[Senate Hearing 106-232]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 106-232


 
                 A REEXAMINATION OF U.S.-CHINA RELATIONS

=======================================================================

                                HEARINGS

                               BEFORE THE

                       SUBCOMMITTEE ON EAST ASIAN
                          AND PACIFIC AFFAIRS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                     MARCH 23, JULY 1, AND 21, 1999

                               __________

       Printed for the use of the Committee on Foreign Relations

                               

 Available via the World Wide Web: http://www.access.gpo.gov/congress/senate


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 55-888 CC                   WASHINGTON : 1999
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
 Superintendent of Documents, Congressional Sales Office, Washington, DC 20402



                     COMMITTEE ON FOREIGN RELATIONS

                 JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana            JOSEPH R. BIDEN, Jr., Delaware
PAUL COVERDELL, Georgia              PAUL S. SARBANES, Maryland
CHUCK HAGEL, Nebraska                CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon              JOHN F. KERRY, Massachusetts
ROD GRAMS, Minnesota                 RUSSELL D. FEINGOLD, Wisconsin
SAM BROWNBACK, Kansas                PAUL D. WELLSTONE, Minnesota
CRAIG THOMAS, Wyoming                BARBARA BOXER, California
JOHN ASHCROFT, Missouri              ROBERT G. TORRICELLI, New Jersey
BILL FRIST, Tennessee
                   Stephen E. Biegun, Staff Director
                 Edwin K. Hall, Minority Staff Director

                                 ------                                

             SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS

                    CRAIG THOMAS, Wyoming, Chairman
JESSE HELMS, North Carolina          JOHN F. KERRY, Massachusetts
PAUL COVERDELL, Georgia              RUSSELL D. FEINGOLD, Wisconsin
CHUCK HAGEL, Nebraska                PAUL D. WELLSTONE, Minnesota
GORDON H. SMITH, Oregon              ROBERT G. TORRICELLI, New Jersey

                                  (ii)



                            C O N T E N T S

                              ----------                              

                        Tuesday, March 23, 1999
              U.S.-China Policy: A Critical Reexamination

                                                                   Page
Roth, Hon. Stanley O., Assistant Secretary of State for East 
  Asian and Pacific Affairs, Department of State.................     3
Responses of Hon. Stanley O. Roth to additional questions 
  submitted for the record.......................................    20

                         Thursday, July 1, 1999
 Hong Kong Two Years After Reversion: Staying the Course, or Changing 
                                Course?

Cohen, Dr. Jerome A., senior fellow on Asia, Council on Foreign 
  Relations; professor of Chinese Law, New York University Law 
  School; partner, Paul, Weiss, Rifkind, Wharton & Garrison......    55
    Prepared statement of........................................    58
Ng, Margaret, Negoi-Yee, Representative for the Legal Function 
  Constituency, Legislative Council, Hong Kong Special 
  Administration Region, People's Republic of China..............    41
    Prepared statement of........................................    44
Roth, Hon. Stanley O., Assistant Secretary for East Asian and 
  Pacific Affairs, Department of State...........................    27
    Prepared statement of........................................    31
Thomas, Craig, U.S. Senator from Wyoming, prepared statement.....    24
Yates, Stephen J., senior policy analyst, the Heritage 
  Foundation, Washington, DC.....................................    47
    Prepared statement of........................................    50
Human Rights Watch, statement submitted for inclusion in the 
  record.........................................................    70

                        Wednesday, July 21, 1999
                Recent Strains in Taiwan/China Relations

Gong, Dr. Gerrit W., director, Asian Studies, Center for 
  Strategic and International Studies, Washington, DC............   105
    Prepared statement of........................................   107
Helms, Jesse, U.S. Senator from North Carolina, prepared 
  statement......................................................   123
Letter to Senator Thomas from the Taipei Economic and Cultural 
  Representative Office in the United States, which included the 
  following enclosures:..........................................   112
    Responses to questions submitted by Deutsche Welle to Lee 
      Teng-hui, President, Republic of China.
    Explanation on President Lee's remarks in an interview with 
      the Voice of Germany.
    Press release from the Mainland Affairs Council.
Lilley, Hon. James R., director for Asian Policy Studies, 
  American Enterprise Institute, Washington, DC, (includes 
  submissions for the record)....................................    95
Thomas, Craig, U.S. Senator from Wyoming, prepared statement.....    75
Torricelli, Robert G., U.S. Senator from New Jersey, prepared 
  statement......................................................   122
Yates, Stephen J., senior policy analyst, the Heritage 
  Foundation, Washington, DC.....................................    76
    Prepared statement of........................................    78
  

                                 (iii)



              U.S.-CHINA POLICY: A CRITICAL REEXAMINATION

                              ----------                              


                        TUESDAY, MARCH 23, 1999

                           U.S. Senate,    
                 Subcommittee on East Asian
                               and Pacific Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 12:12 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Craig Thomas 
(chairman of the subcommittee) presiding.
    Present: Senator Thomas.
    Senator Thomas. Again, this has been kind of a full day. 
They just completed a hearing here and there will be another, I 
believe, this afternoon. Well, there is another.
    So welcome to all of you and thank you very much for 
coming. Today, the subcommittee meets for the first time in 
what I hope is a series of meetings over the next couple of 
months designed to thoughtfully and critically examine United 
States policy toward the People's Republic of China. The 
remaining hearings will involve people from the private sector.
    Let me start by saying--stating a rather basic philosophy 
that I bring with me to this issue: If you want different 
results, you cannot keep doing the same thing.
    I am concerned that as far as we go with China, we complain 
about a lack of results. And we continue to take basically the 
same approach.
    There have been a number of encouraging developments in 
China in the past year. China has begun to reform its economy, 
is moving the PLA out of the private sector and released a 
small number of political prisoners, signed the Convention of 
Human Rights, greatly increased the number of democratic 
elections taking place at the village level.
    Beijing has, for the most part, avoided interfering in Hong 
Kong affairs and has resumed something of a dialog with Taiwan.
    Despite these improvements, I cannot ignore the fact that 
for every step China has taken forward, it appears also to have 
taken one or two back. A bilateral relationship that 10 months 
ago looked as if improvement was being shown, I believe now we 
have turned a little bit down a rocky road.
    For example, there have been damaging leaks, of course, to 
the Chinese of sensitive U.S. nuclear technology, which has 
enabled them to advance their own nuclear program, or, at least 
allegedly so.
    The PRC has continued the buildup of missiles on the 
coastal provinces facing Taiwan, and has said including Taiwan 
in a U.S. missile defense would be the ``last straw'' in U.S./
PRC relations.
    Beijing apparently still refuses to deal with the Dalai 
Lama to discuss Tibet, despite a series of concessions on His 
Holiness's part.
    There has been a disturbing increase in the last 6 months 
in the crackdown of freedom of expression, and arrests and 
convictions. In addition, the government has shut down 
fledgling pro-democracy organizations and sought to curb 
Internet use and access.
    Despite U.S. requests, the Chinese are still not doing all 
they could, or in their own best interest should, to defuse the 
potential powder keg in North Korea. I discussed this point 
this morning with Ambassador Kartman.
    And despite agreements and promises, large sectors of the 
Chinese economy remain closed to U.S. imports. The result has 
been our biggest bilateral trade deficit ever.
    The administration has had a policy of engagement with 
China now for a number of years. And I have, since I came to 
the Senate, generally supported the concept as the best way to 
effectuate change in China.
    But as a supporter of the concept, I now have to look at 
the facts, review its application and ask what the results have 
been, which areas have shown improvement.
    Such a review shows me that what engagement has gotten us 
lately is a military buildup that seriously threatens Taiwan, a 
veto of the U.N. proposed peacekeeping operations in the 
Balkans, an upswing in the harsh suppression of internationally 
recognized human and political rights, continuing refusal to 
address the question of Tibet, a continuing effort allegedly to 
purchase or steal sensitive computer technology.
    At times, it seems to many members that the White House has 
been more interested in the concept of engagement than in what 
results, if any, the application of that concept is achieving. 
The most glaring and disturbing illustration of that tendency 
may involve the allegation of the leaks lately.
    I believe it is time to take a step back, on both sides of 
the aisle, and give our China policy a long, hard, critical 
look.
    We need to take the concept of engagement and decide what 
needs to be done so that this policy will produce the results 
that we want, that we seek.
    I am not advocating isolating China or shutting off our 
contacts or the dialog. I do not believe that we can bully or 
badger the Chinese into accepting our view of the world as the 
only one that is correct.
    I agree that we need to communicate frankly with Beijing on 
a whole variety of fronts and that because of its size, its 
economy and its importance, we cannot and should not ignore 
them.
    We need to take a long look at our policy, determine if it 
is working, if the results outweigh the effort we put into it. 
We need to look at what we should expect in return.
    So today's hearing is first, I hope, in a series to address 
this topic. And we are going to hold it with the business 
community and human rights groups and others.
    Before I begin, I would like to thank Secretary Roth for 
appearing on such short notice. I know he is fully scheduled 
this week.
    We had so little notice, I have agreed in consultation with 
Senator Kerry to waive the requirement that he submit a 
prepared statement for the record.
    I would also like to note particularly as my colleagues 
come in, that keeping with the wishes of the majority leader, 
this discussion is not focused on the Los Alamos issue.
    That is to be confined to the full committee. So we are 
going to keep our comments in terms of the overall approach to 
policy for China.
    Mr. Secretary, welcome. Thank you. This is going on at the 
same time the policy meetings are in the Senate, but 
nevertheless we wanted to get to it.
    I confess frankly I am planning to go to China next week, 
and so it was important for me to hear from you and to talk 
about these things before we do go.
    So welcome, sir, and go right ahead. And then we can have a 
little dialog.

STATEMENT OF HON. STANLEY O. ROTH, ASSISTANT SECRETARY OF STATE 
    FOR EAST ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE

