah, and that's taken me to different places. And I've really enjoyed giving back to the sport. Well, let's go top down news. You know, the market went down depending on what time you looked at newspaper this morning. Yeah, 800 points. 800 points, okay. And that was pretty dramatic, although it's not a surprise because, you know, the virus has been sort of catching people's attention for the past few weeks, only the past few weeks. And so what does this mean in terms of the trade with China and the international global trade and for that matter, the international economy vis-a-vis what everywhere, including the U.S. and China? Well, right now, everything is sort of on lockdown in China. People are in quarantine. They've canceled flights in and out of China. People still work, but they're working remotely. And people are restricted from going outside of their homes, except in certain instances to go buy food, supplies, etc. And there's regulations about when people can be on the street and go to their offices. But that hasn't affected people's ability to do business. What's affected is the perception of China as a place to do business. People think if they go over there, they may catch this virus and they may die. It's very similar to the SARS epidemic that lasted for about three and a half months, and everything was kind of in a standstill during that time. The issue is going to be, how does that affect the trade agreement between U.S. and China? Is everything going to be in a standstill, or are we going to continue to move forward into phase two and phase three? I'm confident that given the Chinese government's ability to get things under control, that it's only going to be a matter of time before China is back in the international business sphere. Right now, people are diverting suppliers to other countries. They're looking at other markets. But this thing is something that will blow over, provided the U.S. and China are able to work together, and China gets their hand on it. And I think they are. You're talking about containment, quarantine, international travel bans. Right, and Trump has a travel ban already. Maybe there's another one that gets instituted to focus strictly on health. You know, the one thing that I caught in the newspaper, which I really, really struck me, was that China was applying all its technology. It was trying to be as smart as it possibly could be. In fact, you know, it struck me that China is being smarter than the U.S. would be in similar circumstances, because it, you know, it takes risks and it has a government that can act immediately. And it's, you know, completely, totally invested in tech. So there was a list of all the things that China is doing to apply tech, all kinds of information tech and demographic tech, you name it, medical tech to try to stop this thing, you know, and it was encouraging. You know, the message to me was that China will be able to stop this either by containment or by one of these or a number, a combination of these technological steps it's taking. You're absolutely correct. I mean, the government has put all their resources into doing everything they can, especially on the tech front, to combat this virus. Because they realize it affects not only their image, but also their ability for their people to make money and to engage in global international trade. And they don't want to have anything that would stop the entrepreneurial spirit of the Chinese people from reaching its full potential. Yeah, and that includes the Belt and Road Initiative. The Belt and Road Initiative. It's billions and billions and trillions of dollars, yeah. It's China's form of soft diplomacy to promote economic trade and development between China and the countries in Eurasia. And I've been to Turkey, Azerbaijan, or Uzbekistan, and I've seen the efforts of the Chinese, you know, to really establish relations in those countries and sort of reform their image in some regards and also show that they're able to bring jobs and economic development to improve the quality of life for people in these other countries. Yeah, raising all boats everywhere. Exactly. I mean, that's what China wants people to believe, you know, because it's important for their image to build allies and to allow their people to make money. So I always say, think of China as the people's Republic of Capitalism, a very controlled, ordered system where people for the first time can achieve the American dream. And you talk to any young person in China, what do they want to do? They want to be an entrepreneur. They want to trade, they want to invest, they want to make money. And the younger generation has only known economic peace and prosperity and they're able to travel, they're able to work and study abroad and to become very Western oriented in their thinking and their training. And when they come back to China, the government realizes that the best way to co-opt these bright, talented young people into the system is a circle of influence or a business development network where these young people can can make money and be entrepreneurs. And we could take a page out of that, but we can learn a lot from them even in recent years. Yeah. Well, they look at the U.S., you know, and that's important. Yes. Well, we're their model, I suppose, but, you know, we're not moving as fast as they are, I say. So here we are and the Trump administration begins no sooner. Is it in office than we have a trade war? So can we please discuss that? Because that's the context for the trade agreement. Did we need a trade war? Well, the good thing about the administration is they did not take the attack that it was a trade war. They always maintained that we're in negotiations with our Chinese partners. And