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U.S.-China Relations: Current Tensions, Policy Choices

Presider: Leslie H. Gelb, President Emeritus, Council on Foreign Relations
Speaker: Carla A. Hills, Former US Trade Representative, Chairman and CEO of Hills and Company
March 29, 1996
Council on Foreign Relations

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Dr. LESLIE GELB (President, Council on Foreign Relations): Good morning, ladies and gentlemen. My name is Leslie Gelb, President of the Council on Foreign Relations. On behalf of the council on Foreign Relations and the National Committee on US-China Relations, I’d like to welcome you to our fifth Policy Impact Panel. We created these panels to help establish the facts of an important issue and to illuminate policy options. These objectives are very much interrelated, first looking at the situation, the facts—the analysis of how serious the problems are and exactly what the problems are, and folding into the second set of questions dealing with policy alternatives and strategy. The idea is to go back to old-style congressional hearings, systematic questioning and responses, so that we get some answers.

Today’s panel will be chaired by Carla Hills. Ambassador Hills was the US Trade Representative. She is now Chairman and CEO of Hills and Company, and she is also a member of the two sponsoring organizations: the Council on Foreign Relations and the National Committee, US-China Relations. I turn the proceedings over to Ambassador Hills.

Ambassador CARLA A. HILLS (Panel Chair; Former US Trade Representative and Chairman & CEO of Hills and Company): Thank you very much, Dr. Gelb, and welcome to all of you on this cold and somewhat snowy and dreary morning.

Your spirits will be brightened by the exchange that, we think, will follow at this Policy Impact Panel which we’ve entitled US-China Relations: Current Tensions and Policy Choices. And our purpose is to discuss how the United States can simultaneously and effectively pursue its multiple objectives in security, human rights and business interests with the People’s Republic of China.

The panel will hear from three groups of witnesses. Our first group is clearly a very distinguished group of experts, and they will have an hour and a half to first present their views in five to six minutes, followed by questions that we will put to the group after each, as I have the opportunity to address their particular issues.

And in this first group, we will talk about the human rights issues in China and the US policies to further those interests. We will talk about US business interests and how we are proceeding on that front. We will talk about the US security interests and—with the People’s Republic of China, and include the issues of Taiwan and nuclear proliferation. And we will conclude with the global issues of common concern.

During the second session, we will focus on the administration’s policies with the People’s Republic of China. And in the final and third session, we will hear from a member of Congress, a former ambassador to China and an Asian scholar.

Let me begin by briefly introducing our very distinguished panel. At my far right is Barber Conable, who served as President of the World Bank and as a US Representative and currently is Chairman of the National Committee on US-China Relations. To my immediate right is James Woolsey, Partner at Shea & Garnder. He was Director of the Central Intelligence and General Counsel to the US Senate Committee on Armed Services. And to my left is Elizabeth Economy, who is a Fellow of Chinese studies with the Council on Foreign Relations. She has taught at the Jackson School of International Studies and written and briefed extensively on the subject of China.

And with that, I would call upon our first witness, Ms. Sidney Jones, who we are so pleased to have you join us. Ms. Jones is currently Executive Director of the Human Rights Watch/Asia. She has worked with Amnesty International and the Ford Foundation, and she is published extensively. And she will focus her remarks on the human rights situation as it exists in China. Thank you.

Ms. SIDNEY JONES (Executive Director, Human Rights Watch/Asia): Thank you very much.

Let me start by saying that I think there are few in this room that would dispute the fact that China has a poor human rights record. You only have to look at the most recent human rights report at the State Department to get detailed evidence of this problem. The question is how best or even whether to address the problem, as some assume that in a period of political uncertainty and heightened nationalism any outside pressure is just going to make things worse.

Needless to say, I disagree. I think we need to look at human rights issues in China in terms of three categories: first, those that can be best addressed in terms of long-term development; those where a mixture of public advocacy and development assistance is desirable; and those where only sustained public criticism backed by effective pressure is possible. The last category is obviously the most controversial.

Without going through an exhaustive list, I would put some of the shortcomings of China’s legal system in the first category and stress the importance of continuing all programs to strengthen the rule of law through legal education, training and exchange programs. There are important efforts at legal reform going on in China, some of which are aimed at abuses like prolonged administrative detention, and these should be supported and expanded. The Fulbright program, the kind of training that was built into the IPR agreement, the exchanges run by the National Committee on US-China Relations, even things like the USIA Visitors program, are all the kinds of initiatives that need to continue.

In the second category, I would put human rights abuses that affect major social groups inside China, such as the problems we identified in state orphanages and the larger problem of abandoned children in China, or abuses affecting China’s vast floating population. These are areas where public exposure of abuse and greater accountability of public officials are critical, but where international advocacy should be combined with social science research and long-term development assistance strategies, including, in the first case, for example, training of orphanage staff.

The third category is the most sensitive, but also the most urgent: abuses associated with political and religious dissent where immediate action is needed now to ensure that some of China’s most courageous and creative citizens don’t have their lives destroyed by prolonged detention, sometimes accompanied by torture, and to ensure that areas like Tibet are protected from some of the worst aspects of the current wave of nationalism. It was these abuses that the Clinton administration first tried to address in the May 1993 executive order on MFN, where China was asked to show significant progress on humane treatment of prisoners, release and full accounting of political prisoners arrested in connection with pro-democracy activities, protection of Tibet’s religious and cultural heritage, unhindered broadcast into China and implementation of the 1992 memorandum of understanding between China and the US on prison labor.

Unlike the first two categories, where at some level there is recognition by Chinese officials of the gravity of the problem, and this is a recognition that permits some kind of constructive solution to be undertaken, there has been a steady deterioration on all fronts in category three, particularly since the United States delinked most favored nation status in human rights in May of 1994, and this became a signal for the general easing of international pressure on human rights in China.

