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By Elizabeth M. Lynch, July 28, 2010

A worn out Senate Majority Leader, Harry Reid

The past week has provided closure to two issues China Law & Policy has been following  for the past few months.  Last week, Senate majority leader Harry Reid announced that the Democrats would not be moving forward on the climate change bill that had been sitting in the Senate for the past year.  Although the bill had the potential to completely reorganize the U.S.’ energy policy, the Democrats were unlikely to get the votes necessary to pass the bill and opted not to try.

The death of the climate change bill raises serious questions about the U.S.’ ability to compete with China on green technology.   The Chinese government has made major and obvious commitments to green technology, attracting capital from around the world.  Without a coherent energy policy, don’t expect investors to seek out green technology opportunities in the U.S.  Until the U.S. has a more coherent policy, anticipate the continued flow of capital to China.

As if the failure of climate change legislation was not enough, the Senate announced yesterday that it would not take up the DISCLOSE Act, the House of Representatives’ response to the Supreme Court’s decision in Citizens United v. FEC, a decision that expanded corporations’ speech rights in U.S. elections.  As China Law & Policy wrote soon after the decision, Chinese companies, some of which have ties to the Chinese government, could use the loophole of their U.S. subsidiaries to donate to U.S. campaigns. China Law & Policy testified before Congress in May on the legislation – the DISCLOSE Act – as it was being considered by the House of Representatives.  Looks like we won’t be testifying before the Senate anytime soon.

Gees, did Harry Reid just have the worst week ever?

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By Elizabeth M. Lynch, March 21, 2010

Not a day goes by without mention of China and its currency: “China’s manipulating its currency, injuring the U.S.” “No it’s not, and if it were, it only hurts the Chinese people.”  Guest blogger Marcy Nicks Moody tries to make sense of it all and examines the mechanics underlying the Treasury Department’s pending decision to either designate China a currency manipulator or not.

A Dusty Springfield Approach to the Chinese Exchange Rate?

Will China allow its currency to float?

By Marcy Nicks Moody

Last week, in a discussion about the administration’s approach to China’s exchange rate policy, White House press secretary Robert Gibbs remarked that President Obama “mentioned just a few days ago that he wished and hoped that China approached their currency using a more market-based interpretation.”

If only wishing and hoping were the ne plus ultra of sound policy-making. Unfortunately, they’re not. And Mr. Gibbs’ comment was more revealing of his administration’s approach to the Chinese exchange rate than he may have hoped. Or wished.

On a more or less biannual basis, chatter over China’s undervalued currency increases, coinciding with a report that the Treasury Department must submit to Congress on international economic and exchange rate policies. This is the document in which a country is formally designated a currency manipulator or, in the case of China or any other country since 1994, is not.

Does China manipulate its currency? Yes. This fact is well-known and rarely questioned. The gargantuan scale of its global trade and current account surpluses and rate at which China is intervening and accumulating foreign exchange reserves to keep the renminbi (“RMB”) from appreciating make it all but impossible to argue otherwise.

But does China intend to manipulate its currency in order to gain an unfair trade advantage? Well yes, but this is part of the legal metric by which China must be judged in the foreign exchange report, and it remains the technical basis on which the Treasury sidesteps formally designating China a manipulator of its currency. The arguments for so doing do not include any serious contention that China does not intend to manipulate its currency, but rather that engagement works better than saber-rattling.

That is one possibility. Another is that there is no saber. What if China were designated a currency manipulator in a Treasury report to Congress? Would the administration huff and puff and hold its breath until all of Washington turned blue? That might be the best option, for nothing necessarily follows from the findings in these reports, other than expedited negotiations, which are fancy words with few teeth. And demonstration of ineffectiveness on an important issue is something the Treasury might understandably like to avoid. Naming China a currency manipulator would strain relations further but in itself provide no foreseeable gain. And besides, the whole world knows it anyway – it’s not like the report would be telling us anything we didn’t already know.