    Secretary Roth. Thank you very much, Mr. Chairman. I 
particularly thank you for the opportunity to focus on the big 
picture of China policy, rather than any one of the number of 
specific issues that one could focus on. I think that unless 
one does keep one's eye on the big picture, what we're trying 
to accomplish, one risks getting lost in the details.
    I thought I would focus my remarks around four questions, 
and they very much track both your opening statement today and 
your earlier speech on the Senate floor.
    The first issue I want to address is: What are the stakes 
in U.S.-China relations. The second is: What are we trying to 
achieve? The third is: How are we trying to achieve it? And the 
fourth is: Is it working?
    I think that very much correlates with the questions you 
raised. So let me start with the stakes.
    I am almost a little embarrassed to deal with that, given 
your knowledge of the subject matter, but for the purposes of 
the public record, I think the point should be made that the 
stakes are enormous.
    U.S.-China relations will be a key bilateral relationship 
in the next century, with great implications for the peace and 
prosperity not only of the Asia/Pacific region, but of the 
entire world.
    Simply put, we do not have the luxury of not dealing with 
China, a fact which you recognized in your opening statement. 
And interestingly, the Economist, not known for its friendship 
for China, recently made exactly the same point in an 
editorial.
    China's sheer size, the fact that it is a permanent member 
of the Security Council, the fact that it is a member of the 
still relatively exclusive nuclear club, the fact that it is a 
massive and growing economy, the fact that it is an increasing 
diplomatic presence and the fact that it has increasing 
military strength all suggest that, like it or not, we are 
going to have to deal with China. It is not a question of 
engaging or not engaging.
    Now, let me turn to the more important point: What are we 
trying to achieve in this context?
    Our goal is very straightforward. We are trying to 
facilitate China's integration into regional and global 
institutions in order to help China emerge as ``a normal 
country,'' a regular player in the international system.
    Let me make it clear. China has to make the choice. You 
know the historical model for China, China as the middle 
kingdom. This was a China which did not play by the rules, but 
rather a China which tried to make them, which saw itself as 
the center of the world.
    We are working on trying to help China make a different 
choice, to become a responsible international player, one which 
belongs to all the major regional and global institutions and 
which behaves according to those rules, rather than trying to 
make them.
    In the regional arena, you are quite familiar with our 
efforts to get China involved in APEC on the economic side and 
in ARF, the ASEAN Regional Forum, on the security side.
    In the global arena, we focus on how China behaves at the 
United Nations, including in its role as a permanent member of 
the Security Council. We are trying to get China into the 
regimes of which it is not a member now, whether it is MTCR in 
the non-proliferation front or the World Trade Organization on 
the economic front.
    We have had a lot of success specifically on the non-
proliferation side in getting China to join many regimes, but 
there is a lot of work left.
    We are trying to influence the choices that China has to 
make as its economic, military, diplomatic and political power 
increases into the next century. How is it going to behave on 
the regional and global stage? We think we can influence that 
choice.
    Now, how are we trying to influence this choice? The first 
point that needs to be made--and again you made it in your 
opening statement--is that engagement cannot be an end in 
itself.
    The goal of policy is simply not to have high-level 
meetings for their own sake. There has to be results, and we 
have to be able to influence Chinese behavior over time.
    We in the administration see that engagement is a means to 
an end, and one that has been widely misunderstood. I am 
referring to that now controversial phrase in the joint 
statement that was issued when President Jiang came to the 
United States in 1997, the phrase ``moving toward a 
constructive, strategic partnership.''
    That means not that we are treaty allies now, not that 
China is replacing other allies in the region, not that we are 
already partners, as we would like to be on a whole host of 
issues. Rather, we have a goal, of moving toward the objective 
of ``constructive, strategic partnership,'' the sooner the 
better.
    Now, we are trying to set up a strategic framework for a 
relationship that identifies and expands the number of areas 
where we have common interests and the number of areas where we 
could work together, while at the same time we work to narrow 
and hopefully ultimately resolve the differences.
    That is the purpose. There has been a lot of 
misunderstanding that somehow this phrase about ``strategic 
partnership'' is a snapshot of the current situation, which is 
obviously objectively not correct.
    Now, the fundamental question, which you asked is: Is it 
working? In one sense, I am almost afraid to ask the question, 
given the current environment up on the Hill and in the public 
at large.
    The problems are obvious, and you alluded to many of them: 
the backsliding on human rights that we have seen since the 
summit, all the problems that have come out related to the Cox 
report and the issues of espionage, the extraordinary trade 
deficit and the difficulties we are experiencing on that front.
    To that list we should add the recent escalation of debate 
concerning Taiwan and TMD, which has risen to the top of the 
bilateral list of issues between us. All these issues are 
obviously out there and need to be addressed.
    Before I deal with them, Mr. Chairman, the point I want to 
make is that this is far from the whole picture. Although you 
have given a list of some of the positive steps that have taken 
place, I want to give my own list, to make it clear that the 
problems should not dwarf the accomplishments.
    The accomplishments are significant. First, on North Korea, 
not only is China working with us well on the four-party talks 
at Geneva, trying to reach a peace agreement, but we believe it 
also has common interests with us in not wanting to see a 
nuclear North Korea, not wanting to see a confrontation on the 
Korean Peninsula and not wanting to see concerns about North 
Korean missiles result in the deployment of theater missile 
systems throughout the Asia/Pacific region. That gives us a lot 
to work with.
    A lot of attention has been given to one unfortunate 
statement attributed to a Chinese diplomat that criticized the 
United States for trying to get access to the suspect facility. 
But, that statement has not been repeated. Despite that 
statement, we do not have evidence that China was trying to 
block the agreement that we reached recently on Kumchang-Ni. 
The hope is that China will continue to work with us because of 
the shared interests that I have identified. I hope that you 
will push very hard on this topic next week in your own trip to 
China.
    There are many more areas of common interest as well. You 
have heard me talk about some of them before.
    We have seen an astonishing change in the Persian Gulf. The 
decision not to sell any more anti-ship cruise missiles, which 
threaten the freedom of navigation in the gulf, free flow of 
oil was a very important decision. It suggests that over time 
one can change China's perceptions of its own interest.
    China is now an oil importer. It will be a much larger oil 
importer in the future. They clearly came to see that we had a 
point in our strategic dialog when we said they should not sell 
these anti-ship cruise missiles, and they have agreed not to do 
it.
    In South Asia, the world could not be more different. If 
you go back 20, or even 10 years ago, China was perceived 
correctly as a very large part of the problem, and now it is 
working with us as part of the solution.
    The fact that China was chairman of the Perm Five and 
worked with us so well after the nuclear testing rounds that 
were undertaken by India and Pakistan recently suggests that we 
are now trying to work together rather than at cross-purposes 
to eliminate the spread of nuclear weapons in South Asia.
    More generally on the non-proliferation front, we have seen 
massive improvement in Chinese behavior. We have seen them join 
a number of international regimes, whether it is the Non-
Proliferation Treaty, the Comprehensive Test Ban, or the 
Chemical Weapons Convention. We have seen commitments on not 
assisting unsafeguarded nuclear reactors. I have already 
mentioned the agreement on cruise missiles. They have now 
agreed to actively study joining the Missile Technology Control 
Regime [MTCR].
    For all the problems which exist, that is an impressive 
record of progress.
    On the economic side, a major development took place just a 
few days ago which got relatively little attention. That was 
the ratification of the concept of private property at the 
Communist Party meeting. This is an extraordinary development, 
if you think about it, the notion of private property in China. 
It suggests that our economic engagement with them is making a 
dent and that, in fact, China is moving down an economic path 
that we should rather like.
    On the environmental side, we are seeing a major change in 
Chinese perceptions. The environment is no longer viewed as a 
trap--the United States trying to keep China poor--but rather 
as a genuine problem for China and the region. It is one where 
we hope to make progress in the dialog, and the Vice President 
will be engaging with Premiere Zhu.
    Even in one of the most difficult areas--democracy and 
human rights, where the problems are, of course, very real and 
disturbing--we have seen some progress in terms of the 
political debate within China, the opening up of the system, 
the fact that there is now wide discourse on the rule of law, 
the fact that we have seen some development such as village 
elections. Without in any way overstating these developments or 
minimizing the problems, which remain, these are still 
remarkable differences if you compare them to the China of 10 
or 20 years ago.
    So I think there is a track record against one wishes to 
measure engagement.
    Now, let me go to, ``How do we proceed from here,'' as I 
think you raised a fair enough point: ``If you know there are 
problems, what are you going to do about them?''
    But I think as I go down the list, Mr. Chairman, we have to 
ask: In each area, would our ability to affect the outcome we 
want be better if we moved away from engagement and toward 
confrontation, or would we simply end up worse off?
    Let me start off with human rights. I ask the question 
rhetorically: Will we make more progress if we abandon 
engagement? Will confrontation get China to ratify the 
covenants to release dissidents who engage in a dialog with the 
Dalai Lama?
    I think that the history of the past 20 years suggests not. 
The track record, whether we like it or not, is that during 
periods of poor U.S.-China relations, China has no incentive to 
move and make progress on human rights issues; and that the 
contrary is true, that in periods when the relationship is 
strong, when we are engaging in high-level diplomacy, that 
there is some chance that China will make progress if we stay 
the course.
    That does not mean this is satisfying. It does not mean the 
progress is fast enough. It does not mean that progress goes in 
a straight line in one direction; rather it is a roller-coaster 
going up and down. But, I think over the medium and long-term, 
we do see a fairly positive track record.
    In the meantime, I think we have to continue to speak our 
minds and do what we are doing. In Secretary Albright's toast 
at the 20th anniversary of U.S.-China normalization at the 
embassy, she made very clear what the position of the 
administration was on human rights.
    You have seen our human rights submission this year in the 
annual report, which did not pull any punches. You have seen 
the Secretary's statements on a recent trip to China. And we 
are at the final moments of, you know, determining how we are 
going to handle the Human Rights Commission in Geneva, where, 
of course, we are going to speak our mind on the human rights 
situation as well.
    So all of this is to suggest that I think that with 
engagement, we have a greater chance of future progress on 
human rights than if we move in the opposite direction.
    With respect to the Cox report and some of the espionage 
issues, I think the common sense answer to espionage is better 
security and better counter-intelligence. Again, if we look at 
history, the threat of espionage will exist regardless of 
whether we continue our engagement policy with China or not.
    We did not have an engagement policy for most of the period 
of our relationship with the former Soviet Union during the 
cold war, but we still had a very real espionage problem.
    The truth of the matter is that we have to take the 
espionage issue seriously and come up with the proper steps to 
deal with it. That is exactly what is under intense study right 
now on top of the formidable measures, which the administration 
has already taken and which Secretary Richardson has described.
    On the trade front, I would suggest that engagement may be 
providing some of the answers. We are in a key phase of our 
negotiations with China right now on the WTO. If we reach an 
agreement, that, of course, will do a lot to level the playing 
field and to provide major benefits to American exporters. I 
would also point out that if we can reach a WTO agreement, 
China has to make the concessions, not the United States, as I 
think Jeff Garden ably pointed out in his op-ed piece today. I 
hope you get a chance to take a look at it.
    If we do not reach an agreement, then we will have to look 
at other bilateral instruments for advancing our interests on 
the trade front, because obviously a trade deficit at over $60 
billion is too high and not, over time, sustainable. The 
administration is committed to protecting our American economic 
interests.
    Finally, on the whole question of Taiwan and TMD, let me 
make a series of points. First, I think that the administration 
has been very straightforward in its track record on Taiwan.
    We demonstrated the depth of our commitment to a peaceful 
resolution of cross strait issues, with the deployment of the 
two carrier groups in 1996.
    China has to know where we stand on this. And we have 
reiterated that in every high-level meeting. We have continued 
to push for high-level cross strait dialog. In that sense, 
there was a major positive development last year when the so-
called Wang-Koo talks took place. There will be another round 
this year in Taipei, not, unfortunately, as we had hoped, this 
spring. The indications are now this fall. But that has the 
prospect for progress. So we are seeing an unusual situation, 
an unusual moment of opportunity.
    There is a direct relationship between the cross strait 
relations and the missile issue. It seems to me quite obvious 
that each side wants something from the other.
    Taiwan does not wish to be threatened by Chinese missiles. 
China does not wish to see Taiwan obtain theater missile 
defenses. The obvious answer is for the two sides to address 
each other's concerns. This would certainly be one possible 
type of issue that could be addressed in cross strait dialog.
    As you know, we are not a party to that dialog. We are not 
a mediator. This is between them. But, nevertheless, this just 
seems as a matter of common sense once again to be something 
that they should be talking about, since it is in their mutual 
interest.
    In terms of U.S. policy, we have made it very clear that we 
are far from a decision on TMD, other than a decision to go 
ahead and deploy the systems necessary to protect our own 
forces.
    But until we have systems on line that work, until we know 
what they cost, until we are able to do a comprehensive review 
of the big picture, including the security implications of 
going ahead with this sale, we are not going to make any 
decisions on theater missile defense. We have said that openly 
to both parties on either side of the strait.
    This theater missile situation should not be confused with 
the decision last week on national missile defense. That is a 
whole other set of issues, where I think there has now been a 
stated policy through the two congressional resolutions and the 
administration reaction to it.
    All I am trying to say is: despite the fact that a 
congressional report, you know, was tasked, which had us come 
up with proposals on deployment of theater missile defense for 
the Asia/Pacific region, this should not be interpreted by 
anyone in the region as an indication that a decision is 
imminent. It is not.
    The final more profound point, Mr. Chairman--and this is 
something I hope you will raise in your trip to China next 
week--is that what China does matters. The question of theater 
missile defense is not solely or even primarily about U.S. 
policy. It is about the perception of threat and what countries 
or governments feel they need to do about these threats.
    If Japan feels threatened by North Korean long-range 
missiles, it has every right to seek to come up with defenses 
to that threat.
    Therefore, if China does not want to see Japan acquire 
theater missile defenses, the only possible basis it can have 
for trying to persuade either Japan or the United States not to 
proceed down that direction is to help address the threat of 
North Korean missiles, which is something we hope that China 
will do.
    Similarly the same situation applies with respect to 
Taiwan. Obviously, if China continues to deploy missiles in the 
provinces directly across from Taiwan, the leaders of Taiwan 
will necessarily be pushed in the direction of seeking to come 
up with defenses.
    So once again the obvious point that we made to Chinese 
leaders during Secretary Albright's trip to China was: If you 
do not want to see Taiwan go down this path of pursuing TMD, 
you should be talking to Taiwan about the threat and trying to 
alleviate the threat. You cannot simply make demands that 
others not do things.
    We have a rather, complex picture with respect to TMD both 
because of the uncertainties about the system's technology and 
cost implications, but also whether the two parties in across 
the strait will be able to deal with it effectively between 
themselves.
    I hope you will have a thorough dialog on those points next 
week in Beijing.
    Why do I not stop at this point and open myself up to your 
questions?
    Senator Thomas. OK. Thank you very much, Mr. Secretary.
    Let me--why do I not--I tried to make it clear in my 
opening remarks that I do not quarrel with the idea of 
engagement, but I do not think, as you look at results, you 
cannot just say it is engagement or no engagement. There can be 
some various degrees of engagement with other things attached, 
it seems to me.
    When you deal with most anyone on a friendly basis, and 
which we are dealing with China on a friendly basis, when you 
do something, you sort of expect something in return. I do not 
think that is unusual. And I do not think it should be 
misunderstood either, for that matter.
    So do I understand you to kind of imply that it is either 
engagement or non-engagement? Are those the only two 
alternatives?
    Secretary Roth. Not at all. I thank you for giving me an 
opportunity to clarify.
    First, I thought it was important to get on the record the 
fact that there had been results from engagement because there 
are many of your colleagues not present today who would not 
agree with your assessment that we should continue engagement, 
but instead would suggest that we move to containment or 
something else.
    And so I thought it was important simply to get on the 
record the notion that engagement has accomplishments and there 
will be a cost if we move away from it. That was the purpose of 
that response.
    I think inherent in engagement is the fact that it is a 
continuum, that it is not one policy, that it has lots of 
options along the way.
    To give you one example: despite the fact that we have been 
engaging with China, we have still maintained a series of 
economic sanctions. Engagement does not mean appeasement, and 
engagement does not mean that we give China everything it 
wants.
    We have not lifted our sanctions on military sales. We have 
not lifted our sanctions on controls on high-tech. We have not 
lifted some of the sanctions on some of our economic programs, 
for which China is not eligible, such as OPIC.
    The point is that engagement is not a gift of everything 
that China wants. Similarly, you know, we were committed to 
engagement in 1996. But nevertheless that did not stop us from 
deploying the two carriers as I referred to earlier.
    Engagement is not a blank check. I would certainly agree 
with you about that.
    Senator Thomas. You mentioned the military or technological 
transfers of things that might be military. Who oversees that? 
Is that a Commerce Department role? Is it a military role? Is 
it a State Department role?
    Secretary Roth. Yes. To some extent, it is all of the 
above, meaning it depends on what you are talking about, right. 
The State Department has jurisdiction over the munitions list 
globally but, of course, since we have a policy of not selling 
arms to China, we do not face too many tough decisions in that 
regard.
    You have seen with satellites where the primary 
jurisdiction has recently been shifted from, the Commerce 
Department to the State Department. But, again it is an inter-
agency process, and all the players get involved.
    On commercial items, primary jurisdiction is with the 
Commerce Department, so it really depends on what we are 
talking about.
    Senator Thomas. Is that shift one designed to give a little 
more inspection and thought to what is transferred in terms of 
satellites and so on?
    Secretary Roth. Well, I think you know that we want to be 
very sure in terms of the satellites that, we are taking into 
account all of the security considerations as well as the 
commercial.
    Given some of the episodes, which are currently under 
investigation, the decision was that we would transfer this 
authority back to the State Department as the lead agency. But 
I emphasize the inter-agency aspects of the decisionmaking 
process remain.
    Senator Thomas. Yes. You mentioned the progress. And I do 
not disagree with that. You also mentioned over the last 10 or 
20 years. How would you assess the progress in the last year?
    Now, I outlined four or five or six things that certainly 
are not what we would like to have happened. So has the 
progress in the last year been less good than in previous 
years?
    Secretary Roth. Well, I certainly was not trying to cook 
the books with the answers by going back to accomplishments 
from a decade ago and suggesting that that is sufficient in and 
of itself.
    I think the picture is somewhat mixed. I tried to suggest 
some decisions, which are recent. For example, this decision to 
recognize personal property that I talked about is a big deal.
    I tried to reference the fact that they have signed both of 
the international covenants (on Civil and Political Rights and 
on Economic, Social and Cultural Rights), although not yet 
ratified either. So it is a mixed picture: Positive that they 
have signed; negative that they have not ratified yet, but 
something we are still pushing on.
    We got an important agreement at the last summit on end-use 
controls for some of our exports.
    I think, again, we have been working pretty well with China 
on North Korea over the past few months. That is something that 
is recent. The cooperation on South Asia after the nuclear 
explosions, was recent.
    So it is not simply going back to changes that have taken 
places over the last 10 or 20 years.
    At the same time, I was trying to be extremely 
straightforward that we recognize the areas where we have not 
made progress.
    We have referred openly to the backsliding on human rights, 
where we have been very disappointed by the crackdown, the 
arrests of the dissidents, refusal to allow the organization of 
people with opposing views.
    We have made no secret of our disappointment at the fact 
that a dialog with the Dalai Lama has not occurred despite the 
indications that President Jiang Zemin made during President 
Clinton's state visit, that they had channels for such a 
dialog.
    Yes, there has been backsliding. And we are quite open 
about that.
    Senator Thomas. So our reaction to something like 
backsliding on human rights is disappointment. That is our 
position, that we are disappointed----
    Secretary Roth. No, we----
    Senator Thomas [continuing]. That we shake our finger and 
say, ``We are disappointed,'' and that is it.
    Secretary Roth. No. Our reaction is to try to get them back 
on the path toward progress.
    Senator Thomas. And how do we do that?
    Secretary Roth. Well, I think it was largely President 
Clinton's dialog with Jiang Zemin, for example, that got the 
original statement about the dialog with the Dalai Lama. I 
understand that President Clinton fully expects to raise this 
issue once again with Premier Zhu in the next couple of weeks. 
And he will raise it again with President Jiang in September 
when they meet at APEC, and we are going to try to turn them 
around on that.
    So it is not a matter that you simply accept the decisions. 
At the same time, we are also pounding away at the Chinese on 
the notion that what they do matters.
    For example, the United States is not without leverage with 
respect to China. China badly wants the lifting of some of the 
sanctions that I have described.
    We make it very clear to the Chinese that the overall 
atmosphere they create in the human rights situation is going 
to influence our ability to lift these sanctions.
    Senator Thomas. I guess that is what puzzles me a little 
bit, Mr. Secretary. You say they badly want it. Now, if you 
are--at least in my concept of badly wanting something, if you 
badly wanted to increase your relationship and have a closer 
relationship, why would you play around this way with the Dalai 
Lama, for example? Why would you make a big deal out of putting 
missiles on the strait?
    Why would you do some of the human rights things, which 
really are not, I guess, at least in my view, are not a threat 
to their stability?
    Why would you do that if you know that is going to be an 
irritant to the people you are trying to work with? And you 
say, ``Well, they are trying to get somewhere.''
    I do not understand that.
    Secretary Roth. I am not going to put myself in the 
position of in any way apologizing or justifying Chinese 
behavior. I am on the same side as you. I do not think they 
should have done these things.
    But if you ask me to try to explain it, I would have to say 
that they are in the same position as many other countries, of 
having competing priorities in their own policy.
    They have their foreign policy priorities, including what 
they want in the relationship with the United States, and they 
have their domestic priorities in terms of how they feel they 
are managing policy in China.
    And I think as you have heard that this is a difficult year 
for China in terms of their own internal political situation. 
They seem to be on the defensive. It is the 10th anniversary of 
Tienanmen. It is the 50th anniversary of the PRC. They are 
worried about possible demonstrations around these 
anniversaries.
    We have seen setbacks to their economy. Growth is slowing. 
Unemployment is rising. They have bitten off a very formidable 
economic agenda. And they are starting to pay the price for 
trying to privatize state/economic enterprises, getting the 
military out of politics. They are now generating consequences, 
including lower growth, more unemployed. We have seen the 
outbreak of some terrorist incidents, bombings in different 
parts of China.
    I think one would say, on balance, that 1999 is not going 
to be a very good year for China internally.
    Some of the steps that they have taken, I think, are driven 
by their domestic political imperatives. Now, again, let me 
make it absolutely clear. That is not, from a U.S. perspective, 
justification for the steps they have taken. We do not believe 
that justifies a crackdown. We do not think they have made the 
right decisions.
    We think the way to deal with their problems is to move in 
the other direction, to follow up some of the economic reforms 
with political reforms, by moving toward greater openness and 
pluralism and democracy. So we are not saying they are on the 
right path. We are not saying, ``Give them a bye during this 
difficult political period until things get better.''
    What I am really trying to do is answer your question as to 
why we think they have done some of these things that we wish 
they had not.
    Senator Thomas. Well, I recognize what you are saying in 
terms of there are some difficult things that are happening.
    They are trying to make a change in the economy, which I 
suppose will result in some unemployment, move the military out 
of the private sector and--and some of those things.
    But some of the things would be easily done. For instance, 
to release the non-violent prisoners from Tienanmen Square. Why 
would not that be an expectation that you could press?
    Secretary Roth. We should press. We do all the time, and I 
hope you will. Nothing says we are stopping on that. They 
should release these prisoners.
    Senator Thomas. It is 10 years.
    Secretary Roth. Agreed. We raise it at the highest levels. 
Secretary Albright raised it on her last trip.
    Senator Thomas. Yes. That troubles me a little. We always 
say, ``We are going to have strong language at the highest 
levels.''
    Well, that does not seem to me to be a policy, to have 
strong words at the highest levels. I hear that so often, and 
I--you know, I guess we--it is true we need to say, here is 
what our policy is, and here is where we are.
    But if you do not have some sort of a position to follow 
through on strong words at the highest levels, so what? Do not 
they say, ``So what?''
    Secretary Roth. Mr. Chairman, I share many of the 
frustrations that you do, but I think one of the things in 
dealing with China that becomes very apparent is that even if 
they say, ``No,'' the first time you raise something and the 
second time and the tenth time, that frequently over time you 
get the objective that you are looking for.
    Senator Thomas. Yes.
    Secretary Roth. And so to me, there is nothing less 
satisfying than sitting in a meeting raising a series of issues 
and basically getting stonewalled on them.
    But at the same time the question is: What impact is it 
having over time on Chinese policy? And I think the answer is: 
Over time, we have been able to affect many Chinese policies, 
and we hope by continuing to raise these issues that we will 
continue to make more progress.
    Now, I wish there were a better, more satisfying answer 
that we could get them to do what we want on every issue now, 
but I do not know that answer.
    Senator Thomas. OK. I do not either, but if I did, I would 
share it with you. But I----
    Secretary Roth. Thank you, Mr. Chairman.
    Senator Thomas. But I guess I go back to--in the back of 
your mind, you have to say if there has been a lack of success 
in some of the things you want to do, you then say to yourself, 
what could we do that would be more effective? What could we 
have done that would be more effective that we could do in the 
future?
    WTO--and that is a good thing. I hope we are able to do 
that, but under the right conditions. I hope we do not find 
ourselves giving away conditions in order to have some kind of 
celebrated signing.
    But even without WTO, why--why should we have a $60 billion 
deficit, at the same time we are restricted substantially from 
selling things in China? Is not that a kind of a tit-for-tat 
arrangement?
    Secretary Roth. First of all, let me reassure you that 
there is no strategy of getting a deal for the sake of a deal.
    There is no desperate search to get a WTO agreement so that 
there will be a centerpiece for the visit, even if it is not 
commercially viable.
    There will only be a deal if it meets our needs, if it is 
one which provides considerably improved, vastly improved 
market access for American exporters.
    This will not be a political issue. I think it is quite 
obvious that if we did go that path, that the Congress would 
have enormous difficulties in accepting it, in providing the 
approval for permanent MFN or NTR that has to follow in its 
wake. So I think I can reassure you on that point.
    In terms of dealing with the growing China deficit, the 
question is: One, what is causing the deficit? But, two how do 
you deal with it?
    I suspect that your position is a lot like mine, that you 
have heard some of the academic arguments and even if there is 
some truth in them, they are not overall good enough, meaning I 
think there are some persuasive cases out there by people like 
Laura Tyson, former head of the Council of Economic Advisors 
and National Economic Council.
    A part of the increase in China's surplus with us or our 
deficit has been because we have seen the shifting of exports 
from other countries in Asia--Korea, Malaysia, Singapore, even 
Taiwan--with higher labor costs to China.
    So what you have seen is a reduction of our deficits with 
many of the other countries, even as our deficit with China has 
increased. And to some extent that is true.
    But, at the same time, that is not a good enough answer. We 
have to do something to get these numbers down; and the best 
way of doing that is to improve our market access. That is why 
we are trying to get this WTO agreement.
    Senator Thomas. Well, I am sure you are right about the 
shift in Asia. Nevertheless, regardless of the shift, the idea 
still is that: Why should we put up with substantial trade 
barriers, both in terms of tariff and non-tariff barriers and, 
at the same time, leave our barriers down?
    Secretary Roth. Yes.
    Senator Thomas. And that--I mean you come with me to 
Wyoming and you talk to the folks there who are wanting to sell 
soda ash, for example, and find that China is not only having a 
barrier to soda ash, but sells it in Asia for 35 percent below 
cost, to dump it on the market. That is hard to explain.
    Secretary Roth. I think, Mr. Chairman, that we agree that 
it is not sustainable to have this size deficit.
    The question is which way one approaches the problem, 
whether we can get agreements that open up markets. We have had 
agreements in areas like textiles and IPR, where we have made 
considerable progress with China over time.
    Obviously, the clear preference for the administration is 
to be in compliance with our WTO obligations and try to keep 
our markets open.
    Our entire global strategy, not just related to Asia, has 
been to try to open markets and increase global trade, not 
diminish it.
    I think the question you are raising is: What if it does 
not work? What if you cannot get the access? That is a 
threshold we will have to cross after we see whether or not we 
get the WTO agreement.
    Senator Thomas. You mentioned Korea. I just met this 
morning with our Ambassador there. And do you think that China 
has been a player, an equal player in terms of our dealing with 
Korea? Do they share with us their work? Do they share with us 
what they have done in Korea? Do we--do we have an exchange?
    Secretary Roth. I think the answer is partially yes, but 
that is not good enough. We have made progress from where we 
were a couple of years ago when every time we tried to talk to 
China about North Korea, they would simply say, ``Oh, they are 
a tough people. Do not worry about North Korea. They will 
shrink their belts. There is no crisis. There is no food 
problem.''
    China would say, ``North Korea is too weak. They do not 
have nuclear weapons. How could you expect such a poor country 
to be a threat?''
    Now, we talk to China in much more realistic terms 
discussing the actual situation in the country.
    We know that China has expressed its concerns about not 
wanting to see a nuclear North Korea. We know that they have 
called for economic reform in North Korea, so there are some 
indications that China's policy is becoming very much closer to 
our own.
    The point is: It is still not good enough. I am not here to 
tell you that China is cooperating with us fully. The argument 
that we are using with China is that, Look, if you want to move 
toward a constructive strategic partnership, you want to 
demonstrate to the American people and your own people that 
this is doable, we should be working actively, publicly, 
cooperatively on this issue. You should be telling us what you 
are saying to the North Koreans, both in civilian and military 
channels about missiles or access to suspect sites or any other 
facilities.
    While we are appreciative of the progress we have made to 
date and think it represents progress, there is a ways to go.
    Senator Thomas. Yes. There really is. One of the things, I 
think, is providing apparently all of the--nearly all of the 
aviation gas that keeps North Korea with some sort of a defense 
mechanism. Does not that come from China?
    Secretary Roth. China does supply North Korea a 
considerable amount of fuel. I did not know specifically about 
aviation fuel. I am happy to take a look at that and give you 
an answer for the record.
    [The following answer was provided for the record.]

    PRC military cooperation with North Korea has been limited 
in recent years. Although the PRC supplies more than half of 
the DPRK's aviation fuel, this quantity is sufficient only to 
maintain minimal training levels. Indeed, training sorties by 
the NKAF have declined 70 percent in the last decade.

    Secretary Roth. It is very clear that the overall levels of 
Chinese assistance have not been sufficient to keep the North 
Korean military operating at previous levels.
    Senator Thomas. Yes.
    Secretary Roth. We have seen a major reduction in training. 
We have seen shortfalls in fuel. We have seen a reduction in 
flying hours from where they were a few years ago. We have seen 
their inability to maintain a lot of equipment.
    So I do not think we should leave you with the impression 
that China is helping North Korea maintain a robust military 
establishment, there is not any evidence to suggest that.
    Senator Thomas. Would you take another look at that, 
please?
    Secretary Roth. Sure. I will get you an answer for the 
record.
    [The following answer was provided for the record.]

    The PRC does not provide North Korea with significant 
offensive weapons systems. The two countries continue to have 
regular military-to-military visits, but in recent years there 
do not appear to have been any exchanges of officers for 
training.

    Senator Thomas. There is--you mention Taiwan, of course, 
which is always one of the real issues. We have made it clear 
through the years, as I understand it, through the various 
agreements we have had that we have supported a one-China 
policy.
    We also have a Taiwan legislation that puts us on the side 
of helping defend Taiwan against any aggression. I am not sure 
that the President made that clear in his last visit.
    Was not there some confusion over what our situation was 
with Taiwan after the President was there?
    Secretary Roth. I believe that the President could not have 
been more clear in what he said. This furor, claiming the 
President's statement of the so-called ``three noes'' was 
anything new, simply is not substantiated by the facts. What 
the President said was a distillation of statements that had 
been made previously by a series of administrations going back 
20 years.
    But there was absolutely no change in our overall policy, 
including the basic parameters, which you have stated, which is 
our adherence to a one-China policy as well as our adherence to 
our obligations under the Taiwan Relations Act, which is the 
law of the land. We work with both of them simultaneously.
    There was no change of policy during the President's trip.
    Senator Thomas. No, I realize there was no change. But I 
think there was some confusion about it. That--that is my view, 
which I will continue to hold.
    Secretary Roth. And which we are trying to resolve by 
making categorical statements that there was no change in 
policy. That was not the intent.
    Senator Thomas. Yes. I understand.
    What do you think is China's position with regard to our 
negotiations with Japan on their security arrangements?
    Secretary Roth. China's position is clear and, in my 
judgment, unsustainable. China has been opposed to the 
guidelines, which are designed to improve how the United States 
and Japan operate with respect to contingencies.
    China has taken the position, which we do not agree with, 
that this is somehow aimed at China rather than being 
situational, meaning enabling us to deal with any contingencies 
that might arise in the region.
    And China has also come out strongly against our decision 
to jointly put money into research on TMD. Once again, I have 
addressed that previously. We believe that Japan has a right to 
try to defend itself against North Korean missiles.
    We keep telling China that it has to stop viewing our 
security relationship with Japan as a threat to China and 
rather see it for what it is, which is one of the primary 
vehicles for the preservation of peace and stability in the 
Asian/Pacific region.
    Senator Thomas. What is the current situation with China 
and the Spratly Islands?
    Secretary Roth. We just learned today that the negotiations 
or talks have concluded between the Philippines and China in 
terms of the South China Sea and seeing whether they could come 
up with confidence-building measures.
    We do not have any specific read on those talks yet. So I 
will give you a more detailed answer for the record. They 
literally just ended hours ago.
    [The following answer was provided for the record.]

    The Philippines and China held Assistant Secretary-level 
experts' talks on confidence-building measures in the South 
China Sea in Manila, March 22-23, 1999.
    While the talks did not achieve any breakthroughs, the 
sides did commit to further discussions, to settle their 
dispute through generally accepted principles of international 
law including the U.N. Convention on the Law of the Sea, and to 
refrain from the use or threat of force. They also agreed to 
improve their dialogue on practical issues such as fisheries, 
scientific research and safety of life at sea.
    Both sides felt that the talks themselves constituted a 
confidence-building measure.
    That said, the sides did not reach agreement on the 
disposition of Chinese structures on Mischief Reef, which the 
Chinese have said will be for civilian purposes but are not at 
present ready for joint use.
    The Spratlys were discussed at the fifth ASEAN-China Senior 
Officials' Consultation in Kunming, and there was a formal call 
by Vietnam to develop a ``Code of Conduct'' on the Spratlys 
through ASEAN.
    Our policy remains to urge the parties to seek a peaceful 
solution consistent with international law, including UNCLOS. 
We have and will continue to express our concerns about 
unilateral actions which may threaten peace and stability in 
the region.
    Our other fundamental interest, freedom of navigation, has 
thus far been upheld by all claimants to the Spratly Islands.

