HONG KONG -- The tense nuclear confrontation with North Korea is no reason for the U.S. to hold back from revising or canceling its free-trade agreement with ally South Korea in the view of Steve Bannon, former chief strategist for President Donald Trump.
Speaking to the Nikkei Asian Review after delivering a closed-door address to an investor conference this week in Hong Kong, Bannon said the U.S. should pursue broad bilateral trade deals with Japan, Vietnam and the Philippines while confronting China over the forced transfer of technologies by American companies wanting to do business there.
"I'm definitely not on an anti-China crusade," said Bannon, who worked in Hong Kong and Shanghai between his time as a banker with Goldman Sachs and his move into the media industry. "I have tremendous respect for China. I have spent a lot of time here. I have had businesses over here. I have got a lot of friends over here," he said.
"But we clearly have to get back in balance on our trade deficit and our trading relationship with China," he said. "We have had a situation that has kind of gone uncorrected with forced technology transfers. There has been basically $3.5 trillion of forced technology transfers over the last 10 years. I refer to this as kind of economic warfare. It just can't continue on." It is unclear how Bannon arrived at the figure.
U.S. manufacturing and technology companies have long quietly complained over Chinese requirements for the transfer of technologies as the price of setting up operations in the country and gaining access to its vast market. He added that the rapid growth in Chinese investment into U.S. technology companies and other acquisitions also is "a huge concern."
"People have to be very, very cognizant of and wary of this," he said. On Wednesday, Trump moved to block Chinese-backed private equity firm Canyon Bridge Capital Partners' planned $1.3 billion buyout of Lattice Semiconductor.
Some observers commented on the irony of Bannon's speaking at a conference organized by CLSA, a unit of state-owned CITIC Securities, while emphasizing the economic threat posed by China to the U.S. His arrival at the conference was met by a small group of protesters.
Bannon has no second thoughts about the U.S. abandoning the Trans-Pacific Partnership trade pact, even though many saw it as an ideal vehicle for addressing issues like investment rules.
"I think it's not healthy for the U.S. to get into these broad overall agreements where we are just one small player among a number of others," he said. "TPP is too amorphous. It could even be interpreted by China as maybe some sort of alliance against them, and that is the furthest thing from what we want."
The right partnerships
While he repeatedly said the U.S.-Korea Free Trade Agreement, known as KORUS, is "not working," Bannon said Washington should seek out more bilateral deals. "What the economic nationalists want in the U.S. is a strong bilateral trade deal with Japan, that we know what the terms are and that [it] can be fulfilled," he said. "Japan and the U.S. are very close allies. I think it's time to codify that with a strong trade arrangement."
Beyond better access to the Japanese market for U.S. automakers, Bannon offered few specifics about what a bilateral deal should cover. Tokyo so far has shown little interest in the idea, he said. "But I think we ought to make it a priority."
South Korea has been just as wary of Trump's suggestion to revisit or cancel KORUS, and many observers have questioned the wisdom of pressuring Seoul at the same time the two are coordinating what to do about North Korea's continuing nuclear and missile tests.
"It is not a conflict," Bannon said. "Now is the time. If you are going to bring it up, you might as well bring it up now. KORUS is clearly not working for us."
"You can bring this up at the same time that you are having a situation with North Korea," he said. "I don't think that will stop preliminary discussions that lead to a negotiation. The renegotiation of KORUS will take a considerable amount of time. Let's just get on with it."
While Bannon did not go into detail on the flaws of KORUS, which was previously renegotiated by then-president Barack Obama before taking effect in 2012, Trump has repeatedly drawn attention to the large U.S. trade deficit with South Korea.
Bannon said that Trump had showed "a lot of bravery" in launching China-related trade investigations using legal provisions that had not been utilized much in recent years. He cited the White House announcement last month of a probe under what is known as Section 301 of the 1974 Trade Act into alleged Chinese theft of American intellectual property and investigations under Section 232 of the 1962 Trade Expansion Act into whether imports of steel and aluminum, especially from China, pose a threat to economic security. He also noted that a key issue in revisiting the North American Free Trade Agreement is to consider whether Chinese imports are exploiting loopholes to transit through Mexico.
Bannon said that Trump "doesn't get the credit" he deserves for attending to Asian issues. "I think that President Trump has been so engaged in Asia, more so than any other region of the world, and for good reason," he said.
Speaking the same day Trump welcomed Malaysian Prime Minister Najib Razak to the White House, Bannon said, "We have more Asian leaders coming to the U.S. in President Trump's first eight months than I think Obama had in his first couple of years. He is fully engaged into the Pacific and particularly Asia."
Additional reporting by Nikkei staff writer Joyce Ho in Hong Kong.