December 07, 2010

Chairman Kerry Delivers A Speech On U.S.-China Relations

WASHINGTON, D.C. – In a major speech on China policy today at the Center for American Progress in Washington, D.C., Senate Foreign Relations Committee Chairman John Kerry (D-MA) stressed the need for a balanced American policy that recognizes and addresses China’s strengths and weaknesses. He also urged the Chinese to use their influence to bring North Korea’s behavior into line with international norms and to work together with the United States to address major issues like climate change and nuclear proliferation. And he pointed out that the United States needs to respond to China’s rising economic influence with an economic renaissance of its own.

“If we act, China’s rise will do nothing to diminish our own power,” said Senator Kerry, who was introduced by former Secretary of State Madeleine Albright. “After all, economics is not war—we can both come out of this well ahead of where we are now. And China’s rise need not disrupt the international system that we have built. In fact, China’s participation can renew that system and better equip it to deal with the challenges of the 21st century.”

Below are Senator Kerry’s remarks as prepared for delivery:

Thank you, Madeleine. I appreciate your gracious introduction enormously. But more importantly, I join everyone else in this room in expressing our appreciation for your remarkable contributions to our diplomacy and to our thinking on the policy challenges facing the country and the world. Thanks in particular for your recent work on NATO. It has been a huge pleasure for me, as Chairman of the Foreign Relations Committee, to work with you in the past. And I look forward to our continued collaboration in the future.

I also want to thank John Podesta for his leadership and the team here at CAP for hosting this conference on U.S.-China relations. It is important to have the opportunity to discuss an issue that bears on so many of the global challenges we face today. It’s been 40 years since Henry Kissinger first shook hands with Zhou Enlai and changed the world. And what we do in the coming months to shape our relationship with China will have a profound impact on the next 40 years and well beyond.

One thing is certain: the rise of China is no longer an abstraction. It’s not just a provocative phrase for writers and scholars and policymakers—something to anticipate in the future. It’s as present as the skyscrapers of Pu-dong that tower over Shanghai or the pageantry of the Beijing Olympics. China’s economy is now the second-largest in the world. It has grown almost 9 percent this year alone, despite a global recession that has left our own economy stuck in neutral. With this economic growth has come greatly increased influence in the Middle East, Africa, and Latin America. And, to the awareness of all and the consternation of some, China is now bolstered by a military that is increasingly capable of projecting power throughout Asia.

While China has worked hard to orchestrate a peaceful rise, inevitably this emergence as a world power has created friction and raised questions of intention and direction. Earlier this year, China leveraged its dominant position in the market for rare earth minerals in a standoff with Japan. Later, China shocked the region by declaring the South China Sea to be one of its “core interests,” on par with Tibet and Taiwan, despite the fact that six different countries have long laid claim to territory and resources there. And, just two weeks ago, when North Korea shelled the South Korean island of Yeon-pyeong, China refused to condemn the North. Instead, Beijing actually warned our navy to stay out of the Yellow Sea, despite the fact that we were simply coming to the aid of an ally.

These actions have taken place against an often troubling backdrop. China’s economic growth has been accompanied by an enormous, and still growing, trade surplus with the United States, turbo-charged by China’s undervaluation of its currency. In addition, China’s no-strings-attached approach to trade and aid has undercut our influence over states like North Korea, Iran, and Burma. And China’s non-transparent double-digit increases in defense spending every year for two decades are raising questions about its intentions.

So it’s not surprising that this newfound power has prompted anxiety in the United States and elsewhere, leading to legitimate questions about China’s rise. But I think it is critical that we not allow speculation about China’s ambitions to degenerate into fear-mongering and demagoguery.

From the days of Marco Polo until the present, the fact is the West has often gotten China wrong. In the 1990s, some in the United States insisted that China was the next Soviet Union. Of course, 9/11 painfully confirmed that China was not the next great threat to the United States. In fact, over the last 20 years China has integrated itself—however imperfectly—into the international rules and institutions that govern key issues like trade and nonproliferation.

