US-CHINA CLIMATE DEAL
1. Context
China’s burgeoning production of electric cars and other green technologies has become a flashpoint in a new US-China trade fight, highlighted by US Treasury Secretary Janet Yellen during her five-day visit to China and seized on by former US President Donald Trump in incendiary remarks on the campaign trail
2. How China’s auto industry is Significant?
- According to the International Energy Agency based in Paris, China has established a significant presence in the automotive industry, contributing to 60 percent of global electric vehicle sales.
- Similar patterns are observed across various sectors like solar panels, batteries, and steel.
- The primary concern revolves around China's extensive capacity buildup in multiple industries, including emerging technology sectors. If domestic demand remains stagnant, China will seek markets beyond its borders.
- China currently holds the title of the world's largest solar cell producer.
- Around a decade ago, there was a notable influx of steel and aluminum imports into the United States. This surge followed China's government support for increased production post the 2008-09 global financial crises
3.Trade between US-China
- The trade relationship between the United States and China has evolved significantly over the course of history, reflecting changes in global economic dynamics, political relations, and technological advancements.
- Historically, trade between the US and China can be traced back centuries, with early exchanges occurring primarily through maritime routes. The opium trade in the 19th century was a notable aspect of this relationship, leading to tensions and conflicts, including the Opium Wars.
- In the late 20th century, economic reforms in China, initiated by Deng Xiaoping, opened up the country to foreign trade and investment. This period marked a significant shift, as China transformed from a closed, centrally planned economy to one of the world's largest trading nations.
- The normalization of diplomatic relations between the US and China in 1979 further facilitated trade and cooperation between the two countries.
- Since then, trade between the US and China has grown exponentially, with both countries becoming each other's largest trading partners.
- China's emergence as the "world's factory" fueled by its vast manufacturing capabilities and lower labor costs led to a surge in imports from China to the US, ranging from consumer goods to electronics, textiles, and more.
- However, the trade relationship has been characterized by various challenges and disputes. Issues such as intellectual property theft, market access barriers, currency manipulation, and unfair trade practices have been sources of contention between the two countries. These tensions have periodically escalated into trade disputes and negotiations, with both sides imposing tariffs and other trade barriers in attempts to address perceived imbalances.
- The relationship between the US and China extends beyond trade to encompass broader geopolitical and strategic considerations. Economic interdependence coexists with geopolitical competition, particularly in areas such as technology, military influence, and regional security
- Trade between the United States and China encompasses a broad spectrum of goods and services exchanged between the two nations. This trade relationship is one of the most significant in the world, with both countries being major trading partners for each other.
- The trade between them includes various sectors such as electronics, machinery, textiles, agriculture, and more.
- Over the years, both countries have engaged in negotiations and trade agreements aimed at regulating and promoting trade between them.
- However, tensions and disputes have arisen, leading to tariffs, trade barriers, and discussions about fair trade practices.
- This dynamic relationship has significant implications not only for the economies of both nations but also for the global economy as a whole
4. US Reaction towards China's Auto Industry
- The US administration emphasizes that robust competition with China needs to be accompanied by discussions aimed at preventing the situation from escalating uncontrollably.
- Over the past three years, the US administration has achieved significant geopolitical advancements in the Asia-Pacific region.
- These achievements encompass fortified bilateral partnerships with Japan, Korea, and Australia, the establishment of a trilateral strategic framework involving Tokyo and Seoul, a reinvigorated alliance with the Philippines, and the formation of new strategic alliances with India and Vietnam.
- Furthermore, the United States has elevated the Quadrilateral dialogue with Australia, India, and Japan to the summit level and introduced a new partnership named AUKUS, which includes Australia and the United Kingdom.
- India should focus on capitalizing on the emerging opportunities to strengthen its relationship with the United States, while also maintaining its longstanding connections with Russia and effectively managing its complex relationship with Chin
5. What is AUKUS?
- AUKUS is a trilateral security partnership formed between Australia, the United Kingdom, and the United States. The name "AUKUS" stands for the initial letters of each participating country.