The most important leaders of China’s human rights and democracy movement remain in detention. Torture and abuse in the various institutions making up the Chinese prison system remain high. Repression in Tibet has steadily increased, particularly since July 1994. Negotiations with the International Committee of the Red Cross have effectively stopped, and China has stalled on its commitment under the 1992 MOU on prison labor.

Whatever value delinkage may have had in terms of the overall US-China relationship, its only impact on the protection of human rights outlined above has been negative. I want to emphasize that the kind of human rights issues addressed by the 1993 executive order are only one aspect of human rights in China, but it’s an aspect that can’t be effectively addressed by a long-term strategy. It involves human rights violations that can’t wait decades to be addressed.

Some have argued that the dissident community is tiny and US-China relations shouldn’t be held hostage to it. But while the number of individuals willing to publicly and peacefully challenge the legitimacy of the Chinese leadership may be small, the government’s response to them has a chilling effect that’s much broader. The detention of Wei Jingsheng may be driven by the same factors that led the Chinese government to react in such a hostile way to the prospect of a democratic government in Taiwan. There’s also Hong Kong after 1997. If the United States and other governments take no action beyond quiet diplomacy now, how will they react when China goes beyond dissolving Ledgco to more far-reaching assaults on the rule of law?

Effective pressure on China in these areas means pressure with teeth. It doesn’t do any good to rely on China’s good faith in making promises on human rights, as some European countries seem to be doing now in the run-up to the debate on China in the UN Human Rights Commission. If China took any steps in intellectual property rights—and it may not have taken enough—it was because there were credible sanctions at the other end.

In the current political climate, there is no way we can expect any progress on issues of political prisoners, arbitrary detention, better human rights monitoring in Tibet in the short term unless there is a clear cost to lack of progress. Public stigmatization is part of that, but another kind of cost could take the form of denying China membership in the club that it wants to be part of rather than, in the case of MFN, taking away something it already has.

There are few such clubs available. None of them are totally desirable, but one of them is the WTO. We agree fully with what Jim Shinn calls conditional engagement, and we don’t believe that imposing sanctions simply out of frustration with China’s behavior on a wide range of issues from human rights to Taiwan is useful. But we do believe that carrots without sticks on human rights issues is as wrongheaded as sticks without carrots.

The options are limited, as I said, but one possibility is having the President certify to Congress that China has made certain concrete human rights improvements, as well as trade reforms, before the US will agree to Chinese access to the WTO. US officials in various contexts have raised this possibility. In December, a senior official said that the Clinton administration was sending the message that while rights were not explicitly part of the WTO negotiations, it was part of the atmosphere.

For those who resist linking trade and human rights, it’s worth noting that China does precisely that. It uses trade as an instrument for achieving non-trade-related goals. It tried to buy the 2000 Olympics by promising contracts and trade deals and temporarily releasing Wei Jingsheng. It offered to finalize a $4 billion deal with Boeing in exchange for a US agreement to freeze IPR sanctions. It appears to be dangling the prospect of a big Airbus deal in front of the French if France breaks the EU consensus on sponsoring a human rights resolution at the UN Human Rights Commission in Geneva now. At the same time, Chinese officials, in some instances, have not hesitated to use human rights violations as a way of furthering commercial goals, and there have been a number of businesspeople arrested in connection with this.

Trade and human rights are already deeply linked, and making access to the WTO contingent on human rights improvement is not going to create a linkage from scratch. It also offers a prospect for multilateral action in that parliaments in some European countries might be persuaded to work on their governments to follow a US model, and I think we need to look at the Li Peng visit to Paris in the next few weeks as a test case of the extent to which popular pressure can be mobilized in France to get Chirac to address human rights concerns in China—an uphill battle, if there ever is one.

Any multilateral action is going to require not only popular pressure within the countries concerned, but forceful and sustained lobbying by the US on its G-7 partners. If there was a credible alternative to economic pressure to bring about improvements in this category of human rights problems, we would back it. At the same time, we do back the more developmental strategies for dealing with other categories of human rights issues. But we haven’t found such an alternative, and we’re convinced that quiet pressure by itself is not going to bring about improvements.

To sum up, the US clearly has an interest in the protection of human rights in China. Strengthening the rule of law and accountability of public officials are goals everyone can agree on, and those goals are served, to some extent, by the process of continued economic reform. But the political repression taking place now is not amenable to long-term development strategies, and the thousands of people who are its victims need help today, not several decades hence. There aren’t many tools available, and we need to try and use the ones we’ve got. Thank you.

Amb. HILLS: Thank you, Ms. Jones. We will voice questions after all of the panelists have had an opportunity to speak. And our next panelist is Dr. Robert Kapp, who is currently President of the US-China Business Council, who was formerly President of the Washington Council on International Trade and Executive Director of the Washington State China Relations Council in Seattle, Washington. Dr. Kapp will comment on US commercial interests.

Dr. ROBERT A. KAPP (President, US-China Business Council): Thank you, Ambassador Hills. I’m delighted to be here. I want to commend the Committee and the Council, both of which I am happy to be a member of, for continuing their fine work in the effort to enhance American public understanding of very complex issues that the United States and China face together.

The US-China Business Council is a group of about 300 American companies, most of them quite well-established in their work with China. I speak today offering my own views and not as the spokesperson for a consensus—a formal consensus by my council.

I’m going to talk just for a moment about broad business trends over the last year or so, and then turn to what I think are broader and more important issues for this section of the program. And in the question-and-answer, we can come back to facts and figures, if you wish.

Basically, in the last year, the Chinese economy has continued to grow very rapidly, but at a more stable and sedate pace than in the breakneck years of ’93 and ’94. GNP growth is down at around 11 percent; employment—inflation at about 14 percent; US exports to China last year grew by approximately 25 percent, making China the largest—or rather the fastest-growing market for US exports among our many trade partners. US investment in China now totals about $25 billion, which is a lot, but pales before the Hong Kong-Macau total of nearly $250 billion. Nevertheless, American companies, especially companies with broad, long-term strategies for global development, have now concluded definitively that China must be an integral part of their corporate strategy and, in fact, will be, in many cases, a kind of almost do-or-die economy with which to deal over the medium to long term.

