Expert Reactions to the Strategic and Economic Dialogue | CHINA US Focus

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Expert Reactions to the Strategic and Economic Dialogue

Norm Coleman, Clyde Prestowitz, Douglas Paal, Zhu Feng
May 4, 2011
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Senator Norm Coleman (R-Minn, 2003-2009), Chief Executive Officer of both the American Action Network and the American Action Forum:

Economic issues are likely to dominate the S&ED, particularly China's currency and investment climate, and the U.S. debt. The addition of military to military conversations is welcome, in order to preempt misunderstandings in Asia and coordinate on issues in the Middle East. China's human rights record will also be discussed.

As usual, America will press China to further liberalize the value of the Yuan, a key concern for Members of Congress and our manufacturers.  The Yuan has gained about 5 percent against the dollar since last June, but by some estimates it is still undervalued by as much as 40 percent.  The S&ED is unlikely to produce any breakthroughs on this front, however.  The U.S. will also raise concerns about the climate for American investment in China.

In terms of foreign policy, the meetings come at a relatively quiet time for Asia, yet a tumultuous one in the Middle East. On the positive side, China didn't stand in the way of the recent UN Security Council Resolution on Libya, and it was relatively supportive of the U.S. operation to take out Osama bin Laden. The U.S. would like more Chinese help in placing sanctions on Iran; while China is beginning to replace some of its Iranian oil imports with Saudi oil, Chinese firms are nevertheless investing in Iran as other countries back away.  The U.S. will also seek China's help as other Middle Eastern crises, like Syria, come before the UN.

America will raise specific human rights cases. While China has increased internal repression in the face of the Middle Eastern uprisings, they may actually deliver on a few select cases, perhaps even before the S&ED begins.

As our largest creditor, China will press the U.S. on our unsustainable debt.   The U.S. is quickly approaching our debt ceiling, and the political parties have widely differing views on solving America's debt problem. As the Standard and Poors downgrading illustrates, default is not unthinkable.  China will look for assurances that we will continue to service our debt even if Congress delays in raising the limit. China will also encourage the U.S. to find a long-term solution to our debt problem. Obviously, this is another issue that won't be resolved during the S&ED itself, but it is certainly a top concern for the Chinese.

For all of our complaints about Chinese treatment of U.S. investors, China may also raise the issue of American barriers to Chinese foreign investment, which they feel are political in nature.  The February 2011 denial of Huawei Technologies' attempted purchase of a U.S. computer company is one recent example. China is not a major investor in U.S. firms at present, but could become so in the future, which could lead to needed American jobs.

China may also raise longstanding concerns about U.S. export controls on dual use items.

Clyde Prestowitz, Founder and President, The Economic Strategy Institute:

The key issue facing the U.S.-China S&ED talks is something that is not on the agenda and that will only be discussed indirectly and incompletely. It is the asymmetry of the two economies. The premise of the discussions is that both countries are pursuing capitalist, free market, free trade economics and thus have more or less the same economic philosophies and objectives.

However, this is, in fact, not at all the case. While the United States thinks the ultimate objective of economic activity is consumption and that any outcome that results from true market activity is optimal and legitimate, China thinks the objective of economic activity is production and development. It thinks the market is a tool for achieving development objectives but not an end in itself and if the market does not produce the desired result it will be by passed in some way that does bring about the desired result.

At the upcoming meetings, the United States will want China to agree to a series of steps that will bring its system more into line with the American free market system. The Chinese will want to avoid that while suggesting that America is failing to fulfill its obligations to the global economic community.

Douglas Paal, Vice President for Studies, The Carnegie Endowment for International Peace:

This meeting needs to make concrete the promises of previous presidential level meetings: maintaining civil foreign policy dialogue, working to avoid frictions in third countries, resolving market concerns about IPR and indigenous innovation, promoting economic rebalancing, and beginning strategic military dialogue.

It is key to demonstrate that our respective leaders can deliver a productive relationship through mutual respect and cooperation.  This will contribute to reducing the profile of the US-China relationship in our respective domestic politics as we enter a sensitive political year.

China has a long list of desires for this meeting, perhaps best captured in showing that the differences between these two countries, with such huge overlapping interests, can be managed effectively.

Zhu Feng, Deputy Director of Center for International & Strategic Studies, Peking University

While any breakthrough achievements characterizing 2011 S&ED are almost unlikely, some of the realistic outcomes could be expected. First, China and the U.S. have narrowed their gap on fresh-up this dialogue to cover mil-mil relations. A Chinese military general and his entourage will for the first time show up at Chinese delegation to engage with his American counterpart at security sub-track, thus rendering the strategic track of dialogue more representative and substantial. Secondly, both sides might be able to agree on injecting impetus to break the impasse of the Six Parties Talks to avoid future tension on Korean Peninsula escalating onto another crisis with the potential being out of control. Thirdly, both sides have committed to their constant coordination and collaboration on trade and financial policies compatible with the “robust, balanced and sustainable development” framework initiated by G20, the primary platform of global economic governance. Without genuine cooperation between these two biggest economies, the efficacy of G20 mechanism would be at great risk. Beijing and Washington should and are able to exhibit their vision and capability to facilitate this crisis committee into a global steering committee on world economy.  

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