Economic growth can help US, China settle many issues

Editor's note: What should China and the United States do to improve bilateral ties? An expert shares his views on the issue with China Daily's Yao Yuxin. Excerpts follow:

The US-China trade conflict is an outgrowth of the US' growing sense of economic malaise, reflecting bipartisan concerns that have spilled over from the White House to Main Street. The conflict has its origin in the late 1970s when both economies were struggling for new growth solutions; a "marriage of convenience" was consummated that initially enabled both countries to thrive, with the US being the "ultimate consumer" and China the "ultimate producer".

Tit-for-tat tariffs are only the opening salvo in what is likely to be a broader and long-lasting conflict. Both countries have deep-rooted fears that the other poses an existential threat to its economic future. The US considers China's technology innovation as a threat to its global dominance. China is also pressurized by America's policy of containment. And although the Sino-US conflict is lacking the ideological motivation of the Cold War, it represents a worrisome threat to globalization and the global economy.

Therefore, the two countries should restart the negotiation on the bilateral investment treaty whose framework was under discussion for 10 years before being suddenly interrupted by the election of the present US president. The treaty could help eliminate the requirement of any foreign ownership caps on investment in either country, eliminate the need for joint ventures and thus take forced technology transfer issues off the table.

Second, the US should increase its savings and reduce its budget deficit, while China should spend more. For example, China could use its surplus savings to fund the social safety net in order to encourage middle-income families to be more aggressive in terms of consumption.

Third, given that the US and China have accused each other of hacking, they should work together to come up with a global solution to cyberattacks, because hacking is a global problem rather than a bilateral problem,

And fourth, the two sides could establish permanent offices, which would work full time on tough and complex bilateral issues such as sharing data, information and policy proposals, to make negotiations a continuous process.

A constrictive resolution to this conflict requires both the US and China to focus on strengthening their own economies. Self-doubt and fear will then give way to determination and mutual prosperity, enabling both sides to escape from the perils of the "art of the deal" and accept the "wisdom of compromise".

Stephen S. Roach, a senior fellow at Yale University's Jackson Institute of Global Affairs