Cantwell Calls for Engagement with China on Energy
At Trade Conference, Senator Calls for Presidential Summit, U.S.-China Energy Working Group, Chinese Membership in International Energy Agency
SEATTLE, WA – Thursday at the Bell Harbor International Conference Center in Seattle, U.S. Senator Maria Cantwell (D-WA) delivered a keynote address at the Washington Council on International Trade’s annual conference. In her remarks, Cantwell discussed building a better relationship with China through positive engagement.
Cantwell laid out concrete steps to improve U.S.-China energy cooperation, including a presidential energy summit between the U.S. and China, a U.S.-China Energy Working Group with cabinet level leadership, and multilateral engagement with China through international organizations such as the International Energy Agency to help mitigate supply shocks. Cantwell also discussed how modernizing China’s domestic energy infrastructure creates opportunities to export innovative U.S. technologies and products.
[Cantwell’s remarks as prepared for delivery follow below]
I’m always excited to attend WCIT’s annual meeting, because I know that everyone in this room appreciates how absolutely critical trade is to Washington’s current economic vitality.
I firmly believe that encouraging trade around the globe will boost growth, raise incomes, and improve job standards for our new partners abroad and right here at home.
Open markets drive political change too. Democracy and open markets are the two prevailing political ideas of the day, and they are becoming even more important. We must not be afraid of the opportunities they present.
Over the last few years we’ve made progress together on trade here in Washington state and in the Senate.
We’ve broken new ground. In 2001, we passed the Jordan Free Trade Agreement.
Since then, we have passed trade agreements with Singapore, and Chile in 2003. Morocco and Australia in 2004. And negotiated pending agreements with about a dozen countries as diverse as Panama and Egypt.
Just this May, the U.S. concluded an agreement between the U.S. and Vietnam as another step toward Vietnam’s acceptance to the World Trade Organization.
Now both the House and Senate are moving toward Permanent Normal Trade Relations (PNTR) with Vietnam.
Peru's Congress overwhelmingly ratified a free trade agreement with the U.S., and the U.S. Senate approved the U.S.-Oman Free Trade Agreement with my support. The House may act on it this month.
And with our new US Trade Representative, we continue to pursue other agreements and negotiations elsewhere: Malaysia, South Korea, Russia.
I met with the new USTR Susan Schwab last month, and reiterated that the U.S. must make sure that European governments do not provide new launch aid to Airbus. And if they do, the U.S. must aggressively pursue litigation at the WTO.
I should also point out that on July 1, the U.S. and Canada reached final agreement on the long-standing softwood lumber dispute.
All of this news is good news for Washington businesses and Washington workers. Our state has historically benefited from liberalizing trade laws:
In the first year following the U S-Chile Free Trade Agreement, Washington state exports to Chile more than doubled.
Since NAFTA passed in 1993, Washington exports to Canada and Mexico have increased by 130 percent.
Now CAFTA promises to have the same effect, bringing our nation closer to trade parity. Great news for Washington pear, cherry, apple and potato farmers.
This long list of successful agreements and negotiations translate into real dollars and real jobs here at home.
The political and diplomatic investments we make today are a down payment on our nation’s future.
It’s clear, of course, that positive engagement doesn’t happen overnight.
After all, it was on July 6, 1973—33 years ago, on this very day—when Warren Magnuson, one of Washington’s great senators, met with China’s foreign minister in Beijing.
Maggie had gone to China to lead the first Congressional Delegation after Nixon opened the door just a year earlier. For two hours, the Senator and the Foreign Minister discussed matters of world trade and world peace in the “Great Hall of the People”
Before that momentous meeting 33 years ago, Maggie scribbled just a few notes as he prepared that day in his hotel room.
Those notes referenced everything from hydro power to private cars. But, among them, one phrase from Maggie stands out: “China can no longer be an island in the world.”
China can no longer be an island in the world. Three decades ago that may have seemed like a public policy objective. Today it’s a basic truth.
What if my predecessor were speaking here today? Would Maggie look back 33 years and be pleased with how far the US had come in its relationship with China? Or would he point out how much further we still have to go?
No matter how he put it, the point would be clear: China is a player. It’s a big, constantly-evolving player. Any other nation, big or small, that also wants a spot on the world stage, can’t afford to ignore or misunderstand China.
Today, its economy is the world’s fourth largest.
For the last 30 years, the Chinese economy has grown by roughly 10 percent every year.
And since 1978, that growth has lifted 200 million Chinese out of poverty.
In 2000, the nation accounted for less than 4 percent of global trade. Since then, China alone has accounted for about 12 percent of the growth of global trade.
China’s imports have tripled from $225 billion in 2000 to $660 billion in 2005.
Washington state plays a large role in that market. Our companies are exporting quality American-made goods to China everyday.
No state, does more trade with China per capita, than ours.
Since 1995, China has been Washington’s third-largest trading partner. And in 2004, our two-way trade measured more than $20 billion.
