The Sino-U.S. Strategic Economic Dialogue (SED) meetings focus mainly on strategic, long-term and upper-level problems in bilateral economic relations between China and the United States. They serve as a platform for deepening understanding between the two countries and prompting the healthy development of Sino-U.S. trade and economic ties.
The third SED between the two countries was held on December 12-13 in Beijing. During these days, the two sides discussed their future trade and economic cooperation at the strategic level, a helpful way for them to resolve problems and disputes concerning their wider economic cooperation. In this way, the SED helps ensure that their complicated bilateral trade and economic relations remain on a track of sound development.
China and the United States signed 31 agreements and memorandums of understanding at the third SED meeting. The agreements focused on financial services, food safety and product quality, the environment and energy, transparency, investment, China's market-economy status, balanced growth and innovation. The two countries also agreed to allow qualified foreign-investment companies issue yuan-denominated stocks and bonds.
When one analyzes three Sino-U.S. SED meetings held during the past two years, the significance of maintaining this dialogue system becomes very clear: It is an indispensable platform for strengthening bilateral economic ties.
The need for the SED
On September 20, 2006, China and the United States issued a joint statement and formally started the SED system. The SED mainly focuses on bilateral and global strategic economic problems that concern both sides, and meetings are held twice a year in turn in each country's capital.
In the meantime, other existing bilateral dialogue and consulting systems, such as the China-U.S. Joint Economic Committee (JEC), China-U.S. Joint Commission on Commerce and Trade (JCCT) and China-
U.S. S&T Joint Committee Meeting (JCM), continue to play important roles in pushing forward bilateral trade and economic cooperation. The Sino-U.S. SED is a new and comprehensive coordination mechanism in the trade and economic fields that is based on a higher level of governmental cooperation. The establishment of the SED reflects the necessity of strengthening bilateral trade and economic relations while deepening cooperation between the two countries.
Trade conflicts and dissensions occur more frequently as bilateral economic relations develop. Nowadays, the United States is the biggest consumer country in the world, while China's economy keeps rapidly progressing. As the two countries' economic ties deepen, the probability of more trade conflicts increases. China, whose per-capita gross domestic product (GDP) is only $2,000, is a very special developing country. Its economic, scientific and technological, and huge labor forces are very competitive, because the country can produce both labor-intensive commodities and hi-tech products. It is natural that China's advantage in the low-end manufacturing industry will extend to high-end industries through the country's further opening-up.
The unbalanced interdependence between China and the United States means trade conflicts between the two are inevitable. However, mutual benefits will still be their principal goal. Both sides have said they would try their best to resolve their problems through dialogues and negotiations, because trade wars only occur between immature trade partners.
Besides their SED meetings on their trade relations, China and the United States also have maintained dialogues to deal with trade and economic problems through systems such as the JEC, JCCT and JCM. The SED mechanism, however, is more advanced than these other dialogue mechanisms, and prevents inevitable trade conflicts.
The SED also has filled in the gaps that exist in the other dialogue mechanisms. Because of economic globalization, the international division of labor, global competition and international cooperation all have grown over time. Therefore, transborder macro-adjustments and controls and international economic coordination are required. Because China is not qualified yet to participate in economic coordination mechanisms led by developed countries, such as the Group of Eight and the Organization for Economic Cooperation and Development, the SED will continue to provide a means of dialogue with the United States in the near future.
The SED needs to further develop Sino-U.S. trade ties and economic cooperation. As early as 1999, China and the United States reached series of agreements on China entering the World Trade Organization (WTO). The agreements laid the blueprint for the two countries' trade and economic relationships during the five years after China joined the WTO. During that time, China stuck to its commitments in accordance with the previous schedule, while the United States determined whether or not China had fulfilled its WTO obligations. After the five-year transitional period, the two countries set up a biannual coordinated mechanism to insure the predictability of their trade relationship. They use this mechanism in lieu of a bilateral free trade area or an agreement to build a trade and investment framework-neither of which the two countries have or plan to have in the near future.
Moreover, under the background of economic globalization, the two countries' economic cooperation is beyond the range of their bilateral relationship, because they have become the "double engines" of the global economy. Their cooperation not only will benefit both of them, but also will guarantee global economic development. The achievements they make through the all-round and in-depth SED system can be beneficial to other countries as well.
The SED, which deals with existing trade problems in attempt to protect both sides' strategic interests, can avoid impacts to bilateral trade, economic ties and strategic relations caused by trade conflicts. Thanks to the SED, problems like the yuan's exchange rate and China's product safety are still controllable. In this regard, the SED prevents an economic cooperation crisis between the two sides.
Some economic experts believe that the United States uses the SED for its own immediate interests, or its future strategic interests. Therefore, the dialogue system actually is a tool for the U.S. side to reach these goals. But, in fact, such a dialogue platform is significant for both countries. The SED system, which was established according to a U.S. proposal, practices U.S. "stakeholder" policies. The United States needs China's cooperation, and recognizes China's position as a rising economy, thus their bilateral trade dialogue and cooperation are greatly deepened and expanded.
The agendas and achievements of the past three SEDs show that the mechanism's goal has been achieved. Since U.S. Democrats won the mid-term elections in October 2006, the U.S. Congress, by the following August, had submitted 30 drafts involving trade conflicts with China. They not only covered all trade fields, in which the United States had criticized China, but also were unprecedented in quantity. With trade protectionism growing in the United States, the SED, as a dialogue platform held biannually between the largest developed country and the largest developing country in the world, plays an important role in maximizing both countries' benefits in trade.
The SED also creates an equal dialogue atmosphere for high-level financial officials of the two countries. China and the United States also have accumulated ample experience working together on financing, trade and foreign exchange rate coordination through established mechanisms like the JEC and JCCT.
Based on previous coordination mechanisms, the two sides have upgraded their dialogue mechanism to the vice-premier level. The presidents of China and the United States strongly support the SED and actively participate in its meetings. This has compensated for deficiencies in other existing dialogue mechanisms under their different political systems, and managed to deepen their bilateral economic reliance on each other as well as enhance their trade interests. These mechanisms jointly form a mechanical network that stabilizes Sino-U.S. ties. The complete and high-level mechanism mirrors both sides' desire to tighten their bilateral economic relations, deepen their interaction and resolve their disputes.
Moreover, the Sino-U.S. SED can stimulate the development of stable, long-term and mutually beneficial bilateral economic ties between the two countries, broadening their cooperation to a wider range and taking it to a higher level. The topics discussed at the three SED meetings were ones that concerned major bilateral interests or global economic problems that required the cooperation and coordination of both countries. The issues involved not only traditional economic fields such as finance, trade, currency and energy, but also non-traditional areas like medicine, sanitation, labor insurance and environmental protection.
Judging from these topics, the SED will enable China and the United States to further coordinate their domestic macroeconomic, social, energy and environmental protection policies, thereby strengthening their common understandings and ameliorating their imbalances in economic and industrial structures, levels of development and governmental policies.
As Vice Premier Wu Yi had said at the SED meeting in December 2007, the SED mechanism has made historical and remarkable progress, because it has signaled the strong intention and confidence of both China and the United States to strengthen their cooperation and achieve a win-win situation for the world.