The United States and the People’s Republic of China will hold the 2011 version of the Strategic and Economic Dialogue (SED) this coming Monday and Tuesday in Washington. Many distinguished people will participate, many well-crafted speeches will be given, many valuable topics will be discussed, and little of long-term economic value is likely to be achieved. Again.
This is especially unfortunate because next year could be very difficult for Sino-American relations.
By far the most important economic issue for America and China is the related imbalances in our economies. The U.S. recognized this several years ago and has repeatedly raised the matter. Result: Both economies are now more imbalanced than when the Dialogue began.
The main reason is simple: Neither country wants to bear the pain of rebalancing. Instead, they take to telling the other side why it should rebalance. And break the currency peg. And sell advanced technology. And so on. Explaining to the other side what’s in its best interest never works, but it’s a lot easier than facing up to your own problems.
The alternative approach is to tackle smaller, more manageable bilateral economic disagreements, and the U.S. seems to be moving in this direction. This is reasonable, but then it is not clear what purpose the SED serves.
The U.S. established the Joint Commission on Commerce and Trade with China in 1983 to talk about exactly such matters. Financial and other senior officials now travel back and forth at will for further discussions, as they should.
The bilateral relationship definitely needs cabinet-level exchanges and technical economic discussions, but 28 years of work along these lines certainly haven’t produced the breakthroughs some anticipated from the SED. What can the SED itself accomplish?
America and China would do well to make substantial progress on one major economic issue, such as mutual investment access (rather than pretending to deal with 40 more). Unless the SED can produce a concrete improvement on a fundamental economic issue, it will continue to serve no substantive purpose.
This has become a potentially dangerous failing. The 2012 U.S. presidential election is mirrored in the PRC by rotation of the top leadership of the Chinese government. Next year, politics could push both sides toward greater confrontation. Now is the time for significant progress, but the record to this point is not encouraging.
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