David Dreier and Bill Mundell: Clean technology cooperation

November 15, 2013

Bold bets on international cooperation are often grounded in similarities. But, sometimes differences can be more powerful drivers of common cause. There is probably no area that illustrates this better than the opportunity for U.S.-China cooperation on clean technology. Both nations should be doing more together now to drive the innovation and commercialization of technologies that keep the planet livable and facilitate the growth needed to meet human needs. Matching China’s needs, resources, scale and incentives with the intellectual, technological and managerial resources of U.S. companies could be a global win. China is accelerating along the learning curve of a toxic environment, facing the full implications of severe health risks and costly cleanup. The challenge is human, economic and political – extending even to civil stability. For us it gets personal, too. We breathe mercury, sulphur oxide, ozone and black carbon that can traverse the Pacific to California in mere days. The ripple effects of environmental degradation anywhere can pack a big security, growth and health punch everywhere.

The U.S. and China diverge on many things, but not on the critical need to develop and implement clean technology. This may be the most important hinge for a new model of public-private partnership between the U.S. and China. That partnership would leverage common interests, but our differences are what would propel it. China has the political ability to focus huge resources quickly – recently pushing its clean tech investment goals from a planned investment of $375 billion through 2015 to $735 billion. China may be better at mustering the patient, long term, strategic approach our environmental challenges require.

Our ultimate goal should be a clean tech revolution that fundamentally alters the way we harness and use energy, consume resources and protect the environment. We have to manage this without crippling growth, destroying U.S. jobs and reversing the decline of poverty in China and elsewhere. America’s innovation capacity, start-up culture and open society were big advantages in the creation of clean tech.

Much of what we helped build is now at risk. Public investment is dwindling, with it the private funding that a longer term public commitment would have secured. The result can be big write offs and shutdowns of promising technologies, job losses and a huge deadweight loss for society. China’s needs and investment reserves can save endangered U.S. companies and game-changing technologies – and even attract new U.S. private capital as China’s long-term partnership provides new investment incentives.

If the opportunity is obvious, so are the obstacles, on both sides. They just aren’t always what you’d think. China tends to over-read U.S. reticence to share technology, and perceive a desire to contain China. Americans often overplay the national security argument. Reality is more nuanced. The inter-agency Committee on Foreign Investment in the United States, or CFIUS, works. It is effective at sifting fact from fiction on national security.

The recent approval of the acquisition of American advanced lithium battery manufacturer A123 by Chinese auto parts maker Wanxiang is a case in point: the sale proceeded after A123’s direct government and military programs were separated out. U.S. companies in China are accustomed to the need to operate with Chinese partners. The reverse isn’t standard. Chinese companies’ often do a poor job navigating our business and political culture. This often inhibits sound business and investment. Recent developments, like negotiations for a bilateral investment treaty, are hopeful signs. These may reflect judgments about China’s long-term evolution toward shared standards.

Our clean tech partnership can be a way, in the here and now, for both countries to instead capitalize on our differences. To make this happen our countries need to build a new facilitating framework for clean tech investment and cooperation. It’s not rocket science – dedicated Chinese government funds meet seasoned U.S.-based venture capitalists with core competency in clean tech. The Chinese acquire controlling interest in individual distressed companies while leaving a minority position for the original investors. Portfolio founders agree to relocate to China as part of the transaction, preserving continuity and allowing the Chinese to “import” the innovation they are so sorely seeking. This would be one of the boldest ways our countries could bet on each other’s success.

Several months ago Henry Kissinger noted that neither the U.S. nor China can solve global problems on their own and that no big global problem can be solved without the U.S. and China working together. When Presidents Xi and Obama met at the Sunnylands Summit in Rancho Mirage, Calif. a few months ago they talked about creating a new model of relationship between major states. Relationships like that cannot be proclaimed. They must be built. Clean tech can be a powerful part of that.

David Dreier is Chairman of the Annenberg-Dreier Commission at Sunnylands. Bill Mundell, a member of the Commission’s Advisory Board, is the producer of a forthcoming documentary on the U.S.-China relationship.

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