Fresh off the heels of President Obama’s first visit to and summit in Russia, the new White House administration will kick off its initial high-level dialogue with China on July 27th and 28th. The U.S.-China Strategic Economic Dialogue (SED) was initiated by President George W. Bush in 2006 as a means to discuss economic relations between the two international powers with a very complex and multi-faceted relationship. Though the U.S. and China are not enemies, they are not allies and there has been a history of tension and grievances from both sides which carries on to the present.
The SED was recently rechristened as the Strategic and Economic Dialogue (S&ED). Thus the meeting’s agenda will discuss a much wider range of topics and objectives of mutual interest. Secretary of State Hillary Clinton and Secretary of Treasury Timothy Geithner will co-chair as representatives of the U.S.
In light of the upcoming S&ED, The Heritage Foundation hosted “The New Strategic and Economic Dialogue: Fresh Start or Waste of Time?” discussion, with three distinguished panelists sharing their respective opinions and expectations for the two-day event in China. Present were Steven Dunaway, an Adjunct Senior Fellow in International Economics and a former International Monetary Fund Asia-Pacific Deputy Director, Edward Gresser, Senior Fellow at the Democratic Leadership Council, and Taiya Smith, Visiting Scholar at the Carnegie Endowment for International Peace.
With the prominent role China’s giant economy and population has today in the global-economic structure, its role and political clout will undoubtedly continue to gain prominence in the 21st century. Thus, inaugural S&ED especially bears considerable significance and implications for the future due to the current global financial crisis.
“U.S. and European corporations are frustrated,” Edward Gresser said. “They constantly get passed over for Chinese companies because of China’s business-investment policies. Yes, changing their public’s behavior is critical as well-in order for the trade gap to narrow, the Chinese have to start spending more and Americans start saving more,” he said.
According to Gresser and Smith, China’s current international economic policies are increasingly agitating American workers and businesses who consider China’s trade practices unfair as it consists of a wide range of barriers to foreign goods and services aimed at protecting domestic and state-owned enterprises. As one prevalent issue, many U.S. and foreign politicians have accused the Chinese government of deliberately devaluing their currency as a means of maintaining their export-levels and advantages.
All three panelists agreed that improved economic relations between the U.S. and China is a significant step toward pulling the world out of the financial crisis and increasing growth once again. Therefore an air of reciprocity is critical for the S&ED meeting, as both countries will have to amend domestic polices and increase trade.
With the exponential rise of the global market, economic interdependence, and transnational networks, the panelists alluded to concerns about the immense global ramifications of China’s political and economic policies.
“Before the current crisis, it was easy for China to paint the U.S. as arrogant bullies trying to re-balance the Chinese economy,” Steven Dunaway stated. “But the European nations probably have more at stake with the Chinese exchange rate than the U.S. And I think all of Asia has more at stake for re-balancing China’s economy than does the U.S.”
“There is a great responsibility for the world’s two biggest economies to improve the financial crisis and growing unemployment,” Smith stated.
“Clinton is obviously very excited, but her role is yet to be determined,” Smith said. “Good dialogue is the goal, but she and Geithner will have to stay close together. It’s going to be interesting to see whether they are going to be able to corral their colleagues for a tough unified stance and produce concrete goals and milestones.”
As far as expectations were concerned, Dunaway stated: “The Obama administration is setting low expectations for the first S&ED. This is obviously for media and publicity reasons and this can work to their advantage the first time, but seeing as how S&ED is an annual meeting now, it can backfire. There will be a lot of pressure and expectations for results leading up to the second S&ED.”