Thayer Consultancy Background Briefing:

ABN # 65 648 097 123

The U.S.-China Strategic and
Economic Dialogue: An
Emerging G2?
Carlyle A. Thayer
August 16, 2009
[client name deleted]
QUESTION: I'm sure you followed the Strategic & Eco Dialogue between China and the US in
D.C. last month. What do you think? Some say it won't materialize coz of the two countries'
differing interests. But if it actually materializes, don't you think this would mean bad news for
US allies in Asia, Japan, S Korea and Australia?
ANSWER: The impetus for the SED came from the top. It was agreed between President
Barack Obama and President Hu Jintao at the G20 Summit in London in April. They viewed
the dialogue as a ‘positive, cooperative and comprehensive relationship for the 21st century’.
The U.S.-China Strategic and Economic Dialogue (SED) has now materialized. The SED will
meet annually alternating between Washington and Beijing.
Secretary of State Hillary Rodham Clinton, in her opening remarks to the SED, spoke of
developing ‘a new global architecture for progress’. The SED has been labeled the G2. It is
probably premature to use that descriptor at this time. The SED is likely to become
institutionalized and gradually emerge as part of the global security architecture in the
decades ahead.
The first SED brought together the largest and highest level of official U.S. and Chinese
representation since normalization of relations in 1979. The agenda extended far beyond the
focus of the previous strategic economic dialogue promoted in 2005 by the then Deputy
Secretary of State, Robert Zoellick, and agreed between Presidents George W. Bush and Hu
Jintao in 2006.
The main outcome was a Memorandum of Understanding on Enhancing Cooperation on
Climate Change, Energy and the Environment. This is a global issue. The U.S. and China are
the two largest emitters of carbon dioxide. It is important for global security that the two find
common ground and agree on mutual steps to reduce greenhouse gas emissions. But the
SED can only form a part of the effort to reduce global warming. The main forum will be via
the UN and at the climate change summit in Copenhagen in December. In this sense the SED
is not yet the G2.
Participants at the SED readily admitted that it was easier to reach mutual understanding - if
not agreement - on bilateral issues, such as their respective national policies to deal with the
global financial crisis, than it was to deal with issues that touched on third parties.
China’s status has been raised as a result of the SED and American allies, such as Japan,
South Korea and Australia, will always be concerned when they do not have a place at the
table when issues of particular national concern are discussed. Admiral Timothy Keating,
Commander of the U.S. Pacific Command and a participant at the SED, held a pres briefing
the day after the SED concluded and offered specific reassurances to Japan, South Korea,
and Australia.
The SED revealed a high level of congruence between China and the United States on the
destabilizing actions taken by North Korea to develop nuclear weapons and test fire ballistic
 2

weapons. These bilateral discussions revealed support for the framework Six Party Talks.
th
This should reassure Japan and South Korea. Indeed, Admiral Keating stated on 28 July the
day the SED concluded, ‘The strength of our alliance with Japan remains powerful and
vibrant, and it’s at the centerpiece of all our strategy in the Asia Pacific region… I do not think
there will be any change in our force posture or force levels for troops stationed in Japan.’
The shift of control over armed forces in South Korea will be handed over to the Republic of
Korea in 2012, for example. Admiral Keating stated on 28th July, ‘There’s never anything
that’s not discussable between our great friends and allies in South Korea, but as you know,
our President, our Secretary of Defense remain committed to OPCON transfer in April 2012,
and I am unaware of any serious discussions otherwise. We are committed to OPCON, as
are – as is the president and minister of defense, and chief of defense staff in South Korea.’
The U.S.-China SED will not function in isolation of long-established patterns of dialogue and
consultation between the United States and its allies, such as the annual AUSMIN (Australia-
US ministerial) talks.
Both China and the United States sent high level military representatives to the SED. It is very
likely discussions in Washington will lead to resumption of military-to-military dialogue and
talks based on the Military Maritime Consultative Agreement. Again, America’s allies should
be reassured that potential points of friction and possible miscalculation will be addressed.
Australia probably has greater grounds for concern that an improvement in U.S.-China
relations is coming at a time of strain in Canberra’s relations with Beijing. The Obama
Administration has not given Australia the same priority as the Bush Administration did. The
recent Australian Defence White Paper painted a starker picture of the strategic implications
of China’s military modernization than official US defense assessments. But the SED or ‘G2’
is not the cause of Australian anxieties. Australia anxieties are based on the fact that for the
first time in history its major strategic and economic partners are not the same country. It was
the United Kingdom in the past and the United States recently. Today China is Australia’s
major economic partner while the United States is its major strategic partner. Australian
anxieties are based on reconciling its strategic alignment with the United States with its
burgeoning economic relations with China.
Admiral Keating provided this reassurance to Australia in remarks the day the U.S.-China
SED concluded, ‘’I would not think Australia…is so much worried about a diminution of United
States military power throughout the region. I’m pretty confident that they can count on us for
the near, mid, and long term to remain as strong and as present and as ready as we are
today.’
In the long term all of America’s allies will be looking for reassurance that the U.S. will remain
fully engaged in regional affairs and continue to provide the ‘public good’ of security. But it is
premature to view the SED as a future ‘concert of great powers’. The SED will be more
concerned with world and transnational issues such as the global economy, climate change,
energy and the environment, international terrorism and proliferation of weapons of mass
destruction.