SENATOR CANTWELL SEP 4-5 VISIT TO BEIJING

UNCLAS SECTION 01 OF 03 BEIJING 002653 SENSITIVE SIPDIS STATE FOR E, H, EAP, EAP/CM STATE PASS USTR FOR TIM STRATFORD, ANN MAIN, JEAN GRIER DOC FOR IRA KASOFF, NICOLE MELCHER, MAC TREASURY FOR OASIA/DOHNER/WINSHIP GENEVA PASS USTR NSC FOR LOI E.O. 12958: N/A TAGS: ETRD EFIN ECON PREL WTRO CH SUBJECT: SENATOR CANTWELL SEP 4-5 VISIT TO BEIJING SENSITIVE BUT UNCLASSIFIED - PLEASE HANDLE ACCORDINGLY. ¶1. (SBU) Summary. Senator Cantwell (D-WA) visited Beijing September 4-5, 2009, meeting with State Council Vice Premier Wang Qishan and NDRC Vice Chairman Xie Zhenhua. The Senator's key message to policy makers here was that although the U.S. and China together created 40 percent of the world's greenhouse gas emissions, putting a price on that emitted carbon would create an enormous market opportunity for both the U.S. and Chinese economies. Cantwell also met with U.S. industry representatives to discuss intellectual property rights. End Summary. State Council Vice Premier Wang Qishan -------------- ¶2. (SBU) In her September 4 meeting with State Council Vice Premier Wang Qishan, Senator Cantwell expressed hope that U.S.- China relations would maintain the positive momentum begun at the inaugural meeting of the Strategic and Economic Dialogue (S&ED). Cantwell noted that though the U.S. and China together created 40 percent of the world's greenhouse gas emissions, addressing this challenge offers important market opportunities for U.S. and Chinese firms. Cantwell urged China to reduce tariffs on green products and services, saying doing so would set a powerful example for other nations. Cantwell asked VP Wang how best to move forward under the memorandum of understanding (MOU) initialed at the inaugural meeting of the S&ED. Wang responded by calling for a "positive, cooperative, and comprehensive" relationship, noting that her follow-on meeting National Development and Reform Commission (NDRC) Vice Chairman Xie Zhenhua will allow greater discussion of cooperation on energy and environment matters. ¶3. (SBU) Wang stated that current development models can no longer be sustained environmentally by the earth. He noted India and China's combined population alone would exceed 2.5 billion by 2025, a significant percentage of the globe, and argued that international aspirations for addressing climate change expressed in the Kyoto Protocol and Bali Roundup cannot be attained without U.S. agreement. Wang said that while developing countries could not leapfrog the industrialization phase to modernization, they must not repeat errors made under Western industrialization. Chinese authorities thus have made the economic development model a paramount consideration. ¶4. (SBU) Wang recounted the difficult decisions he took as mayor of Beijing, specifically in the run up to the 2008 Olympic Games when he ordered the closure of a chemical plant, employing 8,000 workers, as well as relocation outside Beijing of iron and steel facilities. Because of such difficult political considerations, Wang argued for "common but differentiated responsibilities" on environmental issues consistent with a global framework. Developed countries should take responsibility to fund and transfer at low cost environmental technologies to help developing countries, according to Wang. Developed countries, he said, must pledge absolute reductions in emissions, while developing countries should commit to the slowing of emission output growth. ¶5. (SBU) Wang next raised previously delivered points regarding the then-pending U.S. decision on whether to impose a trade remedy under the WTO special safeguard mechanism against Chinese exports of light vehicle tires. Wang underscored U.S.-China cooperation to overcome the global economic downturn and the pledge at the last G-20 not to implement protectionist measures before the end of 2010. Wang reiterated that, in the four cases brought under the Bush administration, the U.S. had refrained from invoking safeguards. In this case, he said that the Chinese tire exports present no structural conflict with U.S.- produced tires, given their qualitative differences (Chinese tires were replacement tires whereas U.S. tires were high-end). Wang acknowledged U.S. President Obama was facing pressure from labor unions, but feared invocation of safeguards could be viewed as a negative barometer for the overall U.S.-China economic relationship. ¶6. (SBU) Cantwell detailed her record on supporting measures in BEIJING 00002653 002 OF 003 dealing U.S.