A Second China Shock, With Brad Setser

LINDSAY:
Welcome to The President's Inbox, a CFR podcast about the foreign policy challenges facing the United States. I'm Jim Lindsay, director of Studies at the Council on Foreign Relations. This week's topic is a second China Shock.

With me to discuss China's recent export surge and its consequences for the United States and the global economy is Brad Setser. Brad is the Whitney Shepardson senior fellow at the Council, where he writes on global trade capital flows and sovereign debt issues. Brad has held several positions in the U.S. government, most recently as senior advisor to the U.S. trade representative from 2021 to 2022. Among Brad's recent publications is a co-authored piece on China's record manufacturing surplus. You can find it on his blog, Follow the Money, which is hosted on CFR.org. Brad, thank you for coming on The President's Inbox.

SETSER:
Oh, thanks a lot for inviting me.

LINDSAY:
I want to dive into the causes and consequences of what is being called the second China Shock, but before we do that, Brad, some context would be helpful. What was the original China Shock?

SETSER:
China was...After a long negotiation, China entered into the WTO, World Trade Organization, in 2002. After China entered into WTO, Chinese exports took off, grew at a phenomenal pace, and during that period a very, very rapid growth. And then rapid growth here means 30 percent year over year. We're not talking a little bit, we're talking explosive growth.

LINDSAY:
Big numbers.

SETSER:
Big numbers, and there's obviously a corresponding increase in U.S. imports and European imports. During that period, there was a sharp fall in U.S. manufacturing employment. And a set of economists, David Otter at MIT, Otter, Dorn, and Hanson, looked at employment and job market outcomes in those parts of the country that had a particular concentration in the production of manufactured goods, and the production of manufactured goods that competed with China. And they basically found not only did those workers in the industries directly impacted by increased competition from Chinese production experience bad outcomes, but the entire community experienced bad outcomes.

So the aggregate effect is more or less in the period before the global financial crisis, the surge in U.S. imports from China, Chinese exports to the U.S., likely led to the reduction of about a million manufacturing jobs, and then another million jobs in those manufacturing centric communities. Of course, other parts of the country experience lower prices. It's not a statement about aggregate gains, it's a statement about concentrated regional costs. And I think what was important for subsequent thinking was that the effects were persistent. It wasn't like you lost your job and you found another job. People in those communities experienced bad job market outcomes, bad economic outcomes for many years. So that's kind of the background. It changed a little bit how many economists think about the cost of trade.

LINDSAY:
So the Chinese economic miracle of the early 2000s rode on the back of exports. Americans got out of that lower prices for consumer goods, probably lower inflation they would have otherwise, but there was a trade-off. I'm probably going to come back to the trade-off word again, in that thousands of U.S. firms couldn't keep pace. They went out of business, their employees lost their jobs, and they didn't easily switch careers. It wasn't a seamless transition to new employment, and it was particularly concentrated in the Midwest.

SETSER:
Midwest and Southeast.

LINDSAY:
So let's talk now about the second China Shock. I have to confess, it's not a topic I expected to be discussing, since everyone seemed to treat the original China Shock as a one-off, that this is a one-time thing. But as you've documented on your blog Follow the Money, Chinese manufacturing exports have surged, and it is causing consequences all around the globe. So maybe first help me understand the size of today's surge in Chinese exports, and then we can talk about why it's happening.

SETSER:
So there's a lot of different ways to measure China's exports. Perhaps the easiest is to think of the First China Shock as an increase in China's manufactured exports, actually more as manufactured surplus. That was a little less than a percentage point of world GDP. And I think over the past three or four years, there's been a second big increase in China's manufacturing surplus, that's a little less than a percentage point of world GDP. So on a global basis, the first China Shock pulls China's manufacturing surplus up to about a percentage point of world GDP, what I would call the second China Shock has pulled that up to about two percentage points of world GDP.

LINDSAY:
So what exactly is a manufacturing surplus?

SETSER:
Manufacturing surplus is you import some chips, you export computers, the computers are worth a lot more than the chips. So the difference between your imports of manufacturers and your exports of manufacturers is your manufacturer's surplus. Of course, China runs a deficit in commodities. China imports a lot of oil. Oil importing economies generally run a surplus in manufacturing. But China's surplus in manufacturing has become exceptionally large relative to its own economy. It was maybe 6, 7 percent of China's GDP a couple of years ago. It's now up to 10 percent of China's GDP. Look at it in dollar terms. China's manufactured exports since the trade war, ironically, but since before the pandemic have grown by about a trillion dollars, and that's just a big number. It's big relative even to an economy like the U.S. Not all those exports are going to the U.S. Matter of fact, a lot of them that are coming to the U.S. aren't coming directly to the U.S., but it is an enormous-

LINDSAY:
When you say that, you mean the Chinese may export to Mexico, which in turn exports to the United States?

