The United States and China have created a new structure for economic dialogue to improve communication between the world’s largest economies and stabilize relations that have become increasingly strained in recent years.
The Treasury Department announced Friday that the United States and China have agreed to create an Economic and Financial Working Group that will meet regularly to discuss policy and exchange information. The announcement follows a summer visit to Beijing by three members of President Biden’s cabinet aimed at easing tensions over long-standing economic and geopolitical issues between the two countries.
The Treasury said the new working group would create “an ongoing structured channel for frank and substantive discussion.” Treasury officials will report to Yellen, who visited Beijing in July. Representatives from the Ministry of Finance and the People’s Bank of China report directly to Vice Premier He Lifeng.
“These working groups will serve as important forums to communicate U.S. interests and concerns, provide a level playing field for U.S. workers and businesses, and promote healthy economic competition between our countries. We will advance cooperation on global challenges,” Yellen said in a statement.
The United States and China continue to have significant economic disagreements over tariffs, technology regulations, and investment restrictions. The Biden administration has recently become particularly concerned about the treatment of American companies expanding into China.
The creation of a working group that directly links Treasury and Chinese officials on economic and financial issues marks a revival of a decades-old approach to the bilateral relationship that was dismantled under former President Donald J. Trump.
Eswar Prasad, former head of the International Monetary Fund’s China division, said: “These issues clearly mean that the United States and China believe it is in their mutual interest to de-escalate disputes and manage their bilateral relationship constructively.” “There is,” he said. “These working groups may also help maintain dialogue on these issues even if the geopolitical rift between the two countries continues to deepen.”
He added: “While the establishment of these working groups is unlikely to lead to a significant easing of trade and economic tensions, it will at least reduce the risk of further tensions, especially as the US political season heats up.” Probably,” he added.
In the 1970s, Congress stripped the Treasury of its authority over trade relations and transferred it to the newly created Office of the United States Trade Representative, which also became a Cabinet agency. Congress acted in response to complaints from American industry and labor unions that during the Cold War, the Treasury and State Departments were making trade concessions to other countries to win alliances against the Soviet Union.
Under former Presidents George W. Bush and Barack Obama, the Treasury Department led interagency negotiating teams in negotiations with China. Treasury leadership has limited the influence of U.S. trade officials, as successive Treasury secretaries have assigned high priorities to economic policy coordination with China and the opening of China’s financial markets to Wall Street companies.
Mr. Trump has abolished the interagency working group system and said each department will negotiate with China individually. Vice Premier Liu He, Vice Premier He Lifeng’s predecessor in charge of international economic policy, bypassed Mr. Trump’s trade representative, Robert E. Lighthizer, to discuss trade with then-Treasury Secretary Steven T. Mnuchin. Repeated attempts were made to reach an agreement.
But Trump did not support those deals, instead supporting Lighthizer, who ultimately negotiated a limited trade agreement that the two countries signed in January 2020 and which remains in place today. .
In August, Secretary of Commerce Gina Raimondo announced during a visit to Beijing and Shanghai that the United States and China had agreed to regularly consult on commercial issues and restricting access to advanced technology.
The Office of the U.S. Trade Representative is aware of the plans for the new working group and will be consulted when discussions move to trade issues, but the new consultation format will be led by the Treasury Department.
A senior Treasury official said that during Yellen’s visit in July, both sides expressed their concerns and reached an agreement to form a group aimed at finding ways to work together. The economics group will focus on issues such as debt restructuring in struggling low- and middle-income countries, while the finance group will delve into themes such as financial stability and sustainable finance.
Yellen said Friday that the new structure is an important step forward in bilateral relations.
“It’s important to talk, especially when you have different opinions,” she said.
Anna SwansonContributed to the report.