There have been many cases at successful businesses, both investments and businesses selling to China over the last year, and there have been cases of disappointment, of course. The many Chinese sectors are beginning to open to foreign presence in a way that was not the case before, and that’s to be applauded. Tariffs have been dropped significantly in the last couple of months, and that’s to be applauded. On the other hand, the US business community perceives not only the persistence of many long-term difficulties that are endemic to China’s political and economic system, but also, in some cases, evidence of a growing—you might call it economic nationalism on the Chinese side, which poses new problems for American businesses seeking to do their work there. Those problems, of course, include the familiar areas of intellectual property rights, market access, lack of transparency, the incompleteness of a Western-style legal system and so forth.

Overall, US exports to China, taking the standard Commerce Department rule of thumb of 20,000 jobs per $1 billion in exports, could be said to account for 200,000 or so American jobs. Those rules of thumb, of course, are not perfect, but the point is that in virtually every state and in most industries now in many of the service sectors, China has a very significant and meaningful part of the overall economic fabric of American life. On the import side as well, of course, Chinese imports to the United States offer a wide range of products at affordable or economical prices and appropriate quality that make China a significant provider to American consumers.

Now enough on that. I want to turn, in this short amount of time I have, to a couple of more serious, if you will, points. The first is that we are in the midst of a periodic China convulsion. We’ve had them before. The term `awakening dragon’ has been resurrected from the trash heap of journalistic history and is to be found in practically every magazine and every newspaper today. America goes through these periods of convulsive attention to China. In the past, they have tended to be followed by periods of disattention.

And let me just say that in this period, I think we need to be careful that we not, as a nation, set our minds to showing, in every case, that what we seen in China is a proof of malevolence. Let me offer some thoughts that have been said to me in recent days.

`They’re importing US grain.’ One would think that would be good. `No. It means that it portends Chinese expansionism because they’re going to be a food-hungry giant.’

`They face an energy shortage as the result of their success in raising the GNP of their citizens from destitution to middling development country levels in 20 years.’ Good news that they’re raising their citizens’ livelihoods? `No. It portends Chinese expansionism because they’re going to be energy short and they’re going to go looking outside of their borders for supplies of energy.’

`They grapple uncertainly with the fate of state owned industrial behemoths bequeathed to them by the Maoist, Stalinist inheritance, and they redis—resist shutdowns or privatizations that might throw 100 million people out of work.’ Interpretation: `They’re turning their backs on modernization.’

`They permit people to become wealthy by hard work or by shadier means, and income disparities grow as state-mandated egalitarianism wanes’—a hallowed shibboleth of many in American political circles, that it should wane. The interpretation: `The regime is creating social privileges on the shoulders of the immiserated.’ And so on.

`A vast schema of laws has been promulgated at the central level, and more will follow. Chinese parliamentarians and legal specialists come to the United States and other advanced economies on study missions practically weekly, examining how we have approached central issues of property rights, investments regulation, social insurance and the like.’ Interpretation: `They’re either trying to steal our secrets,’ or `They just pass laws but don’t enforce them.’

`They relinquished a totalitarian power to force citizens to remain fixed in geographic place, unable to move or to search for greater opportunities, and 100 million people leave the poverty of the farms’—remember that in the United States all but 5 percent of the population has long since left the farm—`to look for opportunities in cities far from home.’ Interpretation: `China has created an army of homeless.’

In other words, I think we’re at at a time in the national dialogue when, if we choose to and if we set our minds to it, anything that we see in China can be interpreted in a negative if not menacing light, and I think that the nation will not be served by that.

The simpler question that I ask today, that I asked two years ago when I first came to Washington to work with the Council, that I believe the United States should be asking—is not, `What should the United States be doing to China in order to compel China to do what we think they ought to do?’ particularly in their domestic affairs, but rather, `Under what conditions will China most likely evolve in directions most compatible with US hopes and values?’ This is the central question, and I think the answer for most of us is to be found—we hope will be found in an encouragement and an enhancement of US contact with China—the word `engagement’ doesn’t translate well into Chinese and I try to avoid using it; it has military connotations to it—but contact with China and true interchange with the PRC.

A couple of other points about the broad framework within which we conduct this annual debate. Number one, China is never going to provide foreign countries the satisfaction of doing what other countries tell it to do, and making clear that it has done so because other countries have told it to do so. I mean, who can look back to China, since 1978, and not conclude that in a great many ways the People’s Republic of China, coming out of the chaos and the violence and unbridled human rights anarchy of the cultural revolution and the political frenzy of the cultural revolution, has moved in directions that most Americans would applaud and consider progressive despite the fits and starts and the two steps forward and the one steps back?

But we are kidding ourselves if, in our own domestic political dialogue, we assume that by taking policy measures here, whether they be legislative or executive, and announcing them to China and the world that we will find the Chinese doing what we want and telling us that they did it because we want them to. They may take the steps we want, but we’re kidding ourselves if we expect that we’re going to be able to bank that progress and go back to the voters or go back to the media and say, `You see? They did it because we told them to.’

The China field is a little like the man snapping his fingers to keep the elephants away. When told that there are no elephants for 10,000 miles, the man says, `You see? It really works.’ All of us seek, in one way or another, to claim that our views or our views conveyed to China have been the decisive views that have compelled China or induced China to behave in ways that we would like to see them behave—the Chinese. And I think, frankly, that is a kind of a lost cause.

A couple of other points before I stop on issues relating to trade. One of the issues which is obviously going to be controversial this year, and perhaps in the future, is the rising merchandise trade deficit between the United States and China in which China sells more goods by value to the United States than we do to China. It is true that there is a merchandise trade deficit and that it has increased in recent years. It is, however, in my view and the view of others whom my council respects very much, not true that the deficit is what US government figures crack it up to be. The simplest reason for that is that many of the products that are produced in China move to the United States through Hong Kong and they are booked as Chinese exports to the United States even when value is added in Hong Kong, whereas when we ship goods to China through Hong Kong, those are exports from the United States to Hong Kong. They don’t count as exports to China.

