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.