By Niu Xinchun (China Daily)
Updated: 2007-12-11 07:28

The Third China-US Strategic Economic Dialogue (SED) will take place in Beijing tomorrow. Compared with the previous two rounds, this one may serve as a link between the past and future and therefore is of exceptional importance.

If it produces a broad consensus on major issues, it will lay the foundation for a lasting mechanism for dialogue and strong enough to withstand the political impacts of the US presidential election next year and the change of administration the year after.

The China-US SED as a mechanism for regular talks is unparalleled in its status, scope and reach. During the first two rounds of the dialogue, the two sides conducted far-reaching exchanges on the basic nature, structural disagreements, and the constructive relationship of Sino-US economic ties, and reached some basic consensus.

For example, both sides have recognized that the international division of industries is the main cause of the trade imbalance between China and the US, and that adjusting the industrial structure and boosting domestic demands are important ways to address the issue, but it must follow the principle of a positive attitude and safe approach.

In addition, the two nations have also made headway in some specific areas. During the first round of talks, they reached consensus on six steps, including allowing US securities firms to set up representative offices in China and increasing US exports to China.

The second round saw the two sides agree on doubling the number of flights between them in 2012, while China agreed to further open up its financial market. They also signed agreements or letters of memorandum on energy resources, pension funds, and unemployment insurance.

The mutual confidence and understanding the two sides established between them and the specific goals achieved in the first two rounds have laid a good foundation for the next round and could take things to a new level.

The strategic mutual confidence between China and the US is expected to be further strengthened. The bilateral economic talks will mark US Treasury Secretary Henry Paulson's fifth visit to China since taking office and his third this year.

Through multiple reciprocal visits and exchanges between senior government officials of both countries, the two have learned more about each other's economic systems, and political decision-making. It has led both sides to recognize the complexity of their bilateral trade ties and the reality that their disagreements can only be resolved through long-term cooperation.

The two countries have also held several rounds of talks in recent months on such issues as product safety, cooperation in energy resources and environmental protection. They reached agreement on some of them, and will be further discussed during the latest round of talks.

US Secretary of Health and Human Services Mike Leavitt said on December 4 that China and the US could sign two letters of memorandum on product safety during the talks to make sure that products imported from China meet US safety standards. It is safe to say the talks will achieve its goals if the two sides manage to make breakthroughs at the strategic and tactical levels.

The US Congress still holds grudges against the China-US SED despite the positive results they have produced so far.

As far as bilateral economic ties are concerned, the overall situation looks good. It provides a good opportunity for the two sides to reach a broad consensus.

The two countries could also enhance their bilateral trade relations if they successfully seize the opportunities. The subprime credit crisis in the US has persisted since August, seriously hurting Wall Street and overshadowing the country's economic prospects.

Paulson and his entourage will be hard-pressed to make the latest round of SED work. He will have to defend it with another success.

When he took office a year ago amid strained Sino-US economic ties as both chambers of Congress passed a string of bills recommending punitive action against China, Paulson tried really hard to convince the lawmakers that they should be patient and give him some more time to resolve some of the major issues through bilateral dialogue.

To keep pushing for his own China-related economic strategy under such circumstances, Paulson will have to convince the Congress with specific results that the SED should continue.

The author is a researcher with China Institute of Contemporary International Relations

(China Daily 12/11/2007 page10)