In the wake of the global financial crisis, some have dubbed China and the United States the G2, signifying their centrality in global economics and politics. Even so, the relationship between China and the United States is rife with new tensions. Trade and currency challenges persist, complicated by domestic politics and differing approaches to security issues.

In its annual conference to honor the memory of eminent China scholar Michel Oksenberg, Stanford's Shorenstein Asia-Pacific Research Center gathered distinguished policymakers and analysts to examine colliding—and overlapping—interests in U.S.-China relations.

The conference was kicked off by Jeffrey Bader, special assistant to the president and senior director for East Asian Affairs at the National Security Council, who began by exploring the possibility of productive, stable relations amid values that appear to differ vastly. In support of this idea, Bader pointed to successive American presidents, going back to Richard Nixon, who found points of commonality with China. China poses a different challenge today, he argued, than even a decade ago, as its influence has grown alongside its commercial and economic presence. The Obama administration, Bader explained, has sought China's support on key issues and pursued partnership within the context of a broader Asian policy. He concluded by saying that China's rise is not intrinsically incompatible with American interest, but that does not preclude ongoing competition.

A panel chaired by Jean C. Oi, director of the Stanford China Program, next looked at competition and cooperation in the U.S.-China economic relationship. Despite the dangers of speculative bubbles and weakened export markets, the prospects for sustained economic growth in China remain very good, argued Nicholas Lardy, senior fellow at the Peterson Institute for International Economics. Robert Kapp, former president of the U.S.-China Business Council, explored growing challenges facing American business in China, exemplified by recent clashes over Internet censorship. Despite the U.S.-China clash at the Copenhagen global climate conference, Stanford Law Professor Thomas Heller contended that behind the scenes global consensus on this issue has advanced.

Points of tension in the security relationship were the focus of a panel chaired by Amb. Michael H. Armacost, the Shorenstein Distinguished Fellow. China-Taiwan tensions have improved, but Smith College's Steve Goldstein cautioned that Taiwan's policies could shift again, particularly if the promised economic benefits of improved ties do not materialize. China and the United States must likewise manage challenging allies in North Korea and Japan respectively, said Alan Romberg, director of the East Asia Program at the Henry L. Stimson Center. Finally, the United States and China have both congruent and conflicting interests at stake in dealing with the situations in Iran and Pakistan, Stanford's Thomas Fingar, the Oksenberg/Rohlen Distinguished Fellow at FSI, told the gathering.

FSI's 2010 Fall Orientation welcomed faculty, staff, researchers, and friends of the institute to the new academic year and highlighted the institute's diverse research collaborations, educational programs, and policy engagement.  Presentations on display and in live video offered highlights of the current work of FSI centers and programs on many of the most challenging issues of the day. In his welcoming remarks, FSI Director Coit Blacker emphasized the interdisciplinary, cross-campus nature of FSI's work and thanked the FSI community for their many contributions to new knowledge and new approaches to many of the most pressing issues on today's global agenda.

This year's Orientation attracted the largest turnout to date. On continual display was a slide show capturing research of FSI centers and programs in the field and multi-disciplinary work here at the institute, along with highlights of FSI conferences, lectures, and policy endeavors compiled by FSI's Nora Sweeny.

Among the highlights were the following displays:

• A presentation by the Center for International Security and Cooperation on the center's research, writing, policy influence, and Track II Diplomacy
• A display of the many books published by the Walter Shorenstein Asia-Pacific Research Center showing the range of economic, political, and regional issues addressed by APARC scholars, and a photo slideshow of recent events and publications demonstrating the breadth of faculty work bridging the U.S. and Asia
• A presentation by The Europe Center, newly launched and housed jointly in FSI and the Division of International and Comparative Area Studies, featuring major research areas, visiting scholars, publications, and notable events
• A presentation by Stanford Health Policy capturing its multidisciplinary work in medicine, law, business, economics, engineering, and psychology
•  A presentation by the Ford Dorsey Program in International Policy Studies, a two-year interdisciplinary Master's program, which captured the IPS practicum, scholarly concentrations, internships, and careers
  