that was the correct approach. See, Trump is not a politician or is not a diplomat. He is a dealmaker. He is a businessman. And it's like, what can you do for me to get the Chinese out of their out of their elements to come to the table and negotiate what the Trump administration would say is a free and fair trade agreement. He says he respects the Chinese, that they have negotiators that are very tough, smart, and they work on behalf of their people that is certainly at a disadvantage to us because our people are not as smart and intelligent. That was the Trump's position. So now that he is in office, he has to prove that he is that dealmaker, that businessman. And, you know, for the past year and a half, we've been going back and forth on tariffs and duties between the two countries to the point now where we have a phase one agreement. So I'll just go over the general points. Yeah, please. Trump administration canceled tariffs and reduced levies from 15 percent to 7.5 percent on 120 billion in Chinese products. The Chinese promised to buy soybeans, pork, cotton and wheat. There's an opportunity for China to diversify its economy and reform its financial system, which is extremely important to promote transparency and accountability for foreign investors. The phase one agreement leaves in place, plays terrorists on some 370 billion worth of Chinese goods, about 65 percent of total US imports from the People's Republic of China. President Trump said the US would lift the remaining tariffs if the two sides could reach a second more substantial agreement. And tariffs that were scheduled to go into effect this past December 15th on nearly 160 billion worth of Chinese goods, including cell phones, laptop computers, toys and clothing are suspended indefinitely. China's regulatory December 15th tariffs, including a 25 percent tariff on US made autos, have also been suspended. So what are the opportunities and challenges of the trade of this phase one agreement? Opportunities. This deal provides much needed certainty to American businesses as they begin the new year. And this is according to the CEO of the US Chamber of Commerce, named Tom Donahue. And he added that it's critical for both sides to begin negotiations on phase two as soon as possible to address significant concerns in the areas of subsidies, digital trade and data discrimination and non-trade barriers to US manufacturers and service providers. For those who can stomach volatility, this could be an entry point for longer term investors into emerging market stocks. Intellectual property and privacy will allow for foreign companies to have a more competitive advantage in the Chinese market. What are the challenges? Chinese FDI, Foreign Direct Investment in US Industries, fell in 2019 to an estimated 3.1 billion US, a fraction of the high of 46.5 billion in 2016, but down 42 percent from 5.4 billion in 2018, according to a new report by the Rodeum Group. Tariffs still remain on roughly 360 billion of Chinese goods, two-thirds of what Americans buy from China for at least 10 months as a means of enforcement for the deal. Average tariffs on Chinese imports will remain elevated at 19.3 percent, six times higher than before the trade war started. And this is according to the Peterson Institute for International Economics, a well-respected international think tank in Washington, D.C. It's more of a secession of hostilities coupled with some barter, and that's according to scholars in Washington, D.C. Washington and Beijing have been locked in a trade dispute now for nearly two years. It's not over just with the signing of this partial deal, but it's in a reprieve for months of uncertainty and threats of tariff increases. There's also signs of future difficulty on the technology front. As the Commerce Department looks to reportedly eliminate a loophole that will let U.S. companies through their overseas facilities sell to Huawei Technologies, a company that's put on, the U.S. has put on its export restrictions list last year. And this is very interesting because you have Chinese companies like CT and Huawei that want to do business in the U.S. But there are allegations that they are really agents for the Chinese government to spy and steal our technology. Alligations that the EU does not agree with, nor does U.K. agree with? Correct. And this is a very challenge for the United States. One of the things I felt that was very important was ETE, allowed foreign compliance officers to participate and be part of their board as a way to show the good will, you know, to promote reciprocal U.S. China business, you know, where people are not disadvantaged and there is no theft of intellectual property. That's a step in the right direction. Exactly. You know, so hopefully more of that can be done and moving forward to allay people's concerns about engaging with Chinese companies when they come into the United States. But at the risk of losing nuance on this, maybe being over simplistic, is this a win-win? A win-lose? A lose-win? Who came out better? I think the U.S. has come out very strong because for the first time the Chinese were brought to the table and they have been taken off their game by Trump. When I was in China in November, all the questions are, well, how do you how can we understand Trump? And I tell them, it's not a politician. He's not a diplomat. He's a steel maker. So when I'm giving a lecture at the China Institute of Technology or at Hangzhou University, I tell them that so that they can understand and have an idea that he's not a normal, he's not a diplomat. You know, you got to think outside of the box and treat him as if you're dealing, you know, with your, with a business, a potential business partner. In other words, you