Seeing the Lighthizer: China trade talks

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Hello. And welcome to the intelligence on communist radio. I'm your host. Jason Palmer every weekday. We provide a fresh perspective on the events shaping your world. This week apple entered the entertainment business saying it would start making its own films and TV shows. That's just the latest media move as internet providers device makers and movie studios. Join forces and expand offerings big companies are trying to get bigger vying for your entertainment, dollar smaller ones aren't going to survive. And you might have noticed that Kim Jong UN North Korea's leader seems a little more modern a little more approachable perhaps during his media appearances. Don't be fooled though. The propaganda message is the same as it ever was. First up though. Not so long ago. President Donald Trump thought this might be the week he'd see grand trade pact with China instead negotiations to ease the economic war between the countries are dragging perilously on American Goshi eaters, led by US Trade Representative Robert lighthizer will arrive in Beijing tomorrow for another round of talks Chinese delegation led by vice premier new visit American next week with the aim of closing a deal by late April. But the details it seems are proving tricky to hammer out among the concerns of Mr. Trump the question of whether China would honour any agreement that's made because we have to make sure that if we do the deal with China that China lives by the deal with a big gap. Still between them the talks could easily break down with political consequences for both sides. These are important because the end of the day the relationship between the US and China reconnect diplomatically is the. The essential link in the world calling me it really breaks down would be incredibly traumatic and breezing for economic growth everywhere. Patrick fouls. Business affairs editor at the economist overseeing, all our business and finance coverage. The talks have been rumbling on for weeks now. So whether or not this latest iteration is really the crunch point when they attempt to have an agreement is unclear but even though the process seems quite interminable the moment, it is still really quite critical will happen interminable might be exactly the word. Why are they dragging on so much with you? Go back to February actually seemed quite lightly. That'd be a kind of short shop deal signed. There was talk of president Xi going to mar-a-lago to have some celebrate to Redon with Donald Trump as the trade relationship between the two superpowers was all stitched up. Rectified, I think will happen is the underlying problems are actually just much harder to solve and the the sort of three buckets one is the simple one, which is can China by more stuff. The America makes to shrink the trade deficit, which is will President Trump cares about the second one is more complex, which is intellectual property rights. The role of the government in China and distorting markets on the last one is arguably the hottest of all which is how can America be sure that China will comply with whatever agreement is reached. And if you take those three sets of issues, I think probably why the talks have been delayed is because the last two are actually really pretty difficult to resolve. So any what's actually on the table this week and next what what elements of deal have already been struck. Everything's still to play for. Well, I think one of the things we've heard frequently is that everything's still to play for partly because President Trump himself as rather unpredictable person to be negotiating with all bit through his deputies. So you have the Treasury Secretary Mnuchin the and also the Trade Representative Robert lighthizer, both of whom have reputations being sold in the case of Mr. lousy all give full miserable in these negotiations. And yet the Chinese know that ultimately the deciding. Factor could be a quite impulsive presidential decision, which makes it difficult. What we do know. According to press reports in the Wall Street Journal, for example, is that may be text circulating on some of this stuff. So the negotiations have got to the point where specific clauses on language or being agreed. But the air of unpredictability that nothing is agreed until everything is agreed seems to hang over the talks and on means, really quite halt. So there is still a risk than they could collapse altogether. Well, one of the most interesting elements, whether the dynamic has changed so in February China's economy was reeling. The financial markets had fallen. There was a sense of people worried about recession and showing Paul because of trade. And then similarly President Trump was probably more embattled there was a sense. He was under pressure domestically and maybe needed a big win. Now if you roll forward to today China's Don a stimulus package. Edge to its economy. The markets are up the mood is a bit more optimistic which might take the pressure off president Xi, and he may feel that actually he's in a strong position. Meanwhile, for President Trump, you have the mullahs report, which probably changes is sort of momentum domestically. And may mean that actually thinks I don't need a win right now. And maybe all keep this in my pocket. Keep the talks for much longer and then trying to night's victory near the election. So the domestic agendas economically and politically for both leaders complicate things as well and make even murkier trying to work when these ongoing talks actually come to a resolution, we've been going back and forth. We've talked on this show multiple times about these trade talks. Do you have a sense for at the moment who who holds the cards? I would think president's Trump's position is stronger. I think his domestic political. Situation as improved as a result of the Miller report. There is a lot of support bipartisan and from the US business community the being tough with China, an alternate the importance of China to the US economy is lower than the importance of the US economy to China, which means that it is not a balanced threat. China