The second point about the trade deficit is that the United States’ ability to export to China is significantly impaired by US regulations, some of them in the form of sanctions, which prevent the US from conducting exports of range of valuable materials and products which the Chinese want and would very likely acquire from the United States if we were permitted—if American businesses were permitted to export them. And we need to recognize that we can’t have it both ways, in complaining of the rising merchandise trade deficit while failing to see that US export prohibitions, in some cases, play a role in that.

Beyond that, of course, there are market barriers in China—lots of them. It is a difficult market to enter, a difficult market in which to compete. To the extent that those fall within the purview of American trade law, there are times when the power of the US government, through the trade bureaucracy, needs to be invoked and is.

On WTO, yes, a commercially acceptable agreement is required. The Chinese themselves are giving strong signals now that they’re prepared to wait a while; that it’s not that urgent; that they don’t really think that the United States is going to make any breakthroughs this year and that they don’t think they will either. But one thing to remember about the WTO accession is that for normal WTO members, a fact, a given of membership in the World Trade Organization is permanent, unconditional, most favored nation treatment.

I call MFN `MFNNST’—or most favored nation, no special treatment—to remind people who are not close to this subject of the fact that most favored nation treatment doesn’t mean a special favor given to only one country; it is the kind of treatment that virtually all countries give each other and the United States gives to all but six or eight pariah countries around the world. But under the WTO, if you’re a member, you get permanent, unconditional MFN.

In the American case, thanks to American law—namely, the Jackson-Vanik amendment to the Trade Act of ’74—we’ve already said to the Chinese, `Even if you jump through the hoops and do everything we tell you to do to get into WTO, we the United States are not going to grant you permanent, unconditional MFN because we’ve got a domestic law that says we’ve got to go through the annual review.’ And it’s my personal view, which will not be shared by all in the room, that the Jackson-Vanik amendment, which was aimed at Soviet Jewish immigration and which is focused in its wording on the permission to emigrate, is essentially irrelevant to the issue of US-China trade relations and should be put out of the way.

On Tiananmen and other sanctions—it’s a tough issue. We all know the damage that Tiananmen did and has done to US-China relations, and we all share the shock and dismay that we remember so vividly from 1989. Let me, however, offer a couple of points as relates to Tiananmen sanctions and US trade with China.

You know, to the great credit of the people of Taiwan, the tragedy of 1947 in which the Nationalist army killed 18,000 Tiawanese, primarily people of higher education, and decapitated at one stroke the intellectual elite the indigenous intellectual elite of Taiwan has finally been brought to light, and one can only give credit to Lee Teng-hui and his party and to the people of Taiwan for discussing this so openly 45 years later. The Kwanji massacre in Korea is coming to light after 16 years. A Thai massacre of a few years ago has never received serious attention in the United States. The Mexico City massacre of 1968 disappeared into the mists of history and so on. I’m concerned, in a way, that as terrible as the Tiananmen issue was, the United States has to look to some of its consistencies in its approach to that.

So for all its fits and starts, we believe the trade and economic contact with China has been and continues to be the strongest and most positive element in a fragile and difficult relationship. American companies are not missionaries of the American way and they should not be, but they are dignified representatives of American attitudes and assumptions. They learn from their Chinese counterparts and hosts, and the Chinese learn from them. They struggle with a difficult cultural, political and material environment, and they learn to adapt their assumptions and operating methods to Chinese reality. They scratch their heads in amazement at the depictions of China that most often make the headlines in the TV news in the United States.

Some of their people thrive in China and believe that they are participating in one of the great social transformations of human history. Others throw up their hands in exasperation and frustration and return home in a year or less. The best and most successful of them learn patience and humility right away, realizing that no matter how brilliantly successful they have been on their stateside careers or even in earlier overseas assignments, China is larger and heavier than they and their companies are, and that their progress and success in China will be measured in inches, not miles; decades, not days. Thank you.

Amb. HILLS: Thank you, Dr. Kapp. Our next witness is Ambassador Paul Wolfowitz. Delighted to have you here. Ambassador Wolfowitz is Dean of the Nitze School of Advanced International Studies at Johns Hopkins, former Ambassador to Indonesia, and he’s served in a number of important posts in both State and Defense and written extensively. We’re pleased to have you give an overview of US security relations with China.

Ambassador PAUL D. WOLFOWITZ (Dean, Paul H. Nitze School of Advanced International Studies, Johns Hopkins University and Former Assistant Secretary of State for East Asian and Pacific Affairs): Thank you, Ambassador Hills, and I know you don’t want to waste time on kudos, but let me just pass one to the Council and the Committee for this effort to shed some light on an extremely important subject on which there is, perhaps, a little too much heat at times.

I’ve been asked to talk about the security aspects of our relationship. And the first point I would like to make may not sound like a security point, but I believe that the democratic elections in Taiwan that we’ve just witnessed are an event of major strategic importance in East Asia and one that we should very much welcome. Why is that? I would say it’s so because, particularly, I believe that the prospects of China itself developing peaceful relations with the rest of the world will be much greater if China moves toward democracy. And I believe the development of democracy in Taiwan is a very helpful example for other Chinese societies, particularly the biggest one.

Just as the success of economic development in Taiwan and Singapore and Hong Kong, I believe, had a powerful effect in China, I think successful political development in other Chinese societies can be a constructive force. And in this respect, I think issues of human rights and democracy are of enormous importance, not just from a humanitarian point of view but a strategic importance. However, in my view, this administration’s approach has erred in several ways: first, by overestimating our influence on the course of events in China; secondly, by raising issues in ways that have often been counterproductive; and third, by allowing this issue at times to dominate all other aspects of the relationship, including some that I think at times have been more important.

