The first meeting of the Obama administration’s Strategic and Economic Dialogue (S&ED) with China, held in Washington, DC, in late July, ended with a dinner co-hosted by the US-China Business Council (USCBC) that was attended by more than 600 political and business leaders. The four co-leaders of the talks each made remarks on the importance of the relationship, and the large PRC delegation, which included 24 ministers, vice ministers, and a hundred or so other officials, departed the next day.

Now what?

US companies operating in China probably won’t feel anything different this month or next. But USCBC feels guardedly optimistic about the evolving bilateral dialogue structure. There is an opportunity to get traction over the next 12 months on some meaningful issues that could benefit USCBC members operating in China.

One important outcome—first floated by USCBC earlier this year—was for China’s central authorities to confirm that the term “domestic companies” in government procurement rules includes foreign-invested enterprises (FIEs). USCBC members have reported that their China facilities are sometimes excluded from central and local stimulus projects and other procurement opportunities. China’s delegation confirmed that its procurement rules are meant to treat FIEs as domestic companies. But the S&ED agreement was silent on whether a written directive clarifying this point will be issued in China, as USCBC advocates. In the absence of a written directive to central and local government agencies, the pledge will be no more effective than the opinion piece by Commerce Minister Chen Deming in the Italian newspaper La Republica in July that made the same promise. It’s not the Italians who need to know—it’s officials in Sichuan and Guangdong.

Other tangible “deliverables” of the S&ED—the facts-only new agreements that seem to frame the US media and congressional views of all US-China bilateral meetings—were limited. As USCBC expected, the first S&ED had two principal outcomes: the establishment of relationships between the members of the new Obama team and their PRC counterparts, and the setting out of a roadmap for engagement over the next 12 months.

Travel stimulus indeed

Each of the next few months features significant opportunities to build upon the S&ED foundation—and turn the roadmap into reality. The chair of China’s National People’s Congress will visit the United States after Labor Day on a trip intended to build relations with the US Congress and also focus on trade promotion. President Hu Jintao will come to the G-20 meeting in Pittsburgh in late September. Though the meeting is less important to companies focused on China because of its broad, multilateral focus, President Barack Obama is likely to meet with Hu on the sidelines and perhaps nudge along cooperation on climate change and other broad issues.

Of more direct relevance to companies, the Joint Commission on Commerce and Trade (JCCT) will convene in China in late October. USCBC has submitted a list of recommended topics for discussion at the JCCT, based on input from our members. We have advocated expanding the JCCT to address commercial policy issues, including China’s industrial policies, in addition to specific trade and investment barriers.

USCBC’s board of directors will visit Beijing on November 4 for commercial advocacy meetings with China’s top leadership. Obama is likely to visit China in November, either before or after his visit to Singapore for the November 14-15 Asia Pacific Economic Cooperation (APEC) forum leaders meeting. December sees the global climate change meeting in Copenhagen, with the United States and China front and center in how the world views prospects for collaboration on curbing emissions. Finally, another outcome of the S&ED—continued high-level talks on bilateral investment issues, a forum strongly supported by USCBC— are planned for late this year or early next year.

The tough stuff is still ahead

So, the first S&ED is behind us. The new Obama officials have met and engaged their counterparts. The range of issues was put on the table … and the hard work remains. USCBC will continue to provide its best ideas and recommendations to both the US and PRC governments.

Meanwhile, USCBC members keep plugging away in China—growing their businesses and confronting challenges. The China Business Review’s next issue will report on USCBC’s latest survey of its member company executives on the operating environment in China. It is these timely views that should shape the focus of the bilateral dialogues set in motion by the S&ED.

[author]John Frisbie and Erin Ennis are president and vice president, respectively, of the US-China Business Council.[/author]

Posted by John Frisbie and Erin Ennis