The Third China-US Strategic Economic Dialogue, aimed at seizing the opportunities brought by economic globalization and meeting the challenges posed by the same, concluded last week. The strategic dialogue has studied the economic and trade ties between the two countries from a strategic vantage point and achieved rich results.
The most recent strategic dialogue yielded achievements in two areas. One is at the policy level, where the two sides reaffirmed the importance of bilateral economic and trade ties and the necessity of better planning their long-term cooperation. They also expressed their opposition to trade protectionism. As US Commerce Secretary Carlos M Gutierrez put it, trade protectionism actually protects nothing. The other area finds expression in the 31 points of consensus the two countries reached in eight fields and the signing of multiple specific cooperation agreements.
Compared to the first two dialogues, the most recent round stands out for the bigger range and depth of issues covered - with richer results to boot - and for extending the scope and depth of economic and trade cooperation between the two countries. Some of the issues covered this time were not discussed on the previous two occasions, such as food and product safety.
US media have exaggerated the quality problems of food and other products exported from China and seriously damaged China's image. Safety issues are close to the hearts of many consumers. They may not know a lot about exchange rates and unfavorable balances of trade, but questions of product safety always hit close to home. Some US politicians have taken advantage of this reporting by pouring fuel on the fire and spreading confusion. That is why the strategic dialogue had to address the issue.
This round of dialogue was more in depth than the last two rounds on a series of topics, such as the opening of China's capital market and the issues of energy resources and the environment. China's level of economic development is such that the country's energy efficiency is still quite low. The country consumes more energy per unit of GDP than developed countries, meaning there is enormous potential to use green energy, while the United States has a great deal to offer in terms of equipment and technology to increase energy efficiency. Given these complementary conditions, the two sides are looking at endless space for cooperation in this area.
As the National Development and Reform Commission Minister Ma Kai said, Sino-US cooperation in energy will create many business opportunities and no doubt become a new engine of growth in bilateral economic and trade relations. For this reason the latest round of strategic dialogue decided to set up a working group to come up with a 10-year plan for cooperation between the two nations in energy resources and the environment. The arrangement is of profound and far-reaching significance.
Since the first strategic economic dialogue, the trade imbalance between China and the US has been a key topic. Vice-Premier Wu Yi noted in her speech at the opening ceremony of the third strategic dialogue that she was extremely concerned about the more than 50 China-related bills with strong protectionist flavor that have been proposed by the US Congress in recent years. If these bills become law, they will seriously hurt bilateral economic and trade ties.
One of the central issues of this legislation is the Chinese currency. The laws' sponsors are demanding that Washington increase pressure on China to revalue the RMB. Some members of Congress claim America's huge trade deficit with China is the result of the RMB exchange rate, which China has deliberately kept low. They say the low exchange rate gives Chinese products an unfair advantage in the US market, and that the best way to correct the mistake is to force China to revalue its currency upward. For example, senators Charles Schumer and Lindsey Graham jointly sponsored a bill in the last legislative year demanding that China raise the RMB exchange rate by 27.5 percent. A lot of similar legislation has been tabled this year as well.
The truth is that the trade imbalance between China and the US has not been caused by exchange rates. The US' manufacturing industry accounts for only 12 percent of its GDP, as many of the enterprises now outsource their production to other countries. China enjoys considerable advantages in manufacturing and is now known as the "world factory". It is only logical that American consumers would welcome the inexpensive quality products China exports. The Chinese side has pointed out on many occasions that the US should relax controls on civilian high-tech exports to expand its share in the Chinese market.
During the most recent round of strategic economic dialogue, Vice-Premier Wu Yi reiterated that China's door is wide open for US products and the only obstacle is the US export policy. Gutierrez also mentioned that tipping the Sino-US trade balance depends on more US exports to China, not fewer Chinese exports to the US. In a word, fixing the trade balance will take joint efforts by both nations.
Wu said China has always strongly opposed the politicization of economic and trade issues. This means irrelevant factors must be kept away from economic and trade issues and no one should be distracted by "political implications" and "strategic impacts". Since the latter half of the 1990s, some people in the US have tirelessly spread "China threat" theories. They are able to fit everything into their "China threat" theories, including the bilateral economic and trade relations between the two countries.
The US-China Economic Security Assessment Committee was established in 2000 as a compromise during the Congressional debates over China's permanent normal trade relations status. The members of this committee were appointed by the leaders of the US' two main political parties. Their job is to watch out for any project in bilateral economic and trade ties, any investment project by the US in China or any investment project by China in the US that might harm the national security of the US. It presents a report to Congress every year and frequently holds hearings to air confusing and deceptive statements. It is the leading voice in the chorus of voices that would politicize economic and trade issues in the US.
The US will vote in a presidential election next year. As always, it is a time when non-issues are blown up into issues, and it is increasingly likely that the Sino-US trade imbalance and intellectual property rights will be played up. It is also time for enlightened people in both countries to join efforts to minimize the damage. Vice-Premier Wu Yi in her speech referred to a letter signed by 160 US transnational corporations and industry associations and delivered to Congress as an example of efforts by enlightened US citizens working against the politicization of economic and trade relations.
Though there have always been elements in the US seeking to politicize bilateral trade issues, we are quite confident about the development of Sino-US economic and trade ties, because it is a mutually beneficial and win-win bilateral relationship that brings substantial benefits to both peoples. The two countries are increasingly interdependent in economic affairs and the majority of the two leading political parties in the US support further development of our bilateral economic and trade ties.
The most recent round of strategic economic dialogue has prioritized a to-do list for the next six months, indicating the dialogue is now an effective mechanism for enhancing bilateral economic and trade ties. As long as the two sides follow this path, each round of the strategic economic dialogue will bring our bilateral trade relations to another level.
The author is a researcher with the Chinese Academy of Social Sciences
(China Daily 12/17/2007 page4)