Cuestión de Alta Diplomacia: China-USA

How to Avoid a Sino-American War

 

 JUN 11, 2015

BEIJING – In a few weeks time, senior US and Chinese leaders will sit down in Washington for their annual “strategic dialogue.” Given rising tensions in the South China Sea, that dialogue is taking on increasing importance.

In 2001, when an American EP-3 spy aircraft operating over the South China Sea collided with a Chinese air force interceptor jet near Hainan Island, Chinese and US leaders managed to defuse the situation and avoid a military confrontation. Today, such an incident in the South China Sea, where China and several southeast Asian countries have competing territorial claims, would almost certainly lead to an armed clash – one that could quickly escalate into open war.

Last month, at the annual Shangri-La Dialogue security conference, Singaporean Prime Minister Lee Hsien Loong conveyed the deep apprehension of the countries of the Association of Southeast Asian Nations about the potential for an armed conflict between China and the United States. The good news is that US and Chinese representatives took the conference as an opportunity to signal subtly their willingness to ease tensions and continue to engage with each other.

US Secretary of Defense Ashton Carter, in an effort to limit the scope for provocation, called on all claimants to territories in the South China Sea to stop island-building and land-reclamation efforts there. He also proposed a regional security architecture that gives all countries and people in the Asia-Pacific region the “right to rise.”

From China’s side, Admiral Sun Jianguo, a deputy chief of staff of the People’s Liberation Army, reiterated his country’s commitment to resolving disputes through “peaceful negotiations, while preventing conflicts and confrontation.” He added that all countries, big and small, have an equal right to participate in regional security affairs and share a responsibility to maintain regional stability.

But such mollifying rhetoric cannot obscure the defining role that great-power rivalry is playing in the South China Sea. China interprets US intervention there as an explicit attempt to contain China by stoking conflict between it and its neighbors. The US views China’s maritime claims as an effort to challenge US primacy in the Asia-Pacific region.

In a sense, both countries have a point. China does aspire to be a maritime power, but its coasts are, to some extent, encircled by Japan and the Philippines, both US allies, and Taiwan, with which the US maintains security ties.

But strategic mistrust between China and the US extends far beyond maritime issues. Despite troubling situations in the Middle East and Eastern Europe, America has remained focused on reshaping its hub-and-spoke alliances into a more networked security system across the Indo-Pacific theatre, capitalizing on the web of intra-Asian military ties among old allies and new partners such as India and Vietnam.

In particular, the US-Japan alliance is undergoing historic transformation, with renewed guidelines for defense cooperation that allow for greater Japanese autonomy in security affairs – and that present China as the main adversary. Add to that the potential deployment of a US-led missile-defense system in South Korea and the prospect of a US military presence in Vietnam, and it is not difficult to understand China’s anxiety.

The US is placing economic pressure on China as well – at a time, no less, when China is struggling to implement risky domestic reforms amid slowing growth. The US recently attempted to block the establishment of the China-led Asian Infrastructure Investment Bank, and then to stop its allies from joining.

Moreover, by repeatedly calling the proposed Trans-Pacific Partnership a “strategic” project, it has politicized the trade deal, which, as the economist Arvind Subramanian has pointed out, will place Chinese firms at a disadvantage in the US and in Asian markets. This effort undoubtedly deserves to be described as “containment.”

For Chinese policymakers, America is not the status quo power it claims to be. In the face of US attempts to reshuffle regional security and economic arrangements, China feels that it has no choice but to prepare for worst-case scenarios – an approach that is reflected in Chinese President Xi Jinping’s so-called “bottom-line concept.”

With a new round of policy debate about China unfolding in the US, tensions may be about to increase. Most American strategists are not only pessimistic about the future of the bilateral relationship; they also identify China as a potent threat to America’s role in Asia.

A recent report for the relatively moderate Council on Foreign Relations states that America’s effort “to ‘integrate’ China into the liberal international order” has generated “new threats” not only to US primacy in Asia, but also to America’s global power. Given this, the report’s authors argue, the US needs “a new grand strategy” toward China that focuses on balancing – rather than supporting – the country’s ascendancy.

Michael Swaine, a seasoned Asian security expert at the Carnegie Endowment for International Peace, also doubts the sustainability of American primacy in the Asia-Pacific region in the coming decades. He advocates a less antagonistic strategy: a multi-stage process of mutual accommodation to create a more stable regional power balance between the US and China.

Ensuring stable peace and continued prosperity in the Asia-Pacific region will require both China and the US to replace their self-serving interpretations of the other’s strategic intentions with more sober assessments. In the short term, that means recognizing that the challenge of navigating complex maritime issues involving so many ambitious regional players must be addressed in a pragmatic and cooperative manner.

By activating top-level diplomacy, building strong crisis-management mechanisms, and enriching the rules of engagement in the South China Sea, a war between the US and China can be avoided. Given the vast damage that such a conflict could cause, this approach is less an option than a necessity.