The U.S. Treasury - preparing its April 15 report

Though the Treasury Department’s stance is far from principled, it does have some weight. But the exceptionalist tone of this stance—which suggests that China is exempt from Treasury censure because of some special status it holds—may well damage U.S.-China relations in the longer term. For years, the United States has encouraged China to act as a responsible stakeholder in the global economic and financial system, playing by the rules China increasingly helps to write. Allowing China to escape criticism for undervaluing its currency simply because ‘it is China’ runs counter to the notion of that stakeholder. Given the belligerent tone Beijing has recently taken on a range of foreign policy issues from Copenhagen to the Dalai Lama’s recent U.S. visit to exchange rate policy itself, the United States would do well to move away from this more recent G2-style exceptionalism and towards responsible stakeholdership in its rhetoric and substantive discussions with China.

Moreover, American concern about undervaluation of the RMB dates to at least 2003. Modest appreciation notwithstanding, engaging and talking softly behind closed doors have not worked. That Chinese surpluses cost Americans jobs should be an abomination to Washington, especially now, as unemployment remains unacceptably high. China is unlikely to move on its exchange rate unless it perceives that doing so would be in its own interest, and for better or for worse, it is up to Washington to create that incentive.

Might a Treasury report designating China a currency manipulator encourage China to move on its exchange rate? Let’s be clear: This is only a document submitted by one branch of the federal government to another, and by itself, the report does little. But might a Treasury report designating China a currency manipulator trigger other events that could encourage China to move on its exchange rate? Congress may be emboldened to pass legislation mandating countervailing duties on goods from countries with misaligned currencies. Indeed, even without the Treasury’s report, which isn’t due until April 15, Congress has already started to move forward on the issue. There is currently a bill with unusual bipartisan support in the Senate that would give Treasury less flexibility in determining whether a country manipulates its currency. Further, the Chinese exchange rate is not solely a U.S. problem. If Washington did, for example, undertake trade sanctions, the frustrated international community would likely follow suit. And this would create a strong incentive for China to allow the RMB to appreciate.

A Treasury report designating China a currency manipulator is unlikely, by itself, to produce any results vis-à-vis the RMB. And it might not even trigger events that would compel China to allow the RMB to appreciate. But it might. The current state of affairs is unacceptable, and as even Dusty Springfield knows, wishin’ and hopin’ and dreamin’ and prayin’ are not enough.

Marcy writes about China. In 2007-08, she was a Fulbright Scholar in China, where she was also a Research Fellow with the U.S.-Asia Law Institute. She received an M.A. in East Asian Studies from Columbia University and graduated from Brown University.

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By Elizabeth M. Lynch, September 7, 2009

Originally posted on the Huffington Post.

Health care will not be the only derisive issue on the Senate’s calendar when it returns to Congress on September 8.

Rep. Ed Markey Announces Climate Change Passage, June 26, 2009

This past June, the U.S. House of Representatives passed the American Clean Energy and Security Act of 2009 (the “Climate Change Bill”).  Far-reaching in its impact on the U.S. economy and particularly detrimental to certain energy-intensive sectors, debate in the Senate will become increasingly cantankerous as special interests and certain states lobby for protection.

And while the Bill, through a series of complicated cap-and trade equations and a plethora of subsidies to renewable energy, has the potential to completely alter the domestic market, debate thus far has been about its global impact.  With fear that countries like China will not pass legislation to cap their domestic industries’ carbon output, the House added two provisions to protect U.S. industries from companies in countries that are not similarly restrained.  Out of a 1,400 page bill, these two provisions have become the center of the debate, some calling these provisions much needed protection and others calling them tariffs.

But conspicuously absent from these discussions is an analysis of what is really going on here.  How exactly do these provisions work?  Will they have the intended effect of maintaining the competitiveness of U.S. industries or are they attempts by certain industries to protect their profits?  Will these provisions bring countries like China to the table in Copenhagen or will they ultimately produce a tariff war?  Can they withstand a challenge under global trade rules?

To answer these questions, China Law & Policy sat down with Jake Caldwell, director of Policy for Agriculture, Trade & Energy at the Center for American Progress.  Click here to listen to the interview with Jake Caldwell.

The Trade Provisions

Applicable Only to Energy-Intensive and Trade-Sensitive Industries
In our interview, Jake stressed that the two trade provisions in the Climate Change Bill will only apply to those U.S. industries that are both energy-intensive and trade-sensitive, making these provisions applicable in fact to only about five U.S. industries: ferrous metals (iron and steel), nonferrous metals (aluminum and copper), non-metal minerals (cement and glass), paper and pulp, and basic chemicals (World Resources Institute (WRI) report, p. xvi).

