Abstract

The world’s most important bilateral economic relationship is at a critical juncture. Notwithstanding America’s leadership transition from Donald Trump to Joe Biden, after three years of a trade war, the United States and China now appear to be in the early stages of a Cold War.  This conflict is very different in one key respect from that which occurred between the United States and the former Soviet Union from 1947 to 1991: The rising power (China) is operating from a position of gathering economic strength whereas the incumbent leading power (US) has a considerably weaker economy than was the case during the first Cold War.  Moreover, unlike America’s limited connection with the former Soviet Union, the US and China have long relied on each other as sources of economic growth; it will be exceedingly difficult to decouple from today’s deep-rooted codependency without exacting a toll on both economies.

The challenge for both nations is to recapture common ground and rebuild trust.  Three potential avenues of resolution: First, picking the low hanging fruits on areas of mutual interest — especially climate change and global health. Second,  an immediate ceasefire in the trade war  — in particular, scaling back the costly and destructive tariffs that have imposed new costs on both nations.  Third, tackling the tough structural issues that have arisen between the two nations —innovation policy, forced technology transfer, intellectual property rights protection, cyber security — by restarting negotiations on a US-China Bilateral Investment Treaty.

About the Speaker

Stephen Roach, Ph. D., is a Senior Fellow at Yale University’s Jackson Institute of Global Affairs and a Senior Lecturer at Yale’s School of Management. He was formerly Chairman of Morgan Stanley Asia and the firm’s Chief Economist for the bulk of his 30-year career at Morgan Stanley, heading up a highly regarded team of economists around the world.

Mr. Roach’s current teaching and research programme focuses on the impacts of Asia on the broader global economy. At Yale, he has introduced new courses for undergraduates and graduate students on the “The Next China” and “The Lessons of Japan.” His writing and research also address trade policy, globalization, the post-crisis policy architecture, and the capital markets implications of global imbalances.

Stephen Roach has long been one of Wall Street’s most influential economists. His work has appeared in academic journals, books, congressional testimony and has been disseminated widely in the domestic and international media. Roach’s opinions on the global economy have been known to shape the policy debate from Beijing to Washington.

His latest book, Unbalanced: The Codependency of America and China (Yale University Press, Jan. 2014) examines the risks and opportunities of the world’s most important economic relationship of the 21st century. His 2009 book, The Next Asia: Opportunities and Challenges for a New Globalization (Wiley), analyzes Asia’s economic imbalances and the dangers of the region’s excess dependence on overextended Western consumers.

Prior to joining Morgan Stanley in 1982, Mr. Roach served on the research staff of the Federal Reserve Board and was also a research fellow at the Brookings Institution. He holds a Ph.D. in economics from New York University. Mr. Roach is a member of the Council on Foreign Relations, the Investment Committee of the Metropolitan Museum of Art, the China Advisory Board of the Environmental Defense Fund, and the Economics Advisory Board of the University of Wisconsin.