Biden Will Normalize Chinese Relations And Collaborate On Climate And Trade

When President Nixon went to China in 1972, it precipitated a decades-long partnership that led to the modernization of China — an evolution that has given American enterprises vast opportunities. That’s why Nixon’s Secretary of State Henry Kissinger is urging President-elect Joe Biden to normalize relations. 

Donald Trump has retaliated against China’s trade strategy by levying tariffs that have been intended to hurt it financially. But it has had the opposite effect — one that Moody’s Analytics and Bloomberg Economics say has damaged America. While the United States and China may be economic competitors, they are also collaborators and have a lot more in common — including finding a solution to climate change, expanding the use of renewables and growing trade relations. 

To that end, China’s President Xi told the UN General Assembly that his country would hit peak CO2 releases by 2030 and that it would be carbon neutral by 2060. And like President-elect Biden, he supports the Paris climate agreement, saying that the pact will provide the blueprint to guide global partners to a greener future. Meantime, China and 14 other countries in the Asia-Pacific region just inked a free-trade deal that covers 2.2 billion people and that make up 30% of the world’s gross domestic product. 

Trump withdrew from the Trans-Pacific Partnership, saying that it would give China a free pass to wield its economic power. But the agreement leveraged the weight of other participants to ensure that China — and everyone else — adhered to internationally-accepted trade rules. The tariffs, conversely, caused U.S. consumers to pay more for goods and services. With his calming influence, Biden will gradually embrace China while still ensuring it plays fairly. Kissinger told Bloomberg’s New Energy Forum that China is “an old friend” and that Trump’s confrontational style could lead to irreversible damages. 

“China would entertain this discussion and put this entire episode in the past,” says Eric Fang, president of the National Center for Sustainable Development in Washington, D.C., in a talk with this writer. “This relationship has worked beautifully for 40 years. China is now the most capitalistic country in the world — the result of this engagement. It is creating policies based on the advice of its U.S. counterparts. America’s genes are blended into Chinese society.” 

The Bully Lost Big

By scapegoating China, Trump has hurt American interests. The two economies are tightly interwoven. Dan Yergin explains in his recent book, “The New Map,” that China holds trillions of dollars in U.S. treasury bonds — the money that helps finance this country’s massive debt. At the same time, the vice-chair of IHS Markit says that Americans’ retirement funds are stocked full of Chinese equities while the country’s green-tech sector is trying to appeal to investors. The Chinese want to be our partner while U.S.-based venture capitalists aspire to work with Asia. 

Immediately, American energy producers have a keen interest in selling their oil and natural gas to China — something that is near impossible because of the trade war and the coronavirus that has weakened demand. But China’s commitment to be carbon neutral by 2060 will change that equation. The announcement is not so that China can make nice among the community of nations; rather, it is striving to be energy independent and to break the grip of the United States, Russia and the Middle East. 

Fang, with the center for sustainable development, says that as a poor nation 30 years ago, China relied solely on its manpower — to take coal out of the ground and to use it to generate into electricity. But today it is a modern economy with a highly educated workforce. That progress is leading to the development of smart cities that have ultra-efficient buildings and that rely on clean energy. That has has attracted companies like Apple AAPL , Microsoft, Philips, Samsung, Siemens and Tesla TSLA , which also want to market their products to China’s 400 million middle class consumers. 

“Energy independence is driving this carbon neutrality policy,” says Fang. “You would think this would be impossible. But if the Chinese government has the will, the people will follow. The government first issues drafts that are disseminated at the local level before they are commented on and finalized. When China makes a statement this big, it is committing and the whole world can see that.

“Every other country is looking to the U.S. and China and asking if the two can take a leadership position,” he continues. “The United States should support China’s efforts to be greener. It is good for the entire world. I see the Biden administration working with China to implement more renewable energy and to address climate change. This will be a major success story and the Chinese want to collaborate.” 

To that end, Fang says that the areas in which the two countries can cooperate are boundless: everything from wind and solar energies to battery storage and electric vehicles, all of which takes venture capital and open trade rules. 

Ending Solar Tariffs

That puts pressure on the U.S. to join what was once the Trans-Pacific Partnership but that is now called the Regional Comprehensive Economic Partnership: 15 countries in all that comprise $26 trillion in economic output, or 30% of the globe’s gross domestic product. It covers 28% of all world trade. If the U.S. continues to sit on the sidelines while this commerce is transpiring, it will lose. 

China is joined by Japan, South Korea, Singapore, New Zealand and Australia. Also Indonesia, Malaysia, Myanmar, Philippines, Thailand and Vietnam. If India takes part, the stakes get even bigger. Before President-elect Joe Biden signs on he will assure its fairness. But he knows implicitly that joining the pact will lift the country out of recession and provide a clear sign that America wants to lead — not cower behind its borders while the rest of world moves forward. 

Trade wars don’t work. For each action there is an equal-and-opposite reaction. Trump has penalized China with about $550 billion in tariffs that have been met by $185 billion in tariffs on American products. Nearly a third of the U.S. economy is tied to trade while 5% of that is linked to commerce with China. 

Trump triggered the trade war in January 2018 with tariffs on Chines solar panels: a 30% tariff, which declines over four years until it goes away — a move intended to save American solar panel makers that comprise just 5% of the global production market. But the industry says that those tariffs have hurt deployment of solar and they have damaged the cause of climate change. 

“We have had numerous conversations with the transition team,” says Abigail Ross Hopper, executive director of the Solar Energy Industries Association, in a talk with reporters. “It understands the impact that tariffs have had and what we have built here.” The association says that once President-elect Biden is sworn in, he will have the authority to wipe out that tariff through executive order. 

“We continue to grow but not at the rate we have anticipated,” she adds. “We have gone back and looked at our projections and compared that to what was deployed … we compete on price and when you add in (a tariff), the cost rolls through to customers.” In the end, it negatively impacts jobs, deployment and investment. 

Restoring America’s Honor

Fang, with the center for sustainable development, generally agrees, saying that the United States cannot compete with China on solar panel development because this country’s labor rates are much greater. But the U.S. has distinct advantages in the higher-valued sectors, he emphasizes. It can then license its technology and receive a premium for it. The more automation that goes into production, for example, the greater value it ultimately creates. And those high-end manufacturing jobs require greater skill sets and superior educations, which means more pay.

“The Asian trade pact will open tremendous opportunities worldwide,” says Fang. “Asia is one-third of the world economy and U.S. could export more of its products. President-elect Biden will want to join the game. The trade pact also calls for a green economy and this will help China to meet its climate targets. China will also be careful when it finances other countries’ infrastructures (through its Belt and Road Initiative) by making them greener.” 

Isolationism is a failed idea. And Trump’s “America First” policies are the latest example of that. Everyone from Ronald Reagan to both George Bushes to Bill Clinton and Barack Obama get this. And it’s why Henry Kissinger is encouraging President-elect Biden to end those policies and to restore America’s honor in the world. It’s needed “Now More Than Ever” — as Nixon once proclaimed — so that the U.S. can collaborate with China on climate change, green-tech and free-trade.