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Diplomacy in Action

Background Briefing on the Strategic and Economic Dialogue


Special Briefing
Senior Administration Officials
En Route to Beijing, China
July 7, 2014

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MODERATOR: Hello, everybody. So thanks – sorry to interrupt your rest, but we have an opportunity to do a discussion here with two Senior Administration Officials. First I’ll introduce them and then we’ll switch to the generic Senior Administration Officials. We have [Senior Administration Official One] and we have [Senior Administration Official Two]. So they will henceforth be Senior Administration Officials One and Two, and this discussion will be on background. And they’re here to talk about areas of focus for the Strategic and Economic Dialogue.

So I’ll hand the microphone over and we can get started.

SENIOR ADMINISTRATION OFFICIAL ONE: Great. Thanks, [Moderator]. Hello, everybody. Let me start with just some very basic facts about what we’re doing in Beijing. This will be the sixth session of the Strategic and Economic Dialogue. It’s co-chaired on the U.S. side by Secretary Kerry and Secretary Lew and on the Chinese side by Vice Premier Wang and State Councilor Yang, Yang Jiechi.

The S&ED meetings are preceded by a meeting of the Strategic Security Dialogue, the SSD, which is meeting this year for the fourth time and is chaired on the U.S. side by Deputy Secretary of State Bill Burns and on the Chinese side by Vice Foreign Minister Zhang Yesui. This is a dialogue, a regular dialogue that brings together both civilian and uniformed military officials from each side and is valuable in that respect.

And then lastly, Secretary Kerry will participate in the fifth session of the Comprehensive High-Level Dialogue on People-to-People Exchanges, called the CPE. In these meetings, his counterpart is Vice Premier Liu Yandong, and this is a forum to promote educational, scientific, and other forms of exchange across a number of areas of common interest.

The S&ED itself begins Tuesday night with an informal dinner between the – on the strategic track between Secretary Kerry and State Councilor Yang. There’s a separate event on the economic track. The following day, on Wednesday morning, there will be a joint session – first the opening of the S&ED with statements from both sides followed by a joint session to discuss climate change. This is an innovation begun last year that allows both the strategic and the economic officials to sit together in a small, high-level group for a very practical, open, and direct dialogue.

There’s a joint luncheon that brings together both the strategic and the economic track, and then the two tracks separate. The strategic side with Secretary Kerry and State Councilor Yang will have a series of meetings, and that will culminate in a working dinner that evening in which they cover the range of bilateral, regional, and global issues.

On Thursday morning, the schedule has both Secretary Kerry and Lew participating in a roundtable with Chinese and U.S. CEOs, and of course, the Chinese Government counterparts. There will be a plenary session and it brings together all of the various mid-level officials who are working throughout the year in the context of the S&ED, and that will be followed by a meeting and a working lunch between Secretary Kerry and Vice Premier Liu for the CPE High-Level Dialogue on People-to-People. And finally, the Secretaries will call on the Chinese leadership at the end of the day.

We expect that as is normally the case, at the end of the S&ED the four representatives will meet with the press and make statements, and that the two sides will issue an outcomes document summarizing the work that has gotten done through the course of the year and through the course of these meetings.

I think one other point of context I would make is that this is in the – the S&ED takes places in the context of a considerable number of high-level engagements between the U.S. and China – the President, of course, the Vice President, various cabinet secretaries who travel or who meet with their counterparts at multilateral fora. But the S&ED is the central, integrated mechanism that allows us to pursue a wide range of agenda items throughout the year, and the S&ED meetings themselves allow us to take stock as to what we have accomplished as well as to set goals for the future. It’s a very important mechanism for coordination and for enhancing cooperation as well.

In terms of the areas of focus, I just ticked through a few. High on the agenda is climate, the environment, on the energy -- and energy. This is a priority for both countries and we’re looking for ways that we can expand cooperation, including through our bilateral partnerships on eco-friendly development and on issues such as wildlife trafficking.

We have the people-to-people and consular-related issues that I’ve mentioned, how we can expand educational exchange, business exchange, tourism. We have a range of regional issues both within the Asia Pacific and without.