    Secretary Roth. But, more important is the overall trend. 
To start from the beginning, I think it is very clear that 
while the United States does not take a position on the 
specific details of the territorial disputes, we very strongly 
support the principle of freedom of navigation in these waters.
    We regularly send the Seventh Fleet through areas of the 
South China Sea, including near the Spratlys, to make that 
point absolutely clear to everybody.
    And at this stage, we do not believe there is a threat to 
freedom of navigation by anything that any of the claimants in 
the region have done with respect to fortification.
    And for the record, I think it is useful to point out that 
China is not the only claimant to the Spratly Islands. There 
are six claimants that have fortifications on various islands 
and reefs.
    Having said all of that, we are concerned about several 
aspects of the recent Chinese steps. First of all, the decision 
to expand or to build larger facilities on Mischief Reef 
appears to us to go at least against the spirit of the 
agreement that was reached between China and the Philippines in 
1995 when this issue of Mischief Reef first arose.
    At that time, China made a public commitment to the 
peaceful resolution of the disputed issues and agreed to ratify 
the Law of the Sea, further cementing its commitment to 
peaceful resolution.
    Yet, it has constructed a facility, which if not ominous to 
our own interest, nevertheless is hard to explain merely as a 
fishing shelter. It does not seem to make any sense.
    We think it is important that this trend not continue, that 
China--or any of the other claimants, I should add--not build 
additional outposts, that they seek to find some mechanism for 
starting to resolve these territorial claims in a non-military 
fashion.
    We expect this issue to figure prominently in an upcoming 
meeting between China and ASEAN that I think will be held in 
April. And we intend to raise this issue, as do many other 
countries, at the ASEAN regional forum in July.
    I think it is very important for China to understand that 
its activity has been noticed, that this activity is viewed as 
an unhelpful step, that this is jeopardizing its relationship 
with ASEAN and calling into question its credibility in terms 
of the commitments it gave a few years back in 1995.
    So I guess I am trying to send the nuanced message, Mr. 
Chairman, not that this is a situation that requires an 
immediate dramatic military response. In terms of freedom of 
navigation our issues are not threatened in the short term.
    But, at the same time, this is not an event that we can 
simply overlook and it cannot be part of a long-term trend. 
China needs to address our concerns and the concerns primarily 
of the other claimants.
    Senator Thomas. In light of the economic difficulties that 
China has and, I suppose, will continue to have as is true with 
most of Asia, what are they--what are their efforts in--in this 
building the military as a military unit? For instance, blue 
water Navy, are they still promoting that idea and investing in 
that?
    Secretary Roth. I think the answer first has to be placed 
in the larger context of Chinese military modernization where I 
think the straightforward answer is: We are seeing China 
modernize its capabilities across the board in every sector of 
its military. And part of that includes its Navy.
    The longer term strategy is to increase their ability to 
operate farther away from the coast, to move away from, in 
other words, coastal defense to a blue-water capability.
    I think that they are in the very early stages of this. For 
example, we have seen a number of incorrect reports for many 
years now about China acquiring aircraft carriers, which has 
not happened.
    Nevertheless they are procuring larger ships. They are 
developing greater capabilities and that capacity is out there.
    Senator Thomas. OK. What--how would you sort of summarize 
the agenda for the Premier's meeting in April?
    Secretary Roth. I think the agenda is going to have to be a 
broad-based one, despite the fact that Premier Zhu primarily 
has an economic portfolio.
    We believe it would be inappropriate for him to come here 
and only to talk about economic issues, as important as those 
issues are. And so it is our intention to discuss the entire 
range of issues in the relationship.
    That includes security issues, includes what we have been 
calling strategic dialog--talking about a lot of the foreign 
policy situations such as North Korea and South Asia.
    It includes obviously talking about human rights. It 
includes talking about non-proliferation. We have stressed the 
point to the Chinese, including during Secretary Albright's 
visit, that they should come prepared to discuss these issues.
    We would like to see accomplishments in some of these areas 
as well, whether it be in a non-proliferation front or 
elsewhere. Of course, the decision will be China's.
    Senator Thomas. The situation with Hong Kong seems to be 
reasonably quiet and apparently reasonably successful so far.
    Do you think Jiang Zemin is determined to get some kind of 
an arrangement with Taiwan during his regime?
    Secretary Roth. Well, I am not going to put myself in the 
position of speaking for Jiang Zemin. I think he clearly has 
gotten a major boost in his concept from the successful 
reversion of Hong Kong and now the fact that Macau is supposed 
to take place by the end of this year. That will leave Taiwan 
as the unresolved issue.
    We have not seen any timetable being issued by China. We 
think that would be a great mistake.
    The administration believes that Deng Xiaoping had great 
wisdom when he made his remark, ``Who cares if it takes 100 
years to resolve this?''
    We believe that China and Taiwan should focus their efforts 
on a peaceful resolution, possibly over stages, and they should 
use the four parties from the cross strait talks to try to 
accomplish this.
    Senator Thomas. Well, Mr. Secretary, I thank you very much. 
I think this is an extremely important area as I know you do. I 
appreciate the efforts you have made.
    We have talked about what maybe we should expect from 
China. What do you think China expects from us?
    Secretary Roth. Well, I think China attaches a very high 
priority to the phrase that I referred to earlier in the 1997 
statement, ``moving toward a constructive strategic 
partnership.''
    China increasingly views itself as a major player on the 
world stage, not just the regional stage, and is looking to be 
treated with respect.
    I think China wants to have its view taken into account on 
a number of regional and global developments. There are also 
things that China expects that are difficult for us, because 
China has not given enough attention to its own behavior, 
meaning, for example: China wants the repeal of all existing 
sanctions; China would like an expansion of high-tech sales; 
China would like a more robust military-to-military 
relationship; China would like us to decrease arm sales to 
Taiwan.
    These are all steps that cannot be considered in a vacuum 
and that do not come as ``freebies'' with engagement, but 
rather these are steps which China's own behavior will have a 
great deal of influence.
    And so they come with their set of expectations. We come 
with ours. We are going to have to try to match the two and see 
what accomplishments and agreements we can reach.
    Senator Thomas. Well, it is not an easy one, and I 
understand each of us has our own culture and has our own 
background and history, of course, and particularly that is 
true with China, because they do have a very long history.
    On the other hand, there are some things that are of vital 
importance to--to us and to them in terms of values. It would 
seem to me that as we see the world become more open through 
Internet, through television, through all those things, why, 
people will be moving toward some of those kinds of changes.
    That is one of the problems with North Korea. I think they 
have almost isolated their people from the rest of the world.
    So I do believe that it is going to be healthy for you and 
the administration and this Congress to review where we are 
with China, its very important relationship with us, certainly, 
and to see if there are things that could be done differently 
to produce some different results.
    And I appreciate much your willingness to talk about it, 
not only this morning, but as we go--as we go about our 
business. So we will be continuing to pursue this concept and 
if we come up with some great ideas, I am sure we will be happy 
to share them with you.
    So I thank you very much, my friend.
    And I would adjourn the committee.
    Secretary Roth. Thank you. I wish you a successful trip.
    Senator Thomas. Thank you.

Responses of Hon. Stanley O. Roth to Additional Questions Submitted for 
                               the Record

    Question 1. I understand that China is to take first delivery of 
Russian destroyers equipped with the supersonic sunburn missile by mid-
year. This missile flies at more than Mach 2 and was specifically 
designed to overcome our AEGIS defense system.
    What are we doing to discourage this transfer? What are we doing to 
prepare our forces and Taiwan's forces for this threat? Does this 
situation perhaps dictate that we rethink our refusal to sell 
submarines to Taiwan as a means to counter these destroyers?

    Answer. Russian and U.S. arms transfers are a subject of regular 
bilateral discussion with Russia. We are aware of the contracts that 
China has signed to purchase Russian destroyers. We have made clear to 
the Russians our view that promoting regional stability should be an 
important consideration in arms transfer policy.
    No international treaty or understanding proscribes transfers to 
China of such arms, nor does U.S. law penalize conventional arms 
transfers by third countries to the PRC. Russia is a member of existing 
international regimes to control conventional arms transfers (e.g., the 
COCOM-successor Wassenaar arrangement, which monitors destabilizing 
arms accumulations). We expect that Russia will abide by its 
commitments.
    The Administration remains firmly committed to fulfilling the 
security and arms transfers provisions of the Taiwan Relations Act 
(TRA). We will continue to assist Taiwan in meeting its legitimate 
defense needs in accordance with the TRA and the 1982 Joint Communique 
with the PRC.
    Consistent with our obligations under the TRA, we regularly consult 
with Taiwan on its defense requirements.
                            south china sea
    Question. Do we believe that the structures China is building on 
Mischief Reef are military in nature, or are they just fishing 
structures, as the Chinese claim? What are we doing to dissuade the 
Chinese from continuing their aggressive unilateral actions on Mischief 
Reef and the Spratly Islands in general? Are we prepared to assist the 
Philippine military upgrade its capabilities as a response to this 
situation?

    Answer:
   We believe the reinforced concrete ``castle-style'' 
        structures constructed by the PRC on Mischief Reef have dual-
        use capability.
   The United States has repeatedly spoken out, both publicly 
        and through diplomatic channels, against unilateral actions 
        that increase tensions in the region and has called for all 
        claimants to resolve their differences in a peaceful manner, 
        consistent with international law. We have strongly denounced 
        the use of force or the threat to use force to resolve the 
        conflicting claims.
   We regularly remind claimants of their past statements on 
        the South China Sea, including the December 1997 joint 
        statement by China and ASEAN, which have indicated a 
        willingness to resolve territorial disputes through peaceful 
        means and in accordance with universally recognized 
        international law, including the 1982 UN Convention on the Law 
        of the Sea. We have urged all claimants to use all appropriate 
        diplomatic channels to resolve the dispute. In this regard, we 
        welcomed the recent talks between the Philippines and China in 
        Manila as well as the discussion of the issue at the ASEAN-
        China Senior Offials Meeting in Kunming, China. We hope these 
        have launched a process which will result in constructive 
        dialogue and peaceful resolution.
   While the United States takes no position on the legal 
        merits of competing claims to sovereignty in the area, we have 
        made clear that maintaining peace and stability in the region 
        and freedom of navigation are fundamental interests of ours. 
        Unhindered navigation by all ships and aircraft in the South 
        China Sea is essential for the peace and prosperity of the 
        entire Asia Pacific region, including the United States. 
        Construction activities by various claimants have raised 
        tensions in the region and are not helpful to achieving a 
        peaceful resolution of the competing claims; however, such 
        activities to date have not hindered freedom of navigation. 
        Indeed, the U.S. Navy sails regularly through the South China 
        Sea, including in the vicinity of Mischief Reef.
   As we have repeatedly stated, the basis of our defense 
        cooperation relationship with the Philippines is not linked to 
        the current situation in the Spratlys/South China Sea. Rather, 
        given the fact that the Philippines is one of our five treaty 
        allies in the Asia Pacific region, we naturally maintain close 
        military ties.
   Ratification by the Philippines of the proposed Visiting 
        Forces Agreement now before the Philippines Senate will 
        strengthen our defense relationship by enabling us to resume 
        ship visits to Philippine ports, to hold joint military 
        training exercises, and to undertake other forms of military-
        to-military cooperation in order to enhance our overall 
        security relationship.

    [Whereupon, at 1:06 p.m., the subcommittee adjourned, to 
reconvene at 2 p.m., July 1, 1999.]


 HONG KONG TWO YEARS AFTER REVERSION: STAYING THE COURSE, OR CHANGING 
                                COURSE?

                              ----------                              


                         THURSDAY, JULY 1, 1999

                           U.S. Senate,    
                 Subcommittee on East Asian
                               and Pacific Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:03 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Craig Thomas 
(chairman of the subcommittee) presiding.
    Present: Senator Thomas.
    Senator Thomas. Good afternoon. We will call this 
subcommittee to order. We appreciate very much your being here.
    Today marks the second anniversary of the reversion of Hong 
Kong to Chinese control. Two years ago, there were plenty of 
pundits who predicted that after the reversion, the PRC would 
encroach upon or abrogate Hong Kong's political and economic 
autonomy. The fact is, though, that today is the subcommittee's 
first hearing since the reversion.
    First, it signals that up until this point, it has 
basically been business as usual in Hong Kong. Granted, 
certainly Hong Kong has had some financial difficulties. Those 
difficulties are not necessarily attributable to any 
interference from Beijing, but are more an unfortunate economic 
condition in East Asia. Second, the hearing signals that 
something has changed in Hong Kong, and that that change has 
caught the attention of the committee.
    There have been concerns, but there has been apparently 
little change in Hong Kong. There have been some notable 
exceptions. On May 18, the Hong Kong Government announced its 
intention to reinterpret,\1\ as has been done by the National 
People's Congress in Beijing, the decision of the Court of 
Final Appeal. That decision is seen by some as undermining the 
Court of Final Appeal and the rule of law in Hong Kong.
---------------------------------------------------------------------------
    \1\ English translation of the Interpretation by the Standing 
Committee of the National People's Congress follows the prepared 
statement of Senator Thomas.
---------------------------------------------------------------------------
    Second, the Asian economic crisis has not left Hong Kong 
unscathed. Third, as a result of the accidental bombing of the 
Chinese Embassy, China has indefinitely suspended Hong Kong 
ports of call to U.S. Navy vessels. Finally, with the 
revelations of Chinese espionage at Los Alamos, there have been 
growing concerns that the PRC may be using Hong Kong as a 
conduit for acquiring U.S. technology.
    So the purpose of today's hearing, the first one we have 
had, is to examine what changes have taken place since the 
reversion, and the Court of Final Appeal decision in 
particular.
    [The prepared statement of Senator Thomas follows:]

               Prepared Statement of Senator Craig Thomas

  [Reprinted from the June/July issue of the Center for Strategic and 
                International Studies' Hong Kong Update]

  Hong Kong Two Years After Reversion: Is Staying the Course Becoming 
                            Changing Course?

    In the days before the reversion of Hong Kong to Chinese control, 
one of the British negotiators on the Sino-British Joint Liaison Group 
used to wear a tie with four Chinese characters on it:



0meaning ``basically no change.'' That expression embodied their 
ultimate goal: that there be basically no change in Hong Kong as a 
result of its transformation from a British colony into a Special 
Administrative Region of the People's Republic of China.
    Central to that continuity was securing the rule of law, and the 
keystone to the rule of law was the establishment of the Court of Final 
Appeal. The rule of law played a pivotal role in making Hong Kong the 
vibrant business community it is today. There is perhaps no symbol more 
potent, more representative, of Hong Kong's continuing independence and 
vitality under ``one country, two systems'' than the Court as final 
arbiter of the law in Hong Kong.
    Despite some dire predictions from certain quarters, in the two 
years since reversion Hong Kong has been business as usual. That is, 
business as usual until January 29, 1999, when a small crack appeared 
in the dike. On that date, the Court handed down a decision which 
interpreted Articles 22(4) and 24(2)(3) of the Basic Law so as to--in 
effect--expand the universe of those individuals with a right of abode 
in Hong Kong.
    The decision was received with something less than enthusiasm by 
the Hong Kong and Beijing governments, which suddenly found themselves 
faced with the prospect of a flood of new immigrants. As a result, the 
Hong Kong government took the unusual step of first asking the Court 
for a ``clarification'' of its decision, and then taking the 
unprecedented step of asking the Standing Committee of the National 
People's Congress to, in effect, reinterpret the applicable provisions 
of the Basic Law. It is that decision which I believe is the first blow 
to ``one country two systems,'' and a threat to the sanctity of the 
rule of law in Hong Kong.
    As I have said publicly since the decision, it is not my place or 
my desire to interfere in what is essentially an internal matter of 
Hong Kong, or to offer my interpretation of the Basic Law. I am, 
however, in a position to comment on the perceptions outside Hong Kong 
of what the Hong Kong government is doing, and the effects those 
perceptions may have.
    Let me emphasize at the outset that I do not attribute any sinister 
or nefarious motives to the government in general, or Chief Executive 
C.H. Tung in particular. There is no denying that the Hong Kong 
government faced a Hobson's choice; if the government let stand the 
decision of the Court, it would--by its own figures--be faced with a 
potential influx of 1.67 million new residents, an increase of almost 
twenty-five percent in an already densely populated metropolitan area; 
and if it asked the Standing Committee of the National People's 
Congress for a reinterpretation of the Basic Law, it was essentially 
inviting that body to overrule and nullify the court's decision. And as 
a legislator, I can certainly appreciate the situation whereby a court 
ruling places a huge burden on government.
    But sometimes appearances can be as damaging as realities. For 
example, in the American legal system a judge or attorney can get 
herself into ethical hot-water simply for doing something that could 
appear improper, even if the act itself is not actually improper. In 
this case, the appearance to those of us outside Hong Kong is that the 
Hong Kong government did not want an expanded right of abode before the 
Court decision, expressed its opposition to the decision when it was 
handed down, explored ways to get around it by asking for a 
``clarification'' in February, and finally decided to go to the 
National People's Congress to get it to ``overrule'' the decision. The 
perception is that the government has set a precedent that when the 
Court hands down a decision with which it disagrees, or the 
implementation of which will be difficult, the government will simply 
go ``over the head'' of the Court to Beijing. Statements by members of 
the Hong Kong government that ``the Government is seeking an 
interpretation of the Basic Law, not an appeal against the [Court] 
judgments--two completely different things'' are--under the 
circumstances--simply a distinction without a difference.
    Such appearances undermine foreign confidence in the finality of 
the decisions of the Court, and, by extension, confidence in the rule 
of law. They also undermine confidence in the application of the maxim 
``Hong Kong people ruling Hong Kong.'' And therein lies the problem for 
Hong Kong vis-a-vis the outside world.
    Hong Kong's pre-1997 success as a center of international trade and 
finance was based in large part on the fact that, because of the 
colony's firmly entrenched dedication to the rule of law, foreign 
companies felt comfortable investing there. A great deal, if not a 
majority, of the business community's jitters preceding the 1997 
handover were centered on its concerns as to whether the rule of law, 
and thus a favorable investment climate, would survive reversion 
intact. Reversion came and went with no perceptible change, until now.
    Certainly this decision to turn to the National People's Congress 
on the right of abode issue is not the death knell for the rule of law 
in Hong Kong--far from it. But it makes people outside Hong Kong ponder 
in the back of their minds whether this might not just be the first 
crack in the dike. It makes them wonder if in 10 years' time they'll 
look back and be able to say, ``See, there's where it all started.'' 
That kind of second-guessing, however minuscule at this point in time 
is bound to translate for any prudent businessman into some hesitancy 
in pursuing his investment or business strategy. And that translates 
into problems for Hong Kong down the road.
    I readily admit that it is within the authority of the Hong Kong 
government to ask the National People's Congress to interpret 
provisions of the Basic Law. But given what is at stake under the facts 
of this particular case, I wish that it would have demurred. I, like 
many other observers of Hong Kong, will now hold my breath and hope 
that resorting to the National People's Congress remains the unique 
exception, and does not become the rule. That is the ``other shoe'' 
which I would hate to ever hear drop.
                                 ______
                                 
    (This is an English translation of the original instrument in 
Chinese and is published for information.)
 the interpretation by the standing committee of the national people's 
 congress of articles 22(4) and 24(2)(3) of the basic law of the hong 
  kong special administrative region of the people's republic of china
    (Adopted by the Standing Committee of the Ninth National People's 
Congress at its Tenth Session on 26 June 1999)
    The Standing Committee of the Ninth National People's Congress 
examined at the Tenth session the ``Motion Regarding the Request for an 
Interpretation of Articles 22(4) and 24(2)(3) of the Basic Law of the 
Hong Kong Special Administrative Region of the People's Republic of 
China'' submitted by the State Council. The motion of the State Council 
was submitted upon the report furnished by the Chief Executive of the 
Hong Kong Special Administrative Region under the relevant provisions 
of Articles 43 and 48(2) of the Basic Law of the Hong Kong Special 
Administrative Region of the People's Republic of China. The issue 
raised in the Motion concerns the interpretation of the relevant 
provisions of the Basic Law of the Hong Kong Special Administrative 
Region of the People's Republic of China by the Court of Final Appeal 
of the Hong Kong Special Administrative Region in its judgement dated 
29 January 1999. Those relevant provisions concern affairs which are 
the responsibility of the Central People's Government and concern the 
relationship between the Central Authorities and the Hong Kong Special 
Administrative Region. Before making its judgement, the Court of Final 
Appeal had not sought an interpretation of the Standing Committee of 
the National People's Congress in compliance with the requirement of 
Article 15K(3) of the Basic Law of the Hong Kong Special Administrative 
Region of the People's Republic of China. Moreover, the interpretation 
of the Court of Final Appeal is not consistent with the legislative 
intent. Therefore, having consulted the Committee for the Basic Law of 
the Hong Kong Special Administrative Region under the Standing 
Committee of the National People's Congress, the Standing Committee of 
the National People's Congress has decided to make, under the 
provisions of Article 67(4) of the Constitution of the People's 
Republic of China and Article 158(1) of the Basic Law of the Hong Kong 
Special Administrative Region of the People's Republic of China, an 
interpretation of the provisions of Articles 22(4) and 24(2)(3) of the 
Basic Law of the Hong Kong Special Administrative Region of the 
People's Republic of China as follows:

    1. The provisions of Article 22(4) of the Basic Law of the Hong 
Kong Special Administrative Region of the People's Republic of China 
regarding ``For entry into the Hong Kong Special Administrative Region, 
people from other parts of China must apply for approval'' mean as 
follows: People from all provinces, autonomous regions, or 
municipalities directly under the Central Government, including those 
persons of Chinese nationality born outside Hong Kong of Hong Kong 
permanent residents, who wish to enter the Hong Kong Special 
Administrative Region for whatever reason, must apply to the relevant 
authorities of their residential districts for approval in accordance 
with the relevant national laws and administrative regulations, and 
must hold valid documents issued by the relevant authorities before 
they can enter the Hong Kong Special Administrative Region. It is 
unlawful for people from all provinces, autonomous regions, or 
municipalities directly under the Central Government, including persons 
of Chinese nationality born outside Hong Kong of Hong Kong permanent 
residents, to enter the Hong Kong Special Administrative Region without 
complying with the appropriate approval procedure prescribed by the 
relevant national laws and administrative regulations.
    2. It is stipulated in the first three categories of Article 24(2) 
of the Basic Law of the Hong Kong Special Administrative Region of the 
People's Republic of China that the ``permanent residents of the Hong 
Kong Special Administrative Region shall be:

          (1) Chinese citizens born in Hong Kong before or after the 
        establishment of the Hong Kong Special Administrative Region;
          (2) Chinese citizens who have ordinarily resided in Hong Kong 
        for a continuous period of not less than seven years before or 
        after the establishment of the Hong Kong Special Administrative 
        Region;
          (3) Persons of Chinese nationality born outside Hong Kong of 
        those residents listed in categories (1) and (2).''

The provisions of category (3) regarding the ``persons of Chinese 
nationality born outside Hong Kong of those residents listed in 
categories (1) and (2) means both parents of such persons, whether born 
before or after the establishment of the Hong Kong Special 
Administrative Region, or either of such parents must have fulfilled 
the condition prescribed by category (1) or (2) of Article 24(2) of the 
Basic Law of the Hong Kong Special Administrative Region of the 
People's Republic of China at the time of their birth.'' The 
legislative intent as stated by this interpretation, together with the 
legislative intent of all other categories of Article 24(2) of the 
basic Law of the Hong Kong Special Administrative Region of the 
People's Republic of China, have been reflected in the ``Opinions on 
the Implementation of Article 24(2) of the Basic Law of the Hong Kong 
Special Administrative Region of the People's Republic of China'' 
adopted at the Fourth Plenary Meeting of the Preparation Committee for 
the Hong Kong Special Administrative Region of the National People's 
Congress on 10 August 1996.

    As from the promulgation of this Interpretation, the courts of the 
Hong Kong Special Administrative Region, when referring to the relevant 
provisions of the Basic Law of the Hong Kong Special Administrative 
Region of the People's Republic of China, shall adhere to this 
Interpretation. This Interpretation does not affect the right of abode 
in the Hong Kong Special Administrative Region which has been acquired 
under the judgement of the Court of Final Appeal on the relevant cases 
dated 29 January 1999 by the parties concerned in the relevant legal 
proceedings. Other than that, the question whether any other person 
fulfills the conditions prescribed by Article 24(2)(3) of the Basic Law 
of the Hong Kong Special Administrative Region of the People's Republic 
of China shall be determined by reference to this Interpretation.

    Senator Thomas. Mr. Secretary, we are pleased to have you 
here, sir. We look forward to your comments. If you will 
process.

