Craig Allen, a veteran American diplomat, has worked in Asia for nearly 30 years. Beginning his government career in 1985 at the U.S. Department of Commerce, he was an international economist for China studies, commercial attaché at the U.S. Embassy in Beijing from 1992 to 1995, and senior commercial officer from 2002 to 2006. Since 2018, he has been president of the U.S.-China Business Council.

A photo presents the front profile of Craig Allen.

Craig Allen

From dispute to multiple rounds of negotiations to signing the “phase-one Economic and Trade Agreement” to more friction, the China-U.S. economic and trade relations have seen many challenges and uncertainties since 2018. Under President Joe Biden there are more changes in the U.S. trade policy toward China such as the CHIPS and Science Act of 2022 that is regarded as targeting China’s semiconductor industry. Craig Allen talks about the uncertainties prevailing in the bilateral economic and trade relationship and the areas where the two countries can work to enhance “recoupling.”

CNS: In August 2019, you described the U.S.-China economic and trade relations as heavy winds blowing hard. How are they now?

Craig Allen: I think I can answer this question in two ways. If you just look at the numbers, it’s pretty good. For example, U.S. exports to China were up 17 percent in 2020 and 11 percent in 2021. Besides, despite a slowdown, U.S.-China bilateral investment continues to flow across both sides of the Pacific. The U.S.-China relation is at a pretty good level, when judging from the statistics.

But I think the reality is much more complicated. The political climate for both remains frosty, and the differences between both have created uncertainties and a lack of trust, as well as increased complexity in the bilateral relationship. All of this puts pressure on investors in both the U.S. and China. I am concerned that if there is a lack of adequate discussion and communication between the two governments, then the differences between the two sides will become even greater.

CNS: What do you think of the Biden administration’s trade policy with China so far?

Craig Allen: The U.S. trade policy with China is part of its global trade policy. Looking from the perspective of its global trade policy, I don’t think the Office of the United States Trade Representative has put forward a coherent overall strategy in this regard. For now, the U.S. has made some progress in resolving trade disputes with the EU and has proposed an Indo-Pacific economic strategy (the Indo-Pacific Economic Framework), but there are no policy details and we are still waiting.

As for the trade policy with China, Biden talked a lot about the negative impact of tariffs on American workers and American families during his presidential campaign. But there appears to be no bilateral negotiations on how to reduce or eliminate tariffs, or to resolve other outstanding market access issues. While the U.S. government says it’s looking for new tools to address the issue I don’t know what kind of tools it is looking for and that makes me feel very uncertain about the future. I think that’s the kind of uncomfortable, uncertain position we’re in today, made worse by the COVID-19 pandemic and the tensions in Ukraine. We’re all waiting to see what happens next while trying to help our member companies deal with this great uncertainty.

CNS: When United States Trade Representative Katherine Tai spoke on the trade policy on China in October 2021, she talked about “recoupling” of U.S.-China economic and trade relations. What kind of signal did it send?

Craig Allen: She only mentioned this expression once. Since then, I haven’t seen any further action or proposals from the U.S. government on it. But I would say that we are seeing positive signs of cooperation on agriculture and climate change: A 35 percent increase in U.S. agricultural exports to China in 2021; a lot of cooperative activities between the U.S. and China on climate change and epidemic control. Many U.S. energy companies are actively engaged in energy saving and emission reduction actions with their Chinese partners. However, in August 2022, China suspended its climate cooperation with the U.S. in response to U.S. House Speaker Nancy Pelosi’s controversial visit to the Taiwan region.

I am not saying that there are no problems in the economic and trade relations, but if there are good opportunities for cooperation, both sides should consider them. Another promising area for cooperation is public health and life sciences.

CNS: You met Chinese Foreign Minister Qin Gang several times when he was the Chinese ambassador to the U.S. What do you think of China’s economic and trade policy toward the U.S.?

Craig Allen: Speaking from the aspect of the global trade again, I think it’s very noteworthy that China’s economic and trade negotiations have been hectic and very successful. I appreciate China’s accession to the Regional Comprehensive Economic Partnership and its formal application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This is a positive sign.

As for the U.S.-China bilateral trade and economic policy, I think we see some very similar things in Beijing and Washington: Both sides want to reduce dependence on the other, particularly in terms of strategic goods or goods that might be of strategic importance.

CNS: There is a view that the U.S.-China economic and trade relation is so closely linked in various areas that approaches such as “decoupling” or “recoupling” do not help constructive dialogue between the two sides.

Craig Allen: I agree. When you talk about the so-called “decoupling,” you’re only looking at a small part of the overall economic and trade relation. It’s really impossible to “decouple” the U.S. and China in areas like agriculture and energy, but in the area of technology, it’s another issue. I think that in the area of technology, both governments are taking actions to make it difficult for companies from one country to do business freely in the other’s territory.

CNS: If the U.S. and China seek to “recouple” their trade and economic relation, which areas should they start with?

Craig Allen: We really need confidence-building measures. For example, lowering tariffs, especially during the inflationary period that we are facing now, would be a very smart move. But I think that both governments have concerns on national security, and we should accept that. If this is the case, we should define national security concerns by defining the scope and drawing up a list so that the other areas can comply with the rules of the World Trade Organization.

However, national security concerns are often exaggerated, motivated by trade protectionism. The U.S. and China will pay a huge economic price for this, and it is the people of both countries who will bear the cost.

CNS: Some U.S. mainstream media commentaries say the “trade war” is a costly lesson for the United States, and that increasing tariffs will not improve its economic and trade relation with China. How do you think the U.S. and China should work together to promote the development of their economies and businesses?

Craig Allen: At the current stage, I see a tendency of a long-term tariff, which is very dangerous because it will distort the U.S.-China economic relation. It would be good if both sides could start negotiations on lifting tariffs. The U.S.-China bilateral relation is in a really difficult time right now, and tariff is one of the tricky issues.

CNS: What kind of political statements from the U.S. and China would help the two sides to move closer to each other?

Craig Allen: It would be great if the leaders of the two countries could reach a consensus on overcoming their economic differences, eliminating tariffs on each other’s goods and restoring bilateral trade relations. It is very difficult to have such a dialogue at this time. But we should keep in mind the fact that the United States and China must co-exist in the long run. I believe that all the Chinese and all Americans will be happy to see a cooperative relation. We should think about the ultimate goal of our cooperation and how to achieve it.

CNS: At the start of 2022, President Xi Jinping and President Joe Biden had a video conference. How do you see this contact between the U.S. and China at the highest level?

Craig Allen: Clear and direct communication between the U.S. and Chinese governments is critical to responsibly maintain the world’s most important bilateral relationship. It’s great that President Xi Jinping and President Biden have personally taken the lead and set a good example. We hope that officials at all levels in both countries will also simultaneously enhance constructive dialogue to manage competition and cooperate on many other pressing, outstanding issues.

(Interviewed by Chen Mengtong)