SETSER:
Yes. Although I think the data showing exports to Mexico that are re-exported to the U.S. is not as strong as the data showing that exports to Southeast Asia are re-exported to the U.S.

LINDSAY:
So now, help me understand why we're seeing the surge in Chinese exports, particularly manufacturing exports. Is this just a natural evolution of the Chinese economy? Is it the result of deliberate state policy? Something else happening?

SETSER:
So I think it's an intersection of at least three important trends and shifts in the global economy. The initial surge was very closely tied actually to the COVID shock. I mean, there was an enormous increase in global demand for goods of all kinds. There was so much demand for goods in the U.S. that our ports were literally full. You couldn't get a ship in and unload. So that increase in global demand for goods was largely met by an increase in Chinese supply. So that's stage one. And that didn't have that many disruptive effects on the rest of the global economy.

I think stage two is that China's own economy kind of stalls. China had been relying very heavily on property investment as a source of growth. Some estimates like a quarter of Chinese growth was coming from building new apartments, building infrastructure to support more new apartments. The property market turned down. Property construction didn't immediately grind to a halt, but new property sales have almost completely come to a stop. And as Chinese property developers were laying people off, as the Chinese economy sort of slowed, one typical response to a reduction in your own demand is your firms look to export more, to keep employment up, to keep output up.

LINDSAY:
So we have COVID, and then we have a housing bubble in burst. What would the third factor be?

SETSER:
Third would be that China's industrial policies started to pay off. China, and this is going to be a shock to all of your listeners, China is not a market economy, not exactly what would be thought of as a market economy. So China's been directing a lot of resources, a lot of money, a lot of credit at specific sectors of its economy, sectors where it wanted to catch up, sectors where it thought the opportunities for future growth were really high. So that was some sectors, which it thought were strategic, like semiconductors and aircraft, other sectors that it thought were strategic and offered new opportunities, like electric vehicles, like battery manufacturing, solar manufacturing, hydro-allogizers, just the clean energy complex. And those investments worked. China created a critical mass of firms that got scale, got cost efficiencies, often got that inside a protected Chinese market. But they became globally competitive, or more than globally competitive.

LINDSAY:
Were they subsidized?

SETSER:
Yes, of course.

LINDSAY:
Heavily subsidized?

SETSER:
It depends on the sector, but yes. I mean I think the initial wave of investment in say electric vehicle batteries was very clearly subsidized. The wave of investment in electric vehicles was facilitated by the subsidies for electric vehicle batteries, supported by local government subsidies for building factories, and then further supported by consumption subsidies. The usual, if you buy an electric vehicle, you get a rebate. In China, you also got a license plate, which is not a given in a big city. And that rebate was limited to Chinese-made cars with Chinese-made batteries. So it was tied to localization or local content requirements. They weren't written out, but no foreign company making a car outside of China ever qualified.

LINDSAY:
So state power clearly had its thumb on the scale of production and distribution favoring domestic firms.

SETSER:
At the start. One of the features of Chinese industrial policy is, it's not like China picks in all cases a single champion. In a lot of cases, it picks sectors that it wants to support, and then local governments pick their own champions. And so, you end up with a lot of competition. It's subsidized, but a lot of competition, because different parts of China compete to create the Chinese champion in this new sector. And so, that's very much what you saw with EVs and batteries.

LINDSAY:
So the Chinese government made a conscious decision as a matter of policy to invest in production. The Chinese government doesn't appear to have invested in consumption and encouraging domestic demand. And I'm curious why that is, Brad, because for at least fifteen years now, I've heard Western economists, particularly American economists, talk about the necessity of China to build its own domestic consumption, that it couldn't rely on exports to prop up its economy.

SETSER:
Look, it's a good question. One of those Western economists was me.

LINDSAY:
Yeah, I was listening to you.

SETSER:
I know. Look, I think there are two separate answers to that question. One answer is that after the global financial crisis, China was able to engineer a very strong recovery on the back of investment. So it did reduce its reliance on exports, it just didn't shift to consumption. And that-

LINDSAY:
This is particularly in the housing.

SETSER:
Housing and infrastructure, a lot of urban and national infrastructure, high-speed rail grid.

