Author: Dominic Meagher

Ross Garnaut has a fondness for saying that we have a chance (just a chance) of pulling together and surviving climate change. That chance is still alive after the release of a collaborative report by the Pew Center and the Asia Society, entitled ‘Common Challenge, Collaborative Response: A Roadmap for US-China Cooperation on Energy and Climate Change’.

Until now, there has been scant common ground between the two largest producers of greenhouse gases (GHGs), the largest developed country and the largest developing country.

The contributors list to the report reads as a who’s who of serious thinkers about climate change from the US and China, including many people who hold high level official positions and are closely involved in their countries’ respective official Climate Change negotiating teams. Read the rest of this entry »

Author: Dominic Meagher

There has been much talk over the last few days suggesting that the US must adopt a modest foreign policy, that Obama will have to do less before he can do more, and that American power is in relative decline and lacks what it will take to re-shape the world.

But President Obama shows no lack of ambition in foreign affairs.

In his Inaugural Address, Obama outlined his intention to revitalize US power.

‘We understand that greatness is never given. It must be earned’ he said.

The rhetoric alone goes a substantial way to restoring America’s international reach.

‘To all the other peoples and governments who are watching today, know that America is a friend of each nation, and every man, woman and child who seeks a future of peace and dignity. And we are ready to lead once more’.
Read the rest of this entry »

Author: Dominic Meagher

There seems to be considerable confusion about Garnaut’s recommendation as to what targets for emissions reduction the Australian government should set.

Garnaut is very particular in the way he articulates his recommendations. The media and public commentary has not been so particular.

There are two sets of targets: primary and secondary. The primary target is the global concentration of GHGs in the atmosphere. This target must (by its nature) be a global target agreed to by at least all of the major GHG emitting countries. The secondary target relates to emsissions reductions. The emission reduction target is a national action target. Each country would have their own emission reduction target. Meeting the global atmospheric GHG concentration target would require all countries to meet their respective emission reduction target.

1. Primary target: global atmospheric GHG concentration target (ZZZ ppm by 2050)
2. Secondary target: GHG emission reduction target (ZZ% reduction of Australia’s annual emissions from 2000 levels by 2020 and ZZ% by 2050)

The secondary target is conditional on the primary target.

Read the rest of this entry »

Author: Dominic Meagher

The US-China relationship is among the most important bilateral relationships in the world. Yet during the American Presidential election, China appeared something of a no-go zone.

In the US there are broadly two camps on China: those who would seek to contain, and those who seek to engage.

President-elect Obama is lauded for his instincts towards international engagement, cooperation, listening respectfully to others, and pragmatism. These are instincts that will serve him well dealing with China. But his comments on trade during his campaign for the Presidency, his penchant for blaming US manufacturing job losses on China and his promise to establish an ‘enforcement office’ at USTR to pressure China to revalue the RMB, point in a different direction and herald a trickier time for Sino-American relations.

Real Clear Politics has described considerable concern in Asia that the protectionist side of Obama will dominate his dealings with Asia, and notably China. Is the concern in Asia justified?

Perhaps not when you compare Obama with President Bush, when newly elected.

Read the rest of this entry »

Author: Dominic Meagher

In May we wrote about China running out of coal and repeated the economic truism that there’s no such thing as a shortage; only a price that needs to go up.

Yesterday, China’s grid price for electricity went up for the second time in two months (except in Tibet) [NDRC].

Source: Rosen and Houser (2007) China Energy: A guide for the perplexed

There have been months of negotiations and lobbying between China’s energy producing firms (especially the five firms which dominate the market**), the two state-owned grid companies, the National Development and Reform Commission (NDRC), provincial officials and probably the SERC and SAAC as well. [See Rosen and Houser's eminently readable, China Energy: A Guide for the Perplexed (p24-25) for details]

During those negotiations, the Chinese people have had to put up with frequent electricity shortages. This circumstance is reminiscent of 2002-2003, when small cities routinely went without electricity for entire weekends. The NDRC has come up with a band-aid solution (see over the fold), but unless China embarks on a more comprehensive reform of its electricity market, 3-4 years from now China will be experiencing wide spread and frequent power shortages again. Read the rest of this entry »

Author: Dominic Meagher

A significant fall in China’s trade surplus couldn’t have come at a better time: just months before the US Presidential election.

The figures were announced (Chinese only) by China’s General Administration of Customs on Monday.

Change in China trade statistics: 2007-2008

(The People’s Daily is reporting a fall of 9.6% in China’s trade surplus, although it isn’t clear how they arrived at that number since their source is the above table)

China’s lower trade surplus is mirrored by a lower trade deficit in the US: while exports to the US rose by 8.9%, Chinese imports from the US rose by 24.5%, leaving China’s trade surplus with the US to fall by 15.6% compared with the first half of 2007.

There are various reasons for the US$13 billion drop in China’s trade surplus. Read the rest of this entry »

Author: Dominic Meagher

Paul Dibb, writing for The Australian, claims “Garnaut’s 500-page report seems to be based on an acceptance of the more calamitous end of the spectrum”. However if anything, Garnaut is optimistic.