More broadly, we have international global issues like Iran, Afghanistan, Syria, Iraq, Sudan, where the U.S. and China in many respects cooperate and certainly where there’s value in close consultations. Within the region itself, of course, high on the agenda remains the challenge of denuclearizing North Korea, and particularly in the wake of President Xi’s recent visit to Seoul we see value in building out U.S.-China cooperation, strengthening our consensus on the importance of denuclearization, and refining further our strategy for getting there.

We will also undoubtedly discuss the issues relating to maritime security and maritime disputes in the region. Secretary Kerry will make our views clear regarding our concerns over the rise of tensions and problematic behavior, particularly in the South China Sea. We will continue to emphasize the importance that we place on peaceful diplomacy and adherence to international norms and law.

On the bilateral front, we’ve got quite a few programs to discuss. We have issues of concern such as cyber, particularly the use of cyber techniques to obtain economic information that’s then transferred and commercialized by Chinese state-owned enterprises. More broadly, we share a common interest in cooperation on cyber writ large, and that will be an area of discussion as we encourage China to utilize the mechanism – the bilateral mechanism available to us, namely the cyber working group.

Secretary Kerry, as he always does – as senior U.S. officials always do – will raise human rights and describe our concerns, talk through our perceptions on universal human rights and the importance of supporting a rules-based international system. We believe that adherence to basic human rights principles is one key to the stability and the prosperity that we want to see in China, and here too we will encourage China to resume the suspended human rights dialogue between the two sides. Secretary Kerry is accompanied by Under Secretary of State Sarah Sewall, who has in her portfolio not only human rights, but also a number of other issues of importance to the Chinese side, including law enforcement and counterterrorism.

The only other comment I would make about the S&ED and the strategic track is that my own experience, having participated for a number of years, initially in a former job and now in my current job – I find that each go around, the interlocutors improve their ability to speak candidly and constructively, and in an – on an informal basis. And so I expect this to be very substantive, and hope it will be also a very productive two-plus days.

SENIOR ADMINISTRATION OFFICIAL TWO: Thanks, [Senior Administration Official One]. Let me make a few comments to provide a strategic contact – context for this sixth S&ED.

2014 is a very important year in the U.S.-China relationship. It’s the 35th anniversary of the founding of the relationship. And so as a relationship that’s three and a half decades old, if it’s anything, it’s a deep, it’s a broad, and it’s a very resilient relationship. And all of those aspects of the relationship we built are going to be on display at the S&ED. My State Department colleague outlined the breadth of the issues that are going to be addressed; he outlined the depth of participation on both sides. And so that should give you a sense of, when we talk about an enduring relationship, one in which there – the agenda is large, there’s a lot of contact, there’s a lot of discussion going on.

And that’s going to be important for this year’s S&ED, because the S&ED this year comes at an important but also very complex and even difficult period in the U.S.-China relationship. The first six months of this year there were a variety of issues on the U.S.-China agenda that were complex for both sides to deal with, whether it was the President meeting with the Dalai Lama earlier; our differences over maritime issues; our differences over cybersecurity issues; the fact that we’re still working towards an agreement on how to best address the North Korea nuclear issue – all of these issues are going to be addressed by the U.S. delegation during this S&ED, and it’s – it will be an important opportunity to try and find greater areas of agreement.

The U.S.-China relationship is always one of trying to constantly balance areas of cooperation, encouraging China to do more as its capabilities and influence expand, but also competition. In other words, in areas where we disagree, making sure that the U.S. is firm about its values and its interests; the U.S. is clear about its broader regional strategy, including the importance of our allies and partners in the region. And as we try and strike that balance between cooperation and competition, we want the U.S.-China relationship to become more stable, to become more dynamic, and ultimately solve bilateral, regional, and global problems.

So why don’t I stop there and open it up for your questions.

MODERATOR: Great. We’ll – got time for questions. We’ll pass the mike. John.

