Tag Archives: U.S.

India-China Axis On Climate Change Moves ‘Green’ Closer To Trade Sanctions

This Bystander is keeping an eye on U.S. Secretary of State Hillary Clinton’s trip to India because it will provide an indication of how China and India are lining up on the climate policy debate. Or at least whether the U.S. is managing to put any daylight between the two countries’ position.

In short, it doesn’t look that she has. She was told flatly by Environment Minister Jairam Ramesh that there was no case for mandatory curbs on CO2 emissions. That mirrors Beijing’s rejection of binding cuts, and repeats the position expressed at the G8 summit in Italy earlier this month–a line Beijing and New Delhi are likely to hold at the U.N.’s Copenhagen conference of climate change at the end of this year. Instead, the two countries are pushing energy efficiency–witness the way Beijing has promoted green technologies in its economic stimulus package.

The reluctance to accept greenhouse gas emissions curbs on the part of China, now the world’s largest emitter of such gases, will make it more difficult for the Obama administration in the U.S. to press ahead with its cap-and-trade proposals, already running into domestic political difficulties, which will ease the pressure on China and India to change their tune. It also increases the chances that the U.S. will impose punitive tariffs on imports from other major greenhouse gas emitters. Though it is open whether that would change Beijing’s hard line on emissions, trade sanctions could, perversely enough, become the most effective means of forging international action on global warming.

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Will Australia Please U.S. By Taking Gitmo Uighurs–Or Please China By Not

U.S. President Barack Obama has dropped a hot potato in the lap of Australia’s pro-Beijing Prime Minister Kevin Rudd. He has asked him to take at least six and as many as 10 of the remaining 17 Uighurs being held at Guantanamo Bay.

Beijing wants them all returned. The U.S. won’t do that because of fears in Washington that the Uighurs, coming from a Muslim minority which has a separatist movement, will be persecuted. China accuses the Gitmo Uighurs of belonging to the East Turkestan Independence Movement, which is Beijing’s culprit of first choice for almost any act of political violence in China.

The Gitmo Uighurs, captured in Afghanistan in 2001, were cleared for release in 2004 after being cleared of links to terrorism. Albania took five and Sweden one but U.S. appeals to other countries to take some have fallen on deaf ears–or at least been drowned out Chinese warnings not to.

Australia’s foreign minister Stephen Smith has played a straight bat so far: “We will consider these individuals on a case-by-case basis in accordance with our immigration law, in accordance with our domestic and international immigration obligations,” he said and added “where it is appropriate, take into account security advice and considerations.”

In the end Australia will have to choose sides between its old best friend, America, and its new best friend, China.

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Huntsman Reportedly Set To Be U.S. Envoy To Beijing

Jon Huntsman is set to be named as the U.S. ambassador to Beijing, according to the Associated Press. Huntsman is the moderate two-term Republican governor of Utah and was consider a potential presidential candidate in the U.S. elections due in 2012. He is also a Chinese speaker having been a Mormon missionary in Taiwan. He was the first President Bush’s ambassador to Singapore and later the U.S.’s deputy trade representative. His quiet political style and preference for back-room negotiation over public bombast would likely go down well in Beijing.

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China And The U.S.: The Pressing Issues For The Clinton Visit

The first foreign trip by new U.S. President Barack Obama’s secretary of state, Hillary Clinton, will be a swing through Beijing, Tokyo, Seoul and Jakarta. This underscores the importance of Asia to U.S. foreign policy, as if it could be anything else, especially in the current global economic slowdown.

The trip will force a clarity to the Obama administration’s China policy that has been lacking so far, especially the murkiness over currency manipulation remarks by Obama’s Treasury secretary Tim Geithner during his confirmation hearing and some of the protectionist tinge to the debate in Congress over the U.S. economic stimulus bill.

There are four immediate short-term Sino-American issues that will form the backdrop to Clinton’s visit to Beijing:

First, the level of the yuan. Obama called President Hu Jintao after Geithner’s remarks to reassure him that no preemptory action was likely. We are still of the view that the remarks were an intended testing of the water by the new U.S. administration, but it can push this topic down the road until mid-May when it is next formally required to report to the U.S. Congress on China’s currency policy. Meantime, China has made it clear that the yuan isn’t going anywhere from current levels for as long as the economy is slowing as it is.

Second, the Uighurs in Guantanamo Bay prison. Obama has ordered Gitmo closed down in a year. The 17 Uighurs there have already been cleared for release but are being held for fear they would be tortured if returned to China. The U.S. can’t find third-party countries to take them, and Beijing is again insisting they be returned to China. Human rights took a back seat in the Bush administration’s priorities; it will move further forward in the Obama’s administration’s, though probably not as far forward as climate change.

Third, the strategic economic dialogue initiated by the Bush administration, and led by former Treasury secretary Hank Paulson. Obama’s team has not indicated whether it will continue the process, or at least in the same form. One likely change would be to combine the Treasury-led talks with a parallel but lower-level set on political and security issues conducted by foreign ministry officials, but have them headed up by foreign minister Yang Jiechi and Clinton, or, even more likely, the two countries’ vice-presidents, Xi Jinping and Joe Biden. These could be periodically capped by a G2 summit involving Hu and Obama.

Finally, the new U.S. ambassador to Beijing. If Japan, as seems likely, gets a heavyweight (Joseph Nye, a former Defense Department official under President Clinton, now at Harvard, is the oddsmakers’ favorite) then China will need (and merits) the same. One name being mentioned is John Thornton, a wealthy and close backer of Obama’s and who was chairman of Goldman Sachs Asia during the Asian financial crisis in 1998-99. He is currently a professor at Tsinghua University in Beijing.

