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End of the US-China
honeymoon
By Bonnie S Glaser
and Jane Skanderup
(Used by permission
of Pacific Forum CSIS)
America's grievances with China mounted
this quarter, signaling a likely end to the post-
September 11 honeymoon in China-US relations and
the beginning of a rocky phase. On a range of
trade and economic issues, the Bush administration
adopted a harsher stance, increasing pressure on
Beijing to appreciate its currency to fend off
criticism from Congress and domestic groups that
blame China for stealing US jobs and unfairly
creating a massive trade surplus with the United
States.
Trade officials began taking
action to curtail the flood of Chinese textiles
and punish China for widespread violations of
intellectual property rights. A takeover bid for
Unocal Corporation by the PRC's state-owned China
National Offshore Oil Company (CNOOC) raised cries
in some quarters that Beijing's offer was part of
a long-term national plan to gain strategic
advantage over the US.
Washington leaned
harder on Beijing to apply economic and diplomatic
pressure on North Korea to rejoin the six-party
talks aimed at eliminating its nuclear weapons
programs. US officials openly declared that they
hold China largely responsible for reining in the
nuclear ambitions of its formerly "close as lips
and teeth" ally, North Korea.
China's
military buildup also came under sharper
criticism. Defense Secretary Donald Rumsfeld
bluntly warned Beijing that its military spending
and procurement programs are unjustified by any
threat it faces. And China's human-rights abuses
and suppression of political dissent and religious
freedom figured prominently in US official
statements and reports issued this quarter.
Mindful of the benefits to the US of
cooperation with China where the two countries'
interests overlap and the dangers of engaging in
full-blown strategic competition with China,
President George W Bush and his cabinet members
attempted to keep the bilateral relationship on an
even keel, while urging Chinese leaders to modify
their policies to make them more compatible with
US national interests.
Much talk, but
no breakthrough on North Korea
Growing
frustration in Washington about North Korea's
refusal to set a date for resuming six-party talks
to discuss eliminating its nuclear weapons
programs prompted greater pressure on Beijing this
quarter to use the full range of its leverage over
Pyongyang to compel North Korean leader Kim
Jong-il to return to the negotiating table, which
he has now done - talks are scheduled for next
week. US officials continued to highlight shared
interests with China in peacefully resolving the
impasse through diplomacy and regularly praised
Beijing for playing a constructive role, but at
the same time efforts were stepped up both
publicly and privately to lean on Beijing to bring
North Korea around.
Amid signs that North
Korea might be preparing to conduct a nuclear
weapons test, newly appointed Assistant Secretary
of State for East Asian and Pacific Affairs
Christopher Hill traveled to Seoul, Tokyo and
Beijing in late April. While in China, Hill
reportedly asked Chinese officials to cut off
North Korea's oil supply, presumably for several
days as many believe Beijing did in March 2003 to
signal its displeasure with Pyongyang's policies
and its refusal to negotiate. The Chinese rebuffed
Hill's request, contending that a shutdown would
damage the pipeline running from China's
northeastern province of Liaoning to North Korea
because the fuel has a very high paraffin content
that can quickly build up and clog the oil flow. A
Chinese Foreign Ministry official complained to
The New York Times that the United States is
focused on too narrow a range of tools for China
to influence Pyongyang.
A month later,
Hill unequivocally assigned China responsibility
for bringing North Korea back to the multilateral
talks. At a hearing on US relations with Northeast
Asia held by the House Committee on International
Relations, Subcommittee on Asia and the Pacific,
Hill maintained that as the host of the six-party
process, China "ought to deliver participants to
the table".
Hill asserted that the Chinese
have "enough influence" to enable them to convince
a country "that they call a close friend" to come
to the table, and "they haven't done it". On May
30, the administration's message was reinforced by
Vice President Dick Cheney who bluntly stated on
CNN's Larry King Live TV show "The Chinese
need to understand that it's incumbent upon them
to be major players here."
