Hosted by the Obama Administration, the U.S. and China are holding two-days of top-level bi-lateral talks in Washington, D.C. this week. The talks are being held Mon-Tues, July 27-28th and will cover a broad range of economic, national security, diplomatic, energy and environmental issues. China sent a 150-man delegation led by State Councilor Dai Bingguo and Vice Premier Wang Qishan. The U.S. delegation is led by Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, but representing the United States, President Obama hosted the event and made opening remarks. The U.S.-China Strategic and Economic Dialogue traces its origin to a finance ministers’ meeting in December 2006. With China’s growing presence on the global stage, the dialogue evolved into higher-level talks covering various global issues.In his opening remarks of the session today, President Obama noted that the relationship between the U.S. and China will “shape the 21st century” and that neither nation should be wary of competition and coordination. “No one nation can meet the challenges of the 21st century on its own, nor effectively advance its interests in isolation.” He added, “Some in China think that America will try to contain China’s ambitions; some in America think that there is something to fear in a rising China,” he said. “I take a different view.” And certainly, he does. As I have written here in the past, although the president speaks the language of globalization and global interdependence, this two-day bi-lateral conference is yet another example of President Obama’s preference for a foreign policy based on ‘Economic Nationalism.‘ This brand of economic foreign policy is really nothing more than trade and economic protectionism with a fancy name, and more akin to conservative trade principles than to liberal. In truth, the president is neither a liberal global ‘free-trader’ nor is he a hard-core protectionist, but a lack of a clear committment, and a preference for bi-lateral agreements, via official policy, actually serve to undermine his statted global economic and foreign policy agendas.
At stake, for instance, is continued demand by China — the largest foreign investor in U.S. Treasuries or ‘IOU’s — for U.S. government debt. The U.S. also wants China to continue financial industry reform and development, and increase domestic demand to reduce dependence on exports. While China, hedging its concerns about the sagging greenback, has been calling publicly in recent weeks for replacing the U.S. dollar as the preferred world currency reserve, with a basket, or index, of global currencies
‘Some in China think that America will try to contain China’s ambitions; some in America think that there is something to fear in a rising China. I take a different view. The relationship between the U.S. and China will shape the 21st century, making it the most important bilateral relationship in the world.’
Chinese President Hu Jintao, in a written message sent from Beijing, said that China and the U.S. “shoulder important responsibilities on a host of major issues concerning peace and development.” Hu called on the two sides to “conduct consultations in an equal and candid manner,” to “seek win-win progress.” Since the global financial crisis was ignited in the U.S. last year, and the enactment in February of the Obama administration’s $787 billion stimulus program, Chinese officials have expressed concern about the prospects for the U.S. economy and the health of their investments.
“We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets,” Chinese Premier Wen Jiabao said during a March 13 press conference after the stimulus package became law. “To speak truthfully, I do indeed have some worries.”
Anticipating China’s concerns about its investment in the U.S., President Obama added that the financial crisis “has made it clear that the choices made within our borders reverberate across the global economy — and this is true not just of New York and Seattle, but Shanghai and Shenzhen as well.” It should be noted that China is still buying U.S. government notes increasing its holdings to $802 billion, double the $401 billion at the beginning of 2007, Treasury Department figures show.
The value of China’s currency, the yuan, is also on the agenda. The U.S. regards China’s currency policy as a distortion and wants China to let the value of the yuan appreciate. The staff of the International Monetary Fund has concluded that China’s yuan is “substantially undervalued,” Nigel Chalk, head of the lender’s Asia-Pacific division, said on a conference call on July 23rd. Geithner also plans to talk with Chinese officials about U.S. concern over China’s resistance to foreign investment, an Obama administration official said. The U.S. will tell the Chinese that the American rebound from a recession won’t be led as much by consumers as past recoveries. The U.S. will urge China to rely more on household spending and less on exports for growth.
On the topic of nuclear security and cooperation, Obama outlined to China a way forward in mutual cooperation to help to prevent Iran from acquiring a nuclear weapon and for its continued aid in thwarting North Korea’s nuclear program. He called for the two nations to strengthen the Nuclear Non-Proliferation Treaty “by renewing its basic bargain: countries with nuclear weapons will move toward disarmament; countries without nuclear weapons will not acquire them; and all countries can access peaceful nuclear energy. “A balance of terror cannot hold,” he said.
President Obama indicated that he has plans to visit China in the near future. That may come in later this year when the president is scheduled to attend the Asia Pacific Economic Cooperation forum in Singapore in November.
Listed below are the primary topical issues to be covered in the Strategic & Economic talks:
ECONOMIC STIMULUS
The United States, the world’s richest country, and China, the fastest-growing major economy, are likely to commit to maintaining fiscal and monetary stimulus policies to bolster their recoveries and try to help shore up a weak world economy.
BI-LATERAL TRADE & CURRENCY EXCHANGE POLICY
The United States, which ran a record $266 billion trade deficit with China in 2008, is seeking ways to rebalance trade, including persuading the Chinese to liberalize exchange rates so that the yuan currency appreciates to trim Chinese exports and boost imports. Notably, U.S. Commerce Secretary Gary Locke, himself an American of Chinese ancestry, said recently the trade imbalance between the United States and China is not sustainable, and the two countries have a joint responsibility to reduce greenhouse gas emissions.
NORTH KOREA & IRAN
The two U.N. Security Council permanent members will discuss ways to curb the nuclear weapons programs of North Korea, which has tested two nuclear devices since 2006, and the suspected nuclear arms ambitions of Iran. China has close ties with both states.
ECONOMIC RE-BALANCING
The United States, forced by economic crisis to cut consumption and boost savings, will urge China to do the opposite — consume more and save less — in order to reduce Chinese current account surpluses.
HUMAN RIGHTS
The United States remains concerned about China’s curbs and censorship of the Internet, controls on religious freedom and policies toward Buddhist Tibet, which was racked by unrest in 2008, and Muslim Xinjiang, where ethnic rioting caused the deaths of 156 people this month.
CLEAN ENERGY AND CLIMATE CHANGE
The United States and China, the leading emitters of greenhouse gases, want to promote clean energy technology trade and other ways to cooperate in reducing heat-trapping gas emissions blamed for global warming.
GLOBAL HOT-SPOTS
Conflict-ridden Myanmar, Sudan and Zimbabwe are all countries isolated by international sanctions but states with which China has close economic and political ties and influence.
