China-U.S. Trade Law : International Trade Lawyer & Attorney : Baker Hostetler Law Firm : Trade Remedies, Customs & Export Controls

This blog occasionally posts articles regarding international trade issues with respect to India that are connected to China - US trade issues.  In that spirit we wish to bring to our readers' attention a recent call for papers to be presented at the 3rd Government Law College International Law Summit, organized by the Students for the Promotion of International Law (SPIL), Mumbai, in association with the Indian Merchants Chambers. The Summit is scheduled to take place from the 3rd - 5th February, 2012. SPIL Mumbai is calling for papers across the full spectrum of the Summit's theme, which this year is International Trade Law and Economic Policy. In particular, they are looking for papers on international trade law, international investment law, international taxation, and competition law. Please click here for more information on this call for papers.
 

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President Obama declared in his State of the Union address on January 27, to a standing ovation, that the United States would not take second place to anyone in the world, and specifically to countries such as China and India. The specific reference to China and India highlighted their growing importance on the global stage. India and China increasingly have been presenting a united front against the United States and the rest of the developed world, despite their own on-going political and territorial disputes (as we noted in our articles entitled, India, China, and the Doha Round, and India and China Turn Up the Heat on Climate Change).

We predicted in India and China Turn Up the Heat on Climate Change that an alliance between India and China could present a formidable barrier at the climate change meetings in Copenhagen in December 2009. Indeed, the talks have been regarded by many as a failure, and the resulting Accord as “low-ambition.” Just as India, with the support of China, had been blamed by the United States for the failure of the Doha Round in July 2008, China, with the support of India, has been blamed by many for the failure of Copenhagen.

The Copenhagen Accord, drafted by Brazil, China, India, South Africa (the “BASIC” countries) and the United States, is not legally binding, and was recognized but not approved by the 193 countries represented at Copenhagen. It seeks to limit a rise in temperatures to no more than 2 degrees Celsius above pre-industrial levels, and sets a goal that developed countries jointly will deliver $30 billion of aid over the next three years and $100 billion a year by 2020 to help developing countries cope with the impact of climate change.

Developing countries, including China and India, have made clear that they will join other countries to combat climate change, but not at the expense of their own economic interests. They conditioned acting on the receipt of significant concessions from the developed world, which they see as primarily responsible for the problem they are being asked to address.

Both China and India chose Copenhagen as the platform from which to demonstrate that they could not be bullied by the developed world. India’s Environment Minister Jairam Ramesh stated in an address following the meetings in Copenhagen that the alliance of BASIC countries highlighted the growing influence of emerging economies. He further characterized as a significant victory the commitment from developed countries to provide $100 billion/year in climate funding without having to make significant concessions in return. He indicated that close links with China would continue. China also declared that Copenhagen proved China could not be pushed around.

India has been concerned about the binding nature of the Copenhagen Accord. Even though India was among the countries that brokered the deal, sources have said that it announced its support for the Accord only after UN Secretary General Ban Ki-moon clarified to Prime Minister Manmohan Singh that the Accord was a political statement of intent with no legal force. In the aftermath of the Copenhagen meetings, Minister Ramesh even “pled guilty” for allowing provision for “international consultation and analysis” of domestic mitigation programs, a greater concession than merely informing the UN Framework Convention on Climate Change (“UNFCCC”) about domestic mitigation programs. When the environment ministers of the BASIC countries met on January 24, 2010, Minister Ramesh stated that the Copenhagen Accord has “no hope” of becoming a legally binding document.

The Copenhagen Accord did include a January 31, 2010 deadline for countries to outline their climate change plans and declare specific emission reduction targets. More than 50 countries respected the deadline, including India and China. India committed to reduce emissions by 20-25% by 2020 (in comparison to 2005 levels) through domestic mitigation efforts, but stated specifically that “its domestic mitigation actions will be entirely voluntary in nature and will not have a legally binding character.” India further stated that “mitigation actions will also not apply to agriculture sector. The emissions from agriculture sector will be excluded from the assessment of emissions intensity.”

China stated in a January 28 letter that it would endeavor to cut the amount of carbon produced per unit of economic output by 40 to 45 percent below projected growth levels by 2020, also from a 2005 base. However, given China’s projected rate of economic growth, China still would increase substantially its total carbon emissions while expecting the developed countries to decrease their emissions drastically.

Whether the Copenhagen meeting was successful cannot be determined strictly from the setting of targets, on the one hand, and the absence of any legally binding agreement, on the other. It may be that “success” will have to be measured by “progress,” with the standard for progress reasonably modest and determined by actual carbon emission reductions worldwide. Nonetheless, unmistakably there will be no global progress without the developing world. Copenhagen confirmed a China-India alliance as the base of a larger group of developing countries resistant to progress at their expense.

China, India, Brazil, and South Africa are now central to progress on climate change. They have asked the UNFCC to hold six meetings through 2010 in preparation for the next climate summit in Mexico City in December. The BASIC ministers themselves will meet once each quarter, first in Cape Town at the end of April 2010. The European Community had entered Copenhagen with even greater ambition than the United States. The BASIC countries proved that Europe, the United States, and other developed countries will make little or no progress without them.
 