Minghao Zhao is a research fellow at the Charhar Institute in Beijing, an adjunct fellow at the Chongyang Institute for Financial Studies at Renmin University of China, and a member of the China National Committee of the Council for Security Cooperation in the Asia Pacific (CSCAP).

Default: SI a las empresas.NO a los Ciudadanos y a los Estados

A Rule of Law for Sovereign Debt

NEW YORK – Governments sometimes need to restructure their debts. Otherwise, a country’s economic and political stability may be threatened. But, in the absence of an international rule of law for resolving sovereign defaults, the world pays a higher price than it should for such restructurings. The result is a poorly functioning sovereign-debt market, marked by unnecessary strife and costly delays in addressing problems when they arise.

We are reminded of this time and again. In Argentina, the authorities’ battles with a small number of “investors” (so-called vulture funds) jeopardized an entire debt restructuring agreed to – voluntarily – by an overwhelming majority of the country’s creditors. In Greece, most of the “rescue” funds in the temporary “assistance” programs are allocated for payments to existing creditors, while the country is forced into austerity policies that have contributed mightily to a 25% decline in GDP and have left its population worse off. In Ukraine, the potential political ramifications of sovereign-debt distress are enormous.

So the question of how to manage sovereign-debt restructuring – to reduce debt to levels that are sustainable – is more pressing than ever. The current system puts excessive faith in the “virtues” of markets. Disputes are generally resolved not on the basis of rules that ensure fair resolution, but by bargaining among unequals, with the rich and powerful usually imposing their will on others. The resulting outcomes are generally not only inequitable, but also inefficient.

Those who claim that the system works well frame cases like Argentina as exceptions. Most of the time, they claim, the system does a good job. What they mean, of course, is that weak countries usually knuckle under. But at what cost to their citizens? How well do the restructurings work? Has the country been put on a sustainable debt path? Too often, because the defenders of the status quo do not ask these questions, one debt crisis is followed by another.

Greece’s debt restructuring in 2012 is a case in point. The country played according to the “rules” of financial markets and managed to finalize the restructuring rapidly; but the agreement was a bad one and did not help the economy recover. Three years later, Greece is in desperate need of a new restructuring.

Distressed debtors need a fresh start. Excessive penalties lead to negative-sum games, in which the debtor cannot recover and creditors do not benefit from the larger repayment capacity that recovery would entail.

The absence of a rule of law for debt restructuring delays fresh starts and can lead to chaos. That is why no government leaves it to market forces to restructure domestic debts. All have concluded that “contractual remedies” simply do not suffice. Instead, they enact bankruptcy laws to provide the ground rules for creditor-debtor bargaining, thereby promoting efficiency and fairness.

Sovereign-debt restructurings are even more complicated than domestic bankruptcy, plagued as they are by problems of multiple jurisdictions, implicit as well as explicit claimants, and ill-defined assets upon which claimants can draw. That is why we find the claim by some – including the US Treasury – that there is no need for an international rule of law so incredible.

To be sure, it may not be possible to establish a full international bankruptcy code; but a consensus could be reached on many issues. For example, a new framework should include clauses providing for stays of litigation while the restructuring is being carried out, thus limiting the scope for disruptive behavior by vulture funds.

It should also contain provisions for lending into arrears: lenders willing to provide credit to a country going through a restructuring would receive priority treatment. Such lenders would thus have an incentive to provide fresh resources to countries when they need them the most.

There should be agreement, too, that no country can sign away its basic rights. There can be no voluntary renunciation of sovereign immunity, just as no person can sell himself into slavery. There also should be limits on the extent to which one democratic government can bind its successors.

This is particularly important because of the tendency of financial markets to induce short-sighted politicians to loosen today’s budget constraints, or to lend to flagrantly corrupt governments such as the fallen Yanukovych regime in Ukraine, at the expense of future generations. Such a constraint would improve the functioning of sovereign-debt markets by inducing greater due diligence in lending.

A “soft law” framework containing these features, implemented through an oversight commission that acted as a mediator and supervisor of the restructuring process, could resolve some of today’s inefficiencies and inequities. But, if the framework is to be consensual, its implementation should not be based at an institution that is too closely associated with one side of the market or the other.

This means that regulation of sovereign-debt restructuring cannot be based at the International Monetary Fund, which is too closely affiliated with creditors (and is a creditor itself). To minimize the potential for conflicts of interest, the framework could be implemented by the United Nations, a more representative institution that is taking the lead on the matter, or by a new global institution, as already suggested in the 2009 Stiglitz Report on reforming the international monetary and financial system.

The crisis in Europe is just the latest example of the high costs – for creditors and debtors alike – entailed by the absence of an international rule of law for resolving sovereign-debt crises. Such crises will continue to occur. If globalization is to work for all countries, the rules of sovereign lending must change. The modest reforms we propose are the right place to start.

