Stephen Roach Warns of Disaster From Our 'Sinophobic' China Policy

SPEAKER_2 (0:02)

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Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:25)

Tracy, you know, when it comes to US trade tensions with China, obviously there are a number of people, they sort of reach back for the fear and the anxiety of trade with Japan in the 80s. But I have to say, like, I don't actually know much about that. I wasn't paying that much attention to trade policy when I was seven years old or nine years old and stuff.

Tracy Alloway (0:46)

That's very disappointing, Joe.

Joe Weisenthal (0:48)

Even though I'm aware that that was a thing and probably some of the concerns, particularly about automobiles specifically and the threat to Detroit and all that was popular the way it is popular now, I actually know very little of that story.

Tracy Alloway (1:00)

Don't you watch movies from the 1980s? There are quite a few villains from 1980s cult classic movies that end up being Japanese businessmen. And I do remember some pop culture zeitgeisty moments from the big fear that Japan Inc. was going to eat the US economy. For instance, there's that famous photo of, I think it was a bunch of congressmen smashing like a radio or a TV or something in Washington in the late 1980s. Do you remember seeing that?

Which you can imagine like, so the idea was the US feels threatened by Japan's dominance in certain primarily consumer electronic goods back then, but also increasingly in computers. And so a bunch of politicians went out and started smashing those publicly to make a statement.

That hasn't happened with China just yet, but you could imagine something like that being done today, but it would be with Chinese solar panels or something like that.

Joe Weisenthal (2:02)

Oh, I'm looking at the photo. They smashed a boombox right in front of the Capitol.

Tracy Alloway (2:07)

You can't get much more 1980s than smashing a Japanese boombox.

Joe Weisenthal (2:12)

This photo goes, it goes hard, as the kids say. It's quite a photo, but you're right. And I do remember the pop culture elements and movies like Falling Down or The Villain and Back to the Future 2, I think it was, or maybe whatever. So I remember it, but I certainly don't remember how it resolved or why it faded or why, you know, I know a little bit, but not really like what the ultimate was there, how similar it actually was, because yeah, sure, you know, it's one thing with boom boxes and cars, but obviously there seems to be, at least in US policy circles, this big national security element that dovetails with some of the concerns about cars and solar and stuff like that. And of course, when speaking of analogies, you know, we've also talked about the history with the real estate, bubble and bust.

We've talked with Richard Koo about the similarities of the real estate boom that Japan had and the bust that subsequently followed and there may be parallels there, but I definitely feel like I need to wrap my head around even further about how useful or not some of these historical patterns are.

Tracy Alloway (3:17)

Absolutely. The other thing I would say is it is remarkable in some respect that the commonality between Biden and Trump is being tough on China trade, right? That is a common thread. And so no matter what happens in November, it seems reasonable to expect that these trade tensions are going to continue in one way or another. So I definitely think it's worth talking about.

Joe Weisenthal (3:42)

Totally. This is really an important element and I'm glad you brought it up, which is the complete Washington consensus. It would seem at this point where there doesn't seem to be any disagreement about the basic notion that we have to do something on trade, that we have to amp up the national security anxiety, whatever it is with respect to China has become completely conventional wisdom of both parties.

And when something is conventional wisdom like that, it's probably good to question some things.

Tracy Alloway (4:11)

Absolutely, let's do it.

Joe Weisenthal (4:12)

All right, I'm excited. We really do have the perfect guest today. Someone I don't believe we've ever had on the podcast before, but someone whose work and writing I've admired and read for a really long time. Really excited to be chatting with Stephen Roach.

He's a senior fellow at Yale Law School, former chairman of Morgan Stanley Asia, and has been talking a lot about this topic for years and years, and has been warning about what he sees as the errors of our current approach to China. So Stephen, thank you so much for coming on Odd Lots.