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121. Writing New Rules for the U.S.-China Investment Relationship

Author:
Jennifer M. Harris
Publication Date:
12-2017
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
Chinese outbound investment is on the rise, and much of it is finding its way into the United States. Be- tween 2010 and 2015, China’s foreign direct investment (FDI) inflows to the United States grew by an average of 32 percent annually.1 Within the past two years alone, Chinese foreign investment inflows to the United States increased four-fold, and available data suggests 2017 will see the second highest annual investment on record, after 2016.2 This is not a two-way street: the United States and other foreign investors do not enjoy similar open market access in China. China maintains a dizzying assortment of formal and informal barriers to for- eign investment—from outright restrictions and quotas to mandatory joint ventures, forced localization measures, and domestic licensing regimes. Despite years of negotiations, these barriers are, if anything, growing more cumbersome in many sectors. U.S. firms paint a darkening picture of the business climate they face in China. U.S. FDI in China has slowed considerably in recent years: after growing roughly 180 percent from 2002 to 2007 (albeit from a low baseline), U.S. FDI flows into China have declined since 2012.3 The one-way surge of Chinese investment into the United States comes against a backdrop of strategic mistrust between Washington and Beijing. Ongoing accusations of state-sponsored cyber predation of U.S. firms, Beijing’s increasing aggressiveness over territorial disputes, its systematic efforts to under- mine the U.S. alliance system in Asia, and mounting tensions over North Korea all contribute to a dark- ening mood in the U.S.-China relationship. And, like so much involving China, this investment is simply different. Rarely, if ever, has the United States seen an increase in investment of this magnitude—espe- cially from a non-ally and especially from one where the lines between state ownership and private own- ership are so inherently blurred. For all the concern surrounding Japanese investment in the United States in the 1980s—coming as it did amid fierce economic competition—those debates ultimately re- mained under the umbrella of the U.S.-Japan military alliance. All of this raises questions about whether the United States needs to tighten its stance on Chinese in- bound investment; proposals to that effect have bipartisan support in the Congress. The Donald J. Trump administration has signaled its desire for a tougher approach in its economic dealings with China, which U.S. businesses seem to welcome. One foundation for such an approach is the principle of reciprocity. Roughly two dozen sectors in China—construction, mining, banking, insurance, and so on—remain effectively off-limits to American investment, because the Chinese government protects its domestic companies through regulations and financial subsidies. Even in sectors that technically allow foreign investment, discriminatory industrial policies tilt the playing field in favor of Chinese firms. Until this changes, Washington would be justi- fied—even obligated—to limit Chinese investment in the U.S. market. However, U.S. policymakers do not have a consensus on what a policy of reciprocity would entail, and different policy interpretations could spell quite different economic and foreign policy consequences for the United States. The United States should aim for a version of reciprocity that allows it the flexibility to maximize pressure on the broad range of Chinese industrial policy concerns while leaving a clear route to negotiations. The United States should also encourage European and other Western countries, many of which are seeing similar increases in Chinese investment, to adopt this new approach.
Topic:
Diplomacy, International Cooperation, International Trade and Finance, and Foreign Direct Investment
Political Geography:
United States, China, Asia, and North America

122. A “Modest Proposal” To End The North Korean Nuclear Crisis: Trump Should Threaten Beijing With A Nuclearized Taiwan

Author:
Steven Holloway
Publication Date:
10-2017
Content Type:
Policy Brief
Institution:
Centre for the Study of Security and Development, Dalhousie University
Abstract:
As the North Korean nuclear crisis escalates, the media is filled with an endless rehashing of the old inutile options. Typically articles in Globe and Mail and others will restate all the traditional options from multilateral diplomacy to tougher sanctions to unilateral US military action but then recount the long acknowledged problems with each option. This paper suggests a simple but revolutionary diplomatic move. It agrees with the many commentators who have said that China is the only actor with the leverage to effectively halt or even roll back Pyongyang’s nuclear and missile program (or even to attempt regime change.) But unlike some of these analyses, I will argue that so far China has not had sufficient motivation to fully exercise its leverage on North Korea. Therefore the key is to develop a threat plausible enough to provide that motivation. If the US is to face a nuclear deterrent from North Korea, then China should face a similar deterrent and threat from Taiwan.
Topic:
International Relations, Diplomacy, Nuclear Weapons, and Crisis Management
Political Geography:
China, Taiwan, Asia, South Korea, North Korea, and United States of America

