Letter from Washington

Advice for the Next Administration

by John Frisbie

Complex issues and election-year rhetoric have a way of tripping up the later realities of good governing. With China's hosting of the Olympics already a flashpoint and the presidential campaign approaching its decisive stage, it is time to step back from the daily headlines and make sure that the United States keeps focused on building a smart China policy. China's growing importance makes abundantly clear the need for a carefully considered and long-term approach.

The United States and China soon will be the two largest economies in the world. China obviously sells a lot to us, but it is also our third-largest—and fastest-growing—export market. US companies have invested nearly $60 billion in China, primarily to reach the growing China market. China holds hundreds of billions of dollars in US government debt.

Beyond the economic sphere, China's role in the world and its importance to the United States is also growing rapidly. Its increasing political and military influence in its own Asian neighborhood, expanding global reach as it searches for secure sources of raw materials, and global environmental impact will not be wished away.

Put simply, we cannot ignore each other. Our economies are already greatly intertwined and will only become more so over time. It is our most important economic relationship, and one that we both must get right.

So the question for our presidential candidates is a simple one: Is the United States better served by a contentious relationship that assumes the worst of Chinese intentions, or by a carefully considered relationship that recognizes the mutual economic and political benefits of building on the growing array of contacts that have evolved in recent years, while holding China accountable when it fails to meet international standards?

The US-China Business Council (USCBC) has been active in China since 1973, well before formal diplomatic relations were established with the PRC, and our experience tells us that nothing achieves greater progress in dealing with Beijing than extended and focused engagement.

The United States needs more engagement with China, not less, in all fields—military, strategic, and, yes, economic and commercial. But it cannot simply be talk for talk's sake. US objectives and interests must be clear, and in the economic sphere that means open investment policies, transparency, rule of law, market-based reforms, and the establishment of a level playing field on which growth in trade and investment benefits both sides.

For the United States, the best approach is a mix of the policies that have emerged in the past few years, led by the forward-looking Strategic Economic Dialogue (SED), regular bilateral trade negotiations and, when necessary, judicious use of existing US trade remedies and World Trade Organization cases when appropriate and winnable.

On the political and military side of our relationship, we have already seen benefits from similar engagement, whether it is in Beijing's more active approach toward dealing with North Korea or the recently announced plan to establish a military hotline to avoid misunderstandings that could turn dangerous.

USCBC has been an early and firm advocate of a forward-looking dialogue to guide the development of this relationship at a time when protectionist pressures on both sides of the ocean threaten to impose policies that could harm US interests. A top goal for the new administration, whether Democratic or Republican, should be to sustain the SED or something like it. Rename it, restructure it—but make sure the new government keeps some sort of long-term, constructive forum.

Some critics point to the lack of dramatic results from the three SED meetings to date as a reason to disband it. USCBC argues that the dialogue has established important channels of communication in areas such as product safety, energy, and the environment. Indeed, these areas are ripe for further success at the upcoming SED in June and afterward, offering opportunities for big and bold ideas from the current administration, our presidential candidates—and the private sector.

Continued engagement on China's financial reforms and market openings, transparency, merger and acquisition policies, and intellectual property rights are also extremely important to the business community and to ensure the level playing field that will benefit workers and companies alike.

Nearly 30 years after the establishment of diplomatic relations, much distrust remains in this relationship. It should be obvious that China will only become more important to us. If we are to ensure that this relationship develops in ways that advance our interests, we need more dialogue, not less.

John Frisbie is president of the US-China Business Council.

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	E-Mail \| Print \| License Letter from Washington Advice for the Next Administration by John Frisbie Complex issues and election-year rhetoric have a way of tripping up the later realities of good governing. With China's hosting of the Olympics already a flashpoint and the presidential campaign approaching its decisive stage, it is time to step back from the daily headlines and make sure that the United States keeps focused on building a smart China policy. China's growing importance makes abundantly clear the need for a carefully considered and long-term approach. The United States and China soon will be the two largest economies in the world. China obviously sells a lot to us, but it is also our third-largest—and fastest-growing—export market. US companies have invested nearly $60 billion in China, primarily to reach the growing China market. China holds hundreds of billions of dollars in US government debt. Beyond the economic sphere, China's role in the world and its importance to the United States is also growing rapidly. Its increasing political and military influence in its own Asian neighborhood, expanding global reach as it searches for secure sources of raw materials, and global environmental impact will not be wished away. Put simply, we cannot ignore each other. Our economies are already greatly intertwined and will only become more so over time. It is our most important economic relationship, and one that we both must get right. So the question for our presidential candidates is a simple one: Is the United States better served by a contentious relationship that assumes the worst of Chinese intentions, or by a carefully considered relationship that recognizes the mutual economic and political benefits of building on the growing array of contacts that have evolved in recent years, while holding China accountable when it fails to meet international standards? The US-China Business Council (USCBC) has been active in China since 1973, well before formal diplomatic relations were established with the PRC, and our experience tells us that nothing achieves greater progress in dealing with Beijing than extended and focused engagement. The United States needs more engagement with China, not less, in all fields—military, strategic, and, yes, economic and commercial. But it cannot simply be talk for talk's sake. US objectives and interests must be clear, and in the economic sphere that means open investment policies, transparency, rule of law, market-based reforms, and the establishment of a level playing field on which growth in trade and investment benefits both sides. For the United States, the best approach is a mix of the policies that have emerged in the past few years, led by the forward-looking Strategic Economic Dialogue (SED), regular bilateral trade negotiations and, when necessary, judicious use of existing US trade remedies and World Trade Organization cases when appropriate and winnable. On the political and military side of our relationship, we have already seen benefits from similar engagement, whether it is in Beijing's more active approach toward dealing with North Korea or the recently announced plan to establish a military hotline to avoid misunderstandings that could turn dangerous. USCBC has been an early and firm advocate of a forward-looking dialogue to guide the development of this relationship at a time when protectionist pressures on both sides of the ocean threaten to impose policies that could harm US interests. A top goal for the new administration, whether Democratic or Republican, should be to sustain the SED or something like it. Rename it, restructure it—but make sure the new government keeps some sort of long-term, constructive forum. Some critics point to the lack of dramatic results from the three SED meetings to date as a reason to disband it. USCBC argues that the dialogue has established important channels of communication in areas such as product safety, energy, and the environment. Indeed, these areas are ripe for further success at the upcoming SED in June and afterward, offering opportunities for big and bold ideas from the current administration, our presidential candidates—and the private sector. Continued engagement on China's financial reforms and market openings, transparency, merger and acquisition policies, and intellectual property rights are also extremely important to the business community and to ensure the level playing field that will benefit workers and companies alike. Nearly 30 years after the establishment of diplomatic relations, much distrust remains in this relationship. It should be obvious that China will only become more important to us. If we are to ensure that this relationship develops in ways that advance our interests, we need more dialogue, not less. John Frisbie is president of the US-China Business Council. Further Reading Time for Companies to Weigh In with the Facts Get Ready for a Busy Fall All Quiet on the Potomac? The Great Currency Debate Click here for copyright permissions Copyright 2008 US-China Business Council Top of Page Table of Contents
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