It is called “the most important economic partnership in the world,” that between the U.S. and China. Today, they are each other’s second largest trading partners.

But, says a report by the China-United States Exchange Foundation (CUSEF), if the two economies are to continue to have a healthy relationship there needs to be “a new direction in economic development in order to provide sustainable growth and employment for their people.”

The path forward “begins with an acknowledgement that the development of the overall relationship between the two countries is constrained by mistrust and differences in important global strategic issues,” the report notes. “It is therefore imperative that mutual trust be built up and strategic differences be managed and addressed.”

U.S. agriculture has a big stake in an expanded trade relationship with China. A recent analysis by the Organization for Economic Cooperation and Development (OECD) and the Food and Agriculture Organization (FAO) of the United Nations projects that China’s imports of oilseeds (chiefly soybeans) are expected to rise by 40 percent over the next 10 years — accounting for a whopping 59 percent of global trade. China has been the largest customer for U.S. soybeans; 2011 purchases exceeded $10.4 billion.

China’s cotton area is projected to decline 21 percent during the decade, which should bode well for U.S. cotton as more affluent Chinese consumers satisfy their demonstrated preference for cotton goods.

While the economic picture for the two countries “looks promising,” the CUSEF report says, the challenges faced by each nation shouldn’t be understated.

China needs to deepen its economic reform, redefine the role of government, expand the rule of law, combat corruption, make its economy more responsive to the market, and address issues of income disparity, environmental degradation, and uneven access to basic education and health care, while the challenge for the U.S. is to “achieve a consensus in economic policy so the economy can move forward with some predictability.”

Both countries “still face economic uncertainty in Europe and the possibility of rising protectionism,” and they “must cooperate to maintain global peace in the face of nuclear proliferation, terrorism, and territorial disputes.”

Other issues include the role of state-owned enterprises in the Chinese economy, all forms of market access into China, protection and enforcement of intellectual property rights, enhancement and enforcement of cyber-security, and collaboration to develop an international convention on cyberspace.

“The stakes are very high,” the report notes, but “the potential economic opportunities created by increased cooperation are enormous. Some will benefit China more, while others will benefit the U.S. more. But in every case, they can be a win-win for both countries.”

See the full report, U.S.-China Economic Relations in the Next Ten Years: Towards Deeper Engagement and Mutual  Benefit,” here: http://bit.ly/16JJd7c

See the OECD/FAO report, Agricultural Outlook 2013-2022, here: http://bit.ly/10NcUzG