Walking a Tightrope

The US Presidential Election could have far-reaching implications for the bilateral relationship. Alan Beebe sat down with Ambassador Max Baucus to get his thoughts on the Election, the future of the relationship, diplomacy - and haircuts.

Baucus at 2016 APCAC_cropped.jpg

Alan Beebe: Ambassador Baucus, what are some of your favorite memories from Beijing?

Ambassador Baucus: I have several recollections of the Great Wall, including when President Clinton visited China, and I was there with him. Another time, I got lost on the Wall. My driver dropped me off at about 10 am, and I said I’d be back by 3pm. I saw several Chinese guys, and I got talking to them. We ventured out past the end of the restored part of the Wall and, my God, it was arduous. At some parts, a couple of these guys had to pull me up over this cliff and onwards. It was getting dark and the Embassy even called my wife in the States, thinking I was lost! Finally, I found my way back to another location and it worked out okay.

Beebe: Using the Wall as an analogy, what are your current thoughts on the US-China relationship? It’s certainly had its ups and downs.

Baucus: It has, but I think that, not too far down the road, it’s going to stabilize a little bit, because it has to. We need each other. Cooler heads will prevail. It will be difficult, clearly, but I think some of the histrionics – at least from the American side – are going to subside, and we’ll get down to the hard work of figuring out how to manage it. Cyber, tech, and human rights are all huge issues, but I do think it’s going to stabilize a little bit.

Beebe: You were, and are, always an optimist! But I think that comes within the context of your long experience in the Senate and US government as Ambassador here. So, we take heart in your comments. I remember when you were serving as Ambassador here, the repeated call for a more comprehensive China strategy.

Baucus: It really struck me that we did not have anything close to a sufficient long-term China strategy. It was very ad hoc, very reactive. I could understand that a large part of this flaw was because China had grown so much over the years. I think we’ve slipped backwards under the current administration. Its policy is driven so much by the President. On trade, Lighthizer and Mnuchin have tried to bring some stability, but I don’t think there’s anything close to a strategic plan.

I’ve talked to some people who think maybe the US should have some kind of a sovereign wealth fund, such as Singapore and some of the Arab countries. We’d need to figure out the mechanics of it, but that would, in and of itself, create some stability, because we’d be more long-lasting; it wouldn’t come and go with different administrations. But the main thing is, we need to find mechanisms to develop a longer-term strategy. I think it’s hard, but it’s doable.

Beebe: If you look at it from the Chinese perspective, they have their five-year plans and arguably take the longer view. From your many interactions with senior Chinese government and party leaders, how do they view the US, and how would you summarize their strategy?

Baucus: As you know, it’s so opaque, there’s just so little transparency. One of my disappointments was that I thought that the government friendships I had developed earlier were ones I could build upon when I began to serve in Beijing. For example, during my time in the Senate, I’d invite China’s US Ambassadors to come to my home state of Montana. I hosted several of them including Yang Jiechi and Zhang Yesui. So when I arrived in Beijing, I thought “This is great, I know some of these pretty important people in the Chinese government.” But it was very difficult. My wife developed a close relationship with the wife of one of the officials, but, once I started probing, trying to determine Chinese thinking – it was very difficult.

Ambassador Baucus meets then Vice Premier Wang Yang at the 2015 AmCham China Annual Appreciation Dinner

When I talked to my Chinese private sector friends, I would ask them if they thought America is in decline. They would roll their eyes a little bit saying they think it’s declining a little too quickly. We’re not declining, but we’re certainly being challenged, and the stature of the US is declining overseas in some respects, which the Chinese are taking advantage of. I do hear the Chinese prefer Biden over Trump, because I think they feel like at least they know what they’re dealing with.

Beebe: Sometimes you’ll hear that in Beijing they prefer Biden and in other cases prefer Trump. But the advantage for China with Trump, despite the unpredictability, is that there are more opportunities globally, given the bilateral approach.

Baucus: When I was serving, I found the Chinese kind of conflicted whether they wanted Hillary or whether they wanted Obama. Full disclosure, I’ve been helping the Biden team on China. I don't know that he personally knows China near as well, as he knows, say, the EU, the Baltic, Russian issues, or the Middle East, because Obama was so involved in the Middle East at the time. But Biden clearly knows that China is critical.

Beebe: That’s one of the dilemmas and challenges – that the US-China relationship is so critical, but it’s not necessarily easy to understand, because it’s so complex.

Baucus: I really do counsel American business to stay the course as much as possible. If you can, think about maybe reshoring, or changing course. Don’t jump too quickly, because the climate might get a little better.

