Thursday, September 15, 2011

Made in the U.S.A. - a BIT between China and the U.S. ??? (Updated 2/17/2012)

( For more on this topic, see my working paper on "Confucianism and CSR - Working Paper, Comments Welcome")

It struck me today that I have not thought too much about U.S. and China trade for green tech goods and services. Federal loans came under scrutiny recently and the discussion will sure to emerge again. Last year, the Obama Administration initiated Section 301 investigations into China’s policies affecting the competitiveness of their Green sector. I heard NPR mention the argument again this morning in defense of the failed solar panel company citing that one reason may be due to unfair competition from China.

I looked briefly on Google to see if there are any current news items about the Section 301 investigation - nothing.

Perhaps a deeper inquiry is necessary, if nothing because I’m curious if the kind hardliner approach is really effective or is it merely provocative of a Chinese response.

China is very good at doing nothing and bouncing the sovereignty check; we are too weak to speak now because of our apparent economic dependency. I have read recently that our debt numbers to China is not as detrimental as we thought. Good news! But it is still curious that I find no recent updates to the Section 301 investigation.

In the ‘80s and ‘90s, the U.S. used the same tactic against Japan and Korea’s subsidies and trade barriers, commentators have argued that this hardliner approach “led to more balanced trade relationships, and even encouraged foreign investors, like Asian auto companies, to build plants in America.” But these days, we don’t have the political will or the leap of military superiority to rely on to get the same effect. I wonder if now is a good time for a softer approach including an ideological focus on China’s new direction in the Circular Economy Law and Sustainability. If U.S. businesses still hope to find export outlets in China for green tech goods and services, team up with Chinese businesses in alliances, and invest in Chinese operations, then just heighten barriers will not work – China will only compete with us to see who can build the highest protectionist mentality. I think NPR suggested this very thing this morning; let’s face it Mr. Obama, if you hope to boost your investments into the U.S. Green technology sector, you really have to open the dialogue with China about exporting these things under fair and equitable terms for us. The only way we can do that is to agree on currency convertibility, which China won’t like, and agree on China’s agenda to pursuit a circular economy and national identity.

This is not just about the Chinese government’s need to exercise its authorities; it should also encompass the will of the Chinese people. I believe the only way for China to enforce its new Circular Economy Laws is by integrating its NGOs, its new media power, and the power vested in the Chinese Communist Party (CCP).

China has undergone great economic changes in the last twenty years. It was once a Communist nation of failing State Owned Enterprises (SOE); now it is the world’s second largest market economy over taking Japan by a thin margin in 2010. United States still dominates the market place almost tripling China’s GDP, but it stills owes a good part of its debt to China and faces serious ongoing economic crisis today. In this symbiotic and delicate global economic climate, convertibility of currency is desirable for all parties’ interest in sustaining the process of our civil and economic discourse. Before we achieve this kind of harmony or any kind of meaningful environmental, social and political progress in a judicial sense, however, we must first overcome some serious cultural fixations in our views about one another’s legal traditions.

In light of the recent Chinese Circular Economy Law (CE), I believe there are some observable judicial process inefficiencies resulting from the cultural entrenchments of Confucius thoughts. Western legal scholars have argued that a specialty environmental court is the answer to China’s legal compliance issue in light of CE. I believe this view is incomplete; it stems from a Cartesian biased ontology. To successfully implement CE and make an impact on correcting China’s environmental, social, and political problems through the Rule of Law, China needs not only a specialty court to enforce CE, but also a uniquely Chinese doctrine of social legalism of natural process law with the cooperation from NGOs, citizens, and the Chinese Communist Party (CCP)--a Confucian aesthetic order of things if you will.

This is inherently apparent in the thousand years of meditation tradition and the nature of Chinese process law. Enforcing a entirely Western style law is impossible in China, the learning curve for the people is simply too steep.

So in addition to using trade remedies to heighten barriers to Chinese imports, we also might try talking to China about its infrastructure and expertise needs and establish some contained currency exchange for these things under a Bilateral Investment Treaty (BIT). This would be the first BIT between China and the U.S. Under a sufficiently contained currency exchange market for only Green Technology and expertise, we remain the capital exporters and China has incentive to allow currency to equalize. China would get the benefit of enforcing the Circular Economy Laws with the help from a nation that knows innovation and social media technology.

Mr. Obama, I sure hope you are negotiating this kind of deal in order to preserve your own investments into the American People and the Green Economy. Should China raise the argument that we are subsidizing our green technology in violation of fair trade practices, we simply put the burden on China to ask that they control their subsidies; or we agree on equitable currency exchange in the sector only (for experimental purposes). Either way, we have a win; both countries walk away satisfied partially.

Today is not the 1980s or the ‘90s. The world is a different place. Counting on the same result under different conditions ought to constitute insanity. It’s time for the U.S. and China come to a BIT, and put the green growth and a sustainable global economy in their common sight.

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