U.S.-China S&ED: New Players, Familiar Issues

The fifth meeting of the U.S.-China Strategic & Economic Dialogue (S&ED) will be held in Washington on July 10–11. This annual gathering of senior officials from across the U.S. and Chinese governments is the main forum for policy dialogue between the world’s two largest powers. The S&ED has been criticized as unwieldy and overly process oriented, and expectations for substantial progress at the Washington meeting should not be unduly high. But the gathering does provide a useful opportunity for new senior policy teams in both Washington and Beijing to take the measure of each other and to agree on a set of procedures for working out differences and seeking areas of cooperation on key bilateral, regional, and global issues.

Q1: What is the S&ED?

A1: President Barack Obama and then-President Hu Jintao of China launched the S&ED in April 2009 as the principal high-level forum for discussing a broad range of policy issues between the two countries. Meetings are held annually in alternating capitals; the last meeting was in Beijing in May 2012. The Dialogue is cochaired on the U.S. side by Secretary of State John Kerry and Secretary of the Treasury Jacob Lew, and on the Chinese side by State Councilor Yang Jiechi and Vice Premier Wang Yang. All four are new to the role, following President Obama’s reelection and Xi Jinping’s assumption of the Chinese presidency in March of this year. A wide swath of agencies and commissions from both governments will participate in the Washington meetings, with as many as 40 to 50 officials in each delegation.

On July 9, preceding the S&ED itself, representatives from the two sides will meet for the Third U.S.-China Strategic Security Dialogue (SSD). Held each year on the margins of the S&ED, the SSD is unique in that it is the one bilateral forum that brings together senior U.S. and Chinese civilian and military officials for discussions on sensitive security issues. The S&ED itself will begin on July 10 with an opening plenary session at the State Department, after which the delegations will split for separate discussions along the forum’s two tracks: the strategic track, covering bilateral, regional, and global political and security issues, as well as development and energy; and the economic track, covering macroeconomic, financial, trade, and investment issues. Joint fact sheets on the outcomes from each track are likely to be issued at the conclusion of the talks on July 11.

Q2: What will be the main topics of discussion on the strategic track?

A2: Regional hotspots are expected to once again take center stage in the strategic-track discussions. On North Korea, Secretary Kerry said after meeting Foreign Minister Wang Yi of China at the early-July session of the ASEAN Regional Forum (ARF) that the two sides agreed to “strengthen our cooperation” on efforts aimed at denuclearizing the north. Still, the challenge for the United States in the upcoming talks will be persuading the Chinese to match their rhetorical shift toward stressing denuclearization with concrete steps that will help achieve that goal.

Maritime tensions in the region will be another focus area in the strategic discussions. China will look to claim credit for agreeing at the ARF session to hold formal consultations later this year with the 10 countries of the Association of Southeast Asian Nations (ASEAN) concerning a formal code of conduct on disputes in the South China Sea. On tensions with Japan in the East China Sea, however, Beijing is showing few signs of flexibility: at a July 5 formal government briefing on the coming S&ED round, it called for the United States to “send correct instead of wrong signals and do more to contribute to the cooling of the situation.”

Q3: Are any concrete outcomes likely on the economic track?

A3: The Chinese side will have little room for maneuver on economic issues at the S&ED. The Washington meeting comes a few months ahead of the critical Third Plenum of the Central Committee of the Communist Party, at which details of the new Xi-Li administration’s economic reform plans will be rolled out. That said, Beijing will likely feel the need to demonstrate some incremental progress on Washington’s trade and investment concerns, including enhanced market access for U.S. exports in China, better protection of intellectual property rights, and a more level playing field between Chinese and American companies. Washington is also likely to continue to press China for financial-sector opening and reform and for more rapid progress toward a flexible, market-determined exchange rate. For its part, Beijing will likely raise its perennial concerns about U.S. restrictions on high-technology exports to China, Washington’s refusal to immediately grant China market-economy status in connection with U.S. antidumping and countervailing-duty laws, and perceptions that the U.S. investment climate is unfriendly to Chinese investors. The most concrete outcome under the economic track could be announcement of significant progress in bilateral investment treaty (BIT) talks, which the two sides agreed at last year’s S&ED meeting to intensify.

Q4: Will the recent controversy surrounding cybersecurity overwhelm the talks?

A4: Cybersecurity will be a central topic of discussion during the Washington meetings. This round of talks will witness the inaugural session of a separate, much-anticipated U.S.-China bilateral working group on cybersecurity. Unfazed by the ruckus over the revelations of former U.S. intelligence contractor Edward Snowden, the Obama administration appears determined to use those talks to continue pressing the Chinese on the rampant theft of U.S. trade secrets and its implications for America’s long-term economic competitiveness.

At least so far, however, Beijing seems reluctant to offer any fresh proposals on managing bilateral friction over cyber theft. Several recent commentaries in the official Chinese media have attacked U.S. credibility on the issue in the wake of the Snowden disclosures. Chinese officials at the July 5 briefing said that Beijing was “ready to work with the United States” on the issue, but then went on to repeat standard messages emphasizing cybersecurity as an international problem and China’s status as a major victim of cyber attacks. The officials also stressed that Beijing’s agenda for the S&ED talks remained firmly focused on expanding bilateral trade and investment, clearly downplaying the cyber issue.

Q5: Will we have to wait another year for U.S. and Chinese officials to meet on these issues?

A5: Although the S&ED meets only once a year, the United States and China hold a multitude of senior and working-level meetings throughout the year. Notably, the Joint Commission on Commerce and Trade (JCCT), which brings together cabinet-level trade officials from the two sides, usually meets in late autumn. Presidents Obama and Xi will also have a number of opportunities to discuss key bilateral, regional, and global issues face-to-face in the latter half of 2013, including at the G-20 Summit in St. Petersburg, Russia, in early September; the Asia-Pacific Economic Cooperation (APEC) Leaders’ Meeting in Bali in early October; and the East Asia Summit in Brunei Darussalam immediately following APEC.

Christopher K. Johnson holds the Freeman Chair in China Studies, and Matthew P. Goodman the Simon Chair in Political Economy, at the Center for Strategic and International Studies in Washington, D.C.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2013 by the Center for Strategic and International Studies. All rights reserved.

Photo Credit: KLEPONIS/AFP/Getty Images
Matthew P. Goodman

Matthew P. Goodman

Former Senior Vice President for Economics