Under the Bill, these industries will initially be given a two-year waiver from compliance to the Bill’s cap-and-trade regulations.  However, after the two years, these industries can seek protection from foreign competition through the following two trade provisions.

Provision 1: Recovery of Some Cost of Compliance
The first of these provisions is less controversial.  Found in Title IV, Part F, subpart 1 of the Bill, it establishes an emissions allowance rebate program.  As Jake explained, this will allow companies in energy-intensive, trade-sensitive manufacturing industries to be compensated in other ways for the cost of complying with the Bill’s cap-and-trade program.  The rebate program will reduce the threat that these companies will lose business to companies from countries that do not impose equally as rigorous caps on greenhouse gas emissions. The rebate program will be phased

Click on image for a PDF of the Trade Provisions in the Climate Change Bill

out by 2035.

Provision 2: Border Adjustment Measures (a.k.a. Tariffs)
It is the second trade provision, found in Title VI, Part F, subpart 2, that is the most contentious; this is the provision that establishes unilateral border adjustment measures – a.k.a. tariffs –  on imports from countries that do not have similar emissions reduction policies.  Under this provision, if by 2018 there is no international climate change treaty in force, the President, starting in 2020, is required to impose a border adjustment measure on imports from sectors in countries that have not capped their emissions or reduced their energy-intensity to comparable levels.  The U.S. importer of the competing foreign product will have to purchase an “international reserve allowance” through a carbon market.  This in effect establishes a tariff on imports from that foreign country.

As Jake pointed out, the President can grant a waiver to certain countries if he or she deems that there is an important national economic or environmental reason that takes precedence.  But the Presidential waiver is subject to Congressional approval through a joint resolution of Congress. In effect, Congress has to “second” the President’s decision, making for a cumbersome procedure.   If either house of Congress does not agree with the President’s reasoning, the waiver is denied.  Given the already politically-sensitive as well as politically-expedient nature of the U.S.-China relationship, it is difficult to imagine that any waiver to a Chinese industry could make its way through Congress without a fight.

Effectiveness of the Trade Provisions

As Jake explained in our interview, the trade provisions were adopted for three reasons: (1) to prevent carbon leakage (the transfer of production and jobs from industries in the U.S. subject to cap-and-trade rules to companies in foreign countries that do not have such rules in place), (2) to keep U.S. manufacturing industries competitive in a potentially unequal carbon-restricted world, and (3) to be used as leverage against other countries that have yet to set emission reduction targets.  But will these provisions achieve their stated goals?  Or are they protectionist responses to pressure from a few select industries?

Carbon Leakage
If a goal is to prevent carbon leakage and promote emission caps in other countries, the trade provisions, especially the border adjustment provisions, are not tailored narrowly enough to achieve these goals.  Congress was largely targeting China with the trade provisions.  However, out of the five U.S. industries that would be able to use the tariff provisions (steel, aluminum, chemicals, paper and cement), only one industry imports more than 10% of its product from China: the cement sector (WRI report, p. xviii).  For the other industries, the majority of foreign imports are from Canada and other developed nations, many of which already have emissions standards that surpass the U.S’.  While there will inevitably be some carbon leakage, it’s questionable just how dramatic it will be.  Currently, the majority of U.S. imports in these sectors come from countries with less-carbon intense production methods than China or even the U.S.  Just because U.S. companies will bare the cost of meeting more rigorous emission standards does not necessarily mean that production will be shifted to countries with less rigorous standards.  Currently, China’s production of aluminum is carbon-intensive and uses a tremendous amount of energy.  However, China’s production is more expensive than Canada’s or the U.S.’ and can barely remain competitive in the global market.  Thus, lower carbon emissions and greater energy efficiency do not always equate with higher costs.

