The Shanghai-La Dialogue was first conceived by the Director-General and Chief Executive Director, Sir John Chipman, of the International Institute of Strategic Security in 2001 to provide a forum for the defense officials and military chiefs to discuss world issues on strategic strategy. The first Summit was held at the Shanghai-La hotel in Singapore in 2002 and followed annually ever since thus known as Shangri-La Dialogue (SLD).  The first meeting was attended by 12 countries and it grew gradually with attendees moving up in official positions, first to vice ministers level then minister level and then included keynote speakers of head of state in addition to that of the host country, Singapore. 

It was in 2007, China first sent a delegation headed by Lieutenant-General Zhang Qinsheng of the People’s Liberation Army with ranking equivalent to vice-minister level. In 2009, the Prime Minister of Australia, Kevin Rudd, gave a keynote speech at SLD and opened the precedence of sideline bilateral meetings between defense ministers to conclude agreements. That year in SLD, Australia and Singapore agreed allowing Singapore’s army to use Australia’s military training facilities for another decade. In 2010, the President of the Republic of Korea, Lee Myung-Bak was the invited keynote speaker. In 2011, it is notable that the discussion topics expanded beyond military matters and for the first time focused on the South China Sea (SCS) Issue. The U.S. defense Minister, Robert Gates, reiterated at SLD the commitment of the U.S. to the Asia Pacific (AP) region. As an outgoing defense minister, he raised a bet of $100 with anyone to proclaim that he predicts the influence of the U.S. would be stronger than today in the next five years. Of course $100 is a joke, so insignificant, considering the U.S. strategy in the AP region. Today, the attending countries of SLD grew to 28 nations. The agenda has elevated far beyond talks of military weapon development and sales. In a White Paper issued by China in 2010, it has cited SLD as one of her avenues to participate in regional security cooperation.
This year’s Shangri-La Dialogue was held from May 31-June 2 with 28 country delegates and 16 keynoters, including Singapore Prime Minister Lee and 15 Defense Ministers or Secretary or Representatives, Patrick M. Shanahan (US), Wei Fenghe (China), Jeong Kyeon-Doo (SK), Takeshi Iwaya (Japan), Federica Magherini (EU), Haji Mohamad Sabu (Malaysia), Penny Mordaunt (UK), Florence Parly (France), Hariton Singh Sajjan (Canada), Ngo Xuan Lich (Vietnam), Delfin Lorenzana (Philippine), Linda Reynolds (Australia), Ryanizard Ryacudu (Indonesia), Ron Mark (NZ), and Eng Hen Ng (Singapore). Observing the 18th Shangri-La Dialogue, it is significant to point out that four of the above 16 keynoters are female, hopefully signifying more peaceful cooperation in the future. 

In examining the speeches delivered at the SLD, one does find a change of tone, perhaps a more explicit expression of sentiments on the security issue. First of all, Singapore’s President Lee Xian Long, made an excellent speech tracing from the history to today’s international relations. He emphasized that it was the openness in trade and interaction that had brought prosperity to the region, not just Singapore as a free trade port but also to the entire Asia Pacific. He made observations on the US-China Trade War and implied its ill consequences. He warned to avoid hardened attitudes and pled for peaceful discussion and resolution on the trade issues. He expressed the wishes of not only Singapore, the ASEAN countries, but also the entire Asia that their desire is to pursue continued globalization, respecting multilateralism rather than being pressured to take sides on any conflict between great nations. His implication was clear, although Singapore is an ally of the U.S., he does not wish to see the U.S. and China prolonging their trade conflicts and expanding into other domains. His tone and of others are that competition is unavoidable among nations but it must be maintained as healthy competition.

