OUTLOOK
The promising collaboration between the US and China to drive innovation in the energy sector looks increasing fragile, as tensions mount over currency and trade policy. Even if a full-fledged trade war (as much of the commentary has been suggesting of late) does not come to pass, domestic pressures are forcing both countries to reevaluate their trading relationship: China has expressed interest in encouraging domestic consumption and the growth of domestic industries, while the US seeks to revive its manufacturing base and bring down unemployment. For clean energy technologies producers, this would challenge the cooperative relationship between the US and China on energy and climate change, and could make the growth of the clean energy sector in both countries more costly than it needs to be.
Source: US Department of the Treasury
The backsliding of the US-China relationship comes at a moment when the US and China are poised to benefit uniquely from collaboration on a host of energy and climate related initiatives. Garten Rothkopfs research on US-China energy cooperation has shown that in a range of areas, including clean coal, renewable energy, and smart grid infrastructure, there is much that can be gained from a collaborative relationship between the two countries in terms of technological advancements, economic befits, and jobs. The recent uptick in tension between the two countries threatens to undermine the progress that has been made and place the US and China on a less cooperative path going forward.
An Uneasy Peace
The relationship between China and the United States has long been an uneasy one; both sides recognize that they are neither full-fledged enemies nor allies. Since the beginning of this year, however, the pendulum has swung in the direction of discord. The fallout from the climate change summit in Copenhagen left a bitter taste in the mouths of both Chinese and American leaders: Americans accused the Chinese of deliberately sabotaging the negotiations, while the Chinese portrayed themselves as the real victims. Meanwhile, American Internet giant Google touched off a storm of controversy when it accused Chinese government agents of hacking into its servers and said it would no longer abide by the content restrictions that the Chinese government requires. On the military front, U.S. weapons sales to Taiwan, which are regularly scheduled and constitute no change in policy, caused an uproar among Chinese officials and led to threats of sanctions against U.S. defense contractors.
These disputes, however, pale in comparison to the brewing conflict over Chinas currency policy. For several years, American politicians and economists have alleged that China keeps its currency, the renminbi, at an artificially low rate relative to the dollar, driving a lopsided balance of trade.
Full article here.
29 March 2010
John Juech