LINDSAY:
Great rail service in China.

SETSER:
We sometimes perhaps should learn something from aspects of Chinese policy. That drove let's say ten years of pretty good growth. I mean, probably even when we say exceptional growth after the global financial crisis. So it didn't seem like China needed a consumption engine.

LINDSAY:
But if you do that, you end up with apartments with no people and trains with no passengers going to places many people don't want to go.

SETSER:
Correct. And I think that happened. I mean, it happened at the margins with the rail network, and it happened in a very big way with property construction. So you hit a wall, you hit a point where you would be building yet more apartments that no one can afford to live in, and at some point the property developers just couldn't financially afford to keep building at that rate. But there's a second element, and I think it's become clearer thanks to the reporting of particularly Lingling Wei of the Wall Street Journal, but others who have contacts close to Xi, people who read some of the work that is attributed to Xi, even if he doesn't sign it, that Xi himself simply doesn't believe that sending out checks to households is productive.

He thinks it leads to welfarism, it undermines incentives to work. It undermines the moral foundations of China's economic rise. "We need hardworking citizens who go out and earn their living in the market, not households sitting around waiting for a check from the government." And that's part of the reason why COVID played out differently in different parts of the world. We supported households, China supported its firms, China recovered from exports, we recovered on the back of strong household spending.

LINDSAY:
Okay, I should just note that President Xi is a communist. He's the head of the Chinese Communist Party. He is not a capitalist and he's not trying to maximize the profits of individual Chinese firms. He's trying to ensure the stability of the Chinese Communist Party. Is that a fair assessment?

SETSER:
Communist does not mean you can't be a state capitalist, and strangely enough, China's communist actually have a very regressive system of taxation, and don't have the world's most generous system of social benefits. So communism has been interpreted to mean state control of the commanding heights of the economy, state control of finance, party control of key parts of the economy, but not necessarily the provision of generous benefits.

LINDSAY:
That actually feeds into this cycle of investing heavily in manufacturers, because consumers in this system without a social safety net are looking to save for themselves, rather than to purchase consumption items and start to up that engine. I think it's an argument our colleague Zoe Liu has made, correct?

SETSER:
It's an argument Zoe has made. It's an argument I have made. I think it is now well accepted. As a share of its economy, household consumption is very low in China. And as a share of its economy, household savings and national savings are very high. So that has, from a macroeconomic point of view, predictable effects.

LINDSAY:
One of the big points I'm hearing in our conversation is that the surge in Chinese exports is not just a problem for the United States. It's a problem for a lot of other countries. Give me some sense of what the reaction has been outside of the United States to this surge in Chinese exports.

SETSER:
Well, it's varied. In some parts of the world, the surge is welcomed, to be honest. If you don't have an auto industry, you like cheap cars. If you're Russia and you're cut off from European cars, and European manufacturers can no longer get parts to make cars in Russia, you're really happy to have access to Chinese autos. But in say, Europe, there's a great deal of concern that Chinese-made electric vehicles will come to dominate the European market, and instead of transitioning from European-made diesel and gasoline cars to European-made electric vehicles, that transition to green transportation will be a transportation to Chinese-made electric vehicles.

So there is various trade responses that are being prepared outside the United States in Europe. Europe's looking into countervailing duties, which means an anti-subsidies offset the impact of subsidies, trade case. And even countries that are friendlier globally to China, like Brazil, are starting to worry that their own local industries are being threatened by a surge in Chinese exports. Brazil's putting friction, introducing tariffs on imports of Chinese steel, which is a bit ironic, because a lot of Chinese steel is made with Brazilian iron, but Brazil feels like it can't compete with its iron coming back to it in the form of steel from China in some chemical sectors. A country like India, which doesn't actually have a great geopolitical relationship with China these days, it's quite protectionist.

LINDSAY:
Not just toward Chinese goods. I mean India's protectionist in general, isn't it?

SETSER:
It is, but it's become specifically protectionist towards China, because it is dealing with a wave of imports from China. So the change, the new trade cases in India have been directed at China. And of course we have our own set of tariffs and those tariffs are being reviewed. President Biden has already announced that as part of that review, the tariffs on steel and aluminum will go up. I think it's very probable based on what has been stated in the press, that tariffs on electric vehicles will also go up.

