Chinese Vice President Xi Jinping has been and gone. His visit to the United States was amicable and he left a market-opening commitment as a parting gift, but there was nothing to make the earth tremble. There may have been some expectation that when the presumptive next leader of the world’s most populous nation visited the world’s most powerful nation, something momentous should take place. Yet nothing did.
To some extent, there was just the standard overemphasis on high-level summitry. While personal chemistry between world leaders can facilitate cooperation, modern leaders are heavily constrained by the demands of their political environment. Even if Vice President Joe Biden, the official host of the visit, had bonded with Xi to the point of deep empathy, it would have made it no easier for the Obama administration to turn to the Alliance for American Manufacturing and plead for patience as China gradually realigns its currency.
In his State of the Union address and his recently-released budget, President Obama took aim at China. When he argued for the centrality of “enforcement” in his trade policy, few had any doubts about which country’s transgressions he had in mind. If they did, the President removed them with his sole example of a successful enforcement action – the barriers he erected against imports of Chinese tires. President Obama, in his denunciations of trade malfeasance and new resources for addressing the problem, was girding for a fight. This reflected political imperatives in a U.S. election year. No matter how charming Xi’s dinner toast might have been, it would not have changed the fundamental calculations.
For Xi’s part, it was even more unrealistic to expect candid revelations of his policy preferences, much less commitments on sensitive issues. He will not ascend to the pinnacle of Chinese governance until later this year. The Brookings Institution’s Cheng Li explained that while a successful visit could raise Xi’s stature and win him political capital, any appearance of capitulation to U.S. demands could be seriously damaging. Xi was playing to the gallery back in China, demonstrating that he could handle diplomacy at this level and do it with a degree of aplomb. Candor and concession were in short supply.
This meant that those trying to discern Xi’s political proclivities were left trying to read tea leaves. Did a mid-1980s trip to Iowa make him a free trader? Did his father’s ordeal in the Cultural Revolution make him sympathetic to democrats? Did a more relaxed style suggest he would be easier to work with? Lots of questions, no reliable answers.
As elections and political transitions in the United States and China this year ratchet up the pressure on leaders and aspirants and make conciliation more difficult, the agenda for the year looks increasingly challenging. Problems abound in both security and economic relations.
On the security front, there are ongoing tensions over China’s military buildup, the South China Sea, worries about the potential for conflict over Iran’s nuclear program, and sharp Sino-U.S. disagreements in the United Nations over the appropriate response to the suppression of protests in Syria. While some particular issues are new, the potential for friction between the countries is qualitatively similar to what existed in years past.
In economic matters, by way of contrast, there have been some important realignments. Not so many years ago, there were vocal U.S. business interests who would speak out against misguided legislative attacks on China. The White House felt an obligation to take unpopular stances against potentially counterproductive measures. There was a mutual recognition between the United States and China of the need to rebalance both economies. Trade liberalization, while fraught with difficulties, was a joint undertaking under the auspices of the World Trade Organization.
All of these features have changed. U.S. business interests, upset by Chinese investment restrictions and policies such as indigenous innovation that threaten to force the transfer of intellectual property, have largely fallen silent. They are not actively campaigning for aggressive policies against China, but there is little eagerness to take public stances against such measures. That shifts the balance of pressures.
President Obama, perhaps concerned about being outflanked by Republican challengers, remained notably reticent about his stance on a China currency bill passing through the Senate last fall. It was left to House Speaker John Boehner (R-OH) to take the politically unpopular stance and block the bill.
China’s current account surplus in 2011 dropped to 2.7 percent of GDP, a level within the suggestive limits that the U.S. Treasury had earlier espoused. China has appreciated its currency and Chinese leaders are now concerned about the potential for serious economic drag as China’s top export market, Europe, faces economic turmoil. However, from a U.S. vantage point, China’s politically-salient bilateral trade surplus with the United States was up 32 percent in January from a year earlier and U.S. pressure for further Chinese adjustment is undiminished. This raises the potential for conflict.
Meanwhile, in trade, the Obama administration has turned its attentions from global talks at the WTO, where China is a member, to regional talks to create a Trans-Pacific Partnership. China has expressed suspicion of the TPP talks, in which it is not a participant.
Given all these heightened tensions, the best hope for a manageable year was that China issues might recede to the back burner. Yet an obscure decision by a trade court that limited U.S. responses to Chinese subsidies threatens to bring such issues to the fore. There is pressure in Congress to pass a law undoing the decision; such a law could serve as a vehicle to address multiple concerns about China.
It was with this policy backdrop that Xi toured the United States. Under the circumstances, perhaps “cordial” and “unremarkable” were the best characterizations one could hope for. Better understanding among leaders, some personal rapport, and public displays of respect may not be enough to carry the countries through the difficult times ahead, but they cannot hurt.
Philip I. Levy serves as resident scholar at the American Enterprise Institute and teaches international trade at the School of International and Public Affairs of Columbia University.