Furthermore, if the goal is to prevent carbon leakage, the trade provisions offer no recourse to individual companies from foreign, carbon-heavy countries that are meeting their own private emission caps.  For example, Baosteel, China’s largest steel producer, is relatively energy-efficient (WRI report, p. 35).  However, under the current Climate Change Bill, even though Baosteel may voluntarily subject itself to carbon targets similar to those that will be imposed on steelmakers in the U.S., Baosteel will still be penalized.  The Bill’s trade provisions evaluate imports on a sector-wide basis and not an individual company one.  Arguably, if the goal is to prevent carbon leakage, the U.S. has a better chance of influencing a Chinese company’s behavior than an entire sector in China.  Thus, the trade provisions should establish a secondary track where certain companies, if they are able to show that they are compliant with U.S. standards, are exempted from the border provisions applied to their country and sector.

Finally, the question remains – how do you measure the carbon footprint of an imported product?  These provisions rely heavily upon the assumptions that monitoring and reporting of greenhouse gas emissions from the country of origin is (a) an easy task and (b) accurate.  While these assumptions might hold true in countries like Canada or Japan, for China, where implementation and enforcement on the local level is a perpetual struggle, any form of data collection is a challenge and results are often less than reliable.  Thus, in a world where carbon measurement is problematic, the actual ability to implement the trade provisions remains questionable.

Competitiveness
As mentioned above, imports from China in the energy-intensive, trade-sensitive industries are very small (14% of cement, 7 % of steel, 3% of aluminum, 4% of paper, and less than 1% of chemicals).  These five industries also make up a small portion of the U.S. economy, accounting for 3% of economic output and less than 2% of U.S. employment.  While these industries will inevitability be negatively affected by the Climate Change Bill, the impact on the greater U.S. economy is relatively small.  Additionally, over-protection of these industries loses sight of the broader U.S. economy and the other goal of the Climate Change Bill: to shift production and jobs to energy-efficient or renewable energy industries.

Furthermore, while the border adjustment measures protect these raw material industries, it potentially could hurt those industries that use the raw materials for production of “downstream” products.  For example, the border adjustment measures are only applicable to the importation of sheet steel, and not to products that are made out of steel, like cars or appliances (WRI report, p. 52).  U.S. car makers will still have to compete against foreign car manufacturers whose products could contain steel from countries without carbon regulations.  Without the benefit of border adjustment measures on cars, U.S. car makers would become less competitive.

Similarly, U.S. chemical manufacturing companies are fairly competitive globally.  These companies refine the carbon-intensive, raw material chemicals to make downstream, specialty concoctions (WRI report, p. 52).  However, by imposing a border adjustment measure on the raw material chemicals, any of these chemical manufacturing companies who import raw materials, would experience an increase in the cost of production, making their products less competitive abroad.  While the border adjustment measures will protect the five energy-intensive, trade-sensitive industries’ profits, they could likely hinder the competitiveness of industries that use these raw materials to manufacture downstream products.

Leverage
The jury is still out on whether border adjustment provisions do in fact bring countries to the table to discuss climate change.  The general assumption is that tariff threats rarely cause countries to act, especially countries as large as China.  However, after the U.S. backed out of the Kyoto Protocol, the European countries threatened similar types of tariffs, targeted precisely at energy-intensive U.S. industries.  Perhaps a mere coincidence, but it’s interesting to note that today, the U.S. is now close to passing climate change legislation.  Recently, South Korea voluntarily set a 2020 emissions reduction target; the South Korean government cited the fear of border tariffs as a reason to set targets.

But it is still questionable how far the threat of tariffs can go.  China has certainly taken notice of the border adjustment provisions in the U.S. Climate Change Bill, but that does not mean it will agree to carbon caps.  China’s exports to the U.S. that would likely be subject to the tariff provisions accounted for less than 0.2% of economic output in 2005, thus making the U.S.’ tariff threats of little consequence to China (WRI report, p. 57).  However, of greater consequence to the U.S. and to the rest of the world is if China, the largest emitter of greenhouse gases, walks away from climate change negotiations because it feels as though it needs to “act tough” for its domestic audience.  In looking at the current border adjustment provisions in the Bill and the tepid success they have had thus far, the Senate might want to ask itself if the risk is worth it.

