Editorial: A pivotal moment on trade with China

The latest meetings of the ongoing strategic economic dialogue (SED) with China concluded in late May. This dialogue is all about direct and candid discussions on the opportunities and risks in our relationship. Treasury Secretary Hank Paulson is trying cooperation and consultation rather than confrontation to get the job done, and we support his efforts. But we also need the dialogue to produce results. 

We are pleased at the specific announcements about improvements, especially the breakthrough agreement in expanding passenger and cargo flights, but also the important new cooperation in financing U.S. exports to China, new market access for the financial sector, increased cooperation in energy and announcements of large purchases of U.S. products.    

But we cannot forget that the whole point of the dialogue is to bring about structural change – the Chinese leadership must recognize that the risk now lies in acting too slowly rather than acting too rapidly, not just in trade, but in addressing their overheating economy.  

We are hopeful that the dialogue will result in faster actions by China to move away from export-led growth to domestic-led growth. We have, for example, noted that Chinese currency appreciation has accelerated notably over the past few weeks. We hope this is not just window-dressing for the SED meeting, but that it will continue and that it will accelerate further as the type of structural change envisioned by the high level dialogue. 

China has taken some positive steps recently, such as raising taxes on some Chinese exports and terminating at least one export subsidy. The Chinese have the tools to slow their super-heated export growth and help reduce their imbalance with us and with other countries. We hope they will use these tools less cautiously than in the past. 

We all want to see a mutually beneficial relationship with China – one in which both U.S. and Chinese companies and workers can compete fairly, with assurances that global trade rules will be observed and enforced. Our economies have a great deal at stake in our trade relationship, and the SED process is the best hope for achieving a win-win outcome. 

There are alternatives, but some of them are pretty troublesome. The clock is ticking in Congress, and without some real progress, the likelihood of legislation that could be damaging is greatly increased.