• A presentation by the Program on Energy and Sustainable Development featuring its work on environmental and policy research employing state of the art methodology to examine such issues as renewable energy, natural gas markets, national oil companies, low-income energy services, and climate change policy
• A presentation by the Program on Food Security and the Environment which addresses hunger, poverty, and environmental degradation. FSE showcased its current research on topics such as solar electrification, food and nutrition security, climate change and conflicts, and evolving U.S. energy policy, as well as its upcoming series on Food Policy, Food Security, and the Environment
• A presentation by the Stanford Program on International and Cross-Cultural Education, which develops multi-disciplinary curriculum materials on international themes reflecting FSI scholarship. Recent educational projects include a three-part series examining U.S.-South Korean relations, Uncovering North Korea, and Inter-Korean Relations; and a collaboration with TeachAIDS, which works to address and overcome the social and cultural challenges related to HIV/AIDS prevention education through materials offered via the internet and CDs in several languages, http://teachaids.org
• A presentation featuring the Stanford Global Gateway, a comprehensive directory of Stanford in the world
• A presentation previewing the vision and mission of the Stanford Center at Peking University, opening Fall 2011

Other highlights included the presentations prepared by Stanford students who worked in the field this past summer. One group worked in China, developing a survey on nutrition and anemia and their effect on learning, with FSI's Scott Rozelle, Director of the Rural Education Action Program. A second group helped Dr. Paul Wise, professor of pediatrics and Stanford Health Policy core faculty member, evaluate prenatal care in the rural highlands of Guatemala.

 

SPRIE Researcher Robert Eberhart spoke on economic growth strategies at the Philippine Development Foundation USA's "PhilDev USA Business Forum" on September 25 in San Jose. The forum, held to discuss solutions to the Philippines' most pressing development problems, was attended by Filipino and Filipino-American professionals and thought leaders, including Philippine President Benigno ("Noynoy") Aquino III and members of the Philippine senate. Eberhart's presentation, "The Philippines in the New Asian Economic Dynamic," was given as part of a session on "Innovation and Entrepreneurship" and is available for download on the SPRIE website.

Hirofumi Takinami, Corporate Affiliates Visiting Fellow from the Ministry of Finance in Japan, participated as a panelist for the event "Recovering from Recession" organized by the Keizai Society's U.S.-Japan Business Forum on September 28, 2010. The other panelists for this event were Daniel I. Okimoto, director-emeritus, Shorenstein APARC, and Keitaro Matsuda, senior vice president, Director of Economic Research for Union Bank. The event covered key issues that lie ahead for the business community trying to recover from this recession. Takinami gave a comparison of government response to the financial crisis in Japan in 1997 and in the United States in 2008, and what implications can be drawn from these experiences. Providing his perspective as a practitioner, he discussed the bailout of the financial institutions to address the financial crises.

Programs to enlist developing countries in climate change mitigation by granting credits for carbon emissions reductions across entire sectors like transportation are quite appealing in principle. However, as researcher Adam Millard-Ball shows in PESD Working Paper #97, "Adverse Selection in an Opt-In Emissions Trading Program: The Case of Sectoral Crediting for Transportation, " any practical implementation of such schemes would entail thorny trade offs between economic efficiency, environmental effectiveness, and political acceptability.

Sectoral crediting mechanisms such as sectoral no-lose targets have been proposed as a way to provide incentives for emission reductions in developing countries as part of an international climate agreement, and scale up carbon trading from the project-level Clean Development Mechanism to the sectoral level.

Countries would generate tradable emission credits (offsets) for reducing emissions in a sector below an agreed crediting baseline. However, large uncertainties in the regulator's predictions of the counterfactual business-as-usual baseline are likely to render sectoral no-lose targets an extremely unattractive mechanism in practice, at least for the transportation case study presented here. Given these uncertainties, the regulator faces a tradeoff between efficiency (setting generous crediting baselines to encourage more countries to opt in) and limiting transfer payments for non-additional offsets (which are generated if the crediting baseline is set above business-as-usual).

The first-best outcome is attainable through setting a generous crediting baseline. However, this comes at the cost of either increased environmental damage (if developed country targets are not adjusted to account for non-additional offsets), or transfers from developed to developing countries that are likely to be too high to be politically feasible (if developed country targets are made more stringent in recognition that many offsets are nonadditional). A more stringent crediting baseline still generates a large proportion of non-additional offsets, but renders sectoral no-lose targets virtually irrelevant as few countries opt in.