- The agreement was announced in September 2021 and aims to enhance cooperation in defense and security, particularly in the Indo-Pacific region. AUKUS focuses on areas such as defense technology, cyber capabilities, and joint military exercises.
- One of the key components of the AUKUS agreement is the development of Australia's nuclear-powered submarine capability.
- This involves the provision of advanced nuclear submarine technology by the United States and the United Kingdom to Australia, enabling Australia to enhance its naval capabilities significantly.
- The formation of AUKUS has significant implications for regional security dynamics, particularly in light of increasing strategic competition in the Indo-Pacific region.
- It underscores the commitment of the participating countries to bolster their defense cooperation and capabilities in response to evolving security challenges.
- However, the agreement has also drawn criticism and raised concerns from some regional actors, contributing to geopolitical tensions and debates about military proliferation and balance of power in the Indo-Pacific
6.US-China Climate Deal
- The recent climate agreement represents a rare instance of consensus between the United States and China, despite their disagreements on geopolitical matters and trade.
- Under this accord, both nations have committed to tripling global renewable energy capacity by 2030, aiming to expedite the transition away from coal, oil, and gas-based energy generation. They anticipate substantial reductions in power sector emissions over the coming decade.
- Although the agreement lacks robust enforcement mechanisms, it advances several key initiatives.
- Both countries have pledged to include reduction targets for all greenhouse gases—including methane and nitrous oxide—in their forthcoming national climate commitments, due next year.
- Notably, China's agreement to address methane, a departure from its previous stance, is significant given its status as the world's largest emitter of this gas.
- David Waskow, international climate director at the World Resources Institute, hailed China's commitment to methane reduction as a significant stride, emphasizing its importance in curbing near-term global warming.
- While the agreement signifies a renewed collaboration between the world's largest polluters and establishes ambitious targets, critics argue that it falls short of addressing climate change adequately.
- Importantly, it lacks commitments from China to phase out coal use or halt the construction of new coal plants—an essential measure according to scientists to mitigate further catastrophic warming
7.Impact of US-China trade war on India
The US-China trade war has had several notable impacts on India, both directly and indirectly:
- India has seen opportunities emerge as a result of the trade war, as companies seek to diversify their manufacturing bases away from China. Indian industries such as textiles, electronics, and automotive components have experienced increased demand and investment as companies look for alternative production locations
- While India has benefited from increased exports in certain sectors, it has also faced challenges due to global trade disruptions caused by the trade war. Fluctuations in global demand and trade flows have impacted various Indian industries, leading to both opportunities and challenges
- India's trade deficit with China has been a longstanding issue, and the trade war has brought renewed attention to this imbalance. While India has sought to address its trade deficit through various measures, including increased exports and regulatory reforms, the trade war has highlighted the need for India to further diversify its trade relationships and reduce its reliance on any single market
- The trade war has led to a reevaluation of global supply chains, with companies looking to mitigate risks associated with tariffs and trade tensions. India has sought to attract foreign investment as companies explore alternative production bases. However, India faces competition from other countries in the region, such as Vietnam and Indonesia, which have also positioned themselves as attractive investment destinations
- The trade war has contributed to shifting geopolitical dynamics in the Indo-Pacific region, with countries like India seeking to navigate between the competing interests of the United States and China. India has sought to maintain a balance between its economic ties with China and its strategic partnership with the United States, while also pursuing its own regional interests
8.Way Forward
Overall, the US-China trade war has presented both opportunities and challenges for India. While India has seen increased market opportunities and investment interest, it has also faced disruptions and uncertainties in global trade dynamics. Going forward, India will need to continue to adapt to the evolving global economic landscape and pursue policies that strengthen its position in the international marketplace
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For Prelims: Economic and Social Development
For Mains: GS II & III: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora, Indian Economy and issue.
1.How India can benefit from ongoing US-China trade fight in terms of a growing economy. Discuss.
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Source: Indianexpress
