Three Georges Dam

.. ” which entails maintaining economic ties while pushing for change through normal diplomatic channels and multilateral organizations. The Three Gorges Dam case is also an example of how efforts to promote trade come in conflict with political concerns. The issue is particularly relevant in considering U.S. foreign policy towards China.

In its relations with China, the United States has long been torn between engagement and disengagement. This division is currently at work in trade policy, with experts advocating the necessity of free trade and activists leading public opinion by highlighting its costs. The renewal of China’s Most Favored Nation (MFN) trading status has been controversial ever since the Chinese government’s 1989 assault on pro-democracy demonstrators in Tiananmen Square. However, consistent with his predecessors since the 1970s, President Clinton argues that maintaining normal trade relations is the best way to integrate China further into the family of nations, promote American interests and ideals, and increase U.S. government influence with the Chinese government. In addition, if the United States were to revoke China’s normal trading status, it would jeopardize access to one of the world’s most rapidly growing emerging markets, one that already supports 170,000 American jobs and doubtless will support more in the years ahead (Favoring China 1997).

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In fact, the United States is China’s largest export market. The U.S. trade deficit with China jumped 17 percent last year to $39.5 billion, a larger imbalance than with any other country except Japan (Ibid.). Experts agree that opening U.S. markets to China has indeed had a beneficial effect and that China is displaying a greater willingness to accept international rules (Favoring China 1997 and Friend or Foe 1997). However, U.S.

policy makers are often caught between the above needs and their obligation to act as leaders by sending a signal to the international community when necessary. Environmental degradation in China poses a threat not only to the Chinese people, but also to the global population as a whole. The state of China’s environment is of concern, particularly as there seems to be little hope for a reversal of current trends. Such trends include the enormous population pressures the country faces, the political problems involved in laying off the thousands of laborers who work in polluting factories, and the fact that despite official recognition of the magnitude of the problem. Chinese environmental officials concede priority to economic development in the short to medium-term. The promotion of sustainable development in China must therefore be considered to be in the U.S. national interest.

Is China’s Environment a U.S. National Interest? This is an issue that is not specific to United States-China relations, but one that is relevant to international relations in general though it is most often debated in the context of North-South relations. Whether or not a specific problem should concern American policy makers depends on whether it has ramifications that transcend national borders. The creation of the Three Gorges Dam reservoir will spell the extinction of several known and, possibly, numerous undiscovered species of flora and fauna. Ecologists such as Paul Ehrlich have posited that the loss of even “minor” species could upset the delicate balance of ecosystems, leading to major ecological disruptions and sometimes greater losses further up the food pyramid.

Moreover, the loss of biodiversity also “deprives humanity of substances needed to produce new medicines, crop varieties and other products through biotechnology” (UN Chronicle 1997, 17). The weight of these arguments depends on the likelihood and extent to which these developments will transpire. But even if the above claims are accepted at face value, the true cost in economic and more subjective terms is impossible to measure. It is this uncertainty that makes it problematic to characterize environmental degradation in foreign countries as a U.S. national interest. Put bluntly, the connection between the extinction of the river dolphin and U.S.

national interests, broadly defined, is simply too tenuous to gain the support of policy makers and the public without spending a significant amount of political capital. Indeed, even within the United States it has been difficult to convince Americans that preserving the spotted owl was worth the loss of forestry jobs in Washington State. However, when environmental conditions in foreign countries impact surrounding nations or the global environment, the case for U.S. intervention is easier to make for several reasons. First, the potential deleterious effects of environmental degradation on economic growth represent a threat to American export markets and the health of the nation’s economy.

Acid rain caused by sulfur emissions from Chinese factories and households has caused billions of dollars of damage to Japan and South Korea’s forests. In order to mitigate the effects, these major markets for U.S. exports are forced to divert economic resources which could otherwise be used to build stronger economies or buy more American products (Esty 1997). Second, the damage that China is inflicting on itself gives rise to similar concerns. Given that China is expected to be an engine of growth for the Asia Pacific region as well as the rest of the world in the next century, the drag on China’s economic growth that environmental degradation will bring has serious implications for the American economy.

Third, Thomas Homer-Dixon has written extensively on how resource scarcities can lead to regional instability by spurring transnational migrations or enticing nations to attempt to expand their territories (Homer-Dixon 1994, 540). In April 1996, U.S. Secretary of State Warren Christopher’s allusion to China’s “enormous environmental pressures” underscored fears in the region that resource scarcity within China translates into threat of war and conquest beyond its borders (A Greener China 1996). If such a conflict were to occur, American military and economic leadership would likely be required to bring about a peaceful resolution. What is ironic about the Three Gorges Dam debate is that the project is aimed partly at reducing China’s reliance on coal as an energy source.

