Navigating Through US-China Policy
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University of Denver Digital Commons @ DU Electronic Theses and Dissertations Graduate Studies 1-1-2010 Navigating Through U.S.-China Policy: An Investigation of China National Off-Shore Oil Corporation's Proposed Acquisition of Unocal Corporation and How Domestic Politics Plays a Role in Balancing U.S. Trade Policy with National Security Policy Vicki Lynn Spencer University of Denver Follow this and additional works at: https://digitalcommons.du.edu/etd Part of the International Relations Commons, and the International Trade Law Commons Recommended Citation Spencer, Vicki Lynn, "Navigating Through U.S.-China Policy: An Investigation of China National Off-Shore Oil Corporation's Proposed Acquisition of Unocal Corporation and How Domestic Politics Plays a Role in Balancing U.S. Trade Policy with National Security Policy" (2010). Electronic Theses and Dissertations. 1385. https://digitalcommons.du.edu/etd/1385 This Dissertation is brought to you for free and open access by the Graduate Studies at Digital Commons @ DU. It has been accepted for inclusion in Electronic Theses and Dissertations by an authorized administrator of Digital Commons @ DU. For more information, please contact [email protected],[email protected]. NAVIGATING THROUGH U.S.-CHINA POLICY: An Investigation of China National Off-Shore Oil Corporation’s Proposed Acquisition of Unocal Corporation and How Domestic Politics Plays a Role in Balancing U.S. Trade Policy with National Security Policy __________ A Dissertation Presented to The Faculty of the Korbel School of International Studies University of Denver __________ In Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy __________ by Vicki L. Spencer June 2010 Advisor: Professor Suisheng (Sam) Zhao ©Copyright by Vicki L. Spencer 2010 All Rights Reserved Author: Vicki L. Spencer Title: Navigating Through U.S.-China Policy: An Investigation of China National Off- Shore Oil Corporation’s Proposed Acquisition of Unocal Corporation and How Domestic Politics Plays a Role in Balancing U.S. Trade Policy with National Security Policy Advisor: Sui-sheng (“Sam”) Zhao Degree Date: June 2010 ABSTRACT When Chinese National Offshore Oil Corporation, Ltd. ( CNOOC) attempted to buy American-owned Unocal Corporation, it unleashed a “perfect storm” in Washington. Members of Congress immediately called upon President Bush to invoke his Exon-Florio authority to prevent the transaction. After the president claimed action would be premature, Congress quickly coalesced to block the deal. The Chinese expressed surprise at the political backlash and ultimately CNOOC was forced to withdraw its bid. The purpose of this study is to explain the fervor that arose over CNOOC’s proposed acquisition of Unocal. The study builds upon the theoretical approach of new institutionalism which emerged in response to the shortcomings of theories that diminished the importance of political values and collective choice in foreign policy making. Since institutionalism emphasizes the significance of history and assumes the infusion of societal values over time, the study applies historical research methodology to the case study. Sources of data include the U.S. Constitution, statutes, judicial opinions, congressional hearings and reports, White House papers, administrative rules, and published biographies. Secondary sources include the media, journals, and think-tank publications. ii The study examines how the president and Congress rely upon formal rules for making policy, and how these rules reinforce the status quo and create obstacles for change. Over the years, the president has acquired greater foreign policy making authority which has upset the balance of power between the two decision-making bodies. Since policy making is incremental, members of Congress have needed to be resourceful in devising informal mechanisms for change. One such mechanism is politicization of an event to raise public awareness, elevate an issue to the top of the policy agenda, and build coalitions essential to passing legislation. The research finds that competition between the president and Congress over foreign and national security policy authority is played out in Washington and is reflected in policy outcomes. In the Unocal acquisition case, politicization allowed members of Congress to advance their agenda to tighten up the president’s process for reviewing foreign acquisitions and to give Congress greater oversight authority. This study is important and timely because China has become a major player in the global economy and is driving the global search for new and reliable sources of energy. As China extends its reach, competition with the U.S. and other major energy importers will increase. Although competition is considered essential for a healthy capitalist economy, other factors influence whether competition will have a positive or negative impact on competitors. One of these factors is the perception of how China’s emergence in the global economy will affect U.S. national security. The future of U.S.- China relations will depend upon the ability of our political institutions to achieve balance and compromise in energy, foreign trade, and national security policies. iii TABLE OF CONTENTS CHAPTER ONE: INTRODUCTION ..............................................................................1 I. Literature Review ........................................................................................................10 A. Realism.............................................................................................................10 B. New Institutionalism .......................................................................................14 II. Theoretical Framework ..............................................................................................21 A. An Integrated Theoretical Approach to U.S.-China Foreign Policy .................21 B. Methodology ...................................................................................................26 III. Conclusion ...............................................................................................................28 CHAPTER TWO: THE UNOCAL PUZZLE ...............................................................32 I. China’s Development Strategy ....................................................................................32 A. Entering the Global Economy ...........................................................................32 B. Producing Energy for Economic Growth .........................................................38 C. Restructuring the Energy Industry to Support Economic Growth ..................47 D. Acquiring Foreign Energy Supplies to Support Economic Growth ...............52 II. Conclusion ................................................................................................................55 CHAPTER THREE: INSTITUTIONALIZATION OF THE PRESIDENCY AND CONGRESS......................................................................................................................63 I. Introduction .................................................................................................................63 II. Institutionalization and Policy Making ......................................................................74 A. Institutionalization of Presidential Powers .......................................................75 B. George W. Bush’s Presidency ..........................................................................89 C. Institutionalization of Legislative Powers .....................................................122 D. The 109 th Congress .......................................................................................140 III. Institutional Changes Triggered by September 11, 2001........................................144 A. Changes in the Relationship Between the President and Congress ................144 B. Changes in U.S.-China Foreign Policy ..........................................................153 IV. Conclusion ..............................................................................................................169 iv CHAPTER FOUR: EFFECTUATING CHANGE IN STATUTORY LAW THROUGH POLITICIZATION OF CNOOC’S BID TO ACQUIRE UNOCAL ..174 I. Introduction ...............................................................................................................174 II. Laws Governing Mergers, Acquisitions, and Takeovers .........................................177 A. Domestic Mergers, Acquisitions, and Takeovers ...........................................178 B. Foreign Mergers, Acquisitions, and Takeovers .............................................181 C. Legislative History of Exon-Florio Amendment ...........................................184 D. Legislative Concerns About Presidential Implementation of Exon-Florio .....194 III. Post 9/11 Implementation of Exon-Florio ..............................................................216 IV. The Unocal Acquisition Case .................................................................................220 A. FTC Review of ChevronTexaco’s Proposed Merger ......................................220 B. ChevronTexaco Corporate Obligations to Shareholders ................................222 C. CNOOC’s Proposed Acquisition of Unocal ...................................................225 D. Bills Introduced and Debated in the 109 th Congress. ......................................230 E. How Politicization of CNOOC Bid Helped Expedite Exon-Florio Reform