STATEMENT OF HON. STANLEY O. ROTH, ASSISTANT SECRETARY FOR EAST 
         ASIAN AND PACIFIC AFFAIRS, DEPARTMENT OF STATE

    Mr. Roth. Thank you very much, Mr. Chairman. And it is a 
pleasure to be back.
    And I want to commend you on the initiative in doing this 
hearing on the second anniversary, as you point out. I think it 
is very important for the people of Hong Kong to understand 
that the U.S. Government, both the administration and the 
Congress, still care, that we still follow developments 
closely, that this is a matter of intense interest, and that it 
is not now just a matter of history, 2 years later. And so I 
think the signal you have sent by calling this hearing is a 
very good one.
    I have submitted much lengthier testimony than usual, Mr. 
Chairman, and that is for the reason you pointed out--that this 
is the first hearing that you have held on this issue since the 
reversion--so I thought it would be useful to get a lot of 
thoughts into the record. But I will give a much abbreviated 
oral statement so that you can get to your questions and to 
another panel of witnesses.
    I think that in thinking about the reversion, the 
interesting thing is that until the last few weeks, essentially 
we could say that it went exactly the opposite of what we were 
worried about. Meaning, at the time of the reversion, I think 
all of us were focused on the political agenda--would Hong Kong 
stay Hong Kong? We all remember the pictures of the PLA 
Garrison marching in, and the question: What kind of role would 
they have?
    We watched the construction of a significant office 
building for the Foreign Ministry, and the Chinese Government 
took one of its senior diplomats from London and may put its 
Ambassador in Hong Kong, and we wondered if he was going to be 
a de facto pro consul. We wondered about freedom of the press, 
freedom of assembly, and whether, as you said, Hong Kong would 
be Hong Kong.
    I think what we did not count on was the Asian economic 
crisis. And in fact, for much of the 2-year period, the 
economic issues have far dominated the agenda in Hong Kong 
compared to the rest. So I thought what I would do with my 
remarks is start on the economic side, but then come back to 
the political side, and, finally, to the two specific issues 
that you have flagged.
    On the economic side, I think one has to note the 
unfortunate luck of the new regime in Hong Kong, taking over 
virtually simultaneously with the onset of the Asian financial 
crisis. And so the government had the challenge not only of 
making a transition away from the old form of government under 
the Colonial administration, but also managing the most severe 
economic crisis in several decades.
    In my statement, I give some of the statistics on just how 
sharp the decline was, particularly with respect to property 
values, but also on some of the other indicators, including, 
not unimportantly, unemployment, which went up to I think a 
historic high of over 6 percent. And so what I did not capture 
in my statement, but I think I would like to do now, is a sense 
of the malaise, even, that I found when I visited Hong Kong on 
several occasions in 1997 and 1998, that there was a sense that 
things really were profoundly in trouble in terms of the 
economy, the mood was sour, and that people were focused on the 
situation, and that, as a result, we found that issues which 
might not have gotten as much attention otherwise had become 
huge issues.
    For example, you remember probably the enormous controversy 
in Hong Kong over the avian flu, the question of how the 
government handled what is called here the ``sick chicken 
issue.'' And then there was another set of controversy over the 
problems that attended the opening of the international airport 
in 1998. And still a third large controversy, this one more 
substantive perhaps, attending to the intervention of the Hong 
Kong Government in the market to secure the currency against 
speculation from the outside.
    But I think all of these issues would have been issues, but 
they became larger issue because of the context in which they 
occurred, which was the overall recession within Hong Kong 
itself, and the general sense of unhappiness. I think now, as 
we approach the 2-year mark today, there is a lot better news 
on the economic situation. This is not to say that Hong Kong is 
fully recovered, but the statistics are pretty dramatic.
    The stock market index has nearly doubled in value since 
last August, and property values are up 15 percent over a year 
ago, August. The Hong Kong Government is predicting a very 
slight, but nevertheless positive, rate of economic growth for 
this year of a half a percent, which compares favorably to a 
decline in 1998--a most unusual situation in Hong Kong which is 
famous for economic growth--and the OECD is predicting 4 
percent economic growth in 2000, which is a fairly robust 
level, if achieved. And tourism is starting to pick up once 
again, which is important both economically and substantively.
    So I think that what we are saying is that the worst of the 
economic crisis appears to be over. And I think that is going 
to have considerable influence on the overall mood in Hong Kong 
and the attitude toward the government.
    So, with that economic background in mind, let me turn to 
the political situation. And I think you captured it correctly 
in your opening statement, that in terms of many of the worst 
predictions or fears about what might happen, they simply have 
not materialized. The PLA Garrison has been all but invisible 
within Hong Kong. The last time I checked, they had not even 
changed the name of the barracks from Prince of Wales, which 
seems quite remarkable to have Chinese PLA forces in the Prince 
of Wales Barracks.
    The Hong Kong authorities have clearly been in charge on 
major issues. No one had the sense that China was running Hong 
Kong from the Foreign Ministry building, that C.H. Tung was the 
Chief Executive in fact and not just in title. That, in many 
ways, concerns about freedom of the press did not materialize. 
This is not to say that there have not been some concerns about 
self-censorship. But, on the other hand, here we are in Hong 
Kong, as part of China, and Wang Dan is still writing a 
bimonthly column, and there is fierce criticism of the 
government in the press. So that certainly one would say this 
is a far more open press than one sees in the rest of China.
    There has also been freedom of assembly. This is the only 
place in China where there was a demonstration this year on the 
10th anniversary of Tiananmen. That is not a minor point in 
terms of keeping Hong Kong as Hong Kong, something you do not 
see in the rest of China. And I have given more examples of 
these type of things that demonstrate that Hong Kong has not by 
any means reverted to some type of much more controlled regime 
in terms of press, assembly, association. And so I think, 
overall, again, if you go back and look at some of the fears 
that had been advanced 2 years ago at the reversion, these have 
not thankfully materialized.
    Nevertheless, there have been some significant problems. 
And I do not think that they should in any way be slighted. And 
I think you mentioned the most important of those at the 
current time, which is the issue of the right of abode and its 
relationship to the independence of the judiciary.
    As you know, Mr. Chairman, I am not a lawyer and I am not 
going to expound on the court decision itself and whether it 
was right or wrong. And, in any case, I do not think an 
American Government official should be second-guessing a court 
decision that is derived at in a free judicial system. I think 
the most important point to focus on is what happened after the 
decision. And one of the consequences we live with here at home 
as well is that when the court makes a ruling, then the 
government has to decide how to adjust to it and live with it.
    And in this case, the Hong Kong authorities faced a very 
severe challenge, because they felt that the court ruling 
opened up a potentially destabilizing situation, where Hong 
Kong could be inundated over a period of time with an enormous 
number of returning children, and that this could affect the 
prosperity of Hong Kong and their way of life.
    Faced with this situation, fearful of what the consequences 
of the court decision might be, the Hong Kong authorities had a 
really rather unattractive menu of alternatives on how to 
address this situation. In other words, once the court case 
happened, there was no easy way out. And as a result, the 
government had to look at the different legal mechanisms, of 
which there were several, which I describe briefly in my 
testimony. But the point is they chose a mechanism that was 
legal, is legal, under the current procedures spelled out under 
the Basic Law and the agreements reached, which is to get an 
interpretive ruling from the National People's Congress in the 
mainland.
    I think that we have to distinguish between a set of 
circumstances where you have the Government of Hong Kong, with 
a considerable degree of support--not by any means a consensus, 
but a considerable degree of support--from the people of Hong 
Kong, supporting this decision from a decision where this might 
have been done by the Chinese Government without a request from 
the Government of Hong Kong, which would have been I think far 
more disturbing in terms of preservation of the rule of law.
    Nevertheless, in terms of the bottom line, Mr. Chairman, I 
think the only thing we can say is that we are going to have to 
watch and see how the situation develops. It is way premature 
to conclude that the rule of law is gone from Hong Kong, that 
this single precedent has vitiated the entire court system, and 
guaranteed that in the future the Government of China will 
intervene through this mechanism. I think we are going to have 
to watch and see what happens.
    We have made our concerns known publicly and privately, 
that this is not a situation that we would like to see 
addressed. I discussed this with Anson Chan on her recent visit 
here, as did many other people in Washington. And you have 
heard her public and private assurances that they hope that 
this is a one-off situation, to use the British phrase, that 
they will not have to go on any issue for an interpretation to 
the NPC any time soon.
    If that turns out to be the case, then obviously we will 
not have a major attack on the rule of law, and that this case 
will recede in terms of its political significance. At the same 
time, until the future has spoken for itself, I think we have 
to be very clear that we are watching, that we are concerned, 
that if this were to become a normal way of doing business, a 
regular way of doing business, that we think it would have 
implications, negative implications, for the rule of law in 
Hong Kong. So this is still a work in progress and up to the 
government to manage it well. And we hope they will do so. They 
have given us a commitment that they are aware of the 
implications.
    Let me turn to the issue of export controls. And here, I 
must say that I think it is very important that we start with 
the facts rather than speculation. Meaning that obviously as an 
enormous port with enormous international commerce, there is 
room for concern about the flow of technology and technology 
transfer. That is true in any major city, including our own 
port cities.
    But, having said that, the evidence that we have to date 
suggests that Hong Kong is one of the best in the world in 
terms of managing its export control regime, and we simply do 
not have significant evidence that there is a problem. For that 
reason, the administration has been quite concerned that simply 
because of fear that there might be a problem or that a problem 
could develop in the future, that legislation has been 
introduced and passed in one house that--in the Senate--that we 
feel makes a very unfortunate--that sets an unfortunate 
precedent of treating Hong Kong the same as the rest of China, 
rather than trying to maintain the ``one country, two systems'' 
difference that we have worked so hard to preserve, that even 
in the absence of evidence that there is a problem, that a 
decision was made to take this step, which seems, under the 
circumstances, an overreaction.
    I must say that I think the Government of Hong Kong was 
completely forthcoming during Anson Chan's recent trip here, 
that she focused specifically on the only real indication of 
concern that she was given when she made the rounds on the Hill 
and talked to people about concerns, which was the issue of PLA 
trucks, and the question of whether the controls on the 
inspections of these truck was adequate or whether technology 
might slip across the border in them.
    And she said, first, that categorically, that if anyone had 
any evidence of this, of anything being transshipped, give it, 
and the government would followup. Which I think, coming from 
the Hong Kong authorities, is credible. But, two, that her 
government would try to tighten the procedures on these trucks, 
just to try to make doubly sure that there was not a problem. 
And they are in the process of trying to work that out right 
now, although I do not believe that the new procedures are 
finalized yet, in terms of implementation.
    But what I am saying is, one, let us make sure we have a 
problem before we go down the path of lessening the divide 
between ``one country, two systems,'' and we do not want to 
slide into treating Hong Kong as part of China routinely; two, 
I want to point out that we have the authority at any point 
within the administration, if we see that there is a problem, 
to impose such controls. So this is not a lost moment, that if 
the Congress does not act now, that there will not be an 
ability to deal with this problem. We think there will be an 
ability to deal with this problem.
    So I would hope that this legislation does not advance any 
further than it has already gone.
    Finally, Mr. Chairman, let me just touch upon an issue 
which got discussed in my last hearing with you in the context 
of China, which was the decision by the PRC authorities to 
suspend port calls for American military ships to Hong Kong. As 
I indicated at that time, we thought that was a regrettable 
decision. We thought that there was no justification for it on 
the merits, and that it was punitive to Hong Kong, particularly 
economically and, again, not something that was necessary in 
the spirit of ``one country, two systems.'' That this is not 
``one country, two systems.'' That this is not, I want to 
emphasize from the perspective of today's Hong Kong decision, a 
decision by the Government of Hong Kong, and they should not in 
any way be blamed or held accountable or responsible for this 
action by the authorities.
    As you know, China does have responsibility for foreign 
policy and defense for Hong Kong, and so they exercised their 
jurisdiction in this case in a way we did not like and in a way 
we hope will soon cease. But it is not something that the local 
government in Hong Kong decided to do, and so it should not be 
considered as part of their track record. And, needless to say, 
we hope this issue will be corrected as soon as possible so 
that these port calls can be resumed.
    Why do not I stop here and open it up to your questions.
    [The prepared statement of Mr. Roth follows:]

               Prepared Statement of Hon. Stanley O. Roth

                        u.s. policy on hong kong
    Mr. Chairman, thank you for the opportunity to speak before your 
subcommittee this afternoon on the subject of United States policy 
toward Hong Kong. Since I first appeared before the SFRC as the 
Administration's nominee to be Assistant Secretary for East Asian and 
Pacific Affairs almost two years ago, I have appreciated the intensive 
and constructive oversight over U.S. policy in the region, which your 
committee has provided. I have been honored to testify at a number of 
hearings which you have chaired on events in China and U.S. policy 
toward that important nation. Yet, this is the first time we have met 
to discuss U.S. policy toward Hong Kong. I believe there is an 
important reason for that omission.
    Exactly two years ago, on July 1, 1997, China peacefully resumed 
the exercise of sovereignty over Hong Kong. That peaceful transfer was 
the product of years of preparation by the leaders of both Great 
Britain and China and by the people of Hong Kong. It was a transfer 
fraught with difficulties and uncertainties and one central question: 
Would Hong Kong be able to retain the openness and the rule of law that 
had made it one of the most vibrant cities in the World?
    The questions we asked, the concerns we felt were primarily 
political: Would Hong Kong actually retain the autonomy it had been 
promised? Would Beijing allow the people of Hong Kong to continue to 
enjoy the human rights they had exercised under British rule? Over the 
course of the past two years, we have watched political developments in 
Hong Kong closely. Most have been positive, although as I will note 
later in my remarks, there are a few worrisome clouds on the horizon. 
Hong Kong has largely remained autonomous, open and observant of the 
rule of law--far more so than any had anticipated.
    Surprisingly, the difficulties, which Hong Kong has encountered 
since the handover, have been not political, but economic. The 
financial crisis erupted just as Hong Kong came under Chinese 
sovereignty, and Hong Kong suffered its first negative growth in over 
25 years. That has posed serious problems for the Government of Hong 
Kong and challenged the confidence of the people of Hong Kong in both 
their government and their future. While Hong Kong has begun to recover 
economically, the difficulties remaining before it are real.
    Given these challenges I would like to reverse my accustomed 
sequence and consider economic developments first, then turn to the 
political. Nonetheless, this two-year anniversary offers a welcome 
opportunity to assess how Hong Kong has done, where it is heading, and 
what this means for U.S. policy.
                         economic developments
    Hong Kong continues to be one of the world's most open and dynamic 
economies--the seventh largest trading entity and the fifth largest 
banking center. As one of the four tiger economies of East Asia--
together with South Korea, Taiwan and Singapore--Hong Kong has been a 
regional hub for large numbers of U.S. companies and the jumping off 
point for many seeking to do business in the People's Republic of 
China. Over 1,100 U.S. companies employ 250,000 Hong Kong workers (10 
percent of the workforce).
Impact of the Asian Financial Crisis
    Despite these strengths, Hong Kong, like the rest of Asia, suffered 
during the regional financial crisis. Property values dropped in 1998 
by as much as 65 percent from their 1997 peak. GDP declined 5.1 percent 
in 1998 and will likely remain flat in 1999. Unemployment, now 6.3 
percent, has grown to the highest levels in thirty years.
    These negative developments were largely not of Hong Kong's making 
and had nothing to do with its reversion to Chinese sovereignty, but 
they did pose the first real challenge to the new government of the 
Hong Kong Special Administrative Region (SAR). Whether fairly or not, 
the new chief executive and Hong Kong's renowned civil service were 
subjected to intense scrutiny by the Hong Kong people who were sent 
reeling by these economic shocks.
    For example, in late 1997 an ``avian flu'' was discovered among 
chickens being sold in the markets of Hong Kong. The Government stepped 
in to destroy all chickens in Hong Kong markets to block the infection 
spreading. Shop keepers and their customers felt frustrated, and the 
Government was criticized. In July of 1998, the new government opened 
the new international airport at Chek Lop Kok. In both cases, the 
government was sharply criticized for problems, which might have gotten 
less attention at other times.
    In August 1998, the Government provoked quite a different sort of 
furor when it spent about US $15 billion to intervene in currency, 
stock and futures markets in order to defend the economy against what 
it perceived as ``manipulators.'' The Financial Secretary and others 
explained at some length why this step did not mark a reversal of Hong 
Kong's commitment to a free market, but many investors appeared shaken. 
They wondered if the new SAR Government would do things differently, 
making Hong Kong a less attractive financial hub than it had been. 
While these questions have continued among some analysts, Hong Kong 
authorities continue to express their adherence to free market 
policies, and Hong Kong continues to be a very attractive location for 
U.S. manufacturers and investors.
    In view of these challenges the SAR Government has encountered over 
the past two years, it is worth noting that Hong Kong's economy and 
confidence in the economy have begun to rebound. The SAR Government has 
undertaken an effective series of modest budget accommodations. It 
froze government land sales (its largest source of revenue) from June 
1998 through March 1999 to stabilize land prices, which have recovered 
15 percent from their 1998 lows. The government is also considering 
strategic changes in economic policy to make the SAR more competitive.
    Last year's business confidence survey by the Hong Kong American 
Chamber of Commerce already indicated that its members were confident 
in the SAR's recovery. 54 percent considered the 1999 outlook as 
``satisfactory'' or ``good,'' rising to 87 percent and 98 percent for 
2000 and 2001.
                         political developments
    Now let me turn to political developments. When Hong Kong became a 
Special Administrative Region (SAR) of China on July 1, 1997, its 
people were promised by the Joint Declaration and the Basic Law that 
the social and economic system, the lifestyle and rights and freedoms 
they had enjoyed as a colony of Great Britain would remain unchanged 
for fifty years. Hong Kong was promised a high degree of autonomy in 
all matters except foreign and defense affairs. Political developments 
since reversion have fulfilled that promise.
Autonomy
    Over the past two years Hong Kong has been governed by Hong Kong. 
The Chief Executive Tung Chee Hwa has worked closely with the civil 
service and Chief Secretary Anson Chan. In all of the management and 
economic issues which I discussed above, the decisions were made by the 
SAR Government without reference to Beijing.
PLA Hong Kong Garrison
    The PLA garrison stationed in Hong Kong has been the primary symbol 
of China's sovereignty over Hong Kong. With the exception of concerns 
over their possible role in transshipments of sensitive technologies, 
which I will discuss below, the garrison has been non-controversial. 
The garrison troops maintain a very low profile. They are mandated only 
to provide national defense and may act in other roles only at the 
request of the SAR Chief Executive. Thus far, they have kept strictly 
to that limited role, have had minimal interaction with Hong Kong's 
uniformed services and have not engaged in business activities.
Human Rights
    One of the most closely watched barometers of Hong Kong's autonomy 
has been its continued respect for fundamental freedoms, including free 
association, freedom of press, and freedom of the speech.
Free Association
    At the time when Great Britain and the PRC were still negotiating 
the hand-over, this concern was thrown into sharp relief by the 
suppression of the Tiananmen protests on June 4, 1989. This tragedy 
immediately sparked massive demonstrations in Hong Kong. Every year 
since, before and after the reversion, the people of Hong Kong have 
held protests and candlelight vigils to commemorate Tiananmen. This 
year, Hong Kong saw a 4,000 person march and a candle light vigil by 
70,000 orderly and reflective demonstrators, all of which happened 
peacefully and without police obstruction.
Freedom of the Press
    Both print and broadcast media in Hong Kong remain free and feisty 
and report without taboos. Reporters and commentators have criticized 
the SAR government for problems in the opening of Hong Kong's new 
airport and its handling of an outbreak of avian flu. Commentary on 
affairs in the PRC is equally vigorous. One newspaper, ``Apple Daily,'' 
regularly published a column by Wang Dan, a leader of the Tiananmen 
student protests now living in the U.S.
Freedom of Expression
    Others in politics and society have also demonstrated their freedom 
to express different points of view. For example, Independent Labor 
Union organizer and Tiananmen activist Han Dongfang broadcasts his 
Radio Free Asia program from Hong Kong. In April, the Frontier and the 
Hong Kong Alliance in Support of Democratic Movements in China 
organized a petition drive to protest the arrest in China of Democratic 
Party and human rights activists. Last month, lawyers and human rights 
activists protested the Hong Kong Government's decision to seek NPC 
interpretation of the Basic Law, a decision I will discuss in a moment.
                            two new concerns
    On all of these political issues where we had had concerns on July 
1, 1997 the record has been quite positive. Since then two unexpected 
issues have arose and raised significant concerns, judicial autonomy 
and the export of sensitive technologies, and I know they have 
concerned you personally, Mr. Chairman.
Judicial Autonomy Under the Basic Law
    Hong Kong has continued to have a high-quality, independent 
judiciary, selected by a non-partisan commission. The highest court, 
the Court of Final Appeal, also includes distinguished jurists from 
other Common law jurisdictions.
    At the same time, there have been several judicial rulings, both in 
Hong Kong and China, that have raised troubling questions about 
judicial autonomy. In perhaps the most controversial case, the SAR 
Government requested the National People's Congress to review a ruling 
by the Hong Kong Court of Final Appeal, which, the government claimed, 
could allow over 1.6 million Chinese to flood into Hong Kong. Just this 
Monday, the Standing Committee of the NPC issued an interpretation of 
the relevant Basic Law provisions on the Right of Abode. This had the 
effect of reversing in part the Court of Final Appeal ruling regarding 
which children of Hong Kong residents had residency rights in Hong 
Kong.
    That is the short summary of the case, but the issue is more 
complex than that. Concern over unlimited mainland migration into Hong 
Kong troubled the colonial government of Hong Kong for many years. 
Along the border arose an intimidating fence line to discourage illegal 
migrants. Hong Kong residents feared that new migrants could threaten 
their jobs and make the over-crowded city almost unlivable. It was 
against this background that the Basic Law sought to establish limits 
on the rights on Hong Kong residents to bring their families to Hong 
Kong from China.
    When a group of Hong Kong residents filed a test case to clarify 
exactly who was entitled to the right of abode, the court ruled that 
the Basic Law had not limited the right as closely as the drafters had 
intended, leading to the government estimate that over one million 
additional family members from China would be allowed to enter from 
China.
    This was a result troubling to both the government and most Hong 
Kong residents. There were no easy remedies. The Government could 
request the National People's Congress in Beijing to amend the Basic 
Law, it could seek an interpretation of the Basic Law, again from the 
NPC, or it could request the court to reconsider its ruling. Each 
approach was legal, each approach had its particular difficulties. The 
Government chose to seek an interpretation.
    Although the Basic Law does include a process for seeking such an 
interpretation, this action sets what we hope will not leave a 
troubling precedent. Frequent resort to interpretations by the National 
People's Congress could render the SAR Government immune from any 
judicial decision it wished to reverse and spell the end of both the 
powers of judicial review and Hong Kong's autonomy from Beijing. On the 
other hand, this could simply be, as the SAR Government insists, an 
extraordinary case.
Export Controls
    The 1992 Hong Kong Policy Act mandated that the U.S. treat Hong 
Kong as a separate entity from the PRC for purposes of controlling 
exports of sensitive technologies ``as long as the United States is 
satisfied that such technologies are protected from improper use or 
export.'' To carry out this mandate, the Administration has kept the 
status of Hong Kong's trade control system under close and continuing 
review. There have been extensive bilateral discussions, exchanges of 
information and verification visits by interagency teams and Commerce 
Department investigators. We have been satisfied, that the Hong Kong 
Government since the handover has been diligent in implementing its 
system and open to cooperation with the U.S. and other countries that 
wish to retain control over sensitive technology exports.
    We completed our most recent inspection of Hong Kong's export 
control enforcement in March and April of this year. It confirmed once 
more that Hong Kong continues to have an effective trade control 
regime. There is no confirmed evidence that Chinese officials have 
interfered in Hong Kong export control decisions.
    In 1998, Chief Executive C.H. Tung received a petition from an 
influential mainland company to return a Chinese armored personnel 
carrier Hong Kong Customs had seized in 1997. On its own initiative, 
Hong Kong Customs had seized the vehicle in transit from Thailand, 
where it had been featured in an exhibition, back to China, because the 
shipper had not obtained the required license. The petition was 
rejected. The Hong Kong Government fined the shipper and confiscated 
the armored personnel carrier. This was the kind of response which our 
export control officials have come to expect of the Hong Kong 
authorities.
    Recently, concerns over Chinese espionage and the integrity of U.S. 
export controls has led in turn to new questions about whether 
militarily sensitive technology might have been transshipped to China 
through Hong Kong. The Cox Committee's report asserted that the PRC 
commonly imports sensitive technologies through Hong Kong and 
hypothesized that such transshipments might occur either through PRC 
controlled companies or via PLA vehicles crossing the land border 
between Hong Kong and China without inspection. The Cox Committee's 
conclusions on the subject were sharply at variance with our own 
assessments.
    Nonetheless, we followed up on the concerns raised by the Cox 
Committee, and we discussed with Hong Kong officials the possible use 
of PLA trucks for the transit of sensitive technologies. We have made 
clear to the Hong Kong authorities that the ball is in their court. 
They need to ensure that all PLA trucks transiting the Hong Kong PRC 
land border are subject to inspections and update us on their efforts.
    Following on the heels of the Cox report, a number of Members of 
Congress have proposed to legislate a stiffer export control regime for 
Hong Kong. I believe such proposals are inappropriate for several 
reasons. As I noted above, cooperation between Hong Kong and U.S. 
officials in enforcing export controls on sensitive technologies has 
been excellent. If there are problems, the Administration already 
possesses the legal tools to address those problems, even to impose 
harsher export control requirements on Hong Kong. Finally, the United 
States has a policy interest in supporting Hong Kong's status separate 
and distinct from China. We should not, as some Members of Congress 
have proposed, treat Hong Kong like China when there is no evidence 
indicating we need to do so.
                        u.s. military stop overs
    Before concluding this review of Hong Kong and U.S.-Hong Kong 
relations, let me turn briefly to the recent decisions by the PRC to 
deny U.S. military planes and ships access to Hong Kong. These denials 
have occurred as a response by Beijing to the tragic accidental bombing 
of the PRC embassy in Belgrade. They reflect a central fact of Hong 
Kong's status, one which we have understood from the day the Basic Law 
was promulgated: Beijing retains control of defense and foreign affairs 
matters in the Hong Kong SAR.
    I hope and, perhaps optimistically, expect that the U.S. and China 
will soon get past the current impasse, which led Beijing to deny our 
military ships and aircraft access to Hong Kong. I see no reason to 
conclude that these denials reflect a change in Beijing's approach to 
the autonomy of Hong Kong in matters other than defense and foreign 
policy.
                               conclusion
    Since I have not testified in front of this committee before on 
Hong Kong, I have taken this opportunity to present in some detail my 
assessment of its current situation and of U.S. interests there. As I 
have made clear, the challenges facing Hong Kong and our interests 
there are different from what I would have predicted two years ago.
    Hong Kong continues to be a vibrant city, economically, socially 
and politically, and the United States has very significant interests 
in doing what we can to ensure that it remains so. We do that by 
treating Hong Kong separately from China in law and policy as long as 
it continues to exercise a high degree of autonomy. The Hong Kong 
Policy Act of 1992 gives us the flexible tools necessary to work with 
an autonomous Hong Kong under Chinese sovereignty. We also support Hong 
Kong's unique status through the continued presence of U.S. companies 
and citizens in Hong Kong. Our challenge is to stay the course and to 
encourage the PRC to do likewise.