Therefore, at first glance the position taken by the Clinton administration seems to contradict its interest in promoting Chinese efforts to clean up the environment. However, it is important to clarify that the basis of the administration’s policy decision rests on concerns about the questionable benefits and likely costs of the megaproject, rather than disagreement over the need for cleaner sources of energy. If the United States has credible grounds to doubt the prudence of a project, it is within its rights and in its interests to make those doubts known and push for alternatives that it believes are more appropriate. In sum, China’s environment, and those of other countries, should only be of concern to the United States when its improvement or degradation can be linked convincingly to American economic or security interests. Environmental Policy: Domestic Affair or a Global Issue? A frequent source of friction in North-South relations is disagreement over environmental policy-making. Some argue that prioritizing environmental impacts is a nation’s prerogative.

This position stems from the belief that economic growth would be stunted if developing countries were forced to adopt stricter environmental standards or rely on expensive, more environmentally-friendly technologies. They would also argue that since environmental policies should be a domestic matter, attempts by developed nations to dictate an environmental agenda impinges on the rights of developing countries as sovereign nations and is an example of hypocritical “environmental colonialism.” An illustration of this hypocrisy is a recent World Resources Institute study that scapegoats countries such as China and India for producing between 10 and 30 percent of the world’s atmospheric pollution. This study concluded that the key to solving this problem is getting developing countries, in general, to curb their output of air pollutants. However, it could be argued that since China and India account for about 40 percent of the world’s population, they should be entitled to emit an equal portion of the world’s air pollution. Calculated in terms of share of the world’s population, countries such as Canada and Australia far exceed their fair allotment of pollution (Agarwal and Narain, 1995). Proponents of this view argue that the developed world ignores the environmental damage it caused during the early stages of its own development, and the disproportionate share of pollution and resource consumption accounted for by its citizens.

The above claim that environmental restrictions would impede economic growth is true to a certain extent, but it is almost certain that if the pursuit of economic growth in developing countries continues at the expense of environmental protection, the long-term negative effects on development and living standards will be enormous. Given the higher quality of scientific knowledge and research in developed countries, and because environmental threats are a global matter, the industrialized world has both the responsibility, and the right to pressure less developed countries to follow more environmentally-sound policies. This is even more imperative when poor environmental policies and conditions in one country have an impact on the environment of another. The claim to this right, however, is legitimate only if developed countries recognize the disproportionate burden that they impose on the environment and the Earth’s resources, and acknowledge that they are better able to afford to finance environmental protection than developing countries. This implies that they must be willing to help developing countries to minimize the impact of their development on the environment, and compensate them for the economic benefits they forego by respecting stricter environmental standards.

Should Environmental Concerns be a Part of U.S. Foreign Policy? The Three Gorges debate highlights one of the major foreign policy dilemmas for policy makershow to promote responsible environmental standards without conflicting with the commercial interests of U.S. corporations. The environmental lobby pressured the government not to allow Ex-Im Bank support for the Three Gorges project, claiming that American taxpayers’ money should not be used to fund environmentally destructive projects. On the other hand, U.S.

multinationals argued that environmental regulations would seriously decrease their ability to compete for Three Gorges-related contracts. This fear of losing business in China is overstated. Many firms who are competing to win Three Gorges contracts privately concede that they do not expect to make any money from the project (Tomlinson 1997). In addition, claims by corporations that they would lose vast amounts of business rest on the assumption that they would win most, if not all, of the available contracts. Loss of U.S. jobs is likewise uncertain, given that American companies such as Caterpillar assemble their machines mostly in Indonesia using parts made in Japan.

It is also true that construction projects typically involve much local labor. Therefore, a significant amount of the economic loss to the United States would be restricted to foregone sales and service of machinery that is not truly American-made anyway. It is worth reiterating that the lack of access to export credits acts as an impediment to, but not a legal ban on, U.S. corporate involvement in the project. Some American firms chose to compete for contracts through their foreign subsidiaries. Those who have not, such as Caterpillar and Rotec, have sold up to $100 million in equipment and services without Ex-Im Bank support (Iritani 1997). Furthermore, despite the lack of export credits, it has been estimated that of the $2 to $3 billion worth of equipment that will be imported to construct the dam, 70 percent will come from the United States (China to Import 1997).

Thus, when the difference between the amount of business that ultimately goes to U.S. companies and the amount of business that would have gone to U.S. companies directly is calculated, the figure may not be so significant. Nevertheless, American firms view involvement in the Three Gorges Dam as a gateway to more infrastructure development contracts in China, a view that the Chinese government also seems to share. Since this project is so important to Chinese leadersPremier Li Peng, a former hydroelectric engineer, has pushed for it personallysome companies fear that their business with China may suffer if they do not take part. Infrastructure development spending is estimated to total around $300 billion by the year 2000. It is the prospect of losing such opportunities that compelled the vice president-international of the U.S. Chamber of Commerce, Willard Workman, to characterize the lobbying campaign as “an effort of some extremists in the environmental movement to export their concept of environmental policy” (Yerton 1996) .

