Given situation between the US and China, at least they're talking

Jul. 18—U.S. Treasury Secretary Janet Yellen's recent trip to China shone a spotlight on how schizophrenic the relationship between the U.S. and China, the world's number one and number two economic superpowers, has become. China accuses the U.S. of trying to stifle its growth and influence in the world. It also is resentful of the U.S.'s backing of Taiwan, which China claims is rightfully part of its territorial rights. China's support for Russia in its invasion and war with Ukraine has strained relations even more. In order to discuss reducing tensions, Yellen was dispatched to China on July 7, for a four-day visit. This comes on the heels of Secretary of State Anthony Blinken's subdued visit a few weeks ago. During her trip to China, Yellen met with the second-most powerful leader in China, Premier Li Qiang. She also met with her Chinese counterpart, Vice Premier He Lifeng. Of particular focus for discussion between the two nations was China's complaint that the U.S. is limiting technology exports to China, such as computer chips, which China claims is hurting its technology industries. The U.S. has launched an active campaign to lure semiconductor manufacturers to locate operations in the U.S. for security reasons, and to rely less on manufacturers in Taiwan and China. In response, a few days before Yellen's visit, China imposed restrictions on the exports of rare metals that are used in the semiconductor and solar industries. From the U.S. point of view, it wanted to discuss what it viewed as punitive actions against U.S. companies that China has raided and disrupted operations for no obvious reason. Yellen also pressed the issue that healthy competition is beneficial to both nations, and that the U.S. is not intentionally trying to damage China's industries or economy. However, she was clear in her remarks that a healthy economic relationship between the two countries will depend on fair trade. In the past, the U.S. has accused China of providing state-sponsored support to Chinese companies, thus giving them an unfair advantage in certain fields over U.S. competitors. Yellen also brought up the issue of cooperating on climate change, as the U.S. and China rank at the top of the list of countries generating emissions harmful to the environment. While neither side came out of the meetings with anything concrete to announce, the visit was still positive. First, while Yellen didn't receive the pomp and circumstance China has bestowed on other foreign leaders, her reception in China was still what could be considered a warm one. While she did not have meetings with Chinese leader Xi Jinping, her meetings with other officials were profound and meaningful. The biggest takeaway from Yellen's visit to China was the fact that top U.S. and Chinese officials are sitting down, face-to-face, to discuss issues that each considers extremely sensitive and important to their future welfare. This is where a delicate balancing act comes in. While the U.S. wants to lessen its dependence on China in certain key industries — this was sorely evident during the COVID pandemic when the U.S. realized how dependent it was on Chinese-made personal protection equipment, medical equipment, and even pharmaceutical components — the world's two superpowers need to find a way to cooperate and live together. Having some level of interdependency is not a bad thing. Do we necessarily want to create a world in which the two countries have little interdependency and care very little for how the other side fares? Interdependent countries realize that engaging in conflict has an economic price on their companies and industries if trade is cut off. This is exactly the situation between China and the U.S. Much as the U.S. and Soviet Union lived under the specter of mutually assured destruction during the Cold War's nuclear age, the U.S.-China trade relationship lives under these same conditions. Despite the U.S.-Chinese trade war initiated during the Trump Administration, in which both sides imposed punitive tariffs on the other's imports, both sides continue to trade at record levels. However, consumers in both countries are feeling the effect of these tariffs in terms of higher prices. A major barrier between the U.S. and China is that fact that you have a democratic regime on one side and a communist regime which veers to authoritarianism on the other side. Misinterpretations and misunderstandings can easily take place. However, Yellen's trip was encouraging, because at least communication is taking place between the two countries. As Yellen stated in China, "The United States will, in certain circumstances, need to pursue targeted actions to protect its national security. And we may disagree in these instances. However, we should not allow any disagreement to lead to misunderstandings that needlessly worsen our bilateral economic and financial relationship." This is a good step in moving the U.S.-China relationship forward. Jerry Pacheco is the executive director of the International Business Accelerator, a nonprofit trade counseling program of the New Mexico Small Business Development Centers Network. He can be reached at 575-589-2200 or at jerry@nmiba.com.