    Senator Thomas. OK, thank you. Thank you very much, Mr. 
Secretary.
    Let us just start with your last issue. What is your 
prospect of this changing? Despite the fact that the PRC makes 
the call, Hong Kong must have some influence on who comes into 
that port, at least in urging change. What do you see happening 
in the future?
    Mr. Roth. I think, unfortunately, that this issue is caught 
up in the much larger issue of the overall U.S./China 
relationship. As you know, there are many areas of discourse 
and diplomatic activity with China, which have not returned to 
usual since the accidental bombing of the embassy. And we have 
been trying very hard to get all of these channels reopened, 
including the negotiations on WTO, the human rights dialog, the 
overall normal relationship, where all the contacts have been 
suspended, and specifically this Hong Kong piece.
    Needless to say, the ball is in the Chinese court. We feel 
we have done everything we can to respond to the tragic 
accident. We have apologized, as I went through in great detail 
the last time, the sequence, conducted our own investigation, 
sent a Presidential emissary to present the findings of that 
investigation. We are pursuing the issue of compensation for 
either the families of those three individuals whose lives were 
lost or those who were injured, and are trying to do the decent 
thing on that grounds, and are pursuing internally the question 
of internal culpability, if there is any, within the 
organizations that were responsible for the accident itself.
    So we feel that, as a package, the administration really 
has done everything that could be done in the face of this 
accident, and now we really think that, having presented all 
this to China, that it is up to the Government of China to 
acknowledge that we have done the best we could under these 
tragic circumstances and to start resuming business as usual.
    They have not, to date, chosen to do so. And I am not in a 
position to speak for them as to when they will. I can simply 
use this platform today to restate the willingness on the part 
of the administration to reengage across the board with them as 
soon as possible, because we think it will be mutually 
beneficial.
    Senator Thomas. Do you think this is symbolic of whether or 
not we are in an engagement situation, this port of call thing?
    Mr. Roth. Well, I think, unfortunately, that has gotten 
linked up into the overall engagement, even though I would have 
tried to make an argument that Hong Kong should have been kept 
separate.
    Senator Thomas. You talked, then, before that about this 
technology movement. And you indicated that, of course, Hong 
Kong has for a number of years been involved in an arrangement, 
when it was a British Territory. That no longer exists, of 
course, even though they have continued. Would it not be hard 
to imagine that if the PRC--I mean, after all, there is a 
movement, a great deal of movement of commerce, is not there, 
between Hong Kong and the mainland?
    Mr. Roth. Of course.
    Senator Thomas. How could you feel comfortable that items 
that were moved to Hong Kong but we did not intend to move to 
the mainland would not move?
    Mr. Roth. I think that the main source of comfort is that 
you have the same people and the same procedures that everyone 
gave such high grades to under the British still doing the very 
same system, you know, manning the border, manning the export 
control regime system. And so, the extent we had confidence 
about it before, I think there is every reason to think we 
should now.
    The only difference that we have been able to find--you 
know, the only difference cited to us so far--has been this 
case of the example of the PLA trucks. That is the only 
different situation. And in that case, besides from the fact 
that this is, in and of itself, a fairly small loophole--
meaning that a very small portion of China's trade goes through 
that mechanism, or commerce goes through that way, but, beyond 
that, that procedures are--you know, the government is trying 
to strengthen the procedures to just make sure that nothing 
improper is going on in terms of inspection regimes for those 
trucks.
    So, this is still a work in progress. I will have to report 
back to you the next time as to whether this has been finalized 
between Hong Kong and the PLA to work out these procedures. But 
I think it is an example of the Hong Kong authorities trying to 
be responsive to a concern, even though they have not been 
presented with any evidence yet that there is an actual 
problem. I think that is a good attitude.
    Senator Thomas. Well, you indicated, and properly, that the 
PRC has maintained the jurisdiction over foreign affairs and 
the military and defense and so on. If they argued that these 
goods were military or defense, why would not they exercise 
some authority under that criteria?
    Mr. Roth. Well, I think the issue is whether there is an 
export control regime, right--is there some mechanism in 
which--you know, the export control regime--is Hong Kong's 
regime being violated? And I think it is for those reasons that 
Hong Kong is asking to inspect the cargoes.
    And it is not clear to me that we are going to have a 
confrontation over this. I think it may be possible for the 
Hong Kong authorities to work this out with the PLA. Thus far, 
they have had a rather good relationship with the PLA, not an 
antagonistic one.
    Senator Thomas. What is your impression, then, of the pre-
licensing and the post-shipment check notion?
    Mr. Roth. Well, I think, again, for me, the issue comes of 
how we treat Hong Kong versus how we treat China. That we have 
worked very hard in the administration to try to greatly expand 
the question of checks, export controls, you know, with China 
itself. That was one of the main issues that the President 
tried to accomplish at the summit last year, was to get these 
checks, because we felt that that would be important to give us 
greater confidence on facilitating additional exports from the 
United States.
    But we have felt that Hong Kong was a very different kettle 
of fish, as it were, from China--one, at the level of 
principle, as I tried to explain, the ``one country, two 
systems'' that we are trying to distinguish between China and 
Hong Kong, and not automatically apply every procedure that 
applied to China to Hong Kong. And the Congress in fact took a 
leading role in the legislation, trying to make it clear that 
the Congress wanted to keep as much as possible in place with 
Hong Kong that had been in place prior to reversion.
    But, second, on the specifics of the issue, we felt that 
Hong Kong had a good record on this, and so we did not need the 
same procedures for Hong Kong that we needed with China. We 
felt that their same controls that worked before reversion 
would work afterwards. And so until we see evidence to the 
contrary, we think one still has to have some confidence in 
their system and, meanwhile, try to close the one loophole that 
has been cited.
    Senator Thomas. I suppose one of the difficulties in terms 
of perception is with the espionage thing, when illegal--what 
we considered to be illegal or improper materials move out of 
the United States directly, then it is pretty suspicious they 
might also move out of Hong Kong. Is that not so?
    Mr. Roth. At one level, of course. At another level, if you 
look at the problem in the United States, I mean we are talking 
about a very different problem in terms of the espionage. And 
it was not things smuggled out across borders, in that sense, 
right, it was the computer problem, more in the controls at the 
laboratories. So I just would not want to extrapolate too far 
from what happened at Los Alamos and maybe other laboratories 
here.
    Senator Thomas. Well, it was not all computers.
    Mr. Roth. No.
    Senator Thomas. It was also equipment for launching 
satellites and things of that nature, as well.
    You mentioned the economy. What has been the impact, in 
your view, with respect to outside investment in Hong Kong?
    Mr. Roth. I regret to say that I did not bring the 
investment figures up with me. But let me get that for you 
rather than make it up.
    Senator Thomas. I suspect there has been some reluctance, 
is there not, to continue investment as it was?
    Mr. Roth. Well, I think one would have to look at 
precedents.
    Senator Thomas. Disneyland I guess.
    Mr. Roth. I think one has to distinguish two different 
issues. One is, is there reluctance to invest because of the 
reversion--meaning the changed control--versus has investment 
fallen off because of the very severe recession which happened 
almost simultaneously, and trying to distinguish. But let me 
get you a solid answer on that.
    Senator Thomas. No, I agree with that. I think there are 
two different reasons. However, the impact, the result of those 
two different events, could become intermingled at some point, 
in terms of the economy.
    Mr. Roth. Right.
    Senator Thomas. It is my understanding that there is less, 
or even little, manufacturing there going on, that that has 
moved pretty much up to the south coast, into Shanghai, where 
it is much less expensive.
    Mr. Roth. Sure. But that had taken place long before the 
reversion. That is not a unique phenomenon. This is something 
going on for a long period of time, and probably a decade. But 
I think you will find that the Hong Kongers are seized with the 
issue of how do they regain some of their competitiveness and 
retain their economic vitality. Because Hong Kong has become an 
expensive place to do business. And particularly if you are not 
doing manufacturing but doing services, then your cost of 
living is high. If your property is astronomical, if rents are 
high, if labor costs are high, in this kind of global market, 
people can and do go elsewhere.
    So Hong Kong has been giving an awful lot of attention to 
what does it need to do to become a--to regain and stay 
competitive, particularly in high tech and in information 
services. And they have not gotten all the answers yet, but 
they are working on it.
    Senator Thomas. Well, I think this is the point. And as you 
point out, there may be two separate and even apart reasons, 
but, nevertheless, the question is now, to some, where is the 
better place to do business? And I guess I am asking, how has 
that impacted Hong Kong?
    Mr. Roth. All I can tell you right now is I have not been 
deluged from complaints when I go to Hong Kong--which I try to 
do fairly often--that somehow the business environment has 
changed for the worse. Businessmen, including expatriate 
businessmen, are not complaining to me that the rules have 
changed, that the rule of law has disintegrated, that it has 
become a corrupt place, that it is no longer Hong Kong, and 
that in any way it has become unattractive. Their concerns have 
been more labor costs, property costs, availability of 
facilities and that, not the issues of the change in the 
system, per se.
    But let me go back and try to give you a detailed answer.
    Senator Thomas. I guess it is interesting. There has been 
obviously competition for some time as to where the gateway to 
trade will be in Asia, whether it will be Shanghai, whether it 
will be Singapore, whether it will be Hong Kong. And I guess 
one of the questions we ask ourselves, because of the changes 
that have taken place, what impact, for instance, the pegging 
to the dollar has, and some of those kinds of things, what it 
has in this competition and where in fact one would expect the 
economy to go now.
    Mr. Roth. Yes, I think that they do have the problem of the 
fact that they have to compete both with the vast lower-cost 
labor market across the border, but also the increased 
sophistication of parts of the Chinese economy, and I think 
particularly in Shanghai. That has become an increasingly 
attractive, modern, cosmopolitan city, capable of attracting 
business and a rather significant investment in the past. And 
of course other competitors outside, of which you mentioned 
Singapore, which is putting a lot of work on its own 
improvements in information technology and trying to become 
ready for the next century in terms of services.
    So I think they do face some competition. But I think a lot 
of those parameters, if not most, are going to be on the 
economic side. And one has to look at whether their total 
impact of their policies in a variety of fields, not just the 
exchange rate, is going to make Hong Kong competitive or not.
    Senator Thomas. Let us go back to the judicial question. Do 
you think that the Hong Kong Government's request for an 
interpretation from the People's Congress jeopardizes their 
judicial autonomy or strengthens it or has no impact? What is 
your impression of that?
    Mr. Roth. I think the most I can say at this point is it is 
too early to tell. I think it is not appropriate at this point 
simply to assert that there is no problem, because we do not 
know if there are going to be more cases in the future, if 
there are going to be a lot of cases in the future. We do not 
know if there are going to be cases in the future where the 
Hong Kong Government will not request such an interpretation 
but it will be forthcoming anyway, which would be a much more 
dire scenario.
    At the same time, we do know what the government has said. 
Which is that it hopes that this is a one-time exception and 
that it is going to work hard to try to keep it that way, 
because it understands the consequences. So I think it is 
premature to sound the death knell for the rule of law based on 
this one precedent. But I think we cannot simply say we are not 
concerned and that we are not watching this, you know, that 
everything is going to be fine. It matters what Hong Kong does.
    Senator Thomas. This Abode case was one in a series of 
cases that have been controversial in Hong Kong. Then I guess 
maybe you have answered it. Do you think there will be a 
pattern, then, of reversion, of going beyond what now is called 
the Court of Final Appeal but apparently is not?
    Mr. Roth. Without pretending I have a better crystal ball 
than I do, I can only cite at this point what the government 
says. Which is, clearly, they understand the implications of 
doing what they have done, which was done with great 
reluctance. And they state their intention not to go this route 
not only not frequently, but they expressed their hope that 
this could be a one-time event. But the proof of the pudding is 
in the eating. And so we are going to have to watch while the 
pudding gets eaten.
    Senator Thomas. Would you think that the economic--what--is 
their 6 percent unemployment?
    Mr. Roth. I think that is about right.
    Senator Thomas. Which is substantially higher than they are 
accustomed to. Would you think that would have any impact on 
the valuation of the Hong Kong dollar now?
    Mr. Roth. I think that Hong Kong faces a particularly 
difficult situation because of the interaction between the 
politics of the issue and the economics of the issue. That the 
peg has taken on enormous significance as an indicator that 
nothing has changed in Hong Kong, but they are going to 
continue the same policies, that the economy is strong, the 
currency is strong and that people do not need to be concerned.
    Therefore, a change in that peg, regardless of the economic 
motivation, has an impact, because some people are going to 
interpret it as well, they could not hold it now that it is 
reverted, and see, they are just not as good as the old guys. 
And that puts the government in a very difficult position, 
because it has to deal with the political implications both on 
its own people and on foreign investors, as well as with the 
economic implications.
    Thus far, the government--when I discussed this with Anson 
Chan a couple of weeks ago, she made it absolutely clear that 
their determination is to hold the peg, because they believe 
that the impact of changing it would be quite extreme. And so, 
despite the fact that this causes them some economic 
difficulties, they appear determined to keep it this way.
    Senator Thomas. What is your impression of the--not 
stability--the strength, the effectiveness, of the Tung 
administration with respect to the legislature?
    Mr. Roth. I do not want to be in the position of giving out 
a report card, per se, and grading them. I think that they have 
had a more turbulent path than expected, partially because of 
external events--as I mentioned, particularly the financial 
crisis, which was the first time in several decades that they 
had an economic situation this bad, which made their job all 
the more difficult. I think that within that context, the fact 
that the economy is making some very significant improvements 
is, in and of itself, a good sign. It suggests that the 
government has had some effectiveness in this area, which is 
crucial.
    At the same time, I do not think one could say that they 
have managed every issue as well as they could have. And in 
fact, you will hear the Hong Kong leadership that itself, in 
terms of the airport, in terms of some of the issues that they 
wish they had done a better job of it. So I think you cannot 
say that it has been perfect, but I think you can certainly say 
that it has been credible.
    Senator Thomas. Is the--I guess the democratic wing of the 
Martin Lee opposition, is it still as active as it was a couple 
of years ago?
    Mr. Roth. Quite active, as we would hope it would be. That 
you continue to see Mr. Lee speak out. His remarks continue to 
get covered in the Hong Kong press as well as in the 
international press. He has not diminished his criticism a wit 
on various things. He has pronounced on the rule of law, right 
of abode issue very recently. He has spoken out on the second 
anniversary, to express some of his concerns. So I think that 
you see a quite vigorous opposition effort there.
    Senator Thomas. Well, Mr. Secretary, I tend to agree with 
you. I think, given the difficulties, the economic 
difficulties, that have come on top of what you would expect 
the difficulties a change would be, they have done a pretty 
good job, and hopefully will continue to do well. And some of 
the difficulties that have resulted in the reduction of 
property values and so on may be helpful over a time, when they 
are able to get some more satisfied in terms of competition and 
so on.
    Thank you very much for being here. We want to stay in 
touch with you on it--not only this, but hopefully opening up 
our communications a little more with Beijing.
    Mr. Roth. You bet. Thank you very much, Mr. Chairman.
    Senator Thomas. Thank you. I appreciate it.
    On our next panel, we have the Right Honorable Margaret Ng, 
Representative for the Legal Functional Constituency, 
Legislative Council, Hong Kong Special Administrative Region, 
People's Republic of China. That is a pretty long title.
    Mr. Stephen Yates, senior analyst, Heritage Foundation, and 
Jerome Cohen, senior fellow for the Asian Studies, Council on 
Foreign Relations.
    Let me explain at this point that it says that Ms. Ng is a 
foreign national as well as a member of the Legislative Council 
with a particular point of view regarding the CFA question. As 
a matter of equity, the committee extended to the government an 
offer, allowing a government official to appear as a witness, 
but they did not do that. So we tried to be as balanced as we 
can.
    Why do not we begin with you, Ms. Ng, please.
    Welcome.

  STATEMENT OF MARGARET NG, NEGOI-YEE, REPRESENTATIVE FOR THE 
 LEGAL FUNCTIONAL CONSTITUENCY, LEGISLATIVE COUNCIL, HONG KONG 
   SPECIAL ADMINISTRATIVE REGION, PEOPLE'S REPUBLIC OF CHINA

    Ms. Ng. Thank you, Mr. Chairman. Thank you very much for 
inviting me. I would like also to thank your committee for 
showing an interest in Hong Kong at this point in time.
    Senator Thomas. Pull the microphone closer so everyone can 
hear you, please.
    Ms. Ng. May I repeat my thanks for being invited here, for 
the committee's interest, as well as for your own interest, Mr. 
Chairman, and your taking the trouble to express your concern 
about the recent events about the ruling of the Court of Final 
Appeal in Hong Kong.
    I have to stress my own involvement. I am here primarily 
because of my intimate knowledge of the cases and of my 
connection with the Legal Functional Constituency. I am a 
lawyer myself, and I have represented these children claiming 
right of abode in Hong Kong in many of these cases which went 
through the courts in Hong Kong.
    Mr. Chairman, I would like to state that the U.S. Hong Kong 
policy, namely that of being especially concerned about Hong 
Kong keeping its separate systems, is very important to Hong 
Kong. My own point of view is that the United States should 
make sure that that message is heard, that if the United States 
at any time should become concerned that a separate system may 
not be maintained, that concern should be voiced, rather than 
to wait till the time comes when you consider that we are no 
longer able to maintain our separate system.
    Mr. Chairman, in the presentation in the paper I have 
prepared for this subcommittee, I have mentioned that the 
concern for the rule of law had been from the start as far as 
the legal profession, and particularly myself, is concerned. I 
have listed the events which led to that concern in the 
testimony, which you have, and if I may refer to some of the 
appendices that went into greater details of what the events 
consisted of. But I suspect that you are more interested in the 
recent event concerning the Court of Final Appeal.
    And I would like to say this, that it is to me not a matter 
of repetition, not a matter of how often it happens, but a 
matter of evaluating what it is that has happened; what 
concerns are raised by the National People's Congress Standing 
Committee reinterpreting provisions of the Basic Law which were 
interpreted by the Court of Final Appeal. I have, in my paper, 
begun by referring to the rule of law as depending not only on 
the existence of an independent judiciary, an independent and 
fearless legal profession, but also, above all, on a government 
which abides by law.
    And I say the importance of this element can readily be 
seen. It is of little use to have an independent judiciary 
handing down judgments against a government if a government 
regularly ignores them. So the attitude of the government in 
being prepared to be bound by law, particularly of the judgment 
of the court, is very significant to the continuation of the 
rule of law.
    Here in the present instance, what the legal profession 
feels very concerned about is that the government, having lost 
its case before the Court of Final Appeal, then took the same 
arguments to the Standing Committee, and invited the Standing 
Committee to come to an interpretation of the same provisions 
of the Basic Law which are opposed to the Court of Final 
Appeal's interpretation. That has an impact on the finality of 
the adjudication of the Court of Final Appeal.
    Also, the manner in which the intervention was sought was 
very unfortunate. Because here is a system which is not 
provided expressly by the Basic Law, which, as you understand, 
is a mini-constitution of the Hong Kong SAR; namely, by way of 
an executive referral to the Standing Committee. If that 
happens, then there is a political channel through which the 
position of a Court of Final Appeal can be, in effect, 
overruled. And that is a matter of some concern to us.
    Also, in this event, what happened was that the Government 
of the SAR could go directly to the State Council to invite the 
Standing Committee to make the reinterpretation. This is not an 
open process. This is a process in which the government had 
direct access to the people making the decisions, and views 
other than that of the government were heard only through the 
brief prepared by the government.
    We are also particularly troubled by the fact that the 
government had interpreted the Basic Law in a very sweeping 
manner, and considered its action to be legal and 
constitutional on a very flimsy legal ground. Of course, Mr. 
Chairman, you are not concerned with who has interpreted the 
law more correctly. However, I would say that where there are 
two possible interpretations--one more general and appears to 
give the government more power, the other more specific, more 
meticulous, which appears to limit the power of the 
government--then it is some indication of the government's 
attitude if it chooses the more general interpretation.
    The interpretation of the Standing Committee, and also the 
process through which this is obtained, would also have an 
impact on all the judges and in judging, for example, 
uncertainty of legal reasoning. The Court of Final Appeal had 
arrived at its conclusion having listened to reasoned 
arguments. After considering full argument and the evidence put 
before it, the Court had come to a conclusion. If that 
conclusion is declared to be wrong, then there must be some 
question as to whether the legal reasoning leading to that 
conclusion was also wrong.
    In the reinterpretation resolved by the Standing Committee, 
it is expressly declared that the Court of Final Appeal had not 
acted in accordance with the Basic Law and had come to the 
wrong interpretation of the provisions of the Basic Law because 
it had not given effect to the true legislative intent. That 
would have some impact on the morale and the confidence of 
judging.
    Documents which were not considered to be admissible as 
evidence; namely, opinions resolved in 1996, were considered as 
showing the true legislative intent of the Basic Law which was 
promulgated in 1990. Now, if such documents were admissible, 
that must mean that, in future, the court's reasoning would be 
affected. That would also have an impact on what submission are 
permissible before the court.
    Mr. Chairman, we are also concerned that good judges are 
not protection against bad laws. If you have a system whereby 
bad laws can be introduced, then good judges cannot protect us 
from it. The authority of the court in the public perception is 
also affected.
    Mr. Chairman, you are aware that in the Basic Law the 
Standing Committee's interpretation on an article of the Basic 
Law will be binding on the courts. If the courts are then seen 
to be applying the reinterpretation, then the authority of the 
court, in the eyes of the public, would become damaged. So this 
would be a dilemma for the court.
    As for the immediate aftermath; the implication of the 
reinterpretation will be worked out in the courts. The 
arguments will be open and public and argued by independent 
counsel.
    In the long term, what we would like to see is that the 
spirit of the rule of law, not only in Hong Kong but also in 
the mainland of China itself, would be strengthened and there 
would be more professional ties between Hong Kong's lawyers and 
other lawyers in other Common Law jurisdictions.
    I would therefore invite the subcommittee and others of 
your colleagues to visit Hong Kong and give it your own overall 
assessment, meet the people and government officials, so that 
you can decide for yourself what the situation is. I would also 
say that our legal system is still there. Commercial dispute is 
still intact. But the rule of law is a seamless garment. And if 
the government has expressed itself to be unwilling to follow 
the court's decision in one case, then its attitude toward 
other cases would also be doubted.
    Mr. Chairman, I think I should stop at this point and 
answer your questions.
    [The prepared statement of Ms. Ng follows:]

