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By Elizabeth M. Lynch, May 12, 2015

In Part 1 of this three-part series, we analyzed how the draft law will restrict foreign NGOs in China,  In Part 2, we examined how the spirit of the draft law is already being felt.  For Part 1, click here; for Part 2, click here. 

More than a week has passed since the Chinese government published its draft Foreign NGO Management Law.  But yet the world largely remains silent – no word publicly from the foreign NGO community in China, the foreign universities that do work in the Mainland or the foreign governments who often fund NGOs working there.  But in light of the draft law’s potentially disastrous effects, is silence really a good strategy?

We’re One, But We’re Not the Same?  Which Foreign NGOs Will Be Covered by the Draft Law

The draft Foreign NGO Management Law is anything but an example of clarity.  But there are two things we know for sure from the current version: foreign NGOs that have an office in China are covered and foreign NGOs without offices in China that seek to conduct activities there are also covered.  (Art. 6).  We also know that the ultimate authority over all foreign NGOs, whether setting up an office in China or merely conducting activities there, is the Public Security Bureau (PSB) (Arts. 7, 12, 20 & 47).

What is the future of U.S. universities in China?

As China Law Translate notes in its Cheat Sheet for Understanding the Foreign NGO Law, what is a foreign NGO is defined expansively as any “not-for-profit, non-governmental social organization.”  (Art. 2).  Such a broad definition can “include universities, international professional associations and interest groups, artistic groups and athletic associations” in addition to what we view as traditional NGOs like the Red Cross.

Similarly, the term “activity” is left undefined, allowing it to encompass anything.  However, even those foreign NGOs without an office in China will be required to establish a relationship with a Chinese partner in order to obtain a temporary activity permit to perform any work in China.  (Arts. 18-20).  The entire process can take 60 days or more, depending how easy it is to establish a relationship with a Chinese partner.  (Art. 20 & 22).  Will Doctors Without Borders have to apply for a temporary activity permit before responding to a medical emergency in China?  Under the current, vague draft, yes.

Universities are also covered under the current draft law.  It is that fact that has alarmed many Chinese scholars who realize that academic exchanges will be negatively impacted by the current, vague draft.

Ultimately, under the proposed draft Foreign NGO Management Law these terms will all be defined by the PSB.  And changed as the PSB sees politically expedient.

Well We Hurt Each Other Then We Do it Again?  Universities and Foreign NGOs Need to Stand Together

As Thomas Carothers and Saskia Brechenmacher highlight in their report Closing Space: Democracy and Human Rights Support Under Fire, governments seeking to limit foreign NGOs are “skillful at dividing and conquering the international aid community.” Is the Chinese government hoping that some foreign aid organizations will not oppose the draft law, eager to curry favor so that they can continue their work in China?

But with the amorphous definition of a foreign NGO under the draft law, that is a dangerous strategy for any foreign NGO with either offices in China or that just conducts activities there.  Almost all NGOs are covered under the current definition and that is why it is important that the foreign NGO community, including universities, stand as one in commenting and opposing the current draft.

Universities and major non-profits have an even greater responsibility to publicly comment on the proposed draft law.  In the current environment in China, not all foreign NGOs are equal.  The Rights Practice, which just had one of its staff members deported from China, likely does not have the same credibility before the current Chinese regime as the Gates Foundation, NRDC,  or Save the Children, which in January hosted President Xi Jinping at one of its spaces in Yunnan.  These are organizations that have long supported Chinese civil society actors  in benefiting the Chinese people.  It is important that these major NGOs continue to support civil society in its entirety, not just those sectors that the PSB presently approves.  Further, these major NGO’s do not know when their own work will imperil them with the PSB and thus, could find themselves subject to the harsh, vague provisions of the current draft Foreign NGO Management Law.  Five years ago, who would have thought that a group of individuals with hepatitis seeking to end discrimination would be considered a threat.  But that is where Yirenping finds itself today.

U.S. and European universities have the best footing to comment on the draft Foreign NGO Management Law.  These universities likely have thousands of academic exchanges – covering law, science, engineering, medicine – exchanges where the Chinese university likely derives tremendous benefit.  Even with the growing police state, the Chinese government probably does not want to risk losing even some of these beneficial relationships.

It is imperative that these major foreign NGOs and universities stand with those foreign NGOs that are the current target of the law and openly comment on the draft law.  Is the Gates Foundation really going to be kicked out of China?  Is UC Berkeley’s Engineering School?

You Give Me Nothing Now It’s All I Got: Where is the White House on All of This?

REUTERS/Larry Downing

Last Friday, U.S. President Barack Obama recognized that if the we don’t write the rules, China will.  Unfortunately, for the non-profit world, Obama limited that rule-writing to trade issues and support for his Trans-Pacific Partnership.

It is time that the White House recognize that with China, there are more rules out there than those that directly govern trade.  The Obama Administration has allowed too many non-trade issues – U.S. journalist visas, now foreign NGOs – to receive scant attention as a U.S.-China policy matter.  With the U.S. abandoning these issues, China is writing the rules in these important areas, and these will be rules that other countries will copy.

But the Administration is not without recourse.  It too can submit comments on the draft law and should. When U.S. technology companies appeared to be negatively impacted by China’s draft Counter-Terrorism Law published late last year, Obama made his displeasure publicly known.  There is no reason to why he cannot do the same with the draft Foreign NGO Management Law. And comments from the Administration can no longer be relegated to a State Department spokesperson.  If there is anything to be learned from the handling of the U.S. journalist visa issue with the Chinese government, a State Department spokesperson is not going to cut it when dealing with the world’s second largest economy.  It wasn’t until Vice President Joseph Biden visited China in December 2013 and publicly raised the U.S. journalist visa hold-up, did China start taking the issue seriously.  Soon after, U.S. journalists’ visas were renewed.

China’s pollution – coming to U.S. shores

Although the Obama Administration should oppose the draft Foreign NGO Management Law on the grounds that its radical clampdown on civil society is anathema to the interest of the Chinese people, opposition can also be tied to trade.  Chinese domestic civil society groups often deal with the flipside of  free trade – environmental degradation, workplace justice, product safety.  And these are issues that are increasingly coming to our shores: air pollution from China now reaches California; unsafe products made in China are sold in the United States.  Chinese NGOs seek to enforce environmental regulation and product safety laws.  Although their goal is to protect the Chinese people from the harms of unregulated capitalism, a side benefit of Chinese NGOs’ success accrues to the American people.  California becomes cleaner and U.S. citizens fear Chinese goods less.  But if the draft Foreign NGO Management Law is passed in its current form, an important lifeline of Chinese civil society – the foreign NGO – will potentially be cut off. To ensure a balanced trade relationship with China, the Obama Administration must comment on the current draft law.  One opportunity is right around the corner: the annual U.S.-China Strategic and Economic Dialogue to be held this June in Washington, D.C..  The draft Foreign NGO Management Law, and the important role civil society plays in a free trade world should be on the agenda.

Finally, the increasingly unbridled power of the public security apparatus, evident in the draft Foreign NGO Management Law as well as the draft National Security Law, which was published only days after the NGO law, should frighten any entity that deals with China – be it a not-for-profit, a business or the U.S. government.  To ignore that development and to believe that the supremacy of the PSB is somehow limited to civil society issues is to do so at the peril of all of the United States’ interests in Asia, including business and military interests.

Like foreign NGOs and universities, the United States government has the opportunity to comment on the draft Foreign NGO Management Law and should do so.  Ironically, the comment period closes on June 4, 2015, the anniversary of the 1989 Tiananmen massacre.

Would you like to make your comment public on China Law & Policy?  Please email us at info@chinalawandpolicy.com with your agency’s comment and we will publish it (assuming it is related to the topic and is family-friendly).
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This concludes China Law & Policy’s three-part series on China’s draft Foreign NGO Management Law.  To read Part I where we analyzed how the draft law will restrict foreign NGOs in China, click here.  To read Part 2 where we examined how the spirit of the draft law is already being felt, click here. 

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By Elizabeth M. Lynch, February 9, 2014

New York Times journalist Austin Ramzy

Last month, while another U.S. journalist was packing his bags, forced to leave China, the U.S. Senate was poised to hold the confirmation hearing for Max Baucus, the Administration’s nominee to replace Gary Locke as ambassador to China.  You would think that central to the Baucus hearing would be the issue of journalist visas, or at least it would be mentioned by the candidate himself as a troubling development.  But you would be wrong.   Instead, after a December where the issue of U.S. journalists in China reached crisis level, Congress reverted to its shortsighted old ways, barely even raising the issue.

But, as the recent expulsion of the U.S. journalist clearly demonstrates, such a lackadaisical approach is increasingly dangerous as the Chinese government attempts to develop a more sophisticated response to try to maintain control of foreign journalists and U.S. media outlets through the visa process.

