If you think the first U.S.-China Strategic & Economic Dialogue last week lacked substance, you are wrong. It was a promising step in the growing bilateral relationship.
An upgrade from the bi-annual Strategic Economic Dialogue initiated in 2006 by the Department of Treasury, it will now be an annual affair, expanded to include both State and Treasury, with a broader agenda reflecting the reality of the importance of the Sino-American relationship in this era of globalization.
What came out of these dialogues though?
Collaboration on environmental policy reform
Great emphasis was placed upon the signing of the Memorandum of Understanding regarding climate change, co-chaired by the U.S. Departments of State and Energy and the Chinese National Development and Reform Commission. Together, the two countries contribute over 40% of the world’s greenhouse gas-emissions. The transition from hydro-carbons to greener technologies without reducing economic growth is the real problem. This thorny issue will come to a head at the United Nations Framework Convention on Climate Change in Copenhagen this December.
Critics of the MOU cite the lack of details therein of what the United States and China intend to actually do concerning reducing their greenhouse gas emissions. Still, the MOU needs to be seen as a process. The real agreement, if any, will be announced either in Copenhagen or at one of the two meetings between Presidents Obama and Hu later this year. For its part, China has already made progress towards addressing climate change with initiatives on developing solar power and electric cars. Today China is a leading producer of both wind and solar technology.
On economic relations, the Dialogue spoke volumes about the interdependence of the U.S. and Chinese economies, a matter increasingly critical to both countries as they recover from the financial crisis.
The Chinese got assurances that America would do its best to recover from the financial crisis, stabilize its economy, and secure Chinese investments. More importantly, the team from Treasury drove home the message to the Chinese that America’s economy will not return to previous levels of consumption and savings, and going forward will make every effort to increase savings and encourage consumption at lower, more sustainable rates.
China’s economy, whether export-led or otherwise, has developed in a significant way to meet demands of rabid American consumerism. If that consumerism is a thing of the past, China’s economy will have to adapt to this significant change, and that will not be an easy process.
The Chinese got an earful about an increasingly important issue for the U.S., regulating government procurement in response to the financial crisis. “The U.S. and China agree to strengthen their cooperation in order to accelerate China’s accession to the WTO Government Procurement Agreement (GPA). This will include China’s submission to the WTO Government Procurement Committee before the Committee’s October 2009 meeting, of a report that sets out the improvements that China will make in its revised offer.”
Prior to the financial crisis, government procurement constituted on average 10 to 15 percent of developed countries’ GDPs and 20 percent of developing countries’ GDPs. Public procurement constitutes a large share of the global economy. With the onset of the financial crisis its share is increasing sharply, especially in the U.S. and China, due to their massive domestic economic stimulus packages.
At an Atlantic Council seminar in July, Pieter Bottelier, former Head of the World Bank Mission in China, discussed the implications of China not yet having signed up to the GPA. When China joined the WTO it agreed to one day accede to the GPA, but set no timetable or roadmap towards accession. The United States is now concerned China’s stimulus package verges on protectionism, and at the Dialogue, the U.S. argued that China would benefit from joining the GPA. China is still not convinced of the benefits of the GPA, but it is clear from the U.S. -China Joint Fact Sheet released by the Treasury that discussions leading to China’s accession are now underway.
Expanding and initiating other dialogues
The Dialogue also produced consensus to expand and deepen dialogues on security, political, economic and social issues of interest to both countries. Military-to-military dialogue between the two countries will reassume. In addition, it was announced that U.S.-China Counterterrorism talks are to be held this fall. There was also a pledge to hold a Human Rights dialogue before the end of the year. Other topics of interest include the global economic crisis, regulation of international financial institutions, North Korea, Sudan/Darfur, Afghanistan and Pakistan.
These are all good benchmarks to start from, build up a track record and see how China’s measures up, then base conclusions upon those outcomes. The Joint Press Release from the Department of the Treasury lists the areas of mutual interest regarding the U.S.-China relationship. Other than the Dialogue there is no other opportunity for so many principals from both sides to meet together at the same time to discuss these matters.
The United States for the past thirty years has constructively engaged China within the international arena of trade and economics. It is both necessary and prudent for the United States to continue this dialogue. The U.S.-China Strategic & Economic Dialogue signifies the start of a new extremely significant process in U.S.-China relations that could move the relationship into a new era. However, the United States does so from a position of strength. The world is changing but there is no country that can match the capacity of the United States.
Patrick DeGategno is associate director of the Asia Program at the Atlantic Council. Damien Tomkins is an intern with the Asia Program; he is pursuing a master’s degree in International Affairs with an Asian focus from American University’s School of International Service.