And while our influence over the larger course of democratic development in China is limited, and I think it will be greater if we recognize those limitations, we have a very important role to play in protecting the continued evolution of democracy in Taiwan. By doing that, we can also do a lot to preserve peace in the Taiwan Strait, to give Taiwan the confidence that it needs to deal with China in a positive way, as it has done in the past and it hopefully is beginning to do again now, and to keep the door open to an eventual peaceful unification.

Second point I would like to make concerns China’s future as a military superpower. There are many reasons—almost unnecessary to state them—why our relationship with China is of such importance. The economic aspects that Bob Kapp just talked about, obviously, would probably stand at the top of a current list. But in terms of long-term peace and security of the Pacific region—indeed, of the world—perhaps nothing is more important than the growth of Chinese military capabilities. But I think one has to put a very strong emphasis on China as a prospective military superpower. It is not a military superpower today. I think it is clearly on the way to becoming one. And those two facts we have to deal with.

One could try to talk about the level of the Chinese defense budget, but the minute you do, with or without classified numbers, you get into an area of almost hopeless controversy and uncertainty. You could take Chinese official figures which could go as low as $6 billion, or you could take serious observers who have produced estimates as high as $140 billion, which would indeed make it one of the largest defense budgets in the world. Given that uncertainty, it’s equally uncertain at what rate the Chinese military is growing. Again, from the official figures, you could claim that the Chinese defense budget has been flat or even declining in real terms, a contention which I would find hard to credit. Indeed, I find Chinese official figures hard to credit on this point, let me say.

On the other hand, you could reasonably assume that it’s growing as fast as the Chinese economy or even faster, which, of course, would mean real growth of 10 percent a year and a doubling in six or seven years. But this emphasizes, I think, the importance of working cooperatively with the Chinese to develop greater transparency about their military activities and their military development. When one looks at Chinese military development, one is reminded of trying to measure it of the difficulties we had in earlier years measuring Soviet military capabilities. I think we had a lot of progress even with the old Soviet Union in getting greater transparency about military activities. I think it would be a very constructive step with China.

But if one stands back from the numbers, I would make two points. First, it’s a mistake to exaggerate China’s current military capabilities. It starts from a low base. It is a heavily manpower-intensive military with very low level of modernization. Its main capabilities are on its own territory or immediately adjacent land territory. Its ability to project power is extremely limited.

The second thing, though, I would say is that it’s a mistake to assume anything other than that at present trends China will become a military superpower sometime in the next 15 to 25 years. Now for Americans, that may seem much too long to think about. For the Chinese, that’s just a very brief moment in history.

I think this underscores the importance of developing a relationship with China during this period in which China becomes a support and not a threat—regionally, to the peace and stability of the Pacific region, and globally, as a responsible member of the international community—particularly with respect to the issue of sales of weapons and military technology.

The third point I would like to make is that our security relationship with China includes very important elements of cooperation, as well as elements of conflict. Of these, I think none is more important right now than the issue of peace and stability on the Korean peninsula. Indeed, whatever anxieties may have been raised by the recent tension in the Taiwan Strait, I think it remains the fact that the greatest current danger of a major war in Asia remains in Korea. And despite some very important differences of approach and even differences of interest between the United States and China, our two countries share a very large common interest in preventing war in Korea and in promoting a soft landing for a rapidly decaying North Korean regime.

I think this is an example of where the administration’s strategy failed. Taking the MFN issue to an ultimately fruitless confrontation with China in the spring of 1994 was probably a mistake on its own terms—was a mistake on its own terms. It was even more a mistake to do it at the very time when the North Korean problem was approaching a moment of crisis and when Chinese cooperation on North Korea could have been extremely valuable.

I think we need to work with China to move beyond the nuclear agreement, to promote real North-South political reconciliation in Korea and reduction of conventional military forces. China, like Japan, like Russia and, of course, most of all, our South Korean ally, can play a role.

Fourth point I’d like to make concerns the recent Chinese actions in the Taiwan Straits. Those should be and are a matter of very serious concern. Even beyond the threat posed to Taiwan, we have witnessed very disturbing behavior with respect to international sea lanes. There would be potential chaos in the Western Pacific if every country, at will, could shut down sea lanes under the pretext of politically motivated military exercises. It is not tolerable.

With respect to Taiwan specifically, Chinese actions, I think, put a serious question mark over what was declared to be China’s, and I quote, “fundamental policy,” unquote, of peaceful reunification, a policy that formed the basis of positions that the United States affirmed in the 1982 joint communique on arms sales to Taiwan. As the communique says, the United States government appreciates and understands—I think one would have to put it in the past tense after the events of the last few weeks—we understood and appreciated at the time that Chinese policy which provided, and I quote, “favorable conditions for the settlement of US-China differences over the question of US arms sales to Taiwan,” unquote. China’s recent behavior marks a disturbing departure from that fundamental policy, and I believe calls for re-examination of certain aspects of the implementation of the 1982 communique.

More specifically, at the time of the communique, the United States said that it would take account of inflation in determining the quantitative level of arms sales to Taiwan. We have never done so. We have reduced the quantitative level year after year in nominal terms, and of course, given inflation, much more in real terms. I think we should take a serious look at taking account of inflation in some form now.

And secondly, I think, given the actions that we’ve seen in recent weeks and months and the threats that have been made, we need to reconsider some of the qualitative limits we’ve imposed on ourselves, with respect particularly to the systems that could assist in countering blockade or systems that could assist in defending against ballistic missiles.

But let me emphasize the point is not in any way to create a Taiwanese military threat to China or politically to encourage unilateral Taiwanese moves toward independence. To the contrary, a more secure Taiwan—a Taiwan that is secure that its existing liberties will be preserved—is a Taiwan that will be more capable of dealing openly with China and moving toward a peaceful resolution of their differences.

