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US-China Strategic and Economic Dialogue: Putting on a Brave Face

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China Power

US-China Strategic and Economic Dialogue: Putting on a Brave Face

The U.S. and China tried their best to steer clear of controversy at their premier dialogue platform.

US-China Strategic and Economic Dialogue: Putting on a Brave Face
Credit: U.S. State Department

The seventh U.S.-China Strategic and Economic Dialogue (S&ED) closed in Washington, D.C. yesterday, after two days of meetings. The dialogue brought together U.S. Secretary of State John Kerry and Chinese State Councilor Yang Jiechi on the strategic track and U.S. Treasury Secretary Jacob Lew and Chinese Vice Premier Wang Yang on the economic track. The two sides tried to avoid controversy in their public remarks, attempting to put a positive spin on a relationship increasingly marked by tensions.

In his closing remarks, Kerry was upbeat, calling this year’s S&ED “one of the more constructive and productive in terms of the seriousness of the discussion that we’ve had on a very long, comprehensive agenda.” He went further still, directly rebutting the perception of many analysts that the relationship is actively declining: “I don’t think you heard in the four people who were sitting here a little while ago any scintilla, not one tiny piece of an indication of a downward spiral.”

Keeping with the positive theme, much of the S&ED focused on issues where U.S. and Chinese interests are most closely aligned. Climate change and other environmental issues were a major focus of this year’s dialogue, as predicted. Of the 127 outcomes from the strategic track of the dialogue, as listed by the U.S. State Department, 44—over one-third—involved “cooperation on climate change and energy” or “cooperation on environmental protection.” On the big-picture level, China and the United States renewed their commitment to the pledges made last November on reducing emissions and boosting clean energy. The two sides also announced new cooperative projects, including a “Green Ports” project and two new carbon, capture, use, and storage (CCUS) pilot projects that could help boost “clean coal” technology.

On the economic side, there were many mentions of the Bilateral Investment Treaty (BIT) that is already under negotiation, but no major breakthroughs. According to Lew’s closing statement, China and U.S. set a goal to “exchange improved negative list offers in early September.” This means the most we can hope for in terms of a BIT deliverable ahead of President Xi Jinping’s September visit to the United States is some positive noise about the new negative lists, which specify what sectors will retain restrictions on foreign investment.

The two sides also discussed international financial governance, calling to mind China’s decision to found the Asian Infrastructure Investment Bank (AIIB) and United States disapproval. Wang, Lew’s counterpart for the economic track of the dialogue, noted that the United States had promised “to implement the plan of IMF quota and Executive Board reform as quickly as possible.” Delays on the part of the U.S. Congress in approving reforms that would give China and other developing nations a greater say in the IMF helped motivate China to found the AIIB. China is particularly eager to see its currency, the renminbi, included in the basket of currencies underpinning IMF’s international reserve asset.

Lew, meanwhile, offered some friendly words about China’s role in global finance. “China has a significant role in the global economic and financial architecture and we welcome China as a partner in supporting, maintaining and advancing high standards in multilateral institutions,” he said. Wang noted that the two sides had for the first time held a special session on U.S.-China “cooperation in the international financial system” as part of the S&ED.

On the security side of the dialogue, cyber issues featured prominently, particularly as the fallout from a major hack into the U.S. Office of Personnel Management (possibly undertaken by Chinese hackers, according to U.S. officials) continues to evolve. Kerry said there “was an honest discussion… without accusations, without any finger-pointing” on cyber theft “and whether or not it was sanctioned by government.” China has repeatedly denied any government sponsorship of hacking or cyber espionage activities, instead drawing attention to U.S. hacking programs revealed in the Edward Snowden leaks. But Kerry denied that there was “confrontational pushback” from the Chinese side during the conversation on cyber issues. Instead, he said, the U.S. message that the two countries must work together to define “common international norms” in cyber space “was clearly delivered and received.”

China was less optimistic. Asked about U.S.-China cyber issues in a press conference, Chinese Foreign Ministry spokesperson Lu Kang reminded listeners that the U.S.-China cybersecurity working group has been on ice since the U.S. decision to indict five PLA officers for cyber espionage. “There had been a sound dialogue mechanism between China and the U.S. concerning the cyber security issue, until it was suspended due to a well-known reason which was not caused by China,” Lu said. “The resumption of this dialogue requires the U.S. side to properly handle the relevant issues and create conditions for the dialogue.”

Noticeably absent from the S&ED official pronouncements was any serious mention of the South China Sea issue, particularly of U.S. disapproval over China’s land reclamation and construction activities in the region. Kerry was careful not to single out China as a bad actor in his closing remarks, saying instead that “countries with competing claims should exercise restraint, refrain from preventative unilateral actions, and settle their differences in accordance with international law.” That forms a sharp contrast with more pointed recent critiques from U.S. military officials.

Instead, the United States may have sought to address the issue indirectly, by holding a new “oceans meeting” as part of the strategic track of the S&ED. That session covered topics such as maritime environmental protection (including fishing conservation) and maritime security and law enforcement. While the South China Sea was not mentioned by name in the official summary of the meeting, many of the topics covered – combating illegal fishing, increasing cooperation between coast guards, working to create and manage “Maritime Protected Areas” in environmentally vulnerable areas – could eventually be applied productively in the South China Sea as well, potentially easing tensions.

Still, there were concerns with this indirect approach – Vietnamese South China Sea policy analyst Tran Truong Thuy warned on Twitter that U.S. support for a Chinese South China Sea Tsunami Advisory Center “will give legitimacy for China in using new reclaimed ‘islands’ … for ‘Tsunami Warning.’”