QUESTION: Hi. I was wondering – you said the relationship was complex, but can you just explain at what stage you are in the discussion on cybersecurity? As far as I understood it last, the Chinese did not want to discuss it, that the talks and the working group on cybersecurity had been suspended. Is this something you’re going to raise with them, and how are you going to tackle it as far as moving this message forward in something that they’re just really not interested in talking about?

SENIOR ADMINISTRATION OFFICIAL ONE: The issue of cyber is relevant in a number of areas throughout both the strategic and the economic track. The proximate issue of concern – and in fact the issue that generated an indictment recently by the Department of Justice – had to do with a particular area of concern in which Chinese actors obtained or stole corporate or proprietary information, according to the allegation, and transferred it to state-owned enterprises for the purpose of commercializing it. That’s one very particular set of concerns that we have raised consistently with the Chinese and will continue to discuss.

There are many other dimensions to cybersecurity, and I think it is well understood that the U.S. and China, as two arguably largest cyber actors in the world and certainly two large targets of cyber threats, have both an interest and an obligation to cooperate on a bilateral as well as a multilateral basis in setting rules and norms and working through the complex mix of problems that face us. We share an interest in a secure, predictable, and orderly cyber environment. We see the bilateral U.S.-China cyber working group as an important forum and vehicle for fulfilling our responsibilities and for making progress. So we certainly would like to see the earliest practical resumption of that forum, but in the meantime, we will as appropriate utilize dialogue channels, including through the S&ED, to exchange views and to make our concerns known.

QUESTION: So beyond the breakfasts, lunches, dinners, which I’m sure will all be very sumptuous, what’s deliverable at this meeting? What would qualify this as a success? What do you hope to have concretely accomplished over the next two to three days?

SENIOR ADMINISTRATION OFFICIAL ONE: I’ll wait to declare victory on the S&ED and to inventory the outcomes and the deliverables until after the principals and the working groups have had an opportunity to actually do the work. Without prejudice to the quality of Chinese cuisine, the meals are working meals. This is a very serious and a very in-depth engagement, possibly unique in terms of America’s substantive dialogues with international partners.

The scope of the delegation and the breadth of the issues is reflective of our ambitions in the U.S.-China relationship. I think the spaces to watch will be on the priority areas that I have flagged. Certainly, there is a tremendous overlap of interests between the U.S. and China on the range of issues relating to climate change, to environmental protection, and to clean energy. And so I would look by way of outcomes at the culmination of the S&ED to what the two sides have to say about the extent to which we’ve committed to or mapped out a course for future collaboration. This is a classic example of an area of a global challenge for which U.S.-China cooperation is an essential ingredient of any long-term solution.

I think similarly, the discussion on regional security issues, particularly North Korea, will be hugely important. There is steady convergence in the views between the U.S. and China on both the importance and the urgency of moving North Korea to take irreversible steps to denuclearize. The recent visit, as I mentioned, of President Xi to Seoul is a significant step for China, and I think that the product of the China-ROK conversations should feed into the discussions that we will have over the next few days.

SENIOR ADMINISTRATION OFFICIAL TWO: Let me just add a little bit to my colleague’s excellent comments. I would encourage you to keep in mind the fact that we’re in the business of managing one of the most important strategic relationships for the United States. That means we need to have the right conversations on the right issues with the right people in the right ways at the right times. And that’s what the S&ED was originally conceived and built to do. And [Senior Administration Official One] and I know it because we were there in 2009 at the National Security Council when this construct of the Strategic and Economic Dialogue was first being built.

So when it comes to a relationship like the one between the United States and China, it’s essential that we reduce uncertainty about each other’s intentions, that we increase areas in which we can find common ground, where our interests overlap, where we can build out cooperation. And as [Senior Administration Official One] mentioned, that could be on issues related to Iran, Afghanistan.

At the same time, it’s important for us to determine where it is our interests are diverging, like your colleague’s previous question on cyber security. We need to really identify where is the difference, and we think one of the fundamental differences is on this question of the acceptability of cyber-enabled economic espionage, which the United States Government does not conduct, and we need to come to a clear understanding with the Chinese about that norm. That’s going to be essential to resolving our concerns about Chinese behavior.

