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**APRIL 21, 2023**
Kuttner on TAP
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**** Does Janet Yellen Have Her Own China Policy?
Her recent speech reassuring Beijing was oddly soft-line and ill-timed.
On Thursday, Treasury Secretary Janet Yellen delivered a surprisingly
conciliatory speech on China. Speaking at the Johns Hopkins School of
Advanced International Studies
<[link removed]>, Yellen declared:
"China's economic growth need not be incompatible with U.S. economic
leadership ... We do not seek to 'decouple' our economy from
China's."
Yellen added, "We believe that the world is big enough for both of us."
Yellen denied that the U.S. was trying to damage China's economy, and
said that U.S. actions such cutting it off
<[link removed]>
from advanced semiconductors were aimed purely at protecting U.S.
national security.
"These national security actions are not designed for us to gain a
competitive economic advantage, or stifle China's economic and
technological modernization," she said. "Even though these policies may
have economic impacts, they are driven by straightforward national
security considerations."
The speech cheered trade traditionalists who are critics of the U.S.
hard line on China. Adam Posen, president of the Peterson Institute for
International Economics, the epitome of the free-trade lobby, said, "The
world is a better place today than it seemed to be before this speech."
Yellen spoke while China has been increasing its threats against Taiwan;
and while U.S. industrial-policy measures such as the CHIPS and Science
Act and the Inflation Reduction Act are explicitly aimed at reducing
dependence on China.
The Yellen speech also comes at a time when key U.S. allies are far from
having a united China policy with the U.S. German Chancellor Scholz has
repeatedly sought to increase Chinese trade and investment deals with
the Chinese. And French President Macron embarrassed even his own
government
<[link removed]>
with remarks on his recent trip to Beijing that were almost equally
critical of Beijing and Washington and proposed Europe as a third
unaffiliated bloc.
So what is Yellen up to?
There are two ways of reading the speech. One is that the administration
is pursuing a nice cop/bad cop strategy.
The tough policies to restrict China's access to advanced dual-use
technologies will continue, as will the tariffs and sanctions against
Chinese products made with slave labor, stolen technology, or illegal
subsidies. But Yellen is dispatched to reassure the Chinese that the
U.S. still wants to pursue an economic relationship and avoid war.
The other is that Yellen, who has been hard to control by the White
House senior staff, is freelancing.
It's no secret that the Biden administration has been split on China
policy. Yellen has been the softest of the soft-liners, criticizing the
China tariffs as taxes on the American consumer. The Yellen faction has
recently gained a powerful ally when her former Fed colleague Lael
Brainard, another soft-liner on trade, was named to head the National
Economic Council.
Meanwhile, National Security Adviser Jake Sullivan, Secretary of State
Tony Blinken, and the various officials in charge of industrial policy
and export controls favor a tougher line. It's hard to believe that
Sullivan was totally blindsided by the Yellen speech. On the other hand,
it's equally hard to believe that he was thrilled by it. The shifting
power balance inside the administration gave Yellen the leverage to
deliver such a speech at all.
If the U.S. is to have an effective China policy, it needs better
coherence and coordination among U.S. allies-and inside its own house.
~ ROBERT KUTTNER
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