I think in this recent crisis, the United States belatedly but successfully demonstrated resolve, a resolve that was important and welcome throughout Asia. I believe we have learned the mistake of the policy of strategic ambiguity, and I hope that the Chinese have learned a lesson from relying on those statements. I think China itself is going to find that it will pay a price for its recent actions, to begin with, in a strengthening of US-Japan’s security relationship and indeed in many of our relationships throughout Asia. We need to put this behind us, but we need to put it behind us on a basis of going back to the essential peaceful approach that was underlaid previous policy.

Let me just say very briefly, and we can discuss it more in questions if you like, the very important question of China’s sales of missiles and nuclear- and chemical-related technology to unpleasant countries, and by that I mean particularly Pakistan and Iran. There are problems here. There are problems with respect to Chinese adherence to its commitments under the non-proliferation treaty and the missile technology control regime. There are problems with respect to the enforcement of US law. But beyond the legal problems, there are strategic issues. And in that respect, the two cases, I think, are different, and we should think about the differences.

With Pakistan, our concerns—which are substantial—mainly focus on the issue of stability in South Asia which, to be fair, is a problem not caused only by Pakistan but to a significant extent by India’s own nuclear program, and a secondary concern about possible Pakistani exports. With Iran, I believe our concerns are much more fundamental. We’re talking about a country that is ultimately more dangerous—or at least, with its present regime, a regime that has hostile intentions toward the entire Persian Gulf and, indeed, toward the West, in general. I believe that as important as it is to emphasize adherence to treaties and adherence to law, I think at times our approach becomes too legalistic; legalistic at the expense of engaging China on a strategic discussion about why these actions have a broader destabilizing effect and strategically lacking in our effort to enlist other countries.

If I had to make one single point on this issue, it would be that we will make much more progress, I think, in curbing disturbing Chinese behavior here if we can find a way to approach this issue multilaterally and not simply on a bilateral US-Chinese basis.

Finally, let me just conclude, coming back to the human rights issue, which I know is not in the security portfolio, but I think it is very important to stress my view that as important as the human rights issue is—and I hope I’ve made that clear—I think MFN is the wrong instrument for promoting human rights. It’s wrong in part—but this is not the main point—because it hurts American interests, it hurts American business, and indeed, that is one of the reasons ultimately I suppose why the administration backed off. But it’s wrong from an even more serious point of view because it hurts the Chinese private sector, a private sector whose growth has been the greatest source of progress on human rights in China. And I agree very much with Bob Kapp. Despite all the setbacks, despite all the horrible treatment of heroic figures like Wei Jingsheng, the human rights situation in China today is substantially better than it was 10 years ago when I visited with Secretary Shultz, and it is light years better than it was 20 years ago.

I think our policy should find a way to raise these individual issues to find tailored sanctions and, probably better, not advertised sanctions—that at least the Chinese know that we mean what we say when we raise them—but not to let it dominate everything in our relationship, and certainly not to pursue it in a way that hurts the very private sector in China that we want to see grow.

Thank you, Madame Chairman.

Amb. HILLS: Thank you, Ambassador. Our final speaker is Dr. Harry Harding, who is Dean of the Elliott School of International Affairs at George Washington University. He is a specialist in Asian affairs with an emphasis on China. He’s written a number of books, all of which have been very well received, including recently “The Fragile Relationship: US-China Since 1972”, which received the outstanding academic book award. We’re delighted to have you, Dr. Harding.

Dr. HARRY HARDING (Dean, Elliott School of International Affairs, George Washington University): Thank you very much, Ambassador Hills. It’s a great honor and a great pleasure for me to appear here this morning.

The organizers of this panel have asked me to identify the major international issues of mutual interest to China and the United States, and then to discuss the prospects for cooperation between our two countries. It’s very easy to answer the first part of the question. China is already playing, or will soon play, a major role in virtually every international issue of interest to the United States.

As the previous speakers have already pointed out, China is central to peace and stability in East Asia, to the successful functioning of the UN Security Council, to the development and implementation of non-proliferation regimes, to the creation of mechanisms for cooperative security, to the operation of regional and global economic institutions, to the global legitimization of international standards of human rights, and to the protection of the world’s international physical environment.

The second question I’ve been given is, unfortunately, much more problematic. Can China and the United States cooperate effectively on these issues? And here the answer is: It depends. It depends on how they define these issues and on whether they can agree on a strategic framework for dealing with them.

What is striking is the very limited conclusions that can be drawn from an analysis of the two countries’ national interests. On the one hand, China and the United States have few intrinsic conflicts of interest. They have no territorial disputes; they’re not near neighbors; their economies are not highly competitive with each other. And yet at the same time, nor do they have intrinsic common interests. They do not, for example, share a common enemy any longer, nor do they share a common culture or ideology. And what this suggests, as Bob Kapp has already implied, is that the future of Sino-American relations will be shaped by the ways in which the leaders and peoples of the two countries define their national interests.

On any of the issues I’ve already mentioned, the two countries could choose to work together or they could define their interests in a more competitive or conflictual manner. To cite but a few examples, in this approach to the international economy, China could choose to adopt a neo-mercantilist policy, demanding access to foreign markets, including the American market, while limiting access to its own. Alternatively, it could choose a more liberal approach, accepting freer access to its own market in exchange for maintaining access to export markets abroad. In its approach to human rights, the United States could choose to criticize every Chinese departure from the democratic ideal and threaten sanctions against these violations of international norms. Alternatively, the United States could choose to regard respect for human rights as a long-term enterprise and could work together with China to develop more humane and responsive governance.

Or, a final example, China could recognize its responsibility to protect the international environment and assign a high priority to environmental protection. Alternatively, it could choose to interpret international environmental regimes as ill-intentioned efforts to slow economic development in countries like China, and thus, to keep them poor and weak.

Thus, the two countries have a choice as to how to handle these critical questions. How can they do so in ways that will promote cooperative behavior? It is now commonly accepted, or at least increasingly commonly accepted, that the principal objective of US policy toward China should be to ensure that China honors established norms of international behavior. This is meant to reassure Beijing that we are not expecting China to follow unilateral American preferences but rather to adhere to rules and institutions that are universally accepted. Unfortunately, thus far, China’s response to this approach has not been wholly forthcoming. Many Chinese leaders and analysts view this policy as a policy of so-called soft containment, as an attempt to control China’s behavior through diplomatic and legal methods rather than by military or geopolitical means.

