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sed 2014
Up Front

What’s at stake at the U.S.-China Strategic and Economic Dialogue?

Cheng Li, Richard C. Bush, David Dollar, and Daniel B. Wright

The seventh meeting of the U.S.-China Strategic and Economic Dialogue—or S&ED—takes place June 23 to 24 in Washington, D.C., with Secretary of State John Kerry and Treasury Secretary Jacob Lew representing the United States, and Vice Premier Wang Yang and State Councilor Yang Jiechi representing China. Since 2009, the S&ED has offered a platform for both countries to address bilateral, regional, and global challenges and opportunities. Brookings John L. Thornton China Center scholars Cheng Li, Richard Bush, David Dollar, and Daniel Wright offer insight into this significant meeting.

Cheng Li: Time to change our way of thinking

In 1945, Albert Einstein said, “The release of atomic power has changed everything except our way of thinking.” During the last 70 years, Einstein’s statement has often reminded us to be critical of anachronistic worldviews in a profoundly changing world.

On the eve of the newest round of the U.S.-China Strategic and Economic Dialogue—and in advance of President Xi Jinping’s upcoming visit to the United States—policymakers in both countries should be less preoccupied by contentious issues, and more inspired by Einstein’s call for a new way of thinking. Two important factors have highlighted the urgent need for this broad strategic rethinking.

First, economic globalization is transforming the world in an unprecedented manner: Goods move around the world in days; people travel from one hemisphere to another in hours; money is transferred across national borders in minutes; and information and ideas are transmitted globally in seconds. But it is utterly ironic that China and the United States, the two greatest beneficiaries of economic globalization, are seemingly building separate economic blocs, delineated by the Asian Infrastructure Investment Bank for the former and the Trans-Pacific Partnership for the latter. Is it conceivable that any economic integration can succeed by excluding the United States or China, the world’s largest and second largest economies?

Second, similar to the use of nuclear weapons, cyber sabotage of infrastructure, transportation, communications, and defense facilities can seriously threaten the peace and prosperity of the entire world. Alarmingly, threats can come from just one computer or mobile device. The alleged North Korean cyberattack on Sony Pictures should be a wake-up call highlighting our vulnerability in this digital era. As responsible stakeholders, the United States and China should take the initiative to establish international norms, technical procedures, and risk-management mechanisms in cyberspace before it is too late.

Richard Bush: A mix of praise and encouragement for continued electoral reform in Hong Kong

The last time that U.S. and Chinese leaders spoke of Hong Kong was at the summit between President Obama and President Xi Jinping in Beijing last November, when the protests in Hong Kong were winding down. At that time, President Obama denied publicly that the United States had anything to do with fostering the Umbrella Movement; acknowledged that these were issues ultimately for the people of Hong Kong and the people of China to decide; promised that Washington would continue to speak out on “the right of people to express themselves”; and that it would “encourage the elections that take place in Hong Kong [be] transparent and fair and reflective of the opinions of people there.”

So what should Secretary Kerry say to Chinese State Councilor Yang Jiechi at the S&ED?

First, he should give China credit for what it has done right. He should commend Beijing for its decision to move Hong Kong’s major elections to one-person-one-vote. Even though there are defects in the process by which candidates for chief executive will be nominated, expanding the electorate is a major step forward (a step that Chinese leaders may now regret). He should also commend the Chinese government for not overreacting to the protests and for leaving left that job to the Hong Kong government.

Second, Secretary Kerry should encourage Beijing not to give up on its electoral-reform project, even though a small minority of radicals in Hong Kong have complicated the effort of well-intentioned leaders to produce a good outcome. He should reaffirm the continued commitment of the United States to an electoral system for the territory where “the chief executive is selected through universal suffrage and Hong Kong’s residents have a meaningful choice of candidates.” He should also acknowledge American understanding that electoral reform is not the only thing that must happen to ensure good governance in Hong Kong, and that governance reforms should occur whether or not the current election reform package receives the approval of the Hong Kong Legislative Council.

Third, Secretary Kerry should reaffirm the president’s pledge that the United States was in no way responsible for the trouble of last fall, and that the protests reflected not only the public’s desire for a certain kind of electoral reform but also a frustration with livelihood problems—problems that must be corrected whatever happens on electoral reform. Yet despite the president’s pledge, Beijing’s propaganda machine continues to blame “foreign forces,” which only distracts attention from the Hong Kong sources of the protests and the need to address them.

David Dollar: Economic talks will set the stage for Xi Jinping’s visit

Will the chill in U.S.-China relations arising from security issues spill over onto the economic track? No, based on my experience. Both the United States and China have compelling reasons to have a robust discussion of economic trends and to try to make progress on bilateral issues. If anything, tension on the security side makes the economic talks more important.

The most important part of the dialogue, which Wang Yang hopes to strengthen this year, is a strategic discussion of issues in the global economy. This year the risk of a Greek default and exit from the euro as well as the implications of the Federal Reserve’s exit from quantitative easing are obvious topics. For the technocrats from the two biggest economies to have a common understanding of and approach to global economic problems is the most important outcome of the exercise.

That said, the United States would also like to make progress on a host of economic issues which generally involve China opening up more and playing by a common set of rules. There are not strong prospects for concrete deliverables from the S&ED this year for two reasons. First, the key economic issue at the moment is the bilateral investment treaty. The two sides have just exchanged negative lists, and while I have not seen any credible leaks of the documents, all indications are that the Chinese list is long and that difficult negotiation lies ahead. Really, all the S&ED statement can do is to exhort both sides to take the negotiation seriously. 

Second, both sides will want to have significant announcements at the time of President Xi’s state visit in September. This S&ED can set the table for a good Xi visit, which in itself would be an important accomplishment. 

Daniel B. Wright: A chance to reclaim common purpose in U.S.-China relations

The fundamental logic of the U.S.-China relationship needs to be refreshed. The S&ED, and more importantly President Xi’s September visit, provide timely opportunities to begin to update that rationale, not only with words, but with action.

Gone are the years of détente when a common enemy provided the strategic basis of our relationship. And quickly fading are the days when fast-growth economic prosperity, or addressing the financial crisis, animated vision and unified stakeholders.

Rapidly changing domestic and global realities call for Washington and Beijing to re-articulate and pursue the significant overlap in the Venn diagram of the U.S.-China relationship. Perhaps that is what Beijing means by “a new type of great power relations.”

More than a slogan, however, best to let form follow substance. Best for Washington and Beijing to make progress this month on such issues such as the bilateral investment treaty, new protocol around cyber and technology, cooperation on climate and the environment, support for sub-national and people-to-people exchanges, and joint support on global economic development. Action on these items could provide sustaining momentum that is aligned with enlightened self-interest and that would be applauded by the people of both countries.

The Strategic Economic Dialogue (S&ED) was founded in 2006 on the basis that a Cabinet-level leadership mechanism was needed for the United States and China, one where leaders from both countries could do more than problem solve. The 2015 S&ED, and September’s Obama-Xi meeting, provide timely opportunities to begin to re-claim a common core in the U.S.-China relationship. Leadership and action are needed at this time.

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