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Assessing The US-China Strategic And Economic Dialogue

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Trans-Pacific View

Assessing The US-China Strategic And Economic Dialogue

Insights from Daniel B. Wright

Assessing The US-China Strategic And Economic Dialogue
Credit: U.S. Department of the Treasury

The Rebalance author Mercy Kuo regularly engages subject-matter experts, policy practitioners and strategic thinkers across the globe for their diverse insights into the U.S. rebalance to Asia. This conversation with Dr. Daniel B. Wright – Founder, President, and CEO of GreenPoint Group, formerly U.S. Treasury Department’s Managing Director for China and the Strategic Economic Dialogue (SED) where he provided strategic counsel to the Secretary of Treasury Henry M. Paulson, Jr. for this Cabinet-level economic exchange with China, and co-led in the development of the U.S.-China Ten Year Energy and Environmental Cooperation Framework, a nonresident senior fellow with the John L. Thornton China Center at the Brookings Institution, ​a board member of the U.S.-China Strong Foundation, and ​ member of the National Committee on U.S.-China Relations – is the 52nd in “The Rebalance Insight Series”.

As a foundational leader of the U.S.-China Strategic Economic Dialogue (SED) launched in 2006, precursor to the Strategic and Economic Dialogue (S&ED) upgraded in 2009, assess the arc of the SED’s key achievements and the direction it might take under a new U.S. presidency.

The SED’s most important contribution – that continues today through the S&ED – has been the creation of “new habits of cooperation” between our political leaders – providing more senior, more direct, and more comprehensive communication that matches the growing importance of the U.S.-China relationship. The S&ED has helped leaders of both countries keep the relationship on an even keel and advance shared interests, manage diverging views, and address critical domestic and global challenges – finance, trade and investment, environmental sustainability and climate change, cyber and other thorny regional issues, to name a few. “New habits” do not often grab headlines, but ask senior U.S. government leaders from either administration – Bush or Obama – who have participated in the dialogue and he or she will attest to how this communication mechanism has strengthened U.S. national interest as we relate to China.

While the S&ED has at times been criticized for “all talk, no walk” and “mission creep”, the dialogue has also produced concrete achievements – especially those that require cross-agency coordination and high-level support. Most notable during the early years, the SED delivered break-through agreements in bilateral air services that has more than doubled non-stop routes between our countries; China’s commitment to an emissions trading regime that is bringing market forces to address air pollution; and a bilateral tourism promotion agreement that has expanded lucrative tourist trade. During the Obama administration, S&ED engagement has led to forward movement in several key areas, including a breakthrough on the bilateral investment treaty (BIT) and a fundamental reorientation in how China thinks about its investment regime; strengthened cooperation on intellectual property rights protection; and support for policies that are designed to shift China’s economy to a pattern of sustainable growth.

Looking forward, I hope that a new U.S. president will accurately assess the importance of China to U.S. national interests, and then determine how best to achieve those objectives. Key to that success will be high-level, effective communication and coordination between leaders of the world’s two largest economies. It would be shortsighted to eliminate the S&ED, a mechanism that has now been used to great effect by both a Republican and Democratic administration. Engagement is the better choice. Better to continue and improve the S&ED. Options to strengthen the mechanism could include: tighten participant numbers to discipline the size and streamline the focus; meet more frequently; and strengthen the role of the White House in the dialogue.

In what ways have the SED talks contributed to the U.S. rebalance to Asia?

Correctly understood, the rebalance to Asia is about the United States shifting more attention, expertise, and resources to Asia in ways that reflect evolving global economic and security realities. U.S. national interests should be advanced through proportional attention and allocation of resources. The S&ED contributes to the U.S. rebalance to Asia by strengthening direct Cabinet-secretary level attention and understanding of issues through direct relationship and dialogue with Chinese counterparts. This should be welcome.

How would you evaluate the impact of the U.S.-China Ten Year Energy and Environmental Cooperation Framework (TYF)?

The TYF is an excellent example of the importance and effectiveness of the S&ED. When we created the TYF under the SED in 2007-2008, we intended to begin a strategic conversation with China about emerging energy and environmental needs of national and global importance. At the time, the Chinese government would not officially use the phrase “climate change” in public. However, by setting in motion a high-level, interagency process that worked constructively with Chinese counterparts on strategic, longer-term priorities, which also had opportunity for immediate, concrete cooperation – issues like water, air, energy, and transportation – we advanced collaboration among decision makers from both Beijing and Washington. Today, almost ten years since the TYF’s founding, U.S. and Chinese leadership acknowledge that the TYF’s process got the ball rolling on what would eventually become game-changing bilateral cooperation on climate change and the globally important results delivered in Paris in 2015. The TYF is a powerful example of how the process of working together through the TYF framework allowed the two sides to realize the importance of collaborating on the issues at stake, paving the way for even more ambitious cooperation.

What top three challenges face a new U.S. administration in strengthening U.S.-China cooperation?

Our biggest challenge is at home. Change and anxiety within both countries create dangerous dynamics among our populations that tempt our leaders to respond to populist trends with isolationism. Rather, the current juncture requires strong leadership that is responsive to the needs of the U.S. domestic population while also navigating the challenges and benefits of the China relationship.

Secondly, and related, a new U.S. administration will need to manage our China relationship within a shifting global context – low growth, tricky markets, deepening impact of technology, stubborn inequalities, and evolving geopolitics. These uncertainties increase the need for enlightened leadership that is able to manage the U.S.-China relationship within a difficult global context.

Finally, although we live in an age of information abundance, our deficit of understanding persists. Information does not equal understanding. U.S.-China relations evidences this gap. A new U.S. administration will need to build a leadership team that includes senior officials with deep understanding on how to effectively engage China.

How should the next U.S. president – Democratic or Republication – communicate the strategic importance of U.S.-China relations to the American public and allies?

Buy-in from the American public is of crucial importance. I often say that Washington and Beijing are necessary to but no longer sufficient for a constructive U.S.-China relationship. Our populations must support a growing relationship that works well for both societies. This is especially important today given the headwinds of isolationism and populism in the United States. The next U.S. president will need to move beyond politics to objectively understand and advance U.S. national interests as they relate to China. For the American public, interests lean more heavily towards the benefits of the economic and trade relationship and what the new administration is doing to advance the interests of the American public. Communicating the positive realities of the U.S.-China economic relationship is a good place to start: China was the United States’ third largest goods export market in 2015; one million American jobs are attributed to trade with China; inbound Chinese investment to the United States totaled $15.7 billion in 2015; and the U.S. and China account for nearly 40 percent of global economic growth. Equally important, a new U.S. administration will need to assure the American population that it is competent in managing the divergent views and conflicts that arise from such a deep and complex relationship.

Finally, a new U.S. president should actively encourage sub-national levels of cooperation – governors, mayors, schools, non-profits, such mechanisms as the U.S.-China Consultation on People-to-People Exchange (CPE) and the U.S.-China Strong Foundation, which have been quieter but deeply strategic dimensions of the S&ED process. We must win the support and trust of the common person to increase the chances of a productive and stable U.S.-China relationship that benefits America, China, and the world. It is critical that the next U.S. president gets it right. We must deepen these habits of cooperation. This will require leadership.