U.S.-China Economic Ties: Key for Asian Stability

April 28, 2004
By Travis Tanner

In an effort to notch up U.S.-China relations on the Bush administration’s agenda, three cabinet level officials—Secretary of Commerce Donald Evans, Trade Representative Robert Zoellick and Secretary of Agriculture Ann Veneman—together with a Chinese delegation of 70 individuals, participated in the 15^th session of the Joint Commission on Commerce and Trade (JCCT) on April 21^st.  The Chinese Vice-Premier Wu Yi, Mr. Evans and Mr. Zoellick jointly chaired the meeting held in Washington DC.  This was the highest level delegation to participate in the session in over a decade. 

The meeting resulted in, among other assurances, a Chinese commitment to drop plans to adopt its own wireless encryption standard and to crack down on IPR infringements, while the U.S. pledged to reconsider its ban on certain high-tech exports to China.  The presence of a relatively large number of top-level bureaucrats suggests the high priority both the United States and the PRC assign to their mutual economic relationship.  Although the commercial benefits of U.S.-China economic ties are critical components of both nations’ economies—the United States is China’s second largest trading partner and China is the United States’ third largest trading partner—the benefits extend beyond economic advantages.  Progress, expansion and coordination on economic issues provide the foundation upon which cooperation on a larger strategic level can be orchestrated and the current and future strain on the relationship can be managed.      

Tensions in U.S.-China relations will most likely intensify in the approaching months as U.S. presidential campaigning picks up and further sparks “anti-China” discussion in the United States.  Current matters of disagreement include Beijing’s view that by proposing to sell an advanced radar system to Taiwan the U.S. is violating the “Three Communiqués” and claims that the reports of Beijing backsliding on human rights are completely unfounded.  Washington is worried over the perceived undervalued RMB, Chinese failure to comply with certain WTO commitments and alleged U.S. manufacturing job loss to China.  Although these are prickly matters that deserve attention, there are larger tensions on the horizon.  Issues that continue to merit Washington and Beijing’s full consideration include how to handle cross-Strait relations and North Korea’s nuclear capabilities. 

Newly reelected Taiwan President Chen Shui-bian’s current trajectory toward establishing a new constitution for Taiwan and Kim Jong Il’s nuclear ambitions present two of the most formidable challenges current U.S. foreign policy faces.  Effective handling of both issues heavily depends on cooperation between Washington and Beijing.  The degree of coordination required to achieve acceptable solutions on both fronts is extremely high.  Thus, in order to successfully manage this relationship, both sides must continue to make progress where possible and emphasize areas of shared interest—this is most effectively achieved through cooperation on the economic front.  Unless U.S.-Sino relations are firmly rooted, the ability to successfully secure mutually satisfactory outcomes on these two issues will be difficult at best.    

Taiwan President Chen Shui-bian continues to stand by his constitutional reform timetable which calls for an island-wide referendum in 2006 and full implementation of the new constitution in 2008.  Chen’s plans to establish a new constitution are viewed by Beijing as an overt move toward independence, and thus, entirely unacceptable.  The U.S. has long held a policy of “strategic ambiguity” toward the Taiwan Strait and insisted that a peaceful solution be reached between the two sides of the Strait without U.S. involvement.  However, in a recent 180 degree turn, the PRC asked the United States to become more active in mediating between the two sides.  This is an opportunity for the U.S. to abandon its ambiguous cross-Strait policy and play an assertive arbitrating role, thereby increasing the likelihood of securing the primary American national interest in the region—stability.

As North Korea’s long-time friend and ally, the PRC played a constructive role in coordinating the two sessions of “six-party” talks held in Beijing which aimed at brokering a diplomatic solution between the U.S. and North Korea over Pyongyang’s underground nuclear program.  Because Pyongyang and Washington have continuously butted heads, negotiations have been slow.  In an effort to reach a conciliatory resolution, the PRC has encouraged the U.S. to deviate from its stated objective—complete, verifiable and irreversible dismantling of Pyongyang’s nuclear program—and exercise more flexibility toward North Korea.  Washington and Beijing’s divergent approaches to resolving the impasse must be overcome if progress toward an agreement is to be achieved.  In a positive sign that the process may be moving in that direction, it is reported that Kim Jong Il (in an unannounced trip to Beijing) pledged to soften his stance toward American demands.   

Military conflict in the Taiwan Strait or the acquisition of North Korean nuclear weapons by terrorist groups certainly are two scenarios the leaderships in Beijing and Washington would like to avoid.  Therefore, it is essential to continue moving forward in the realm of economic cooperation where both countries share an increasing number of similar objectives and where progress is occurring.  For both countries, economic growth hinges on the other.  During 2000-2003, U.S. exports world-wide increased by 9% while exports to China were up 76%.  The U.S. is the single largest export market for firms in China, taking in 30% of total exports produced.  The risk of damaging the increasingly integrated economic links naturally encourages negotiation and cooperation on a variety of non-economic related issues, and therefore, expanding economic ties should receive significant attention from the highest levels of the respective leaderships.   

The hands of the Bush Administration are full coping with turmoil in Iraq, the 9/11 hearings and coordinating a reelection campaign.  The Chinese, too, are dealing with a host of domestic problems from economic matters, such as growing inequality and possible overheating of the economy to potential political unrest in Hong Kong.  Nevertheless, steps to ensure stability in the U.S.-China relationship are taking place.  Vice President Cheney’s recent trip to China and subsequent talks with the Beijing leadership, as well as the mutual high-level bilateral support for the JCCT meeting are healthy signals that both countries are willing to expand resources to further solidify U.S.-China relations.  While these are steps in the right direction, continued strides toward developing economic relations must remain a high priority for both nations.

Travis Tanner is the Assistant Director of China Studies at The Nixon Center.