Out with the old for U.S., China

But one way to bring back all that cash America has exported to China is precisely by selling American assets to Chinese buyers. Such investments will bind China even more closely to the United States, aligning our interests. The onerous requirements of vetting and approving deals in Washington should be narrowed to specific military technologies; otherwise, let China buy what it wants. In return, Beijing must continue to expand the sphere of what U.S. companies can acquire in China.

The environment is No. 4. The United States and China are the top two emitters of greenhouse gases, and global efforts to reduce them are useless without these two nations working together. China, however, wants the United States to take responsibility for the emissions of American-owned factories in China, while the United States wants China to reduce its use of coal (and China wants the United States to subsidize the costs of doing so).

Without a clear path forward, let's forget communiques and bilateral agreements and develop a true joint climate policy. That would involve regular meetings and annual targets that might be set by some combination of the Environmental Protection Agency and China's Ministry of Environmental Protection. Given that a significant portion of China's emissions result from American companies manufacturing goods there, and given that the cost of U.S. energy consumption is shaped by China's hunger for resources, the two nations must coordinate policy and action, including emissions targets that adjust over time — with China bearing a larger share of the burden as it becomes ever more energy-intensive.

The Obama administration is committed to alternative energy and smart grids; Beijing has announced an ambitious agenda of high-speed rail, solar energy research and deployment, and next-generation nuclear reactors. Think of how much more could be done if their efforts and spending were combined, and they invested together in new energy technologies and shared the fruits of that R&D.

Finally, lose the old military mind-set. Japan and Taiwan have tethered their futures to China, which makes the presence of the U.S. 7th Fleet as anachronistic as U.S. troops in Germany were after the Berlin Wall fell. Obama and Hu should agree that Japan can take care of itself and that Taiwan, far from the flashpoint it was during the Cold War, is becoming more like Hong Kong — autonomous, different, more open, but tied to Beijing.

These proposals may sound outlandish, but they have a precedent: the European Union, which in its early stages struck many as equally unrealistic. Said one British diplomat when the first of many European agreements was proposed in 1957: “The treaty has no chance of being signed; even if it is signed it will never be ratified; even if it were to be ratified it will never be implemented.”

For all the faults of the EU, the Europeans understood that sometimes it's best to relinquish some state control for greater security and prosperity. Today, the emergence of China as a first-rate economy offers a similar opportunity. Things that were once thought impossible will happen, but only if we have the vision and the will to make them so.

Zachary Karabell is president of River Twice Research and the author of “Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on It.”

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