New York Times Reporter Austin Ramzy Effectively Expelled from China

For ten years, Austin Ramzy diligently covered Asia and China for Time Magazine, first out of Hong Kong and then since 2007, out of Beijing.  While his pieces were thought-provoking for a Western audience, they were hardly the type that would illicit anger from the Chinese government.  There were no articles exposing government officials’ vast wealth and while Ramzy did report on certain human rights issues in China, those articles were interspersed among other more general pieces.  In other words, he was likely not on the Chinese government’s target list in terms of renewing a visa.

But Ramzy’s status changed when, in April 2013, he took a job with the New York Times.  Since October 2012, when it published a Pulitzer-Prize

Former Premier Wen Jiabao

winning series on former premier Wen Jiabao’s questionable role in his family’s lucrative business holdings, the New York Times has become the Chinese government’s Enemy Number One.  Its website, including the Chinese-language portion, has been blocked in China, its U.S. website allegedly hacked from China, and every December, when it comes time to renew their visas, the New York Times China correspondents have faced excessive delays and effective expulsion.  The New York Times Fall 2013 coverage of the U.S. investigation into J.P. Morgan’s cushy ties with the children of China’s government elite, including the daughter of Wen, likely did not help its situation.

Ramzy’s visa troubles began almost as soon as he started working for the Times.  Although Ramzy had a journalist visa good through the end of December 2013, because he switched employer, under Chinese law, Ramzy was required to first apply for a new press card with the Chinese Ministry of Foreign Affairs (“MOFA”).  Once issued, Ramzy then, with his new press card, would be required to apply for a new journalist visa and residency permit with the Public Security Bureau (“PSB”) to reflect his new employer (see Regulations on News Coverage by Permanent Offices of Foreign Media Organizations and Foreign Journalists -“Foreign Media Regs” – Art. 10).

But, according to a source familiar with the matter, MOFA began giving Ramzy a hard time from the beginning.  For two months, the Beijing MOFA office refused to accept his press card application, informing him first that he would have to apply through Hong Kong, and then informing him that it would have to be through the New York consulate.  However, Article 10 of the Foreign Media Regs clearly states that the application can be made within China and directly to MOFA.

As the source told China Law & Policy, it was not until June 2013, two months later, that MOFA finally accepted his press card application.  But MOFA would sit on Ramzy’s application, and come December 2013, Ramzy was part of the New York Times contingent that was almost effectively expelled en mass when MOFA failed to process any Times correspondents’ press card applications and renewals.

Photo from Ramzy’s Twitter feed showing that he had mostly packed his things

While the pressure from the Obama Administration, in particular Biden’s December visit to Beijing where he publicly raised the issue, appeared to have averted the de facto closure of the Times‘ China bureaus, Ramzy seems to be the lone casualty.  Ramzy’s vulnerability likely came from the fact that he was the only New York Times correspondent who was hired in the middle of the year.  For some reason, MOFA processes “new” applications for a press card with a news agency differently than a mere renewal of the press card for a reporter that continues to work for the same news agency.  This is what happened to New York Times correspondent Chris Buckley the year before.  Like Ramzy, Buckley took a job with the Times in October 2012 but MOFA failed to process his press card.  When his prior journalist visa and residency permit expired on December 31, 2012, Buckley was forced to leave China.  For the past year he has been reporting for the Times from Hong Kong while MOFA allegedly is still processing his press card application.

Similarly, by the end of this December, without a press card, Ramzy was unable to apply for a new journalist visa.  His prior visa and residency permit was set to expire on December 31, 2013.  At the end of December, MOFA provided Ramzy with a one-month “humanitarian” visa so that after seven years, he could pack up his life and leave.  On January 30, 2014, Ramzy left Beijing and relocated to Taipei, Taiwan to cover China from there.

Stronger Response from Both the US & China

With his departure, the White House issued a strong statement, condemning China on Ramzy’s effective expulsion.  This was a marked departure from the White House’s prior strategy of silence when other U.S. reporters were effectively expelled or banned from reporting from China (Melissa Chan in 2012, Philip Pan in 2012, Andrew Higgins from 2009 to 2012 and Paul Mooney in 2013).

But the U.S. was not the only country with a changed strategy.  For all of these prior expulsions and bans, the Chinese government has never

MOFA spokesperson Qin Gang

provided a specific reason for its delay or denial.  But in Ramzy’s case, the Monday before his departure, MOFA spokesperson Qin Gang addressed the issue and tried to put a fig leaf of legality over the situation.  While Qin implied that MOFA was still processing Ramzy’s press card application, he accused Ramzy of violating Chinese regulations because he continued to enter and leave China on his old visa connected to his prior employer and never applied for a new visa or residence permit.

Qin was correct that Ramzy did not apply for a new visa and residence permit once he took the job with the Times, but that was not a willful act.  For a journalist visa and residency permit, part of the application is submission of a valid press card (Foreign Media Regs, Art. 10).  Here Ramzy was not able to apply for a new visa where MOFA was sitting on his application for a new press card, failing to process it.

Regardless of that fact, the law does not require Ramzy to apply for a different type of visa (presumably a non-journalist one) while waiting on a new press card.  The only time that a journalist must apply for a different type of visa to remain in China is if his press card has been “canceled,” a decision that must be made public (Foreign Media Regs., Art. 14).  Here, Ramzy’s prior press card was not cancelled; rather he was applying for a replacement.*  Nowhere in the Foreign Media Regs is there a requirement that a journalist change his visa type while waiting on a replacement press card.

Finally, China’s Exit-Entry Administration Law permits a foreign resident to stay in China to expiration of a prior residence permit even when a new one is denied: “[I]f an extension is denied, the foreigner concerned shall leave China on the expiry of the validity period specified in their residence permits” (Exit-Entry Administration Law, Art. 32).

Ramzy was within the law in entering and exiting China on his prior visa while waiting on his press card.  But MOFA’s citation to the law, even if inaccurate, is an interesting development and not restricted to foreign journalist visas.  Rather, it has been a trend in dealing with criticism from abroad.  An examination of how the Chinese government has dealt with public interest lawyers shows a government increasingly using the law – even if only a fig leaf – to explain its suppression of dissent.  The Chinese government has come to realize that the rhetoric of law is often an effective defense and silencing device in dealing with the West.

The Danger of the Senate’s Silence

It is this more sophisticated response that should put the U.S. government on warning that Beijing does not intend to back down in toying with

The Baucus Senate Confirmation Hearing – Why Bother?

foreign journalists visas.  That is why the absence of this issue during the Baucus hearing was a dangerous disappointment.  During the hour and a half session, not a single Senator specifically asked what Baucus intended to do about this issue.  Instead, the hearing descended into the verbal embodiment of a high school social studies essay on the “interconnectedness” of the world, how they are like us, and with Baucus addressing human rights only superficially, stating that its protection “is the bedrock of American society.”

By not focusing on the issue of journalists visas during the hearing, Congress has effectively signaled to Beijing that it can go back to the status quo; the Senate is too concerned with how to sell beef in China to pay attention  to one journalist unable to stay there.  This is certainly a missed opportunity because if there is one thing the Chinese government does not understand and fears as a result, it is Congress.  Even if five minutes of the hearing addressed the issue, that might have given the Chinese government food for thought.

And it would also have been useful for Americans to know what Baucus’ strategy will be.  As Ambassador, Baucus will have a lot of power to determine if there should be a policy of visa reciprocity.  Does he think that is an appropriate approach?  Does he think there are other ways to deal with this issue?  How public will he be when the Chinese government again trifles with a U.S. journalist’s visa?

The U.S. government – both Congress and the Administration – cannot allow this issue to slip into the background.  While the White House should be commended for issuing a statement on Ramzy’s expulsion, it needs to use every opportunity to remind the Chinese government that this is a key issue.  Just stating it is not enough.  Last week, when Daniel Russell, Assistant Secretary of the Bureau of East Asia and Pacific Affairs at the State Department held a press conference, two reporters in the audience were from Chinese government-run media outlets.  Perhaps starting the press conference with a comment about how the U.S. allows a free foreign vis-a-vis China might demonstrate just how important the issue is to the current Administration.

Goodbye New York Times?

