Friday, November 10, 2017

Trump's China Deals And Alaska's Liquid Natural Gas Pipeline

NPR had a report on Trump's visit to China the other day and the story essentially said China was eating our lunch.  I'm going to offer you a fair amount here, because it's all relevant, but the key points are:

1.  Trump has sidelined the professionals who know China and replaced them with political hacks.  
2.  Even with seasoned professionals at the table for the US, China is one of the most restrictive countries for foreign businesses and the US is one of the most open, giving China great advantages.
3.  China has regularly supported its private companies so they could compete with an unfair advantage overseas.
4.  China, when it does work with foreign companies, requires partnerships with Chinese companies and access to all their technology advances.  

OK, here's from the NPR piece, just before this point there's a discussion about American beef having a much higher tariff than Australian beef.
"James McGregor, president of the greater China region for the consulting firm APCO, says China's lifting of the U.S. beef ban in May is the latest case of too little, too late. And he's not optimistic the Trump administration is focused enough to improve business for U.S. companies in China.
"There is no strategy and professionals are not involved," he says. "The people from [the U.S. Trade Representative's office] and Commerce and State are sidelined."
McGregor says instead of representatives from the U.S. Trade Representative and other government staff who typically deal with China, President Trump has political appointees with little to no trade experience engaging with the Chinese.
"It's really been a farce," says McGregor. "And if it continues like this, it's really going to hurt American business. The Chinese are pros. They know what they're doing.
Anybody sitting on the other side of the table as Chinese negotiator has been doing that subject for 20 years."
McGregor says Chinese negotiators have called friends of his in Beijing to see what the Chinese side could give to Trump during his Beijing visit to please his base. He calls these "Twitterable deliverables," and he puts the lifting of the Chinese ban on U.S. beef in this category: an easily promotable gift that, because it has come so late, may not have a meaningful impact on the U.S. economy."

What would have an impact, says William Zarit, chairman of the board at the American Chamber of Commerce in China, is forcing China to open its markets to U.S. business and to stop giving preferential treatment to Beijing's own so-called "global champion" companies. Tech giants Baidu, Alibaba and Tencent, as well as telecommunications company Huawei, have all received generous support from Beijing. 
"These global champions are being nurtured in the domestic market with protection and with strong state support, so that in some ways, when these companies go international, it's tantamount to a Western company competing with the country," says Zarit. 
And when U.S. companies come to China, they're often forced to hand over their technology and enter into joint ventures with Chinese partners. U.S. companies in at least 10 sectors — including automotive, healthcare, tech and entertainment — have investment caps preventing them from competing with Chinese companies on a fair playing field. Chinese companies in these sectors have no such caps in the U.S. market.

I thought about this as I read  the Alaska Dispatch New account of the an Alaska deal signed with China's Sinopec, two large Chinese financial institutions, and the Chinese government to move along  the governor's pet project, the one he ran for governor to accomplish, a liquid natural gas pipeline.  

Are we once again the colony having our resources exploited by wealthy Outsiders?  Is the governor making too many concessions because this project is so important to him?  Are the Chinese giving Trump some empty fluff he can use to show his base how successful his trip was?  The ADN article said that nothing was really final and that "senior Sinopec executives weren't aware of the gas pipeline deal with Alaska."

Our governor is smarter and more pragmatic than most of our politicians.  He spent time as a lawyer in court over oil and gas issues.  That's a good way to learn to understand a business and the players in it.  

Maybe the best thing for the state is to just be able to use the gas we have to raise revenue while we can.  There don't seem to be any details available and we probably don't have that much leverage anyway.   Though I have wondered, with global warming, whether we might spare the $43 billion price tag for the pipeline (which experience suggests will be considerably higher in the end) and just wait a few years until tankers can pick up the gas directly from the North Slope.

But for now, we're part of Trump's evidence of what a great negotiator he is.  And maybe it's a show of Governor Walker's smarts, that he's willing to let Trump get the credit.  Stay tuned, this is going to be a long process.

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