This week the U.S. and China held their third Strategic and Economic Dialogue, an annual forum that brings together hundreds of officials for talks on issues of concern for the two nations. While conspiracy-minded observers are wont to see the get-together as the germ of a Group of Two that will one day rule the world, the truth is more mundane.
The S&ED, as it is known, is a get acquainted meeting at which the two governments identify concerns and then try to thrash out agreements that will build trust and confidence among the world’s two leading economies. There is considerably more smoke than fire — proof, if nothing else, of the importance of such discussions and the long road the two nations have to travel to build a relationship that one day reaches its potential.
The U.S-China Strategic Dialogue was launched in 2006 by the Bush administration. The title of the forum acknowledged the rising importance of China as a partner of the U.S., but in fact, the discussions focused on economic issues.
Three years ago, the administration of U.S. President Barack Obama expanded their scope to include the political and security issues that were increasingly prominent on their bilateral agenda. The meetings demonstrate the seriousness of each country’s commitment to the relationship — each contingent is made up of hundreds of officials, from Cabinet secretaries on down — and serve as sounding boards for the exchange of views as well as platforms for announcing new agreements that thicken the weave of bilateral relations.
This year’s meeting was notable for the inauguration of the U.S.-China Strategic Security Dialogue (SSD). U.S. participants in the SSD included Deputy Secretary of State James Steinberg, Under Secretary of Defense Michele Flournoy, Vice Chairman of the Joint Chiefs of Staff Gen. James Cartwright, Assistant Secretary of State Kurt Campbell, and Commander, U.S. Pacific Command Adm. Robert Willard; Chinese participants included Vice Foreign Minister Zhang Zhijun and PLA Deputy Chief of the General Staff Gen. Ma Xiaotian.
The establishment of this track is important. It is designed to insulate top-level military discussions from political vicissitudes. Historically, whenever there is friction in the U.S.-China relationship, communications among the two militaries are cut off. This is counterintuitive and dangerous: It is when tensions are rising that communications channels most need to remain open. The two sides will need a robust dialogue as they try to understand each other’s worldview and lay the groundwork for discussions about nuclear weapons.
The success of future arms control talks depends on China’s eventual inclusion: While such negotiations are a distant prospect, preparations should begin now.
Most observers will credit the S&ED for charting modest progress on key issues. Blame the visit of Chinese President Hu Jintao to Washington in January, which pre-empted any real accomplishments at this week’s meeting. It is always better for a head of state to strike deals and get the credit than to leave the accolades to his Cabinet.
Still, the meeting did produce some results. The heads of the two economic delegations, Treasury Secretary Timothy F. Geithner and Chinese Vice Premier Wang Qishan, announced that they had agreed on a “framework of comprehensive economic cooperation.” This encompasses a range of policies, but tops among them is foreign exchange rates.
While the renminbi has appreciated over the past two years, the U.S. still complains that China keeps the value of its currency artificially low to support its export industries and, in essence, export unemployment. In remarks after the meeting, Mr. Geithner acknowledged “very promising shifts in the direction of Chinese economic policy.”
The two countries agreed to explain in detail their use of export credits. While this sounds arcane, it could be the first step toward mutually agreed upon rules on how such programs should operate. Government support for exports is a prime source of trade friction.
China also agreed to eliminate a system of preferences for products that the government buys, a move that opens government procurement opportunities to foreign companies. A lobbying group for U.S. business interests in China said that a quarter of its members lost government contracts in China last year because of the policy.
In addition, China said it would continue to liberalize its financial sector by allowing foreign firms to sell auto insurance, sell mutual funds and other investments, and underwrite corporate bonds. It is a modest step, but it is progress: China is the world’s largest auto insurance market.
For its part, the U.S. agreed to consider relaxing restrictions on the sale of high-technology products to China, a long-standing Chinese complaint.
The two sides also had a candid and frank discussion on human rights. Criticism of China on this topic is something of a necessity for U.S. officials and China is convinced that such statements constitute interference in its domestic affairs and are an attempt to undermine the regime.
The typical rejoinder — which was rolled out this week — was that each country has its own priorities and its own system of rights and while China has made progress, it — like other nations — can do more.
That measured response suggests that the S&ED is making progress. The two sides should be able to bring up contentious issues without disrupting their conversation. These talks aim to promote better understanding between the two countries. Plainly, they have a long way to go.
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