But to get back to your question, it’s fundamentally about having the right conversations to maintain a healthy, dynamic relationship with China that doesn’t drift towards inevitable strategic rivalry or confrontation.

MODERATOR: You have a question?

QUESTION: Sure. To what extent are you seeking and are – could you develop any cooperation on Ukraine? Or why is there resistance on China to support your sanctions efforts on Ukraine?

SENIOR ADMINISTRATION OFFICIAL ONE: The issue of Ukraine and the situation there will undoubtedly feature on the strategic track discussions about international issues. The fact of the matter is that there has been cooperation from China on the Ukraine, including at the UN Security Council. But here is an opportunity to talk through where the situation currently stands, what our respective interests are, and what the implications are not only for the U.S. and for China, but for the international system.

China has a long-held and frequently espoused commitment to defending sovereignty and territorial integrity. We have an opportunity through these direct conversations to hear more from the Chinese on how they reconcile those principles with their stance on the Ukraine, on Crimea in particular, and to talk through what each of us sees as the path forward.

MODERATOR: You have a question?

QUESTION: Just to return to Brad’s question, and without wanting to be too cynical about your ambitious goals within this dialogue, I understand that you feel it’s important to have the conversations. I guess the question is: Do you feel the Chinese are actually listening to you?

The maritime tensions have increased since last year. The – you’re in a worse position on cyber than you were last year. And other than cooperation on questions like Ukraine and some cooperation on Syria that we’ve seen in the UN, what exactly do you feel you’re achieving through these dialogues other than just keeping the conversations going? There is a growing sense in China among some Chinese leadership that the United States is just in decline and that they are actually the rising power. So I wonder if you could address that a little bit.

SENIOR ADMINISTRATION OFFICIAL ONE: Well, I’d go back to the comment that my colleague made a moment ago, which is to underscore the breadth and the complexity of the U.S.-China relationship. The stakes are very high. And what we have in the S&ED is a sustained mechanism for more than a conversation – to have a strategic dialogue in which we can each identify what we see as the problem areas and the problem behavior on the part of the other side, identify and build out our priorities in terms of greater cooperation where we posit strong common interests and see bilateral cooperation as an important component to achieving important objectives; to compare notes on regional and transnational challenges, situations, and threats, and to ask ourselves what the two systems, what the bureaucracies, what the agencies of the respective governments ought to be working on in the period ahead.

The S&ED provides an opportunity for adjustments to our respective policies as warranted. It creates an opportunity to delve down deeply into why the other side is behaving in a particular way and why that particular behavior is troubling to the other one. It provides an opportunity to ask questions and to challenge assumptions and sometimes to disagree. But we come out of it with a to-do list. On the issues where we think we can get more done, we come out of it with a better understanding of the areas of disagreement and what might be done to ameliorate that. And we also come out of it with a high degree of confidence that we’ve done more than just give a press conference, we’ve done more than just give a speech. In both the strategic and the economic track, we’ve been able to really delve down and talk through areas that left unattended can be increasingly sources of friction.

The S&ED is part of the gyroscope that keeps the relationship upright and oriented towards progress, oriented towards the future. It would be tremendously difficult to manage a relationship of this scope without the systematic and regular interaction that we have.

Now, there have been times when the dust settled and the hotel rooms were vacated, that what was left behind were some very newsworthy and very dramatic, significant breakthroughs or outcomes. There have also been times in the past where the outcomes were noteworthy really for their breadth and not for their drama. I don’t know where on that spectrum the sixth S&ED will fall, but you shouldn’t underestimate the power and the value of this comprehensive and integrated dialogue that marries up both the political and security concerns and the economic and trade concerns of both sides.