Some of them ask bluntly why China should follow any rules that it did not write, especially when it believes that some of those rules, such as those on non-proliferation, trade liberalization and environmental protection, advance the interests of richer and more powerful countries against the poorer and weaker ones. Other Chinese are a bit more accommodating. But they ask what China will get in return for honoring these international rules. If China stops selling M-11 missiles to Pakistan, will the US stop selling F-16s to Taiwan? If China agrees to trade liberalization as the price for admission to the WTO, will the US agree to grant China permanent, unconditional most-favored-nation status? And if China releases a few political prisoners, will the United States refrain from public criticism of China in the UN Commission on Human Rights? In short, China seems to view compliance with international norms not as a matter of automatic obligation, but rather as the occasion for bargaining for quid pro quos.

This presents the United States, and China, in fact, with an important strategic choice. How do we deal with China’s reluctance to accept the principle of automatic compliance with international rules and regimes? Essentially, we have three options. One is to impose sanctions against China for violations of international norms. The problem here is that we find it difficult to find sanctions that would be effective. Minor economic sanctions, especially on the export side, unless commonly applied by all of China’s other major trading partners, would have little effect but to disadvantage American exporters. More powerful economic sanctions, such as the revocation of China’s most-favored-nation status, would drive the Sino-American relationship into confrontation, thus ending much hope that the two countries could cooperate on the global and regional issues I’ve been discussing.

The second strategy is to find positive incentives—to reward China for compliance. To some degree, it may be possible to do something that China wants or to stop doing something China doesn’t like in exchange for cooperative Chinese behavior on major issues. And yet this approach will be difficult for Americans to accept. For one thing, it accepts China’s position, outlined above, that adherence to international norms is a subject for negotiation rather than a matter of automatic compliance.

Thirdly, we could try to persuade China that adherence to international norms is in China’s own interest since all countries benefit from widespread acceptance of these universal standards. This is the most desirable strategy, but in some ways would be the most difficult. It would require us to spell out more clearly what obligations we want China to accept and why those obligations will, in the end, benefit China. We will have to convince Beijing that we do not have the hidden intention of keeping China weak, preventing its development or obstructing its emergence as a major power.

And furthermore, we will have to accept China’s right to participate in the drafting of new rules and even in the redrafting of old ones. China’s integration into the international community, in other words, will necessarily involve the transformation of the rules of that community, as well as the alteration of China’s present mode of behavior.

In short, although it is necessary and appropriate to say that China must accept international standards of behavior, it is not sufficient. We must decide how to deal with China’s skeptical response. Some combination of negative sanctions and positive incentives will doubtless be required. But in addition, we will have to devote more effort to persuading China of the legitimacy of those international norms, the benefits China will achieve from honoring them, and our good intentions in upholding them. If both China and the US can abide by those norms, and if they can, therefore, define their national interests accordingly, then—and I might add only then—will the prospects for cooperation on the full range of international issues facing our two countries will be greatly enhanced.

Thank you.

Amb. HILLS: Thank you very much. Barber Conable will have the first question.

Hon. BARBER CONABLE Jr. (Former US Representative and World Bank President; Chairman, National Committee on US-China Relations): All right. Thank you very much, Madame Chairman.

I, of course, am affected by my experience and am interested in a relationship between the bilateral and the multilateral. It seems to me that we have what could be described as a rather excessively bilateral relationship with China at this point. And on issues like human rights, Ms. Jones, it seems to me that China’s very bad human rights record generally is not an insult to Americans but an insult to humanity. And one of the questions is: How do we enlist a multilateral resolution of this issue? Dr. Harding has talked about the problem of China negotiating its entry into multilateral arrangements. And yet, isn’t that what should be generally our goal if we are to have a China that is a comfortable cohabitor in this world?

I’m particularly interested in the relationship of this question to the WTO, where it seems that the sooner we can get China into a framework of trade, where other countries would also be interested in maintaining a good trading relationship with China—the sooner we can do that, the better off we will be. And yet we seem to be the sole arbiter of China’s entry into the WTO. I’d just like to have some further discussion of this, and let’s start with Ms. Jones there.

Ms. JONES: Thank you. Let me start by saying that I also agree that any multilateral approach on human rights is preferable to a unilateral approach; there’s no question about that. But I also think that the United States needs to play a leading role in putting that multilateral coalition together. And I’m not always convinced that we’re putting as much resources into building that coalition as we could. For example, last year, before the United Nations Human Rights Commission meeting, there were people from the administration out lobbying various members of the commission as early as October, November, when the commission was going to meet in March. This year the lobbying started much later, and it was clear that there wasn’t as much heart in the effort as there was before. This happens on a wide range of things.

If you’re going to have any kind of multilateral trading pressure, then the lobbying is clearly going to be more intense than you would need if you were just going to get a resolution at the United Nations Commission in Geneva, which means you’re going to have to devote as much time and resources into building that coalition as you would have to do for something like getting a major resolution at the Security Council or working on multilateral cooperation in the security sphere more generally.

In the case of the WTO, I think what we’re asking for is not that the rules on access to the WTO be changed, but that if we require some kind of presidential certification by Congress, for example, that could also become a model for trying to get NGOs and other non-governmental organizations to put pressure on parliaments in Germany or in France or in Europe to try and get grass-roots pressure to bring about the kind of multilateral coalition that governments themselves don’t particularly want to be part of. And I think it’s our responsibility, but it’s also the responsibility of members of Congress to try and ensure that those ties take place.

Hon. CONABLE: Mm-hmm. All right. It does seem to me that we underestimate our potential as an influence on multilateral resolutions generally.