can't know it's always going to be a surprise. Exactly. And I think that benefits the U.S. because that element of surprise is always going to keep the Chinese off their game. We're going to take a short break. That's Ralph Winnie. He's an international trade lawyer here, giving talks to the Bar Association and the like, but his office is in Washington, D.C. We're talking about the trade deal. Phase one would be right back. Hello, I'm Lillian Cumick, host of Lillian's Vegan World, the show where we talk about veganism and the plant-based diet located in Honolulu, Hawaii. I'm a vegan chef and cooking instructor, and I have lots of information to share with you about how awesome this plant-based diet is. So do tune in every second Thursday from 1 p.m. Aloha. Aloha, I'm Stan Osterman, Stan the Energy Man, every Friday here on Think Tech, Hawaii. If you're really interested in finding out what's going on in energy, especially here in Hawaii, but also all the way around the world, and especially if it has to do with hydrogen, look into Stan the Energy Man every Friday, 12 o'clock, Think Tech, Hawaii, either, Aloha. OK, we're back. We're live with Global Connections on Think Tech, Hawaii with Ralph Winnie, who joins us in our studio for a discussion of the trade deal that the Trump administration has just concluded phase one. So you mentioned before the break, Ralph, that there might be a phase two, a phase three. How many phases are we going to have? Does anybody know? Will there come when we reach Nirvana on this at a certain phase? Well, think of everything as being negotiable. OK. I think we are definitely going into phase two for more clarity and substance to have a more permanent relationship. But things will be renegotiated. I mean, the Chinese, that is their hallmark because they want to get the best deal possible for them. So I certainly think we are moving forward in the right direction. Getting phase one was key. That's eliminated a lot of uncertainty. Now we're just going to move forward to the next phase and be ready for anything. As a former wrestler, when you go out there on the mat, you just have to be ready for anything. You can study your opponent all you want, but you have to recognize that there are going to be opportunities and challenges, you know, when you're on that mat. And that's what I tell people. You have to recognize that this is not going to be easy. I mean, things are going to come out of nowhere. You're going to have to be ready to engage and be ready to fight. You know, for your interests. You know, that's what Trump, I think, as indirectly said, you know, he's fighting for the U.S. interests, which have not been protected under previous administrations. And that's what we all should want. We should want to have the negotiations fighting for the American people, the American worker, so that they are not taken advantage of. That's what the Chinese do on their end. Not to take advantage of the U.S. per se, but to fight for their for their people. Yes, you know, and they're very good at it. So what about how this affects people, affects business? You know, you spoke last week at the Bar Association about the ideal client in the circumstance of this agreement. What is the ideal client right now? OK, well, the ideal client is a client that has sales between five to 30 million U.S. a year, number one. Number two, the client can be in a variety of businesses such as manufacturing, software retail, online e-commerce, pharmaceuticals, automotive, franchising, that's restaurants and other concepts, including apparel and fashion. The ideal client is someone who wants to enter the Chinese market for sales and services of their products and services. The client could be interested in a joint venture, manufacturing, or direct retailing. Often you can do, it's important to deal with clients that have existing relationships in China, but they're joining, say they're joint venture partners are no longer playing ball and need conflict resolution. That's key, conflict resolution. Litigation, arbitration, and other conflict resolution proceedings, I think are very important as you move forward in China. The ideal candidate client includes someone who wants their IP protected. That's trademarks, domains, copyrights, patents. The client would want to have a comprehensive strategy and program in China and need both registration, maintenance and prevention of counterfeiting. And finally, the ideal client would include someone who wants to sensitize their Chinese subsidiaries to the need for compliance with ethical employment, HR compliance, including the Foreign Corrupt Practices Act. So make sure everything is above board on the table that you're doing everything right legally. So that is the most important thing. Under this space, the old problem was that the Chinese company, you have to go into a partnership and even a woofy, holy old foreign services had exposure to the loss of intellectual property, the loss of trade secrets and all that. Has that been ameliorated? If I go do business in China now, am I going to be subject to the same vulnerabilities of the loss of my secrets? Well, if you go in there on your own, it's very likely because you're a foreigner and you don't know how to navigate the system. You don't have the right partners. When you work with a recognized firm that will help you navigate the system, find your joint venture partner, register your company, help you pay your taxes. That's the key and that relationship building. You need people that have relationships with the people in the right business sectors in the government because the government is involved in every aspect there. So that's important. Does the trade agreement help me now? It does