But progress has not been as comprehensive as some predicted. Despite the dramatic growth of private enterprise, the government still controls key sectors of the Chinese economy. And economic liberalization has not led to significant political liberalization. Even though China allows freer expression than it did 20 years ago, we must remember that we are also talking about a country that has imprisoned Liu Xiaobo for peacefully advocating democratic reforms, and that refuses to allow his family to attend his Nobel Peace Prize ceremony. China’s failure to safeguard the basic human rights of all of its citizens, especially those most critical of the government, impedes its development and undermines its standing in the international community. And the United States can and should continue to highlight it.

But whether we are impressed or disappointed with China’s progress, the simple fact is that we need China, and China needs us. We have to get this relationship right. After all, we are talking about our connection to one-sixth of humanity. The most serious problems we face today, from nuclear proliferation to climate change, can’t be solved alone. And, economically, our futures are deeply intertwined and will remain so. If China succeeds in rebalancing its economy, then the global economy will benefit and so will we. If China fails—or, worse, if we cut ourselves off from China in a misguided attempt to contain it, as some have suggested—then we will all suffer.

So, even though we cannot call China an ally, we must not treat it as an enemy. As Winston Lord recently reminded me, the first two of his “Lord’s Commandments” are (1) Thou shalt not demonize China; and (2) Thou shalt not sanitize China. And I think he is right. Quite simply, we must not have any illusions about China, positive or negative. The most important thing we can do is to see China as it really is.

The first step in seeing China without illusions is understanding that, while China has become a great economic power, it faces extraordinary challenges at home and abroad.

When I met last year with two of China’s next-generation leaders, Vice President Xi Jinping and Vice Premier Li Keqiang, their mood was not triumphant, it was determined. Why? Well, just consider that China’s government is responsible for more than a billion people. Think about that: those are a billion people who need jobs, who need health care, who need clean air and water. And right now many of them don’t have those things. We sometimes have trouble taking care of 300 million people, and we’ve been industrializing for over a hundred years.

About 400 million Chinese still live on less than two dollars a day and lack safe drinking water and adequate housing. China’s poor are as numerous as the entire populations of the United States and Japan combined. China’s per capita income is ranked around 100th in the world, so if it’s a superpower, it’s the first poor superpower in history.

In the midst of this poverty, Chinese society is undergoing dramatic transformations. This country that once prided itself on egalitarianism is now experiencing vast income disparities. The government is trying to accommodate the move of some 600 million farmers into cities. And the society is rapidly aging. By 2030, there will be 240 million Chinese over the age of 65. That will make it difficult to provide retirement and health benefits to the elderly without bankrupting the state or impoverishing working people.

To fuel the economic growth it needs and just to keep the lights on for its entire population, China faces a large and growing dependence on imported oil. Twenty years ago China was an oil exporter, but today China ranks second, after the United States, in oil imports, at more than 4 million barrels a day.

And all of this growth—particularly in the energy sector—brings a major cost. China’s environment is deteriorating significantly. Because it relies so heavily on coal-fired electric power plants, China is now the world’s largest emitter of greenhouse gases. And in its frantic push for growth, China has sacrificed environmental preservation. As a result, land, air, and water quality have been seriously compromised. Sixteen of the world’s twenty most air-polluted cities are in China, and nearly 50 percent of river water in China is unsuitable for agriculture or industry.

And these are just the domestic challenges. China also faces a host of foreign policy challenges.

There was a time when China’s leaders were encouraged to pursue an even-keeled and modest foreign policy. As Deng Xiaoping said, China should “hide brightness, cherish obscurity.” But more and more, as I mentioned earlier, China’s actions have been anything but obscure. The truth is: China shouldn’t be worried about containment; it should be worried about over-reaching and that’s because its increased assertiveness has done more to remind its neighbors of the value of America’s presence in the Asia-Pacific region than anything our diplomats could have done on their own. Frankly, to see China as it really is, is to understand that China doesn’t yet know what kind of power it wants to be—that it is still feeling its way on the world stage.

So as President Hu Jin-tao prepares to come to Washington next month, he has good reason to seek a closer partnership with the United States. For our part, we will be seeking greater Chinese cooperation on a long list of issues.

