The US-China Strategic and Economic Dialogue between Washington and Beijing has begun. Owing to the global financial crisis, the talks will have even more significance than usual. But when it comes to China policy, Washington is separated into two general camps: the ‘functionalists’ and the ‘strategists’. In the past 24 hours, comments by President Obama that Washington and Beijing should be ‘partners’, as well as a joint op-ed in the Wall Street Journal by Secretary of State Clinton and Secretary to the Treasury Timothy Geithner calling for broad ‘strategic level discussions’, indicates that the functionalists are winning.

Functionalists basically believe that America and China have become so intertwined – as economic partners and increasingly as global stakeholders – they ought to be ‘strategic partners’. Hence, barriers are mainly transactional and tension due to misunderstanding. Yes, there are profound disagreements but fix these practical problems and many obstacles toward a fruitful partnership will eventually melt away.

On the other hand, the ‘strategists’ believe that the US and China are already in a state of ‘strategic competition’. True, we ought to improve interaction and understanding between Washington and Beijing to minimize friction but cooperation is largely tactical. There is a fundamental clash of interests and values between the two powers and although these can be managed, they cannot be solved unless the values and interests of either Washington or Beijing are to change – something highly unlikely.

Functionalists tend to be economists and those concerned with the US-China economic relationship. That they are is due to the fact that there is such an intricate intertwining of the American and Chinese economies that it makes little sense for one to try to harm the other. Win-win rather than zero-sum competition is the mindset and is the more rational and plausible way to go. As Clinton’s and Geithner’s quotation of a Chinese proverb (one I have never heard of incidentally) in her joint op-ed states: When you are in a common boat, you need to cross the river peacefully.

Strategists would concede that this kind of reasoning rightly applies to economic relations with Beijing. Yet, strategists would also point out that a fundamental strategic reason offered for why economic relations with China should proceed was that a China growing richer would accelerate the prospects for domestic political reform. This would, over time, encourage China to become a willing participant and even defender of the open and liberal regional order in Asia.

Yet, as China grows richer, it is the state-controlled sectors of the economy that grow more powerful while its genuinely independent private sector have been deliberately suppressed. This makes China more powerful, but does push it closer to political reform. On the contrary, it has offered the Chinese Communist Party better and more resources to entrench its own power and position in Chinese economy and society.

Strategists subsequently warn us that as Beijing’s power grows, it might very well be less likely to uphold a regional liberal order in Asia that it had no role in defining or creating. In fact, my study of one hundred recent articles by over two dozen of its top strategic thinkers reveal that four in every five articles was about binding, circumventing, reducing or superseding US power and ideas in Asia. China views the American backed liberal order as an institution designed to preserve what it calls America’s ‘hegemonic maintenance’ in Asia; even if Beijing has so far benefited enormously from rising up within the existing order.
 
Subsequently, although Washington strategists accept that China’s rise must be accepted and accommodated, its ambitions must also be constrained and its strategic options, especially in Asia, must be limited. The primary way of achieving this is enmeshing China within a US led regional hierarchy underwritten by US alliances and partnerships with Japan, South Korea, Australia, Thailand, the Philippines, Singapore, Indonesia, and increasingly India.

For China to rise within the hierarchy, it needs to do so within the existing regime of restrained competition, regional norms and other processes. China will also find it difficult to dominate regional institutions if US partners such as Japan, South Korea and increasingly India (an emerging strategic competitor with China in all but name) are part of these same institutions. That is why Beijing generally prefers to deal with Washington bilaterally, or deal with Asian institutions that do not include America.

This is why so-called variants of the ‘G-2’ approach – the US and China getting together as equal strategic stakeholders in the regional and global system - is dangerous. Strategists fear that when it comes to Asia in particular, a widened top-level ‘strategic dialogue’ of equals from Washington and Beijing covering non-economic issues – particularly security relations and architecture in the region – would offer Beijing the equal strategic billing with Washington that it desires without offering anything of value in return. Indeed, America’s Asian allies and partners – which is really the whole region minus Myanmar, North Korea, Cambodia and Laos – are fearful that leverage over Beijing will be too easily given away.

Most Asian states see the hierarchical system currently in place as the primary approach to best persuade Beijing to rise within the existing regime of restrained competition, regional norms and other processes. The US led hierarchical system is the ultimate guarantee of continued peace and stability in the region. Rushing toward a G-2 approach that Washington functionlists prefer would jeopardize much of this.

The debate between functionalists and strategists is far from over. While economic matters dominate, functionalists will take the stand. But others in Washington and throughout Asia can only hope that too much of the US advantage is not given away in the process.

Dr John Lee is a Research Fellow in foreign policy at The Center for Independent Studies in Sydney and a Visiting Fellow at the Hudson Institute in Washington.