provide clarity. It provides more access to the financial markets. But you'll still need to work with a recognized firm when you're there. You can try on your own, but it's harder, especially if you don't speak the language. Now, someone like Michael Jordan, when his heir Jordan shoes were being compromised by a Chinese company, he hired a Chinese media publicist to promote the theft of his intellectual property and also a Chinese firm. And these were two very important strategies because his image was promoted in a very positive way, that he was working within the Chinese system to combat the theft of his intellectual property. And that's very, very important because you need the media, plus you need the law in China on your side through these important relationships that are built through your legal firm and your media company. In all of this, Ralph, where does a firm like yours fit? I mean, you're an international trade firm and this ideal client you described would be an ideal client for you, I assume. So what services can you provide and how do you approach getting this client representation in China? Do it yourself? Do you associate with a firm in China? Right, so I cannot legally practice law in China because I'm an American trained lawyer. So the firm that we work with in China handles all aspects of a particular client's need on the ground in China. But you'll collaborate with them. So it's for inbound into China, correct? Yeah. So we're like the shepherd, the person that is there, but sort of is behind the scenes. Because illegally I can't practice law there as a foreigner. But we have Chinese trained lawyers that do all of that. And the conflict resolution, the arbitration, the mediation is so important. It's so important to register your patent and your trademark in China so you have the protection of the government so that people do not try and steal it. The problem with the Chinese is the mindset under a communist system, whatever I have belongs to you. It's part of that collective. To be, to claim that I have something of my own that's being a bourgeois, being a raconteur, a bad person. So the whole mindset has got to be retrained to understand that there are certain things of yours that have to be protected. Especially when it's Chinese companies going after other Chinese companies for theft of intellectual property. But it was never an issue until China became a global power. And foreign companies had issues with going in there to do business. So it's a very interesting dynamic that's going on. But... What about the venue for this litigation, arbitration, mediation? You know, there was a time when people talked about having that venue right here in Hawaii. Right. That we were a good crossroads for it. That hasn't happened, not that I know. But where is it happening? Are you calling for arbitration, mediation, venue in China or in the US or where? Well, it would take place in China. Now it could happen outside of China if it's a global company. But generally it's within China because the dispute is with a Chinese company. Yeah. And it's a very practical solution. It's just the foreigners don't have an idea how to get involved in it. Now there are Singapore companies that have been very successful because the people that have brought the cases are ethnic Chinese. So they have a natural feel for how to navigate the system. It's very similar in Russia where who are the most successful business people? They are the refuseniks, the children of the refuseniks that came over here when they were eight, nine years old, grew up in the American system, still speak Russian, know the culture and the tradition, and then they can go back and know how to navigate the Russian system. So you have a lot of Chinese that are born and raised here that go back, that are very effective in that regard. But it is very difficult without the right team over there in China to be very effective. So I get the impression from what you're saying, Ralph, that when we finish hopefully soon with the virus, knock wood, knock wood, and when we finish understanding and implementing phase one of the trade agreement, maybe phase two, maybe phase three, there's a light at the end of the tunnel. And it means better trade, more reliable relationships, more what do you want to call it, common prosperity, not only between US and China, but for the world. So those are my words, what are your words? No, I think you're right on. And I think the US and the Chinese economy are inextricably linked. The personal relationships that are developed at a very young age are so important. President Xi has made that one of his commitments to increase ties at the cultural level, the social level, to build those personal relationships that lead to a professional relationship. It is in both US and China's interest to have a viable trade agreement. So there is clarity of the issues so that people don't feel on either side that they're being taken advantage of. And there's reciprocal US-China business where people benefits and make money. That's a wonderful view of the future. I hope it comes true, knock wood, knock wood. Thank you. You've got a lot of bumps and grinds along the way, but that could be a great solution for the world. Anyway, thank you, Ralph Winnie, international trade lawyer practicing in Washington, D.C., largely with China, who comes to Hawaii in order to consult with the wrestling team at Kailua High School. Am I right? Ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha. Yeah. Thank you, Ralph. I got out to my old coach, Jim Peacock. He wanted to come to my presentation. He's had a heart attack, and my thoughts and prayers are with him. Thank you, thank you very much. Thank you, Ralph, Ralph Winnie, aloha.