Daniel Russel, “Remarks at USCI’s China’s Growing Pains Conference,” April 22, 2016

Remarks at "China's Growing Pains" Conference

Daniel R. Russel
Assistant Secretary, Bureau of East Asian and Pacific Affairs
University of Southern California U.S.-China Institute
Los Angeles, CA
April 22, 2016

Good morning and thank you for the introduction. The one thing missing from my bio is I'm the U.S. government official who told Sony there was no problem “greenlighting” the movie The Interview. I wasn't sure what kind of welcome I'd get in LA.

There’s a lot of China expertise in this room and an impressive panel lined up today, so I’m not going to compete with them and offer an analysis of China. Instead I’m going to talk about what I know best – America’s policy and diplomacy with China.

At this very moment, representatives of 130 countries are in New York, on Earth Day, to sign the Paris Climate Agreement.

There were many important moments along the way to a climate deal, but one stands out. It was April 2013, and I was with John Kerry on his first visit to Beijing as Secretary. We were not making much headway on getting the Chinese on board with an ambitious plan for both of us to announce dramatic cuts.

For all kinds of bureaucratic and other reasons, the Chinese were resistant. Secretary Kerry was determined to break through. So he pushed, and ultimately, he got State Counselor Yang Jiechi to announce the creation of a bilateral high-level working group making US-China cooperation on climate change a top priority.

China’s credibility with the developing world was vital in bringing along India, Brazil, South Africa and others to bridge the North-South divide that had tanked Kyoto and plagued Copenhagen. That trip to Beijing three years ago was the turning point.

The rest, as they say, is history. In 2014 Presidents Obama and Xi announced that we would set aggressive targets for carbon reductions; in 2015 we did so. Today, the U.S. and China--the world’s two biggest economies and two biggest emitters--are signing on the dotted line.

And climate is just one example of the contribution that U.S.-China cooperation can make, and is making, to meeting global challenges.

But before I get into that, let me provide some context on the Obama administration's approach to Asia.

For me, the story starts with someone who is now a proud Angelino, someone you’ll hear from this afternoon – Jeff Bader.

I’d had the privilege of working with Jeff over the years and following him I some great jobs, so when he came in as President-elect Obama’s top Asia hand and asked me to join him, I jumped at the chance.

We started at the National Security Council on President Obama’s first day in office.

As our first Pacific President, and as a new President grappling with the worst economic situation since the Great Depression, Obama understood the importance of the Asia-Pacific.

He recognized that economic and demographic trends were driving an Asian century, and he knew that America’s national interests would be served by economic integration, security cooperation, and tackling big problems together.

That’s why he decided to “rebalance,” to allocate more attention and resources to the region – rebuilding our alliances; building new partnerships; strengthening regional institutions and rule of law; and engaging deeply with China.

To understand the Administration’s approach to China, it’s critical to understand that our Asia policy is about America’s interests in the entire region, beginning with our traditional allies and partners, but with an emphasis on building inclusive regional architecture and institutions.

China policy is a subset of our Asia policy, and not the other way around.

The context for the progress we’ve made with China includes the President’s active engagement with ASEAN and each of its 10 member countries, as well as the quality of our alliances - particularly with Australia, South Korea, and Japan.

It also includes our support for democratic Taiwan and for universal values and human rights; the successful negotiation of TPP and the strength of U.S. businesses and investors across the region. It also includes the credibility of our security presence.

These things generate confidence that we’re in the region to stay; that we are committed to a rules-based regional order that benefits all nations; and that we won’t accept the division of the region into spheres of influence.

And I believe our policies toward China have made clear we are determined to avoid either a G2 condominium or a cold war strategic rivalry.

From day one, this administration has been clear-eyed about China – both about the potential for cooperation and the potential for conflict.

That is why President Obama has invested so much time, thought and effort in seeking practical cooperation, in managing and resolving those differences, and in trying to shape China’s choices to encourage responsible stewardship and contributions to global leadership.

President Obama has held face-to-face meetings with his Chinese counterparts something like 30 times so far, in addition to phone calls, letters and senior envoys. This has been critical in dealing with a top-down Chinese system.

Early in 2011, looking ahead to the change in leadership at the 18th Party Congress, Jeff Bader asked the President to propose an exchange of visits between Vice President Biden and then-Vice President Xi Jinping as part of a mutual effort to build relationships between our top leaders.

The result was a series of extraordinary, private conversations first in Chengdu and then in 2012 here in L.A. The two Vice Presidents had wide-ranging discussions about history, philosophy, governance, and politics that gave us our first real insights into Xi Jinping.

Once Xi took office, we looked at the calendar and realized that it would be nearly a year before the two leaders would meet at an international Summit.

We came up with the idea of an informal retreat, away from the capital, that would allow for more intimate, candid, and extended conversations. The result was Sunnylands in 2013.