Since (at least) early 2007 Garnaut has been writing and talking about a global “Platinum Age” of economic growth, named in relation to the “Golden Age” coined by renowned economic historian Angus Maddison. Maddison identified the period from 1950-73 as a “Golden Age” of global economic growth (growth averaged 4.9% during the 23 year period, the most rapid sustained global growth in the history of humanity). Garnaut has been pointing out that growth in 2007 exceeded 5% for the fourth successive year (more rapid than the Golden Age – a Platinum Age).

One of the most basic relationships in environmental economics describes the extent of human induced environmental degradation as a function of population, economic activity, and an environmental impact coefficient (the Holdren-Ehrlich Identity). The environmental impact coefficient is the degradation we cause per person per dollar.This identity makes it clear that if the economy grows rapidly and population remains the same, the only way to avoid increasing environmental degradation is to decrease the environmental impact coefficient: do things more cleanly. So far so good…

Economists have, for a long time, assumed that China would not continue growing as quickly as it has. This idea seems to be based on the notion that such rapid progress simply can’t be sustainable. The International Energy Outlook 2005 (pdf) projected China’s growth from 2002 – 2015 at 6.4% (see Table 2). Half way to 2015 China is still growing at almost double that rate.

Read the rest of this entry »

Guest Author: Denis Hussey, Tasman Transparency Group

Philippa Dee and Christopher Findlay have correctly identified the issues facing the WTO in dealing with ‘behind-the-border’ barriers, the major impediments to trade in services. Their approach recognizes that reform of these barriers requires a domestic transparency process operating in (and by) individual WTO countries.

The approach they advocate is of major importance in enhancing the domestic benefits for countries participating in multilateral trade negotiations, and for the future of the WTO system. ‘Behind-the-border’ barriers often apply at a regional or provincial level, and are therefore quite unlikely to reach the negotiating table unless the national ‘offers’ governments take to negotiations in Geneva are consciously structured to include these non-transparent barriers to trade.

The WTO has no authority to deal with these barriers. Read the rest of this entry »

Author: Dominic Meagher

China’s energy markets can most accurately be described as operating under the principles of managed market-based economy. Gasoline prices have been heavily controlled and the prices for key energy resources such as coal are not exactly set by the market.

But nor is the government any longer able to completely control energy prices as it once did.

Last week China’s NDRC lifted the prices of gasoline, diesel oil, aviation kerosene and electricity (Xinhua). At 18 per cent, the price rise was the largest ever one day price rise for gasoline in China, and the first price rise since November (CNBC).

So what’s behind this sudden energy price adjustment? Read the rest of this entry »

Author: Dominic Meagher

The Japanese Destroyer, Sazanami was led into Zhanjiang military port yesterday by the Shenzhen, a Chinese missile destroyer (and the first Chinese navy ship to visit Tokyo last November).

This is the first time the Japanese navy has been in China since World War II.

The 4,600 ton warship and its 240 member crew arrived in Zhanjiang (in Guangdong province) loaded with relief supplies. The supplies (mostly food, blankets, hygiene masks and disinfectant) are being unloaded today and will travel by train to Sichuan to aid the recovery of the Sichuan earthquake victims. (CCTV)

The visit has received wide coverage in Chinese media, with Chinese sailors lined up to welcome the ship under the flags of both countries. Read the rest of this entry »

Author: Dominic Meagher

Within hours of the Prime Minister raising the need of forethought and discussion to deliberately shape the evolution of our regional architecture naysayers had begun to publish straw-man arguments.

Matthew Franklin at the Australian leads with the headline, Kevin Rudd to Drive Asia Pacific Union, and claims:

Kevin Rudd wants to spearhead the creation of an Asia-Pacific Union similar to the European Union by 2020.

Today Mike Steketee, also at the Australian runs the headline, Don’t push EU model say ex-PMs, Bob Hawke and Paul Keating, and refers to Paul Keating as saying “an economic union modelled on the European experience was unachievable and inappropriate for the region.” Read the rest of this entry »

Author: Dominic Meagher

(image: World Bank’s East Asia blog)

The Food and Agriculture Organization of the United Nations (FAO) opened its High Level Conference on World Food Security today in the midst of soaring world food prices. From the Conference website:

An estimated 850 million people in the world today suffer from hunger. Of those, about 820 million live in developing countries.

850 million is more than 1 person in every 8 people on the planet. The World Bank says

:

High food prices are a matter of daily struggle for more than 2 billion people. High prices threaten to increase malnutrition, already an underlying cause of death in over 3.5 million children a year. * An estimated 100 million people have fallen into poverty in the last 2 years * Prices are expected to stay high through 2015

This is far from a simple problem. In it are tied the issues of climate change, international trade, security, economic development, sustainability, equity, corruption, race relations (think Zimbabwe), fiscal and monetary policy, bioethics and religion… thorny is an understatement. Short term solutions are likely to focus on food aid to countries suffering most from high prices. More systemic solutions are likely to get bogged down in politics. But the conference is continuing, so there is still hope. Suprisingly, there seems to be more disagreement about the causes than the solutions. And there isn’t even complete agreement on the primary question: are high prices really a problem? Read the rest of this entry »

Author: Dominic Meagher

Some of you may have seen this alarming report (thanks to All Roads Lead to China for the link) about Chinese power plants running out of coal. Apparently as of 10 days ago there were only 3 days of reserves in some regions and “32 power plants have shut down due to lack of fuel”. So what’s going on? Read the rest of this entry »