SENIOR ADMINISTRATION OFFICIAL TWO: I wholeheartedly agree with my colleague’s comments. Let me add two points. First, keep in mind that the U.S.-China relationship is a motion picture. It shouldn’t be looked at as a snapshot. And I understand as journalists your responsibility is to take that snapshot, but always keep in perspective that it’s a motion picture and it’s sort of that grand, epic, big Hollywood motion picture in which there’s a lot of actors, a lot of interests at stake. And the trajectory of any particular issue takes time to play out.

If you would’ve picked a major U.S.-China meeting in 1994 or 1995, you could raise a number of issues that today aren’t even on the agenda, like the issue of the destabilizing effects of Chinese proliferation of nuclear weapons and ballistic missiles. That’s just not even on the agenda. So there are all of these issues where we have differences – cybersecurity, maritime issues – they all have an arc in them. And the S&ED is an important inflection point in that arc every year because it’s the most substantial amount of time that our top diplomatic and economic policy makers and security policy makers spend with their Chinese counterparts working on these issues.

The second point that I’d make is that keep in mind when you look at the series of interactions between the U.S. and China over the last year, there is a regional context, that regardless of one’s assessment of the U.S.-China relationship, the U.S. position in Asia is as strong as it’s ever been before. So going into this S&ED, you have a U.S. position in Asia in which our alliances are rock solid, following great diplomacy that Danny and Secretary Kerry have been executing for the past several years, the President’s very successful trip to Asia – Northeast Asia, Southeast Asia, allies, non-allies – and we’re making serious progress on concluding the TPP. So we could be having the same conversation in six months in which the U.S. further strengthened its effort to build a stable and diverse security order, an open and transparent economic order, and a liberal political order.

So always keep in mind there’s a regional context that China is part of, because that’s how we think about our China strategy, and the U.S. remains very strong and very active in the Asia Pacific.

QUESTION: Obviously, as time goes on, U.S.-China relationship has evolved from the first S&ED that took place. If you can elaborate, what’s – what are you trying to do differently in this year’s dialogue aside from the topics, varying – depending on what has happened in the past six months and et cetera? It’s just – what’s new here? What are you doing? Are you – is there a new – are – is there a new sort of approach that you’re trying to see in terms of understanding what China is looking in bilateral relationship – does – and basically, how has it evolved since the first S&ED and where you are now, just kind of bigger picture, since you’re marking the 35th anniversary of the bilateral relationships as well?

SENIOR ADMINISTRATION OFFICIAL ONE: Well, the short version of the question, “How has the S&ED changed over the last five iterations,” is that I think that the ratio of talking points to discussion has shifted significantly. In the first S&ED, there was tendency to stick to the script. And we had fairly long and somewhat turgid sessions that involved detailed readouts from working groups and long expositions in rooms with big tables and a lot of chairs. We have gotten much more efficient and effective in organizing the conversation at the same time that both sides have gotten more comfortable holding real conversations.

And so I think our confidence and belief that the S&ED over the next few days will generate a significant degree of consensus and progress in terms of our understanding of our respective positions and our ability and commitment to work together is based on the increased quality of the dialogue, and the gradual reduction in the size of many of the meetings really allows the principals to talk and to talk about the issues that they care about.

That brings me to the other part of your question, which is to some extent the S&ED, because it has achieved relevance and a degree of flexibility in terms of the focus, allows us to bore down on the areas of concern. And that includes the concerns where the U.S. and China have overlapping interests and can and want to work closely together – climate change, environment, energy falls into that category, as I would say new challenges like the threat from North Korea. But it also allows us to allocate more time and zero in on concerns that may have exacerbated or arisen over the last year. And we have heightened concerns of – stemming from the tensions in the Asia Pacific region relating to territorial disputes, and particularly to the readiness of claimants to utilize military, paramilitary, coast guard forces in furtherance of their claims; the readiness of claimants to resort to coercion or to retaliation. We’ve seen a series of incidents, many of which or all of which the U.S. has spoken out about publicly, that we can and should discuss in greater depth with the Chinese during the course of the S&ED.

We’re also seeing developed – international developments that directly affect the overall security and stability of the world. This has an impact on energy. This has an impact on trade, and therefore it has an impact on both the U.S. and the – and China. So although the S&ED is part of an annual cycle, it has the agility to allow senior policymakers to focus on areas of concern that have sharpened in the course of the year.