North Korea was
a central topic of discussion in phone calls
between presidents Bush and Hu Jintao on May 5 and
between Secretary of State Condoleezza Rice and
counterpart Li Zhaoxing on June 2. Bush publicly
admitted in his May 31 news conference that the US
and China are spending a great deal of time
discussing North Korea. Moreover, he lauded
China's role as a partner in "helping to secure"
the Korean Peninsula from nuclear weapons.
Nevertheless, senior Bush administration
officials continued to urge the Chinese to
supplement their carrots to Pyongyang with threats
of negative consequences for failing to rejoin the
multilateral process. Under Secretary of State
Robert Joseph intensified public pressure on
Beijing in late June when he told reporters,
"China has to make a decision how to influence
North Korea," adding that "It has a number of
tools." Joseph then went further and threatened
"very significant consequences for US-Chinese
relations" if China fails to take more action. The
shot across the bow undoubtedly irritated Beijing.
It remains unclear, however, whether this harsher
stance represents Joseph's personal view or
broader administration thinking and policy.
As Washinvgton blamed China for not doing
enough to persuade the North Koreans to join in a
sixth round of the six-party talks, Beijing
pointed the finger at the US for not addressing
Pyongyang's concerns and failing to provide
sufficient inducements that China can use to more
effectively engage North Korea. "China has done a
very good job. But China alone is not enough,"
Foreign Minister Li told reporters in early May
while attending a meeting in Tokyo.
Beijing continued to even-handedly call
for both the US and North Korea to show greater
flexibility. This was demonstrated during Hu's
meeting with South Korea's Prime Minister Lee
Hae-chan in late June in which Lee's spokesman
quoted Hu encouraging close cooperation between
China and South Korea to get North Korea and the
US to be "more flexible" so that the early
resumption of the six-party talks could be
realized.
Reports that Washington was
considering taking up the North Korea nuclear
weapons issue in the UN Security Council provoked
warnings from Beijing that it would not support
such an effort. China's UN ambassador Wang Guangya
bluntly criticized any attempt to get the Security
Council to impose sanctions on North Korea as
"likely to destroy the whole process" of seeking a
diplomatic resolution through the six-party talks.
Privately, the Chinese admitted their
growing discontent with North Korea's policies,
but insisted that exerting pressure by curtailing
energy and food supplies would not likely result
in Pyongyang's compliance and would be potentially
dangerous for Chinese interests. From China's
perspective, the benefits of applying pressure are
uncertain, while the risks are apparent. The
already tenuous relationship between China and
North Korea would likely be damaged, perhaps
irreparably; Beijing's influence over North Korea
would diminish; and North Korea could be
destabilized, unleashing a flood of refugees
across the border into northeast China. Moreover,
North Korea might still refuse to resume the
multilateral talks and might even proceed with a
nuclear explosion or test its Taepodong 2
intercontinental ballistic missile.
Sounding the alarm on China's
military
Rising US concern about China's
military buildup, already apparent in the early
months of 2005, gained steam this quarter.
Assistant Secretary of Defense Peter Rodman
testified that although China's overall
capabilities lag far behind the US, the PLA has
already achieved "a significant asymmetric
capability that raises the risks to US forces".
He described China not only as a future
challenge, but also "a problem here and now". In a
keynote address at an Asian security conference in
Singapore sponsored by the London-based
International Institute for Strategic Studies in
early June, Rumsfeld maintained that China's
military spending, particularly its investment in
missiles and advanced military technology, pose a
threat not only to Taiwan and to American
interests, but also to nations across Asia. He
questioned the purpose of China's growing
investment in its military, claiming that "no
nation threatens China".
Rumsfeld called
for China to match its economic liberalizations
with domestic political freedoms. If China fails
to move toward a freer political system, he
predicted that it would "grow less fast and be a
less influential country". To an audience largely
composed of defense ministers and other senior
officials from Asia, the message seemed out of
step with the increasingly cooperative
relationships that China has forged with its
neighbors in recent years and heightened fears
about a possible US-Chinese confrontation in Asia.
Although prospects for lifting the EU arms
embargo against China this year have dimmed, in
part due to Bush administration lobbying to keep
the restrictions in place, worries persist that
removing those restrictions anytime soon could
negatively affect Asia-Pacific stability. In
mid-April, senior US officials from the
departments of State, Commerce and Defense
addressed the dangers of lifting the EU arms
embargo at a joint hearing of the House Armed
Services Committee and International Relations
Committee.