This statement reflects the view that the Ex-Im Bank should be in the business of promoting commercial interests, not necessarily studying environmental impacts or conveying American foreign policy concerns. However, a commercial policy without environmental guidelines also exports a certain concept of environmental policy: one that signals that Americans are willing to do anything in the pursuit of profit. If the manner in which U.S. government agencies operate overseas are a reflection of American values, then the Ex-Im Bank is faced with the dilemma of choosing between two sets of values: that of corporations and that of environmentalists. If neither extreme is an acceptable reflection of American values as a whole, then the solution must lie somewhere in between. The most workable compromise is to establish a minimum standard of environmental guidelines.

Given U.S. market leadership in many environmental and infrastructure technologies, as well as the high demand for investment in China and other developing countries, such guidelines should not be too onerous a restraint on American firms wishing to conduct business overseas. Sanctions: Forceful or Futile? Within the United States there is a large divide between some policy makers who favor maintaining trade sanctions as a foreign policy tool, and private sector interests who insist that they are only effective in hurting U.S. businesses. The track record for unilateral actions taken by the United States is mixed, but tends to be discouragingly ineffective. A study of more than 100 instances when economic sanctions were applied for political purposes, economic sanctions worked to some extent about one-third of the time (Haass 1997).

This ineffectiveness is a serious concern in a global economy where foreign competitors will gladly fill the void left by American companies, and lends support to those who argue that sanctions or boycotts should only be employed for issues of global security, and then only when there is multilateral support. Holders of this view believe that foreign policy concerns are more effectively conveyed through “constructive engagement”continuing commercial ties that help developing countries progress economically (with the expectation of eventual political liberalization). Deeper economic ties, in turn also lend more weight to diplomatic pressure. In the case of the Three Gorges, American expertise could help ensure that the project is built safely and in a manner less damaging to the environment. On the other hand, imposing sanctions or implementing a boycott are sometimes the most unambiguous signals of disapproval that the U.S.

government can convey to protest another country’s policies. Though it may be true that greater involvement by American firms may help mitigate some of the risks raised by the construction of the Three Gorges Dam, the more important issue is preventing similarly environmentally suspect projects in the future. This is a very real concern given plans for other megadams in the region such as Laos’ Nam Theun 2 Dam on the Mekong River. Weighing the economic costs of unilateral action against the implications of not registering the government’s reservations about the project, taking a stand against the Three Gorges Dam was a justifiable policy action. The extension of export credits would have set a precedent of the U.S. government assisting domestic firms gain contracts in overseas projects despite its fears of possible environmental consequences.

Such a policy would do little to discourage developing countries from accepting enormous environmental (and economic) risks. Imagining such risks as quantifiable entities, this policy would result in American firms rushing around the globe trying to “mitigate” environmental damage through incremental reductions in this stock of risk, rather than preventing risks from accumulating in the first place. The Clinton administration opted to take a stand against what it deemed to be a questionable undertaking. Though the true motivation behind the decision may be open to question, this policy potentially can serve as a basis for the prevention of poorly conceived and environmentally destructive projects. The critical factor is the contention that American leadership is needed to give an issue such as higher environmental standards the first push it needs to gain currency.

Alternatively, American leadership is sometimes needed to prevent these issues from being excluded from the global dialogue. In other words, U.S. leadership is necessary both on the leading edge of the environmental movement and as a last line of defense against unbridled commercialism. In sum, the above examination of these issues leads us to conclude that the environment should matter in U.S. foreign policy, especially when the effects of environmental degradation cross national boundaries.

Moreover, it should matter enough for U.S. government agencies to adopt environmental guidelines. Most importantly, the U.S. government should take unilateral measures particularly in instances when the environment should matter more. Recommendations We support the Clinton administration’s policy regarding the Three Gorges Dam despite the fact that the policy was largely a result of pressure from special interest groups, and as a trade-off for President Clinton’s broken election promise to revoke MFN status for China. A genuine commitment to environmental protection seemed lacking in the decision making process, underscoring the absence of a core policy for the environment.

Such a core policy is necessary, because a policy driven by environmental concerns and applied in international transactions helps promote sustainable development in both developing and developed countries, opens the way to multilateralism, and ultimately promotes higher environmental standards. Given the catastrophic state of China’s environment, we recommend that the Chinese environmental crisis be given higher priority in the U.S. government’s dealings with China. We therefore make the following recommendations toward a credible and consistent U.S. foreign environmental policy.

