The U.S.-China Strategic and Economic Dialogue

July 17, 2009

The United States and China will convene the first annual joint Strategic and Economic Dialogue (S&ED) in Washington on July 27–28. Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner will lead the U.S. delegation. Vice Premier Wang Qishan and State Councilor Dai Bingguo will lead the PRC delegation.

The S&ED represents the marriage under one umbrella of two earlier high-level dialogues begun under the George W. Bush administration: the Strategic Economic Dialogue convened by former treasury secretary Hank Paulson and the Senior Dialogue first convened by former deputy secretary of state Robert Zoellick and his successor, John Negroponte.¹ With Secretary Clinton’s participation, the S&ED effectively raises the profile of issues formerly discussed at the Senior Dialogue to the cabinet level on the U.S. side (Dai Bingguo reprises his earlier role as the senior Chinese interlocutor for “strategic” matters).

Q1: Is this the G-2 that we have heard so much about?

A1: No. The G-2 is a conceptual framework that recognizes the importance of the United States and China as integral players in most if not all global issues. The S&ED is a bilateral mechanism designed to achieve greater mutual congruence on matters of shared concern. It isn’t a forum for the United States and China to solve the world’s problems.

Q2: What is on the agenda at the S&ED?

A2: A dog’s breakfast of issues confront the two sides on July 27 and 28. Dynamic and complex structural issues arising from the global economic interest share the stage with urgent concerns over North Korean nuclear weapons production and proliferation. Arriving at a coherent and constructive agenda has been a challenge for both sides, particularly given the varied and not entirely complementary portfolios of the two principal U.S. agencies involved and the similarly separate and distinct briefs of their Chinese counterparts. The morning of July 27 has been set aside for a plenary session on crosscutting issues, followed by separate breakout sessions on the economic and strategic tracks. The prize crosscutting issue is climate change, with some additional attention to overseas development assistance. From the U.S. perspective, management of these issues on the Chinese side has been relatively stovepiped within competing agencies. Their elevation to core agenda items by the United States at the S&ED is an effort to cut across these stovepipes and begin to make genuine progress at real decisionmaking levels. Whether or not such progress is achievable at this month’s meeting is uncertain at best, particularly because neither Chinese cochair has definitive decisionmaking authority on these issues.

The separate economic and strategic tracks that have emerged will cover the gamut of critical issues facing the two countries. On the economic side, these include a focus on practical efforts to work cooperatively to address the economic crisis and find ways to encourage growth in its wake. The U.S. side will be primarily focused in this regard on the structural imbalances in both economies that should be addressed to reduce future crises, including the current account deficit in the United States and China’s excessive reliance on exports to fuel economic growth. Much of the discussion will therefore center on efforts China is making to increase domestic consumption. Some discussion will also take place on China’s participation in institutions like the International Monetary Fund, the International Energy Association, and others. On the noneconomic side, the two sides will discuss a range of complex bilateral and multilateral issues, including matters involving North Korea, Iran, Pakistan/Afghanistan (and to a lesser extent, Sudan and Burma), among others. The North Korean issue is clearly the focus here, with the two sides increasingly enjoying reasonably good cooperation on the subject, but much left undecided on the issue.

Outside of the main forum, the Chinese participants will meet with and be addressed by President Barack Obama and will spend some time on Capitol Hill meeting with members.

Q3: What is not on the agenda?

A3: The S&ED is designed less as a vehicle for achieving “deliverables” in the relationship than as a means for the two sides to develop mutual confidence. While the United States and China have developed an increasingly close relationship over the years, there still remains a fundamental sense of mutual strategic mistrust. On the U.S. side, concerns remain unanswered over China’s strategic intentions in the Pacific, the direction and pace of its military modernization, and its long-term role in international institutions of which the United States is a champion. China worries about U.S. acceptance of its rise as a fellow global power. These fundamental questions, in particular those related to military matters, are not on the agenda, regardless of their relative strategic importance.

By and large, commercial issues or matters of immediate trade and economic friction are similarly not on the agenda. Most of the heavy lifting on those issues will be left to the Joint Commission on Commerce and Trade (JCCT), a nominally semiannual dialogue that is cochaired on the U.S. side by the secretary of commerce and the U.S. trade representative (Vice Premier Wang Qishan gets double duty as the Chinese chair of the JCCT in addition to his role as cochair of the S&ED). Therefore, issues such as respect for intellectual property rights, discriminatory procurement provisions such as the “buy America” or “buy China” provisions of the two countries’ respective stimulus plans, and other matters will be left for a later date. That said, some pressing issues, such as China’s insistence on implementing installation on all personal computers of so-called Green Dam universal personal computer filtering and tracking software, will undoubtedly be raised by the U.S. side, given their urgency.

Certain other issues of considerable sensitivity will also not be raised as centerpiece issues, except in passing and without significant exchange. These include matters related to China’s currency valuation and the desirability of augmenting its dollar reserves; and also issues related to ethnic tension in China because of the recent bloody upheavals in Xinjiang (and the 2008 troubles in Tibet).

Q4: What is the bottom line?

A4: Previous high-level dialogues between the United States and China have taken place amid high expectations. The S&ED enjoys the blessing of low expectations, which is a good thing given the complexity of the bureaucratic process involved; the mismatch on issues of the key U.S. and Chinese players; and the wide sweep of issues on the agenda. With 28 minister-level officials coming from Beijing and a legion of prominent personages taking part on the U.S. side, both sides will be as focused on managing the logistics of a bureaucratic circus as achieving concrete results. Ultimately, the S&ED will formally launch what is certain to be an intensive and sometimes intimate dialogue between the Obama administration and the Chinese government on a wide variety of critical issues. Absent some dramatic gaffe or diplomatic incident, its success on that score is assured.

¹ China referred to the Senior Dialogue as the “Strategic Dialogue.”

Charles W. Freeman holds the Freeman Chair in China Studies 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).

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