The speech delivered by Patrick Shanahan, the new Defense Minister of the U.S., was a prepared speech emphasizing the wish of the U.S. to project her presence in Indo-Pacific Ocean. His speech although not naming names was clearly targeting China and calling her allies in the region to side with the U.S. to stop the rise of China however with little legitimate reasons. Shanahan did not modify his speech after hearing President Lee’s keynote speech which contained an obvious purpose to moderate any hostility between the U.S. and China and any conflicts in SCS. China’s Representative, General Wei Feng He, delivered his prepared speech defending China’s peaceful rise policy and her pursuit of globalization and multilateralism. Wei responded to President Lee and Mr. Shanahan’s speeches and inserted his comments which was not shy to hint that the U.S. intrusion under the name of “Freedom of Navigation” in the Indo-Pacific especially the SCS was the cause of instability of security in the region. Wei stressed that China will seriously defend her sovereignty rights and she has rights to strengthen her defense in SCS or elsewhere especially when facing threat.
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Overall the other speeches were moderate containing a few echoes from official ally’s position stressing the desire to maintain stability and willingness to cooperate in maintaining the regional security. If one had to draw a conclusion, it might be said that there was no clear signal in taking sides or making threats in the speeches other than the U.S. and China exchanging a few barbs. Hopefully, when the delegates at SLD return to their countries that they will convey the genuine tone of the 2019 SLD - it is the region’s wish that the two great nations, the U.S. and China, will soften their hostile attitudes and carry on a healthy competition benefitting the world. It has been said clearly, confrontation between the U.S. and China will lead to instability and no country in the region wishes to see it happen. The Asian countries do not wish nor have the will to form a NATO-like alliance to replicate another Cold War!
 


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President Trump in a highly publicized and televised ceremony signed the Phase One US-China Trade Deal/Agreement on January 15, 2020, at the White House with the Chinese Designated Chief Trade Representative Vice Premier Liu He. The fact that President Trump personally signed the agreement with Vice Premier Liu signifies his belief that he, different from previous Administrations, had taken a tough stand in trade negotiations and made significant achievements, including USMCA (trade agreement with Mexico and Canada), Japan Deal, and South Korea Deal. From President Trump’s White House Announcement (White House Website), he said: “My Administration has fought tirelessly (nearly 20 months) to achieve a level playing field for the American workers.” He has signed a landmark fully-enforceable Phase One Trade Agreement with China.
 
Prior to the trade war/negotiation, the U.S. was suffering under a trade deficit with China (-$375.6B in goods and +$37.72B in services, 2017, -419.2B/+41B 2018, ~-$353B/+$33B 2019), figuring out how to get manufacturing industries to return to the U.S. and trying to stop technology transfer to China enticed by entry into the vast Chinese market. China, on the other hand, was struggling to sustain her economic growth (6.8% in 2017, 6.6% 2018 and 6.25% 2019),upgrading her manufacturing base and innovating into higher technology industries. Trade is subject to government and WTO regulations but at the end trading is done between corporations with voluntary deals. Thus, there were no simple and quick fixes to balance the trade deficit as the two largest economies each has a huge inertia and each is slowly transforming based on each’s own economic policies. Trump chose to start a tariff war but it could not fix the trade imbalance but it did force the two countries come to the negotiation table.
 
 
With tariff and counter tariff, both countries suffered from economic damages. The Chinese economy is obviously hurting as seen from the above GDP figures although part of the decrease can be attributed to China’s own structural reform in upgrading her industries. Although the U.S. GDP growth had been maintained at 2.4-2.6% under Trump’s Administration, but the US farmers were definitely hurt. In addition, the manufacturing supply chain supporting each country’s production were seriously damaged causing uncertainties and complaints in both exporting and importing corporations of a number of  countries. In particular, the silicon chip industry was drastically upset by the US technology export sanctions which uprooted not only the high-tech product supply chain but also many other industries’ steady need of semiconductor imbedded finished parts. Any prolonged disruption of manufacturing supply chain, from material to parts to services will potentially creating a world recession.
 
 
After the signing of the Phase One US-China trade deal, many analyses have got into overdrive not only in the U.S. (somewhat low key in China) but also world-wide immediately reaching the agenda of Davos Economics Conference held in the Vaillant Arena, Davos, Switzerland on January 21-24, 2020. In the U.S., the narrative is mainly focused on what the U.S. has won in the deal and the expression of caution in the next phase of negotiation on issues such as cyberspace and State Owned Enterprise (SOE) which require legislation changes on the government of China. There are five major ‘wins’ typically cited by analysts and correspondingly, one can find a few responses in Chinese media offering their interpretations.
 
First, the White House claims a win that China agreed to a deal that is enforceable. China agreed to buy $200B American goods over 2017 level (Agriculture $32B, Manufacturing goods $78B, Energy $52B and $38B Services). Second, China agreed to place greater effort in preventing counterfeit (easier legal action) and IP rights. Third, U.S. maintains 25% tariff on $360B Chinese goods (China maintains tariff on $100B Am goods). Fourth, language to restrict currency devaluation and allowing both sides to seek IMF interference. And Fifth, China agreeing to remove barriers for entry in banks, insurance and other financial services. These five points do appear as China’s concessions and U.S. victory, although tough issues such as cyber hacking, forced technology transfer with market entry and State Owned Enterprises (SOE) were postponed to future phase of negotiation.
 