The issue of Israeli arms sales
to China, a major irritant between Washington and
Jerusalem, may have been finessed with an
agreement hammered out in late June that would
effectively give the US veto power over Israeli
arms sales to China and allow upgraded
technological cooperation between Israel and the
United States.
The Pentagon's annual
report to Congress (See China according to the
Pentagon Asia Times Online July 21)on
the Military Power of the People's Republic of
China, was foreshadowed in Rumsfeld's Singapore
speech and numerous media reports. The report
apparently maintains that China is pursuing an
ambitious, long-term transformation of the PLA to
develop the capability to fight and win
short-duration, high intensity conflicts along its
periphery. Double-digit increases in military
spending for the past 15 years are credited with
producing steady improvements across force
structure, doctrine, organization, and personnel.
China is improving its ability to project power
and is shifting the cross-strait military balance
in its favor. Drafts of the document have been
circulated and rewritten during the quarter as
officials try to strike the right balance between
criticizing China's military buildup and praising
its cooperation on security issues such as North
Korea and counterterrorism.
Human rights
and democracy remain on the radar screen China's
human rights abuses and the systematic suppression
of political dissent were highlighted by Susan W
O'Sullivan, a senior adviser for Asia in the State
Department's Bureau of Democracy, Human Rights,
and Labor, in a statement before the US-China
Economic and Security Review Commission.
Addressing China's increased control over the
Internet, O'Sullivan underscored the Chinese
government's heavy investment in new technology to
selectively block offending material temporarily
or permanently, or edit it electronically, as well
as the common practice of closing down websites.
In addition, O'Sullivan expressed US
disappointment about the slow pace of political
reform under the fourth generation of leaders.
Bush emphasized the need for greater religious
freedom in China in an interview with Reuters in
which he revealed that he is constantly reminding
Chinese leaders that "a great society is one that
welcomes and honors human rights, for example,
welcomes the Catholic Church in its midst, doesn't
fear religious movements".
In an interview
with Bloomberg News, Rice drew a contrast between
the lack of democratization in China and the
situation in India, which she termed a "quite
remarkable democracy". In an implicit reminder to
Beijing that the establishment of mutual trust is
hampered by China's socialist political system,
Rice noted that "our view is that democracies tend
to be stabilizing in their activities and
behaviors". Addressing the Commonwealth Club of
San Francisco in late May, Rice expressed hope
that China would conclude from the experience of
other Asian countries that political openness is a
prerequisite for lasting success.
Shaping China's rise
In a
comprehensive statement on China policy to the
House Sub-committee on East Asian and Pacific
Affairs on June 7, Assistant Secretary Hill
addressed the economic and security consequences
for the US of China's emergence in the
Asia-Pacific. Hill reiterated Secretary Rice's
assertion in Tokyo earlier this year that the US
"welcomes the rise of a confident, peaceful, and
prosperous China ...[and wants] China as a global
partner, but one that is "able and willing to
match its growing capabilities to its
international responsibilities". China's rise is a
"logical evolution", and is not a zero-sum game
for the United States, he maintained. As for the
litany of differences between the two countries,
including human rights, nonproliferation, Taiwan,
and some aspects of trade and finance, Hill
emphasized that they should be dealt with in a way
that advances US values and national interests.
Hill appraised China's economic emergence
as largely positive, but warned that China's
growing needs for energy and other resources
"could make China an obstacle to US and
international efforts to enforce norms of
acceptable behavior". In addition, he cited
China's willingness to invest in and trade with
"problem states" such as Iran, Sudan and Myanmar
as exerting the "biggest impact" on US national
interests. In closing, Hill said that the US must
work with China, and with our partners around the
world, "to ensure that its emergence takes place
within strong regional and global security,
economic and political arrangements."