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We noted in our article entitled India, China, and the Doha Round that India and China have forged a formidable alliance in the Doha Round of negotiations. Now the two “Asian giants” have combined forces in an effort to gain leverage in another multilateral dialogue – this time, the dialogue on climate change that will take place in Copenhagen later this year.

India and China signed an agreement (“Agreement”) on October 21, 2009 on climate change, providing further recognition that the two countries have much to gain from cultivating a long-term, economically-driven partnership. An India-China alliance, however, is a relationship that the developed world will regard with some caution. India and China were accused of conspiring to stall the Doha Round of negotiations in July 2008 and, unless the developed world makes some of the concessions they demand, the combined forces of India and China could present a similar barrier in Copenhagen. 

The Agreement was signed at a ceremony in New Delhi by Minister Jairam Ramesh, of India’s Ministry of Environment and Forests, and Vice Minister Xie Zhenhua, of China’s National Development and Reform Commission. The two countries agreed to work together over the next five years on a variety of initiatives, including collaboration in the areas of energy efficiency, renewable energy, clean energy technologies, sustainable agriculture, and reforestation. The Agreement also reaffirmed the “principle of common but differentiated responsibilities, in particular that developed countries should take the lead in and continue to reducing [sic] their greenhouse gas emissions and providing financial resources, technology transfer and capacity building support to developing countries.” China accounts for more than 20 percent of global emissions. India accounts for less than 5 percent, but it is the fourth largest emitter after China, the United States, and Russia. Despite the difference in emission levels, however, Minister Ramesh noted on October 21 that there was virtually no difference between the negotiating positions of India and China. Both countries have agreed to work on slowing the growth of greenhouse emissions, but resist making those limits binding and subject to international monitoring.

The Agreement, and the earlier Doha Round collaboration, suggest a transformation of regional and global relationships, albeit within defined and specific sectors. For students of traditional international relations, it ought to be unexpected and counterintuitive. India and China are demonstrating that global issues may encourage regional alliances even as regional issues, historically, might have made such alliances impossible. One day it might even turn out that regional alliances on global issues can help solve the regional divisions over local and regional issues.

China and India fought a war against each other as recently as 1962. Substantial territorial and sovereignty issues continue today, especially with regard to the northeastern Indian state of Arunachal Pradesh, portions of which China claims as South Tibet. In recent weeks, the Indian press has reported on nighttime boundary incursions and troop buildups, and there has been tension between the two countries about an upcoming visit by the Dalai Lama to Arunachal Pradesh. Just days before the Agreement was signed, the People’s Daily Online accused India of pursuing a “shortsighted and immature” foreign policy of “befriend[ing] the far and attack[ing] the near.” It stated that India’s “dream of superpower is mingled with the thought of hegemony, which places the South Asian giant in an awkward situation and results in repeated failures.” 

Some may view the emerging economic partnership between India and China with skepticism also in light of China’s historical alliance with Pakistan. China has long regarded Pakistan as its “all weather friend,” and has offered it economic assistance in addition to military aid and support for its nuclear program. However, the friendship may be fraying, probably because it was built in significant part on taking sides against India. Some experts have noted that, as India grows in global importance, China appears to be distancing itself from the unconditional friendship it previously offered to Pakistan. For example, in October 2008, China refused a request from Pakistan’s President for a full blown economic bailout. 

China would be wise to court India and to continue improving relations with its historic rival regardless of its relationship with Pakistan, which China is unlikely to abandon completely in the near future. As the saying goes, nations have no permanent friends and no permanent enemies, only permanent interests. A stronger relationship with India is in China’s economic interest. India commands a much larger place on the issues of the day – the global economy, climate change – than Pakistan, and therefore is more important to China. Although China and Pakistan signed a comprehensive free trade agreement in 2006, trade between China and Pakistan was approximately $7 billion in 2008, contrasted to the $51.78 billion in total trade between China and India.

India’s population of over a billion people, and its growing middle class, make India more like China than Pakistan, and make India an attractive market for Chinese products. China’s new capitalism has a greater future alongside a prosperous India. China replaced the United States as India’s largest trading partner in 2008, and India ranked as China’s tenth largest export destination. The growing importance placed on India by the United States – for example, with the signing of the civil nuclear agreement in October 2008 – also means that China cannot afford to overlook or minimize India’s role in the world. 

Climate change is expected to be on the agenda during President Obama’s meetings with China’s president Hu Jintao in Beijing on November 16 and 17 and with Prime Minister Manmohan Singh at the White House on November 24. It would be surprising if President Obama were not speaking to China about India, and to India about China, which is all the more reason to expect that China and India will be speaking to each other. Notwithstanding emerging references to a “G-2” of China and the United States, India is no more likely to be left out of the equation from Asia than the European Union could be left out of the conversation with the United States. Should there be no reductio to a G-2, the emerging alliance between India and China may turn out to be a major reason. As for Copenhagen, the weight of the new Asian alliance might make all the difference.

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