Ms. JONES: But can I just say that if we take one or two concrete measures that we want to see brought about—and one of those has always been access by the International Committee of the Red Cross to Chinese prisons—if there’s any one measure that would improve the treatment of some of the people in jail in China, that’s it. It’s an issue which there isn’t any necessary knee-jerk reaction against, from countries like Japan or Europe, and what it would require is some kind of systematic lobbying effort to go around and get that pressure on China in some form or another, and it doesn’t happen. And I’m not sure why it doesn’t happen.

Hon. CONABLE: But—does any other panelist want to comment?

Amb. WOLFOWITZ: Yeah. I’d like to comment. I agree with what Sidney Jones said, and one reason it doesn’t happen or wasn’t happening until recently is because at the same time that we said we cared about democracy and human rights in China, we dealt with the largest democracy in Asia, namely Japan, as though the only thing that mattered was the sale of auto parts. I’m very much in favor of selling auto parts in Japan, but I think the notion that we have no strategic relationship with Japan now that the Cold War is over is absolute nonsense. And I beginning to think the administration is learning that lesson, and I think Secretary Perry’s trip and the president’s trip may begin to correct it a little.

But you’ve got to approach the relationship with your important allies as covering these things across the board. And you’re absolutely right; these issues should be raised. When the Japanese care about something—they cared about Chinese nuclear testing—they found a way to send a message without dragging in trade issues. And I think—by the way, I think the WTO is not going to be an instrument for human rights—I mean, precisely because trade is not a good instrument for sanctioning with respect to human rights, so it’s going to depend much more on dealing with countries like Japan that are giving China huge freebies, and they can withhold some of those if China misbehaves.

Amb. HILLS: Ambassador Woolsey.

Hon. R. JAMES WOOLSEY (Former Director, Central Intelligence; Partner, Shea & Gardner): I’d like to return to Paul Wolfowitz’s opening point about the importance of the elections in Taiwan as a strategic event, and ask his and perhaps some of the other panelists’ thoughts about the Chinese response to those elections—sort of pre-emptive response—and the American strategic response to China’s missile firings and other recent actions.

First of all, until President Li visited, I believe, your and Barber Conable’s alma mater—and his—late last spring, relations between Taiwan and the mainland seemed to be going reasonably well. People were exchanging 10 points and 12 points and talking, at least indirectly. Do I surmise from your comments that you don’t really believe that it was some propensity on the mainland to be hostile to the Ivy League, to land grant colleges or perhaps to the music of “Far Above Kyoga’s Waters,” but rather the forthcoming elections...

Hon. CONABLE: It’s pronounced `KAYoga.’

Hon. WOOLSEY: KAYoga—I’m sorry. I didn’t mean to—those of us from other parts of the country have trouble with that. I’m sorry, Barber.

If it was not really the forthcoming elections in Taiwan which were such a great affront on the mainland and led to the Chinese reaction—or in other words, do you believe that the responses of last summer—the missile firings of last summer and the missile firings of a few weeks ago—were really occasioned by actions that President Li was taking in international affairs to perhaps enhance Taiwan’s international position, the attempt to enter the United Nations and so on, or were they principally occasioned by China’s concern about a real democracy coming into existence in Taiwan?

Amb. WOLFOWITZ: First, I guess I should point out that not only Secretary Woolsey but Ambassador Hills are graduates of what we learned to call the Cornell of the West, in Stanford, I believe, we’ll get this one straight.

Hon. WOOLSEY: Far above Pacifics.

Amb. WOLFOWITZ: I think one of the problems is this is a heavily overdetermined event. There were many things propelling the Chinese in this direction, not least of which is the fact that they’re in the course of a presidential election of their own, except there are no rules for it; there’s no timetable for it; but they are competing with one another for leadership and power, and any issue that comes forward that can be seized in that way—it’s a very sensitive time.

I think we’ve gone a bit too far in blaming ourselves, although I think we mishandled the visa issue. I think if we had said straightforwardly from the beginning, `This is an unofficial visit. He’s going to his alma mater.’ As a matter of fact, if you want a calmed-down, pro-independent sentiment in Taiwan, give them a little bit of dignity. We got ourselves in this box in part because we wouldn’t let him get off his airplane in Hawaii when he was passing through. We don’t have to treat them like an independent country—that’s part of the deal with China—but we can treat them with some respect and some dignity, and when we don’t pay a price internally.

I think that whole thing could have been handled—I think there’s a lot of silliness about Lee Teng-hui promoting independence in Taiwan. In any case, we can make it very clear Taiwan’s not going to get in the United Nations if China, much less the United States, opposes it. Taiwan’s not going to be recognized as an independent country if the major powers of the world say, `It’s contrary to our policy.’

They are afraid, I think, to some extent, that democracy in Taiwan will lead to these international issues that cause them problems. But I do believe, although it’s denied, that they are simply afraid of democracy. And you can’t explain what they’re doing in Hong Kong in terms of Lee Teng-hui visiting Cornell. There is a democratic infection, from their point of view, which they’re trying to insulate and keep out of China.

I think we should recognize this makes the whole issue of human rights extremely delicate, and while I’d like to see democracy grow and spread, I don’t think we’ll help our cause by suggesting we’re hoping for the imminent collapse of the regime there. I think gradual evolution—of course, they label peaceful evolution as a problem—I think gradual evolution is what we should go for.

Hon. WOOLSEY: Could I follow with one question?

Amb. HILLS: Certainly.

Hon. WOOLSEY: Dr. Harding gave us an excellent taxonomy of sanctions and the problems with those, positive incentives, the problems with trying to persuade China that compliance is in its own interests with these various international agreements and regimes. You had a very interesting thought which was sort of outside that envelope, which was that perhaps in light of what has happened, particularly with the recent missile launches, the terms of our obligations under the ’82 communique should be reexamined with respect to qualitative sales to Taiwan, and you mentioned particularly ballistic missile defense. I’d be interested in your views and if you’d expand on that.

Amb. WOLFOWITZ: To be can