Bush
continued to engage with President Hu by phone
this quarter to cultivate a good working
relationship with China's leader and encourage him
to adopt policies that mesh more closely with
American interests. To make up for Bush's decision
to not meet with any foreign leaders apart from
host Russian President Vladimir Putin at the
commemoration of the 60th anniversary of the
allies' victory over Nazi Germany and to avoid a
loss of face for Hu Bush placed a phone call to
Hu on the eve of his departure for Moscow. The
call was deliberately highlighted in the White
House news briefing that day to underscore the
importance that Bush attaches to Sino-US
relations. North Korea topped the agenda, with the
two leaders reiterating their commitment to work
together toward a nuclear-free peninsula, but not
agreeing on specific ways to achieve that goal.
Bilateral trade and economic issues were
also discussed, and Bush again urged Hu to move
toward a freely floating currency. After listening
to a short briefing by Hu on the historic visits
to the mainland by Taiwan's opposition leaders
Lien Chan and James Soong, Bush urged China's
leader to continue working on ways to reach out to
President Chen as the duly elected leader of
Taiwan.
Economic diplomacy in high
gear
Bilateral economic issues sharpened
this quarter, as the administration sought to
assuage an increasingly restive Congress and
interest groups about a slew of issues ranging
from the US trade deficit, textile quotas,
currency issues, intellectual property rights, and
as the quarter ended, energy issues. Perhaps E.
Anthony Wayne, assistant secretary for economic
and business affairs, best summed up the
complexity of the economic relationship when he
said in a June 6 speech to the Executives' Club of
Chicago that he and his staff spend most of their
time dealing with "fears, legitimate complaints,
and misperceptions" about trade issues with China.
China's rise as a global economic power is not in
dispute, he said, "but people's feelings about it
run from admiration to uneasiness and even
hostility".
Events throughout the quarter
reflected the deepening challenge of
distinguishing fact from fiction in how China's
economic rise affects American interests. Chinese
officials and media, meanwhile, pointed toward
separating "politics from economics", and the
importance of negotiating trouble spots in the
interest of overall bilateral relations. "Don't be
afraid of floating clouds covering up the eyes,"
intoned a People's Daily Online editorial, arguing
that "it is essential to handle economic and trade
frictions ... from a strategic height."
While many analysts have observed an
increasingly harsher US stance toward China this
quarter, speeches and actions by officials from
both countries suggest an acute awareness of the
strategic implications of letting rhetoric derail
cooperation needed to solve problems. There are
serious disputes across a range of issues, but a
technocratic, pragmatic approach has tended to
prevail. Officials must also handle domestic
political pressure to more actively defend
interests.
Currency issues
Domestic political pressure was most evident
in the question of the yuan's peg to the dollar,
and the quarter began with an April 7 non-binding
vote in the US Senate to raise US tariffs on
imports from China by 27.5% unless it revalues its
currency within six months (the figure is
mid-point in the 15 to 40% range some economists
say China's currency is undervalued.) The vote on
the "China Free Trade Act", cosponsored by
Senators Graham and Schumer passed by a two-thirds
majority, revealing a surprising level of angst in
Congress with China's undervalued currency, viewed
to be the cause of a host of US economic problems,
from a surging trade deficit to the loss of
manufacturing jobs.
"This amendment says
to the Chinese, enough already," Schumer said
April 6. "It says to the Chinese, this is a shot
across your bow. Reform because, if you don't,
there are going to be dramatic consequences
throughout the world, in our country, and in your
country as well."
Chinese officials were
not pleased with this rhetoric, and blamed it for
sparking speculation frenzy on the yuan that would
only further delay reform. Speaking on the
sidelines of an Asian Development Bank meeting in
Istanbul May 6, Chinese Finance Minister Jin
Renqing said, "We will actively and prudently push
forward this reform, but I believe under the
current situation that speculation on the renminbi
exchange rate is very hot, that pushing forward
this reform is very difficult." On May 12,
People's Bank of China vice governor Wu Xiaoling
complained that external pressure specifically
pending legislation in the US Congress was
prompting a flood of hot money into Chinese
assets, especially property. "Originally there was
a pretty good environment" for reform of the
exchange rate, Wu said. "It is not proper to say
that the reform direction of the Chinese
government is being carried out under pressures
from outside."
