Time to avoid downward spiral of US-China ties

WASHINGTON - The United States and China should seize the opportunity of an ongoing annual high-level dialogue to avert the downward spiral of their relations, otherwise the current trend is worrisome, said one of Washington's leading China experts.

Kenneth Lieberthal, a senior fellow at the Brookings Institute's John L. Thornton China Center, made the remarks to Xinhua as the sixth round of China-US Strategic and Economic Dialogue (S&ED) and the fifth round of High-Level Consultation on People-to-People Exchange (CPE) went underway in Beijing.

There was a significantly different set of perspectives in Beijing from that in Washington on what was going on and why, he said.

"I think it is important for us to discuss these issues in serious detail to see whether we could find a way to build confidence in each other's sincerity, to reduce the current downwards spiral and establish some basis for moving forward on a geo-strategic level," said Lieberthal, who had served as a special assistant to the Clinton administration for national security affairs.

The bilateral relations have experienced some setbacks, as the two sides sparred over China's territorial disputes with its neighbors in the Asia Pacific region. The US has recently indicted five Chinese military officers for so-called commercial espionage which China denied.

"The degree of trust in each other's long-term intentions is declining and has reason to decline. I think we need to address that quite seriously," Lieberthal said.

He noted it is important to have a greater degree of confidence in understanding what the other is doing, at least a little more agreement in terms of what is occurring, and then to discuss why it is occurring and see "whether we can reduce the characters that exist in each other's motivation."

Besides, there are many economic and trade issues where practical cooperation can be made, he said.

Lieberthal acknowledged that the exchange rate issue is politically easy to focus on, but, in reality, there are more important issues than that such as the ongoing negotiation of the Bilateral Investment Treaty (BIT).

"The BIT creates job, opportunities and mutual interests on both sides, and helps stabilize the relationships and give you confidence the relationship will be handled carefully into the future," he said.

The BIT talks, started in 2008, entered a substantial phase after the two countries agreed last year that the negotiations would be conducted on the basis of pre-establishment national treatment with a negative list approach.

The US businesses are eager to make the negative list as short as possible, and pressed China to allow greater market access to its financial service sectors in which the US businesses excel. China wants the US side to narrow the national security review of Chinese investment, and treat China's state-owned enterprises (SOEs) fairly.

"My own sense is that it would probably take three to five years before the BIT is completed and ratified on both sides. The good news is both are actively engaged in the negotiation," said Lieberthal.

He noted both presidents are willing to advance the relationship and the S&ED is a good place to communicate at very high level.

"The APEC (Asia Pacific Economic Cooperation) meeting in November is the one that enables both presidents to cast this relationship in broader terms that are necessary to move forward constructively. If that does not happen, I am quite worried that the current trends are not very good," he said.