U.S.–China Week: Xi’s visit assessed—commercial hacking, climate, military measures, investment (2015.09.28)

Welcome to Issue 22 of U.S.–China Week. What to make of President Xi Jinping’s U.S. visit and the releases following his meetings with President Barack Obama? To paraphrase Zhou Enlai speaking to Richard Nixon, “It’s too early to say.” Zhou wasfamously misinterpreted as referring to the French Revolution, when he really meant the Parisian convulsions of 1968. While the significance of Xi’s visit is in question, we won’t have to wait decades, or even years, to see if its promise is fulfilled. There has of course been an outpouring of good writing on U.S.–China relations, some of which I will highlight in future weeks. In this edition, I tried to briefly address four policy areas and how one might assess progress in the coming months.

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CYBERSECURITY
U.S. wins commitment, but not acknowledgement, on commercial theft; New channel opened to assess compliance

The United States and China “agree that neither country’s government will conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors.” Those identical words appear in parallel but differing U.S. and Chinese releases listing outcomes from Xi’s U.S. trip. Further bilateral language commits both sides to establishing “a high-level joint dialogue mechanism” chaired by a ministerial-level Chinese official yet to be named, and by the U.S. Secretary of Homeland Security and Attorney General. “This mechanism will be used to review the timeliness and quality of responses to requests for information and assistance with respect to malicious cyber activity of concern identified by either side.” The first meeting of this “dialogue” is to occur before New Year’s. The governments also committed to “further identify and promote appropriate norms of state behavior in cyberspace,” “welcome[d]” a key UN report on those norms, and will set up a “senior experts group” on the topic.

ANALYSIS: Fundamentally, this is a victory for the U.S. side, which has been frustrated for years in its efforts to engage the Chinese government on commercial hacking. It exceeds expectations, including my own (though this was my optimistic scenario). As Obama said in the joint press conference, however, “the question now is, are words followed by actions?” Even if they are, this parallel statement does not forswear traditional espionage targeting government records. It does not forswear stealing commercial secrets without the intention to hand them over to competitors. It does not forswear hacking critical infrastructure or military systems, and it does not even forswear stealing commercial secrets from military contractors and handing them over to other companies for national security purposes, rather than for “competitive advantages.”

Still, the U.S. government has gained leverage here, even if only slightly, and it has not given up the option of sanctions. One could imagine a meeting of the new bilateral channel in which the U.S. side expresses dissatisfaction with Chinese follow-through on a complaint and threatens sanctions, saying, “If you don’t go after them, we will.” Any real effort by the two governments to advance norms for cyberspace is of great potential value—but it’s still early days. To assess how important this new deal is, look for arrests in China (deal might be is working), sanctions from the United States (deal may not be), and further dependable reports of IP theft from non-defense firms (deal is not working, at least not quickly). The real test will be whether bilateral efforts to develop norms and reduce conflict on cybersecurity issues grow stronger or falter. And so we wait.

CLIMATE CHANGE
China to implement cap-and-trade; Both sides reiterate intention to lead Paris summit to climate deal

Obama and Xi issued a “Joint Presidential Statement on Climate Change,” maintaining momentum after their surprising November announcement that the two countries would join hands to push for a global agreement at the UN Climate Change Conference in Paris in just over two months. The biggest news was China’s plan to launch in 2017 a carbon emission trading system covering “all key industrial sectors,” according to NRDC’s Barbara Finamore. The Chinese delegation also made climate and renewable energy cooperation at the local level a central topic before and during Xi’s visit, with a “Climate-Smart/Low-Carbon Cities Summit” in Los Angeles beforehand and a “U.S.–China Climate Leaders Declaration, signed by 24 provinces, states, cities, and counties.”

ANALYSIS: The White House and the Chinese central government have produced a remarkable statement of intent. Outcomes will hinge on their follow-through, including whether China’s government will be successful in implementing its ambitious carbon trading system, and whether the U.S. government maintains its climate-conscious course of action or falters as a result of Congressional action (inaction?) or electoral outcomes. The greatest hopes hinge on the multilateral efforts expected to culminate in Paris in December. What is clear is that if Paris is a success, U.S.–China cooperation under Xi and Obama, a process started at Sunnylands, will have been a big part of the reason. It will take years to fully assess the strategy of having local governments lead, but in the United States at least, that approach is well suited to overcome national-level gridlock.

SOUTH CHINA SEA
Modest confidence-building measures overshadowed by lack of discernible progress on maritime differences

As expected, the November 2014 memoranda of understanding between the United States and China addressing crisis avoidance at sea and notification of major military activities was augmented with new material on crisis communications and air-to-air safety. U.S. officials downplayed a Sept. 15 incident in which a Chinese fighter passed in front of a U.S. spy plane, saying this not a trend. Meanwhile Obama repeated the recent U.S. position that “the United States will continue to sail, fly, and operate anywhere that international law allows.” Xi’s statements suggested no change of position. (China’s outcomes document does report China will attend the RIMPAC 2016 military exercises.)

ANALYSIS: If reports are correct and the recent “unsafe intercept” incident between U.S. and Chinese planes was really a rare event in the period since the November MOUs, it is curious that such an event would occur just before Xi’s visit. After that incident and before Xi arrived, National Security Adviser Susan Rice said, “We’ve seen a marked improvement in operational safety since we signed these measures.” The MOUs are designed to decrease the risk of accident and escalation, not to resolve the underlying issues, and assessing their effectiveness is a long-term task.

BILATERAL INVESTMENT
Only the bare minimum progress on BIT, but evidence of lively dialogue on national security reviews

Although the governments reportedly did exchange new negative lists in early September, as promised at June’s Strategic & Economic Dialogue (S&ED), the strongest joint language from Xi’s visit only says the governments “reaffirm as a top economic priority the negotiation of a high standard [bilateral investment treaty (BIT)] … [and] commit to intensify the negotiations and to work expeditiously to conclude” it. Meanwhile, matching language from both governments discusses national security reviews for investment, issues that might be covered in a BIT. Chinese representatives have long been concerned with U.S. reviews of foreign acquisitions, and U.S. observers question the implications for investment from a new Chinese national security law. Bilateral language commits both governments to reviews based only on “national security concerns,” not “broader public interest or economic issues.” They commit not to engage in reviews of old deals under post facto rules.

ANALYSIS: BIT progress will likely be slow, but “expeditious” negotiations would be apparent if key chapters of a treaty were locked down and if lively jockeying over the negative lists were under way. If a BIT is getting close, the White House will also have to make efforts to build support in Congress. On national security reviews, the question is how China’s new law will be implemented. An earlier draft suggested an ambiguous and expansive review process that might have significantly delayed and tied up a broad set of foreign investments. If a Chinese national security review system goes into effect without huge downsides, that’s progress.

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a senior research scholar, lecturer, and senior fellow of The China Center at Yale Law School, where he specializes in U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. A full bio is available here.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

Subscription to U.S.–China Week by clicking here or e-mailing me is free and open to all, and an archive of past editions appears at my long-running website on U.S.–East Asia politics, Transpacifica.

Contact: Follow me on Twitter at @gwbstr. Send e-mail to [email protected].

1 thought on “U.S.–China Week: Xi’s visit assessed—commercial hacking, climate, military measures, investment (2015.09.28)

  1. Pingback: U.S.–China Week: TPP and the China threat, beyond the bilateral, Chinese opinion on U.S., frozen in cyberspace (2015.10.05) | Transpacifica

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