There is more than might have been, but a lot less than first meets the eye. That describes the climate deal struck this week by President Barack Obama and Chinese president Xi Jinping in their private two-day meeting following a gathering of 19 Asian Pacific leaders in Beijing. The very fact of a deal is more than even well-informed observers expected. But whether the agreement to cut emissions is “a game-changer,” as Fred Krupp, head of the Environmental Defense Fund, a prominent green organization contends, is quite another matter.
Start with the signatories: a lame-duck American president, his policies repudiated by the electorate, who will be long gone when the emissions cuts he is promising are to move from paper pledges to reality, and a Chinese president operating in a regime that has no built-in mechanism compelling it to honor its pledges, and who the shifting currents of internal Communist party politics might well have consigned him to a Chinese gulag by the time emission cuts are to begin.
Then there are the terms of the deal. America is to double its current pace of reduction in CO2 emissions, and do so immediately, while China’s will be permitted to continue to rise for another sixteen years before reaching the peak to which Xi agreed. Environmentalists are as usual dissatisfied with these terms, calling the U.S. pledge a mere re-statement of earlier goals, and demanding that China move its peak-emission year five or ten years forward, which of course it won’t. “Dissatisfied” doesn’t begin to describe the more robust reaction of Obama’s Republican opponents. Outraged comments by key Republicans include “a non-binding charade,” “job crushing,” and “creating havoc” with the American economy. But since the president can implement his plan by executive orders and regulations, there is little Congress can do. Even if Republicans were to take the White House in 2016, investors will be unlikely to make long-lived investments in coal plants -- the main targets of Obama’s ire -- since those investments can be wiped out by another spin of the political and policy wheels in 2020 or soon thereafter.
The advantages to both signatories are clear. Obama says that his opponents can no longer argue that it is useless for America to cut its emissions without an agreement from China and India to do the same. He can also point out that pundits who have declared him “irrelevant” -- a condition that most frightens him, according to an increasingly leaky White House -- have been proved wrong: he was treated to a private dinner at Mr. Xi’s residence, a buddy-buddy walk in the garden, and toasts in the Great Hall of the People en route to signing an agreement that only a very relevant president could have struck.
At least, that is how the administration’s public relations machine is describing it. Unfortunately for the president, there is another way to look at the new pact. The Chinese regime has committed itself to doing nothing to slow emissions for sixteen years, if then, while America will start bearing the costs of the agreement immediately. Meanwhile, Mr. Xi will be seen willing to take action to reduce the health-destroying levels of pollution that are forcing multinational companies to pay a health bonus to get their executives to accept assignments in China, and are distressing Chinese citizens.
In fact, Xi has surrendered less even than the formal document suggests. The regime’s central planners know that the country’s heavy industries and biggest polluters, such as cement and steel, are dominated by clapped-out state-owned enterprises (SOEs) that are kept on life support by credit from state banks that have no hope of ever being repaid for their loans. The regime knows that situation is not viable in the long run, and plans to transform its economy by the time the agreed emissions peak is reached in 2030. Lighter, less polluting industries will be turning out goods for an increasingly affluent domestic-consumer market. In short, if emissions do peak sixteen years hence it will not be because of presidential signatures on a bit of paper, but because of the changes produced by the communists’ successive five-year plans. And if even those changes fail to curb the growth of emissions, reasons can be found to declare the agreement “inoperative”, to borrow a phrase made famous by spokesmen for President Richard Nixon, the man who opened China to the West in 1972.
This economic transformation is now likely to be financed in important part by Western capital. Mr. Xi announced that he will give foreign investors greater access to China’s stock markets, but in the controlled sort of way that is the hallmark of central planning. Investors will be allowed to invest only in companies the regime designates, with daily and total caps on the amount they are permitted to invest. Other restrictions abound, the net result of which is that in addition to directing its own capital in a manner consistent with its central plan, the regime will have a hand in directing foreign capital as well. Despite those controls and the rather rough treatment overseas companies are receiving from China’s antitrust and regulatory authorities, and the vagueness of capital gains and other tax rules, foreigners are champing at the bit to get a piece of the Chinese action. Shades of Lenin’s notion that capitalists would sell him the rope with which to hang them. The regime hopes the new rules will boost the nation’s stock market, which remains 50 percent below its 2008 peak even after a bit of a surge early this week.
China also expects to benefit from its belated agreement to join a cut by the U.S. and 53 other nations in tariffs on some 200 high-tech products, including semi-conductors, MRI machines, video game consoles, and GPS devices. The great bulk of the $1 trillion in trade in these products is now accounted for by exports from China, which stalled an agreement until its own manufacturers were well established.
Lest Obama fail to notice, Mr. Xi chose the occasion of his visit to announce agreement of the 21 countries of the Asia-Pacific Economic Cooperation forum to study creating a China-led free-trade zone that would be an alternative to Obama’s stalled 12-nation Trans-Pacific Partnership that excludes China; and agreed to pay a decidedly unisolated Vladimir Putin $284 billion for more natural gas to help him weather sanctions. Oh yes, and unveiled China’s new J-31 stealth fighter, announcing plans to sell it to nations barred by the Pentagon from buying America’s F-35. All tangible responses to Obama’s merely rhetorical “pivot” to Asia.