China will follow the US: a climate change fable

President Obama's emphasis on climate change has notable implications for US-China relations. On her inaugural trip to Asia, Secretary of State Hillary Clinton sought to expand the Sino-American Strategic Economic Dialog to include climate change among America's chief China policy priorities.

Making climate change a high priority is a mistake. It may inject unnecessary hostility into the already-strained bilateral relationship over what should be a secondary issue. And it rests on a faulty premise: many argue that the PRC will make sharp cuts in carbon emissions but only if the US does so first. This claim borders on nonsense.

America must go first: a flawed premise

The importance of American leadership is often neglected in discussion of trans-Pacific matters. In climate change debates, it is not neglected but twisted. The American climate change leadership the Obama Administration wants Beijing to follow will certainly not be successful due to moral concerns. The world is littered with instances where American moral leadership has been ignored or actively defied by the PRC - the Sudan genocide, Iranian and North Korean nuclear programs, Burmese human rights repression, and so forth.

Instead, the usually unexamined and always inaccurate assumption behind the notion that China will follow the US on climate change is that it is question of economic competition - i.e., Beijing does not want to harm the competitiveness of its firms with carbon restrictions. This is certainly true, but it has nothing to do with whether the US is willing to harm the competitiveness of its firms first. That is because US firms are well down the list of China's competitiveness concerns.

China's economic story is multifaceted. The bulk of it, though, is captured in the creation and maintenance of conditions to encourage relocation of East Asian output to the Chinese mainland, primarily for the purpose of export. This extends from the initial zones to draw capital from the Chinese diaspora for export back to home markets starting in 1979 to the mass movement of factories to serve the entire world as WTO membership was finally secured (PDF 1.78MB) in 2001. Chinese firms may be competing first and foremost for the US market, but they are competing against other export platforms to the US in East Asia and around the globe.

Consider what would happen if China were to impose carbon-driven restrictions on firms operating in China without the US "going first". This would not be to the principal benefit of American companies. Rather, the relocation process would reverse: East Asian firms would disinvest in China, moving production to the second-most competitive regional location for textiles, computer assembly, furniture, and other products. Depending on the goods, this could be Vietnam, Bangladesh, Indonesia, or others. These countries would then be the source of the bulk of US imports.

Perhaps more important, most American companies operating in China would probably move not back home but to low-cost third-party platforms elsewhere. Dramatic and effective American steps to restrict carbon emissions would make all goods imported into the US more competitive but do nothing to alter China's incentives to take the same steps. What would actually encourage the PRC to impose carbon-driven restrictions would be willingness by Japan, Korea, the Philippines, Central America, and other exporters to impair their own competitiveness in the name of curbing emissions.

Jobs: China's insuperable barrier

Behind Chinese policies on competitiveness - indeed behind almost everything involving the PRC - is the Communist Party's top priority for 20 years and counting: jobs. The well-documented demographic surge that precipitated the one-child policy has put a generation's worth of pressure on the party to create jobs and avoid socio-political instability. This is the main reason the Chinese development pattern differs from its East Asian predecessors: Beijing has been much more open to foreign investment because the PRC's primary concern has been employment generation - even more than economic nationalism.

This is why China has allowed the environmental devastation already seen and why, despite its general view that climate change is dangerous, Beijing will accept nothing that even threatens to seriously inhibit employment. In his address to Congress, President Obama cited China's new energy program as the largest in the world. On some counts, this may be accurate. It absolutely does not, however, indicate a willingness to genuinely move away from high-emissions energy production.

The horrific health damage done by air pollution has been clear in the PRC for more than a decade. Coal production was declining at the end of the 1990s, while its effects were being documented. Since then, however, coal output has nearly tripled, and the reliance on coal in electricity and broad energy supply has increased despite strong oil demand and touting of alternative energy.

The party has been unwilling to protect the environment and safeguard the health of its citizens in the face of possible job losses even in recent, sustained periods of double-digit growth. It certainly will not do so in the context of record job losses now.

Until the US is willing and able to offer concrete assurance of "green" jobs for China in numbers sufficient to offset those lost in steel, cement, and other industries, bilateral negotiations on this subject will for the next several years produce only hot air. When America has so many other matters to discuss with the Chinese - including those that will be sharply disputed - introducing yet more grounds for confrontation is a dubious risk.