Consistent pressure on the Chinese government from all parts of government must continue until Pan, Buckley, and Ramzy’s visa applications are processed.  Back in December, when it looked like the New York Times and the Bloomberg China bureaus would effectively close, the U.S. government was able focus its resources and pressure China to renew the correspondents’ visas.  But here, the danger is no different.  Where the New York Times is unable to get a new press card for any new employees in China, it will be unable to replace its current correspondents.  How long can David Barboza, 10 years in China and Ed Wong, six years, stay there?  It might be a slow death for the Times‘ China offices, but, unless something changes, its end inevitable

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* After publication of this post on February 9, 2014, it was brought to my attention that Ramzy’s prior press card with Time Magazine could have been “cancelled” under Chinese law and that Article 14 might apply to him.  A correction in the form of a new post can be found here.  Apologies in advance.  — EML

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By Elizabeth M. Lynch, May 18, 2012

Chen Guangcheng, entering a Beijing Hospital with US Ambassaor Gary Locke and State Dep't Legal Advisor Harold Koh

More often than not, I am my friends’ go-to China person; something in the news pops up with China, I get the questions.  So I wasn’t surprised on Saturday when over some carrot cake at the Chelsea Market a friend of mine had questions about Chen Guangcheng: if he cared so much about human rights in China, why would he leave?  What is up with the Chinese government, keeping a blind man trapped in his own home?  How did things get so messy between the U.S. government and Chen?

It’s been almost a month since Chen fled the home that illegally became his prison. So what exactly is up with Chen’s escape and to answer some questions – what does it all mean?

Chen’s Escape Has Propelled Human Rights to the Top of the US-China Agenda

My friend’s question on Saturday caught me off guard – does Chen really care about human rights in China if he fled to the protection of the U.S. Embassy, ostensibly to seek asylum and leave China.

To ask a man with a wife and two children to be a martyr for his cause is asking too much.  As this blog has recounted previously, since Chen’s release from prison (oddly convicted of a traffic disturbance) did not result in freedom.  Instead, for the past year and a half, Chen and his family have been subjected to illegal house arrest and at times, physical torture by his captures.

It is true that by departing China, Chen’s ability to change China’s current system will be much reduced if not extinguished.  But his heroic flight has perhaps done more to highlight the Chinese government’s recent illegal oppression of dissent than anything else.  Over the past year and a half, this blog has increasingly written about the Chinese government’s crackdown on China’s nascent rights defending (weiquan) lawyers. Aside from people already interested in the issues, these posts – and the acts of repression which they have focused on – have received little attention.

Chen’s escape and his subsequent stay at the U.S. Embassy  altered this focus. With Hillary Clinton arriving for the Strategic and Economic

Inspiring Architecture? The US Embassy in Beijing

Dialogue (S&ED), the focus of U.S.-China relations shifted to human rights.  For one week, as the world watched, the U.S. and China’s relationship was thrown back to a 1980s-Cold War paradigm, when ideology played a more governing role.  For one week, the Western media’s attention finally focused on the repression of rights defending lawyers, and the lip service the Chinese government gives “rule of law” when it comes to civil rights and civil liberties.

It is amazing that a single man’s act, that one blind man’s heroic act, can still change the dialogue in U.S.-China relations.  It is a hopeful reminder that in this globalized world, individuals still matter; that one man’s quest for freedom is still “news.”  And don’t think Chen’s act was not a heroic one.  Not only was a blind man able to find his way to Beijing, but imagine if he wasn’t; imagine if he was caught.  Likely his fate would match that of Gao Zhisheng, a rights defending lawyer who, while in government custody, remains missing.

The U.S. Government’s Actions Supported Human Rights

Some have criticized the U.S. government – or more aptly, the Obama Administration – for its dealings with the Chinese government over Chen.  Initially, the U.S. Embassy worked out a deal with the Chinese government whereby Chen would stay in China, study law at a university in a coastal city away from the thugs of his hometown, and be left alone with his family.  This was what Chen initially wanted.

But once he left the safety of the embassy for a Beijing hospital, Chen began to reconsider his options.  As Prof. Jerome A. Cohen recounted to CNN, the promised U.S. Embassy official was unable to stay with Chen at the hospital and once he began speaking other rights defending lawyers – friends he hadn’t been able to speak to for a year – he began to more clearly understand the increased oppression of rights defending lawyers in China.  Chen was scared; Chen realized that without full information, he misjudged the situation.  That’s when he vocally requested that he be able to leave China for the United States.

Were some in the U.S. Embassy a touch too naive to rely on the Chinese government’s promises?  Most likely.  But being naive is not the same as turning one’s back to human rights.  It was Secretary of State Hillary Clinton’s decision to allow Chen into the U.S. Embassy in the first place.  Chinese citizens cannot just willy-nilly enter the U.S. Embassy; even American citizens are allowed limited access to their embassy (which resembles a high-security prison).  As the N.Y. Times has recounted, embassy officials were notified of Chen’s flight to Beijing and on April 25, Secretary Clinton gave the authorization to sneak Chen into the embassy compound.  Secretary Clinton knew full well that by providing that approval, a throw-down with the Chinese government on the issue of human rights was certain and the ultimate outcome unclear. It is unfortunate – although not all together shocking given the current acrimonious status of politics – that Washington D.C. cannot view this moment as a proud one for America and its ideals; that the web of support that both parties have built for a human rights network in China over the years enabled Chen to come to our door.   Instead, it appears that what could otherwise be a proud moment for Americans, is becoming a political tug-of-war.

Who is Driving the Bus? The Chinese Central Government’s Lack of Control

Beep Beep! Who drives this bus??

What is perhaps the most shocking of all from this whole situation is the Chinese central government’s lack of control of local governments. Chen’s persecution has largely been conducted by the local government in his hometown, with local government officials still seething after his attempt to bring a lawsuit against them for forced abortions.  But even when Chen fled to Beijing, his safety could not be guaranteed, hence his changed desire to leave for the United States.  Many of his relatives left in their villages are being persecuted by local officials.  It makes one wonder – who really drives the bus in China?

Imagine a United States where Governor George Wallace could ignore federal law, have his way and continue segregation in his home state of Alabama.  Likely you can’t.  It’s unfathomable to think that a national government is unable to enforce its own laws, and in the case of China, that a supposed authoritarian dictatorship cannot control lower level party members.

Chen’s case reflects a center weaker than anyone previously thought.  And that is what is most frightening and should give people pause.  Does China really have the power to become a rising superpower or will it revert to its warlord past, where each city is governed by its own power broker and the central government remains impotent?

While China’s weakness appears to manifest itself often in human rights issues, it should not be just a concern for human rights advocates.  Anyone working in or with China – business people, government officials – should be troubled.  A weak center, especially as China undergoes an important leadership transition this year, does not bode well for China.

Prof. Jerome Cohen – The Fixer

On a final note, I want to focus on Prof. Jerome Cohen and his role in all of this.  As a research fellow for two years, I had the privilege of working

Prof. Jerome A. Cohen

with Prof. Cohen at NYU’s U.S.-Asia Law Institute.  In that time, I got to know a kind, brilliant man who never ceased to amaze me.  It was Prof. Cohen who first identified the ingenuity and necessity of Chen’s unschooled, “barefoot lawyer” approach in 2003 and deservedly catapulted him to the world stage.

While my two years with Prof. Cohen were filled with inspiring moments, I have never been more proud of him than I was with his handling of the Chen Guangcheng situation.  While this is all purely based on hearsay, it appears that it was Prof.  Cohen who got the U.S. and China out of what was becoming a crisis situation.  Prof. Cohen’s lifetime of experience with China, including high-level delegations soon after Nixon’s visit to China in 1972, allowed him to realize that all that was needed was a practical solution where everyone could save face: a scholarship for Chen to study law at NYU’s U.S.-Asia Law Institute and invitation for his wife and children to join him.

Now we wait and see.  The United States has approved Chen’s visa application and just yesterday he applied for his Chinese passport.  Although the Chinese government could renege on the deal, that looks increasingly less likely and ultimately not in their best interest.  It’s never a satisfying moment when one of your citizens essentially seeks protection from a foreign government for human rights abuses, but on some level, the Chinese government is likely happy that Chen, who has long been a rabble rouser and a cause célèbre for other Chinese rights defenders and foreign friends, is leaving the country.  Unfortunately for Chen and his family, he will likely never be able to return to his home country.

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By Elizabeth M. Lynch, January 13, 2011

I used to think I was the only one who noticed the huge, weird, angry sign “Trenton Makes the World Takes” plastered on the Delaware Bridge just outside the New Jersey city of Trenton.  So imagine my surprise when this slogan was featured in Commerce Secretary Gary Locke’s speech about U.S.-China relations before the U.S.-China Business Council (USCBC) on Thursday.  For Locke, the manufacturing center of Trenton during the early 20^th Century is China today; it’s China that now makes and the world takes.

But the status quo must change Locke argued.  While noting some successful U.S.-China commercial relations, Locke raised the issue of market access in China, particularly in light of China’s indigenous innovation policies and its lax protection of intellectual property (which makes one wonder why didn’t he continue to play with the Trenton theme and say “China makes AND takes”; that would have elicited laughs from the USCBC for sure),  Between Locke’s speech, reprinted below, and Treasury Secretary Tim Geithner’s speech Wednesday, there is some serious saber-rattling coming from the American delegation in preparation of President Hu Jintao’s State visit next week.