                   Prepared Statement of Margaret Ng

             the rule of law in hong kong since 1 july 1997
    The rule of law depends on the existence of an independent 
judiciary, an independent and fearless legal profession and, above all, 
on a government which abides by law. The importance of this last 
element can readily be seen. It is of little use to have an independent 
judiciary handing down judgments against the government if the 
government regularly ignores them. Indeed, if that is the case, people 
will soon find it a waste of time to sue the government.
    The rule of law in Hong Kong has been a cause of concern since the 
handover precisely in that regard. Although the legal system has 
survived intact, and the independence of the judiciary and of the legal 
profession have remained unchanged, the SAR government's commitment to 
the rule of law has become distinctly open to question.
    The cause for concern has been there from the start (see my paper 
``Post-Handover Rule of Law--A New Interpretation'' 1998 attached). In 
the second year of the SAR, two issues aroused particularly strong 
public feelings. The first was raised by serious crimes committed in 
Hong Kong but tried in the mainland where the suspects were 
apprehended. It was accepted that there might be practical difficulties 
in having the cases tried in Hong Kong, but the SAR government's over-
readiness to concede jurisdiction showed a lack of commitment to 
defending Hong Kong's autonomy. Under the Hong Kong system, the rights 
of an accused person are protected. Conceding jurisdiction means 
withdrawing the protection of Hong Kong's law and legal system.
    The second issue concerned the decision of the Secretary for 
Justice not to prosecute the chairman of a major publishing group while 
three of her subordinates were prosecuted, even though she was named 
their co-conspirator. The Secretary disclosed that part of her reason 
for not prosecuting the Chairman of the group was ``public interest'', 
because the group was facing financial difficulties and prosecuting its 
Chairman would, in her view, cause the group to collapse and many 
people to lose their jobs. Such considerations went directly against 
the principle of equality before the law. For details please see my 
speech (attached) moving ``no confidence'' against the Secretary for 
Justice in the Legislative Council on 11 March.
    The most serious cause for concern arose from what has been called 
the ``crisis of the Court of Final Appeal.'' Maintaining a separate 
legal system in Hong Kong and the preservation of the common law system 
is crucial to confidence in the continuation of the rule of law in Hong 
Kong. This was agreed between China and Britain and enshrined in the 
Sino-British Joint Declaration and the Basic Law. To ensure this 
separation Hong Kong was given the power of final adjudication vested 
in the Court of Final Appeal (``CFA'') in Hong Kong.
    The crisis arose out of two landmark judgments of the CFA on 29 
January 1999. These judgments declared unconstitutional discriminatory 
and restrictive legislations preventing mainland-born children of Hong 
Kong parents enjoying the right of abode under the Basic Law from 
coming to Hong Kong. Although widely acclaimed in Hong Kong and 
internationally as an affirmation of Hong Kong's high degree of 
autonomy and protection for human rights under the Basic Law, the 
judgments soon came under harsh attack in Beijing. Four months later, 
upon the request of the SAR Government which said the judgments gave an 
additional 1.67 million people the right of abode, thus creating an 
intolerable burden for Hong Kong, the Standing Committee in Beijing by 
resolution on 26 June declared the Court's ruling wrong and not in 
accordance with the Basic Law. The Standing Committee substituted its 
own interpretation of the relevant Basic Law provisions. The 
interpretation given is the same as requested by the SAR Government. 
Article 158 of the Basic Law provides that the interpretation of the 
Standing Committee is binding on the Hong Kong Courts. A more detailed 
account of the development of the events may be found in my Special 
Newsletter of that date to the legal profession (attached).
    The Standing Committee's resolution is a serious blow to the rule 
of law in Hong Kong. First and foremost, this is a clear case of 
political intervention into the judicial process. The prediction of 
1.67 million arrivals were scaremongering tactics even where the 
Government rightly considers the consequence of the Court's ruling to 
impose too heavy a social burden than Hong Kong can shoulder, the 
proper solution would have been to amend the Basic Law for which due 
process has been provided in the Basic Law. The Government claims that 
under Chinese law, reinterpretation by the Standing Committee is just 
as lawful. This is strongly disputed by lawyers and legal scholars in 
Hong Kong and in the mainland. However, even if both means were allowed 
by law, the process least likely to damage Hong Kong's rule of law 
should have been chosen. No such sensitivity was shown. In fact, the 
more summary and less transparent means is chosen to achieve, in 
effect, an amendment while bypassing all the safeguards of the 
legislative process. This is incompatible with true regard for the rule 
of law.
    Of equal importance to the rule of law is that the law must not be 
allowed to be distorted to serve the government's purpose. The Basic 
Law does not authorize the SAR Government to ask the Standing Committee 
for an interpretation of the Basic Law. Under the common law, the power 
of interpreting the law lies with the court. Article 158 gives the SAR 
courts the power to interpret ``on their own'' provisions of the Basic 
Law within the SAR's autonomy, while stipulating that the CFA should 
refer provisions outside the SAR's autonomy to the Standing Committee 
for interpretation if the interpretation of such a provision is 
necessary in adjudicating a case. The Government asserts it has the 
power to invite the Standing Committee to overrule the CFA by 
reinterpretation under Article 43 and 48. These Articles merely impose 
the duty on the Chief Executive to implement the Basic Law. To claim 
that the CFA's interpretation of an article has made it difficult for 
him to implement it, and he is entitled to seek reinterpretation is 
clearly stretching Articles 43 and 48 beyond their meaning. This also 
bypasses Articles 158 and 159 which protect Hong Kong's autonomy: the 
CFA decides on whether an interpretation should be sought, and the 
Legislative Council decides on whether an amendment should be proposed.
    The legislation which contained provisions struck down by the CFA 
for being unconstitutional was a discriminatory law creating disabling 
restrictions so that people who qualify for the right of abode are 
prevented from asserting them. Illegitimate children are discriminated 
against legitimate children; a father's illegitimate children are 
discriminated against a mother's illegitimate children. Devices for the 
``verification'' of status are set up the effect of which is that 
children of Hong Kong residents from anywhere in the world, including 
Macau and Taiwan, can come to Hong Kong and exercise their right of 
abode as they wish, but children born in the mainland are subject to 
arbitrary decisions of the Chinese Security Bureau for issuing exit 
permits. Only children born after their parents have qualified are 
recognized to have the right of abode while their elder siblings born 
before that event are denied the right. Respect for the family unit 
protected by international human rights conventions are incorporated 
into the Basic Law is not given effect. When these restrictions were 
struck down by the CFA, the Government maintained the court had not 
taken into account the ``true legislative intent'' and requested the 
Standing Committee to reinterpret the Basic Law in accordance with the 
``true legislative intent''. With the exception of the discrimination 
against illegitimate children--which had been done away with long ago 
in China--the Standing Committee interpreted the relevant provisions to 
uphold the Government's position.
    The reinterpretation was sought as a device to drastically reduce 
the number of people eligible for permanent resident status with the 
right of abode. The Government was not content just to curtail by an 
amendment of the Basic Law the number of people who may acquire the 
right in the future, but sought a reinterpretation on ``true 
legislative intent'' which, it hopes, will take away vested rights 
retrospectively. The Government sees it simply as an immigration 
problem straining social and economic resources, and forgets that the 
people it keeps out are not immigrants but children of Hong Kong 
residents on whom the Basic Law has conferred the right of abode. Such 
disregard for rights is incompatible with the respect for the rule of 
law.
    The introduction of the concept of ``true legislative intent'' will 
weaken the rule of law by making the law arbitrary. One of the 
provisions interpreted by the Standing Committee, Article 22(4), 
states:

          ``For entry into the Hong Kong Special Administrative Region, 
        people from other parts of China must apply for approval. Among 
        them, the number of persons who enter the Region for the 
        purpose of settlement shall be determined by the competent 
        authorities of the Central People's Government after consulting 
        the Government of the Region.''

    It was agreed evidence that this provision was an implementation of 
a provision of the Joint Declaration that the practice then prevailing 
on regulating the entry of people from the mainland into Hong Kong. It 
was further agreed evidence that people with the right of abode in Hong 
Kong were not subject to such regulation. Persons ``who entered the 
Region for the purpose of settlement'' referred to mainland Chinese who 
had no right of abode in Hong Kong but who were (still are) allowed to 
stay and, upon completing a 7 year ordinary residency, obtain permanent 
resident status with the right of abode. No evidence, in spite of 
thorough search on both sides, had been found or produced that this 
provision was ever intended to regulate the children of Hong Kong 
permanent residents born in the mainland who acquire the right of abode 
upon the Basic Law coming into effect on 1 July 1997. Yet the 
Government wanted to rely on this provision to provide the legal basis 
for them to impose immigration control on someone who has the right of 
abode. The CFA rejected this distortion. The Standing Committee 
overruled the CFA and upheld the Government's position on the basis of 
``true legislative intent.''
    This concept of ``true legislative intent'' which is not determined 
by any objective evidence not only makes the law uncertain, but makes 
the law mean what the Standing Committee, a political body in Beijing, 
says it means. Interpretation by reference to ``true legislative 
intent'' is fast becoming prevalent. A former drafter of the Basic Law 
has pointed to another decision of the Hong Kong court--on the right of 
abode of adopted children--for not reflecting the ``true legislative 
intent.''
    The Government's ultimate position is that whether one likes it or 
not, its request and the Standing Committee's acceptance of that 
request for an interpretation of the provisions of the Basic Law, be 
the provision within or outside Hong Kong's autonomy, and at any stage, 
whether before, during or after a Hong Kong court hearing, is lawful 
and constitutional because Article 158(1) of the Basic Law and Article 
67(4) of the PRC Constitution provide for it. The Government's 
construction of these provisions to this effect is strongly disputed by 
learned legal opinion in Hong Kong and in the mainland. Leaving aside 
legal arguments, the important question is: If this is indeed the true 
situation--if the Basic Law and PRC Constitution sanction such a 
process, what effect would this have on the rule of law in Hong Kong? 
The answer must be that the common law system will be fundamentally 
changed, and the rule of law seriously undermined since both are 
vulnerable to the intervention of the Standing Committee whenever it 
sees fit to do so.
    It is not good enough for the SAR Government to assert repeatedly 
that only in very rare and exceptional circumstances would it ask the 
Standing Committee to step in. The question is not how rare or 
exceptional. The significance is that it can do so whenever it likes, 
and if it should choose so to do, no power in the SAR can stop it. This 
has made the rule of law more precarious in future. It has also 
provided an open channel for the Standing Committee's intervention.
    The SAR Government's proposal to seek reinterpretation was strongly 
opposed by members of the legal community in Hong Kong and abroad. The 
Hong Kong Bar Association issued numerous statements and appeals to the 
public. Although the Law Society Council took the position that 
interpretation and amendment are ``both lawful,'' and the matter is a 
political choice to be left to the Government, many of its members 
disagree. 630 lawyers from both branches of the profession co-signed an 
appeal to the Government against reinterpretation. Over 360 signed a 4-
page letter rejecting the arguments of the Secretary for Justice. A 
group of some 300 solicitors published an open petition to the Standing 
Committee in the local newspapers not to accept the SAR Government's 
request. The International Bar Association based in New York published 
a statement on 28 May against reinterpretation. The Lawyers Committee 
for Human Rights wrote on 29 May to ask Chief Executive C.H. Tung to 
reconsider. So did the Chairman of the English Bar. All to no avail.
    The Government's conduct in the controversy over reinterpretation 
raises other serious concerns. In increasingly strident language, the 
Secretary for Justice berates those who oppose the Government's move as 
``arrogant,'' narrow-minded, prejudiced, and resisting mainland 
practice because it is alien to the common law which they were trained 
in. They were admonished to study and welcome the mainland system. One 
cannot but begin to wonder, (a) Is the government telling us that Hong 
Kong's system is no longer the common law, but a hybrid of the common 
law and Chinese law, or the common law as restricted by the Basic Law 
interpreted according to Chinese law principles? (b) Is the freedom of 
speech going to be the next victim, and those who dare oppose the 
Government's position, however rational and rationally expressed, going 
to be targeted as enemy of the SAR?
    It should be pointed out that in other areas there has been 
positive progress, such as reaching understanding with the mainland on 
the mutual enforcement of arbitral awards. Faith in commercial 
litigation continuing to be left largely undisturbed is still 
relatively strong. There, the independent judiciary, assisted by the 
independent legal profession, will continue to operate as before, with 
government winning at times and losing at others without resorting to 
political intervention to reverse the results. However, rumblings have 
begun to be heard about the Government changing the rules of the game 
without prior consultation or notice. The more the Government shows 
itself to be inclined to pay scant respect to the rule of law in 
certain matters, the less people will have confidence that the same 
attitude will not apply to all matters.
    To see the rule of law in China is the ardent desire of numerous 
patriotic Chinese people, and in particular, members of the legal 
profession in Hong Kong and in the mainland. By virtue of the fact that 
Hong Kong is now part of China, there is at least one part of China 
where the rule of law prevails. For the long term interest of Hong Kong 
and of the rest of China, the continuation of the rule of law in Hong 
Kong must be defended with total commitment.

    Committee Note.--The attachments mentioned in Ms. Ng's statement 
have been retained in the committee's files.]

    Senator Thomas. Thank you very much. I appreciate your 
concise statement, and applaud your way of doing it. Thank you.
    Mr. Yates.

   STATEMENT OF STEPHEN J. YATES, SENIOR POLICY ANALYST, THE 
              HERITAGE FOUNDATION, WASHINGTON, DC

    Mr. Yates. Thank you very much, Mr. Chairman. I am happy to 
have this opportunity to come before your subcommittee today to 
talk about Hong Kong 2 years after its handover to Chinese 
sovereignty.
    Because I have submitted a statement to the record, I will 
just skim over some of the remarks I have prepared and 
hopefully leave more room for questions and answers.
    Senator Thomas. All of your statements will be included in 
the record.
    Mr. Yates. Thank you.
    At the heart of your committee's interest appears to be a 
legal question. I am not a lawyer. I will give an opinion and 
leave it to the professionals to hash that out. But I would 
like, at the outset, to talk a little bit about some of the 
issues that I thought were important as we entered into the 
transition process, as a way of providing context to how Hong 
Kong appears to us today. Because I think that there is a very 
different perception of Hong Kong today than there was when we 
went into the hand-over. A lot of it was covered in your 
exchange with Secretary Roth about the changes that were beyond 
Hong Kong's control, events that occurred outside of Hong Kong 
but have had a profound impact on its reality today.
    In an analysis I wrote in 1996, I tried to come up with a 
framework that emphasized causes for concern and reasons for 
optimism. Among the causes for concerns I had going into the 
hand-over process was Hong Kong's dependence on trade. I 
thought that because two to three times Hong Kong's GDP, or the 
value of its GDP, is generated in trade.
    And Hong Kong would be particularly vulnerable if there was 
a downturn in China's economy, if there was some kind of 
interference by regulation or other means that would inhibit 
China's economic growth or trade between the United States and 
China. And I thought that that might put Hong Kong in a 
particularly precarious situation.
    As events have transpired, I think Hong Kong's 
vulnerability to trade has come from a completely different 
source, but the concern still remains. I would not recommend 
that they create boundaries or inhibit trade and investment, 
but I think it is just a fact of life that Hong Kong's social 
system and economic system will be at the mercy of forces 
beyond its control.
    I had concerns about limitations on freedoms and democracy. 
The plan of the PRC Government to have the democratically 
elected Legislative Council replaced with an appointed body, at 
least for a time, was of great concern. It seemed to be a very 
bad step to take as the SAR Government was formed.
    I was happy to witness, less than a year later, more than 
50 percent of the Hong Kong electorate, in torrential rain, go 
to elect the first Legislative Council of the Special 
Administrative Region. It was inspiring to see that people in 
Hong Kong remain interested, concerned and active in making 
sure that their government is responsive to their local 
interests. I am hopeful that that kind of an interest will 
continue in the future and that future concerns about basic 
freedoms will be addressed through democratic procedures within 
Hong Kong.
    There was a concern about the spread of corruption and the 
weakening of the Hong Kong system of rule of law. At the heart 
of today's discussion will be issues of rule of law. I do not 
think there has been a great deal of evidence or discussion 
about an unusual spread of corruption within Hong Kong. And I 
think that the Independent Commission Against Corruption has 
been one of the models in Asia of how to effectively try to 
monitor and root out corruption.
    It cannot be perfect--no system will be--but I think that 
it is admirable that it has succeeded to this point without any 
kind of political interference that I can see. There have been 
exceptions. There have been a few cases. And I am sure other 
people will bring them up.
    There was also, finally, a concern about the presence of 
the People's Liberation Army in Hong Kong. We did not know what 
the presence of the PLA in Hong Kong would be like. We knew 
basically where their garrison would be, but we did not know 
whether these people would be seen on the street in uniform, 
how intrusive would this presence be, would there be any kind 
of interference between the PLA and Hong Kong's police. And so 
I think, along these lines, things have gone better than 
expected, although there is concern today because of the 
presence of the PLA, as was referenced in concerns about PLA 
trucks possibly carrying technology across the border into 
China.
    Reasons for optimism prior to the hand-over had more to do 
with China's economic dependence on Hong Kong. It was kind of 
the goose that lays golden eggs. Today, even with Hong Kong in 
recession, it is still a mighty fine place to live compared 
with a lot of China. And Hong Komg still generates a great deal 
of wealth, and it is an important source of economic 
development for China. And so I think that that kind of 
reasoning still holds, to a degree.
    There were reasons to believe that the PRC would be very 
cautious about interfering in Hong Kong because it needed the 
example of Hong Kong's ``one country, two systems'' experiment 
to succeed if they had any hopes of trying to have a similar 
kind of experiment work with reunification with Taiwan.
    And then there was also the great familiarity that people 
in Hong Kong had with the mainland prior to the hand-over. In 
many ways, the social and cultural integration had begun far 
before the political or formal integration did. And I thought 
that was one reason for optimism.
    Many events have taken place since the hand-over. We have 
talked a bit about democracy. We had the election of the first 
Legislative Council in the SAR, the first Legislature with even 
part of its membership within the PRC elected by a direct 
popular means.
    There was a financial crisis and the market intervention 
that has also been discussed.
    The judicial independence was challenged, in the case of 
the right of abode issue. And we have had discussion somewhat 
about export controls that have been suggested as one of the 
responses to the Select Committee Chairman Chris Cox's report.
    There have been human rights covenants signed by China. 
That was something that we had hoped China would do in order to 
bolster support for provisions under Hong Kong's Bill of Rights 
Ordinance. But, at the same time, dissidents have begun to be 
denied entry to Hong Kong. When certain high-profile exiled 
dissidents wanted to come to Hong Kong for meetings to talk 
about prospects for future democracy on the mainland and also 
talk about Tiananmen Square, they were not allowed to enter. I 
do not have evidence that Beijing said anything one way or the 
other on this, but it smacks a bit of Beijing-like intolerance.
    And, finally, the halting of port calls I think is an 
important strategic signal sent to us, but also sent to Hong 
Kong, that says when Hong Kong becomes a pawn in an 
international chess game between the United States and China, 
the interests of the people of Hong Kong are going to be 
discounted, and that there is going to be, I think, a low 
premium placed on their well-being as these strategic signals 
are sent. I think it is unfortunate that this has occurred. 
Many have expressed to me that they think this will be a 
temporary measure of China exercising its sovereign 
prerogative. But no one can guarantee that this will get back 
on course.
    There are still other causes for concern that I will leave 
in my statement. I think that, just to address briefly the 
right of abode issue, again, I would give all the caveats--I am 
not a lawyer, I do not pretend to have understood all the ins 
and outs of this issue, but some of it seems to be common 
sense. It seems as though the ruling made by the Court of Final 
Appeal seemed to be an expansive view of the provisions under 
the Basic Law--some would say erroneous.
    And if so, then it would be grounds for the kind of 
interpretation that has been asked for. Others may address what 
kind of sequence should have been followed. If there was a 
concern about the correctness of the court's initial 
interpretation, what legal procedure should have been followed?
    My concern is, no matter what the legal merits are, it 
appears that a final adjudication was appealed. And on a common 
sense level, there is something wrong with that. And I think it 
is very important for Hong Kong to come up with a proper legal 
mechanism to be able to deal with these kind of challenges in 
the future.
    I think we are fortunate that this was a controversy based 
on an issue that really there is not a large degree of 
disagreement in Hong Kong. Many people in Hong Kong were 
concerned about the immigration repercussions of this broad 
definition of right of abode. And so I think because many 
people were concerned about a large number of new immigrants, 
the substance has not been challenged as much as the process. I 
think the process is politically very, very important. The 
precedent is important. If this is a one-time experiment, I 
assume that the consequences are manageable. But it is a cause 
for concern at the outset.
    On export controls, I would simply state that I think that 
it is very important that we not consider Hong Kong to be just 
another part of China, as long as the government remains 
cooperative and we have no evidence of lack of cooperation on 
these controls. Obviously, if, as Secretary Roth said and as 
many others would say, as soon as there is evidence otherwise, 
the recommendations that Mr. Cox has made and that the Senate 
has considered are very appropriate.
    Thank you very much for this opportunity. I think this 
hearing and the frequent visits by Members to Hong Kong 
demonstrate how important Hong Kong remains in the eyes of U.S. 
policymakers, and we hope for a better future.
    [The prepared statement of Mr. Yates follows:]

               Prepared Statement of Stephen J. Yates \1\
---------------------------------------------------------------------------