Joseph E. Stiglitz, a Nobel laureate in economics.

Martin Guzman, a postdoctoral research fellow at the Department of Economics and Finance at Columbia University Business School.

Los combustibles fósiles, a morir.

 

The G-7 Embraces Decarbonization

JUN 10, 2015

NEW YORK – This week’s G-7 meeting at Schloss Elmau in the Bavarian Alps marked a major breakthrough in climate-change policy. The seven largest high-income economies (the United States, Japan, Germany, the United Kingdom, France, Italy, and Canada) made the revolutionary decision to decarbonize their economies during this century.

For the first time in history, the major rich economies have agreed on the need to end their dependence on fossil fuels. German Chancellor Angela Merkel, US President Barack Obama, and the other G-7 leaders have risen to the occasion and deserve strong global approbation.

The historic breakthrough is recorded in the final G-7 communiqué. First, the G-7 countries underscored the importance of holding global warming to below 2° Celsius (3.6° Fahrenheit). This means that the Earth’s average temperature should be kept within 2°C of the average temperature that prevailed before the start of the Industrial Revolution (roughly before 1800). Yet the global warming to date is already around 0.9°C – nearly half way to the upper limit.

Then, the G-7 leaders did something unprecedented. They acknowledged that in order to hold global warming below the 2°C limit, the world’s economies must end their dependence on fossil fuels (coal, oil, and natural gas).

Currently, around 80% of worldwide primary energy comes from fossil fuels, the combustion of which emits around 34 billion tons of carbon dioxide. This level of emissions, if continued in future decades, would push temperatures far above the 2°C upper limit. Indeed, with rising worldwide energy use, continued dependence on fossil fuels could raise global temperatures by 4-6°C, leading to potentially catastrophic consequences for global food production, higher sea levels, mega-droughts, major floods, devastating heat waves, and extreme storms.

The science is clearer than many politicians would like. For humanity to have a “likely” chance (at least two-thirds) of staying below the 2°C threshold, a small reduction in CO₂ emissions will not be enough. In fact, emissions will have to fall to zero later this century to stop any further rise in the atmospheric concentration of CO₂. Simply put, the world economy must be “decarbonized.”

The breakthrough at the G-7 summit was that the seven governments recognized this, declaring that the 2°C limit requires “decarbonization of the global economy over the course of this century.” The G-7 finally stated clearly what scientists have been urging for years: humanity must not merely reduce, but must end, CO₂ emissions from fossil fuels this century.

Decarbonization is feasible, though by no means easy. It depends on taking three key steps.

First, we must become more energy efficient, for example, through modern building designs that reduce the needs for heating, cooling, and energy-intensive ventilation. Second, we must produce electricity with wind, solar, nuclear, hydroelectric, geothermal, and other non-carbon energy sources, or by capturing and storing the CO₂ produced by fossil fuels (a process known as CCS). Third, we must switch from fossil fuels to electricity (or hydrogen produced by zero-carbon electricity) or in some cases (such as aviation) to advanced biofuels.

The hard part is the practical, large-scale implementation of broad concepts in a way that does not disrupt our energy-dependent world economy and does not cost a fortune to achieve. But as we tally these costs, we need to keep in mind that runaway climate change would impose the greatest costs of all.

To succeed, we will need several decades to convert power stations, infrastructure, and building stock to low-carbon technologies, and we will need to upgrade the low-carbon technologies themselves, whether PV solar cells, or batteries for energy storage, or CCS for safely storing CO₂, or nuclear power plants that win the public’s confidence. The G-7, notably, committed to “developing and deploying innovative technologies striving for a transformation of the energy sectors by 2050” and invited “all countries to join us in this endeavor.”

This global process of decarbonization will be long and complex, and it will require detailed roadmaps with periodic redesigns as technologies evolve. Here, too, the G-7 made a historic breakthrough by declaring its readiness to “develop long-term national low-carbon strategies” to get to a decarbonized future. The United Nations Sustainable Development Solutions Network (SDSN), which I direct on behalf of UN Secretary-General Ban Ki-moon, has been working on such low-carbon strategies for the main emitting countries in a project called the Deep Decarbonization Pathways Project.

Of course, the G-7 declaration is only a declaration, and it does not yet include the commitments of many of the world’s largest CO₂-emitting countries, including China, India, and Russia. Yet it is a crucial step that will greatly encourage other countries to participate in deep decarbonization as well, especially in view of the G-7’s commitment to speed the development of improved low-carbon technologies.

The outcome of the G-7’s meeting augurs well for a strong global agreement on climate change when all 193 UN member states meet in Paris in December to hammer out a truly global climate agreement. The G-7 countries have not yet ensured a successful outcome at the Paris meeting, but they have taken a big step toward that goal.

Jeffrey D. Sachs, Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University, is also Special Adviser to the United Nations Secretary-General on the Millennium Development Goals.