Commerce Secretary Gary Locke Delivers Policy Speech

on U.S.-China Commercial Relations

Thank you John, for that kind introduction.  And thank you for having me here today.

We are today less than a week away from an important State visit by Chinese President Hu Jintao.

More than two decades ago, on my first trip to mainland China, I could not imagine that the U.S.-China relationship would eventually become so consequential.

Nor could I have imagined a scene like we witnessed a few days ago: Defense Secretary Gates joining together with his Chinese counterpart to stress the need for stronger military ties between China and the United States.

In 1989, I came in from Shanghai’s airport on a rickety, Russian-made bus, and stepped into that city’s dimly lit streets into a world very different than the one I left in the U.S.

There were swarms of bicycles – young men with their dates balanced on handlebars, grandparents pedaling to the market, boys and girls with white-knuckle grips on their parents’ shoulders. Bikes everywhere.

Shanghai then was a gritty, industrial city filled with low-rise buildings.

There were no skyscrapers. Few cars.

There was little sign of what was to come.

Today, Shanghai’s skyline is dotted by more than 400 skyscrapers.  Go to the Shanghai World Financial Center – one of the tallest buildings in the world – and you can stay at a Park Hyatt Hotel with a lobby on the 79^th floor.

Those bike paths I saw on my first visit have been replaced by elevated freeways shuttling people and commerce at a frenetic pace.

To see it is to be awed, and I am every time I go back to China.

The explosive growth in places like Shanghai has helped lift almost 200 million people out of poverty.  In the years ahead, hundreds of millions more Chinese citizens will join the middle class.

The United States welcomes this growth, because it’s good for the people of China; it’s good for the global economy; and it’s important for U.S. companies who offer world-class products and service, products and services that can improve the quality of life for the Chinese, while providing jobs for American workers back home.

With the U.S.-China Business Council’s help, this has become perhaps the most important bilateral trading relationship in the world.

China is the top destination for American exports, behind just Canada and Mexico.  And America is the number one national market for Chinese exports.

In the past 20 years, U.S. exports to China have increased by a factor of 12; imports from China have increased more than 30-fold.

However, we are at a turning point in the U.S.-China economic partnership.  Last year, China became the second largest economy in the world.  And the policies and practices that have shaped our relations over the past few decades will not suffice over the next few decades.

So today, I’d like to talk a bit about how we can move forward and ensure that we can unlock the full potential of the U.S.-China commercial relationship in the early 21^st century.

The gross trade imbalances between our countries are a good place to start, because they have the potential to threaten global stability and prosperity.

And I think a great illustration of that can be found in, of all places, Trenton, New Jersey.

Many of you have likely taken Amtrak up to New York, and when you pass by the Delaware River in New Jersey, you see that famous sign: Trenton Makes and the World Takes.

Well, replace Trenton with China, and you have a simplistic, but pretty accurate description of the global economy over the last few decades.

China and the United States benefited tremendously from this arrangement in recent years.

American consumers got an impressive array of low-cost goods.  And in its transition into one of the world’s top exporters, China was able to lift millions of its citizens into a fast-growing middle class.

But it’s not sustainable.  The debt-fueled consumption binge in developed countries like America is over.

And countries like China are beginning to realize that there are limits to purely export-driven growth.

That’s why we need a more equitable commercial relationship.  And it is within our reach.

The United States is doing its part to facilitate global adjustments by increasing private savings and exports, as well as taking steps to bring down its long-term fiscal deficits to a sustainable level.

And the Chinese leadership is making the rebalancing of its economy one of the cornerstones of its forthcoming five-year plan.

China is aiming to promote domestic consumption through a variety of measures, such as boosting the minimum wage for its workers and building an improved social safety net. Changes like these will hasten the rise of a middle class that wants the same cars, appliances, fashion, medical care and other amenities that have long been enjoyed by consumers in the Western world.

The Chinese government is also putting an intensive focus on strategic emerging industries, with more high-value work in areas like healthcare, energy and high technology.

And the Chinese have signaled that they want foreign businesses to help develop these sectors by entering joint ventures and by conducting more research and development in China.

This is assistance that U.S. companies are eager to provide, so long as China deals meaningfully with concerns about intellectual property protection, as well as a variety of other issues I will talk about later.

Such cooperative projects can serve as the foundation for a stronger economic relationship between China and the U.S.

But China’s long-term success at addressing the concerns of international businesses will help determine whether it realizes its economic vision – a vision in which China is a leader in innovation and a producer of higher-value goods and services.

Here’s the good news: we are already seeing examples of just how this future could play out, as our businesses and our governments collaborate to tackle some of the world’s greatest challenges.

Just look at what’s happening with the new Energy Cooperation Program that Secretary Chu and I announced while in China in October 2009 to promote more collaboration between Chinese and American companies on energy issues.  One of the founding corporate members of the program, Boeing, is partnering with Air China and Petro China to research a new generation of aviation biofuels that don’t rely on food crops.

If this venture is successful, it could reduce the carbon footprint of airplane travel, and avoid the negative impact that other biofuels have on the global food supply.

Or look at what’s happening with Duke Energy, one of America’s leading utilities, which has signed an agreement for joint research with China’s largest energy company, Huaneng, and with the Chinese government’s Thermal Power Research Institute.

Today, there are scientists and researchers shuttling between the companies and the research institute, working to develop cutting-edge solutions for cleaner-burning coal and carbon sequestration.

The Chinese and American governments are also working together on a variety of transportation issues, including how to spur the deployment of more high-speed rail.  China has embraced high-speed rail and has developed its infrastructure at a tremendous rate.  Starting from scratch, China has constructed and put into service over 4,000 miles of high-speed routes in the last decade – making China’s the longest high-speed rail network in the world.

In meetings last year, officials and experts from the Department of Transportation and China’s Railway Ministry met in Cambridge, Massachusetts, to share information on the development of high-speed rail standards.  And at the state level, the Chinese government has signed cooperation agreements with the State of California on its high-speed rail project to link Anaheim and San Francisco.

There is, however, a sobering side to U.S.-China commercial relations: For every story like Duke Energy’s or Boeing’s, there are many more that are never written.

When I talk to business leaders across America, they continue to express significant concerns – shared by business around the world –about the commercial environment in China – especially China’s lax intellectual property protection and enforcement, lack of transparency in government decision-making and numerous indigenous innovation policies that often preclude foreign companies from vying for Chinese government contracts.  These policies mandate that products must be made, conceived and designed in China.

It’s important to note that since China formally joined the WTO nine years ago, it has made important progress opening its market.  Tariffs have come down, private property rights are steadily evolving and great strides have been made to free the flow of commerce across China’s borders.

On balance, the competitive playing field in China is fairer to foreign firms that it was a decade ago.  And we commend the Chinese for that.

It is also not lost on countries in the West that on our march towards industrialization, we sometimes protected native industries with policies that today would mobilize an army of WTO lawyers in opposition.

But those policies were folly then, and they are surely folly now.  After World War II, the United States and a growing community of nations painstakingly built a global trading system based on the freer flow of goods, ideas and services across borders.

And the creation of the World Trade Organization in 1995 ensured that countries would be held accountable for their commitments to open markets and lower barriers.

China has benefited tremendously from this international trading system, especially since it joined the WTO in 2001.  The United States and other foreign nations have every right to seek more meaningful commitment and progress from China in implementing the market-opening policies it agreed to when it joined the WTO.

From our experience, there are usually five things that need to happen to turn these promises into reality.

It starts with the easiest step: a statement of principle from Chinese officials that action will be taken to solve a market access issue.

Next, that agreement has to be codified into binding law or regulations.

Third, the law or regulation needs to be faithfully implemented by the central government.

And fourth, it needs to be implemented at the local and provincial levels.

Only after all these things have happened can you arrive at the fifth, final and most important step, which is where this new law or regulation becomes a norm – an accepted way of doing business in China’s commercial culture.

When it comes to indigenous innovation, intellectual property or a variety of other market-access issues, an enduring frustration is that in too many cases only the earliest steps are taken, but not all five.

Perhaps an agreement is made, but it never becomes binding.  Or perhaps there’s a well-written law or regulation at the national level, but there’s lax enforcement at the provincial or city level.

A few weeks ago, the Commerce Department and the office of the U.S. Trade Representative welcomed Vice Premier Wang Qishan and other leading Chinese officials for the 21st Joint Commission on Commerce and Trade, where we worked through a variety of specific trade issues.

It was a productive meeting.  Vice Premier Wang and his team were responsive to our concerns and they pledged action in a variety of areas critical to American businesses.

They agreed to remove administrative and regulatory barriers discriminating against American companies selling everything from industrial machinery and telecom devices; to those that restrict U.S. participation in the development of large-scale wind farms in China.

They also agreed to revise one of their major government procurement catalogues to ensure a level playing field for foreign suppliers and to reduce the use of counterfeit software in government offices and state-owned enterprises.