This comment came a day
after billions of dollars of speculative money was
let loose on foreign exchange markets worldwide
following an erroneous report that the government
would revalue the currency by May 18. On June 23,
Chinese Premier Wen Jiabao argued in a keynote
speech at the Sixth ASEM Finance Ministers'
meeting in Tianjin that it is China's right to
choose its own currency regime "suitable to its
own national conditions". Meanwhile, on May 26,
the US Treasury released its "Report to Congress
on International Economic and Exchange Rate
Policies", which addressed a range of problems
with current global imbalances, including China's
fixed peg. The report concluded that while China's
currency value is highly distortional, it does not
meet the "technical qualifications"of a currency
manipulator. Testifying before the Senate
Committee on Banking, Housing, and Urban Affairs,
Treasury Secretary John Snow added that this
should not be interpreted as acquiescence to the
status quo; "if current trends continue without
substantial alteration," he warned, "China's
policies will likely meet the statute's technical
requirements for designation" as currency
manipulation.
When committee members
including Schumer grilled Snow on what this
meant, Snow reluctantly opined that China would
need to make a "significant" move and that it
would need to do so before the next exchange rate
report is due to Congress in mid- October. Snow
reiterated his position in June 23 testimony to
the Senate Finance Committee, saying, "I believe
that the risks associated with delaying reform far
outweigh any concerns with immediate action," he
said. "The current system poses a risk to China's
economy, its trading partners, and global economic
growth."
In truth, while Chinese officials
have repeatedly said that they intend to
eventually adopt a flexible currency, there is no
consensus among officials or economists on how to
get there from here. Some argue China should wait
several years until its financial system is
strengthened, others argue that the opportune time
has already passed. "The economic and social price
of yuan revaluation is climbing higher by the
day," senior economist Liang Hong wrote in the
China Economic Times in June. "As more hot money
flows into the country and the trade surplus grows
worse, the task at hand becomes more complicated,"
he asserted. An Asian Development Bank study
released June 1 concluded that a 10% revaluation
would "stabilize China's overheating economy by
suppressing inflationary pressure, and reducing
investment and GDP growth. On the other hand," the
report went on, "a 20% appreciation nearly halves
GDP growth, risking a hard landing for China."
The impact on the US trade deficit would
"hardly make a dent", the report adds, because a
reduction of imports from China would be replaced
with an increase of imports from other countries.
Federal Reserve Chairman Alan Greenspan agreed in
testimony before the US Senate Finance Committee
on May 23, saying that only a higher savings rate
in the US would alter the trade deficit picture.
Both the IMF and World Bank echoed this view,
arguing in separate opinions that China's exchange
rate was not the sole problem of global imbalances
and asserting Beijing's legitimate right to set
monetary policy.
As the quarter ended, the
Bush team was able to buy some more time from
Congressional action, as Secretary Snow and
Chairman Greenspan emerged from side meetings with
senators Schumer, Graham, and other key
congressional leaders June 30 with an agreement to
postpone a scheduled July 27 vote until the fall.
No doubt Snow's new special envoy to China, Olin
L. Wethington appointed May 19 and taking over
the portfolio of Ambassador Mark Speltz has his
work cut out for him. Wethington has a long
history of financial diplomacy, including currency
talks with Japan and Korea and most recently
assisting in Iraq reconstruction.
Textile tariffs
On two
occasions in May, Secretary of Commerce Carlos
Gutierrez announced that the Committee for the
Implementation of Textile Agreements (CITA) had
concluded that "considerable market disruption"
existed for a total of seven textile products, and
imposed a 7.5% quota above the moving average of
the 12 months prior to when the complaint was made
late last year. (CITA said that three of the seven
were self-initiated actions, and four were brought
by the National Association of Manufacturers,
among other groups; CITA has yet to rule on eight
more cases currently pending). If a satisfactory
solution cannot be reached within 90 days, the
quota will remain in place through the end of
2005.