The United States Should Articulate a Core Foreign Environmental Policy We believe that there is a need for an overarching environmental policy that would add integrity to the U.S. stance on export and environmental standards. In the long run such a policy may foster sustainable development by encouraging more ecologically sound infrastructure projects in developing countries. There will be instances when even having such a policy in place will not be effective in preventing an environmentally damaging project from being implemented. In these cases, the policy is still valuable, because it sends a signal to the international community that the United States believes that there are minimum environmental standards that must be observed.

Additionally, setting such a precedent provides an invitation for multilateral action on an issue of global magnitude. Such a signal may appear futile in the short run, but its impact on future international negotiations could be critical. Finally, it is also our belief that the United States should consider trade sanctions, if environmental degradation in one country has cross-border environmental or political consequences. The United States Should Promote Environmental Technology Transfers to China China suffers not only from a lack of capacity and clean sources of energy, but also from high inefficiencies. To remedy this problem, the Chinese government is preparing to spend more heavily on the environment while continuing to seek foreign funds.

The Ninth Five-Year Plan calls for boosting environmental investment from 0.8 percent to 1.5 percent of GDP by the year 2000, and a list of some 1,400 priority projects requiring $21.7 billion has been drawn up to complement the plan. However, these ambitious goals will not likely be met. Currently, there exist more than $1.3 billion worth of multilateral agency-funded environmental projects annually in China. Many of these projects call for pollution control equipment, normally procured with hard currency through international competitive bidding. American companies, considered one of the strongest leaders in environmental technology, have been quite successful when they have participated.

Currently, environmental assistance from the United States to China totals less than $10 million, compared to Japan which will provide $183 million in soft loans over the 1994-2000 period (Esty 1997). The best prospects for market growth in environmental technology includes clean coal and desulfurization technology, both critical in carbon dioxide mitigation. Other areas of potential growth in technology are environmental monitoring instruments, process controls, sanitary landfill liners, and inexpensive but effective wastewater treatment plants. Given such potential market growth in China, this represents a lucrative opportunity for American businesses as well as an effective avenue for promoting efficient energy use within China. In fact, in April 1996, “the United States and China embarked on a program of environmental cooperation to address problems such as rapid urbanization, pollution from energy consumption and the changing agricultural patterns” of an increasingly prosperous population (U.S.

Strains, 1996). The United States should increase such initiatives in order to maximize the competitive advantage of U.S. firms’ environmental technology. According to experts, with self-interested help from the United States and other wealthy nations, a program to install efficient equipment and processes throughout China’s energy system could reduce its energy consumption by 50 percent (Hertsgaard 1997). Exercise Swifter Diplomacy to Offset Possible Retaliation A possible result of the Clinton administration’s decision to block Ex-Im Bank financing for U.S. companies involved in the Three Gorges project is that an antagonized China may retaliate against American businesses by excluding them from large infrastructure projects in the future.

Chinese resentment may stem from the perception that Ex-Im adopted environmental guidelines specifically in opposition to the Three Gorges project, soon after it had been approved by the Chinese government. We believe the United States should have acted sooner through high-level diplomatic contacts in order to forestall any possible retaliatory actions. Although in 1996 Vice President Gore and Premier Li Peng agreed on a program of environmental cooperation, a similar effort should have taken place before or immediately after the Ex-Im decision was announced. To be more specific, it should have included an offer to China to participate in the United States-Asia Environmental Partnership (USAEP)a program that links U.S. private and public sector environmental expertise with government programs in Asian countries.

China is currently excluded from the program due to the events in Tiananmen Square. This policy, adopted under the Bush administration, is inconsistent and counterproductive, because it punishes China for its deplorable human rights record at the expense of its environment. By depoliticizing the USAEP, the Clinton administration would have signaled to the Chinese leadership that the Ex-Im Bank ruling was guided by a genuine interest in the sustainable development of China, rather than by domestic political considerations. To date, China has not been offered participation in the USAEP, a situation that should be rectified immediately, so as to not undermine United States credibility in the international arena. We recommend that in the future the U.S.

government exercise swifter diplomatic action when it recognizes that new export rules may antagonize trading partners, particularly if strained U.S. relations with the concerned countries may undermine American security, commercial, or other interests. Conclusion In the case of the Three Gorges project special interest groups played a major role in influencing U.S. foreign policy. Despite the potential for short-sighted responses to case-specific conditions, the decision was appropriate also in view of the fact that it led to a significant advance in domestic politics. Moreover, we believe the decision could be viewed as a starting point for establishing a core foreign policy regarding the environment. Having such a core policy will add consistency to U.S. foreign relations, prevent the government from becoming hypnotized by each individual issue, and ultimately enable the government to engage constructively in the sustainable development of China and other developing countries.