Examining the interpretations of Chinese scholars on the Phase One Trade Negotiation, one find little counter argument but some explanation of China’s rationale for agreeing to the phase one agreement. The Chinese government regarding the agreement of having a structured mechanism for resolving dispute and negotiation as a major concession from the U.S. China seems to have concluded a basic position - willing to reduce trade imbalance through rational negotiation. Hence one finds that the Chinese scholars’ response and interpretation of the trade deal are more on explaining their rationale than claiming victory.
 
First, China regards the substantial tariff maintained on each side as a mutual incentive and leverage to continue into the next phase of negotiation, a somewhat positive attitude. Second, China claims that she welcomes and needs enhanced IP protection to upgrade her industries. Third, increasing purchase of American agriculture products satisfies China’s consumption needs, however, the scholars underscored that the purchase must be made under competitive pricing. Fourth, Importing services, especially financial services is mutually beneficial, thus, China also welcomes orderly entry of services. Fifth, Increasing imports meets China’s needs, however, consumption (hence purchase) must obey market principle. Based on the interpretations from both sides presented above, we are not surprised that this 86-page phase one deal was agreed on after the negotiation teams walked away from the previous 150 -page document. 
 
Scott B McDonald, in his article, ‘Phase One of Trump’s Trade Deal Is a Win for America’ (1-20-2020 Nationalinterests.org) considers the phase one a truce for Trump and Xi. McDonald is agreeing with most commentators that the next phase of negotiation is more challenging. While his article claims a win for America, he did not elaborate who is the real loser in the phase one deal. Based on the above analysis, I think China did not lose in the deal, who are the losers then? As a consumer, my simple deduction is that American consumers will be the loser since the tariff remains on $360B Chinese imports. Most of these imports are household goods American citizens buy, now at a higher price than prior to tariff war. Secondly, I believe that exporters from other country traders to China will also be losers. If China is obligated to purchase $200B more goods and services from the U.S., it is likely China will reduce purchase from her other trading partners, for example, Germany and France in EU, Canada, and South America. Indeed, there is such complaint in the Davos Forum.
 
Ifay Chang. Ph.D., Inventor, Author, TV Game Show Host and Columnist (www.us-chinaforum.org) as well as serving as Trustee, Somers Central School District.


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Even a layman in the United States and China can sense that the U.S.-China relationship is heading towards a treacherous direction. The mass media of each nation have been energized to crank out “ideological*” rhetoric laced in news and publications in all sort of media, newspapers, movies, television, radios and books. Fortunately, this phenomenon has not yet bloomed to be overwhelming like fascism happened prior to WW II. There are many sane souls in the U.S. and China expressing their sincere concern and honest expression warning the extreme hawkish fear-China and Anti-China Americans and the over-reactionary fear-US and anti-US Chinese citizens.
(*truth is there are no clear ideological differences in freedom to hold a job, to speak, to travel and to cumulate wealth and laws to maintain society order; the difference highlighted by the rhetoric is the governing system, democratic vs authoritarian government. Neither are perfect and both need improvement; it’s a trade off between magnitude of liberalism versus degree of government efficiency and law and order. Actually, there is a common ideology: that is each nation wants her citizens to live better tomorrow.)
However, the momentum of media is scary, especially when one begins to observe and to be influenced by fake news, exaggerated reporting and ultimately brain washing driven by false “ideology”. We citizens must speak up and dispel such a curse.
 
No one can honestly deny that the U.S. and China want their citizens to have better living conditions than their elder generations. The question is how does each government develops a plan to accomplish that goal (how are the 300 million Americans and 1400 million Chinese being prioritized in their respective national plan) and whether the obstacle of the goal is really hindered by the plan of the other country? The U.S. has been the De-Facto world leader for decades in the past century. The U.S. is a developed country with a large middle class in her population. The U.S. government is basically concerned with China’s fast economic rise upsetting the world order (which was managed by the U.S. ) and impacting her economic growth (at a lower rate than China's). Whereas China is a partly developed and partly developing country with still a large population (comparable to US population) living in poverty. China is compelled to keep a high GDP growth (above 6%) development plan in order to lift all her citizens above poverty line.
 
