One part of former Treasury Secretary Henry M. Paulson Jr.‘s legacy that should have survived the ravages of the global financial crisis was the Strategic Economic Dialogue (SED,) a forum through which China and the United States could move their economic relationship forward.
The SED continues (most recently last April), but Mr. Paulson is apparently distressed by the crumbling public consensus behind the America’s commercial and financial relationship with China and how that is undermining progress. In his most recent paper, “A New Framework for US-China Economic Relations,” he calls upon the next president (presumably, for the Republican Paulson, Mitt Romney) to rebuild that public consensus, and to move the relationship forward on five “principles” or goals.
The goals are certainly admirable: unlock the promise of capital and cross-investment; assure financial markets that are transparent and have strong oversight; work to strengthen market confidence in both economies; free up bilateral trade, and help technology flow more efficiently and promote innovation. In the process, Paulson supplies a laundry list of things both China and the US must do to achieve those goals.
Unfortunately, the paper stops here. Leave aside that most, if not all of this, is nothing new. We have been handed a bucket of dreams and no direction on how to attain them. It is almost as if Paulson, a man for whom the past two decades have involved setting and gaining agreement on goals and delegating the details to underlings, has forgotten that there is more to success than simply setting objectives.
Worse, Paulson makes the common mistake of isolating the economic aspect of the Sino-US relationship from everything else. That may have been possible once: it is no longer. China’s behavior in the South China Sea cannot be isolated from America’s willingness to allow China to invest in US petroleum companies. Our willingness to sell China technology cannot be divorced from their failure to protect IPR or Beijing’s willingness to abet hacking. Taking anything less than a holistic approach to the relationship is naive at best, foolhardy at worst.
Unimaginative and impractical, the result is an effort that amounts to little more than Paulson trying to keep his name attached to China policy.
The paper also reflects badly on the Atlantic Council. Something that has been clear for nearly three decades is that the doyennes of the Atlantic Civilization remain ill-suited by preparation, prejudice, and worldview to navigate the west through the ascent of the East. That the Atlantic Council would be the organization through which Hank Paulson would publish this feel-good list of policy prescriptions is illustrative of that disconnect. Wiser heads – especially those who live and think in greater proximity to the vermillion gates of Zhongnanhai, – would undoubtedly offer a more realistic course of action.
- No Hard Landing In China, Henry Paulson Believes (forbes.com)
- DC China Journal: Paulson at Atlantic on China (theepochtimes.com)
- Paulson: China Reform Can Help U.S. in Long Run (ritholtz.com)