Friday, December 18, 2009

Geopolitical Complications at Copenhagen

The problems at the various climate summits are economically quite simple--there is both a tragedy of the commons problem (in the emitting of carbon dioxide) and a freerider problem (in the halting thereof). Even Europe has has largely decided that the moral payoff for "leading the way" in CO2 control is not sufficient to break its back alone, especially if it enables other economies to slurp up the CO2 "availability," as it were, that they create.

This, of course, is why anyone trying to control global CO2 output needs a treaty. But it is not so simple to simply forge a treaty on this and tell everyone to stop producing. Should all countries cut a portion of their CO2? Should we create a baseline CO2/capita standard which countries must meet? What, instead, of a CO2/GDP/capita standard? These different standards can be abstractly debated on their own merits, but each representative at Copenhagen is undoubtedly going to support the one that best suits their own self-interest.

Right now, one of the big hang-ups seems to be the US-Chinese rivalry, which stems far beyond simple fairness, egalitarianism, equity, whatever, into rather unsubtle geopolitical/economic warfare. The Chinese want to walk away with a "promise" to reduce CO2 output by a certain percentage, but do not want any oversight into their own in-house emissions reporting. The US, of course, is unwilling to sign anything that lets the Chinese get away with zero transparency, while the US gets constant comb-overs by the EU to make sure that it is putting in sufficient efforts to curb CO2.

And again, this goes beyond fairness, or effectiveness. Could the world at large reduce CO2 production to whatever reasonable levels it sets for itself without the Chinese getting on board until some years from now? Certainly. China may be a big contributor to world CO2 emissions, but it is not yet so big to single-handedly destroy any attempts to put caps on world emissions (where the US is certainly that big, as is the EU). This is, as usual, about long-term and arcane calculations about the relative power of the two perceived titans of world politics, the US and the People's Republic of China.

My own opinions about where the US should be aiming its sights aside (hint: Russia and Iran), the US sees a great threat to its pacific hegemony in the Chinese, and the Chinese probably see a great opportunity in this treaty, if it should come out the right way. Further, the Chinese have an advantage--for years, the Chinese have denied any aspirations of being a "world leader" or any of that claptrap. While they are concerned about their reputation in order to open trade and assuade the military fears of their neighbors, the Chinese lack the desire to be loved, admired, and followed that the US became addicted to in the Second World War (and not for entirely sentimental reasons. The relative love affair that the Western World has had for the US over the past sixty years has allowed the US to make bold moves in its own geopolitical favor and receive backing in legitimacy, money, manpower, military base placement, etc. It's been a very powerful tool, and it's far from lost, all the Bush-era apocalyptic soothsayers' opinions to the contrary. But I digress). The Chinese can legitimately look Copenhagen dead in the eye and say, "we don't care if you approve of our economic or environmental practices," as long as such disapproval
does not grow so large as to threaten boycott (which would certainly be difficult to legitimately threaten, although it would damage the Chinese and Southeast Asian economies far, far more than the economies of the US or EU, under-read cocktail-sipping fatalists' opinions to the contrary. But I digress). It's not an enviable position for the United States.

For the United States has a reputation to uphold, and it may be in a position where it is making a value judgment about that geopolitically powerful reputation and its geopoltically powerful manufacturing industry (which is still the largest and most formiddable in the world, a fact that would be more widely known if we were not so obsessed with predicting our own demise. But I digress). Should the US walk away and say, "no deal without China breaking its back as much as we do," its European allies will grow increasingly impatient and disillusioned about American exceptionalism, altruism, leadership ability, what have you. But should the US say, "the Chinese be damned, we're going to do the right thing," then it will quite disproportionately and quite significantly load a disadvantage onto its own manufacturing industry, its war machine, its economy in general--and ultimately its ability to project power into the pacific.

Manufacturing is a CO2-heavy process, even when it's not a coal-fired steel plant (of which we have precious few these days). You'd probably have nightmares over how much CO2 went into the air to make that brand new Prius you're so proud of buying (and re-buying after a mere 3 years to get the "higher effiency" model, in a misguided attempt to save the earth. But I digress). Military manufacturing is much, much worse. Military manufacturing puts a much higher emphasis on performance over price, to the point that it hits some seriously diminishing returns (to whit, the military often picks some very odd opportunities to say "only the best for our boys!" and "we need to save money," but I digress). And, until renewable technology really picks up, manufacturing price is often fairly well-correlated to CO2 usage to make it (of course, in the case of military hardware, the CO2/price ratio is higher than for most goods).

The short of it is this: A major carbon tax or cap-and-trade will be a disaster for the US military's already- enormous budget, in a country whose debt is already so horrifyingly large that both parties are balking at spending more (and the Greek debt crisis is hopefully teaching a lesson about the limits of the power of borrowing. But perhaps not. I digress). Additionally, the US will simply flat-out lose more manufacturing to China if it should impose limits on its CO2 production and China doesn't. While the US will make sure to subsidize its arms manufacturers, many other industry's won't be so lucky. The US would have to (until renewable technologies mature) be incredibly picky about just which manufacturing sectors are "Critical to national security," or it would annihilate its economy just to keep them all afloat.

And, of course, for every manufacturing plant the US loses, it's one China gains. China's ability to compete, in particular, in high-precision manufacturing would increase significantly--a prospect that US security advisors (for better or for worse) shudder to think about (the US still has rather obnoxious export limits on high-precision manufacturing equipment to China, as well as other "dual-use technology" that the US and EU currently specialise in making. But I digress). This manufacturing would, of course, make China's economic position more powerful in the Pacific, and enable its indigenous military hardware industry (which has been crawling obediently towards independence from Russian supply).

Increased tax revenues, increased manufacturing capacity, and increased trade partnerships in the Pacific would greatly increase China's geopolitical and military position in the region, where the opposite would apply to the US. This is one of the big reasons the US is so very obsessive about making sure the Treaty (that it's actually considering signing) is "fair" in the sense that it hurts the US and China equally.

I doubt, though, that the US is going to get its wish in that particular field until Chinese GDP growth starts to peter out. And if it can handle its looming demographic crisis, China is unlikely to see GDP grwoth slow for some years to come.
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