To Jaw-Jaw is Always Better than to War-War

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You know I think that we – the global media and so-called global governance experts and even officials – sometimes forget the value of former Prime Minister Winston Churchill’s statement (identified in the title) expressed at the White House in 1954.

So I acknowledge it before trying to assess the deliverable from the Third S&ED, the “US-China Comprehensive Framework for Promoting Strong, Sustainable, and Balanced Growth and Economic Cooperation” (Framework) – I won’t even try an acronym for this one.  But the Framework is the the document signed by US Secretary of the Treasury Timothy Geithner and China’s Vice Premier Wang Qishan.

Yes, there is much in the way of diplomatic words and commitments.  In other words – “blah, blah, blah”.  But two things of significance stand out.  The first is how in the Framework China and the US ackknowledge that the two are highly interdependent.  Among several paragraphs here is one that stands out.

Each country recognizes that the health and continued growth of the other’s economy is indispensible to its own prosperity.

And they express an understanding in addition that the two have a significant impact on the global economy:

As the two largest economies in the world, economic outcomes and policy actions in the United States and China have a significant impact on the health of the global economy.  The United States and China recognize and take into account the impact  their policies have on the global economy, and cooperate to strengthen the international trade and financial institutions that support global growth and stability.

These paragraphs and others underline how Chinese leaders – at least the economic ones – recognize that  “interdependence” – not unilateral action is the dynamic of economic policy action.  It suggests that leaders have an understanding that national interest may be at the heart of their actions but that national interest alone will be insufficient to secure economic growth and prosperity.

In reaction to my friends then – yes I mean Arthur Stein and in particular Richard Rosecrance, who fret over the parallels between the German- British relationship after 1905 and the current US-China relationship – I think the difference is significant.

The second aspect of the Framework that stands out is the recognition of the importance of the G20 complex in giving a setting to deal with the global economy.

6. The two countries reiterate their support for the G-20 Framework for Strong, Sustainable, and Balanced Growth and reaffirm their commitments to improve the living standards of our citizens through strong economic economic and jobs growth, and to use the full range of policies to strengthen the global recovery and to reduce excessive external imbalances and maintain current account imbalances at sustainable levels.  The United States and China affirm active support for the mutual assessment process of the G-20.

15. China and the United States commit to deepen their cooperation to ensure financial sector stability and strengthened financial sector regulation and supervision, both bilaterally and in the G-20, the Financial Stability Board, and international standard-setting bodies.

17. The two countries pledge to strengthen communication and coordination and to support a bigger role for the G-20 in international economic and financial affairs.

The paragraphs above reveal that the two powers are prepared to work within the multilateral policy framework being hammered out by the IMF, the G20 finance ministers and in the Framework Working Group and additionally the two at least in this document avoid the excessive reliance on bilateral discussions.  This is important in part because a bilateral economic discussions have been pitched, on the one side, to a critique of Federal Reserve policy of quantitative easing and on the other on currency manipulation of the renminbi.  That discussion is partial and also rather toxic – unhelpful in actually dealing with the global imbalances that generate instability and volatility in the global economy.

My advice to my colleagues – especially in the media – who are so quick to declare these discussions a waste of time and unproductive – remember our friend  Churchill and the value of “jaw-jaw”.

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