    \1\ Members of the Heritage Foundation staff testify as individuals 
discussing their own independent research. The views expressed are 
their own, and do not reflect an institutional position for the 
Heritage Foundation or its board of trustees.
---------------------------------------------------------------------------
                      hong kong under chinese rule
    Mr. Chairman and distinguished members of the Subcommittee, thank 
you for inviting me to address you on this second anniversary of Hong 
Kong's handover from British to Chinese sovereignty. Today's hearing is 
one of the many ways the United States Congress demonstrates to Hong 
Kong, China, and the world that developments in Hong Kong remain vital 
to U.S. interests in Asia and of great importance to U.S. policymakers.
    Mr. Chairman, before making a few observations about developments 
affecting Hong Kong's economic leadership and development towards 
democracy that have occurred since the establishment of Chinese 
sovereignty two years ago (especially recent controversies affecting 
U.S. interests), I would first like to return to an analytical 
framework that I found useful in placing U.S. interests and concerns 
about Hong Kong in perspective prior to the handover. This framework of 
weighing reasons for optimism against causes for concern is found in a 
Heritage Foundation backgrounder titled ``The U.S. Interest in Hong 
Kong,'' written in December 1996. I bring this analysis to your 
attention not because I am the author, but because I think its review 
makes clear how different our perception of Hong Kong is today when 
compared to the period just prior to the transfer of sovereignty. It is 
humbling to realize how limited is our ability to forecast events of 
great consequence, but this review also brings to mind the old clich, 
``the more things change, the more they remain the same.''
                    pre-handover causes for concern
    Hong Kong's Dependence on Trade. Hong Kong's dependence on foreign 
trade is a cause for concern because a loss of autonomy could diminish 
its global competitiveness and put at risk the jobs of millions of 
workers. The total value of Hong Kong's trade typically amounts to 2 to 
3 times its GDP. Such heavy reliance on trade makes Hong Kong 
vulnerable to government interference, either by undermining 
competitiveness through burdensome regulation or politicizing its 
economic institutions.
    Limitations on Freedoms and Democracy. Limitations on freedoms and 
democracy in Hong Kong are of concern to not only political activists, 
but businessmen as well. Imposed political limitations unintentionally 
may diminish economic growth and market efficiency. Beijing's intention 
to replace the Legislative Council and limit the application of two 
international covenants on human rights raises serious questions about 
its tolerance for freedom and democracy within its ``one country, two 
systems'' model. Similarly China's harassment of Hong Kong reporter Xi 
Yang, together with the widespread fear of self-censorship in the Hong 
Kong press, has caused concern about the viability of freedom of the 
press after 1997. A free press is not only vital to democracy; the free 
and efficient flow of information is also vital to free markets.
    Corruption and the Rule of Law. With the establishment of Chinese 
sovereignty over Hong Kong, many have feared that the corruption that 
has plagued business in China will find its way into Hong Kong. One of 
Hong Kong's main attractions has been the clean, modern business and 
legal environment it provides for foreigners to conduct business with 
China. Notwithstanding the real success of the Independent Commission 
Against Corruption (ICAC) in fighting corruption in Hong Kong since 
1975, the import of Chinese-style corruption greatly would diminish the 
attractiveness of Hong Kong as a regional operations center for 
international business.
    The People's Liberation Army. The role of the People's Liberation 
Army in Hong Kong after 1997 is critical to the success or failure of 
the transition. An assertive military presence will undermine 
confidence in Hong Kong's future autonomy. China's military--the PLA--
will replace the British Garrison currently stationed in Hong Kong as 
part of the transition process. The mission of the PLA in Hong Kong is 
to provide for the territory's defense, and interference in the local 
affairs of the Region is forbidden. But Article 14 of the Basic Law 
states that the SAR government can ask Beijing ``for assistance from 
the [PLA] garrison in the maintenance of public order.'' With Tiananmen 
still fresh in their minds, some Hong Kong residents want protection 
from, not the protection of, the PLA. And if the Chief Executive of the 
SAR is appointed by Beijing, the people of Hong Kong will wonder how 
cautious he will be about requesting such ``assistance.''
                   pre-handover reasons for optimism
    China's Economic Dependence on Hong Kong. Hong Kong's high level of 
investment in China, not to mention China's high level of investment in 
Hong Kong, may be Hong Kong's best security guarantee. Hong Kong plays 
a vital role in facilitating trade and investment with China. Moreover 
China's economic development depends on foreign investment and trade. 
Because China's access to foreign trade and investment depends on the 
continued rule of law and free flow of capital, goods, and information 
in Hong Kong, Beijing may not be inclined to do anything to destabilize 
or undermine international confidence in Hong Kong. Doing otherwise 
could deal a fatal blow to its own development.
    Communist Party Legitimacy. China's Communist Party's need for a 
successful transition in Hong Kong to bolster its own legitimacy is 
another reason for optimism about Hong Kong's future autonomy. The 
Communist Party has made reunification of the motherland a key pillar 
of its legitimacy. Increasing the living standards of the Chinese 
people is the second pillar. A turbulent assimilation of Hong Kong into 
Chinese sovereignty would threaten to destroy both pillars and thereby 
undermine the legitimacy of Communist Party rule in China. A 
destabilized Hong Kong would obstruct the vital flow of foreign 
investment and trade that supports Beijing's current economic reform 
and modernization. The failure to sustain economic growth and 
development along with the failure to fulfill the mission of national 
reunification thoroughly would undercut both pillars of Communist Party 
legitimacy.
    The Taiwan Factor. The dramatic effect an infringement on Hong 
Kong's promised autonomy would have on the independence movement in 
Taiwan is another reason for optimism. The importance of Taiwan in 
Beijing's Hong Kong calculations cannot be overstated. China's ``one 
country, two systems'' model was crafted with reunification with Taiwan 
in mind, and Hong Kong is the critical first test of this model. 
Although a successful transition in Hong Kong is no guarantee that the 
``one country, two systems'' approach will work with Taiwan, a failed 
transition would eliminate virtually any possibility of peaceful 
reunification with Taiwan. Nothing would mobilize domestic and 
international support for Taiwan's independence--an outcome Beijing 
wants desperately to avoid--more than a botched transition in Hong 
Kong.
    Familiarity with the Mainland. Hong Kong's familiarity with 
mainland China is another reason to be optimistic about the success of 
the transition. Hong Kong's transfer to mainland sovereignty is no 
blind date. To residents of Hong Kong, China is a known quantity. In 
fact, Hong Kong's prosperity today is a testament to its knowledge of 
and ability to work within the Chinese system. The wealthy in Hong Kong 
achieved that status because of their connections inside China and in 
the West. They have profited from helping join foreign capital with 
opportunity in China. For this small but very influential group, the 
transfer of Hong Kong's sovereignty is a matter of politics catching up 
with economic reality.
    Progress of the Joint Liaison Group. Significant progress has been 
made to adapt Hong Kong's independent legal and judicial systems to 
post-1997 requirements. Since 1984, the Sino-British Joint Liaison 
Group has done a tremendous amount of work to pave the way toward a 
smooth transition. Major achievements of the Joint Liaison group 
include the Sino-British agreement on the construction of the new 
airport, the establishment of the Court of Final Appeal in Hong Kong on 
July 1, 1997, Hong Kong's continued participation in 30 international 
organizations, and the continued application of some 200 multilateral 
treaties to Hong Kong after 1997.
       the role of the united states heading into the transition
    Even though a successful transition that maintains Hong Kong's high 
level of autonomy clearly serves China's own best interests, the United 
States must remain vigilant in its efforts to protect U.S. interests at 
risk in the transition. The United States must protect the many U.S. 
citizens and businesses in Hong Kong as well as minimize the risk to 
market access and regional peace and stability generated by uncertainty 
over Hong Kong's future. U.S. interests will be served best by a 
realization of the level of autonomy promised Hong Kong in the Joint 
Declaration. To protect U.S. interests and help preserve the freedom, 
stability, and prosperity of Hong Kong, the United States should:

          Beware of the impact U.S. policy toward China has on Hong 
        Kong. Protection of U.S. interests in Hong Kong depends very 
        much on the China policy of the U.S. government. Politically 
        generated trade friction between the United States and China, 
        such as is created by threats to revoke China's most favored 
        nation trading status, puts U.S. interests in Hong Kong in 
        jeopardy and destabilizes Hong Kong.
          Articulate U.S. interests in Hong Kong to leaders in China. A 
        clear understanding of how the United States intends to protect 
        the security of the 35,000 U.S. citizens and 1,000 U.S. firms 
        in Hong Kong, as well as its multibillion-dollar investment and 
        trade interests, will help China's leaders avoid miscalculation 
        when responding to U.S. actions in Hong Kong.
          Maintain a strong U.S. presence in Hong Kong. U.S. officials, 
        businessmen, students, and tourists are a vital source of 
        information, and their presence demonstrates to the people of 
        Hong Kong that the United States is observing the transition 
        process carefully.
          Strongly urge Beijing to allow the current democratically 
        elected Legislative Council to serve out its term. If Beijing 
        insists on replacing the current legislature, the United States 
        should urge Beijing to shorten the term of the provisional 
        legislature by preparing now for elections to take place as 
        soon after July 1 as possible.
          Support Hong Kong's continued participation in international 
        organizations. As the world's freest economy, Hong Kong should 
        play a key role in international organizations in leading the 
        world toward a more free and open trading system.
          Urge Beijing to sign international human rights covenants. 
        Such a move by China would assuage the fears that led Hong 
        Kong's residents to demand a Bill of Rights Ordinance [over 
        Beijing's strong objection] in the first place.
          Closely cooperate with Hong Kong Special Administrative 
        Region government to fight drug trafficking, money laundering, 
        alien smuggling, and commercial piracy. For this cooperation to 
        work, it is important that the United States not allow 
        differences with Beijing to alienate or put at risk the new SAR 
        government.
                  key developments since july 1, 1997
    Much has happened since the launch of Deng Xiaoping's ``one 
country, two systems'' experiment on July 1, 1997:
    Development towards Democracy. On July 1, 1997, Hong Kong's 
democratically elected legislature was replaced with an appointed 
provisional legislative council. On May 24, 1998, Hong Kong voters 
turned out in record numbers (53 percent) and in a torrential downpour 
to elect the new Special Administrative Region's first Legislative 
Council--the first legislature in the history of the People's Republic 
of China to be chosen (albeit partially) by direct popular election.
    Financial Crisis and Market Intervention. On July 2, 1997, the Bank 
of Thailand allowed the baht to float, introducing a new word into the 
Asian vocabulary--recession. The impact of economic turmoil in 
Thailand, Indonesia, and Korea was felt throughout Asia and beyond. As 
panicked investors fled and hungry speculators attacked, Hong Kong was 
bound to be hit. In 1998 Hong Kong's economy contracted by 5.1 percent, 
the Hang Seng Index fell to lows near 6000 (down from pre-handover 
highs near 16000), and property values and tourism revenue plummeted. 
On August 14, 1998, the Hong Kong government broke with tradition by 
purchasing an estimated $15 billion in stocks in an effort to ward off 
hedge fund speculators betting against the government's ability to 
maintain its currency peg to the U.S. dollar. Recently the government 
announced its intention to gradually dispose of its investments, but is 
concerned that an abrupt withdrawal might send another shock through 
Hong Kong's jittery market.
    Judicial Independence Challenged. On January 29, 1999, Hong Kong's 
Court of Final Appeal (CFA) rendered a very controversial decision 
having to do with the rights of certain children born on the mainland 
to claim ``right of abode'' (a form of permanent residency) in Hong 
Kong. The CFA adopted a very expansive interpretation of the relevant 
provisions in the Basic Law, granting the right of abode to all 
children of legal Hong Kong residents, even children born on the 
mainland out of wedlock and prior to the parent becoming a legal 
resident of Hong Kong. Under this broad interpretation, a 50 year old 
man, as soon as his 75 year old father attains legal resident status in 
Hong Kong, automatically inherits the right of abode in Hong Kong. So 
too do his children and grandchildren. Due to the perceived social 
welfare consequences of such an immigration boom, and the belief that 
the CFA had incorrectly interpreted key elements of the Basic Law, the 
Hong Kong government on February 24 asked the CFA to ``clarify'' 
certain aspects of its ruling, and in June requested an authoritative 
interpretation of the legislative intent behind relevant provisions in 
the Basic Law.
    Cox Report and Export Controls. On May 25, 1999, the House Select 
Committee on U.S. National Security and Military/Commercial Concerns 
with the People's Republic of China released an unclassified version of 
its report, cataloguing China's efforts to acquire sensitive military 
technology through espionage and commerce. Among the recommendations 
made by the Select Committee Chairman Chris Cox (R-CA) is a call for 
tightened controls over sensitive dual-use technology exports to Hong 
Kong.
    Human Rights Covenants Signed, But Dissidents Denied Entry. In the 
Fall of 1997 and Summer of 1998 respectively, coincident with Sino-U.S. 
presidential summits, China signed the United Nations Covenant of 
Economic, Social and Cultural Rights and the Covenant on Civil and 
Political Rights. This move was welcome as a gesture to assuage 
concerns about the continued application of the terms of these 
covenants in Hong Kong. Political opposition and free expression have 
remained vigorous and relatively uninhibited in Hong Kong. Tiananmen 
anniversary vigils and public debates over the fate of democracy on the 
Chinese mainland continue. But starting on April 21, 1999, the HKSAR 
began denying entry visas to exiled Chinese dissidents wishing to 
participate in these activities. While Hong Kong remains home to 
several high-profile mainland dissidents, and the views of others are 
freely broadcast and discussed, this most recent gesture smacks of 
Beijing-like intolerance.
    U.S. Military Port Calls Halted. In response to the tragic, but 
accidental, U.S. bombing of China's embassy in Belgrade on May 7, 1999, 
China announced that U.S. military vessels would no longer be permitted 
to port in Hong Kong. Most analysts consider this to be a temporary 
expression of China's sovereign prerogative, but do not take it as a 
given that U.S. military vessels will be able to resume port calls in 
Hong Kong in the near future. Prior port calls were viewed as a sign of 
continuity and good faith in U.S.-Hong Kong relations. Their 
termination, even temporarily, sends a disturbing strategic signal to 
the United States, but also to Hong Kong. Those most hurt by the 
absence of such visits are merchants in Hong Kong's well traveled 
tourist and entertainment districts. This gesture reduces Hong Kong to 
a pawn in China's geopolitical chess game with the U.S. and 
demonstrates a disregard for the impact of such political moves on the 
well being of Hong Kong residents.
                         new causes for concern
    Since the establishment of Chinese sovereignty over Hong Kong, all 
of the pre-handover causes for concern remain. Hong Kong remains 
heavily dependent on international trade and investment. Its 
vulnerability to dramatic fluctuations in regional and global trade and 
investment flows has become shockingly clear to Hong Kong residents 
over the last two years. Hong Kong residents and outside observers 
remain anxious about the continued protection of political liberties 
and further development of democracy. An effective Independent 
Commission Against Corruption and firm commitment to the rule of law 
remain critical to Hong Kong's future success. And the People's 
Liberation Army presence in Hong Kong remains a latent concern to many, 
especially since the government has yet to define crimes against the 
state (as described in Basic Law Article 23) and how it intends to 
enforce such a prohibition. Notwithstanding these concerns, few 
problems attributable to the change of sovereignty have emerged over 
the last two years. I will briefly discuss two challenges to Hong 
Kong's high degree of autonomy that have captured a lot of recent 
attention.
    Judicial Independence. As mentioned above, Hong Kong's Court of 
Final Appeal rendered a particularly controversial decision in January 
that many executive officials feared would pose a grave challenge to 
Hong Kong's social welfare. Few question the government's concern that 
a dramatic flow of mainland migrants into Hong Kong would strain 
government services and tax the generosity of current residents. The 
controversy arises from the question of whether the CFA's ruling 
reflected a correct interpretation of relevant provisions in the Basic 
Law, and the fact that the SAR government has been seeking ways to 
address the immigration concerns created by the ruling in ways that may 
compromise the Court's authority and Hong Kong's autonomy.
    The CFA's interpretation of the Basic Law does appear to be 
unnecessarily (perhaps erroneously) broad, and the SAR government's 
request for an authoritative interpretation of the relevant Basic Law 
articles does appear to be an appeal of what was supposed to be a final 
adjudication. I speak here only in terms of appearances. There is a 
vigorous debate in Hong Kong among distinguished legal professionals 
(which I am not) over the merits of both of the above claims. But the 
dispute is rarely focused on the underlying issue--who qualifies for 
permanent resident status in Hong Kong and by what means. The central 
government and the SAR government clearly have the legal authority to 
control population flows into Hong Kong, and coordinated efforts in 
this regard are appropriate. I suspect that the means used in this case 
to resolve the underlying issue are not worth the political cost.
    The problems created by this case appear to be more political than 
legal. As sovereign, Beijing has the right to interpret and amend the 
Basic Law any time it likes according to its own constitution and 
legislative process. If Hong Kong's autonomy has been compromised in 
the process, at least in this case, it would appear that it was done at 
the behest of many of Hong Kong's people and not initiated by Beijing. 
It is ironic that many who argue that the CFA's ruling must be final--
one that would bring a large flow of mainland migrants into Hong Kong--
view the flow of Han Chinese into Tibet as a threat to Tibet's 
autonomy, special identity, and culture. Events have proceeded too far 
in this case for there to be an ideal or even positive outcome. The 
court created a problem with no proposed solution and the government 
responded with a solution that created more problems. In the end, this 
issue only becomes a concern to the United States. if Hong Kong's 
judiciary continues to be questioned by the executive branch and 
overruled by the central government. If it remains an isolated 
incident, then it will be a regrettable event with manageable 
consequences.
    Proposed U.S. Export Controls. Representative Cox's recommendation 
to consider new controls over sensitive dual-use exports to Hong Kong 
is understandable, given security concerns raised in the Select 
Committee's report and China's sovereignty over Hong Kong. The problem 
is that there has been no evidence that the SAR government has been 
anything less than cooperative with the United States in controlling 
the flow and monitoring the end use of sensitive technologies. Given 
the Hong Kong government's continued cooperation with these and many 
other security concerns, imposition of export controls risks dealing an 
unnecessary blow to Hong Kong's autonomy.
                        new reasons for optimism
    As before the handover, Hong Kong's successful integration into the 
People's Republic of China under the ``one country, two systems'' model 
remains critical to Beijing's key goals of expanding economic 
development and eventual reunification with Taiwan. The primary reason 
for optimism about Hong Kong's continued freedom and prosperity under 
Chinese sovereignty is the fact that its most debilitating developments 
are the result of events outside of China. Very few predicted that Hong 
Kong's greatest challenge over its first two years under Chinese rule 
would be economic. And even those visionary few who did, mistakenly 
assumed that Hong Kong's economic downturn would come about as the 
result of mainland micromanagement and corruption. That may yet occur, 
but it is important to note that throughout this economic crisis, while 
much of the world offered Hong Kong its advice and criticism, Beijing 
was notably restrained and Hong Kong remains highly integrated and open 
to the global system of trade and investment.
    Even some of the emerging causes for concern give rise to a measure 
of optimism. The decision to block exiled dissidents and to seek an 
interpretation of the Court of Final Appeal's ``right of abode'' 
decision, both appear to be the result of decisions made within Hong 
Kong. On nearly every issue other than the denial of U.S. military ship 
visits, Beijing has erred on the side of caution to avoid even the 
appearance of interference in the Special Administrative Region's 
affairs. Indeed the one area most analysts feared would become the 
first casualty of Chinese sovereignty--political freedom--has perhaps 
gone the most smoothly. The Hong Kong people remain enthusiastic about 
exercising their right to vote and ensuring government responsiveness 
to local needs. And Hong Kong continues to progress along its 
admittedly slow democratization path--next year's legislative election 
will bring a slight increase in the number of directly elected seats. I 
remain hopeful that this franchise will continue to expand and that the 
people of Hong Kong will have the means at their disposal to guarantee 
that their judicial, legislative, and executive leaders are accountable 
to them before all others.
    The United States has a deep and abiding interest in seeing that 
Hong Kong maintains its high degree of autonomy and continues to be a 
shining example of how freedom works in a Chinese society. The U.S. 
should avoid policy measures that compromise Hong Kong's autonomous 
status or undermine its economic vitality. Continued expressions of 
support and concern for Hong Kong's future success, such as this 
hearing and the frequent visits by Members of Congress to Hong Kong, 
are important signals to all concerned that U.S. policymakers remain 
engaged in these issues and will continue to press for progress.
    Thank you very much, Mr. Chairman and members of the Subcommittee, 
for interest in these issues. I look forward to your questions to help 
fill any gaps in my presentation.

    Senator Thomas. Thank you, Mr. Yates.
    Dr. Cohen.

   STATEMENT OF DR. JEROME A. COHEN, SENIOR FELLOW ON ASIA, 
  COUNCIL ON FOREIGN RELATIONS; PROFESSOR OF CHINESE LAW, NEW 
  YORK UNIVERSITY LAW SCHOOL; PARTNER, PAUL, WEISS, RIFKIND, 
                       WHARTON & GARRISON

    Dr. Cohen. Mr. Chairman, I agreed with what you said about 
the importance of perceptions. And my purpose in coming here is 
to try to alter the popular perception of what has taken place 
in Hong Kong with respect to the recent decision of the Court 
of Final Appeal and what has followed.
    I think what Mr. Roth said was correct, that more important 
than the court decision is what happened after. But that is not 
an excuse for ignoring the court decision, because I do not 
think you can understand what happened after, or put it in 
proper perspective, if you do not look at the court decision.
    Now, Ms. Ng, for whom I have the greatest respect, as a 
lawyer, as a politician, as a columnist, as a friend, said 
something that I agreed with--that we have to evaluate what it 
is that happened. And I think we have to evaluate the Court of 
Final Appeal decision in a way that rarely has been evaluated 
in the press. I think the press has done a poor job in this 
country in helping people to understand what has taken place. 
And I think, consequently, we have seen not only 
misunderstanding perhaps, but some unfairness with respect to 
the People's Republic of China and its efforts to develop a 
legal system.
    I think, in other words, to use informal parlance, they are 
getting a bum rap on this. And I think the Government of Hong 
Kong, to some extent, although it has made a few mistakes along 
the way, is also getting a bum rap.
    Why do I say that? Ms. Ng has emphasized, as many people in 
Hong Kong do, that Hong Kong has a separate system. But nobody 
has mentioned here, so far, that it is not a totally separate 
system. The meaning of the hand-over was that Hong Kong was 
handed over to the People's Republic under a Joint Declaration, 
an international agreement, between the United Kingdom and 
China, and a Basic Law enacted by the PRC National People's 
Congress that, as Ms. Ng said, has been often referred to, even 
by the Court of Final Appeal, as a so-called mini-constitution.
    That is a written constitution. It purports to allocate 
power between the central government and the local region, Hong 
Kong, the SAR. It does not confer on Hong Kong or its courts a 
totally unlimited power. The key to the arrangements of the 
Basic Law, as those of us who have grown up in a Federal system 
appreciate, is Article 158. And you cannot discuss what has 
happened without discussing the Court of Final Appeal's 
interpretation of Article 158.
    Now, my own view--I will not read my statement, my 
statement tries to give you a capsule of how all this developed 
and what the implications might be. But my own view, simply 
stated, is that the Court of Final Appeal, in a very complex 
judgment that handled some issues correctly, did not handle the 
key issues correctly. The key issues are institutional and they 
are substantive. The substantive issues concern the 
interpretation of two provisions of the Basic Law concerning 
immigration.
    The institutional question really concerns whether these 
questions or either of them was the kind of question that the 
Court of Final Appeal, before making its decision, under 
Article 158(3), should have referred to the Standing Committee 
of the National People's Congress for interpretation?
    The substantive questions concern not only who should be a 
permanent resident of Hong Kong under the Basic Law, but also 
whether whoever is deemed to be a permanent resident under the 
Basic Law should still be required to obtain an exit permit 
from the People's Republic of China, as has been the custom and 
has been required by Article 22(4) of the Basic Law.
    Now, the latter is obviously a question, both in law and in 
fact, ``concerning the relationship between the Central 
Authorities and the Region.'' And, indeed, since it has been 
the Chinese Government's prerogative to issue these exit 
permits, it is also a matter ``concerning affairs which are the 
responsibility of the Central People's Government.''
    Why do I use these phrases? Because these are the very 
criteria that require the Court of Final Appeal, before it 
makes its decision, to ask for an interpretation by the 
Standing Committee in Beijing. And yet, through the most 
elaborate, labored, theoretical constructs, the court arrives 
at a result that plainly is contrary to common understanding of 
the meaning of the words and to the factual situation.
    Now, we keep talking about ``the rule of law.'' And people 
who are against what the government has done in response to the 
court's decision wrap themselves in the mandate of ``the rule 
of law.'' But the rule of law has to begin with the bastion of 
the rule of law, which, in Hong Kong, is the Court of Final 
Appeal. And when you have a court composed of very able people, 
who make a bold leap to transform the natural meaning of the 
arrangements in the Basic Law in order to maximize Hong Kong's 
autonomy, you are faced with a departure from the rule of law 
and a very bad model, especially for a mainland that is trying 
to develop a serious legal system.
    I feel that if I were the judge, I would have interpreted 
the immigration provisions to take a narrower position than the 
Court of Final Appeal did. I would have agreed with the court 
that, in reading the Basic Law, a permanent resident under 
Article 24 should not be required to get an exit permit from 
China under Article 22. But reasonable people could go either 
way on both of these substantive issues of statutory 
interpretation.
    But where I have the greatest difficulty with what the 
Court of Final Appeal has done is its refusal to send to 
Beijing, under the authorized legal process of Article 158(3) 
of the Basic Law, the matter of the interpretation of Article 
22. That is what started off this whole process that has 
created a totally unnecessary dispute in Hong Kong. Hong Kong 
is going to have some very serious problems that cannot be 
avoided by the judiciary, including flag desecration issues 
that we, too, have struggled with. But this was a controversy 
that could have been avoided if the Court of Final Appeal had 
done the obvious legal thing.
    It tried to make a really bold gamble. It almost got away 
with it. But the social and economic consequences of its 
interpretation were such that the Hong Kong Government felt 
obliged to seek the hearing in Beijing to which it was entitled 
under the Basic Law and which was denied it by the Court of 
Final Appeal. That is the frustrating position that the Hong 
Kong Government found itself in.
    Under the law, it should have had an interpretation by the 
Standing Committee before the Court of Final Appeal made its 
decision. If that had been done, you would not have a crisis, 
the Standing Committee would have given its interpretation, the 
matter would have come back to the Court of Final Appeal, which 
would have had to apply that interpretation. But this was a 
kind of power grab by these five able judges, a very bold and 
brassy thing to do and, as I say, it almost succeeded, but it 
did not.
    And, frankly, from the perspective of someone who has 
studied Chinese law all his life--as well as grown up in our 
Federal system, a common lawyer integrated into a Federal 
system--I was angry when I read the Court of Final Appeal 
decision, because I thought these fellows are highly 
sophisticated and are engaging in legal legerdemain. It is 
unfortunate, because the experience of the United States is 
when judges are judicial activists, when they try to solve 
political problems by taking a very ambitious point of view, 
they often bring discredit to the institution to which they try 
to bring credit.
    In my formal statement I quote Charles Evans Hughes, one of 
our greatest Justices and politicians, who said, in 1928, that 
``the Supreme Court has suffered severely from self-inflicted 
wounds.'' What he meant by that is overly ambitious court 
decisions, including the Dred Scott decision, caused a loss of 
public confidence. And this is the lesson I hope that the Court 
of Final Appeal has learned in this Hong Kong crisis.
    You asked the question earlier, Mr. Chairman, what the 
impact of this determination might be. My hope is that it will 
sensitize the Court of Final Appeal to a stricter reading of 
the Basic Law, and to the importance of the fact that judges 
must be sensitive to the needs of the community in which they 
live and not try to play games fast and loose with the law.
    [The prepared statement of Dr. Cohen follows:]

