The US-China relationship is the most important bilateral relationship of this century 

John Thornton: Thank you Henry and thank you for inviting me to participate in this very interesting and important dialogue. And I'm honored to be a member of this particular panel. We’ve already heard quite a bit of wisdom from my three colleagues and I will try to make a modest contribution to that. What I'd like to do is to step back from the breathless statements of doom, which dominate much of the media commentary, in the media, among politicians, and among so-called experts, or even the thoughtful observations of concern, which may be overly influenced by specific current actions by one party or the other. The US-China relationship is and will be both the most important bilateral relationship of this century, and the one which will drive or create in large measure the world in which we all will live. In general, I am skeptical of the tweaking statements about inflection points or decoupling or Cold War analogies. For me, these kinds of statements are mostly emotional, provocative, not helpful and wrong. I think we're better off looking at the long term and the trajectory of the dynamics trends and forces creating that long term. Recently, I have taken to looking at the mid-21st century, the year 2050 or thereabouts. The best estimates are that the world's population in 2050 will be about 10 billion people. Today we are approximately 7.8 billion. The incremental 2.2 billion - more than half of them will come from 9 countries: India, Nigeria, the Democratic Republic of the Congo, Pakistan, Ethiopia, Tanzania, the United States, Uganda and Indonesia. In 2050, as now, a small percentage of the world's countries will represent 65 to 70% of the global GDP - maybe the top 10 countries will represent that. In that world, in which very few countries dominate the global GDP, and in which the incremental 2 plus billion people are coming from very poor countries, does any serious thinking person believe the world would be better off with the rich countries primarily arguing or even fighting amongst themselves, while the rest of the vast percentage of the world remains poor, malnourished, victims of climate change, sources of migration and disease and poverty? Or do the wealthy most powerful countries have a responsibility to work together to lead the world to a safer, more prosperous, harmonious place? Isn't the answer obvious? If the answer is so obvious, then why does it feel or seem that at least some maybe many of the world's richest most powerful countries do not seem to be animated or motivated by such a collective goal? There are a myriad of answers to this question, but it certainly includes a penchant for being captured or trapped by the past’s old thinking, as well as a fear of change, of losing one's place. Whatever the reasons, surely the world's two most powerful countries, the US and China, have a disproportionate responsibility to lead the world. Of course, with others. And there is no reason why they cannot do this. In fact, we have a unique asset at this very moment in history, which we have never had before. An extraordinarily powerful asset: the newly elected US President Joe Biden has a pre-existing relationship with the Chinese President Xi Jinping. When President Biden and Xi were vice presidents of their countries, they spent extensive, continuous, informal time with one another, probably more genuine private time than any two US and Chinese presidents have ever spent with one another. This is a gift from p providence. We cannot throw this asset away. Indeed, we must use it to its fullest extent. Knowing the two presidents, Biden and Xi, as people, as human beings, as leaders, does anyone think that a well-conceived meeting, one on one, between the two of them, would be anything other than a strong, good, healthy, warm and productive meeting? And knowing what we know about the two countries and their positions in the world, does anyone think such a good meeting would not be well-received by the American and Chinese people, or by people all over the world? Of course, it would. This is not that difficult, and there is a screamingly obvious place to start: climate change in the G20 meeting in Glasgow. The issue of climate is a global one, it is larger and more important than the US and China. The entire thinking world wants it to be solved or well-managed. The two leading countries must lead on the solution or it will not be solved. Everyone knows this. Tellingly, the two presidents are following the only path, the only modus operandi, that works in US-China relations - one might call this the Zhou Enlai-Kissinger Kissinger model, or, more recently, the Liu He-Lighthizer model. The only model that we know works is when the US and Chinese presidents appoint a very senior, serious, experienced, highly trusted individual. And together the two presidents instruct the two people to get into a metaphysical room, truly work together, build a relationship of trust and do not come out until they have solved the problem. The two presidents have done just that with the appointment of John Kerry and Xie Zhenhua. Meanwhile, it would be helpful, while the two are doing their work, if the two sides moderated their language about all other matters. Or as Stape said – “tone down the rhetoric”. No other matter by definition is as important as the existence of the planet. Mankind has to exist for all other matters to have an opportunity to flourish and or be addressed. This is a point of simple compelling priority. Both presidents have publicly said that they will cooperate on climate irrespective of other issues. Both should instruct their senior leaders to give the existential issue a real chance to get resolved. Finally, to state the obvious, success on climate will demonstrate yet again that the US in China working together can lead the world to a better safer, healthier, more harmonious existence. This is good for both countries and the world and gives hope and a concrete model, that all other gnarly complex problems can likewise be addressed by the two leading countries working together with others for the collective benefit of their countries, their peoples in the world. Thank you. 

