Following Presidents Joe Biden and Xi Jinping’s virtual meeting, history hangs heavy over their discussions.
We are approaching the 50th anniversary of Richard Nixon’s February 1972 visit to Beijing. That visit required a bold calculation of risks, not least of all because China in 1972 was an avowed exporter of revolution to counter global American influence. Nixon chose to buck the domestic political odds because, as he wrote in Foreign Affairs in 1967:
“Taking the long view, we simply cannot afford to leave China forever outside the family of nations, there to nurture its fantasies, cherish its hates and threaten its neighbors. There is no place on this small planet for a billion of its potentially most able people to live in angry isolation.”
Biden faces his own tough domestic political challenges in engaging with China. Republican and Democratic leaders alike identify China’s rise as our greatest security and economic challenge.
Given these challenges, the Biden administration is right to commit to a more balanced and nuanced policy centered around the “Three C’s”: Competition, confrontation, and cooperation.
To achieve any progress on cooperation, both sides would be well served to recognize the positive elements of the U.S.-China trade and economic relationship. After all, the vast majority of trade with China does not involve threats to national security, America’s innovative base, or the welfare of our middle class. And we have seen generations of prosperous commercial engagement with China supporting millions of U.S. jobs, growth and innovation.
However, that engagement is becoming increasingly fraught as tensions between our governments rise — a challenge the U.S. Chamber outlined in our February 2021 report on the costs of U.S.-China decoupling.
Were the broader relationship to spiral into conflict, businesses and entire communities would be devastated. For this reason, the two governments must insulate as much of the commercial relationship as possible from the political pressures driving them apart.
Despite these challenges, both sides have continued their engagement on the January 2020 “Phase One” deal. There have been discrete successes under Phase One: Agriculture and financial services have benefited from greater purchases and structural reforms, respectively, and China has started to purchase more U.S. oil and gas amid an energy shortage. But China has only two months to honor its Phase One commitments and it is woefully behind.
The Biden-Xi discussion represents the best opportunity to stabilize this crucial relationship. We offer three key policy recommendations for the Biden administration.
First, increase efforts with China to ensure full implementation of the Phase One agreement as the basis for addressing more critical concerns. The distorting effects of China’s state-directed economic policies such as industrial subsidies, state-determined domestic market share targets and digital restrictions are indistinguishable from the market access barriers restricting American businesses and workers from competing on a level playing field in China.
We urge the administration to work with China to achieve iterative progress on these structural challenges, accelerate efforts with allies and partners to address shared concerns over intensifying non-market economy policies and practices and utilize the World Trade Organization and an affirmative trade agenda globally to bolster U.S. competitiveness, open markets, advance market-based rules and promote U.S. innovation leadership.
Second, in light of supply chain challenges and rising inflation, both leaders should begin to remove the bilateral tariffs in place since 2018. The Congressional Budget Office estimated tariffs cost the average American household nearly $1,300 in 2020 alone. While the Biden administration has made moves to expand the Section 301 tariff exclusion process, the scope of that effort remains far too narrow. We urge immediate action to broaden exclusions and provide relief to U.S. businesses, workers and consumers.
Finally, from working together on global climate and sustainability to health and macro-financial matters — collaboration is plainly in the interest of each country. Businesses will play a key role in that effort to ensure a strong, stable and equitable global pandemic recovery. We strongly support the efforts of the administration to raise global climate ambitions and encourage Biden and Xi to intensify efforts on climate, global public health and macroeconomic issues.
As someone who has been closely involved in U.S.-China relations for decades, my assessment is that the current relationship is at a historic low point. However, just as we saw with Nixon’s visit in 1972, there is a clear path forward today. Biden and Xi are now uniquely positioned to similarly rise to the moment by recommitting to the same type of pragmatic, cooperative and constructive bilateral engagement that both countries — and the world — so sorely need.
Myron Brilliant is executive vice president, head of International Affairs, U.S. Chamber of Commerce.