The U.S. and China Are At the Table: What’s At Stake?

The U.S. and China Are At the Table: What’s At Stake?

A ChinaFile Conversation

U.S. Secretary of State John Kerry and Treasury Secretary Jack Lew are in Beijing this week for the sixth session of the high level bilateral diplomatic exchange known as the Strategic and Economic Dialogue. We asked contributors what's likely to happen and what's at stake.—The Editors


William Adams

William Adams is a Senior International Economist for PNC Financial Services Group. He is responsible for forecasting economic conditions in China. Formerly Resident Economist at The Conference Board China Center, he has published extensive research on China’s economy.

I have to confess that I don’t plan to follow this round of the S&ED very closely. The U.S. delegation has departed from a politically divided Washington that holds an unusually jaundiced view of international economic agreements. If they negotiate a substantive agreement, would Congress sign off on it? Our representatives, in turn, are hosted by a Beijing so preoccupied by its anti-corruption campaign that it’s questionable if anyone is even thinking about international economic relations. I don’t know if these meetings will produce anything. But I do know that playing Twister with both hands tied behind your back is pretty hard.

It’s a pity, because there is plenty still left to do in this bilateral relationship. Both countries could benefit from a liberalization of trade in healthcare, education, and other services, for example. This is an obvious export opportunity for Americans, who excel at producing these services, and would make life better for China’s increasingly wealthy (and rapidly-aging) consumers. But with public opinion in the United States so unreceptive to trade agreements with China, the odds seem slim. In slightly wonkier territory, neither country particularly likes the global monetary status quo. The U.S. would like a set of ground rules that compels China’s currency to float freely, while China would like to see the global economy less dependent on the U.S. dollar. For both of us, these reforms would serve our narrowly defined national interests, making it easier for the People’s Bank of China and Federal Reserve to smooth out the fluctuations of the business cycle and insulate their domestic economies from foreign shocks. Yet an agreement seems unlikely here, too: Despite central bankers in both countries blaming their domestic real estate bubbles on difficult-to-control inflows of foreign capital, it is still sacrilege in either the U.S. or China to admit the need for international cooperation on the topic.

Even so, the S&ED exercise still seems worthwhile, if only for the issues which can be safely kept off of the table. Yes, the U.S. and China are eyeing each other warily over cyber-surveillance. Yes, the jockeying over the Senkaku/Diaoyu islands increases the risk of an unplanned escalation of military tensions (I can’t help but think of that old joke about academia whenever these uninhabited islands come up – the fight is so vicious because the stakes are so low). Yet it is reassuring to remember that the logic of economic cooperation makes a potential escalation of these military/strategic conflicts so costly as to be pretty much unworkable. We Americans want our Chinese consumer goods, just as the Chinese want the imported American soybeans that feed the pork served on Chinese dinner tables. Our interdependence protects us.

The S&ED is awkward as a purely economic institution. It’s easy to think of purely economic objections to participating in it, or institutions like it, to manage the U.S. role in the global economy. But the S&ED, and institutions like it, are what keep our schoolchildren from needing to practice duck and cover drills, and that’s worth something. If it turns out that this week's meetings help advance the mutual prosperity of the U.S. and China, too, then so much the better.

Zha Daojiong

Zha Daojiong, a Senior Arthur Ross Fellow at the Center on U.S. China Relations at the Asia Society, is a Professor of International Political Economy at Peking University, where he specializes in studying such non-traditional security topics as energy, food, and trans-boundary water use. His recent research interest has expanded to political/societal risk management for Chinese foreign direct investment in developing as well as developed economies. His Area Studies expertise covers Southeast Asia, the trans-Pacific region, and Africa. Zha is the author and editor of several books, including Managing Regional Energy Vulnerabilities in East Asia (Routledge, 2013), Building a Neighborly Community: Post-Cold War China, Japan, and Southeast Asia (Manchester University Press, 2006), The International Political Economy of China’s Oil Supply Security (in Chinese, 2005), and China’s International Relations in the 21st Century: Dynamics of Paradigm Shifts (University Press of America, 2000). He has published dozens of academic articles in refereed journals in English and Chinese. Prior to his tenure at Peking University (since 2007), he taught at the University of Macao, the International University of Japan, and Renmin University of China. Zha studied at the University of Hawaii, where he received his Ph.D. in Political Science.

Can the S&ED between China and the United States deliver? In one sense, yes. The routine has continued for eight years, without interruption. It is easy for us to forget that the format of bringing a cross-section of ministers from both countries to the same meeting began in 2006. It survived the change of top leadership both in Washington, D.C., and in Beijing. Mutual agony between the American and Chinese societies is never short of supply, but the meeting has not been allowed to fall victim to shifting public sentiment. And that is responsible diplomacy.

Each of these meetings ends with a joint ‘fact sheet’ of projects and programs. It is the result of joint drafting of an agreement about a platform on which to operate after the meeting is finished. Details of the fact sheet don't easily draw interest among the general public as they mostly concern different specific parties and interests in both societies. But it is important and, in some cases even essential, for the agreed upon projects to receive high-level endorsement in order to be expedited or even to begin in the first place.

In another sense, perhaps the S&ED cannot deliver. The meetings have gone on, but, as news commentaries are quick to remind us, there remain differences between the two countries over a long list of strategic issues. What's more, the pervasive mood in 2014 is that things have gotten worse, not better. Voices of skepticism about the utility of the meetings are getting louder. But let us bear in mind that it is equally hard to ascertain whether or not holding the meeting might lead to escalation of any particular dispute. Evolution of strategic relations between China and the U.S. are complex and involve many other actors as well.

Still in a third sense, the state of affairs is normal. By adding a ‘strategic’ component to the meeting, Beijing and Washington get to be viewed as doing a “2x2” meeting of defense and foreign ministers. Yet a meeting on strategic issues between the two is by definition different from those between the U.S. and its allies. Few commentators would cry foul if a “2x2” meeting between Washington and another capital didn't resolve differences between them or lead to a higher level coordination on a pressing issue of the day. But when it comes to a meeting on strategic issues between Beijing and Washington, commentators naturally start to question: why is it so difficult for one side to take the other’s position seriously?

I am not hinting at dropping the “S” in the meetings. It is just that those who design the meeting, in both Beijing and Washington, need to do a better job at expectation management. One possible way is for government officials to engage their critics by addressing skepticism in this way: would doing away with the routine make the situation any better?

That said, time has come for both Beijing and Washington to make a greater effort to deal with skepticism about and criticism of the S&ED. They can do so by doing a systematic follow-up of implementation of projects in the Fact Sheet, and then inform the general public. The tracking and review process hopefully can achieve twin goals: generating momentum for implementation of projects agreed upon and putting planning for upcoming meetings on a more solid ground.

William Adams is a Senior International Economist for PNC Financial Services Group. He is responsible for forecasting economic conditions in China. Formerly Resident Economist at The Conference Board...
Zha Daojiong, a Senior Arthur Ross Fellow at the Center on U.S. China Relations at the Asia Society, is a Professor of International Political Economy at Peking University, where he specializes in...





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