Wang Huiyao: Thank you very much. John, you have an excellent proposal. I think you have gone really deep on that I agree that this relation between China and the US is the most important in the world and of course, we can work on many issues, given the world is really having profound changes as you outlined. Knowing that the population is going to hit 10 billion by 2050, we need a longer horizon and need to look at history with a broader view. When I had a dialogue with Joseph Nye, he also talked about that by 2035 or even later, maybe China and the US would treat each other differently, less hostile than today because we have the world in mind and it's going to make a huge difference. Now we have challenges like climate change, like floods in Europe, floods in China’s Henan, wildfire in North America, which we really need to contain. And I agree with your brilliant idea that since President Biden and President Xi have a such a great personal rapport, they should appoint special envoys and what you regard as Zhou Enlai-Kissinger and Liu He-Lighthizer model. These are really great.

I may have a follow-up question since you are in the investment community and you had been leading the Goldman Sachs for so many years. The world really needs a lot of help and you said nine countries are going to be populous in the next several decades. The infrastructure seems to be what's lacking in many  developing countries. As a matter of fact, at this CCG annual forum, former Vice Minister of Commerce, Chen Jian, who looked after the Chinese outbound investment for many years, actually said that what had been proposed at the G7 conference about B3W could be looked at together with China's BRI and other EU investment plans. The world should work together with some infrastructure plan and to look at the future, particularly for the developing countries. As a matter of fact, President Xi had a video conference with French President Macron and Angela Merkel, the German Chancellor, just several  weeks ago, and they talked about China-EU collaboration in Africa. We need things that glue these countries together to work on a better objective, rather than being obsessed with these non-urgent issues such as tracing the source of the virus. So what do you think? John, please.

John  Thornton: First of all, I want to remind people that the BRI - when it was first conceived back in 2013 - there was a G20 meeting, and President Xi met with a very senior American who is standing in for President Obama as President Obama was not present. And in that meeting president Xi told the Americans of the concept he had with the BRI, and the senior American said to President Xi, "What a fantastic idea, maybe we can do this together?" And President Xi said, "That would be an excellent idea, let's do it together". And the senior American went back to the United States and  in the next six months or so, the Mandarin technicians decided it wasn't a good idea, and the idea got killed in the US before it ever got to President Obama's desk and so the cooperation never occurred. And since then, as you know, the BRI has been characterized by many people in the United States as some kind of nefarious geo-strategic plan to take over the world and it’s not. Now to your direct question, of course, the B3W and BRI - all those efforts should be coordinated globally by the wealthy countries, trying to build the infrastructure necessary for the rest of the world, so that we build a safer, more prosperous world. We all know these projects are very difficult to execute, it's not as though anyone's got a monopoly on how to do this well. They are hard. And we would be doing ourselves a great service if we the world became particularly expert at building important infrastructure all over the world in an efficient manner for the benefit of the respective. So obviously we should be doing it, there's no question about that. 

Wang Huiyao: Thank you. Actually, I heard the same story last year in February at the Munich Security Conference where CCG hosted a roundtable. We had the former Secretary of State John Kerry as a speaker there. He actually mentioned that when he met President Xi, he was inviting China to join the Paris Accord and President Xi also invited the US to join the Belt and Road. At the time, John told me that it was a positive concern, but the mandarin technicians somehow lost it in the system and it never materialized. But I think it's time that for the next several decades, maybe China, US, EU, and Japan and all those countries could work together for the infrastructure revolution that has really transformed for China. Also China has built the AIIB, and the US was also invited but somehow, they didn't join. Now, the AIIB has 104 country members, including almost all the European countries, just excluding Japan and the US. I hope that we could upgrade AIB to GIB, to a global infrastructure investment bank, and let the US, China and EU work together. Thank you for opening our minds on that. 