Additionally, Vice Premier Wang asked the Commerce Department and the U.S. Trade Representative to partner with him on a public campaign to reduce intellectual property rights violations in China, which he is leading.

The American government welcomes these commitments from China.

But to be clear, they are only a first step.  What was agreed to at the JCCT were important statements of principle and policy – but they must be turned into concrete action with results.

Take last year’s JCCT, when the Chinese agreed to remove a local content requirement for wind turbine suppliers – a positive step forward.

But soon after, China’s government employed a rule that required foreign businesses seeking to build large scale wind farms in China to have prior experience with such projects in China.  The rule might have been different than the local content requirement, but it had the same effect – making it tougher for foreign companies to compete with China’s domestic companies.

At this year’s JCCT, we persuaded the Chinese to modify that rule as well.

Or look at the issue of intellectual property. We have heard Chinese leaders condemn IP-theft in the strongest terms, and we’ve seen central government laws and regulations written or amended to reflect that sentiment.

But American and other foreign companies, in industries ranging from pharmaceuticals and biotechnology to entertainment, still lose billions of dollars from counterfeiting and IP-theft in China every year.

For example, in the United States, for every $1 in computer hardware sales there is about 88 cents in software sales.  But in China, for every dollar in hardware sales there is only eight cents in software sales.

According to the Business Software Alliance, that discrepancy is largely explained by the fact that nearly 80 percent of the software used on computers in China is counterfeit.

So America welcomes Vice Premier Wang’s pledge to accelerate China’s crackdown on intellectual property violations.  And China will have a very willing partner in this endeavor in the United States.  But we will be focused on meaningful outcomes.

I recognize I’m not the first foreign official to express concern over the commercial environment in China.  But it would be a mistake to portray this concern solely as U.S. self-interest masquerading as advice.

The Chinese economy is increasingly moving up the global economic value chain, where growth is created not just by the power of a country’s industrial might, but also by the power of its people’s ideas and their inventions.

In the long run, economies with poor intellectual property protections and inconsistent application of market access laws will lose out on generating great new ideas and technologies.  And they’ll lose out on the jobs that come with producing new products – jobs critical to an expanding middle class.

The damage won’t happen overnight.  I freely admit that companies and countries can gain short-term advantages from lax rules in the commercial space.

But over time, if innovators fear that their inventions or ideas will be stolen or discriminated against, one of two things will happen – they’ll either stop inventing, or they’ll decide to create or sell their inventions elsewhere.

Ultimately, all that the United States seeks is a level playing field for its companies, where the cost and quality of their products determines whether or not they win business.

That is the ideal we strive for in the United States.

And our commitment to open and competitive markets is a big reason why we remain the number one destination for foreign direct investment in the world.

We understand that China’s modernization and evolution towards a more market-oriented economy is a process that will take time.

China has 1.3 billion people.  Seven hundred million of them still live in rural areas; many with little electricity or running water.  It took the United States over 100 years to build the electrical transmission capacity it has today.

To meet the rising demands of its own consumers, China will have to build a similar amount of capacity in just 15 years.

These are enormous undertakings.  And it’s understandable if, in the past, China’s immediate development goals took precedence over other concerns.

With millions of Chinese coming in from the countryside looking for work, it isn’t necessarily an easy decision to close down a factory producing counterfeit goods, when that factory is providing badly needed jobs.

So what we’re discussing here are real and significant challenges. For market reforms to continue, it will take constant vigilance – not just from the United States, but from all countries and businesses around the world that benefit from rules-based trading.  And from Chinese business and government leaders, who themselves have a strong stake in ensuring that China is friendly to global innovation and international competition.

In front of us is the opportunity for China and the United States to lead the world economy in the early 21st century to create a new foundation for sustainable growth for years to come.

We can’t tell exactly what that future will look like.

But we can be certain that it will be a better future if the Chinese and American governments pursue cooperation over confrontation in the economic sphere.

Cooperation that will put millions of our people to work.

Cooperation that will develop technologies to solve the most pressing environmental, economic and social challenges facing the world today.

This is the great opportunity before China and the United States.  We just have to seize it.

Thank you.

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By Elizabeth M. Lynch, December 27, 2010

With President Hu Jintao set to make an official State visit to the U.S. next month, expect an increase in op-eds concerning violations of human rights in China and the demand that President Obama raise human rights issues with President Hu.  These op-eds usually name particular human rights activists, those who have been at it the longest and whose regular imprisonment and abuse make the international news.  Teng Biao is one such human rights lawyer who receives international attention whenever the Chinese police take him into custody, which, unfortunately, is a fairly regular occurrence.

In a recent essay translated in the Wall Street Journal, Prof. Teng recounts the wrongful detention and police brutality he suffered on December 23, 2010, when attempting to visit a colleague’s mother.  But what makes Prof. Teng’s essay particularly poignant is that he admits that because of his special status as an internationally-known human rights lawyer, the beatings he suffers at the hands of the police are much less severe than someone with less international name recognition.

The op-eds that will inevitably appear prior to President Hu’s visit to the U.S. should not just call for the freedom of a single human rights activist; rather it is important that these op-eds also look at the systemic problems with the culture of lawlessness that permeates the Chinese police and the lack of a rule of law.  Prof. Teng portrays a police force drunk on its own power and willing to cast aside the law to do as it pleases, including abusing its citizens.

‘A Hole to Bury You’
A first-hand account of how China’s police treats the citizens it’s supposed to serve and protect.

Human Rights lawyer, Teng Biao

By Teng Biao*

Beijing – On Dec. 23, the United Nations International Convention for the Protection of All Persons From Forced Disappearance came into force. China has declined to accede to this convention. My experience that same day is just one of many examples of how the authorities continue to falsely imprison Chinese citizens.

That evening, I was in the Xizhimen area of Beijing chatting with my colleagues Piao Xiang, Xu Zhiyong and Zhang Yongpan. Ms. Piao had been disappeared after she and I went to Dandong on Oct. 7 to argue the court case of Leng Guoquan, a man framed by the police for drug trafficking; she had only been released on Dec. 20. Her abductors had been officers from the state security squad of the Public Security Bureau. I asked her to narrate the entire process of her disappearance in detail.

Later, I suggested to Mr. Zhang, “Let’s go and see Fan Yafeng’s mom.” The day before, we had contacted fellow human rights lawyer Fan Yafeng and found out that he was under strict house arrest. But he had said that his mother was going to be alone at home in the evening and so I thought we should go see her.

Because I used to go there frequently I remembered clearly where she lived. As Mr. Zhang and I entered the block of flats and started walking up the staircase, I had a feeling that someone was following us. Observing that we went to the third floor, a young security guard asked us whom we were visiting. We said, “We’re seeing a friend.” Immediately, he called out for someone else to come up.

We knocked on the door and were greeted by Mr. Fan’s mother. But as we entered the flat, the security guard came with us, and a person in plainclothes stormed in just behind him. The man in plainclothes demanded to check our IDs in a very coarse manner. I asked him in a loud voice, “What sort of people are you? How can you enter a private residence without permission?”

The plainclothes man said, “I am a police officer. We want to check your ID cards.” “You’re a police officer? I want to see your police ID.” “If I am telling you I’m a police officer, then that’s what I am. What are you doing here?” “Is that your business? How can you prove you’re a police officer if you don’t show your police ID card?”

***Click here to Read More***

*Prof. Teng Biao is a lecturer of law at the Law School of the China University of Political Science and Law (CUPL), one of China’s most prestigious law school.  After working with human rights lawyer Xu Zhiyong to successfully abolish the Custody and Repatriation system, Teng and Xu opened the public interest law firm, Open Constitution Initiative, which was shut down in summer 2009.  Teng has been repeatedly warned by administrators at CUPL that if he continues with his rights defense work, he could lose his job and even his personal freedom.

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By Elizabeth M. Lynch, October 19, 2010

Steve Orlins of the National Committee on U.S. China Relations interviews Amb. Jon Huntsman

Last night’s China Town Hall, a live webcast sponsored by the National Committee on U.S.-China Relations and hosted by various educational institutions throughout the United States, fell short of expectations.   Featuring U.S. Ambassador to China Jon Huntsman, the conversation was anything but a frank discussion on the current difficulties in U.S.-China relations.  Instead, the evening had the stale air of political-speak and left one wondering, who exactly was the audience for this event?  But although Ambassador Huntsman’s comments were largely staged, a few key highlights emerged.

Interestingly, the audience was not the American public.  From Ambassador Huntsman’s answers, it appeared to be the Chinese leadership.  Many, if not most of his substantive comments responded to some of the Chinese leadership’s issues in U.S.-China relations, notably their fears on human rights and currency. Ambassador Huntsman began his comments by focusing on the importance of dialogue in the U.S.-China relation and the very real need of greater understanding of each other’s countries and their particularities.  It’s true that most Americans’ views of China are not the most informed and the culture is a bit of an enigma to many but, as the Ambassador pointed out, the same holds true for most Chinese on their views of American culture.