These aren’t just statistics but real dollars and real jobs.
We see this as China is set to become Boeing’s largest market outside the US for new commercial airplanes.
Chinese aviation continues to grow at double digit rates. Over the next 20 years, Boeing predicts that China may need 2,600 commercial airplanes.
We see this in Weyerhaeuser’s sales of lumber, containerboard, pulp and logs to China—in 2005 only Japan was a larger Asian market for its products.
And we see this in the free flowing coffee at more than 400 Starbucks in China, potentially the company’s largest market outside of North America. Of course they’re using beans roasted right here in Kent, Washington.
When we step back from its impact on our state, we see trade with China transforming America’s economic and political landscape.
Since China entered the WTO in 2001 US exports have more than doubled.
In 2005 US exports to the China grew about 20 percent. And this growth isn’t measured just in jumbo jets. Total US farm exports to China have jumped from $1.3 billion in the first quarter of 2005 to $2.3 billion this year—that’s half of America's agricultural export growth, placing China second only to Canada as a farm export market.
It is clear that we have an emerging partnership with China, and it’s time to double up and maximize our efforts.
These numbers are reason for optimism, not fear.
We must reinforce our relationship through new collaborations.
To be sure, America and China have some challenges – China needs to take action to stop piracy and counterfeiting as the US needs to address our trade deficit totaling $200 billion last year.
But we must not let our relationships drift so that the U.S. and China become competitors rather than partners.
Our mutual interests are not merely economic, as we were reminded this week. The United States needs China’s help to address national security issues like Iran and North Korea’s nuclear programs.
As a permanent member of the U.N. Security Council, China is key to imposing sanctions against Iran, should ongoing negotiations fail and it will be instrumental in any response to North Korea’s missile tests.
Though Six Party Talks with North Korea have stalled, China’s leverage may finally get North Korea back to the table.
When we elect cooperation over conflict, the security, economic and political rewards will be great for both nations.
It’s no surprise that China’s influence has come to the forefront just as our global economy grows evermore connected.
Today, America struggles to find the path toward energy security. And nowhere is China’s ascendancy on the world stage more obvious than as it strives to meet its own critical energy needs.
How we approach these global energy issues today will impact our economic and trading relationships with China, our national security, and our environment for decades to come.
That’s why I believe it is time for us to wake up and establish a formalized, high-level dialogue between the U.S. and China on energy policy.
Various “accidents of geology” have landed the U.S. and China in the same boat when it comes to energy policy: neither of us can drill our way to energy security within our own borders.
Both of our economies have grown increasingly susceptible to global energy supply shocks and resulting price spikes.
Because we are major trading partners, it is in neither of our best interests to watch the other’s economy plunge into recession as a result of major global energy insecurity.
And it is in our mutual interest—as a matter of economic and security policy—to view ourselves not as competitors for scarce energy resources, but as global partners in the race to move beyond petroleum dependence.
Establishing a sustained, cooperative relationship with China on energy policy will also open new markets for new markets to American companies and the efficiency technologies they create.
These new markets can, as Thomas Friedman recently wrote, “turn Red China into Green China,” providing America with economic opportunity and long-term environmental benefits.
Here are some of the facts:
Today, China accounts for about 40 percent of the increase in world oil demand.
The number of passenger vehicles on Chinese roads has more than tripled since 2001, and may equal the U.S. by 2030.
China faces a massive internal transformation from its rapid growth and modernization. Despite some government investment in rural infrastructure, 30 million Chinese still didn’t have electricity in 2004.
Trying to keep pace with growing demand, China is essentially adding one, huge 1,000-Megawatt coal-fired power plant to its grid each WEEK. That’s like adding enough capacity every year to serve the entire country of Spain.
These new coal plants have created problems like widespread air pollution.
Sixteen of the world’s 20 most air-polluted cities are in China.
Even with the influx of plants, this patchwork approach to grid development has left areas of the country with uncertain access to power.
In 2004, China had power shortages in 24 of 31 of its provinces and autonomous regions.
Here’s another fact that I find remarkable. China quadrupled its gross domestic product from 1980 to 2000.
The country managed to accomplish this feat by increasing its energy use at just half the pace of its overall economic growth. That is: GDP grew twice as fast as its energy usage.
China wants to quadruple its GDP again by 2020. But the relationship between energy consumption and economic growth that marked the last two decades has been turned on its head.
Since 2001, China’s energy consumption has been growing at a rate one and a half times the growth of its overall economy. That statistic has gotten the attention of national security experts, environmentalists, academics and economists alike.
Because China is so poorly endowed with every natural resource but coal, it has become increasingly dependent on oil imports.
China now relies on the Middle East for almost half of its oil. Beijing has been racing around the world to lock in production sources for oil and gas in countries such as Canada and Saudi Arabia—our own foremost suppliers of oil.
