On January 20, Donald Trump took the oath of office and became the 45th U.S. president. The transition earmarks a new chapter in bilateral relations between China and the United States. When the dust of campaign rhetoric and party politics have settled down, where will President Trump lead the United States? How will the president “make American great again”? And, for that matter, how will the president handle the bilateral relationship with China, which has hitherto provided critical steam for both economies? All these questions warrant a close look at the dynamics that have powered the bilateral relations so far.
The Current Status of Bilateral Relations
Over the last eight years, Chinese President Xi Jinping (and his predecessor, Hu Jintao) and U.S. President Barack Obama managed to create momentum for bilateral ties that has withstood the impact of the 2008 international financial as well as U.S. domestic politics. The two countries managed to build and maintain “new type major country relations,” which has brought tangible results for both sides.
The two leaders made a point to meet regularly via bilateral visits as well as regional and international summits. These talks allowed them to make strategic and political decisions on some tough issues. As of January, the two countries have established 94 bilateral dialogue mechanisms, facilitating conditions for both sides to address tough issues through dialogue and negotiations. Will President Trump continue that practice of sustained dialogue?
Official talks mirror the intertwined economic and people-to-people relationship. Bilateral trade surpassed $500 billion in 2016, against the backdrop of generally sluggish global trade. China and the United States are major trading partners to each other (if the EU is not counted as a single bloc, the U.S. is China’s top trading partner and China is the second-largest trading partner for the U.S.). Now, the two countries have also become major investors in each other. Meanwhile, since the turn of the 21st century in particular, frequent people-to-people exchanges between the two countries have promoted understanding and friendship. Currently, there are more than 100 flights between both countries each week in order to service travelers for political, commercial, and civil activities between the two countries. Last year, people-to-people exchanges once again broke the 5 million mark.
At the global level, China and the United States are key members at many regional and international organizations, where leaders and officials from both countries have been active players. The two countries are both permanent members at the UN Security Council where they have been coordinating policies on many key issues in order to promote global governance, even though the two sides have had occasions of arm-twisting on issues where their national interests are divided. The largest joint achievement for the United States and China so far was the signing of the climate change convention at the UN summit in Paris in 2015, which would help save the world from sliding into self-destruction in terms of environment degradation. Besides the UN, both countries have been working closely at the APEC and the G20 summits, which have the mandate to promote regional economic integration and global governance.
However, the question now is whether the new U.S. administration would join hands with the Chinese side and continue with a working relationship that benefits not only both countries, but also countries around the world.
There is no doubt that mature relationships are bound to be accompanied by complicated issues and friction. China-U.S. relations relations are no exception. Under the Trump administration, bilateral relations between China and the United States are likely to be punctuated by the following issues, which could become “hidden Himalayas” if not properly addressed.
From a political perspective, there is no denying that China and the United States have different systems, different cultural traditions, and different values. Consequently, these differences are likely to cause misunderstanding and mutual suspicion on many issues. It is an open secret the the United States is not yet accustomed to the fast pace of China’s development and, thus, U.S. politicians and strategists have regarded China as an actual competitor. For that matter, successive U.S. governments have been hedging against China’s rise. It was out of the above consideration that the Obama administration initiated the “pivot to Asia.”
Meanwhile, bilateral relations between the two countries lack the solid support of mutually binding treaties. The three joint communiques are often subject to “interpretations” by the U.S. side. The president-elect has stated publicly that his administration would revisit the “one China” policy, which is both a red line and a life line for the Chinese side. The whole world is holding its breath to see whether President Trump will really disregard the core interest of the Chinese side. With these scenarios in the background and Trump in the White House, the two countries are likely to experience a bumpy start in terms of bilateral relations.
The political cycles in the United States have become “roadblocks” for bilateral relations. During their campaigns, most presidential candidates use “China bashing” tactics in order to attract media attention or win votes. Likewise, when these president-elects get to the White House, they always experience a “learning curve” that sees them eventually deviate from campaign politics and party politics and bring U.S.-China relations back to the right track. The above scenario, repeated over and over, has always resulted in fluctuations in the bilateral relationship, and will continue to be a source for misunderstanding and even conflicts. It is noteworthy that the two governments very often butt heads on many issues because of the lack of common understanding or benchmarks on the issue at stake.
From an economic perspective, there is the issue of misaligned economic relations. China and the United States are the two largest economies in the world, and both countries are main engines for the global economy. However, the two economies are a world apart in terms of stages of development. Both countries are at different ends of global production chains and value chains, which determine what each side is to produce and how much benefit each side would gain. As a result, policy coordination remains difficult.
