US election looms over US-China talks
By Jing-dong Yuan
MONTEREY, California - The fourth session of the bi-annual United States-China
Strategic Economic Dialogue (SED) took place last week at the US Naval Academy
in Annapolis, Maryland. First launched in December 2006, the SED has become a
useful forum for senior US and Chinese officials in charge of economic affairs
to exchange views, work out differences and develop joint programs of mutual
benefit.
Last week's SED is notable for a number of reasons. The cabinet-level meeting
provided the first opportunity for American officials, led by Treasury
Secretary Hank Paulson, to meet an almost entirely new Chinese team of
ministers and agency heads led by Wang Qishan, China's new vice premier
overseeing financial
affairs and foreign trade.
Second, and perhaps an indication of concrete results, the two sides signed a
10-year Energy and Environment Cooperation Framework at the conclusion of the
two-day meeting, which has been the result of working group consultation and
negotiation from previous sessions.
Beijing and Washington also agreed to launch negotiations of a bilateral
investment treaty to develop transparency measures in order to further promote
investment and trade, and engaged in discussions on a whole range of issues
from the US subprime housing loans to Chinese sovereign wealth funds.
The meeting marks a transition from the initial phase of set-up and exploration
of mutual concerns and mutual interests. Now, there is increasing focuses on
what the two countries can and should do in more concrete terms and on adopting
measures to address issues that could impede expansion in bilateral trade,
investment, and long-term strategic planning.
As the world's top energy consumers and the highest in carbon dioxide
emissions, the United States and China have both incentives and
responsibilities in ensuring stable and secure energy production, supplies and
use. At the same time, they must also maintain sustainable economic growth and
environmental protection. The bilateral Energy and Environment Cooperation
Framework is a major step toward these goals.
In a recent article published in the Financial Times, Vice Premier Wang Qishan
called for long-term US-China cooperation in joint research and development,
adopting fiscal and taxation policies, and engaging multilateral and bilateral
dialogue and consultation in the areas of energy and resource conservation,
renewable energy, and climate change.
Another noticeable change in the SED process is the growing equity of the
dialogue, moving away from Chinese defense against US charges and reprimands on
issues such as currency manipulation and trade deficit, to a more balanced
give-and-take where Chinese participants raised questions about and expressed
concerns over US policies from subprime housing loans to under-saving and
over-consumption. It is increasingly becoming a two-way street.
In the coming months and years, implementation will be the key to ensuring that
the goals set in the energy and environment cooperation framework can be
achieved. The SED has established a healthy pattern of regular consultation,
which needs to be maintained and strengthened, and smoothly transitioned to the
next administration.
Indeed, despite what the SED has achieved so far, serious issues remain.
Critics have pointed out that the George W Bush administration has oversold the
process itself and has failed to move the agendas in substantive areas such as
trade imbalance, the Chinese currency, which the US has viewed as undervalue,
market access, and protection of intellectual property rights.
Notwithstanding the over 20% appreciation of the yuan against the US dollar
over the past two years, the Chinese currency is still considered to be
undervalued and therefore gives Chinese goods an unfair advantage. This leads
to continued and growing US trade deficits. Barriers to the Chinese market
remain high, especially in the service sector such as banking.
The politicization of economic disputes and issues remains a distinct prospect
as the US presidential campaigns heat up and both candidates project themselves
as the best choice for protecting American economic interests. China could
again become the scapegoat for America's economic woes. Getting tough on China
could be an attractive election ploy.
Both the larger issues, in politico-security and economic terms, and regardless
of US election cycles, will dominate the discourse and policy debates in the
United States. The rise of China raises serious questions about its potential
challenge to US dominance. Growing Chinese economic power and political
influence give Beijing the confidence to protect its national interests with
increasing assertiveness. At the same time, its requirements for energy and
resources will likely dictate a foreign policy that could be incongruent with
US interests - from Sudan to Iran.
The SED has set a useful framework for US and Chinese leaders to employ for
in-depth consultation and negotiations at a high level. As such, it remains a
process that has yet, with success not guaranteed, to deal with structural
issues as the two countries continue to adjust and adapt to what is seen as a
tectonic transformation and their respective roles in the international system.
Managing such a transition could be a major challenge to both China and the
United States.
Dr Jing-dong Yuan is director of the East Asia non-proliferation program
at the James Martin Center for Non-proliferation Studies and an associate
professor of international policy studies at the Monterey Institute of
International Studies.
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