Recalibrating the ‘Pivot to Asia’: Behind the 7the Sino-US Strategic & Economic Dialogue

In the recent S&ED between China and the U.S, the most intriguing developments involved not just the formal bilateral progress, but those undercurrents that illuminate the potential future of the dialogue

After months of diplomatic friction over the South China Sea, both sides acknowledged an easing of tension in the run-up to the seventh meeting of the Sino-U.S. Strategic and Economic Dialogue (S&ED).

It was also reflected in the Pentagon meeting between U.S. Secretary of Defense Ashton Carter and China’s Central Military Commission Vice Chairman General Fan Changlong.

The fifth Strategic Security Dialogue (SSD) served as a prelude to the S&ED.

The S&ED advancements

As the Sino-U.S. relationship is growing broader and deeper, the dialogue offers a way to sustain bilateral cooperation, despite differences.

That was evident in the strategic talks between Secretary of State John Kerry and State Councilor Yang Jiechi; and in the economic negotiations between Treasury Secretary Jacob Lew and Vice Premier Wang Yang.

As the two nations agreed to work to complete a code of conduct on cyber activities, they also widened the scope of discussions by adding new sections to their annual dialogues and consultations.

Moreover, the dialogue paved the way to President Xi Jinping‘s upcoming visit to the United States in the fall.

Although the S&ED began amid U.S. concerns about cyber-hacking, territorial disputes and economic issues, it also occurred as Chinese companies’ direct U.S. investment has increased fivefold since 2009. That has added more than 80,000 jobs in America, as Vice Premier Wang Yang noted in his Wall Street Journal op-ed.

Today, Chinese investments in the United States total almost US$50 billion and are likely to increase to between US$100 billion to US$200 billion by 2020. That translates to 200,000-400,000 jobs in America.

During the S&ED talks, the most intriguing developments involved not just the progress that took place, but the undercurrents that could precipitate subtle shifts in the U.S. policy approach to China.

Fostering economic and strategic success in Asia

Surprisingly, the White House decided against a meeting with General Fan Changlong during his five-day meeting trip to Washington, despite the Pentagon’s recommendation that it go ahead.

In the past, Generals Guo Boxiong, Zhang Wannian, Cao Gangchuan and Chi Haotian all met the incumbent U.S. president during official visits.

Most observers argued that that the White House was motivated by domestic pressures, due to U.S.-Sino differences regarding about the South China Sea.

However, the meeting that never materialized may have contributed to the ongoing rethink about the Obama foreign policy – particularly the administration’s pivot to Asia – in both Democratic and Republican camps.

There are those who believe that free trade in the Asia Pacific region is very much in the U.S. and Chinese interest; but that both nations should be participants in the evolving trade blocs in the region. By the same token, there are many who believe that the China-proposed Asian Infrastructure Investment Bank (AIIB) is not a threat against but complementary to the U.S. interests in the region.

Some policy authorities believe that U.S. pivot should be “recalibrated,” although this view is typically expressed in more diplomatic terms.

It is a view that unites moderate Democratic internationalists and longtime Republican multilateralists, from Henry Kissinger to pragmatic presidential contenders like Jeb Bush. As Jeffrey A. Bader, a veteran Brookings analyst, has recently argued, there are valid reasons to argue that America’s China policy is changing and it is time to ask, as he does: “Are we in search of enemies?”

Until recently, eight U.S. presidents since Richard Nixon have rejected the idea of inevitable hostility and an across-the-board rivalry between the United States and China.

A generation of peace in Asia was made possible by such statesmen in America and their counterparts in China. That tradition should be sustained.

Thematic frictions, structural tensions

During the Obama era, the S&ED has illustrated all vital aspects of the White House’s China policy, including the “Pivot to Asia,” efforts to consolidate a “new model of cooperation,” various levels of bilateral and multilateral engagement, technical and ideological views on visa policy and public diplomacy.

On security issues, the key topics involve the U.S.-China military-to-military relationship, military activities on both sides, and maritime disputes in the region. These topics also include the Middle East, including the continued hostilities in Syria and sanctions against Iran.

In turn, the Sino-U.S. economic issues range from the bilateral economic relationship and global rebalancing to bilateral trade relations and currency policies, which are reflected in U.S. concerns about China’s holdings of U.S. Treasuries, and bilateral WTO disputes.

However, with currency reforms, the Chinese renminbi has appreciated 35 percent against the U.S. dollar over the past decade and China’s currency is “no longer undervalued,” as the IMF has reported.

More recently, there have been increasing efforts toward the U.S.-China Bilateral Investment Treaty (BIT), especially as Chinese investment in the United States has taken off and both nations are looking more extensively into the enforcement of Intellectual Property Rights (IPRs).

The bright spots in the bilateral cooperation are climate change and energy cooperation.

Like in the past, the seventh dialogue also reflected the divergent policy approaches of China and the United States, which explain much of the current thematic frictions and underlying structural tensions in the dialogue.

While Beijing emphasizes a medium-term perspective on bilateral relations, Washington is driven by shorter-term pressures and early positioning for the 2016 presidential election. And while Beijing is accelerating regional economic integration, Washington’s “Pivot to Asia” is fueled mainly by security concerns.

Nevertheless, there should be no divergence from the bottom line: America and China must reconcile their differences in ways that promote continued economic dynamism and lower tensions in the region.

The original version was released by China.org on June 26, 2015

Dr Dan Steinbock is the research director of international business at the India, China and America Institute (USA) a visiting fellow at the Shanghai Institutes for International Studies (China) and at EU Center (Singapore). For more, see http://www.differencegroup.net