has probably has more to lose. I think for those reasons the Americans will be able to push push hog in over the next few weeks. Patrick. Thanks very much for coming in. Thank you. What show did you watch last night? And how and where will you be getting your entertainment in ten years time? In the last few years, the media landscape has changed dramatically, especially in the US giddy up Stein is our media editor people are watching just a lot less traditional television. What we call linear television, where you know, you're a show on the certain our to certain time. And of course, they're using net flicks. But increasingly they are also watching other television on demand, whether it's via Hulu Amazon prime video or whether it's watching something that is on one of their cable television services, but on demand. So they've changed their viewing habits. And so the big media companies have seen this the big telecommunications companies have seen this and what they've done is started to buy each other up and try to marry content and distribution to take on Netflix. See AT and T buying Time Warner Disney buying much FOX in deals that combined worth almost two hundred billion dollars. And you also have Comcast America's largest provider of broadband. Vying sky over in the UK, and that is also partly a play to take on television and a different way. Amid this upheaval in the business model of entertainment apple has made its own announcement, a new service unlike anything that's been done before. Apple TV. Apple had a big event on Monday in Cupertino where people expected that they would see apple really announce a lot of details about its new streaming video service. Instead, we got just a glimpse of the reason people were expecting apple to make a big splash is that there's a race right now to provide direct consumer video services in America and also internationally because Netflixing established such a big lead in both places. Got like sixty million subscribers and the US almost eighty million outside the US and growing quickly internationally and the other folks realize that this is where consumers are going. And so apple is a formidable potential threat in this space because they've got, you know, nine hundred million iphones around the world one point four billion IOS devices. And so that's a big installed base of devices that you can immediately put products and services out to it does seem like kind of a mix of companies that you name there. We have the. To make devices. We have the kind that run the internet pipes, and the kind that make movies and television shows is the push here for each one of them to try to become all of those things. Each of these companies has a different strategy different approach to try and capture the market in streaming video. And that's why I think probably more than one or two concede. You got Netflix. They've got a huge lead. A really don't think anyone's going to challenge them, despite the fact that they're losing access to the films that these other companies make themselves, but I think they're going to survive. And then you're gonna have folks like Disney, which has just a ton of world famous popular movie franchises. You've got the marvel cinematic universe Star Wars Pixar films frozen. I mean, it's just an incredible amount of high quality intellectual property that is unrivalled. So I think they will do. Well, then you have eighteen t which I think will take a slightly different approach. They own some the pipes in this case, really the most important one is their wireless national coverage in the US and. World where you have five G, basically broadband like speeds over wireless, you can imagine their content like HBO being bundled with a wireless absorption and dust retaining wireless customers. So that's their strategy. Apple has its nine hundred million iphones around the world that can instantly be feeding whatever product and service they want to. So each of these companies has a slightly different approach. And I think each of them has a chance to still be around ten to fifteen years, especially if each of them has some stable of highly desirable content. That's right. This is why people worry a little bit about Netflix because they created big globally famous content kind of franchises. But people kind of wonder do they have enough and this, of course, why net flicks is spending massive amounts of money far more than anybody else's spending right now on TV this year. They'll probably spend about fifteen billion dollars to succeed at a global level without having marvel films or Star Wars, you gotta have a really high. High volume of content. You're describing a situation where it seems as if content is still king, but these are different kinds of companies pursuing different business models to get to begin of content. Which do you think looks most promising in that longer run? I think it's really king in this era is the direct customer relationship, which is sort of a partial marriage of continent distribution, not necessarily owning the pipes. But owning that direct connection to the consumer. Netflix has that AT and T has that because they already have a bunch of customers of wireless and via their satellite TV directtv. Apple has that with its devices around the world. Comcast has that was sky Disney by comparison essentially starting at zero so customer acquisition will be their biggest challenge. And that's why it is important that they have these must have famous movie franchises. And so we've only been speaking about a real handful of companies you reckon in the long run. It's not winner takes all some sort of positive feedback thing where all of the small players now will just disappear I think it will be real. Challenge for any small player to succeed. You'll have a few of these big companies making a huge amount of content and consumers will increasingly winnow down their choices of what they'll buy because each of these services will cost money ten fifteen dollars a month and it adds up. So they'll be dropping pay-tv. You'll be an acceleration in what we call cord cutting in America where people drop their expensive bundles it'll be a real