In particular, we want to talk about North Korea’s recent provocations. Beijing may think it can restrain the North’s bad behavior more effectively by deepening trade and investment. But the North’s belligerent conduct—the sinking of the Cheonan, the construction of an illicit uranium-enrichment facility, and the artillery attack on Yeon-pyeong Island—undermines China’s core interest in regional peace and stability. China has a responsibility to its neighbors and the rest of the world not to turn a blind eye to North Korea’s military provocations. No other country has as much influence over North Korea as China does, and it must use that influence to bring the North’s conduct in line with basic international norms. China should send a clear message to North Korea that its behavior is unacceptable. A good place to start would be strengthening its enforcement of UN sanctions. And together, China and the United States, in concert with our South Korean and Japanese allies, must eventually find a way to resume dialogue with North Korea, because sanctions alone will not convince the North to change course.

We also need to address the yuan, which economists agree is significantly undervalued. That effectively makes U.S. exports more expensive and Chinese exports cheaper, contributing to our trade imbalance. In recent months, China has begun to adjust its currency, but—simply put—that’s not yet enough. A sustained appreciation needs to happen, beginning sooner rather than later. If the G-20 can’t deal with this problem, then we should look at other multilateral tools—ones with teeth—that can. By now it should be clear that Congress is growing increasingly impatient, and may take matters into its own hands.

I also think we need to continue to press China on a global agreement to reduce greenhouse gas emissions. The reluctance of the United States to move has made this far more complicated, but the truth remains that the United States and China together account for almost half of the world’s emissions. China deserves credit for the progress it has made to reduce its energy intensity. But these steps are not enough. We and China need to agree to measurable, verifiable, and reportable reductions in emissions. If we both don’t reduce our emissions and move to cleaner energy, the impacts of climate change will become unmanageable at catastrophic levels.

When we understand the full extent of China’s challenges, foreign and domestic, it becomes clear that the tendency to demonize China, to consider it the next great threat, just isn’t based in reality. In fact, over the long run, there is incredible potential for cooperation, even as we have to deal with certain disagreements now.

So how should we manage this complex relationship? Over 40 years of engagement, we’ve learned that it is important to be flexible—that different types of problems require different tactics.

We know that on certain issues it is best to engage bilaterally. In order to reduce the mistrust that lingers in Beijing and Washington about our strategic intentions, we need sustained, high level military-to-military dialogue. I am glad that after a long hiatus, a new round of defense talks will get under way later this week. I hope that Presidents Hu and Obama will pledge to insulate these talks from political disruption. Because it is precisely in times of tension—whether over Taiwan arms sales or an incident at sea—that our military officers need to have open channels of communication.

We know that, on other issues, we will be more successful when we augment bilateral engagement by weaving China into the fabric of international norms and institutions. The United States loses billions of dollars a year in exports because of China’s failure to protect our intellectual property. In 2006, China committed at the bilateral Joint Commission on Commerce and Trade that its government agencies would use only licensed software. But China has failed to follow through. The next round of the JCCT takes place next week, and I hope China will move on this issue. But the best solution may be to collaborate with other developed nations to convince China that its own long-term ability to innovate is being undermined by its failure to protect the intellectual property it currently imports.   

And still other issues will be best addressed by an increased American presence in the region. While the United States is not an Asian country, it is nevertheless a Pacific country. There are few days when we remember that more vividly than December 7. On this day 69 years ago, Japan attacked us, triggering America’s entrance into World War II. Throughout the islands of the Pacific, thousands of American troops gave their lives to protect our values—and to protect others. This anniversary reminds us that we never want to return to war, but it also reminds us of the power of our engagement. Today, Japan is a peaceful democracy that we are proud to call an ally. And let us never forget that the blood we spilled those many years ago allowed China to emerge as the nation it has become.

Recent events on the Korean Peninsula and in the South China Sea reaffirm the importance of the alliances that came out of that conflict—and of forging new partnerships and strengthening regional institutions to maintain peace and stability. Two good places to start would be approving the new Free Trade Agreement with South Korea and fully funding the State Department’s Lower Mekong Initiative. We should also negotiate the Trans-Pacific Partnership trade agreement to balance China’s economic influence in the region. Some have called this intensified U.S. engagement in East Asia a “hedging strategy”—insurance against the possible emergence of China as a regional hegemon. I don’t care what we call it. I just want to see it done.