But China also has access to nations where U.S. companies are limited or which pose other challenges like Sudan, Angola, Burma, and Iran.
Ultimately, the way China develops natural resources overseas in Africa and Latin America will affect the world’s environment, as well as our own strategic alliances in Northeast Asia, Africa and Latin America.
As Henry Kissinger and multiple national security experts have warned, this competition over energy resources may cause international conflict in coming years.
The U.S. and China share concerns about high oil prices and have a common interest in mitigating global supply shocks and the resulting price spikes. Both nations need to work harder to increase energy efficiencies to achieve continued economic growth.
There’s no reason the U.S. and China should not be working together on the same side in virtually all international energy negotiations. Currently this is far from the case.
Today, China views the U.S. as a competitor in the global energy market—and vice versa. The Congressionally chartered U.S.-China Economic and Security Review Commission warned of “a petroleum collision course well before the world’s aggregate petroleum supply is exhausted.”
We must take three concrete steps that will put us on the path to proactive engagement and cooperation!
First, President Bush should work with President Hu to convene a U.S.-China Energy Summit.
Second, we should put at the top of our agenda an effort to establish an ongoing U.S.-China Energy Working Group, with cabinet-level leadership from the administration.
Establishing just such a group was one of the major recommendations of the U.S.-China Economic and Security Review Commission’s report to Congress in 2005. This working group will serve a number of purposes.
We should dust off, update and reinvigorate a version of the 1995 U.S.-China Energy Efficiency & Renewable Energy Protocol, which resulted from then-Energy Secretary Hazel O’Leary’s Presidential Mission on Sustainable Energy and Trade.
This protocol laid the groundwork for later discussions between then-Presidents Clinton and Zemin, at summit meetings held in 1997 and 1998.
At one time, 30 U.S. firms were involved in activities under the program which was designed to strengthen bilateral cooperation and advance the role of the private sector in China’s energy development.
A permanent working group would also be necessary to oversee any joint R&D efforts and could serve as an arbiter in subsequent negotiations over technology transfer issues.
Finally, in addition to direct bilateral engagement, we should work to bring China into the membership of the International Energy Agency.
The International Energy Agency is an intergovernmental organization with 26 different nations as members, which prepares for and seeks to mitigate global supply shocks.
In recent years, the IEA has also served as a clearinghouse of information on global energy policies and technologies.
Chinese membership in the IEA would be useful on two fronts.
First of all, China is now the second largest consumer of oil behind the United States. And second, there is increasing concern about China’s approach to acquiring new energy resources around the globe.
Dubbed a “mercantilist” approach by global economic and national security experts, China has focused on buying up resources at the wellhead in various regions, with the intention of taking them off the international market.
By encouraging China’s multilateral engagement in an organization like the IEA, it may move Beijing to become a more constructive player in the global energy marketplace.
Clearly, these three initiatives: (1) a presidential summit, (2) establishment of direct U.S.-China energy working group, and (3) promoting China’s engagement in the International Energy Agency—are just the first steps down a long road when it comes to complicated global energy security issues.
But it is clear that the U.S. and Chinese economies are now intertwined, and our energy security should be considered with common purpose as well.
This issue will color our relationship with China for decades to come. With direct, proactive engagement, there is also opportunity.
Meeting China’s energy needs is key to its domestic stability and economic growth.
Improved cooperation between our nations would have significant economic benefits for both countries.
It’s a huge opportunity to export American technologies and products.
Earlier, I spoke about the challenges China faces when it comes to providing power to all of its citizens and industries.
Modernizing China’s domestic energy infrastructure will require $35 billion in investment. Annually. That’s every year for the foreseeable future.
We must work to open Chinese markets to the grid management software, the smart meters, the new transmission technology, and the biomass and biofuels-related innovations that are being developed right here in the Pacific Northwest.
Given the evolving nature of the Chinese energy industry—from complete state-controlled entities to more hybrid models in some cases—we aren’t going to crack these markets open overnight. Gaining entry, once again, requires proactive engagement and a sustained commitment.
Whoever develops the technologies that break our economies from their petroleum dependence will hold the keys to the 21st Century. Our best interests would be best served by forming closer ties with our Chinese counterparts on these critical energy security issues, which will challenge the international community for the foreseeable future.
This November, I will lead a women’s business delegation to China. We will be meeting with prominent Chinese women executives in Beijing and Shanghai.
We’ll talk about the role that women play in social and economic growth and we’ll talk about bringing our nation’s closer together.
Fourteen years before he went to China, Senator Warren Magnuson told the Seattle PI that failing to trade with China amounted to “pretending 700 million people in the world don’t exist.”
Thirty-three years later, it’s about time we get real. It’s time to understand China’s internal transformation, our own global energy needs, and our nations’ evolving relationship. It’s time to see the great promise in our common interests.
Making sure that the United States and China stay on the road to positive engagement is essential to common prosperity and a better future for our people.
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