-China economic matters, and queried Wang as to when he thought the safeguards should be used given their adoption at the WTO. Wang called safeguards a product of "Cold War" mentality to be used as a "deterrent" whose usage would constitute a "trade atomic bomb," especially negative given the current economy. Wang predicted if safeguards are invoked in this case, the precedent would be used by other industries and countries, leading to a dangerous "trade war." ¶7. (SBU) Cantwell closed by arguing for greater access for U.S. firms in China's markets, specifically container shipping/port operations. Cantwell noted that as China's state-owned COSECO shipping group had been granted rights to operate port terminals in Long Beach, CA, similar access should be granted to U.S. firms such as SSA Marine, which is striving to be the first U.S. port operator in China. Wang pledged to consider the issue, but noted disparity exists in certain industries for China such as in the airline industry, where U.S. carriers far outcompete Chinese carriers in passenger volume. NDRC Vice Chairman Xie Zhenhua -------------- ¶8. (SBU) In her meeting with NDRC Vice Chairman Xie Zhenhua, Senator Cantwell said the United States and China had made good progress on strengthening efforts to combat global climate change and promote green energy technologies, citing the recent MOU initialed at the S&ED. She reiterated points on U.S.- China's responsibility for 40 percent of the world's greenhouse gas emissions and related market opportunities, particularly if that carbon had a price, again urging China to reduce tariffs on green products and services. While agreeing U.S.-China cooperation on green energy had increased following the signing of the Ten Year Framework and MOU, Xie urged faster implementation of the agreements in order to show "concrete results." He said that he would meet with Special Envoy for Climate Change Todd Stern in Washington on September 17 to formally sign the MOU and hoped the two sides could quickly decide on projects and begin to move forward. Regarding trade in clean energy products and services, Xie stressed that China had an open attitude as long as the cooperation was mutually beneficial. ¶9. (SBU) Xie pressed Cantwell on the prospects of the U.S. Senate passing a clean energy bill before the end of the year. While noting that the recent House clean energy bill was more complex than needed, Cantwell expressed optimism that the Senate would be successful in passing a more streamlined bill. She said Congress was aware that failure to act could result in the EPA taking unilateral action on limiting greenhouse gas emissions, which would lead to a less predictable outcome than a legislative solution. Cantwell told Xie that conservative Senators would support a climate change bill if there was strong support for the nuclear energy industry. Xie urged speedy passage of a climate change bill, saying it would send a positive signal ahead of the Copenhagen climate change talks in December. He also agreed with Cantwell that U.S. businesses were worried about unpredictability and that a price on carbon was essential to create market incentives for industry to pursue innovative solutions. ¶10. (SBU) Xie said China's policy of promoting greater energy efficiency and moving to a low carbon economy was clear and would not change. He said Cantwell would see this commitment firsthand during her follow-on visit to Shanghai; he said the 2010 World Expo would be the first 100 percent carbon neutral event of its kind. Noting that China's 12th Five-Year Plan would include new "proactive" initiatives, Xie also indicated that China is likely to issue a new climate change plan before the Copenhagen meeting. Meeting with U.S. Industry and Associations -------------- ¶11. (SBU) Cantwell closed her day of meetings with representatives from Microsoft, Cummins, AmCham, and the U.S. China Business Council. Primarily discussing intellectual property rights issues, Cantwell heard strong consensus IPR BEIJING 00002653 003 OF 003 infringement remains a critical threat for U.S. industry in China, and that U.S. innovation and intellectual property are the cornerstone of U.S. strategic economic advantage in the face of an ever-more-competitive, industrializing China. Cantwell pledged to maintain vigilance and work with her Congressional counterparts to defend these and other U.S. interests. ¶12. (U) Senator Cantwell's delegation did not have an opportunity to clear this message. HUNTSMAN