China takes the textiles issue very
seriously and argues it is World Trade
Organization (WTO) compliant. On May 30, Commerce
Minister Bo Xilai conducted a press conference
with Chinese and international media in which he
argued that the US action is based on
"insufficient evidentiary grounds", and argued
that the specific conditions laid out in Paragraph
242 of China's WTO succession agreement have not
been met. He defended Chinas textile trade as a
"take to compensate for other areas of gives in
market opening", and while he agreed that there
has been an increase in China's textile exports to
the US (and EU) since January 1, the fault lies
with the developed countries that failed to phase
out textile quotas, keeping 90% of them until "the
last minute" the bulk of these in products for
which developing countries have greater advantage.
The textile industry employs 19 million
people in China, Bo pointed out, many in the
low-income population, and the Chinese government
has a responsibility to protect the legitimate
rights of Chinese industries. Bo further explained
that the May 20 action to impose export duties on
74 textile products was not in reaction to the US
move, but had been under study for some time.
China will continue to exclude from that list
textile products subject to US (or EU)
restrictions, he added. In concluding, he urged
the EU and the US to spend more energy on the
development of high-technology and on Airbus and
Boeing, "rather than quarrel with us on socks and
trousers". (This may have been a reminder that
China Southern Airlines had just announced on May
12 it would buy 45 Boeing planes in a deal worth
about $3 billion.)
The issue was a focal
point of the June 2-4 visit to Beijing by Commerce
Secretary Gutierrez, with USTR (US Trade
Representative) Rob Portman joining him June 4.
The two met with Chinese Vice Premier Wu Yi and
Commerce Minister Bo. In addition to negotiations
on textile quotas, intellectual property rights
(see below), and currency issues, they were
preparing for the next annual meeting of the Joint
Commission on Commerce and Trade (JCCT) in July
2005 in Beijing. The last 2004 JCCT meeting
successfully resolved a whole host of issues, both
sides agree, so officials have only their own
success to improve upon. Intellectual property
rights (IPR)
China's infringement of IPR
provoked harsh criticism from US officials this
quarter that Beijing could not ignore. Echoing a
phrase coined by former USTR Bob Zoellick "If we
make it, they can fake it" Assistant Secretary
of State for East Asian and Pacific Affairs
Christopher Hill pointed to IPR as a priority in a
June 7 hearing before the Sub-committee on East
Asian and Pacific Affairs of the Senate Foreign
Relations Committee. The issue is far from
confined to knock-off CDs and DVDs; Hill listed
"automobile brakes, even entire passenger cars,
electrical switches, medicines, marine pumps,
processed foods, and other items that create
health and safety risks in China and abroad
because of poor product quality regulation". For
US businesses, IPR infringement is "really the
solution to the bigger problem the trade
deficit", argued Charles Martin, president of the
American Chamber of Commerce in China, because
fake goods crowd out imports of legitimate
products.
Chinese officials do seem to
grasp the enormity of the problem. On April 21,
the Information Office of the State Council issued
a white paper entitled "New Progress in China's
Protection of Intellectual Property Rights", the
first IPR white paper since 1994.
Citing a
number of areas of progress, the paper also
pledges that China will "enhance its cooperation
with various countries and international
organizations with a more active, open attitude".
In addition, more than 20 government agencies
collaborated in a "public information week" that
sought to educate businesses, students, and
broader society on the importance of IPR. US
officials acknowledged progress is being made, but
nevertheless the USTR placed China on the Priority
Watch List on April 29 after concluding its "Out
of Cycle" review of China's IPR regime a step
that is sometimes a precursor to applying
sanctions. This issue will definitely be addressed
at the July JCCT meeting; US officials are seeking
a range of specific measures such as increased
criminal penalties and more budget outlays for
enforcement at the local level.
Energy
issues
Conflicting competitive and
co-operation pressures on bilateral energy issues
were revealed late in the quarter, kicked off by
the June 23 takeover bid by China National
Offshore Oil Corp Ltd (CNOOC) to acquire Unocal
Corp, putting back into play Chevron's $16.7
billion offer that it thought was locked up. On
June 30, Congressional suspicions about CNOOC's
$18.5 billion cash bid were expressed in a House
vote of 311-92 to ban Treasury from using any
funds to "recommend approval" of the sale, and a
second non-binding resolution, adopted 398-15,
that expressed concern the sale "would threaten to
impair" US national security.