You know, so much of our conversation about U.S.-China relations centers on these abstract terms. We spend a lot of time talking about engagement and partnership, cooperation and competition, hedging and balancing. Obviously, we must engage China. Obviously, we want to fully integrate China into the global community. And, yes, in the face of an uncertain future, I think there is a place for hedging as well.

But if we are to adopt a truly effective China policy, we must first and foremost recognize that our greatest source of influence is our own power—and our greatest challenge is to strengthen our own economic competitiveness. To see the U.S.-China relationship without illusions, we must see the United States without illusions. We have to focus on concrete facts.

Here’s one fact: the World Economic Forum publishes a Global Competitiveness Report every year. For years, we led the world as the most globally competitive economy. But in 2009, we dropped from first to second place. And this year, we dropped to fourth. That’s in no small part because we are saddled with an enormous deficit, an inadequate educational system, and a century-old infrastructure in places. We’ve got to change that, or we’re going to be dependent on others for the technologies of the future.

Consider that China is the leading clean energy producer in the world. We invented solar panels, but China now boasts the world’s largest solar panel manufacturing industry – which exports about 95 percent of its production to countries including the United States. In 2008, for the first time, China attracted more renewable-energy capital investment than the United States. In addition, the Chinese government has announced a ten-year, $400 billion clean energy technology investment program. It’s true that an American company recently opened the world’s largest private solar R&D facility, but you have to go to Xi’an to see it! As Steven Chu, the secretary of energy, said last week, “For centuries, America has led the world in innovation. Today, that leadership is at risk.”

How do we ensure that innovation remains a hallmark of America? Tony Blair said that “talent is the 21st century’s wealth” and he was right. Unfortunately, we’re failing to educate and prepare Americans for a competitive global economy. We need an aggressive focus on math, science and engineering for our own people. We have a real problem when the Microsofts of the world say they can’t fill all their high-paying engineering jobs with Americans because 59 percent of all U.S. doctorates in engineering and science are awarded to foreigners. And we need to relax visa restrictions so that the best from the rest of the world can come and work here. That’s why I introduced legislation to provide visas to immigrant entrepreneurs whose startup ideas have attracted U.S. investment.

We also need to create new and strong incentives for investment in the building blocks of economic competitiveness—roads, bridges, rail, aviation, communications and other essential infrastructure. While we spend roughly 2 percent of GDP on infrastructure, China is spending 9 percent. They are investing about $13 billion in 25 new airports, including another one in Beijing. They’ve begun work on a brand new high-speed rail network that will serve 90 percent of the country’s population—over a billion people—once completed. If our ability to move people, goods, energy and ideas is a century out of date, how are we going to keep businesses here? To help catalyze investment—including from China—in our infrastructure, I plan to introduce legislation to create a U.S. infrastructure bank. It’s one step toward getting America back on the path to global competitiveness.

Now just because I’m looking at what we can do in America, in no way am I excusing China for significant anti-competitive transgressions that are truly harming the United States and many other countries. But even if China does revalue its currency, that is not a silver bullet. It will not bring a flood of jobs back to the United States and it will not instantly cause a rebound in the American economy. What’s more important is that we decide what kind of economy we want—and make it happen.

I have faith we can get this right. The 21st century will be a century of American renewal at home and continued leadership abroad. But we have to start making policy choices that reflect reality. We need to remind ourselves that it was our economic strength after World War II that gave us the ability to become the world’s superpower. We need to put domestic economic strength back at the top of the U.S. agenda and at the center of our common purpose. The stakes are high. At risk is our ability to provide for our country and to promote our national security. We cannot afford to be blind to this reality. The time for action is now.

If we act, China’s rise will do nothing to diminish our own power. After all, economics is not war—we can both come out of this well ahead of where we are now. And China’s rise need not disrupt the international system that we have built. In fact, China’s participation can renew that system and better equip it to deal with the challenges of the 21st century.

The story of U.S.-China relations can be a story of genuine cooperation, of fierce competition, and of spectacular accomplishment. Undoubtedly, we will disagree—strongly, at times. But I am convinced that we can work together—that we should not simply manage this relationship over the short term, but cultivate it over the long term. We have to resist the temptations of those in China and the United States who seem to relish a relationship defined in terms of conflict instead of cooperation. Despite our differences, the two most powerful nations on Earth must find common ground.


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