Ambassador Huntsman continued with his plea for greater understanding between the two nations by raising the issue of human rights.  According to Ambassador Huntsman, the Chinese need to understand that human rights is an important issue to Americans; it is a part of who we are, and that is why we always raise it in bi-lateral discussions.  This is certainly the conciliatory route to take in addressing the very prickly issue of human rights in China and it appears to be the strategy purposefully chosen by the Obama Administration.  President Obama took this approach in his Shanghai Town Hall address last November and the same rhetoric emerged after the U.S.-China Human Rights Dialogue this past spring.

But one wonders – is this effective?  Or by claiming that human rights is a part

June 1989 - Tank Man

of our – e.g. the American or the Western culture – does this rhetoric cheapen the call for universal human rights?  If human rights is universal, then why must we couch the call for it in cultural terms?  And why is there never a reminder from the Obama Administration about China’s commitment, both on the government and individual levels, to human rights?  China has signed various international human rights treaties and many of her people clamor for greater human rights.  Back in June 1989, many died for it.

For now at least, this cultural contexting of human rights appears to be the strategy in dealing with the call for greater human rights in China.  So don’t expect to see any developments on this front with the current Administration; instead, expect human rights to painted as a peculiar particularity of the American culture; something the Chinese will just have to understand about us, sort of like how we like baseball while the rest of the world is crazy for soccer.

But on a more positive note, Ambassador Huntsman used the China Town Hall to signal to the Chinese leadership that it needs to do something about its currency, and quickly.  Although initially complementing the Chinese leadership on allowing the currency to float, Ambassador Huntsman continuously stressed the need for China to allow it to float more rapidly, heavily implying that retaliation from any angry Senate would be sure to follow.  While the Treasury Department has again delayed its report that determines which country is a currency manipulator, the Ambassador’s veiled comments seemed to hint that the U.S. government might be getting closer to taking action on currency.

Ambassador Huntsman shone though on the final question of the night from an audience member in China (likely at the American Chamber of Commerce which was the only organization hosting a webcast within China) about China as a hot-button campaign issue.  Instead of referring to some of the recent campaign ads as mere “anti-China rhetoric,” Ambassador Huntsman noted

Sen. Sherrod Brown

that many of the issues raised recently during the election cycle are important issues and should be addressed.  Interestingly, the New York Times ran two op-eds on Monday intelligently discussing the issues (Paul Krugman and Sherrod Brown); each noting that what is good for American business interests in China is not necessarily what’s good for America.  But Ambassador Huntsman did note that the danger is relegating China issues to a 15 second ad and hoped that once people are elected, that Congress should have a deeper conversation about China.  Evidently Ambassador Huntsman has been out of the country too long; Congress, on both sides of the aisle, appears incapable to discuss any issues deeply, if at all.  And it doesn’t appear that the U.S. government – including Congressmembers and Senators – ever have an interest in hiring staff that actually knows anything about China.  While Ambassador Huntsman is right that these issues do need to be discussed intelligently and sincerely, good luck with resting your hope with Congress.

Although the message from the China Town Hall was less than frank, it was still good that the National Committee on U.S.-China Relations sponsored this event – it provides insight into the U.S.’ relationship with China.  Additionally, the sponsoring educational institutions each hosted a talk, either before or after the Ambassador, discussing more recent developments in China.  At Seton Hall School of Law’s China Town Hall, organized by Prof. Margaret K. Lewis, Prof. Carl Minzner gave the keynote speech.  An expert on legal and political reform in China, Prof. Minzner spoke much more frankly about China’s future course, especially as it pertains to greater rights protection of its citizens.  Prof. Minzner’s speech will be analyzed in a future blog post.  Stay tuned!

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By Elizabeth M. Lynch, April 27, 2010

With the fortieth anniversary of Earth Day this past April, Americans celebrated with vigor and advocated saving the planet.  Well, most Americans did.  As China-observer Marcy Nicks Moody notes, recent breakdown between Democrats and Republicans in the Senate could forestall any hope of the U.S. moving forward on climate change legislation.  And could allow China to remain ahead of the green technology game for a long time.

Happy 40th? – Congress Says Bye, Bye Climate Change Legislation

By Marcy Nicks Moody

Last Thursday, Americans celebrated the fortieth anniversary of Earth Day, established by U.S. Senator Gaylord

Earth Day Founder, Sen. Gaylord Nelson

Nelson in 1970 to raise awareness of environment-related issues. Last Sunday, thousands gathered on the National Mall in Washington, DC to participate in the Earth Day Climate Rally with the alleged goals to “stop protecting polluters,” “enact comprehensive climate legislation,” and “demand accountability from Washington.” There were exhortations to grow kitchen gardens along with clamorous chanting of the word ‘green.’ The weather was glorious, and spirits did not seem dampened by the blow dealt to climate legislation by the U.S. Senate just the day before.

Sandwiched between Earth Day and the Earth Day Climate Rally was the day on which another U.S. Senator, Republican Lindsey Graham of South Carolina, announced that he would no longer participate in negotiations on a Senate version of proposed climate legislation. In a letter to colleagues Senators John Kerry (D-MA) and Joseph I. Lieberman (I-CT), Senator Graham cited his disappointment over reports that the Democratic leadership of the Senate was planning to take up discussions of immigration before addressing climate change as a reason for his changed stance.

Senators Graham, Kerry, and Lieberman were the primary architects of this bill-to-be and had been planning to formally announce the bill with the White House last Monday. But any debate on immigration would make it impossible to deal with national energy and climate change policy, the South Carolina Senator said. So he won’t support the draft climate change bill, in spite of the fact that he helped create it. Senator Graham won’t support some legislation because talking about something else would just be too painful or distracting? This seems a bit irrational.

In Happier Times - Senators Graham, Kerry & Lieberman

Setting aside speculation over why Senator Graham radically and suddenly changed positions, the simple fact that he did it is disappointing. To be sure, the Senator is not the only culpable party in this turn of events. He is likely under enormous pressure from fellow Republicans to stop negotiating with Democrats. And if reports are true that both the White House and the Democratic Senate leadership had been planning to take up immigration first not because it could pass (the House has not yet discussed the matter) or because it is more urgent (climate change is equally as urgent: the longer we wait to address climate change, the more expensive it will be), but because it could present a useful wedge issue for the Democrats in the coming election cycle, then Senator Graham has every right to be peeved.

But unless Graham’s strategy has the result of getting climate change legislation considered in this session of Congress, it is bad for Americans. The science demonstrating the negative and possibly catastrophic consequences of anthropogenic climate change is overwhelming. That emissions of greenhouse gases (GHGs) must decrease is flagrantly obvious. And that the United States, which prides itself on its innovative strength, global leadership, and remains the largest economy in the world, has still not acted on this evidence is disgraceful.

It is also bad for business. The clean technology market is big and growing, but without the passage of climate change legislation, signals to U.S. businesses as to the future prices of clean versus pollution-intensive energy remain unclear. A recent Pew report on clean energy in the G-20 economies notes that appropriate domestic policies—such as those aimed at reducing GHG emissions or incentivizing the use of renewable energy—have tended to positively affect a country’s competitive position in the clean-tech market. The winners in this race include Brazil, the United Kingdom, Germany, Spain, and—who else?—China. The United States does not make the shortlist of enlightened energy and environment policymakers of the rich world.

Lights out for the U.S. in the race for green tech?

In fact, the Pew report finds that China has already overtaken the United States on several important measures (including, of course, its dubious distinction of being the largest emitter of greenhouse gasses for the past several years). In 2009, for instance, China overtook the United States for highest financing of and investment in clean energy. And it is likely to overtake the United States in installed renewable energy capacity soon. Though targets are not always met, Beijing has set ambitious targets for wind, biomass, and solar energy usage, and these targets do not exist solely not to be met. They may currently be aspirations, but that’s more than the United States currently has to go on.

Mitigating climate change and making U.S. clean-tech business better is accomplished by limiting greenhouse gas emissions. The best way to limit GHG emissions is to put a price on them. Indeed, the fact markets have not already done so has been described by climate expert Nicholas Stern as “the greatest market failure the world has ever seen.” The climate legislation which has been stalled and stalled and stalled again in the U.S. Senate is generally envisaged as a cap and trade system that would cap GHG emissions at a certain level, create a scheme in which licenses to emit GHGs could be traded, and eventually shrink gross amount of permissible emissions. This amounts to an indirect tax on GHG emissions, and though it is far from ideal, it would create a price for emissions at the margin and therefore makes strides in the right direction.