Beebe: It goes without saying these are choppy waters here for American business in China. I would say that companies, largely speaking, feel that they’re slowly getting squeezed, whether it be in the tech sector or otherwise. So, I think there was sort of a mixed view here, at least among our membership as to the Trump administration’s approach towards China. Phase One was a sigh of relief, partly just because there was some stability, but also because there were some tangible outcomes as part of that agreement.

But I’m curious on your view of Phase One. Do you think it was a good deal? Or a good start? And do you see it staying intact past the Election? From our perspective, we see the Chinese government continuing to want to stick to the Phase One agreement, and it seems to be one of the few things holding the relationship together right now.

Baucus: That’s very much my view, too, that it’s about the only thing holding the relationship together right now. And for that reason, I think that both sides want to continue it. The optics are important for both countries to continue. American farmers want to sell soybeans and corn, and manufacturing and energy products to China. It doesn’t really address some of the structural issues as much as we’d like, but it’s a start. Whether Trump or Biden is elected, I do think it’s going to continue, if for no other reason than it’s important for both sides to maintain it.

Beebe: That’s the sense that we have as well. We’ve been called in quite a number of times this year by the Ministry of Finance, the Ministry of Commerce, the NDRC, and others, just wanting to talk about Phase One in the spirit of trying to move things forward. That doesn’t happen very often: we’re usually the ones making the call, and if we do get called, it’s not necessarily going to be a positive meeting!

Baucus: That’s good to hear. When I was serving there, I developed what I called my three P’s in dealing with the Chinese – you’ve got to be patient, positive, and persistent. Stick with it, but in a positive, upbeat way. You go to all the agencies, and each one’s pointing you in another direction. But they’re all taking notes, and, to a large degree, it works itself through the system in some strange way.

The real goal here is to get respect. We want the Chinese to respect us, not push us around or bully us, and there were lots of times where we would stand up and they did back down. But a lot of that was low key. It enabled both sides to save face, have more maneuvering room, and not to let the nationalists get a head of steam.

Beebe: At AmCham China, we just have to keep plugging away, even though the ground is shifting on us pretty frequently. Given all the provincial outreach you did – I think you visited every single province and region – do you have any reflections on that?

Baucus: It was important for me to get up from behind the desk, get out, and see what’s going on. You can learn a bit from reading memos from your staff, but it’s so important just to get out and smell different parts, taste, and talk to people. I would talk to government officials and American businesses wherever I went.

From left to right: Former AmCham China Chairman and current Vice Chair William Zarit, former US Ambassador to China Max Baucus, former AmCham China Chairman James Zimmerman, and AmCham China President Alan Beebe in December 2016

But, my goal was just to ask constructive questions – not accusatory or difficult personal questions – and go out of my way to show that I wasn’t being superior or condescending. In the fifth or sixth month after I began to serve, I met with a Chinese general. I had my talking points, he had his talking points, and we just kept going back and forth. So, I just interrupted him mid-sentence – quite rudely, from an American perspective – but constructively asked him to provide concrete examples. He loved it. He still came back with some of the same points, clearly. But he really liked it, because he didn’t have to stick to his talking points.

That’s the approach I took from then on. I would do my very best to not be too scripted, but try to get a sense of the situation and move the ball farther than might otherwise have been the case. I even did that with Americans coming over – American officials who I thought were too intimidated, or a little bit too polite talking with the Chinese government, and also with American CEOs who were new and didn’t have a lot of experience in China. I would tell them: “Get into it constructively, and, honestly, time is short. Take advantage of this opportunity.”

There was another time when Secretary Pritzker brought over a delegation. Across the table was Liu He, and some others. Not a lot was being accomplished; people were reading canned statements to a large degree. Secretary Pritzker gave her points and then Liu He gave his and then back and forth. By the time it came down to me, I realized I was the only one in this room of about 150 people from either the Chinese or the American side who had ever run for public office. I spoke up and said, “I’ve run for office 18 times, and faced umpteen number of voters. Sometimes they like what I’m doing and sometimes they give me a hard time. But I’ve learned two things in all those years: the same issues that concern American voters are the same basic concerns the Chinese people have. Number one, they want to have food on the table, and be able to take care of their family, with education, clean air, clean water, and decent healthcare. In both countries, people are the same. And second, people are pretty smart. After a while, they get it. It may take a while, but they get what’s going on. And so, when we’re talking about this negotiation here, this tiny detail, let’s keep in mind who we’re representing, and why we’re here”.

