Secretary of State Hillary Clinton and US Treasury Secretary Tim Geithner play host this week to the third round of a newly formed bi-lateral talks between the US and China. This is the first time the so-called US-China Strategic and Economic Dialogue (SE&D) is being held in the US. The purpose of the talks, Geithner said in his opening comments on Monday, is to look for opportunities to build closer economic ties between the World’s two leading economic powers. The two sides will also “address areas of concern” and to ” share perspectives on the major challenges facing each of [our two countries] at home as well as in the broader global economy,” Geithner added. “I believe we are making significant progress in strengthening our economic relationship.” The two-day S&ED is co-chaired by Chinese Vice Premier Wang Qishan, State Councilor Dai Bingguo; and representing the US, Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner. Geithner said that the key challenge that the US economy is facing remains the high unemployment, currently at 9.0%.
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“Even after a year and a half of positive economic growth and more than two million private sector jobs created — unemployment is still very high, and we still have a lot of work to do in repairing the damage caused by the crisis,” Geithner noted in his remarks at the joint opening session of the S&ED. “Our challenge is to strengthen the foundations for future economic growth. This requires a sustained effort to improve education and improve incentives for innovation and investment, even as we put in place the long term fiscal reforms that force us once again to live within our means as a nation.” Geithner noted that cooperation between the US and China contributed in “no small part” to the global recovery. And the continuing effort of working together will benefit the sustaining growth of the world.
China is our nation’s second-largest trading partner and its third-largest export market, with bilateral trade totaling about $457 Bn (US) in 2010, with China carrying a $273 Bn surplus over the US, according to the Commerce Department.
According to a Brookings Institute analysis, Expectations for the US-China Strategic & Economic Dialogue meeting are muted – a good sign that reveals a maturing US-China relationship. The focus has shifted to making methodical progress on issues between the two nations, rather than on resolving major conflicts or arriving at dramatic breakthroughs. There are of course differences in the objectives of the two sides and different perceptions of what constitutes progress. This enhances the value of the S&ED dialogue even if there are few high-profile successes. The sometimes bellicose rhetoric between these two vital economic powers has ratcheted down as progress has been made on some of the most visible points of tension. The currency issue continues to fester but recent developments have transformed this into a problem for the rest of the world rather than just between the US and China. However, there are storm clouds gathering on the horizon as more fundamental and contentious issues, with high stakes on both sides, come to the fore. For the US, concerns over China’s manipulation of its currency, human rights violation, copyright infringement & piracy, and the “imbalance” between the US and China evidenced by a huge trade surplus, and US concerns over the leverage China holds in World Markets with almost $2 Trn in US Treasury reserves.
For China, they are pushing for greater access to US technology products & expertise, freer access to US Markets for Chinese FDI, formalized in a bi-lateral investment treaty between the two nations, their concerns that tepid US economic policy & financial regulatory reforms could worsen the sluggish global recovery, and China’s desire to be recognized as a ‘Market economy’ by the US in order to gain greater WTO liberalized trade preferences with member nations. See Geithner Q&A video here.