As the Senate continues to dawdle, the Earth Day Climate Change rally on the National Mall was far from unimportant. Especially in a democracy like the United States, it is important that citizens buy into ‘going green.’ It is important, frankly, that green be cool. But though considerations of how to green one’s lifestyle are admirable, they are not game changers. Coal is still cheap; Whole Foods is expensive, and “going green” remains largely the privilege of the wealthy in society.  Unless we change our laws.  The Senate should get to work. The alternative is to accept an outcome in which a hundred U.S. kitchen gardens bloom while a hundred Chinese companies compete for the top spots in clean-tech. In addition to, well, catastrophic climate change.

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, March 30, 2010

Is it St. George or Google that Slays the Dragon?

Google has become the Western media’s new Saint George.  With its pullout from China last week and its refusal to submit to the Chinese government, Google slew the dragon of censorship, or at least that is the story being marketed by the press.

But if we look back to Google’s announcement from January 12, 2010, the catalyst of Google’s troubles in Beijing had little to do with censorship.  Instead, what initiated Google’s eventual withdrawal from China was the hacking attack of its computer infrastructure and the theft of valuable intellectual property.  Absent this attack, would Google have left China?  How did we go from a cyber-attack to a principled stance on censorship and why?  And is relying on Google to promote human rights a good thing?

Don’t Be Evil….Unless it Doesn’t Correspond with Shareholders’ Interests

Google claims that its informal motto of “don’t be evil” is a central pillar of its corporate core values.  But in reality, its motto can only be applied to the extent that it does not conflict with shareholders’ interest.

Google is a publicly traded company and as such, its primary duty to is to its shareholders, usually achieved through the maximization of profits.  This isn’t just a precept of sound business; it is an actual requirement of the law.  In the U.S., directors and officers of a corporation have certain fiduciary duties toward the corporation’s shareholders; if an officer or director acts in a way that breaches these duties, shareholders may bring an action against the board of directors and the officers.   This is to guarantee that the directors and officers act in good faith toward a corporation’s shareholders and make decisions based upon reasonable business interests and not upon personal ones.

Before Google made its January 12 announcement, rest assured that it probably checked with legal counsel to guarantee that shareholders could not bring a suit against it for violating fiduciary duties.  Most likely someone wrote a memo analyzing the merits of shareholders’ potential claims against Google for pulling out of the largest internet market in the world.

The current China internet market totals around 348 million users, more than the population of the United States but less than a third of China’s potential internet population of 1.3 billion people.  With such an untapped potential, even if Google maintained its 33% market share of the Chinese search market, it could potentially reach 429 million people.

Can walking away from a market that potentially could be that big ever be justified to shareholders on the grounds of Google’s censorship?

Likely not.  A rational shareholder purchases shares of Google not because of its founders’ stance on censorship in China but more for high return on its equity investment; in other words, profits through increased share price.

So how does Google get away with avoiding a shareholder lawsuit?

First, Google’s foray into China resulted in marginal benefits for the company.  Google did not enter the Chinese market with its Chinese search engine google.cn until January 2006 (to understand the difference between google.cn and google.com see CL&P’s previous article).  However, prior to 2006, Chinese internet users were able to access the U.S.-based search engine, google.com.  At the end of 2005, just through the use of the U.S.-based google.com, Google already had 27% of the Chinese search engine market.  Fast-forward to 2010, four years after it launched its censored Chinese search engine, Google was only able to raise its market share six percentage points to 33%.  Even with its withdrawal from the Chinese mainland, Chinese internet users will still have access to Google either through its U.S.-based search engine, google.com, or its newly established Hong Kong-based search engine, google.com.hk.  Thus, Google’s market share in China will likely continue to hover around 30%.  So the impact of Google’s withdrawal on its profits is relatively small, staving off a shareholder lawsuit.  If profits in China were higher, would Google still have left?  Maybe not.

Furthermore, the initial reason behind Google’s departure – a cyber-attack – is likely sufficient to justify giving up the domestic China market and the meager increased profits.  Although the cyber-attack has been pushed to the background, it’s actually a pretty big deal.  The attack on Google, which was coordinated with an attack on over 30 other western high tech companies, resulted in the theft of proprietary source code and other intellectual property.  While Google hasn’t openly discussed the extent of the cyber-attack, Adam Segal of the Council on Foreign Relations and an expert on cyber-espionage, hypothesizes that the Chinese hackers made substantial inroads in obtaining some of Google’s core technologies, namely “how it collects information on users and how it uses it to exploit its [Google’s] market advantage.”  This is information that is core to Google’s success and not something that it wants hackers to be able to access.  Any gains from protecting this information far outweighs the losses of shutting down its Chinese search engine.

Cyber-attacking or Playing the Art of Warcraft?

Why then the censorship angle?  First, companies don’t really like to announce their vulnerabilities to cyber-attacks.  It’s not surprising that not a single company out of the other 30 that were attacked has stepped forward.  But second, and perhaps slightly cynically, the censorship angle is a marketing bonanza for Google.  Google is the West’s white knight, and although its share price has dropped significantly since it first threatened to leave China, it could have fallen lower absent the positive press surrounding its departure.

And if this was really just about the censorship, why did it take over two months for Google to leave the mainland?  The Chinese government is not about to give up on censorship, as Google executives must be keenly aware of.  So why prolong it?  And if censorship is so abhorrent to Google’s mission, why continue to promote your Android technology on Chinese mobile networks?  Censorship in China is not limited to computers.  A tremendous amount of censorship and surveillance also occurs on mobile devices.

Google’s principle stance against censorship likely has merit and its belief in “don’t be evil” isn’t idle chatter.  But in regards to Google’s withdrawal from China, censorship was neither the only nor the primary reason for its departure.

What’s the Big Deal if Google wants to Say it Left because of the Censorship?

First, by relegating the cyber-attack aspect of the Google-China incident to the background, the press, U.S. government and corporate America avoid confronting what some call the greatest threat to U.S. prosperity.  Adam Segal – in an interview on Digital Age – offered a sobering account of cyber-espionage and the U.S.’ lack of preparation to deal with this increasingly sophisticated threat.  Although previously focused on military secrets, Mr. Segal argued that the threat is increasingly on corporate secrets.  One of the last vestiges of the U.S.’ success lies in its intellectual property.  But cyber-espionage, especially by the Chinese, puts this very much at risk.  Before, companies avoided intellectual property theft by not doing business in China or setting up an office there.  But now, with increasingly sophisticated hacking, companies can no longer avoid the risk that their research and development is vulnerable – the physical location of a company’s R&D does not matter.  According to Rahm Emanuel, “never let a serious crisis go to waste.”  But that is exactly what happened here.  Every discussion about Google – from the press to Capitol Hill to the Administration –  has been about censorship, not about the more serious threat to the U.S.’ national security, cyber-espionage.  Google should certainly be commended for being so open about the Chinese cyber-attack.  Such frankness and cooperation with the U.S. government is important in battling cyber-espionage.  But the U.S. government appears to have largely ignored this opportunity to create a structure or a defense to deal with this issue.

But perhaps more importantly, should we rely on Google, a publicly traded company, to serve as our proxy on issues

Human Rights Attorney, Gao Zhisheng

of human rights?  Google was not created to promote human rights; Google’s dual aims are technology innovation and profits.  And there is nothing wrong with that; it’s what corporations do.  But by focusing so much on Google’s decision to leave China and cloaking it in this narrative of a principled stance against censorship, are we excusing our own behavior and inaction?  While the press has focused on Google’s departure from China, a real human rights defender, GAO Zhisheng, has “disappeared” in China.  Detained by the Chinese police last year, Mr. Gao went missing a few months ago with Chinese officials stating that he was “where he should be.”  Only yesterday was he found, alive.  But this story has received little attention from mainstream press and scant consideration from the Administration (the Google incident inspired a speech from the Secretary of State).  What kind of emerging superpower says that one of its citizens is where he belongs?  And what kind of society that is considered a bastion of human rights allows this power to get away with it?

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By Elizabeth M. Lynch, February 2, 2010

In yesterday’s New York Times, Helene Cooper argued that the Obama Administration’s recent announcement of over $6 billion in arms sales to Taiwan shows a “new toughness” toward Beijing and perhaps even a “fundamentally new direction” in the Administration’s China policy.  But, by focusing on the arms sales, Ms. Cooper overemphasizes the event.  U.S. arms sales to Taiwan are far from novel or tough, and some may argue, periodically required under U.S. law.

Similarly, Beijing’s angry reaction was predictable.  In fact, for each prior Administration’s arms sales to Taiwan, the Chinese government has responded in much the same way: postponement of military-to-military meetings, issue formal protests with U.S. officials, and saber-rattling for the domestic consumption.  However, Beijing’s recent threat of sanctions against U.S. companies involved with the arms sales is new and serious.  But this is more a reflection of China’s growing confidence and less a reflection of a changed or “tough” U.S. policy toward China.