LINDSAY:
I want to pull at this thread about the export of Chinese green technology, whether we're talking about solar panels or electric vehicles, because the Chinese clearly are at the cutting edge of those industries, they are highly efficient, even if they are subsidized. I will note that so many Chinese solar panels have flooded Europe, and they are so cheap that Europeans have taken to building fences using those solar panels. As you mentioned, car manufacturers around the world, but especially in Europe, are worried about being put out of business by very inexpensive green vehicles, electric vehicles coming from Europe. But I've heard others say that this actually is a benefit that we face climate change, and we should think of this not as being swamped by Chinese exports, but is a good green glut. It's an opportunity to speed up the transition to a lower fossil fuel, lower carbon economy that will benefit us all. So obviously a trade-off there, how do you assess those arguments, Brad?

SETSER:
Look, it is a trade-off, there's no question about it. The cheapest way to build out solar capacity right now is just to import panels from China. Don't worry about creating your own industry. The cheapest sources of electric vehicles globally are clearly from China. So if you want to accelerate the transition away from an oil-powered auto fleet, Chinese EV capacity is the easiest, cheapest way to do it. There is though, I think a view politically, certainly it's the view of the Biden administration, that in order for the green transition to be politically sustainable, it has to be tied to local manufacturing jobs.

And in the U.S. there's an added argument, which Senator Manchin expressed, was like, "Look, we're actually kind of self-sufficient when it comes to oil now and gas. Why would we want to shift from being self-sufficient, even if it is bad for the climate, to being dependent on China for our energy infrastructure, for our transportation?" So for those reasons, there has been a political desire to link the green transition to an expansion, the production of green goods. And so, China and Chinese production skills put those two objectives in tension and in conflict, which is why both the U.S. and Europe are struggling in different ways to find the right balance between two competing objectives.

LINDSAY:
So how should the United States respond to the challenge it faces, Brad? And I ask that against not just the backdrop of the political challenges in general, the fact that we're in the middle of an election year, an election season where clearly the premium is on being seen as standing up for America, however you translate that into practice. But there's also the question of how effective things like countervailing duties and tariffs are. We have seen, for example, with tariffs being placed on China by the Trump administration and continued by the Biden administration, that we're seeing Chinese move production around to try to avoid the sanctions. There's also questions about whether or not the United States government should look to weaken the dollar as a way of balancing things by making imports more expensive and U.S. exports less expensive. No doubt there are other sorts of tactics you can try, including jaw-boning Beijing about its own policies. How do you think about the policy reaction space? What's worth doing, what isn't?

SETSER:
Well, I think you would also have to include within your policy toolkit domestic industrial policies that have the character of subsidies, so that you kind of artificially lower your cost of production.

LINDSAY:
Which is already happening with the Inflation Reduction Act, among others.

SETSER:
And the CHIPS Act. So we subsidize capital investment, including in sectors where we're competing directly with Chinese production, and that poses issues going forward, but it's a way of getting, say, investment in U.S. battery production, when there's plenty of battery production capacity in China. I think in the green technology space in particular, there is a role for tariffs. Bilateral tariffs, as you alluded to, don't work perfectly. They're often easy to get around. It is often easy to ship parts to another country, typically Southeast Asia, and then import the final good tariff-free if you're just tariffing trade with China. You see that very much with solar, for example. Solar wafers, solar cells go to Southeast Asia, become solar panels, and they avoid the tariffs that are directly placed on China. They're still potentially subject to some of the global tariffs, but you get around the tariffs that are placed on China, and I think in general, there are limits to what you can do with bilateral tariffs.

The exception so far actually has been with autos. Chinese companies haven't yet gone out. So China BYD is now building production facilities outside of China. BYD is the leading Chinese electric vehicle producer, but it actually doesn't have very much production capacity outside of China. So until those investments are made globally, most Chinese made EVs, or EVs made with Chinese parts, are coming straight from China and are therefore currently subject to the 25 percent 301 tariff, the Trump tariff, and the 2.5 general auto tariff. Over time, though, I don't think that will be sufficient. I think you're going to need blocs.

LINDSAY:
What do you mean by a bloc?

SETSER:
North America, if it were to become a more integrated auto customs union, would be a bloc. The EU is a bloc. A region with a common set of policies, often a common external tariff. So I do think that as the USMCA is heading into a review-

LINDSAY:
USMCA being the U.S., Canada, Mexico Free Trade Agreement.

SETSER:
Rebranded NAFTA. NAFTA 2.0, there'll probably need to be a NAFTA 2.1 that will have stronger rules of origin for cars coming into the U.S. market. Even cars that don't qualify for the special tariff-free entry. 2.5 is not a high tariff for a car, and so I think the issue in a forward-looking sense will be does 2.5 work if you're worried about a Mexican facility?