If Thornton is appointed and the vice-presidents take over the two countries’ strategic dialogue, it would signal that the U.S.’s China policy is being set more in the White House than the State Department.

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China Not Really No 1 Car Market — Yet

Chinese car sales surpassing America’s for the first time makes for a good press headline but to this Bystander the substance and the symbolism don’t hold up for long once you start to pick them apart.

The comparison is based on annualizing December’s monthly sales, giving 10.3 million vehicles in the U.S. and an estimated 10.7 million in China. Detroit’s carmakers saw year on year falls between 40% (Ford) and 55% (Chrysler) in December as recession bit. In China, growth is slowing, but the economy is still growing. November’s car sales were down year on year by barely 10%. December looks to have been a strong month.

The U.S. is a mature car buying market. Pretty much everyone who wants a car already has one, and this is no time to be upgrading existing vehicles unless you absolutely need to. Similarly corporate buyers, such as car rental companies, have little call to expand or improve their fleets. In China the car buying classes are still expanding (and creating a new market for used cars as the FT notes); fleet buyers such as local governments are being encouraged to switch to green vehicles.

In the end the raw size of China’s population will make it the world’s largest car market. How far it has to grow can be gauged from the fact that China has 40-50 cars per 1,000 residents compared with 470 per 1,000 residents in the U.S.  Assuming a return to the sales rates of Detroit’s good years and comparable car ownership levels, the arithmetic puts China’s future car market at 150 million vehicles a year.

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Taiwan Arms Sales A Storm In A Teacup

Beijing’s response to last week’s announcement of the U.S.’s $6.5 billion arms sale to Taiwan has been prompt if largely symbolic: cancellations of military and diplomatic exchanges with the U.S.

Several planned senior level visits and military-to-military exchanges for this month have been scrapped, according to the U.S. Defense Department. The U.S. State Department says China has also pulled out of some meetings on humanitarian assistance and disaster relief.

At the weekend, state media scolded the U.S. over the sales, saying they endangered China’s national security and would have an adverse effect on Sino-U.S. relations. So all in all it looks as if this will all blow over.

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Paulson’s Flying Trip To Beijing Provides Little Cheer

U.S. Treasury Secretary Henry Paulson’s flying visit to Beijing to prepare for the next round of strategic economic dialogue due in June was a glummer than usual affair.

Squeezed in between Washington appearances on Monday to announce his plan to restructure America’s financial regulation and a Thursday U.S. Senate hearing on the Bear Stearns bailout, Paulson briefed Chinese leaders on the U.S. economy and the risks that the credit crisis posed to the real economy.

Not that Chinese leaders haven’t been paying attention. “There is no doubt that what’s happening in U.S. markets clearly has to give pause to the Chinese,” over its own financial markets liberalization, the FT quotes Paulson as saying. “They may be too polite to say it directly.”

Concern, too, over investment – where both countries have been complaining about growing protectionism against each other. “This is an area where there has been a loss of confidence on both sides. More work needs to be done,” Paulson said.

The recent accelerated appreciation of the yuan, which has risen against the U.S. dollar at an annualised rate of about 15%-20% so far this year, was a rare bright note.

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Inflation More Than Washington Behind Yuan’s Rise Against Dollar

When U.S. Treasury Secretary Henry Paulson arrives in Beijing on Wednesday, the Chinese currency might coincidental break through the symbolic seven to the dollar level. As Richard McGregor writes in the FT “the currency has become a litmus test of Chinese responsiveness to U.S. complaints on trade.”

Yet what really is driving the recent strengthening of the yuan — it has risen more than 15% so far this year, more than in the previous two and a half years — is domestic inflation not Washington’s grumbling. Beijing is finding it increasingly difficult to sterilize the economy against the inflationary impact of the foreign exchange reserves piling up because of the trade surplus.

With inflation running at a 12 year high, that has become a more important policy imperative than supporting exporters and inefficient state owned enterprises that are in no fit state to compete against imports. Plus it gets it a few bonus brownie points in Washington — if not Brussels or Tokyo.

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Trade News

The E.U. and the U.S. are expected to file a joint complaint to the WTO against China in the next few days over financial news and information. At issue is Xinhua’s monopoly over providing financial information to Chinese clients. This requires the big international groups such as Reuters, Dow Jones and Bloomberg to distribute their services through Xinhua.

(Update: Reuters reports the complaint will be announced Monday.)

If the case goes ahead it will be the latest in a number of trade disputes that the E.U. and the U.S. have undertaken with some success. The U.S. and E.U. won at the WTO over car parts earlier this month (the first joint complaint and the first time the WTO ruled against China), the U.S. settled two other cases out of court and has two more on IP on the stocks. The E.U. has initiated a range of anti-dumping investigations.

This all reflects the growing strains stemming from China’s still expanding trade surplus with both the E.U. and the U.S. — and presumably Washington and Brussels can expect sympathetic press coverage in this latest case.

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No 4 as No 1. Some Mistake, Surely?

Just ran across this Gallup Poll from earlier this month, asking Americans which of China, the U.S., the E.U., Japan, Russia and India is the world’s leading economic power, now and in 20 years. China easily tops both lists, a contrast to when Gallup asked the same questions in 2000 and the U.S. was the clear leader.

Yet look at the numbers for the size of those economies and the order is 1. E.U., 2. U.S., 3. Japan, 4. China, 5. Russia, 6. India, with the E.U. and U.S. being five times bigger economies than China. Even if you use purchasing power parity rather than nominal GDP, China is still third.

The disparity between perception and reality that the poll reveals may go someway to explaining why Americans and Europeans are turning so protectionist right now.

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