I just got the following email from a loyal reader:
- Misunderstandings and China’s concerns about being bullied have created distance, says Michael Pillsbury, an outside adviser to Donald Trump
- Having no Chinese-language text of the 120-page draft agreement Beijing was potentially agreeing to could present an obstacle
Let’s unpack both of these.
Pillsbury’s concern about China being bullied stems from Larry Kudlow’s having said that Robert Lighthizer had read “China the Riot Act”:
He [Pillsbury] added that “I did not agree with” comments White House economic adviser Larry Kudlow made on February 28 in a Fox News interview about the last round of talks in Washington a few days earlier. Kudlow said in an interview after those talks that Lighthizer had harshly reprimanded the Chinese side to get back to the negotiation table after a tough first day of talks followed by a breakdown in the discussion on the second.
“Lighthizer read them the Riot Act. And Vice-Premier Liu He responded. And all of a sudden everything picked up,” Kudlow had said, sending an upbeat message of what he described as “heading towards a remarkable historic deal”, though “we have to hear from President Xi Jinping” to sign it off. Pillsbury said Kudlow’s remarks implied to Chinese hawks that the US delegation had “bullied” Chinese trade negotiators and brought indignity to Liu.
“Their concerns, which may be paramount concerns, are that China has been bullied and made inappropriate concessions. And we can see this argument is now in the Chinese press,” Pillsbury said. “I believe China will be tough and not accept some of the American demands” because of fears of having their “nose rubbed in it” after Kudlow’s comments, he said. “Unnecessary misunderstandings seem to have occurred.”
Pillsbury is 100% right and I’m guessing hardly anyone who knows China (heck, human nature) didn’t wince when they first saw Kudlow’s comments. I (and the other China lawyers at my law firm) are always talk about how no country likes being told what to do by another country, and that is especially true of China because of its history. See this Washington Post story, U.S. Was Winning the War Against China’s IP Theft, which quotes me as saying the following:
“No country likes to be told what to do,” said Dan Harris, a lawyer who writes the China Law Blog and specializes in Chinese legal issues. “And they especially don’t like to be told what to do in public. That goes double for China. If you push them loudly, they will feel they have no choice but to push back loudly.
Kudlow has put China in a difficult position and by doing so, he has only made it harder for China to settle. And what Kudlow did with China, foreign companies constantly do with China companies, to the detriment of resolution. We will tomorrow do a post on how to negotiate with Chinese companies.
The SCMP article also discusses how Pillsbury also blames trade negotiation problems on language misunderstandings:
“Part of the problem seems to be that there is no Chinese-language text of the agreement that the Chinese delegation supposedly was agreeing to. My own concern is that I don’t think China will give up its sovereignty, the right to retaliate if we put tariffs on them again.”
He said that not having a Chinese translation was another source of “possible misunderstandings”, with translation of the 120-page draft agreement into Chinese needed for top leaders in Beijing to agree to it. “In Chinese translation there are a lot of nuances and choices in how you phrase things,” he said.
Just yesterday, I got an email from one of my law firm’s international litigators saying that we should “cabin” a particular issue. This lawyer grew up in North Dakota and went to college there. He then went to law school at the University of Minnesota and for many years practiced at a leading Minneapolis litigation law firm. I had never heard the word cabin used as a verb and I had to look it up. Google defines this as “to confine within narrow bounds,” but most dictionaries do not have any definition for cabin as a verb at all. I have decided this is a Minnesota term since Minnesota is famous for just about everyone having a cabin on one of its 15,000+ lakes.
I mention this internal email to highlight how even among native-born Americans there can be language confusion. Multiply that by 100 and you have what can and does happen in English-Chinese transactions, even among people who are supposedly fluent in both languages. Take our law firm as an example. We have eight lawyers who are truly fluent in Chinese and yet only four of them are fluent enough to be able to craft legal documents in both English and Chinese. There is a difference between being able to watch a Chinese language movie or read a Chinese language newspaper and understand all or nearly all of those, and yet still not be able to have sufficient language skills to draft an agreement that can determine whether millions of dollars are gained or lost.
In China contracts that work, we wrote about why it is so important to have your contracts with Chinese companies be in Chinese:
The first reason is to achieve clarity. Having a well-written contract in Chinese will assure you that the Chinese company with which you are doing business truly understands what you want of it. Put simply, it will put the two of you on the same page. For example, if you ask your Chinese supplier if it can get you your product in thirty days, it will answer with a “yes” pretty much every time. But if your Chinese supplier signs a contract mandating that its failure to ship your product within thirty days will require it pay you 1% of the value of the order for each day late, you will know that the Chinese company is serious about the thirty day shipment terms.
The US-China trade talk snafus highlight the need for clarity in the negotiating phase as well. The issue regarding the need for “China’s top leaders” to first understand the writings is prevalent when foreign companies negotiate with Chinese companies as well. We have countless times seen deals where the foreign company thinks it has a deal or is on the verge of a deal with its Chinese counterparty, only to have the company owner step in and change everything because he or she did not really understand the terms previously discussed solely in English. Is that what happened in the US-China trade talks?
All the time, an American or European company will come to our law firm wrongly believing it has a “deal” with a Chinese company and believing our job is merely “to document it.” We look at the deal and immediately note the following:
- There is no way the Chinese company would agree to one or more provisions and either it did not (and the foreign company is mistaken) or it did, but does not understand to what it has agreed.
- There are one or more things about the deal that are bad for both sides and both sides would benefit by changing those.
- There are one or more things that are completely illegal in one or both countries.
- There are one or more things that are completely unworkable or nonsensical in one or both countries.
Sometimes these companies will have been negotiating for months (even years) and made many trips back and forth to China and everything they have done is unworkable or illegal under any terms. Other times, they essentially need to start all over at square one.
What should these companies have done? What should the US and China trade negotiators have done? They should have spent the extra time and money upfront by using truly bilingual negotiators from day one and every single step of the way and — to the extent possible — the true decision-makers should have been intimately involved in negotiations from day one and every single step of the way as well. This usually costs more in time and money in the short term, but it nearly always ends up saving way more time and money in the long term.
What are your thoughts?
3-31 Updates: Two very interesting comments, to which I want to respond.
1. Comment: I had to look up “snafu”. I spent about 10 seconds trying to figure out the typo. Reminds me of “gasfa”. Now if anyone knows what that means I will give you a free tangram!
I could go on and on. If I hadn’t become a lawyer, I would have become a linguist (or architect), I love it that much. Not kidding.