LINDSAY:
BYD building a production facility in Mexico-

SETSER:
Or Tesla.

LINDSAY:
Or Tesla.

SETSER:
Okay, building a production facility in Mexico that uses a Chinese battery, a Chinese chasis, a Chinese drive train, with Tesla American software with BYD Chinese software, and puts it together, assembles it, but without a whole lot of Mexican value added, and then it shipped to the U.S. What's the right tariff for that good or that car? Right now it's 2.5. In Europe, there's a common external tariff, and I don't know that you want a common external tariff for everything in North America, but I could imagine having a common external tariff for autos and auto parts, for example, a North American automotive community might make sense. I think there will be pressure to go beyond bilateral tariffs, because bilateral tariffs don't work well. The other thing that does work over time, as you alluded to, is changes in the value of the dollar. The dollar is strong, the yuan now is weak.

LINDSAY:
Is that a result of deliberate Chinese government policy or is that just the way the market's working?

SETSER:
Well, it is the result of Chinese monetary policy, not Chinese intervention in the currency market. China has kept its interest rates low, it's actually lowered interest rates. One of the effects of the property market is a weak domestic economy. No price pressure, no inflation, just a little bit of deflation. So China's at the margin cutting interest rates, U.S. interest rates were raised and are quite high. Our economy's running pretty hot, and that has pushed the dollar up against all currencies, including the yuan. China with its direct currency policy looks to be trying to keep the yuan from becoming even weaker. So it's not China holding its currency down.

LINDSAY:
In some sense, it's propping it up.

SETSER:
It is propping it up. How exactly it is propping it up, is something I explore in excruciating detail in my blog.

LINDSAY:
People interested in that should check out your blog, Follow the Money on CFR.org. I suspect a lot of people listening to us though really want to hit the high points.

SETSER:
So the big issue around the dollar and around the yuan is that it is hard to push the dollar down when U.S. demand is strong and when U.S. interest rates are high. And to be honest, the U.S. fiscal deficit is big and it's contributing to both. It is hard to push the yuan up when China's own growth is weak, and when China's government isn't willing to use its fiscal power to help households, it only wants to hand out checks to companies adding yet more capacity. So until that constellation changes, it's hard to get the currency values to converge.

But to my mind, there's no doubt that dollar adjustment is part of any long-term solution. The dollar is not only exceptionally strong now, it's been strong for ten years. There's abundant, well-grounded, doesn't get published, because there's nothing new, but it is a very, very, very well established relationship between the value of the dollar and imports, and even more, exports.

LINDSAY:
I should just note as we talk about trade-offs, if you get a weaker dollar. That means if you travel to Mexico, or to Europe, or to Asia on holiday or business, everything becomes much more expensive. I mean, there are no free lunches in this conversation.

SETSER:
That's true. I mean, the arbitrage, to use a more fancy term between the cost of dining out in Paris and the cost of dining out in Washington, DC is currently very favorable to Paris.

LINDSAY:
And there's a lot of very good food in Paris, but we won't explore our favorite restaurant choices in the City of Lights. I want to come back to the point you made, Brad, because I think it is quite important about blocs. If you start speaking about blocs, whether it's North America, in Europe, or to transatlantic community, all of that is about policy coordination. You have to get all of the major players to agree, but that's a real challenge. I think you mentioned we're going to have a sort of rethink of the USMCA in 2026, as I believe, and obviously negotiating USMCA the first time was quite a painful process. It can be very difficult to bring countries to bear, because their interest may be aligned, they're not identical. And I know that with the Inflation Reduction Act and the Science and CHIPS Act, a lot of Europeans and a lot of America's allies in Asia were quite angry, because they saw it as the United States trying to solve a problem at their expense. How do you overcome those problems?

SETSER:
Well, actually foreign policy, foreign economic policy, diplomacy, negotiation, ultimately adjusting aspects of your policy in return for other countries adjusting aspects of their policy.

LINDSAY:
Okay, how do you do that in an election year?

SETSER:
I think it will be impossible to do in an election year. I think mean there was a set of failed negotiations between the U.S. and Europe at the end of last year that were effectively the last opportunity to get more alignment across the Atlantic. With respect to Mexico, it's obviously going to be part of the renewal of USMCA, which is one of the parts of the shift from NAFTA to the new USMCA that Bob Lighthizer, the former USTR insisted on, was that it had to be renewed, had to be reevaluated periodically. So I think with Mexico, it's ultimately their trade-off is this comes from the fact that their auto industry requires exporting to the U.S., and so giving up exports to the U.S. to maintain better relations with China is not a good trade for them.

