To keep up with these changes that affect our citizens and our planet, we need to update our official ties with Beijing. During their first meeting in April, President Barack Obama and President Hu Jintao announced a new dialogue as part of the administration’s efforts to build a positive, cooperative and comprehensive relationship with Beijing. So this week we will meet together in Washington with two of the highest-ranking officials in the Chinese government, Vice Premier Wang Qishan and State Councilor Dai Bingguo, to develop a new framework for U.S.-China relations. Many of our cabinet colleagues will join us in this “Strategic and Economic Dialogue,” along with an equally large number of the most senior leaders of the Chinese government. Why are we doing this with China, and what does it mean for Americans?It was nice of the Secretaries to mention previous administrations, considering that (i) the original SED was a W-era creation - a very successful and well-regarded one at that - and (ii) the SED started the high-level bilateral talks on about 90% of all issues that the S&ED will cover, like domestic economic stability, monetary policy, bilateral trade, IPR, the global financial system, investment, and the environment (to name but a few). The S&ED, however, has the word "and" in it, so it's totally different and had nothing to do with a certain former president.
Simply put, few global problems can be solved by the U.S. or China alone. And few can be solved without the U.S. and China together. The strength of the global economy, the health of the global environment, the stability of fragile states and the solution to nonproliferation challenges turn in large measure on cooperation between the U.S. and China. While our two-day dialogue will break new ground in combining discussions of both economic and foreign policies, we will be building on the efforts of the past seven U.S. administrations and on the existing tapestry of government-to-government exchanges and cooperation in several dozen different areas.
Got it? Good.
(In reality, the S&ED will also cover geopolitical issues like North Korea and Iran, and it has elevated Sec. Clinton and the State Dept. - big surprise - to "co-equal" status with Treasury as the leaders of the Dialogue. So it is different. A little.)
Anyway, President Obama opened today's S&ED with his usual ambiguity and flaccidity, and even threw in a Yao Ming quote to remind us all that the President loves basketball, and Yao Ming is Chinese (although quite seriously injured). He mentioned trade once, with characteristic "free and fair" qualification, and of course discussed the environment and "climate change." (No word yet on whether the Chinese delegation was overheard snickering when Obama mentioned "chart[ing] a low carbon recovery.")
And then Obama left and went golfing. Only kidding! I think.
So what will the S&ED produce over the next two days? Well, if form holds, not much immediately. What is announced over the next few days will probably be pretty minor - stuff thrown out there to make the meetings and their the bigwig hosts look successful and important. But immediate success is not what the S&ED is about. It's about laying the groundwork for resolving the "Big Things" - e.g., bilateral savings/consumption patterns and China's US dollar reserves - that have been bugging these countries for years and certainly won't be solved over two street-closing days in Washington, regardless of how awesomesupercool the new President is.
Movement on the Big Things tends to be kept under pretty tight wraps in order to sustain any progress made, but information will slowly leak out. Here are a few of the things I'm keeping my eyes on:
Energy/Climate Change & Carbon Tariffs. In the past week India rejected carbon emissions caps, and Germany joined China in loudly opposing carbon tariffs - two of the biggest parts of Waxman-Markey. So what on earth are these folks gonna agree on? Seriously.
China's Currency Policies and the White House's Stance. Candidate Obama was a vocal critic of China's currency policies, but President Obama refused to label China a "currency manipulator" in April's semi-annual Treasury report. Labor unions still (falsely) blame these policies for the (fake) decline of US manufacturing and were rather peeved when the Treasury report came out. Fixing China's currency is in everyone's interests, but China won't be bullied, but the White House has to appear forceful before its union buddies, but.... Oh, I give up.
Government Procurement. The US has "Buy American," and China has responded with the creatively named "Buy Chinese." Both are bad policy. China's not a member of the WTO's Government Procurement Agreement, so Buy American's restrictions on procurement of Chinese imports probably don't violate WTO rules. Nonetheless, China's peeved and has a great excuse to retaliate against US exports.
Chinese Domestic Consumption. Stoking China's domestic consumption is the "holy grail" of US-China trade policy and a key target of Team Obama's attempts to recalibrate the bilateral trade deficit. But it's not like China doesn't want increased domestic consumption and hasn't tried like crazy to increase it (seemingly regardless of the huge potential problems caused by such policies). It just hasn't materialized, and thus China's still dependent on exports to drive GDP growth (and thus maintain domestic stability). Export-led growth = bilateral trade deficit = upset US unions and protectionists (regardless of how misguided those feelings are).
The Overall "Tone." In previous SEDs, the US mostly lectured and China mostly listened. Now, the Chinese have serious concerns of their own, namely the massive expansion of liquidity in the US that has watered down China's US Dollar holdings. And China's economy is growing, while the US economy is, well, not. (Although I certainly am suspicious of China's "recovery," given what they did to manufacture it.) So it'll sure be interesting to see who's wearing the pants in the S&ED relationship now.
Best of luck to the S&ED folks. They're gonna need it.
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