Year by year, our aim in this forum is to have a thoughtful dialogue on the state of relations between the U.S. and China, the single most important bilateral relationship in the world. With the help of world leaders and experts, we like to explore this relationship through a global, as well as a bilateral, lens. For we all recognize that this bilateral relationship is not played out in isolation. It is vital to understand and assess its impact on the rest of the world.
Our theme this year is “Beyond Differences, Toward Cooperation.” We will explore it from multiple angles: global economic recovery, trade and investment, global supply chains, cooperation on climate and people-to-people cultural exchanges.
One year into the Biden administration, significant differences and disagreements remain between the U.S. and China. During the previous administration, the framework for conducting the relationship was fundamentally changed. There are questions over what will happen next with trade between the U.S. and China, following last month's expiration of the Phase One trade deal.
While it is widely reported that relations between the two remain tense — or are even deteriorating — around certain high-profile issues, it is relevant to note that the two economies remain highly interdependent. Trade and investment data underscore this reality. In 2020, China was America's largest goods trading partner, third-largest export market and largest source of imports. Exports to China supported an estimated 1.2 million jobs in the U.S. in 2019. Recent surveys indicate that American companies remain committed to the China market over the long term and count China among the top five priorities in the global strategy of their companies. At the same time, the U.S. is still China's largest export market.
Another positive is that predictions of decoupling between the U.S. and Chinese economies appear — like reports of Mark Twain's death — to be premature. We have indeed seen shifts in long-established trade patterns in recent years. But in my experience this has had far more to do with digital technology than decoupling. And transportation issues related to the pandemic have, by far, been the greater cause of disruption to global supply chains. Trade flows would have been even stronger had it not been for these bottlenecks.
It is encouraging to see meetings taking place between senior Chinese officials and American business leaders. China has recently acted upon the visa concerns of U.S. businesses by upgrading fast-track entry for executives and their dependents.
There are other green shoots as well. The leaders of both nations are communicating in earnest and are addressing substantive issues. In my mind, the tone of high-level exchanges has markedly improved.
Last month, the U.S. and China cooperated in a rare joint pledge by the five permanent members of the UN Security Council to reject nuclear war and avoid arms races. In November, the U.S. and China signed the Joint Glasgow Declaration on Enhancing Climate Action in the 2020s. Personally, I can think of no more urgent and important task for the people of the world. The Glasgow Declaration is a victory for multilateral thinking.
Looking ahead, we can expect a flurry of media coverage around the 50th anniversary of President Nixon's visit to China in February 1972. Of course, that took place in the Cold War era of U.S. superpower rivalry with the Soviet Union. But I believe we can still draw insights from what President Nixon described as “the week that changed the world.”
In the declassified U.S. transcript of his historic meeting with Chairman Mao, President Nixon says, and I quote: “What brings us together is a recognition of a new situation in the world. … [W]e can find common ground, despite our differences, to build a world structure in which both can be safe to develop in our own way on our own roads.”
Today, the world again faces new situations, new challenges.
In addition to the all-important climate issue, if as a businessman I am asked to identify two other priorities for cooperation between the U.S. and China, they are global economic recovery from the pandemic and upgrading the multilateral system for sustainable trade and investment flows.
I would like to offer two propositions for this Forum's consideration, and one observation:
First, to accelerate global economic recovery, I strongly believe it is time for the trade war between the U.S. and China to be placed in abeyance. With inflation increasing in the U.S. and with the growth of China's domestic consumption slowing, I am sure the will must be there on both sides. The pandemic has utterly changed the global economic landscape in which punitive tariffs and sanctions were first imposed on China in mid-2018. And in an interdependent world, all nations are affected when the two largest economies are at odds.
Continuing the trade war will, in my view, only be an impediment to restoring the full economic health of both nations and to maintaining economic stability at a global level, given the scale of devastation wreaked by the pandemic. Hopefully, going forward, the U.S. and China will work to resolve their trade issues in more constructive ways.
Second, the U.S. and China have a golden opportunity to lead much-needed efforts to upgrade the multilateral system for trade and investment. Having been conceived some 75 years ago, it must be made fit for purposes in the age of digital commerce, climate concerns, pandemics and inclusivity. Along these lines, a global dialogue is already underway to revitalize the World Trade Organization. That is welcome, but such a huge task cannot be left to Geneva alone.
Here in the Asia-Pacific two mega free trade areas are taking shape which, together, cover roughly one-third of the world's population and one-third of global GDP and trade. They are the Regional Comprehensive Economic Partnership (RCEP), which came into force on Jan. 1 this year, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into force three years ago. These two groupings have numerous overlapping members. China is a lead player in RCEP and has applied to join the CPTPP. The U.S., as you know, is in neither, having given up its earlier leadership of the CPTPP's forerunner.
What if the U.S. and China were now to work together to combine the two? For sure, it would take time to reconcile differences in the approach to each bloc, perhaps with a reformed WTO facilitating that process. But the outcome could be far greater than the sum of its parts. I believe it could form the basis for a new multilateral system better able to serve the changing nature and needs of trade and investment for the next 75 years and beyond.
To close, the observation I wish to share is prompted by President Nixon's remark to Chairman Mao about nations developing in their own way on their own roads.
Companies today face ever-increasing complexity when they do business with both the U.S. and China. Many find themselves under intense pressure to make a choice, or risk falling foul of government policies and regulators. For most businesses it is not desirable — or even viable — to make such a choice, so many decades after U.S.-China economic interactions were first encouraged. Moreover, by operating across boundaries, companies deliver value and generate wealth for shareholders and other stakeholders in their respective countries. They have certainly helped to keep e-commerce going for consumers around the world during the pandemic.
In my view, therefore, the principle multinational businesses should follow when operating in any country is that of rigorously observing local laws. Where differences and contradictions arise in understanding each other's laws and systems, I further believe that these are best addressed through multilateral channels.