But for Europe, I think it has been difficult, and I think Europe's an interesting case. You can also, I think Japan falls within this broad framework. The U.S. and Europe increasingly share similar diagnoses of the underlying problem of a China that wants to export, that doesn't want support its own consumers, of a China that throws money at manufacturing, a China that's investing in so much green capacity that there's no scope for others to build out their industries. But we end up using slightly different policies in response, and so we don't end up aligned on the policy, and in some cases we end up discriminating against each other.

That has been the case with steel. We have just a flat-out old-fashioned tariff that actually hit Europe, and then we initiated a tariff rate exemption that lets a certain amount of European steel come in tariff-free, but then you hit the tariff. Europe is moving towards a carbon border adjustment mechanism, which will penalize Chinese steel, but in a completely different way. Europe is trying to do a countervailing duty case against Chinese EVs. That's within the WTO rules. In theory, if you do it that way, China can't retaliate. Of course, China-

LINDSAY:
In theory.

SETSER:
In theory. China always retaliates and they've already threatened to retaliate. The French brandy manufacturers are already under siege. I think we at the Council should do our part. If French brandy is tariffed, we should make a special exemption from our own buy American policies, and supply our members-

LINDSAY:
I'm a bourbon guy, so you can have the brandy.

SETSER:
But the point being that they're sticking within the four corners of the WTO. We're already outside the four corners of the WTO, and that difference just continually complicates and frustrates efforts to coordinate.

LINDSAY:
This is what I worry about, Brad, and I wrote about it recently on my blog, The Water's Edge, in that the United States and its European friends, partners, and allies may agree on what the threat is they face from Chinese surging exports, but they're going to opt for different policy solutions that are to some extent incompatible. And then you get into this vicious cycle of recrimination that doesn't stop, and you end up in a much worse place than you could be if you could coordinate. And I agree with you that diplomacy is the answer, but it's very challenging to do so, especially on these issues where there are very concrete specific domestic interests that are quite vocal about having their interest protected.

SETSER:
Very good analysis. I've put forward a couple of ideas that try to be both politically realistic, yet allow for more coordination. So one of those ideas is that Europe should adopt, and this is going to sound heretical to my European friends, buy Europe policies for their electric vehicle subsidies. Technically, that's a WTO violation. It is, however, in a broader sense, reciprocal. China has buy China. Wouldn't be unreasonable to respond to buy China with buy Europe. And if you had buy Europe, we have buy America, some cases buy North America. We could do a subsidy sharing deal. You'd have to go back to Congress. You'd have to amend the Inflation Reduction Act. But that would be a way of moving from a world where we have adopted uncoordinated policies, to a world where we've adopted coordinated policies, and that a world that allows more trade rather than less trade across the Atlantic.

I think there's some analogous steps that could be taken with steel. I'd like to see the 232, which is just a flat 25 percent tariff on the value of your imports of steel, become a per ton carbon tariff. Could do that under the same statutory authority, but you'd be taxing the embedded carbon in your imported steel, which actually is very close to what Europe's going to be doing. It's not going to be the same, but it'd be closer. I think if you work together and you're willing to be a bit flexible, there's scope to move towards a more coordinated harmonized approach, which would be in both party's interest. And I'm just using Europe as an example, Japan could fit easily in this framework.

LINDSAY:
On that note, I'll close up The President's Inbox for this week. My guest has been Brad Setser, the Whitney Shepardson senior fellow at the Council, and the author of the blog Follow the Money. Brad, fast-hitting discussion. Thanks for joining me.

SETSER:
Well, thanks for inviting me.

LINDSAY:
Please subscribe to The President's Inbox on Apple Podcasts, YouTube, Spotify, or wherever you listen, and leave us a review. We'd love the feedback. You can email us at [email protected]. The publications mentioned in this episode and a transcript of our conversation are available on the podcast page for The President's Inbox on CFR.org. As always, opinions expressed on the President's Inbox are solely those of the host or our guests, not of CFR, which takes no institutional positions on matters of policy.

Today's episode was produced by Markus Zakaria, with Director of Podcasting Gabrielle Sierra. Molly McAnany was our recording engineer. Thank you, Molly. Special thanks go to Michelle Kurilla for her research assistance, and to Justin Schuster for his editing assistance. This is Jim Lindsay. Thanks for listening.