US-China Energy Pact Endangered

US accusations that Beijing is illegally subsidizing its wind power industry potentially undermine a fledgling clean energy partnership that the Department of Energy claims is making great progress. At the very least, it provides grist for the argument made by one high-profile clean energy advocate that the US doesn’t properly understand its partner.

On Wednesday, the Obama administration filed a case with the World Trade Organization challenging a Chinese government fund that awards grants to makers of wind power equipment – the second time in four months that the US has accused China of violating world trade rules. The scheme, the administration argues, is illegal because it is based on manufacturers using parts made in China.

The conflict stands in contrast to the much-trumpeted clean energy partnership the two countries forged just over a year ago.

The joint US-China Clean Energy Research Center (CERC), announced by Presidents Barack Obama and Hu Jintao in November 2009, has so far made three awards worth a total of more than US$150 million to groups conducting research in clean coal, clean vehicles, and energy efficiency in buildings.

“We’re doing great,” Robert C. Marlay, the Department of Energy’s deputy director in the climate change technology program, told Asia Sentinel. “Sometimes it’s not easy to make awards, and we have gotten these things done in record time.”

Marlay says progress since then has been brisk but the CERC is operating on a five-year plan, “so there is some deliberation” to the process. “This is kind of an experiment in bi-lateral relations,” he said.

But one analyst says the pact is not doing so great. She says the US mischaracterizes and misunderstands China when it comes to clean energy, ultimately hindering the partnership.

“We’ve improved from the Bush era, but there’s a lot more the US and China could do together,” said Peggy Liu, the American-Chinese co-founder of the Joint US-China Collaboration on Clean Energy. “Part of the barrier is the lack of understanding by a lot of US leaders about the intentions of China and how to work culturally with China.”

The Shanghai-based Liu, who Time magazine in 2008 named an ‘environmental hero’, says there are fundamental communication issues between the US and China that need to be solved. “There’s an alarming gap between what the US thinks China thinks of it, and what China thinks of it,” Liu said.

In dealing with both the US and China governments on clean energy issues, Liu has frequently found glaring discrepancies in how each interprets certain communications. “The reaction of the two sides sometimes is almost 180 degrees opposite.”

Part of the problem is that the US sees China as a threat, Liu said, adding that the level of anti-China sentiment in the country is at an “alarming” level.

“The US is leaning on a crutch that they lean on a lot, which is trying to find a common enemy to spur action domestically,” she said.

The WTO anti-subsidies case is just the latest example of such behavior. In a recent debate over federal wind subsidies for wind energy, US Sen. Sherrod Brown, an Ohio Democrat, raised the spectre of a Chinese-led clean energy takeover. “We cannot sit idly by while China races to the forefront of clean energy production at the expense of US manufacturing,” Brown said.

During the mid-term elections in November, the right-wing ‘Citizens Against Government Waste’ group ran a TV ad that played up the threat China poses to US world dominance (watch the ad here). Just the month before, the Obama administration said it would investigate Beijing’s clean-energy subsidies, a move that angered Chinese officials.

Meanwhile, in a Nov 29 speech at the National Press Club, US Energy Secretary Steven Chu said that China’s clean energy success represents a “Sputnik Moment” for the US. "When it comes to innovation, Americans don't take a back seat to anyone – and we certainly won't start now," he said. "From wind power to nuclear reactors to high-speed rail, China and other countries are moving aggressively to capture the lead.”

However, Liu says China is more concerned with domestic competition than international dominance. Because of language barriers, cultural differences, and inexperience in foreign deal-brokering, as well as travel restrictions because of difficulties in getting visas, China’s clean-energy industry is very inward-looking. “It’s not directly competing with Western technology companies.”

Ultimately, the US is focusing on the wrong enemy, she said. “What they really need to be doing is focusing on the ‘war on energy’ as a whole, and creating a domestic clean energy market.”

To address the communication problem, the US needs to employ more “truly bi-lingual, truly bi-cultural” facilitators for negotiations with China. “You need more native-Chinese speaking people working for the US government; people who understand Chinese culture and the way Chinese business works.”

While Secretary Chu is ethnically Chinese, he is “pretty American,” Liu said. As well, most other China-focused representatives in the US government are American-born Chinese, or Taiwanese Chinese, or Americans who have learned Chinese language.

Meanwhile, China is ahead of the US in clean energy advances because its government is better set up to adapt to change, Liu said. The country has been adapting quickly for 30 years, as evidenced by the huge success of Starbucks in what is a distinctly tea-drinking society. The US, on the other hand, is hamstrung by a desire to retain the status quo.

The US, Liu said, “wants to keep its leadership. It wants to keep its democracy. It wants to keep its rights to bear arms – well, some people. It wants to keep its right to free speech. It wants to keep Silicon Valley as Silicon Valley. But by virtue of staying status quo, they’re starting to lose leadership.”