Introduction

On June 19th, 2018, the Institute for China-America Studies held its annual conference examining the state of China-U.S. relations. This year’s conference, “China-U.S. Relations in Year Two of Trump,” consisted of four panels focusing on the overall bilateral relationship, the ongoing nuclear negotiations on the Korean Peninsula, maritime security and the looming trade war between the world’s two economic superpowers. The panels featured distinguished experts from China and the United States and tackled some of the biggest challenges the bilateral relationship faces.

Opening Remarks by ICAS Advisory Board Chairman Dr. Wu Shicun

Dr. Wu began his remarks by noting that although the Sino-U.S. relationship remains strong, it faces significant challenges. The recent summit between Kim and Trump in Singapore has in some ways put U.S. and Chinese interests at odds. Through a series of moves, including the recent opening ceremony of the American Institute in Taiwan’s new headquarters in Taipei, the United States has harmed the bilateral relationship and increased tensions between Taiwan and the mainland. On economics and trade, the trade war initiated by the United States can only develop into a lose-lose situation for both sides. Dr. Wu noted that the confrontation between China and the United States in the South China Sea will intensify as both sides blame each other for militarization of the region.

Although Sino-U.S. relations are at a crossroads, Dr. Wu believes that both sides will continue to encourage and support academic exchanges between the two countries. ICAS has been a significant player to that end. Over the past four years, ICAS has not only brought Chinese policy perspectives to an American audience and shed light on American foreign policy practices for a Chinese audience, but it has also promoted the discussion and consultation between various think tanks from both nations.

Keynote Address by Deputy Chief of Mission Li Kexin

Minister Li opened his remarks by observing that the lack of political will and trust are two of the biggest challenges facing the Sino-American relationship. For its part, China’s political will is based on the lessons it has taken away from its turbulent past. Wars, famine and misery have made the Chinese people hungry for development and prosperity. It is only by cooperating with the international community over the last 40 years that this has become possible, and China is determined to continue to do so. Decades of experience has proven that the Chinese dream is compatible with the American dream. The stronger the U.S.-China bilateral relationship becomes, the more both parties are able to thrive and succeed.

The factions in Washington that fail to see this win-win equation are growing in number and in influence. Players at the highest echelons of the U.S. government remain deeply suspicious of China’s intentions, and see the relationship as a zero-sum game. To them, even the Confucius Institute is an instrument of Chinese influence and every Chinese student in the country is James Bond. As such, Minister Li laid out a three-pronged strategy for improving the bilateral relationship.

The first is to be true. China should continue on its course and operate from a position of good faith. Actions speak louder than words, and, over time, the record will speak for itself. The second is to be patient. Change takes time and altering the status quo is far more difficult than maintaining it. China should be firm in securing its interest, but avoid hasty, reactionary measures that can escalate tensions. The third and final point is to be be candid. Play your hand well and avoid ambiguity. Most things are negotiable, some are not. Taiwan is an example of a non-negotiable issue. No Chinese politician will ever move on the issue of Taiwan. For China, it is a matter of sovereignty, not diplomacy. By being open about these issues both sides can maximize the integrity of their red-lines and minimize the risk of a disastrous miscalculation.

Panel 1: China-U.S. Relations at a Time of Flux

The first panel examined the overall China-U.S. relationship with a particular point of reference being the state of China-U.S. relations at this time last year. There was consensus among the panelists that the overall relationship has deteriorated over the last 12 months. Despite Trump’s “happy talk” about his personal relationship with Xi Jinping, recent U.S. policies “have created an enormously destructive dynamic.”

One of the greatest hurdles that has been introduced into the relationship is uncertainty. U.S. policy makers, first and foremost the president himself, say one thing, do another, or contradict each other multiple times a day. As one panelist put it, “I don’t care if they are angry as long as they can be consistent about it.” This makes reconciling American and Chinese policy positions on key issues such as trade and security nearly impossible and puts China in the unique position of being “the adult in the room” who has to exercise patience and restraint.

The most “important and dangerous issue” in the relationship as identified by the panelists was Taiwan. Over the last several months the Trump administration has made several policy moves that threaten the status quo and have caused China to question America’s commitment to the One China policy. Any attempt to break Taiwan away from the mainland is a clear red line for China, and the resulting conflict could quickly escalate out of control.

Despite these negative trends the panelists expressed optimism that the differences between the two sides could be managed. Whether they admit it or not, “the US and PRC need each other” to thrive, but a major correction is needed from both sides in order to minimize the risks to the relationship.