So, after having the first round of discussion, allow me to come back to other distinguished panelists. Adam, I know the Peterson Institute has been studying TPP for so many years. So when Trump withdraw from TPP, CCG is the first think tank in China to propose that China should join TPP. We issued several reports and have been constantly advocating for it. And finally, Premier Li mentioned at last year’s National People's Congress that China's interested in joining CPTPP and President Xi announced at APEC summit that China will positively consider joining CPTPP. The Minister of Commerce has now put the CPTPP agreement on the Ministry of Commerce’s website to show the standards for all these issues. So Peterson is a great think tank on economic issues and you have many scholars who have been studying TPP for many years. So what's your take on these issues? Because TPP involves data flow, as Minister Zhu said, which used to be an obstacle, as well as IPR protection, environment protection, labor standards, SOE reform, comparative neutrality. Like John said, we should have two sides talk about that. The US designed the TPP, and why doesn't it come back to talk about those urgent issues? And US and China can push the reforms in the WTO by regional integration experiments that we already have on RCEP, CPTPP and others as well. So Adam, your take, please. 

Plurilateral trade agreements should be based on quality and standards 

Adam S. Posen: Thank you, Henry. Let me pick up on what you and my friend Guangyao were saying about reform. The most important thing about CPTPP, especially as it has evolved since President Trump withdrew, is that it is an incredibly high standard agreement and it is an incredibly open agreement. In other words, when we, Peterson Institute, as you say, has been proudly doing work on economic agreements on free trade areas, particularly in Asia, for decades. And long ago, there was a debate between my predecessor, Fred Bergsten and the distinguished Columbia Economist Jagdish Bhagwati about trade blocs - stumbling blocks versus building blocks. And the basic message that we took, that I have altered slightly, is that you can have regional agreements be useful if they genuinely open things up and if they genuinely encourage reform and high standards in the countries that are members and if you are not biasing them by political factors. So I'm going to go out on an unusual limb here and say, for the time being, it would be good if CPTPP continues to succeed and grow without either China or the US being involved. I think in the current context, where a number of people in both Chinese and American governments are looking to line up various developing countries around the world, including but not solely East and South Asia, as being on one side or the other. And this relates to what professor Thornton was saying about the Belt and Road Initiative and how that goes. I think it was very good to have a live, high-standard, open entity that is neither Chinese nor the US, and that offers a way forward without asking people to commit to one side or another in some sense. And we can see this in the extension of CPTPP, potentially to the UK and to Korea. In both cases, this would send an important message to the rest of the world that you can have high standard Commerce on the issues you raised, including labor rights, environmental standards, data privacy, state subsidies and so on, all the things that the Obama administration and former USTR Mike Froman, but also importantly, the Japanese, Singaporean, Australian, New Zealand governments argued for. And have that be a standard that then puts pressure on both the US and China to raise their own games. And this goes with something I wrote almost a year ago, where I encouraged the Australians and the Japanese to pursue what I call principled plurilateralism, that is that they should be willing to engage in these plurilateral deals, but they have to be based on quality and standards. I think this will disappoint some people in both Beijing and Washington, particularly in Washington, where the arguments for CPTPP initially and the claims to bring it back to Washington are all about aligning the trading system against China or having a bloc that puts pressure on China but by pressure on China by exclusion. I also think that it's preferable to go this route by having an independent strong CPTPP that's not dominated by China or US because, frankly, we know that once trade agreements are made, you'd have issues of enforcement, and China and the US would probably make as conditions of their accession changes to the TPP or changes to enforce it. It will not be entirely reliable. We've seen this in the way the US is repeatedly renegotiated USMCA and US-Korea trade agreement. We've seen this in other ways in China’s deals. Whereas if we keep it open to everyone but China and the US without saying so, CPTPP is big enough that anybody who accedes, including South Korea or the UK, would have to be an accession country. Now, my friend Guangyao mentions the importance of multilateral institutions and obviously, the WTO is lurking in the background here. I think there are completely ways of keeping this compatible with the WTO but the kind of plurilateral deals are less of the willing are necessary to keep moving reform forward, we cannot have India and Brazil blocking all progress of trade. I should put in one footnote, thank you for your indulgence. This is my own view - we are a center of work on CPTPP and on trade integration in Asia. My colleague Jeff Schott recently wrote telling Japan that they need to get the US back into CPTPP. So the above is not as a Peterson Institute’s position, this is my own. The final point I would make is, in light of Guangyao’s and Stape’s rightly raising, that the pandemic response is far more important than any other things that we talked about. I chose not to talk about that because I was trying to be responsive directly to your question and I don't want to give the impression that I've changed my mind since you and I spoke a year and a half ago, it is still the critical thing. But what that means it is, as seen in the latest IMF release, which came out overnight that the world is incredibly divided with the poor countries being excluded from vaccine distribution, and likely to have very long lasting suffering economically and socially as you or John said rightly this isn't just about public health this has much more long lasting implications. I think a China and or US included CPTPP would reinforce the message to the rich countries or the countries already integrated can get on with their business and ignore what happens in the rest of the world. And that message is already coming through much strongly on the vaccination and aid front. So at this time, I would much rather see China and the US put their efforts into being helpful, there, than into CPTPP. I want Japan, Australia, Singapore, Canada and all the members of CPTPP to move forward, but not China and the US. 

