U.S. Extends Trump-Era Halt to Economic Dialogue With China

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Bloomberg

July 14, 2021

Treasury Secretary Janet Yellen and her staff have no plans to resurrect the regular U.S.-China economic dialogue that governed ties between the two nations during the Bush and Obama administrations, continuing for now the suspension put in place under President Donald Trump.

While Yellen’s team, and those of other departments, are in touch with Chinese counterparts, the expectation for now is not to restart formal high-level talks, according to people familiar with the situation.

A Treasury spokeswoman declined to comment.

The disinterest in reopening channels active under President Barack Obama adds to evidence of President Joe Biden’s toughening stance on China, which is pointing toward a continuing deterioration in ties between the world’s two biggest economies.

A spate of U.S. actions in recent days — including a planned warning to American businesses in Hong Kong, new import controls for China’s Xinjiang region and talks about a digital trade agreement that would exclude Beijing — underscore that Biden plans to extend and even deepen Trump’s more confrontational approach.

Biden administration officials say the U.S. strategy is a reaction to China’s own aggressive behavior. That stance will force tough choices for investors and companies caught in the middle of what Biden himself has described as a defining battle of the 21st century — and may come as a surprise to those who expected a softer touch under the Democratic president.

“It’s a mistake, frankly,” Max Baucus, a former Democratic senator and U.S. ambassador to China under President Barack Obama, said on Bloomberg Radio. “We’re making a mistake by not trying to find some way to properly, carefully deal with China. The more we shift toward a decoupling, the more we stand to risk falling into deeper problems.”

Yellen on Monday called out China among countries that imperil the “rules-based international order” constructed after World War II, along with singling out Russia and Belarus. That was after she attended a gathering of Group of 20 finance chiefs that saw the Chinese delegation participate remotely — preventing the possible first in-person meeting between Yellen and her counterparts.

She accused China of “unfair economic practices, malign behavior and human rights abuses” in the remarks in Brussels to European finance ministers.

Yellen has had one virtual meeting with Liu He, China’s vice premier, on June 1.

Then-Treasury Secretary Henry Paulson in 2006 during the George W. Bush administration launched the so-called Strategic Economic Dialogue, which brought the finance chiefs, central bankers and foreign ministry officials — among others — together twice a year. That continued, as the Strategic and Economic Dialogue, or S&ED, annually after Obama became president.

While there were few policy breakthroughs, the talks would feature lengthy joint statements and offer public signs of cooperation from each side. The two nations took turns hosting sessions that ended in group photos.

The Trump administration halted those talks in 2018, after the group met in 2017 at the Treasury Department under then-Secretary Steven Mnuchin and were unable to produce a joint statement.

“There’s an impression that the S&ED was useful as a stalling tactic — for China to not have to make changes, that they could just talk forever,” said Scott Kennedy, a China scholar at the Center for Strategic & International Studies, a bipartisan research center in Washington with prominent Republicans and Democrats on its board.