And we have developed that model further by supplementing formal State visits with extended private sessions during President Obama’s visit to Beijing in 2014 and President Xi’s visit to Washington last September.

This concerted high-level engagement has been invaluable, both as the driving force behind important achievements and as a vehicle for preventing problems from getting out of hand.

Equally important has been our success in building up institutional engagement with the Chinese system, like the S&ED) and the combined civilian and military SSD.

These mechanisms allow us to engage with the Chinese bureaucracy to work through differences and advance practical cooperation.

These processes produce concrete results – in some cases major accomplishments – but just as important are the gains in mutual understanding and trust that they generate.

The net effect has been to put a floor under the U.S.-China relationship that can absorb considerable stress without risking conflict, and to enable both sides – including our militaries – to better understand the other, even where we cannot agree.

As China’s economy and global interests have grown, its foreign and security policies have evolved. For example:

To appreciate how far we’ve come on climate, remember in 2009, China firmly rejected calls to limit greenhouse gas emissions, claiming they would unfairly limit economic growth in developing countries.

Now, as we speak, Vice Premier Zhang Gaoli is in New York, signing the Paris Agreement and China has committed that by 2030, their CO2 emissions will peak and one-fifth of their energy will be renewable.

To appreciate how far we’ve come on countering proliferation, remember that China used to claim the need to allow “legitimate commercial transfer of dual-use items” to avoid taking action against proliferators.

Now, China is removing chemical weapons stocks from Syria, and helping to make Iran’s heavy water research reactor proliferation-resistant. China’s also working with us on North Korea.

Seven years ago, Chinese leaders were reluctant to take on significant responsibilities in dealing with regional hotspots citing their doctrine of non-intervention.

Now, they’re taking an active role in training Afghan diplomats and mediating between Pakistan and the Taliban. Now they’ve become the largest contributor of U.N. peacekeepers among the permanent five members of the Security Council, and their Navy participates in counter-piracy patrols along the coast of Africa.

Seven years ago, China was in denial about wildlife trafficking, despite being the world’s largest consumer of illicit products.

Now, we’re working together to implement a near-complete ban on the import, export and sale of ivory in both our countries.

Seven years ago, it was rare for China to partner with others on aid to developing countries.

Now, after having cooperated on the Ebola crisis, we’re coordinating on the Global Health Security Agenda.

Seven years ago, China depended on exports to keep its economy growing, and resisted efforts to further integrate the region around high standards for trade and investment.

Now, policy makers in Beijing understand China’s need for internal economic reforms and a transition to a consumer-driven economy. They have gone from disparaging TPP to inquiring about the possibility of someday joining.

We’ve made significant progress toward a high-standard Bilateral Investment Treaty and are accelerating our efforts.

Even the AIIB, after much cajoling, has made considerable progress toward adopting the standards and accountability of existing development banks – and its initial projects will now be in partnership with the ADB.

Seven years ago, our military-to-military relations were narrow, pro-forma and frequently interrupted. The danger was obvious – we all remember the EP-3 incident.

Now, we’ve established regular military dialogues and frequent high-level exchanges. We've put in place confidence building measures that reduce the risk of incidents and provide tools for managing any that occur.

Seven years ago, fewer than 100,000 Chinese were studying in America. Now, that number as more than tripled, and tourist and business visas have jumped to over 2.3 million per year.

Now, the other side of the story is the set of issues where we have significant differences. North Korea, which I touched on earlier, is one that straddles both worlds.

I don’t want to draw a “then-and-now” contrast because this issue has moved in fits and starts through processes like the Six-Party Talks – and not for the better.

On the one hand China has found it difficult to use its leverage to stem the profound security threat from North Korea's pursuit of nuclear-armed ballistic missiles. On the other hand there is an uptick in cooperation and a growing convergence between us on the need for stronger measures to rein North Korea in.

Cyber also has long been a source of tension in our relationship. The Chinese turned deaf ears to our complaints about state-sponsored cyber-enabled theft from American businesses to help Chinese businesses gain competitive advantage.

Ultimately, it was the prospect of a significant sanctions package that changed the value proposition of hacking for commercial gain. In the weeks prior to Xi Jinping’s Washington visit last fall, a top party official – Meng Jianzhu – was dispatched to negotiate, and ultimately we got a promise to end state support for cyber theft.

A chronic friction point is China’s suppression of universal freedoms. The human rights picture in China wasn’t good seven years ago, and the situation has gotten significantly worse with a troubling crackdown on political expression, civil society, and ethnic minorities. These increasingly harsh and restrictive practices harm China, alienate its friends, and are hugely frustrating to supporters of the US-China relationship.

We consistently raise our concerns, in public and in private, both about problematic policies and individual cases, helping to provide some space for advocates to work in China where possible, or safely to leave where it is not.

