The recently concluded Strategic and Economic Dialogue (S&ED) between the United States and China was a major disappointment. It lacked strategy at a time when both countries face formidable challenges on many fronts. And what passed for dialogue was a series of speeches and tightly scripted talking points. Most significant, it failed to address an increasingly corrosive trust deficit that poses the most serious threat to Sino-American relations in 25 years.
Conditions were tough heading into the talks. The US Treasury was complaining yet again about the Chinese currency, which had depreciated by 2.4% against the dollar in the first half of 2014, after having appreciated by 37% over the previous eight and a half years. The US State Department and China’s Ministry of Foreign Affairs were engaged in a war of words over mounting territorial and sea-lane disputes in the East and South China Seas.
But the darkest clouds were on the cyber front. Two months before the S&ED, the US Department of Justice indicted five officers of the People’s Liberation Army (PLA) on 31 counts of charges ranging from computer fraud and hacking to identity theft and economic espionage. In response, China suspended its participation in bilateral military exchanges on cyber threats. Meanwhile, revelations of the pervasive scope of US cyber-espionage activities reverberated from Capitol Hill to Berlin, giving rise to legislation aimed at controlling America’s largely unchecked National Security Agency and casting a pall over the all-important US-German relationship.
Charges and counter-charges on the cyber issue have focused primarily on motives. The US has been quick to distinguish between commercial and military espionage. But for China, this distinction rings hollow.
Chinese officials see little difference between the cyber threat posed by the NSA and that posed by the PLA, especially given that America’s cyber intrusions have also been aimed at foreign companies, trade negotiators, and international leaders—all of whom are directly or indirectly engaged in commercial activity. In the end, moral hair-splitting is less important than the blame game itself—a visible manifestation of the deepening bilateral distrust wrought by a destructive phase of Sino-American codependency.
Against this backdrop, it was hardly surprising that the S&ED produced so little. Cyber exchanges between the two militaries were not restarted, and negotiations over a bilateral investment treaty—a mutually beneficial rules-based framework that would go a long way in opening up both countries’ markets to increasingly globalised US and Chinese companies—were particularly disappointing. A year ago,