At US-China summit, trust is the issue

When President Obama and Chinese President Xi Jinping sit down in the California desert for a rare working summit meeting this weekend, they are not likely to spend much time talking about ham. But that will be on the minds of tens of thousands of American workers who may soon have a new Chinese boss.

Residents of Smithfield, Va. – a charming river town in rural southern Virginia  – do not yet know what to make of the Chinese buy-out of Smithfield Foods, the town's largest employer and the biggest pork producer in the United States. 

Some shrug off the multi-billion dollar takeover of Smithfield by China’s Shuanghui International – the largest purchase so far of an American company by Chinese investors – as business as usual in a time of globalization. Others see the proposed deal as threatening the security of America’s food supply chain and as a betrayal of a historic Virginia brand that proudly traces its roots to the earliest English settlers on the nearby James River four centuries ago. The buy-out will more than double the number of Americans working for Chinese companies on US soil.

This foreign acquisition of this Fortune 500 company represents a new phase in US-China economic ties. Chinese investment dollars are beginning to flow more strongly after years of controversy and uncertainty. With $3.4 trillion in China’s foreign exchange reserves looking for a landing spot, more such large corporate bids by Chinese investors are likely to follow.

Yet there is too little strategic trust between the two governments and the world’s two largest single-country economies to welcome such deeper economic integration without strong reservations. Hence the urgency of this weekend’s summit at a luxury ranch in southern California between Mr. Obama and Mr. Xi.

The leaders face a crowded agenda ranging from cybersecurity and trade imbalances to North Korea’s nuclear ambitions, maritime conflicts in East Asia, and China’s ongoing human rights abuses. White House officials say no pre-determined results are expected as they talk through the issues and explore what China’s new leader means in calling for a “new type of great power relationship” with the US.

For the Obama administration, the meetings have a clear but not exclusively domestic relevance for American jobs and the nation’s fragile economic recovery. Yet even in commercial relations where the mutual benefits are obvious, there are stubborn gaps in fair treatment, reciprocity, and consistent policies that chip away at mutual trust.

For example, near the top of the American agenda is a volatile issue barely mentioned two years ago when Xi’s predecessor, Hu Jintao, made a state visit to Washington: the massive cybertheft of commercial and military technology that a recent presidential commission estimated has been worth hundreds of billions of dollars over the past 10 years. The commission estimated that the cyber-intrusions continue to drain $300 billion annually from the US economy.

Despite the difficulties in pinpointing their origins, the evidence of Chinese culpability appears so convincing that Beijing has little plausible deniability. Even the most China-friendly observers say the Chinese behavior is profoundly destabilizing to foreign commercial relations. NBC News reported this week that Chinese hackers even penetrated the computer systems of both US presidential candidates in 2008, spying on their policy positions and campaign activities.  

While the two sides have recently agreed to hold regular talks on cybersecurity beginning in July, assurances at the highest level of more responsible conduct are needed to reign in the criminal behavior and erosion of trust that stifles commercial and political ties. Xi is reportedly ready for that, and the world awaits his words – and deeds.

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