Strategic Economic Dialogue (SED) wrapped up its fourth session yesterday (June
18), and if nothing else, it served as a classic example of the saying that
beauty is in the eye of the beholder.
If you’re not familiar
with SED, it’s essentially a series of regularly scheduled biannual meetings
designed to make it easy for companies from the US and China to do business.
Participants include business executives as well as government representatives. This time
around, key topics were energy, the environment and a bilateral investment
What was accomplished in these
areas is a matter of sharp disagreement. According to John Frisbie, president
of the US-China Business Council, “The SED has become a vital forum to ensure
that US interests are addressed in our relationship with China…. A high quality
bilateral investment treaty with China would help reduce barriers to US
companies doing business in China [and] it would encourage Chinese companies to
invest here in the US, creating jobs for American workers.” .
Scott Paul, executive director of
the Alliance for American Manufacturing (AAM), had a somewhat different view on
the value of SED to US-China business relations.
“In this latest SED, the Administration squandered
another opportunity to make U.S.-China trade more balanced and market-driven.
On issues like currency misalignment, energy subsidies, and widespread dumping,
another six months have passed without action.
“The SED is built on a flawed premise, namely that
regularly scheduled dialogue alone can achieve meaningful progress on critical
and complex issues. We need a more robust approach from Washington…. If
the Administration does not insist that China honor its commitments, we
shouldn’t expect progress.”
So, what do we actually know about the US-China business
situation? Two things are clear.
China still has quality problems. If you make a high-end
product in terms of quality, this is good news, no matter who your customers
are. Consumers are now willing to take a second look at more expensive American-made
products, particularly if there’s a potential safety issue. And if you sell
B2B, China is a huge and growing market where companies will pay extra for
machine tools they know they can trust.
China’s advantage in cost of landed goods is diminishing.
This year, the Chinese government instituted new work regulations and put an
end to some industrial subsidies, with the result that costs for Chinese
factories have gone up as much as 40 percent. And according to a recent Wall Street Journal article, Asia-U.S. shipping
costs have tripled since 2000. The
Financial Times of London states that shipping costs with some vessels are
up 62 percent since April of this year alone. This is good news for all U.S.
manufacturers who compete with China, regardless of what happened (or didn’t
happen) at SED.