(Earlier in
the week, the House had also voted overwhelmingly
to bar the Export-Import Bank from proceeding with
a $5-billion credit package to support a bid by
Westinghouse Electric Co, a unit of British
Nuclear Fuels PLC, to build nuclear power plants
in China.) Ultimately, the Committee on Foreign
Investment in the US (CFIUS), chaired by Treasury
Secretary Snow, has responsibility for deciding
the national security question, and it has rarely
blocked a sale of a domestic company to a foreign
one. In this case, many energy industry analysts
argue that because two-thirds of Unocal's assets
are in Asia, and due to its long-term supply
contracts to Thailand and Indonesia, for example,
the acquisition does not pose a challenge to US
interests. Unocal does provide a small percentage
of the US strategic petroleum reserve from its
deep-water wells in Mexico, but CNOOC officials
have pledged to either sell these or put the
assets in a trust. Many business analysts argue
that the real significance of the CNOOC bid is
China's determination to build world-class
companies that can compete internationally, and
that it recognizes it needs foreign help to do so.
For others, however, Beijing's offer
provided further evidence of a Chinese plan to
translate its immense trade surpluses into
strategic advantage that would redound to the
detriment of the US. The takeover bid comes on the
heels of China's acquisition of oil and natural
gas fields in Kazakhstan, Venezuela, Sudan, Iran,
Iraq, Peru, Azerbaijan and Indonesia. Many of
those countries are considered unsavory or even
rogue states by Washington and China's business
dealings with them have aroused suspicions that
Beijing's economic inroads will not only provide
China with secure access to energy, but also new
sources of political leverage. The CNOOC bid also
brought into relief US energy vulnerability. In
the House of Representatives, Richard W Pombo
(R-CA), chairman of the House Committee on
Resources, who spearheaded the House bill and
whose district includes Unocal's headquarters,
said, "This should be a wake-up call for America
to get as serious about energy as China appears to
be." The Unocal board meets August 10 to vote on
the CNOOC and Chevron bids.
On the
cooperation front ironically, on the same day as
the House voted on June 30 US Secretary of
Energy Samuel Bodman announced in Beijing the
establishment of the first DOE office in China to
support co-operative efforts on energy and nuclear
security issues, and back in Washington, the first
US-China Energy Policy Dialogue was convened. "The
United States and China have a constructive
relationship on a variety of issues, including
energy security and nuclear security," Secretary
Bodman said. "Through the US-China Energy Policy
Dialogue, and with on-site assistance from the new
DOE office, we can enhance our co-operation to
promote energy efficiency, diversify our energy
supplies, expand the use of clean energy
technologies, as well as continue our mutual
efforts to increase nuclear security in both our
nations."
Are US-China ties headed for
retrogression? It is premature to predict a
downward slide in US-China relations, but current
trends are on balance more negative than positive.
Opportunities will be presented in the second half
of the year that, if actively seized, could put
the relationship on a more positive trajectory.
Both countries are looking to the July meeting of
the Joint Commission on Commerce and Trade to make
progress in the economic realm. An important venue
for discussions of geostrategic issues will be the
Global Dialogue that will be launched in late
July, led by Deputy Secretary of State Robert
Zoellick and Executive Vice Foreign Minister Dai
Bingguo. The list of thorny international issues
on which the US and China are on opposing sides or
are partially at odds keeps growing: UN reform, US
presence in Iraq, Iran's nuclear programs,
Uzbekistan's crackdown, East Asian regionalism,
the Proliferation Security Initiative, genocide in
Sudan, North Korea's nuclear programs, the
US-Japan alliance, Taiwan, and the militarization
of space.
Summits and other high-level
meetings will also provide a chance to inject new
momentum into the bilateral relationship. Hu
Jintao will make his first visit to the United
States as China's president in September. Bush
will stop in Beijing in November when he travels
to Asia to attend the Asia-Pacific Economic
Cooperation summit. High-level military exchanges
are also on the agenda, including a visit by
Secretary Rumsfeld to China and Central Military
Commission Vice Chairman Guo Boxiong to the US.
(Used by permission of Pacific Forum CSIS) |
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