123. The Dispatch (Summer 2016)

Author:
David J. Bercuson, Stefanie Von Hlatky, Thomas Juneau, Barry Cooper, Candice Malcolm, Paul Dewar, Ferry de Kerckhove, Colin Robertson, Glenn Davidson, Paul Durand, Thomas Keenan, Andrew Rasiulis, and Hugh Stephens
Publication Date:
06-2016
Content Type:
Journal Article
Journal:
The Global Exchange
Institution:
Canadian Global Affairs Institute (CGAI)
Abstract:
The Dispatch (later called The Global Exchange) is the Canadian Global Affairs Institute’s quarterly magazine featuring topical articles written by our fellows and other contributing experts. Each issue contains approximately a dozen articles exploring political and strategic challenges in international affairs and Canadian foreign and defence policy. This Summer 2016 issue includes articles on immigration, defense policy, arms deals and more.
Topic:
Defense Policy, NATO, Diplomacy, Nuclear Weapons, Politics, Immigration, Military Affairs, Weapons, Arms Trade, and Nonproliferation
Political Geography:
China, Iran, Canada, Taiwan, South America, Saudi Arabia, and North America

124. Understanding China’s Foreign Policy Goals in Asia Through the South China Sea Disputes

Author:
Srdan Ulijević
Publication Date:
12-2016
Content Type:
Working Paper
Institution:
Institute for Development and International Relations (IRMO)
Abstract:
Ever since the launch of the Reform and Opening policy in 1978 China has been under close scrutiny of scholars and policymakers for its potential to transform the world’s economic, political and military relations. As the country’s economy grew larger and its political clout became more in�luential, international relations scholars had been applying various models and theories in order to understand and possibly predict China’s foreign policy behavior. Questions pertaining to whether China will be a status quo or revisionist power in the international system became even more relevant after the end of the Cold War and the collapse of the Soviet Union. With its sizeable landmass, strategic geopolitical location, large population and rapidly modernizing economy, China had all the trappings of a potential superpower. With its sizeable landmass, strategic geopolitical location, large population and rapidly modernizing economy, China had all the trappings of a potential superpower. By joining the World Trade Organization in 2001, China had effectively secured the key economic component necessary to achieve the crux of its grand strategy – to build comprehensive national power as well as to increase its in�luence in international fora. As a result of the WTO membership, China’s economy was propelled to new heights and its GDP grew more than eight times between 2001 and 2014. On the diplomatic front, multilateral and bilateral cooperation proliferated, with countries from every continent �locking to Beijing to sign trade deals. The EU offered to share its normative experience in regional cooperation while the US openly invited China to become a “responsible stakeholder” in 2005. For its part, China initiated a series of bold diplomatic moves towards the Association of Southeast Asian Nations (ASEAN), branded by the media and policymakers as the charm offensive policy. The charm offensive period lasted from 1997 to 2008 and paved the way for China’s deeper economic, political and military cooperation with Southeast Asian countries. The policy fueled dreams of China becoming the engine of ASEAN’s future economic growth and prosperity.
Topic:
Foreign Policy, Diplomacy, and Military Strategy
Political Geography:
China, Taiwan, Asia, and United States of America