QUESTION: Thank you very much for having this. Let me just follow-up the snapshot, the maritime security. As you said, United States is going to urge China to follow international law and international norms. But as you know well, China has a completely different approach, particularly in a historical approach in terms of – for example, the nine dash line and – in any kind of dispute, they have – they are insisting they have a historical background instead of international law. So my question is: How the United States is going to raise this issue, and what is the good approach to discuss and to narrow a gap? And are you going to raise the oil rig development in Vietnam and ask to stop development? Thank you very much.

SENIOR ADMINISTRATION OFFICIAL ONE: Well, I think I would break down the question and break down the issue into some component parts. First and foremost, we will make clear to China, as we have made clear to all of the claimants, that we are not backing one claimant’s position against another’s when it comes to the question of sovereignty. We genuinely don’t take a position on sovereignty with respect to these competing claims.

That means that the United States is unbiased when it comes to the underlying sovereignty question. This is – these are typically challenging issues for neighbors to deal with. They require patience. They require flexibility. They require time, and they require respect for international law.

A second element, though, is the matter of how claimants put forward their claims. First, we urge all of the claimants – not only China, but including China – to clarify their claims in ways that are consistent with international law, including UNCLS, because it is our observation that ambiguity about claims can be destabilizing and can lead to confrontation and even conflict.

The concern that we have expressed about the nine dash line or about historical arguments is not to suggest that we are opposed to China’s sovereignty claim or backing a competing sovereignty claim, but simply that the ambiguity associated with the nine dash line is problematic. The other half of that is the issue of the behavior by the claimant states in connection with their assertions. We believe that the assertions of sovereignty, the defense of a position, should be made through diplomatic channels. And where diplomacy fails and when patience runs out, we accept the right of claimants to avail themselves of legitimate international legal mechanisms as appropriate.

But whatever course a claimant chooses to pursue, it should be and must be a peaceful course. I’d add that I think it should be a neighborly course. China has stated repeatedly and at high levels its commitment to good relations with the countries on its periphery and its commitment to peaceful diplomatic means to address territorial issues. We want China to honor that and live up to its word.

We think that there have been a series of actions over the last six-plus months that clearly have raised tensions among China’s neighbors and generated concerns among other claimant states. This is very relevant to the United States as a Pacific power, as a major trading nation, as a – an important consumer of the sea lanes and as a long-term guarantor of stability in the Asia Pacific region.

So this is a conversation that we will have as we have tried to do throughout: in a very direct, candid, and constructive way.

Thank you.

QUESTION: How much progress do you see to make in the bilateral treaty, the investment treaty? Do you see making immense progress on that? Or is it still – or do you think it’s still far away from actual agreement?

And second of all, how large does the Chinese yuan loom in this conversation? It has always dominated the economic discussion. Is it still going to be a big issue, or do you see these other issues of security and investment kind of replacing that?

SENIOR ADMINISTRATION OFFICIAL ONE: I think that both the U.S. and China have sought to build on the significant progress we made last year at the S&ED when China agreed to a negative list approach to the bilateral investment treaty to a BIT. Both we and China see tremendous benefits to our economies from expanding investment and see a BIT – a B-I-T – as an important element in creating a framework that will foster increased investment on a solid and sustainable basis.

I’d – would defer to our trade and economic experts on the question of how far they’re getting, but I believe that there is certainly a determination on both sides. I believe that where there is a will there’s a way, but I’m also very mindful of the tremendous complexities of the issue, given the size of the two economies.

And on the currency issue, I think the saying goes my mother didn’t raise a son foolish enough to make a comment about currency. I know that --

QUESTION: (Off-mike.)

SENIOR ADMINISTRATION OFFICIAL ONE: Well, Secretary of the Treasury Lew has spoken to that issue and undoubtedly will speak further to it. I think I’m best served letting him be the voice of the U.S. Government on currency.

QUESTION: All right. Thanks very much.



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