Seven months after the election of a new US President, China and the US are set to launch their first Strategic and Economic Dialogue. Tough words spoken about China’s “currency manipulation” and predatory trading during and in the aftermath of the election are now a distant memory. The reality of the global economic crisis and the emerging issue of global climate change have added new impetus to closer cooperation between the world’s two leading countries.
During the Bush era, Beijing and Washington initiated two high-level talks – a Senior Dialogue (or called Strategic Dialogue) and another Strategic Economic Dialogue (SED). They played an important role in addressing timely security and economic issues at national, regional and global levels, and coordinated their positions through adjusting their respective policies.
Some two months after being sworn into office, President Obama agreed with the Chinese President Hu Jintao to combine the aforementioned two talks and lift them to a higher level – to further their relations through the Strategic and Economic Dialogue (S&ED) platform.
Indeed, it is impressive that the two countries have set the tone of their relationship so soon under the new US President. It is more important to note, however, that the two countries will address security and economic issues – either pressing or long-range matters – at such a crucial time.
This is a critical time when the US has a new leadership with great challenges and new priorities. For the first time since the end of WWII, the US faces one of the gravest economic recessions due to the financial crisis. With the unemployment rate approaching 10 percent, such an economic downturn is affecting many aspects of American life and much of the society. It is likely that President Obama would list this as the most pressing national security threat if the White House were to draft a new National Security Strategy Report.
In a highly interdependent world, no one can be immune to such a global challenge. China has been affected already: its GDP growth rate in the fourth quarter of 2008 declined by nearly half from the prior year, although in the second quarter this year it grew 7.9 percent. Tens of millions of Chinese migrant workers have felt the threat of America’s lost interest and ability to consume. China’s competitiveness in export, for decades, has suddenly turned vulnerable, making it more difficult to appreciate its currency.
As China and the US are highly dependent upon each other, they have to address this crisis collaboratively. Both need to stimulate their respective economies while creating opportunities for each other. Both could be tempted to “Buy America” or “Buy China” but have to distance themselves from such a simplistic vision. While the US needs China to keep buying Treasuries – and actually China has bought $30 billion lately – the US government has to be more responsible for the recovery of American economy and foreign assets in America, including those of China.
Given President Obama’s progressive policy on international cooperation on global issues, China and the US are seeing increasing chances to cooperate, as well as to collide. On cooperation, Beijing and Washington are now more inclined to consult each other at international forums before making major decisions, either for resuming the Six Party Talks on the North Korean nuclear program and imposing sanctions on DPRK’s recent missile and nuclear tests, or for exploring the potential collaboration on clean energy technology.
The incidents at sea involving US reconnaissance and survey ships and Chinese vessels in China’s economic zone in March, however, have underlined the growing tension over the control of waters and seabed resources. Recently there have been unfortunate incidents involving the USS Impeccable and Chinese vessels, as well as a Chinese submarine hitting an underwater sonar array being towed by the destroyer USS John McCain. Such incidents indicate increasing chances of physical collisions of the two navies in China’s exclusive economic zone, and deserve special efforts to avoid their recurrence.
The Bush administration was deaf to global efforts to cool down the earth and hence withdrew from the Kyoto Protocol. But President Obama is committed to reducing carbon emission and has thus presented a challenge to China. China and the US, especially under the Obama administration, could develop a type of new confrontation – the need to commit to reduction of greenhouse gases, with specific time-bound obligations.
As a signatory of the Kyoto Protocol, China has been supporting this regime, taking voluntary measures to reduce the increase of carbon dioxide, without being under a quota compulsion to do so. However, with the Obama administration re-committing America to climate change – which is certainly commendable – China feels unfair pressures to follow suit.
China doesn’t feel the need to reduce its net increase of carbon emission, and is not ready to cut it. Rather, Beijing believes that as a major industrialized country, the US has been the lead emitter, on a per capita and total level, in the world for the past 150 years. While all countries have to cut their carbon emissions, they have to share their responsibility according to their ability and the amount they have emitted. Developing countries might echo this view while the developed countries would feel it unfair if China and the US, responsible for 43% of the world’s carbon emissions, would not at the same time assume the responsibility to cut their total emissions rather than the net increase.
The White House and US Congress are debating a carbon tax scheme that would levy a tax on US consumers who buy commodities from foreign countries without spending adequate efforts on climate change. This has prompted a strong reaction from China as it views such a policy as a new trade barrier, violating WTO rules.
These issues – fixing the economic recession and climate change – will be tackled at the S&ED. They are of the nature of both cooperation and competition. It is obvious that China-US relations are increasingly more mature and complex: while those areas of collaboration are ever expanding, the focus of their competition, based more on interests than ideology, is also shifting. Apparently, those “traditional” areas of tension – Taiwan, human rights, nonproliferation, and trade imbalance – have not disappeared, but newly emerging issues – fair economic/trade relationship, currency conversion, carbon emission etc. – are defining how the two countries will nurture their partnership. Noticeably, the contentious maritime disputes underline their mutual strategic hedging, but these might be addressed at their future meeting of the Military Maritime Consultative Agreement (MMCA).
Again, China and the US are going to handle their relations through talks and negotiation. Through giving and taking for thirty years, they are already experts in knowing that they share stakes too vast to risk with serious confrontation. Also, they are experts in conducting negotiations to balance respective interests. At such a vital time, the S&ED should serve not only to exchange strategic perspectives and test strategic intentions, but also to settle emerging disputes and strengthen cooperation. Such tasks entail the pressing demand and commitments of top-level leadership. The S&ED is the exact venue to attain such a purpose presently.
China and the US are both experiencing a significant transformation. America is at a crossroads between further decline on one hand and transcendence on the other. China could emerge as the second biggest economy in the world, and expects to assume more responsibilities commensurate with its added capacity. While a G2 between the two is quite out of the picture, their closer partnership is surely both a necessity and a reality.
Shen Dingli is a professor and Director of the Center for American Studies and Executive Dean of the Institute of International Studies at Fudan University in Shanghai, China. Rights: Copyright 2009 Yale Center for the Study of Globalization YaleGlobal