Legality of the Trade Provisions

As Jake mentioned, World Trade Organization (WTO) rules require that countries pass nondiscriminatory trade provisions – that the provisions do not discriminate against foreign products in favor of domestic ones.  Arguably, the current Bill does discriminate.  As discussed earlier, individual companies that could be meeting similar carbon caps will be discriminated against if their home country has not agreed to carbon caps.  Without some sort of procedure that exempts foreign firms which individually meet carbon caps from the border tariffs, the current trade provisions may not withstand a WTO challenge.

There will certainly be a Senate showdown over the Climate Change Bill.  Already ten Democratic Senators have stated that the trade provisions need to be stronger.  But do they really?  If your singular goal is to protect 3% of the nation’s economic output and 2% of its jobs, then yes, the trade provisions will maintain the status quo, at least for the time being.  But if your goal is to increase innovation in new sectors like renewable energy, create clean jobs and limit global climate change, then the trade provisions, as they stand now do not achieve that goal.  There is a need to maintain U.S. competitiveness in the five effected industries, but in the current tariff provision, what is being maintained are corporate profits in a few select, and powerful, industries.  The Senate needs to take a good hard look at the current trade provisions and question if it is worth it.  Perhaps it is time to move away from defensive measures against China and begin to better engage China in agreeing to a climate change treaty.  Without China’s agreement, any legislation the Senate passes will have negligible effect in limiting climate change.

Click here to listen to the interview with Jake Caldwell

Click here to open a PDF of the transcript of the Jake Caldwell interview

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By Elizabeth M. Lynch, August 9, 2009

On Friday, the day before breaking for a month-long recess, the Senate finally confirmed Gov. Jon Huntsman as U.S.

Our New Ambassador to China!

Ambassador to China.  In the coming weeks, Ambassador Huntsman, his wife and two youngest daughters will move to Beijing.  In addition to managing the U.S.-China relationship and working with Chinese officials on North Korea, climate change and other difficult issues, Ambassador Huntsman will also be helping to arrange President Obama’s first trip to China, scheduled for this fall.

For more information from the Salt Lake Tribune, click here.

For an analysis on the Huntsman confirmation from the China Daily’s English edition, click here.

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By Elizabeth M. Lynch, August 4, 2009

In Friday’s Huffington Post, Sen. John Kerry published a timely op-ed piece, “Who Lost the Earth?” on the need for the U.S. and China to reach some kind of an agreement on climate change.  “Who Lost the Earth?” comes at a point when it appears that any agreements reached during  December’s U.N. Conference on Climate Change will likely not include the two biggest emitters of greenhouse gases: the U.S. and China.

In his op-ed, Sen. Kerry correctly commends China for its efforts in already implementing measures to curb greenhouse gases.  It is in fact impressive that China is already experimenting further than the U.S. with some energy efficient technologies.   Furthermore, Sen. Kerry is right to criticize those in the U.S. who say that China “won’t lift a finger.”  While nervous that it could forestall economic development, China still has a sincere interest in solving its impending environmental crisis.  Every year, over 60,000 “mass incidents” (protests often involving thousands of people) in China are spurred by environmental damage.  The Chinese government views these mass incidents as a very real threat to its rule.

But even in light of these factors which propel China forward on the issue of climate change, Sen. Kerry and his Democratic colleagues still need to be realistic about China’s capacity.  Sen. Kerry notes that there needs to be legal commitments on the international stage and that China needs to be held accountable.  All of this is true.  But at the same time, China’s circumstances must be understood.  While moving forward in some areas, China still lacks the technical capacity to implement many energy-saving measures.  Simple things like an energy audit of a building often elude local officials.  Many industries, such as waste-heat recovery, have yet to be developed.

Another impediment is the difficulty for the central government to implement environmental laws on a local level.  Because China is an authoritarian regime, many believe that whatever the Chinese central government wants to achieve, it can easily impose.  But with this authoritarian government comes a layer of inflexibility.  Rule is from the center out; from top down; for the central government to guarantee that laws are implemented on the local level, it must amass all of its power, and oversee the locality, a very time-consuming and exhausting activity.