Why Does China Care so Much about Taiwan?  Isn’t it a Separate Country?

Nope, scrap that vision from your mind.  Taiwan is not a separate country, at least not in the eyes of the Chinese, Taiwanese or U.S. governments.   The People’s Republic of China (a.k.a. the mainland) views Taiwan (a.k.a. “The Republic of China”) as a renegade province and any relations between Taiwan and other countries is viewed as interference in the mainland’s domestic affairs.  While Taiwan has largely developed as an independent society, it agrees with the mainland’s assessment that there is only “one China.”  The Taiwanese government has never called for independence and the Kuo Min Tang party (pronounced Gwo min-dang and a.k.a. “the Nationalists” or KMT), which has ruled Taiwan for most of Taiwan’s separate existence, also espouses the view of “one China” and that eventually, the mainland and Taiwan will reunite.  The difference is who rules this reunited China.  For Taiwan, it’s the KMT; for the mainland, the Chinese Communist Party (CCP).

All of this stems from World War II.  After the War ended in 1945, the KMT and the CCP resumed their civil war, a civil war that was put on hold to fight the Japanese invasion from 1937 to 1945.  By 1949, the CCP’s victory was certain and the KMT government fled to the province of Taiwan to continue the Republic of China.

Thus began the baffling existence of two Chinas – the communist People’s Republic of China on the mainland and the KMT’s Republic of China on Taiwan.  Each China claimed that it was the “official” and “rightful” China and the other a mere province; each forced the international community to recognize only one China – either China on the mainland or China on Taiwan – hence the birth of the “one China” policy.

The U.S. continued to ally itself with the KMT and the Republic of China, recognizing Taiwan as the official China and all but denying the existence of the mainland.  But starting in 1972, with President Richard Nixon’s historic visit to the mainland, relations between the U.S. and the PRC began to improve and in 1979, the U.S. switched recognition of China from Taiwan to the mainland.

Obama’s Arms Sales to Taiwan Is Par for the Course in U.S.-China Relations

The Obama Administration’s recent announcement of arms sales to Taiwan follows a long line of arms sales by the U.S.  Almost every president since 1978 has sold arms to Taiwan.  In fact, the U.S., under the 1979 Taiwan Relations Act (TRA), is required to sell defensive arms to Taiwan.  In 1979, after changing recognition to mainland China, the U.S. did not want to leave its former ally completely open to attack or takeover.  As a result, Congress passed the TRA.

The TRA authorizes quasi-diplomatic relations between the U.S. and Taiwan.  For example, instead of having an official embassy on Taiwan, the TRA allows for the “American Institute in Taiwan.”  Additionally, and more importantly, the TRA established the U.S.’ responsibility toward Taiwan if it is threatened.  At issue here is the TRA’s requirement that the U.S. periodically sell defensive arms to Taiwan.

In announcing arms sales to Taiwan, the Obama Administration is merely following its obligations under the TRA.  Additionally, the Obama Administration has not acquiesced to Taiwan’s request for F-16s.  During the George W. Bush Administration, Taiwan repeatedly requested the purchase of F-16s.  Similarly, Taiwan put out feelers with the Obama Administration to see if there was a possibility that they could purchase F-16s.  Again, Taiwan was told not to put in a formal request for F-16s.

The F-16s are a big issue since they are not “defensive” arms; Beijing would very much view a sale of F-16s to Taiwan as going a bit too far.  But Obama’s package to Taiwan merely includes the usual: Patriot missiles, Black Hawk helicopters, mine-hunting ships and information technology.

If the Obama Administration wanted to use the Taiwan arms sales requirement to “toughen” its stance to Beijing as the New York Times claims it has, the Administration would have acquiesced to Taiwan’s request for F-16s.  Instead, it merely sold similar arms to Taiwan that President George W. Bush sold in 2008.

This is not to say that the Obama Administration does not have a strong China policy.  Secretary of State Hillary Clinton’s recent policy speech on internet freedom was a robust critique of countries like China that censor their internet and partake in cyberhacking.  This follows President Obama’s strong and public criticism of internet censorship while in China this past November.  The New York Times would have done better to focus its argument on the Administration’s novel and forceful rhetoric on internet freedom vis-à-vis China.

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By Elizabeth M. Lynch, December 17, 2009

Sec. of State Hillary Clinton in Copenhagen

Who would have thought that the U.N. Climate Change Conference could tear the world away from the on-going saga of Tiger Woods?  With protests in the streets of Copenhagen that escalate every day (click here for an insider’s perspective on the protests), a mass walk-out by developing nations from the conference, and constant barbs between the world’s two largest emitters of greenhouse gases (GHG), the U.S. and China, the drama is running high in the closing days of Copenhagen and the world is on edge.  Will there be a deal?

As Marcy Nicks Moody noted, a legally binding treaty will not emerge from Copenhagen. However, going into Copenhagen last week, with both the U.S. and China announcing their respective commitments, a strong political agreement seemed possible.  But with the increasingly antagonistic discussion between the U.S. and China delegations, has the world reached an impasse?  Should everyone pack their bags now and head home?

Not quite yet.  There is still reason to have hope.

First, the very fact that there is heated discussion, disagreement and even anger is a good thing.  If Copenhagen was going to be a rubber stamp, a mere sheet of paper that no one was going to pay attention to, there would not be such dissension in the ranks, especially from the U.S. and China.  But countries like China and the U.S. are strategically considering their interests in anticipation of a strong political agreement that will likely provide the framework for a legally binding one in the future.

Second, we are still in the negotiation stages.  Yes, the exchanges between the U.S. and China over financial assistance,

China's Climate Change Ambassador Yu Qingtai at Copenhagen

transparency, and caps have become more hostile, but that could also be because, now with China on a more equal footing in the world, it is able to negotiate harder and play both offense and defense.

Additionally, the climate change talks have proved to be a growing experience for China and its leadership.  Copenhagen is the first international summit of substance that China is a part of in its new status as an emerging global power, forcing its leadership to confront the reality that such a title comes with both advantages and disadvantages.  China’s increased status in the world gives it the negotiating power to better protect its interests in the final document, surely a distinct advantage.   But its increased status also means that China’s interests are no longer completely aligned with the other developing countries’ interests; while China is still the de facto leader of “the Group of 77 plus China” and holds sway over many of the African nations because of trade alliances, there are times when China’s interests are adverse to the developing world’s.  As China’s power continues to grow, such division between it and the developing world will inevitably increase and China will have to become more comfortable with this fact.  Copenhagen is a reflection of these growing pains.

So how do we move forward?

Tomorrow, the leaders of the world will converge on Copenhagen with the goal of producing a clear and strong roadmap to a legally binding treaty.  The biggest issue that could prevent some form of a deliverable is the U.S. and China relationship.  So how do we move forward?

China has demanded international funding for its climate change commitments.  China argues that the western nations, for the past few hundred years, have been able to grow without any restrictions on their development.  Fossil fuels were used without consideration for the climate and lands were deforested with abandon.  China argues that the West’s irresponsible development vis-à-vis the global environment is the cause of the current climate change crisis.  But by asking that all nations partake in a climate change deal, China maintains that the West is unfairly spreading the costs of its own development on all countries.  As a result, China is demanding that if the West wants it to agree to a climate change bill that would require China to pay for past western growth, the West needs to offer some form of payment.

The logic underlying China’s argument cannot be denied.  However, if a deal at Copenhagen is not reached, China will be the cause of the world’s future climate crisis.  By that time, when the “score” between the West’s development and China’s will be equal, it will be too late to broker a deal.  Additionally, China’s demand for some form of climate reparations comes at a financially difficult time.  Politically for the U.S., it’s difficult to justify a blank check to the U.S.’ largest debt holder.

However, the U.S. should not just walk away from China’s demand since the U.S. could benefit from this as well.  China has already stated that without international funding, it will not allow outside international verification of its Copenhagen commitments.  The U.S. has balked at China’s refusal to allow for outside verification, and rightfully so.  While China has made some progress in improving its statistical measurement ability, it is still worlds away from the West and given some of China’s past practice of using measurements that produce falsely positive results, the West is right to be skeptical.

But Copenhagen could serve as an opportunity to help China develop its capacity to measure and verify data as well as implement its commitments on the local level.  And this would not just help with climate change.  China has a horrible record of statistical reporting in every sector – environmental, criminal justice, trade disputes, and economic development.  However, with the assistance from the West, China will not just learn to better measure its own development but will become more comfortable with public reporting.  This could create a more reliable and transparent government, something that both the Chinese people and the outside world could benefit from.

Thus, hopefully in these last few days, the U.S. and China can reach a targeted agreement whereby the U.S. and the West will provide financial assistance to China’s attempts to better measure its data as long as China opens this process to U.S. and Western observation.