Wang Huiyao: You mean, we should let CPTPP run for a while and experiment more. But what about the WTO? The WTO ministerial conference is coming up this year, and we have the new director general being approved by the US and has been running office already for a few months. So what do you think of the prospect of the WTO reform? We have those plurilateral meetings on digital economy, t on liberal investment facilitation as well. It seems that now as G7 and OECD proposed this corporate minimum tax internationally, to which China is one of the 130 countries who agreed. So how can the G20 really turn their efforts to fighting the pandemic and addressing those economic issues?   

Adam S. Posen: On the WTO, with so many things to rhetoric has outstripped the reality, all the talk about WTO reform and WTO dysfunction, especially in Washington, is exaggerated and unjustified. I think the frustrations with the large-scale trade rounds are real and there are some tweaks to be had to the WTO body. But the new director general Ngozi Okonjo-Iweala, who I admire greatly, has come in with the right attitude, which is don't try to fix everything at once, don't get caught up in procedures, try to get deliverables and show the world that the WTO can deliver things that matter to people. And so she is rightly focusing on trade issues, having to deal with the pandemic, with fisheries, with direct limited appellate body reforms. I think this is the right way to go. There are too many things to be done, what's important is that the WTO leadership gets the membership in time for the end of this year's ministerial conference to make meaningful progress on two or three of these issues, one of which is pandemic. Otherwise it doesn't matter which of the issues, you just need to demonstrate that the WTO can do something useful. And I think if we go off onto too many directions at once, it's not going to be helpful.   On minimum cooperate tax, it was a wonderful thing to see China as well as other major economies agree on this. I think it is critically important for the legitimacy of taxation in all societies as well as providing revenues on a stable basis for all societies, that we get the international corporations, notably but not solely the US digital giants, under this regime and not having base erosion and profit shifting. Again Minister Zhu was involved in the first rounds of those discussions and I praise him and I praise Secretary Yellen for leading us. My fear speaking, frankly, is that this may be a League of Nations repeat moment, John warned us against excessive analogy, so I hope you'll forgive me. But you have a progressive democrat that in this case the American leadership that gets agreement on something at the global level and comes back and finds an isolationist Republican US Senate prevents it from being enacted, and then the world has to go forward somehow, without the US participating. I think this could be disastrous if the US Congress does not take up what the US Treasury Secretary rightly negotiated on behalf of the US in the world. The second point is that it's not perfect, going back to the themes we've all hit. This was an OECD agreement because that's where the multinationals are and that's where the expertise was and it makes sense. But as my colleagues Gary Hufbauer and Simeon Djankov have written for the Peterson Institute there are a lot of small countries in the world that are not purely tax havens that are not Ireland or the Netherlands that are going to be affected by this development. Again, it's wonderful to see China and US willing to cooperate on something substantive but there has to be some engagement of the needs of developing countries and small countries, again, not the tax havens that have made billions over the years but other countries. So it's not a done deal but my biggest fear as I said, is the US creating, not as important as the League of Nations, but in another League of Nations moment, doing the right thing internationally and failing to deliver domestically to keep up with it.