125. China and the Middle East: Venturing into the Maelstrom

Author:
James M Dorsey
Publication Date:
03-2016
Content Type:
Working Paper
Institution:
Centre for Non-Traditional Security Studies (NTS)
Abstract:
China’s increasingly significant economic and security interests in the Middle East have several impacts. It affects not only its energy security but also its regional posture, relations with regional powers as well as the United States, and efforts to pacify nationalist and Islamist Uighurs in its north-western province of Xinjiang. Those interests are considerably enhanced by China’s One Belt, One Road initiative that seeks to patch together a Eurasian land mass through inter-linked infrastructure, investment and expanded trade relations. Protecting its mushrooming interests is forcing China to realign its policies and relationships in the region. As it takes stock of the Middle East and North Africa’s volatility and tumultuous, often violent political transitions, China feels the pressure to acknowledge that it no longer can remain aloof to the Middle East and North Africa’s multiple conflicts. China’s long-standing insistence on non-interference in the domestic affairs of others, refusal to envision a foreign military presence and its perseverance that its primary focus is the development of mutually beneficial economic and commercial relations, increasingly falls short of what it needs to do to safeguard its vital interests. Increasingly, China will have to become a regional player in competitive cooperation with the United States, the dominant external actor in the region for the foreseeable future. The pressure to revisit long-standing foreign and defence policy principles is also driven by the fact that China’s key interests in the Middle East and North Africa have expanded significantly beyond the narrow focus of energy despite its dependence on the region for half 1 China has signalled its gradual recognition of these new realities with the publication in January 2016 of an Arab Policy Paper, the country’s first articulation of a policy towards the Middle East and North Africa. But, rather than spelling out specific policies, the paper reiterated the generalities of China’s core focus in its relations with the Arab world: economics, energy, counter-terrorism, security, technical cooperation and its One Belt, One Road initiative. Ultimately however, China will have to develop a strategic vision that outlines foreign and defence policies it needs to put in place to protect its expanding strategic, geopolitical, economic, and commercial interests in the Middle East and North Africa; its role and place in the region as a rising superpower in the region; and its relationship and cooperation with the United States in managing, if not resolving conflict.
Topic:
Security, Diplomacy, Economics, Imperialism, and Infrastructure
Political Geography:
Africa, United States, China, Middle East, Asia, and North Africa

126. Russia’s Asia Pivot: Engaging the Russian Far East, China and Southeast Asia

Author:
Bhavna Dave
Publication Date:
05-2016
Content Type:
Working Paper
Institution:
Centre for Non-Traditional Security Studies (NTS)
Abstract:
The Russia-ASEAN summit being held in Sochi on 19-20 May 2016 to mark twenty years of Russia’s dialogue partnership with ASEAN is a further indicator of President Vladimir Putin’s ‘pivot to Asia’ policy, triggered also by its current confrontation with the west. Through this pivot, Moscow wants to assert Russia’s geopolitical status as a Euro-Pacific as well as Asia- Pacific power. It is a pragmatic response to the shifting of global power to Asia. It also builds on the growing Russo-Chinese relations to develop the Russian Far East, a resource-rich but underdeveloped region into the gateway for expansion of Russia into the Asia Pacific. At the same time, the growing asymmetry in achieving the economic and strategic goals of Russia and China has resulted in fears that the Russian Far East will turn into a raw materials appendage of China. Moscow lacks the financial resources to support Putin’s Asia pivot. Therefore, Russia needs to strengthen ties with other Asia-Pacific countries and ASEAN as a regional grouping so as to attract more diversified trade and investments into its Far East region. It is in this context that the Sochi summit takes on added significance. However, given Russia’s sporadic interest in Southeast Asia and its strategic role defined mainly by the limited potential of Russian energy and arms exports to ASEAN Member States, the PR diplomacy and summitry at Sochi may not deliver substantive outcomes for Russia. Nonetheless, Moscow aims to enhance its status in the east and seek business and strategic opportunities through the summit thereby compensating to some extent Russia’s loss following the sanctions imposed by the west over the annexation of Crimea.
Topic:
Foreign Policy, Diplomacy, Military Strategy, and Infrastructure
Political Geography:
Russia, United States, China, Europe, and Asia

