Increasing Market Access for US Financial Firms in China
Testimony presented at "Increasing Market Access for US Financial Firms in China: Update on Progress of the Strategic and Economic Dialogue" hearing before the House Committee on Financial Services Subcommittee on International Monetary Policy and Trade
The US-China Strategic and Economic Dialogue (S&ED) and its predecessor, the US-China Strategic Economic Dialogue, have made some progress in addressing economic issues in the bilateral relationship. China has agreed in principal to rebalance the sources of its economic growth away from exports and investment and toward domestic consumption demand and has made small but concrete commitments on more specific issues, for example, increased access by US firms to China’s financial services market.
In assessing the pace of this progress it is important to recognize limits that constrain the ability of negotiators from both the United States and China to make reciprocal concessions. Negotiators on the US side, for example, are constrained in responding to China’s number one request—relaxation of controls on US high technology exports to China—because the executive branch cannot relax standards unilaterally, rather congressional action is required to reform our export control system. Thus in the most recent S&ED US negotiators were only able to offer extremely weak statements such as “The United States commits to give full consideration to China’s request that it be treated fairly as the United States reforms its export control system.” Committing to give full consideration to the other side’s top priority involves no concrete commitment whatsoever on the US side. I regard it as fully analogous to China’s commitment, when it joined the World Trade Organization (WTO) in 2001, to become a contracting party to the Government Procurement Agreement “as soon as possible.” In trade negotiation parlance committing to do something as soon as possible or to give full consideration to the other side’s request are both “get out of jail free cards” that absolve the countries making the statements from ever having to take any concrete action.