After I said all this, I looked across the table and there were great big smiles. Then there was simultaneous applause. One of the Chinese officials told me his boss thought it was the best speech he’d heard in a long time. Afterwards, I kept asking myself, what caused that reaction? Why did the Chinese appreciate that? I couldn’t figure it out.

Beebe: I wasn't there­, but my guess is that because it was authentic and spontaneous, and that’s not how Chinese can operate. Everything is so scripted. You have to take your notes and report back and you’re told what to say and how to say it.

Baucus: That’s what I took away from it, too, that it was just mutual respect, and being honest in an equal way. The idea that we are all here together, so let’s find a commonality.

Beebe: What advice did you give Ambassador Branstad when you went to visit him in Iowa for a couple of days before he arrived here?

Baucus: I just told him to be straight, above board, honest, and engaged. I mentioned I visited all the provinces, and I encouraged him to do the same. Get around, talk to people, ask questions. I’ve had two fantastic jobs. Representing Montana is one, but also representing the US in China was also a super job. It’s such an opportunity, so rewarding. You have near vertical learning curves and so many different issues, but that’s stimulating, too.

Beebe: Without a doubt. If there’s one thing I never hear from people, it’s “I came to China and I was just bored stiff!” So, when could we reasonably expect a new Ambassador in China? And what advice might you have for him or her?

Baucus: Well, I would expect about a half year. It’s a long process, with the selection, the vetting, and the training from State Department. I would give the same advice to this person I gave to Branstad, and to remember you represent the President, not the State Department. We had 50 agencies in the Embassy – everything from energy to CDC – and each is going its own direction. Talk to the White House and make sure that these agencies are working together. More than that, get direct access to the President. Getting that access is really important, because that will enhance your position with the Chinese government. The more they know that you are talking to the President, that will help very significantly.

Beebe: Looking forward, would things change fundamentally as far as the US-China relationship is concerned, depending on who wins the Election?

Baucus: I really don’t want to be political here, but I do think that, at a certain level, things are not going to change a lot. Because the tectonic plates are shifting, with a rising power and an established power, it’s inevitable that there will be tension between the two largest economies, especially when each has very different cultural backgrounds. If Biden gets elected, there will be a change. Not so much substantively at first, but there would be a considerable process change. President Biden will not tweet two to three times a day­. He’s been in public service his whole life, and is so involved in traditional US government organizations and processes, so he will continue that. I think that’s a big plus, because there won’t be any big surprises. He will want to work together with the WTO, the Paris Accord, Iran – all issues that China cares about.

The first goal is to get the coronavirus under more control. Second, infrastructure spending in the US is going to bring jobs back. There would be a lot of spending to address climate change, and renewable energy industries. He’s going to start from a position of economic strength in the US. He’s a foreign relations guy, it’s in his blood. So, he’s going to try to coordinate American policy with all our allies.

China will keep growing. They’ll keep rolling along until they’re checked, either internally or externally. We can’t do much about the internal, but we can do something about the external. That’s not to stop China’s rise – there are many in the US who do want to stop China’s rise and there’s nothing more foolhardy than that, in my judgment – but interact in a way where competition is respectful. That takes time, and trust, as we build relationships. It won’t be immediate, but as long as we keep the faith, then we have some prospect of success.

The 2015 AmCham China Board of Governors present a gift to Ambassador Baucus and his wife at the US Ambassador’s Residence in January of that year.

Beebe: We’re just in such unchartered waters. We represent the American business community in China, and we do our best to stay down the middle, but, as you can imagine, it’s not easy. What advice do you have for AmCham China in these turbulent times?

Baucus: Strictly from a business perspective, I think we’re in a low point that’s going to get better. This too shall pass. It will get better, because it has to. China needs us, we need China. That means stay the course, and keep building those relationships. Chinese businesspeople want to work with the US too, and a lot of them agree with a lot of what you say.

Beebe: On a personal note, I was out in Dali in Yunnan a few weeks ago, and I went to the Linden Centre, which is run by an American guy, Brian. If I recall correctly, you said that you visited twice: you went once, then, during your final days here, you enjoyed it so much, you went back.

Baucus: I like Brian, I really take my hat off to him. What he’s done with that architecture, that structure there, it’s wonderful. I got my cheapest ever haircut in Dali. I think it was about RMB 10 or something like that. But it was a good haircut, too, I might add!

This article originally appeared in the AmCham China Quarterly magazine, 2020 Vol 3, which can be downloaded directly here.