More importantly, the ever-growing bilateral economic and trade relations still lack institutional support. The two countries have been conducting negotiations on a bilateral investment treaty and are close to signing a deal, but it remains an open question whether the Trump administration will continue with the process. Meanwhile, the two countries are major trading partners, but have yet to negotiate and sign a free trade agreement.
From a cultural perspective, both countries have unique characteristics, in accordance with their national situations and histories. It is true that common cultural traditions and common values are “lubricants” for the modern state-to-state relations and “power boosters” for the regional economic integration process. It is for precisely this reason that China and the United States, which share few common benchmarks on questions of traditions or values, often find it difficult to proceed with bilateral programs or agendas.
From the security perspective, neither China nor the United States can afford not to build harmonious relations with each other. However, the two countries have different global strategies. China has assured the international community that it will embark on the road of peaceful development, and does not want to challenge the dominant position of the United States. However, the U.S. is yet to become accustomed to a fast-growing China. On the contrary, recent U.S. governments have been treating China as a real potential competitor, and, thus, have been implementing a “hedging” policy on China, driven by Cold War logic.
On the one hand, the United States has been intertwining with China in the economic field, in order to maximize the benefits of economic cooperation and to influence China’s development, cultural values, and traditions. On the other hand, the U.S. government has been seeking leverage over China. In the political and military arena, the United States has been building alliance relations, based on shared values and tradition, with the countries surrounding China. In the economic arena, the U.S. government has been trying to build the “next generation” of trade and investment institutions, which exclude China.
Policy Thoughts for the Trump Administration
China and the United States are both at a crossroads in terms of sustainable economic development and national rejuvenation. Both countries are under pressure from a sluggish global economy and contracting global trade. Both countries face traditional and non-traditional security threats. Both countries have the obligation to join hands to promote global peace, development, and cooperation. Therefore, the “same boat spirit” should still apply to bilateral relations under President Trump.
First, the two countries should carry out more dialogue and communication along with more policy coordination and cooperation. Both countries should adopt the spirit of “give and take” as well as balancing rights and obligations in dealing with bilateral relations. For example, it is a legal obligation for the U.S. side to recognize China’s market status in accordance with the WTO agreement. This should not be held hostage to domestic political concerns.
Second, both countries should join hands to build a sustainable relationship based on avoidance of conflict and confrontation, mutual respect, and win-win cooperation. Therefore, it pays for the two countries to conclude their Bilateral Investment Treaty (BIT), which will allow more Chinese entrepreneurs to set up their businesses in the United States and help create jobs. It is also very much desired for both countries to start negotiation on a free trade agreement, which will help to avoid unnecessary economic friction.
Third, both countries should take steps forward and implement reciprocal policy measures to reduce the deficit of mutual trust, which requires both sides to respect each other’s core interests. Both countries should avoid implementing policies at the expense of the other side.
Fourth, both countries should further tap into their economic potential by allowing real two-way investment, which would help immediately reduce the trade deficit on the U.S. side. Both countries should build on their cooperation in the areas of clean energy and environmental protection, where the United States has clear technological advantages. Both countries should step up their cooperation in intellectual property rights protection, which would generate new steam for bilateral trade. Both governments could facilitate conditions for joint ventures in the United States, which could produce and market the end products to third-party markets.
Fifth, both countries should refrain from finding “scapegoats” for domestic issues. For example, the ever-growing trade deficit between the United States and China is the result of globalization. More than a quarter of a million U.S. enterprises have outsourced their production lines or manufacturing links to China, and now reship the end products back to the U.S. market. As a matter of fact, the bulk of the foreign direct investment enterprises across China are doing the same thing. Currently, roughly 60 percent of exports from China are attributable to FDI owners in China (ie, foreign companies). Therefore, China enjoys the title of largest exporting country in the world in terms of trade volumes, but not in terms of actual trade benefits. More importantly, the bulk of the products exported from China are ones that the United States does not itself manufacture. Under Trump, the United States could cut off commodity imports from China by administrative or legal measures, but it would not help reduce the total trade deficit at all. Instead, U.S. customers would have to spend more to buy the same products from other countries, minus the same quality.
In summary, against the backdrop of globalization and the volatile international situation, it in both countries’ interests to build sustainable relations that would benefit both countries and peoples. As the American saying goes, it takes two to tango. Whether the two countries “tango” or not, the consequences will be felt by the international community. The Chinese side is ready to deepen cooperation. How about the new U.S. president?
Dr. Liu Youfa is a senior adviser at the Indian Studies Center at the Pangoal Institution, a leading China-based think tank. Formerly Dr. Liu served as consul general (ambassadorial rank) at the Chinese Consulate General in Mumbai, India