In the past few years we have been working with likeminded countries to discourage or amend a spate of draft laws and regulations that would not only restrict the freedom of speech and political rights of Chinese citizens, they would also discriminate against U.S. businesses and organizations.

But the most widely covered area of friction with China is its behavior in the East and South China Seas.

I want to underscore up front: this isn’t a territorial dispute between the U.S. and China—we don’t make any claims to any of these islands for ourselves, or favor anyone else’s land claims there over China’s.

There is a lot of tough talk about China defending its “indisputable” sovereignty, but sovereignty over what? Over recognized land features, in keeping with international law? Or over global sea lanes and maritime areas within 200 miles of other countries?

There is an important distinction between these two types of claims, although both need to be made in ways that are consistent with international law.

Territorial claims are notoriously hard to resolve, and some disputes pre-date the creation of the People’s Republic of China.

But maritime issues were dealt with comprehensively in the 1982 Law of the Sea Convention, which China ratified. It covers issues such as who has jurisdiction to fish or drill for oil in any given location. It covers the rights and freedoms enjoyed at sea. It guarantees to all countries the freedoms of navigation, overflight, and other lawful uses of the seas.

We don’t ask China to renounce its territorial claims in the East or South China Seas, but we do ask China to renounce unilateral and destabilizing actions that change the status quo at the expense of the other claimants.

We don’t object to China exercising international maritime rights, but we do urge it to clarify its South China Sea maritime claims consistent with international law and to recognize other countries posess the same rights it exercises.

We don’t seek to undermine China’s interests, but we’re determined not to let China undermine the interests of all other nations, including the U.S.

Those interests include the rights and freedoms allowed under international law. They include the principles of the U.N. charter, including freedom from coercion.

Is freedom of navigation really in jeopardy? Well, China has begun warning and seeking to divert ships and planes operating near its newly built-up outposts in the Spratlys.

Is lawful commerce being impeded? Well, local fisherman are being chased out of traditional fishing grounds.

Do China's neighbors face coercion and threats of military force? Well, PLA Navy warships loiter in disputed waters, not to mention the newly built outposts on disputed features, which are replete with military ports, runways and facilities.

Are claimants free to seek peaceful, lawful dispute resolution?

China has pulled out the stops in vilifying the Philippines for pursuing arbitration as stipulated in the treaty.

Is someone militarizing this region?

Well, the ASEAN leaders certainly think so, and they are speaking out against behavior that contravenes the 2002 China-ASEAN Declaration.

But isn't the U.S. also militarizing? No. Our military operates as it has for decades, worldwide, in a manner fully consistent with international law. There is no right we exercise that we don't also respect in other countries, including China. Our presence is supported by the coastal states of Southeast Asia.

So what next? Well, we’re looking for a path forward that respects the rights and interests of all claimants.

We think the UNCLOS arbitration case can clarify the maritime entitlements of the Philippines and China in a way that narrows the maritime area that’s in dispute between them.

Legalese aside, this decision could open up space for all claimants to take a deep breath and attempt meaningful discussions of resource management, of joint development.

We hope the decision can serve as a springboard toward a modus vivendi in the South China Sea that can reduce tensions.

Here is the bottom line. This Administration has from the outset worked with determination and in good faith to establish a U.S.-China relationship that is productive and allows for healthy competition.

We rejected early on the notion that strategic rivalry was inevitable with a rising China, and I think we have proven that predictions of America’s decline were (to paraphrase Mark Twain) greatly exaggerated.

We set out – and I believe have largely succeeded – in establishing a framework that fosters practical cooperation on issues that matter to both nations and the world, but that also helps us solve or at least narrow disagreements wherever we can, and manage them peaceably where we cannot.

We have avoided not only the “Thucydides’ trap”, but also the accommodationist trap where accepting China’s “core interests” is the price for trade benefits and global cooperation.

We have consistently welcomed China at the table of global rulemaking, but have tried to make clear China’s commensurate responsibility to cooperate in maintaining the global order. We have tried to make clear its obligation to accept that the rules apply to us all.

The global system will be stronger, the global economy will grow faster, and global challenges will be easier to address if China is pulling its weight and working with us.

China faces many internal challenges – slowing economic growth, overcapacity, local government debt, capital market instability, necessary but disruptive economic reform, a rapidly aging population, pollution, urbanization… And frankly, despite positive messages at the beginning of President Xi’s term, many reform seems to have stalled.

We know this is hard, and complicated. We have our own issues. But the viability of the Chinese economy and the stability of Chinese society is dependent on making hard decisions... good decisions.

As President Obama has said, the United States benefits from a stable, prospering China. We have a stake in their success; we have more to fear from a weak China than from a strong one.

So, effectively addressing these domestic challenges, and doing so in ways that are consistent with universal rights and international law – is going to be important both for the Chinese people and for the world.

I trust that all of you want China to succeed, and I look forward to the results of your hard work today. Thank you.