Panel 2: The Korea Conundrum – Can the Turnaround in the Peninsula’s Fortunes be Sustained in 2018?

The second panel came exactly one week after the historic meeting between president Trump and Kim Jong-un in Singapore and largely focused on the outcomes of the summit. Some panelists expressed a degree of hope that North Korea would follow up on its pledge to denuclearize over time, while others remained deeply skeptical that Kim would ever surrender the nuclear weapons that have transformed him from an international pariah to a diplomatic rockstar.

Some panelists observed that North Korea might pursue a “nukes in the basement” approach, claiming to have denuclearized, but retaining a small covert nuclear force, much like Israel does. Another possibility voiced was that Kim would seek to extend the process for years, in order to claim progress while gradually integrating North Korea into the world order and simultaneously generating a de facto acceptance of North Korea as a nuclear weapons state.

Despite these disagreements, there was consensus that the summit had been a net win for peace and stability. Regardless of how tangible the specific deliverables are, a diplomatic process has started that both Trump and Kim are vested in, making armed hostilities far less likely. All panelists agreed that Trump, Moon and Kim were lucky to have each other as partners. With any other leaders at the helm, the personality-driven peace process that has unfolded over the last several months would never have taken place, and the world would be a far more dangerous place because of it.

Luncheon Speech by Ambassador (ret.) David Bolton

Ambassador Bolton observed that when most people think of U.S.-China maritime issues, the South China Sea is usually the foremost issue on their minds. It is certainly a big component of U.S.-China maritime interaction, but there are other important areas in which the United States and China interact on the world’s oceans.

Cooperation on fisheries is one of those areas. The United States and China hold annual bilateral meeting to discuss fishing practices. They compare notes, align policies and try to persuade each other to change policies. One particularly valuable outcome of these meetings is the ship-rider agreement. Under this deal, officials are allowed to ride on the coast guard ships of the other country, enabling them to enforce that nation’s law when American or Chinese vessels are inspected.  

There are other areas where cooperation both can and should be strengthened. The world’s oceans are in poor health, and plastic pollution is a major contributing factor. A lot of it comes from China and other Asian nations, who need to do more to address the problem. An addendum to UNCLOS is currently being hammered out at the United Nations that is designed to strengthen conservation rules on the High Seas and to create a regime for marine development and protection. Unlike most issues related to the South China Seas, Chinese and U.S. interests are aligned in this sector, which the ambassador cited as a reason to be hopeful that significant progress can be made.

Panel 3: Developments in the South China Sea and China-U.S. Maritime Ties

Although the disputes in the South China Sea have taken a back seat to other hot-button foreign policy issues, such as defusing the crisis on the Korean peninsula, it remains an unresolved source of friction in the China-U.S. relationship. The status quo is far more stable that it was in the period 2013-2016, but the South China Sea disputes could quickly escalate into open hostility.

The overlapping territorial claims in the region remain unresolved, but aside from a few small-scale spats and skirmishes, the bilateral relationship between most claimant states has largely improved. Some panelists expressed concern that China has continued to expand its military installations in the South China Sea over the last year, rather than pausing or slowing these activities. The United States has simultaneously continued its freedom of navigation operations in the region, which China strongly opposes when they infringe on Chinese territorial and maritime claims, and especially when it is conducted in a hostile manner with a clear political agenda.

Despite outstanding differences in the South China Sea, there are bright aspects of U.S.-China maritime cooperation in the region. Notable areas of cooperation include environmental protection of the oceans, regulating fishing practices and search and rescue operations.  

Panel 4: Locked and Loaded: Are We Already in a China-U.S. Trade War?

The opening shots in the trade war between the United States and China have already been fired. The real question is whether or not the damage can be limited or even rolled back. The panelists unanimously agreed that the Trump administration was doubling down on bad policy that is destined to backfire. Although China is in the wrong on several of the grievances the United States has voiced as reason for it’s section 301 tariffs, the methods it is using to address those grievances are illegal under international law, and will undoubtedly lead to the United States losing the resulting case that China will surely bring to the World Trade Organization.

The panelists also agreed that the Trump administration’s basic understanding of the economic benefits of the trade relationship with China, and other actors (including U.S. allies), was puzzling at best. Trade deficits do not necessarily imply financial loss, which Trump indicates frequently in his public comments. Trade deficits indicate that one party buys more goods than they sell to another party. It’s an imbalance in terms of the size of the accounting sheet, but has nothing to do with loss or gains of value. It is also worth noting that with global value chains producing a significant fraction of the import, export and consumption of final products, bilateral trade accounting measures are even less meaningful.