By Tao Wenzhao
How should we evaluate the second round of the China-US
Strategic Economic Dialogue (SED) held in Washington May 22 to
23?
Carlos Gutierrez, US commerce secretary, got it right: The
strategic economic dialogue focuses on the overall situation, not
on resolving particular issues. Therefore, no short-term results
should be expected.
The China-US Joint Economic Committee and other joint committees
are already in place to handle particular economic matters. The
strategic economic dialogue is needed to address the two countries'
long-term economic relationship from a wider perspective. The goal
is to develop sustainable mutually beneficial economic ties.
This task goes beyond the functions of limited-focus joint
committees. The eagerness for immediate results does not work
here.
The Washington dialogue strengthened mutual trust through
intensive discussion on issues of deep concern to both sides. This
is the big yield of the dialogue.
Chinese Vice-Premier Wu Yi, who headed the Chinese delegation,
emphasized the intensive discussions on the service industry,
energy, the environment, balanced economic growth and innovation.
Energy and environmental protection were the most serious issues
discussed. Cooperation in these two areas has great prospects and
is expected to inject vitality into both economies.
Also, both sides agreed to promote balanced growth of their
economies through macroeconomic policies and to encourage
innovation through policy exchanges and technological
cooperation.
In his opening statement, US Treasury Secretary Henry Paulson
said both China and the US face challenges of domestic
protectionism and questions about the merits of trade and
globalization. He went on to say: "There is a growing skepticism in
each country about the other's intentions. Unfortunately, in
America, this is manifesting itself as anti-China sentiment."
This is worth attention.
After the US mid-term elections last year, protectionist
sentiment gained strength in the US Congress, with China as a ready
target. According to US statistics, the total volume of US-China
trade in 2006 reached US$343 billion. The US sustained US$232.5
billion in trade deficits with China, almost three times that of
its trade deficit with Japan. For the past four years, China has
been the biggest source of the US trade deficit.
A host of factors explains the US trade deficits. They include
international division of work, Americans' low savings rate, and
restrictions on exporting high-tech products to China. It is not so
simple a matter as revaluating the renminbi, despite the beliefs of
some US lawmakers.
To make matters worse, ideological factors, which find
expression in the theory of a "China threat", have gotten mixed up
with protectionist sentiment.
In 2000, the US-China Economic and Security Review Commission
was set up to watch over trade between the two countries, US
investment in China, and Chinese investment in the US which could
possibly harm US security. Every year, the commission submits a
report to Congress, organizes frequent hearings and circulates
seemingly plausible but inflammatory opinions. In 2005, when China
National Offshore Oil Corp planned to purchase California-based
Unocal, the commission played a major part in defeating the
acquisition. It stoked the China fears on Capitol Hill, to some
extent damaging China-US economic ties.
We should be aware that partisan fights are a daily occurrence
in US politics. This is especially true when the White House and
Congress are controlled by different parties. With the US
presidential election next year, it is possible that the US trade
imbalance with China will became a campaign issue.
In fact, bilateral economic relations benefit both economies and
peoples. The Chinese and US economies complement each other in
terms of structure and level of development.
The US is the biggest economy in the world and China the fastest
growing one. Co-development of the two economies is of vital
importance to the progress of the entire world economy.
It is natural that some friction arise with bilateral economic
interaction. It should be remembered that trade friction between
the US and Japan in the 1980s was much more intense than the
current China-US friction. The problems can be resolved through
negotiations based on equality and by implementing the principle of
mutual benefit.
Both sides have numerous options in promoting bilateral economic
and trade ties.
On the part of the US, easing control on the export of high-tech
products to China is a feasible move. Since the publication of the
notorious Cox Report in 1999, the US has been restricting high-tech
exports to China. This has led to the decline of US market share in
China and, in turn, became a major factor contributing to the US
trade deficit.
The restrictions have aroused resentment from US businesses
which are well aware that China can turn to other countries such as
EU members and Japan for high-tech wares. In the end, it is the US
that pays for the restrictions.
But the situation is improving. Westinghouse Electric Co is set
to introduce third-generation nuclear power technologies in China.
This type of cooperation helps reduce the US trade deficit with
China.
The author is a researcher with the Institute of American
Studies under the Chinese Academy of Social Sciences.
(China Daily May 28, 2007)
