China and the US: A G-2 by another name

Posted in United States | 30-Jul-09 | Author: Jing-dong Yuan

US Treasury Secretary Timothy Geithner (left) greets Chinese Vice Premier Wang Qishan as he arrives for the opening session of the Economic Track of US-China Strategic and Economic Dialogue at the Treasury Department in Washington, DC.

SINGAPORE - At the first United States-China Strategic and Economic Dialogue (S&ED) in Washington on July 27-28, the two countries signed a memorandum of understanding to enhance cooperation in climate change, energy and the environment and pledged closer cooperation on restructuring their respective economies and working toward more balanced global growth.

While the meeting itself did not result in major agreements, it nonetheless set the tone for the bilateral relationship in the coming years. The US and China have never been so interdependent economically and both recognize the importance of working together to confront the challenges they face and seek solutions.

The S&ED builds on past high-level bilateral consultations on strategic and economic issues, but its rationale is different. During the George W Bush administration, a senior dialogue on security issues was initiated in 2005, followed by the Strategic Economic Dialogue a year later. The former sought to encourage Beijing to become a stakeholder in the international system while the latter focused on key disputes in Sino-US economic relations, ranging from alleged currency manipulation by China to trade imbalances.

In other words, as China rose as a major power on the global stage, and as it benefited from greater economic integration, it was expected to follow international norms and practices adopted by members of the international community. Implicitly, Washington as the teacher was giving advice to China the student on its diplomatic responsibilities as well as codes of conduct in international economic affairs.

These processes, regardless of their initial motivations, served as the basis for more institutionalized, regular and high-level bilateral consultations to handle disputes and promote common interests in a candid, constructive and cooperative manner. They also eased Congressional pressure in the US and potentially damaging punitive US legislative measures against China.

The Barack Obama administration in Washington has inherited a relatively stable US-China relationship as it assumed office in the midst of the most serious global economic crisis since the Great Depression. The essence of Obama's approach is the willingness to embrace multilateralism and best captured by his remark: "We exercise our leadership best when we are listening."

And listen Washington did. China's role has been elevated in recent years, given its accumulated economic power. There is greater emphasis on the importance of how the two countries should work together to deal with global challenges, from the economic crisis to climate change, from the environment to the proliferation of weapons of mass destruction. As acknowledged in a joint statement on July 27 from US Secretary of State Hillary Clinton and Secretary of the Treasury Timothy Geithner, "Few global problems can be solved by the US or China alone. And few can be solved without the US and China together."

Obama laid out at the meeting what he envisioned as the top priority areas for US-China cooperation, given their mutual interests: a lasting economic recovery, a clean energy future, prevention of proliferation of weapons of mass destruction and emerging non-traditional and transnational security threats. The Chinese delegation was more concerned with the value of the US dollars and ballooning US deficits, with good reason: China holds more than US$800 billion in US Treasury bonds.

Vice Premier Wang Qishan asked that the US properly balance and handle its money supply, but also conceded that China should rebalance its economy to encourage greater domestic consumption. Major adjustments await the two countries in the coming months and years as they seek long-term and sustainable economic recovery. None will be easy and some could have major consequences for employment, consumption and general economic growth.

While the two countries agreed on the importance of dealing with the North Korean and Iranian nuclear issues, they left out the specifics such as whether China will be willing to step up pressure on Pyongyang. Nor was it clear that Beijing was receptive to harsher sanctions on Tehran for its uranium enrichment program. This also suggests that on strategic issues, differences remain between Beijing and Washington in terms of perspectives and specific approaches.

The strategic side of the dialogue left much to be desired. One positive outcome out of the meeting was the resumption of high-level military visits, which were temporarily disrupted last year due to the US decision to sell arms to Taiwan.

Military-to-military contacts remain limited and it will require greater efforts from both sides to enhance mutual understanding and develop crisis-management mechanisms. Beijing and Washington must also address the issue of power transition and manage strategic competition - perceived or real - as China builds up its military capabilities and the US adjusts its global defense posture. Recent months have already witnessed maritime incidents that could have unwelcome consequences if left untended.

Beijing and Washington came away from the first S&ED with limited, albeit important, accomplishments. They demonstrated a strong commitment to build a positive, cooperative and comprehensive relationship and set the tone for future consultation based on shared interests in bilateral, regional and global contexts. Most fundamentally, they both recognized that only by working together can they address the many challenges. This is perhaps the most important accomplishment made in the two days of meetings.

Dr Jing-dong Yuan is director of the East Asia Non-proliferation Program at the James Martin Center for Non-proliferation Studies, Monterey Institute of International Studies. He is currently a visiting senior research fellow at the East Asian Institute, National University of Singapore. The views expressed are his own.

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