The U.S. has faced competition in the last century (Japan and Western European nations) and managed successfully to maintain her economic growth and kept her number one economy position in the world. Japan and Germany are smaller country than the U.S. but China is a large country with more than four times of US population. Hence, when China is keeping her fast economic growth rate, her absolute size of economy is approaching the size of the US economy threatening her number one position. However, the ranking of the size of economy (GDP) is not really a significant index; the GDP per capita is a far more meaningful measure of citizen’s living condition. For 2019, China’s GDP per capita is $10098 and U.S. $65111, a more than six fold difference. Therefore, it is not surprising that China wants to maintain her 6+% economic growth in order to fulfill her goal to bring more people out of poverty and into middle class. But what it is surprising is that the U.S. would Choose (using all means) to suppress China’s economic growth, thus initiating trade war, technology suppression, investment sanction and diplomatic and military maneuver to suffocate China’s rise.
 
Trump won the presidential election on his campaign slogan to make America great again giving him a mandate to revive the vigor of US economy and rejuvenate the U.S. infrastructure, however, blaming the U.S. economic problems on China is not fully justified and any measure for suppressing China's development offers no assurance of helping the U.S. economy. In fact, the trade and technology wars already showed a lose-lose effect making the global economy vulnerable. With negative measures such as sanction and tariffs, it only stimulates China to take measure to be more independent of the U.S. than keeping a symbiotic relation with American industries. Even if the U.S. succeeded in crashing China’s economy (17% of world economy), it would impact the global economy as well, ultimately hurt the U.S. If China managed to survive the economic confrontation, it would certainly help China to be more self-sufficient and make the U.S. more vulnerable on low-tech merchandise which depends strongly on Chinese manufacturers and/or her supply chain.
 
The current China policy, be it trade war, bashing China, or forming anti-China alliance has not shown any obvious benefits. Many China experts, including economists, have argued that the previous “engagement” China policy, the U.S. had adopted since her recognition of the People’s Republic China, is by and large a successful policy, not only having made China to embrace Western capitalism and some American values, defeated the Soviet Union and lifted China’s economy with her hundreds of millions citizens living above the poverty line. China’s rise in turn has stimulated global economy, which can be seen in Asia, Africa and South America, and has provided the U.S. low-cost household merchandise. Just the Chinese tourists alone have benefitted the world when hundreds of million of Chinese could afford to travel. Therefore, I urge the U.S. to immediately revise her somewhat 'hostile” China policy. To help leading mass media into such a discussion, I shall present a simple conceptual model, called ACE-ACE model to produce Win-Win results for the U.S. and China.
 
The model is based on the observation that engagement and collaboration have produced better results for the U.S. and China than pressing conflicts and confrontation. The facts show that trade, technology and space wars do not produce absolute single winner, more likely they waste more global natural and human resources affecting global development. The ACE-ACE Strategy is basically avoiding wasting energy (negative) and channel positive energy to produce double win (Win-Win). If both countries could take up an ACE as a strategic program or method to aim to win, the ultimate result would be Win-Win.
 
Then, what is the ACE strategic method? Actually, it is quite simple; ACE Methods are positive energy programs stimulating each other even when competing. An ACE method is guided by three strategic alphabets, A, C and E, producing positive effects. The ACE program tool-box contains a bunch of 'positive' action words as following examples: A (Adapt, Analyze, Assess, Adjust and Agree), C (Collaborate, Compete, Compromise, Cooperate and Congratulate) and E (Emulate, Engage, Equalize, Evaluate and Excel). An ACE Strategic Method is simply picking three action words (with the attitude of producing positive result) out of the ACE tool-box. Following the above example, the tool-box can yield a total of 125 (5x5x5) strategic methods to be applied to deal with all aspects of U.S. - China Relations: culture, commerce (trade), currency, diplomacy (foreign affairs), economy (debt, growth, finance, investment, ...), education, environment (infrastructure, climate, transportation, ...), military, social (healthcare etc), technology (science, industry, space, ...).
 
Take the trade issue, if the U.S. Picked ACE (Analyze, Compete, Equalize) (rather than tariff and sanction), China would pick ACE (Agree, Compromise, Engage), then a positive Win-Win is likely the result. Take the current 5G technology issue, China apparently picked ACE (Adapt, Compete, Excel). If the U.S. Would pick ACE (Adjust, Collaborate, Emulate) rather than (sanction), again a positive Win-Win would most likely occur. Even if both picked ACE (Assess, Compete, Equalize), healthy competition would still yield positive results. These oversimplified illustrations here are not jokes but offer a profound philosophy for two great nations to use ACE-ACE to develop positive Win-Win policies instead of falling in the Thucydides trap leading to war and mutual destruction!