struggle for any sort of small direct consumer service that doesn't have the heft of a really big conglomerate by them, and what you'll see is the bigger companies gobbling up some of the smaller ones, some of the smaller TV networks, either just going out of business entirely or seeking mergers to survive. It seems like the big cable companies used to try to gather together as many channels as they possibly could to make the best offer they possibly could to use. You would pay your ex dollars a month and stick with them instead of a rival or pay more for your monthly subscription. And so on. Aggregating? Right. And it now seems like they're all these tech companies in two degrees. Still these cable companies still aggregating is this just a more tech lead. Kind of more wireless version of exactly what we saw with the cable companies. You could absolutely see things going in that direction where we'll have a new sort of bundle aggregating these different direct consumer services at some point down the road. We're not quite there yet. But you know, they're going to have to avoid repeating the mistakes of the cable companies with pay TV in America, which was just to keep adding channels which made money for the companies who had TV networks and it made money for the cable companies, but it became so costly for the consumers that it became easy to disrupt for a new player like net flicks and for Amazon prime video. And now these new direct consumer services where the companies are going to be disrupting themselves to sell directly to consumers Gotti. Thanks very much for your time. It was good to be with you. Hey, my own don't Jillian not today. North Korea's propaganda event of the year has had a makeover hundred on two team in there. What he means on the New Year's address from supreme leader Kim Jong Hoon felt like the propaganda had taken a more relaxed tone this time around. It's the one time in the kindle on dresses, the nation conventionally comparison, the American such the union Leinna shipper is our Seoul bureau chief she's been following the media and the message in North Korea previous he used to stand behind this podium. It was like who's in some big hole the flags behind what you expect from a nominally this communist nation, and this he was sitting on a library. Big armchair, wearing a western sausage and tie, which she doesn't usually do that only. He's an sort of tripe mile SU and the bookshelves behind him completely different setting from what he's usually done. Lina that sounds like a pretty significant shift in in propaganda tone. What we're state media like before the same old Stalinist stuff as his father used to put out a longtime was very similar to the classic diatribes against evil American appearance. The classic North Korean propaganda him. Awesome. Inspecting factory inspecting Afam one of my favorites from last year, actually, because they had a they had a big emphasis on economic issues was him pointing potatoes sitting on massive piles of possessors surrounded by his offices, much almost like sort of terrible indie band cover for late eighties manned. So what changed why did Mr Kim stop pointing at potatoes his just done different things. So this different propaganda materials work with he's been on all these visits abroad. So there's more picture material for the propaganda, and what they seem to have decided to do is to present. Him in a way. That's a lot more. Plan to the world presenting slightly more modern image in the western dress during the new year. Dress him standing on top of marina bay sands on Singaple, smiling, people waving people having skyline mind, and that sort of thing it sounds like the aesthetic has changed. But do you think anything has is there anything wider to interpret here? Or is this just a slightly more westernized form propaganda? Kaffa l- pertain what's gang on? So the goal of North Korean propaganda. Such hasn't changed as supposed to show people. The the leaders working tirelessly for the good of the country in everything. He does great. That message doesn't change. It's been most doubt costs on that tool. One of the things that's changed since last is that most Koreans now here a lot more and more quickly about his visits abroad. So if you look at the first time he went to see Xi Jinping in Beijing last March people in North Korea. No about that until he come back. And when he went to last month to meet on from Vietnam war. They really rolled out the red carpet those wellness. Breathless rolling coverage of daily updates those a big splash on his red-carpet. Welcome in Vietnam. And that little shows a much greater confidence, the usual North Korean position has been mass. Apparently about provoke leaves the country as what might happen if he leaves the country who knows what might happen abroad minutes might try to assassinate him. Somebody else might sauce revolution ahead that that sort of thing was a big deal. And that doesn't seem to be quite so much of a worry as used to be. So being careful to avoid over interpreting. Then why do you think Mr Kim is bothering with this? So one of the things changed and North Korea the past few years as much more foreign information, and for me have trickled into the country, even the Kim Jong and his trying to crack down on this increasing number of people in North Korea have access to things like Korean TV drama zal western films, unclear exactly how much, but there's a there's a clear sense that much will familiar with the cels of media that xix than they were maybe ten or twenty years ago. So one thing this whole propaganda style. Chain might be. Trying to do is to package. The same message in a way that it will be appealing too much wildly audience. So clearly, there's a sense he's he's an internationally respected character because he can adopt the same sort of style as the people who enter nationally respected. Layup. Thanks very much. Thanks. That's all for this episode of the intelligence, you subscribe to the economist at economists dot com slash radio offer, twelve issues for twelve dollars or twelve pounds. See you back here tomorrow.

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