Is The Obama Administration Intent On Making China Its Top Priority?

May 20, 2009

Martin McCauley writes: When U.S. President Barack Obama and Chinese President Hu Jintao met for the first time in London on April 1 – during the G20 summit – they announced the setting up of the US-China Strategic and Economic Dialogue. U.S. Secretary of State Hillary Clinton and Chinese State Councillor Dai Bingguo will chair the ‘Strategic Track’ and Treasury Secretary Timothy Geithner and Chinese Vice-Prime Minister Wang Qishan will chair the ‘Economic Track’. The first round of the dialogue will take place in Washington during the summer.This announcement builds on the relationship established by Henry Paulson, former U.S. Treasury Secretary, and Robert Zoellick, deputy Secretary of State, during the years of the Bush Administration. Paulson’s Strategic Economic Dialogue began in September 2006, at a critical moment in Sino-American economic relations. Congress was preparing to impose punitive tariffs on Chinese goods because of Beijing’s enormous trade surplus with the U.S. Washington wanted Beijing to revalue the yuan to cut the surplus. In Washington’s eyes the appreciation of the yuan had two objectives: one was to reduce the trade surplus and thereby to cut back on U.S. household expenditure and indebtedness and the other was to encourage Chinese households to spend more and save less. Eventually the yuan appreciated by about 20 per cent against the U.S. dollar. A trade war was thus averted.

Robert Zoellick talked of China becoming a ‘responsible stakeholder’ in the international system. He and his successor, John Negroponte, pressed China on several issues. One was the supply of arms to Iran and their transfer to terrorists in Iraq and Afghanistan. Another was the poor state of human rights in Darfur, Myanmar and Zimbabwe. As a result, China was much more cautious in its supply of arms to Iran and engineering troops from the People’s Liberation Army were sent to Darfur to help the UN-African Union Mission to build an airport and over 6,000 km of roads.

The Obama Administration has decided that a strategic engagement with China is critical to solving many of the world’s most intractable problems. The approach adopted has to be hard headed and pragmatic.

The number one priority for the Obama Administration is climate change. Energy and climate change legislation will be much easier to get through Congress if China is seen to be contributing to the reduction in CO2 emissions. China is now the greatest emitter of greenhouse gases in the world. China and the US together are responsible for 40 per cent of world CO2 emissions. American trade unions are concerned that the cap and trade system will result in many companies transferring production to China.

The UN Conference on climate change in Copenhagen at the end of this year has to update the Kyoto Protocol. It will only succeed if the U.S. can convince China to cut emissions. Beijing has so far resisted pressure to commit itself to targets arguing that, as a developing country, it cannot afford to do so. If the developed world wants China to reduce CO2 emissions it has to supply the technology at no cost to Beijing.

At the last G20 summit China argued in favour of a new international reserve currency. Over the last five months China has carried out over 95 billion yuan currency swaps with six countries which hold part of their reserves in yuan.

The Sino-American dialogue permits the two powers to engage in vigorous debate about major issues such as Taiwan and North Korea. Another issue is the new U.S. Pakistan and Afghanistan policy. Washington will argue that it is in the interests of China because of the threat of Islamic militants penetrating Xinjiang.

Some of America’s allies, especially in the East and in South Asia, are concerned that the new relationship could develop into a G2 grouping. They fear that Washington may construct a geopolitical relationship with Beijing which will place them at a disadvantage. Initially there are only to be annual meetings of the two new groups. However, there are many more policy areas which could be drawn into the dialogue. The signs are that if China and the United States can find a common language their new partnership will become the leading force in international relations.

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