Unlike the U.S., China does not have a flexible regulatory state where government authority has been delegated to specific agencies that have almost exclusive jurisdiction over a field.  Nor do laws allow for individuals to enforce the law through lawsuits on behalf of the government (i.e. private right of action).  Instead, the Chinese central government must do all in a country as large as the U.S.  Not surprisingly, its ability to control the local level and guarantee that laws are implemented is not as prevalent.

In moving forward, U.S. policy makers must take China’s circumstances into account.  While they need to push China forward to meet greenhouse gas emission targets, these targets must reflect China’s current capabilities.  If Sen. Kerry and the Democrats do not devise a realistic strategy to help China in terms of technology assistance and implementation skills prior to Copenhagen in December 2009, opponents in Congress will use China’s capacity issues as an excuse to reject any agreement arising out of Copenhagen.  This would not just be a defeat for Sen. Kerry and like-minded Democrats; this would be a defeat for the future of this world.

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By Elizabeth M. Lynch, July 29, 2009

On Tuesday, the Senate delayed voting on the confirmation of Jon Huntsman as the next Ambassador to China. Reason for the delay is unclear although the Senate has said that it still needs to compile paperwork.

While some in the press seem to speculate that the hold up could be due to issues related to Gov. Huntsman’s large financial holdings, it could also simply be the Senate overworked with the Sotomayor confirmation, health care reform and other issues.

Voting on Gov. Huntsman’s confirmation has been postponed to next Tuesday or Wednesday (August 4 or 5).  Congress’ last day before its month-long summer recess is Friday, August 7.  It appears that Gov. Huntsman’s  confirmation is coming down to the wire.

More information can be found here.

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By Elizabeth M. Lynch, July 25, 2009

Gov. Jon Huntsman at his confirmation hearing, July 23, 2009

Originally posted on ChinaGeeks

Thursday’s Senate confirmation hearing for the next ambassador to China was a virtual love-fest from both sides of the aisle.  Democratic senators gushed about Utah Gov. Jon Huntsman’s China background and Mandarin language skills and Republican senators John McCain, Orin Hatch and Bob Bennett attended the hearing to show their ardent support for the nominee.  There is little doubt that Gov. Huntsman – a Republican governor, nominated as Ambassador to China by a Democrat president – will be confirmed on Tuesday when the full Senate meets to vote on his nomination.  But his confirmation hearing still proved a telling sign of the Administration’s priorities in its relationship with China (nominees are always prepped for weeks prior to their hearing by Administration officials).

In his opening statement Gov. Huntsman stressed the importance of working with China on two high-priority fronts: first, repairing the international economy and second, maintaining peace and stability in Northeast Asia.  In what was likely a nod to the Chinese government and an acknowledgement of the increasing tension with North Korea as illustrated by Secretary of State Hillary Clinton’s recent trip to Asia, Gov. Huntsman highlighted China’s leadership in organizing the six-party talks and commended China on working closely, and successfully, with the U.S. and the U.N. Security Council in dealing with North Korea.  Gov. Huntsman also mentioned other areas where the U.S. and China must continue to work together: advancing global counter-terrorism efforts, stopping the spread of weapons of mass destruction, combating extremism and promoting stability in Afghanistan and Pakistan, and promoting better governance and development in places like Sudan, Burma and Zimbabwe.

Most people believe that President Obama nominated Gov. Huntsman solely for strategic reasons – to eliminate a strong Republican presidential candidate in 2012.  But that could easily be only partially true.  Another reason is that Gov. Huntsman is actually a very good pick to represent the U.S. in a relationship that has become much more delicate as it becomes more important.  Gov. Huntsman has a strong China background, experiencing first-hand Chinese societies in Taiwan (during his time as a Mormon missionary) and Singapore (as Ambassador).  Additionally, during the hearing, Gov. Huntsman supported continued human rights discussions with the Chinese, criticizing our current approach as too “on-again-off-again.” Instead he advocated for a regularized and systematic forum where issues such as freedom of religion, freedom of speech, rule of law, and access to information can continuously be discussed.  While some might argue that this was mere political posturing to secure votes from Congress, Gov. Huntsman’s statement is a noted departure from Secretary Clinton’s recent announcement that human rights cannot interfere with our handling of other crises. Such a departure provides credibility that Gov. Huntsman sincerely wants to make human rights issues a regular part of his dialogue with the Chinese.  Also, his experience in Taiwan and Singapore provide him with the alternative perspective that economic development in a culturally-Chinese society does not necessarily require the authoritarian regime that currently exists on the mainland.