127. Brazil and the Regional Leadership Vacuum: The Chinese-American Advantage

Author:
Corival Alves Do Carmo and Cristina Soreanu Pecequilo
Publication Date:
06-2016
Content Type:
Journal Article
Journal:
AUSTRAL: Brazilian Journal of Strategy International Relations
Institution:
Postgraduate Program in International Strategic Studies, Universidade Federal do Rio Grande do Sul
Abstract:
The first decade of the 21st century was characterized by Brazil’s action in South America. However, since 2011, there was a setback in the country´s strategic, economic and political investments in integration, allowing the projection of the US and China. The aim of this article is to analyze this context.
Topic:
Foreign Policy, Diplomacy, and International Cooperation
Political Geography:
United States, China, Asia, Brazil, South America, and North America

128. The Blind Men and the Elephant: Making Sense of China's One Belt One Road Initiative

Author:
Nimmi Kurian
Publication Date:
12-2016
Content Type:
Special Report
Institution:
Centre for Policy Research, India
Abstract:
China’s One Belt One Road Initiative has virtually been a lightning rod for divisive debate and a polarised narrative since it was announced in 2013. For India, it has been the proverbial elephant in the room, as it awkwardly swings between willful pretence and wishful erasure. The policy brief looks at the clues this initiative could offer on the likely drivers of China’s economic diplomacy in the region. There could be three signals for India to watch out for. A clear pointer is the growing role of domestic determinants in setting the direction and pace of China’s regional economic engagement. Another pointer could be China’s role in shaping and defining Asia’s new institutional financial architecture. Lastly, the initiative could be a signal of how China is likely to engage with the larger questions of benefit sharing, trade-offs and the allocation of risks and burdens in subregional Asia.
Topic:
Diplomacy, International Trade and Finance, Regional Cooperation, Infrastructure, Economic growth, and Soft Power
Political Geography:
China, South Asia, India, and Asia

129. China and Iran Expand Relations After Sanctions’ End

Author:
Chris Zambelis
Publication Date:
03-2016
Content Type:
Journal Article
Journal:
China Brief
Institution:
The Jamestown Foundation
Abstract:
While the full implications of the JCPOA on Iran’s regional and international standing have yet to be realized, the outcome of Xi’s 2016 visit to Tehran is likely to presage years of continued Sino-Iranian engagement and cooperation. At the same time, China is steadily being confronted with outside competition for Iran’s most promising markets and similar challenges. In terms of its history of dealings with Iran in recent years, this represents unfamiliar territory for China.
Topic:
Diplomacy, International Trade and Finance, Treaties and Agreements, Bilateral Relations, Sanctions, and Nuclear Power
Political Geography:
China, Iran, Middle East, and Asia

130. EU trade diplomacy and the cold peace in cross-Strait relations

Author:
Maaike Okano-Heijmans
Publication Date:
11-2016
Content Type:
Policy Brief
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
Today’s uncertainty in cross-Strait relations is not without consequence for third parties that maintain ties with both China and Taiwan. To what extent does (and should) the situation also impact on EU’s trade diplomacy with both sides? This policy brief argues that under today’s circumstances, the cold peace in cross-Strait relations is reason to tread carefully — and to stay on course. The May 2016 inauguration of the Taiwanese government led by Democratic Progressive Party (DPP) leader Tsai Ing-wen placed a big question mark over the future of cross-Strait relations. Within weeks, Beijing had unilaterally imposed a freeze on (semi-)official talks until the new Taiwanese President acknowledges the so-called 1992 Consensus. While confirming its ‘one China’ policy, the EU may contribute to the stability of cross-Strait relations by being a partner in China’s economic reform and by negotiating EU–China and EU–Taiwan investment agreements in parallel. In this policy brief author Maaike Okano-Heijmans builds on discussions during the 13th Symposium on ‘Sino–EU Relations and the Taiwan Question’, which was held in Shanghai from 9–11 October 2016 and in Taipei from 12–14 October 2016. These second-track dialogues were supported by the Friedrich Ebert Stiftung, the Shanghai Institute of International Studies and the Taiwanese Ministry of Foreign Affairs.
Topic:
International Relations, Foreign Policy, Diplomacy, International Political Economy, and International Trade and Finance
Political Geography:
China, Taiwan, and European Union