Although Gov. Huntsman’s approach to human rights is slightly different from the Administration’s, he whole-heartedly supports the Administration’s focus on climate change in U.S.-China relations, deviating from many of his Republican colleagues.  In discussing caps on greenhouse gases, Gov. Huntsman maintained that the U.S. should support an agreement on climate change with China, viewing any agreement as an economic, exporting opportunity.  The U.S. will become a leader in clean air and energy efficiency industries, industries that he argued would likely dominate the global economy for the next 20 to 40 years.  Unfortunately, Gov. Huntsman did not address the intellectual property concerns of exporting U.S. clean energy technology to China, a thorny issue that will certainly prove tricky in any discussions on climate change.

The nomination of Gov. Huntsman is a telling signal that the Obama Administration perhaps grasps the realities of the new China.  The China today is not the China that existed 30 years ago when the U.S. first normalized relations.  In only the past few years, China has quickly emerged as a global leader with a strong economy, large militarily and significant influence on other countries.   Today, the U.S. negotiates with a power that in many ways is its equal; one that can easily walk away from the negotiating table.  For the next few years, the U.S. and China will have to be able to cooperate on a myriad of tough issues that could impact the future of our world order – climate change, trade, humanitarian crises, currency, terrorism, just to name a few.  It is important to have a representative in Beijing who understands how to effectively negotiate with the Chinese and find common ground between our two nations, but at the same time is willing to stand his ground when our interests diverge, which, at times, will be unavoidable.  Gov. Huntsman, with his knowledge of Chinese culture, language skills, and his courage to buck his own party and accept the nomination, could likely be the best person for the job.

Gov. Huntsman, his wife and the author (on the right) after the confirmation hearing

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By Elizabeth M. Lynch, July 22, 2009

It’s 2015.  The immediate danger of climate change is apparent; rising sea levels in some countries, drought in others; countries on the brink of war due to shortage of food; governments that have existed for more than five centuries are toppling.  In this scenario, how would leaders in the United States, India and China respond?

This is no longer a theoretical question.  In testimony Tuesday before Congress on “Climate Change and Global Security,” Sharon E. Burke of the Center for a New American Security (CNAS), reported on a recent “climate change war game” that CNAS sponsored and which included representatives from the U.S., Europe, China and India.  Similar to war game simulations that countries’ militaries periodically organize, CNAS set up a dire climate change simulation to see how these countries would respond.  Ms. Burke testified that the responses in their simulation have thus far been accurately reflected in the current stalemate among the U.S., China and India.  In CNAS’ climate change game, India staunchly refused to agree to specific targets to carbon emissions, a sentiment that was recently shared with Secretary of State Clinton on her trip to India.  However, the CNAS simulation found that India was willing to negotiate on other issues.  Because they perceived their country as vulnerable to natural disasters, India was willing to concede certain things.  Ms. Burke also commented that the climate change game also showed that concessions made by the U.S., although provide the U.S. greater credibility, were not as important to other countries as the behavior of China.  However, in the simulation, China was not willing to concede to anything unless more developed countries financially supported their efforts.

While the countries in the CNAS climate change game were unable to reach an agreement, Ms. Burke was not willing to give up all hope.  Instead, she urged that the CNAS simulation be used to alter the current negotiations, negotiations that are obviously going nowhere.  The past has shown that the U.S. and China can reach agreement on issues even more complex than climate change (e.g. thermo-nuclear war) but policy makers need to find the commonalities between the two countries.  For China, climate change is a national security issue – currently there is great unrest in China due to environmental damage so they have as much of an interest as the U.S. in reducing the threat of climate change.  In a follow up with Ms. Burke after the hearing, she maintained that negotiators need to find a Plan B; we cannot continue with the current dialogue.  And although Ms. Burke thought that perhaps Plan B will not emerge until after the U.N. Climate Change Conference in Copenhagen, many policy makers have begun to realize that a Plan B is necessary.

To watch a full video of the hearing, please click here (starts at 30 minutes, 22 seconds in).