               Prepared Statement of Dr. Jerome A. Cohen

                  hong kong, china and the rule of law
    Mr. Chairman and Members of this Subcommittee:
    I am glad to have the opportunity to take part in this hearing on 
recent events in Hong Kong. For almost forty years, as a law professor 
and lawyer, I have been involved with China and Hong Kong. During this 
period I have worked in Hong Kong for a total of almost ten years and 
in Beijing for approximately three years.
    China is my ``rice bowl.'' For the two decades since China began 
its ``Open Policy,'' I have represented American and foreign 
multinational companies in their efforts to conclude contracts and 
settle disputes with Chinese companies. On a pro bono basis, I have 
also helped some Chinese government institutions--national, provincial 
and local--in their efforts to develop a legal system credible to 
foreign business and assisted in the education and training of China's 
rapidly growing legal profession. I served as Honorary Professor at the 
Hong Kong University Law Faculty in 1979, and last year the Hong Kong 
Government asked my advice on a question concerning the Basic Law.
    My perspective on Hong Kong's relations with China's Central 
Authorities is a dual one. It reflects not only my long specialization 
in Chinese law but also my training and experience as an American 
lawyer in a common law system that over two centuries ago began to be 
integrated into a federal constitutional structure.
    Just two years ago, the United States and other Western powers 
awaited the United Kingdom's ``handover'' of Hong Kong to China with 
great apprehension. Their fear was that China might not respect the 
complex arrangements of the 1984 Sino-British Joint Declaration and 
China's 1990 Basic-Law that had fleshed out Deng Xiaoping's unique 
``one country, two systems'' formula for Hong Kong's next half-century.
    Now a political crisis that has been brewing in recent months has 
come to a boil in this Special Administrative Region of China. 
Ironically, responsibility for the crisis must be assigned to Hong 
Kong, not Beijing, and to Hong Kong's highest court rather than to its 
government, as commonly supposed. This again demonstrates the wisdom of 
one of America's greatest judges, Charles Evans Hughes, who long ago 
pointed out that overly ambitious Supreme Court decisions risk the loss 
of public confidence. ``The Court has suffered severely from self-
inflicted wounds,'' noted Hughes in 1928.
    Hong Kong's crisis came to prominence in January in a cluster of 
cases requiring its newly-minted Court of Final Appeal to interpret the 
Basic Law and related legislation in order to determine (i) which of 
several categories of mainland Chinese children who have at least one 
parent currently residing in Hong Kong are entitled to take up 
permanent residence in Hong Kong, and (ii) whether those entitled to 
permanent residence require an exit permit issued by the Chinese 
Government. The Court of Final Appeal's January 29 decision, 
disagreeing with the lower courts that had considered these questions, 
stunned Hong Kong and the Chinese Government. It not only announced an 
interpretation that maximized the number of mainland persons eligible 
for permanent residence in Hong Kong but boldly challenged the Central 
Authorities in two institutional respects that have important 
implications for Hong Kong's political future.
    While popular attention in Hong Kong focused on the socio-economic 
impact of the Court's decision to allow so huge a number of new 
permanent residents, what first caught the attention of Beijing's 
political elite was the Court's broad statement that a Hong Kong court 
has the power to invalidate any legislation of the National People's 
Congress or its Standing Committee that it deems inconsistent with the 
Basic Law. This view, which may soon be put to the test in forthcoming 
cases involving the government's right to punish desecration of the 
national flag, drew immediate protests from legal experts and media in 
mainland China. The Hong Kong Government sought to quiet matters by 
asking the Court for an unprecedented ``clarification'' of its remarks, 
which the Court promptly offered, without altering its immigration 
interpretations. However, its brief supplementary judgment, while 
toning down its original rhetoric, implicitly continued to claim that 
the Court can invalidate any national legislative act that it deems 
inconsistent with the Basic Law.
    At least in form, if not substance, this ``clarification'' did 
``give face'' to the Central Authorities and succeeded in quieting 
matters. Beijing appeared willing to overlook the Court's second, 
initially less-noticed, institutional provocation, even though to many 
observers it seemed to fly in the face of Basic Law Article 158's 
arrangements for allocating power between the Central Authorities and 
Hong Kong. Those arrangements give Hong Kong courts the power to 
finally adjudicate disputes, a power they had not enjoyed under the UK, 
which had authorized appeals from their decisions to the Judicial 
Committee of the Privy Council in London. But Article 158 also 
prescribes that, in any case in which the decision turns upon an 
interpretation of a Basic Law provision concerning affairs which are 
the responsibility of the Central Government or concerning the 
relationship between the Central Authorities and Hong Kong, the Hong 
Kong court making the final decision must request the Standing 
Committee of the National People's Congress to make such interpretation 
before it makes its decision. That interpretation is then to be applied 
by the Hong Kong court to the facts and claims before it.
    Resolution of the two major substantive issues in this litigation 
required interpreting ambiguous provisions of the Basic Law. One issue 
was whether, in order to be deemed a permanent resident of Hong Kong 
under Article 24(2)[3], ``persons of Chinese nationality born outside 
Hong Kong of those residents listed'' as permanent residents in Article 
24(2)[1] and [2] must have been born at a time when either parent had 
already obtained permanent residence or whether it is sufficient if 
either parent subsequently acquired permanent residence. This I shall 
call the Article 24 issue.
    The second issue was whether persons of Chinese nationality living 
on the mainland who qualify for permanent residence in Hong Kong 
nevertheless require an exit permit from the Chinese Government to 
leave the mainland before they can exercise the right of abode in Hong 
Kong enjoyed by all who are deemed permanent residents. This would not 
have been an issue were it not for Article 22(4) of the Basic Law, 
which provides that, for entry into Hong Kong, ``people from other 
parts of China'' must apply for approval from the Chinese Government 
and that the Central Government determines the number of persons who 
may enter Hong Kong for the purpose of settlement after consultation 
with the Hong Kong Government. The issue thus arose whether persons of 
Chinese nationality living on the mainland who acquire a permanent 
resident's certificate should nevertheless be deemed subject to the 
requirement of Article 22(4) because they are ``people from other parts 
of China.'' This I shall call the Article 22 issue.
    Neither of these issues was simple, as impressive technical and 
policy arguments were mustered by counsel on both sides. My own 
interpretation as a judge, based on the texts of the Sino-British Joint 
Declaration and the Basic Law plus the other available evidence of the 
drafters' intention, would have been to read Article 24(2)[3] narrowly, 
unlike the Court of Final Appeal. But I would have agreed with the 
Court on the Article 22 issue, holding that Chinese on the mainland who 
acquire permanent residence under Article 24(2)[3] should not be 
required also to obtain a mainland exit permit. Yet, conscientious 
judges might come out either way on each of these issues.
    My greatest problem with the Court's decision is not over its 
substantive interpretations regarding the immigration issues but over 
its refusal to refer the Article 22 issue for interpretation by the 
Standing Committee of the National People's Congress before the Court 
rendered its judgment. The words of the Basic Law, in Article 158 as 
well as in other provisions, are rarely self-defining, and, of course, 
there is room for sophisticated judges to give meaning to them in ways 
that achieve the major purposes of the unique legislative construct of 
``one country, two systems.'' Yet, it is difficult for me to conclude 
that the question of whether under Article 22(4) the Central Government 
continues to have the power to require exit visas for those nationals 
who have acquired permanent Hong Kong residence and the power to 
regulate the number of them who can leave for Hong Kong is not an 
affair that is the responsibility of the Central Government or does not 
concern the relationship between the Central Authorities and Hong Kong.
    Therefore, it seems clear that respect for the arrangements set 
forth in Article 158 should have required the Court to refer Article 
22(4), which is found in Chapter II of the Basic Law entitled 
``Relationship between the Central Authorities and the Hong Kong 
Special Administrative Region,'' to the Standing Committee for its 
interpretation. This interpretation was needed to reach the decision 
and plainly affected the judgment of the Court. I find the Court's 
elaborate theoretical efforts to avoid the duty imposed by Article 15 
8(3) strained and unconvincing.
    Unlike the Article 24 issue, which at least in isolation can be 
regarded as a matter ``within the limits of the autonomy of the 
Region'' under Article 158(2), since it involves the determination of 
who is entitled to Hong Kong permanent residence, the Article 22 issue 
both in law and life ``concerns the relationship between the Central 
Authorities and the Region'' if words are to be given their intended 
meaning. Both before and after the ``handover,'' the regulation of the 
immigration of mainland nationals to Hong Kong has been the subject of 
close cooperation between the Central Authorities and Hong Kong 
officialdom.
    The five able members of the Court of Final Appeal who unanimously, 
if astonishingly, decided that there was nevertheless no need to refer 
the Article 22 issue for interpretation by the Standing Committee, were 
taking a bold gamble in the interest of maximizing Hong Kong's 
autonomy. They would have gotten away with it had not the Hong Kong 
Government's preparation for the anticipated immigration influx 
recently led it to believe that as many as 1.67 million people might 
have to be absorbed during the next decade by a population of merely 
6.5 million. The Hong Kong Government used this figure as the 
centerpiece of a massive propaganda blitz designed to convince any 
doubters among an already anxious community that Hong Kong cannot cope 
with the housing, education, health, welfare, environment and other 
needs of such an immigration wave, at least without substantially 
degrading local life.
    The Government's goal was to demonstrate overwhelming public 
support for an effort to reduce the impact of the Court's decision 
without affecting the decision itself or the rights of those who 
brought the litigation. The Government considered three Options: (1) 
bringing a new litigation in the hope that, upon reflection, the Court 
might adopt a narrower interpretation of the immigration provisions; 
(2) seeking an amendment of the Basic Law to the same effect; or (3) 
seeking a corrective interpretation by the NPC Standing Committee not 
only of the Article 22 issue but also of the Article 24 issue, which 
the Hong Kong Government had previously thought did not require 
Standing Committee interpretation. The Hong Kong Government rejected 
the first two options as too slow and uncertain in outcome and instead, 
via the Central Government, requested the Standing Committee's 
interpretation of both key issues. It evidently hoped that the Standing 
Committee would read the relevant legislation to exclude from the right 
of abode in Hong Kong any child if neither parent was resident there at 
the time of birth, thereby reducing to a relatively manageable 200,000 
the number of people with a right to immigrate.
    Although the Hong Kong Government's statistics and scare tactics 
have been criticized, the vast majority of the community supported its 
proposed solution. However, many members of the legal profession, the 
democratically-elected members of the Legislative Council and many 
commentators condemned the effort to obtain a Standing Committee 
interpretation, claiming, often in the most melodramatic language, that 
this marked the beginning of the end of Hong Kong's judicial 
independence, rule of law, local autonomy and individual rights. Some 
argued that, since the Basic Law makes no explicit provision for the 
Hong Kong Government to seek a Standing Committee interpretation, there 
was no legal basis for the effort.
    Others concede that Article 158 confers full power upon the 
Standing Committee to interpret the Basic Law at any time and on its 
own initiative or in response to the request by others. Some also agree 
that Hong Kong's Chief Executive has the power to seek Standing 
Committee interpretation because of the responsibilities imposed upon 
him by the Basic Law for its implementation and administration of Hong 
Kong's Government. Yet, many question not the legality but the 
propriety of the request for interpretation. They fear that seeking an 
interpretation in the wake of a judicial decision will undermine the 
integrity of the judicial process. Frequent resort to this technique 
following judicial decisions adverse to the interests of the Hong Kong 
Government could render meaningless the line drawn by Article 158, 
which grants the Standing Committee the ultimate power of 
interpretation but which grants the Hong Kong courts the ultimate pawer 
of adjudication. Many have argued that substantive and procedural 
standards are needed to curb the exercise of this power.
    The Hong Kong Government offers assurances that it will use its 
power to seek interpretations sparingly, only in exceptional cases. It 
emphasizes that under Article 158, Standing Committee interpretations 
cannot affect court judgments already rendered. It also points out that 
in many countries, including our own, the executive has the power to 
request legislative correction of statutory interpretations with which 
the executive disagrees, and the legislature has the power to make such 
changes, without altering the judicial decisions involved or 
undermining the judicial process.
    Hong Kong's current political storm could have been avoided if the 
Court of Final Appeal had referred the Article 22 issue to the Standing 
Committee. The Court's refusal to do so highlights an omission in the 
Basic Law, which fails to provide for cases in which a Hong Kong court 
erroneously refuses to make a reference required by Article 158. This 
is why the Hong Kong Govermnent had to devise an ad hoc method of 
seeking an interpretation. The Basic Law drafters apparently assumed 
that, since the Standing Committee can issue such interpretations of 
its own accord at any time, it was unnecessary to provide for a request 
outside the judicial channel.
    The passion of those who have opposed the Hong Kong Government's 
request for interpretation can in large part be attributed to their 
lack of confidence in the Standing Committee's interpretive process. 
Until the recent immigration cases reached the Court of Final Appeal, 
attention seldom focused on this process, and little was known about it 
except by specialists. Obviously, to common lawyers Article 158's 
requirement that in certain instances Hong Kong's court of final 
adjudication must refer questions of interpretation of the Basic Law to 
a legislative, rather than a judicial, body for binding interpretation 
is a strange and discomfiting arrangement.
    Every political-legal system that allocates power between its 
central and local governments in a federal-type arrangement requires 
some institution to interpret the terms of the relevant constitutive 
documents as questions arise. In most, but not all, countries familiar 
to Western lawyers, this role is played by a judicial or quasi-judicial 
institution, typically a supreme court or separate constitutional 
court. Because China's distinctive governmental system is nominally 
based on legislative supremacy rather than a separation of powers and 
the Standing Committee has generally enjoyed the power of final 
constitutional and legislative interpretation, the Basic Law conferred 
this crucial power of final interpretation upon the Standing Committee 
and not upon China's Supreme Court. The latter choice might have raised 
fewer misgivings since many might have assumed that even in China--a 
country not notably respectful of judicial independence--legal 
considerations are more likely to be taken seriously in Court than in a 
legislature. Yet such a choice might have been opposed on the ground 
that it too would undermine Hong Kong's power of final adjudication.
    In order to bolster confidence in the legal and deliberative 
quality of the Standing Committee's interpretations, Article 158 
requires that, prior to issuing any interpretation of the Basic Law, 
the Standing Committee must consult the Comnmittee for the Basic Law 
established by the Basic Law for this purpose under the Standing 
Committee. Yet, apart from the fact that it is composed of twelve 
members, six from the mainland and six from Hong Kong, nothing else 
about the Basic Law Committee is prescribed.
    As the date approached for the Standing Committee's deliberation on 
the Hong Kong Government's request, many questions arose concerning the 
role of the Basic Law Committee in this process. How would it function? 
Would it receive materials and hear arguments from non-members? Would 
its procedures permit serious discussion among its members? What weight 
would be attached to its recommendations? Would minority views be 
presented, and would Basic Law Committee recommendations be made 
public?
    Most of these questions were soon answered. The Basic Law 
Committee, which has a number of legal experts from both the mainland 
and Hong Kong among its members, met for three days in Beijing during 
the week prior to the scheduled Standing Committee session. It had 
already received from the Hong Kong and Central Governments and other 
sources a vast amount of relevant legal and media materials. This was 
not a public hearing but an informal, private committee discussion that 
focused on a draft interpretation submitted to it by the Legislative 
Work Commission of the Standing Committee. After a good deal of give 
and take and apparently considerable lobbying by officials of both the 
Central and Hong Kong authorities, the Basic Law Committee submitted a 
slightly modified version of the draft interpretation to the Standing 
Committee, together with a report detailing its views and noting that 
two of its members, who were not identified, dissented with respect to 
what they believed to be the overly broad scope of the draft. As of 
this writing, the report has not been made public, although there is 
said to be a possibility that it might be.
    On June 23, the Standing Committee's 155 members, headed by former 
Prime Minister Li Peng, met to consider a draft interpretation as well 
as an ``Explanation'' of the draft prepared by the Legislative Work 
Commission. The Standing Committee's procedures included discussion 
among small groups composed of approximately 25 members each, and the 
Committee also reportedly consulted the Law Committee of its parent, 
the National People's Congress.
    On June 26 the Standing Committee issued its long-awaited 
interpretation, which was something of an anti-climax. Virtually all 
observers had anticipated that the outcome would be favorable to the 
Hong Kong Government on both the Article 22 and Article 24 issues, and 
it was. Indeed, the Standing Committee's conclusions were all but 
formally made known to the public following its June 23 meeting. 
Nevertheless, the interpretation is very important to Hong Kong's 
future not only because of its implications for immigration but also 
because of its constitutional significance.
    First of all, the Standing Committee confirmed the procedure by 
which Hong Kong's Chief Executive can seek its interpretations--
submission of a report by the Chief Executive to the State Council, 
China's highest administrative organ, which in turn submits a motion 
regarding the request for interpretation to the Standing Committee. The 
interpretation stated that the Chief Executive's submission of the 
report was pursuant to Articles 43 and 48(2) of the Basic Law, thereby 
implicitly confirming his power to seek an interpretation.
    Second, the Standing Committee, without being wholly explicit, 
seemed clearly of the view that Article 24 as well as Article 22 of the 
Basic Law concerns affairs that are the responsibility of the Central 
Government and the relationship between the Central Authorities and 
Hong Kong. Therefore, the interpretation stated that the Court of Final 
Appeal, before making its judgment, should have sought an 
interpretation by the Standing Committee as required by Article 158(3). 
Since the Court failed to do so, the Standing Committee decided that 
having consulted its Basic Law Committee, it would make the necessary 
interpretation pursuant to the powers granted it by Article 67(4) of 
the Chinese Constitution and Article 158(1) of the Basic Law.
    Adding insult to injury, the Standing Committee's interpretation 
went on to state that the Court of Final Appeal's interpretation ``is 
not consistent with the legislative intent.'' It held, again without 
offering elaboration, that Article 22(4) includes persons of Chinese 
nationality born outside Hong Kong of Hong Kong permanent residents, 
who are subject to the same exit requirements when heading for Hong 
Kong as other ``people from other parts of China.'' Moreover, it said, 
Article 24(2)[3]'s conferral of permanent residence is limited to 
persons of Chinese nationality born outside of Hong Kong of a parent 
who possessed Hong Kong permanent residence at the time of the child's 
birth.
    At this point the Standing Committee went beyond the formal request 
for interpretation, which only sought guidance concerning the third 
category of Article 24(2). The interpretation stated that the 
legislative intent of all categories of Article 24(2) is reflected in 
the ``Opinions on the Implementation of Article 24(2)'' adopted by the 
Preparatory Committee for the Hong Kong Special Administrative Region 
of the National People's Congress on August 10, 1996. This broader 
interpretation, which was opposed by two members of the Basic Law 
Committee, reportedly was stimulated by the lobbying of the Hong Kong 
Government, which apparently decided to elicit an interpretation broad 
enough to cover certain future cases and thereby obviate the possible 
need for a subsequent request for interpretation.
    Finally, the Standing Committee attempted to clarify the legal 
effects of its interpretation. Henceforth, it stated, the Hong Kong 
courts shall adhere to this interpretation, but the interpretation does 
not affect the right of abode acquired by parties to cases decided by 
the Court of Final Appeal on January 29.
                               conclusion
    Where does this long saga leave us? Hong Kong responses to the 
Standing Committee's interpretation are varied but suggest that the 
matter is not about to be forgotten. Actually, the interpretation seems 
to have spawned a new rash of litigation and heightened the stakes for 
those whose cases are already before the courts, as would-be permanent 
residents seek to place themselves within its penumbra or to maneuver 
around it. Moreover, the air is full of extreme reactions and dire 
predictions. Judges reportedly feel depressed and embattled. 
Sympathetic columnists urge the Chief Justice to resign because of an 
allegedly devastating blow to his authority. Lawyers organize protest 
marches and write nasty letters to the Secretary for Justice. 
Dispirited young barristers are supposedly considering other lines of 
work. Editorial writers and democratic politicians condemn the Chief 
Executive for having compromised Hong Kong's legal autonomy and the 
rule of law.
    The Hong Kong Government, having won the day--at least 
temporarily--is trying to speak with a voice of moderation and 
reconciliation, although inevitably it speaks with many voices. The 
masses of ordinary people and the business community appear to feel 
relieved that the threat of inundation by immigrants has been 
diminished.
    My own hope is that ``the chattering classes,'' Hong Kong's 
democratic leaders and those members of the legal community who have 
been upset at the fate suffered by the Court of Final Appeal's January 
29 decision, will calm down, develop more realistic expectations and 
strategies for integrating Hong Kong's legal system with that of the 
mainland and prepare for the long haul required for constitutional 
progress.
    I also hope that they reflect on the wisdom of the Court of Final 
Appeal's bold but unsuccessful attempt to distort the delicately-
balanced arrangements of the Basic Law. The current controversy could 
have been avoided had Hong Kong's supreme bastion of the rule of law 
itself followed the rules set forth in Article 158 of the Basic Law. 
Unnecessary controversy is not what Hong Kong needs. The ensuing months 
are likely to bring unavoidable judicial controversies that will tax 
the legal, political and emotional resources of the community.
    I hope these remarks are helpful to the Subcommittee, Mr. Chairman.

    Senator Thomas. Thank you, sir.
    I appreciate all of you taking the time to do this. And let 
me just ask a few questions. Very briefly, I feel that you 
would like to respond a little bit to Dr. Cohen.
    Ms. Ng. Mr. Chairman, thank you for the opportunity.
    Mr. Chairman, I was trying to avoid going into the 
reasoning of the court decision. But having heard Mr. Cohen's 
testimony, I feel that that cannot be avoided, and I hope I 
will have your indulgence.
    Senator Thomas. Try to keep it short.
    Ms. Ng. Indeed, I will.
    First, the court decision is who has the right of abode. 
Mr. Chairman would appreciate that the court has to interpret 
according to the language of the law. The language of Article 
24 is very simple. It defines six categories of people with the 
right of abode in Hong Kong. The first three categories deal 
with Chinese nationals. The first is a Chinese national born in 
Hong Kong. The second is a Chinese national who has settled in 
Hong Kong for 7 years. The third is a Chinese national who is 
born outside Hong Kong of the first and second categories, full 
stop.
    From this, the court is unable to interpret restrictions 
such as discrimination between children who are born in wedlock 
and outside wedlock, between children whose parents were born 
before their parents got the status and children whose parents 
got the status after they were born. By interpreting both the 
plain language of the provision and having regard to 
international conventions protecting the unity of the family, 
which is incorporated into the Basic Law, the courts were 
unable to interpret in such a way as to separate the families, 
particularly when the meaning is plain.
    Now, with respect to whether the other articles would limit 
this right, the Court of Final Appeal took this view. Now, what 
was considered was Article 24 (the right of abode of Hong Kong 
permanent residents), which is within the autonomy of the SAR. 
The matter for interpretation was the right of abode. It has 
been agreed between the parties, by the government itself, that 
the right of abode is a Common Law concept.
    According to the Common Law concept of the right of abode, 
the right of abode is incapable of being restricted by 
immigration measures. So, in that sense, the SAR Government was 
not entitled to subject people who have the right of abode to 
immigration restrictions. That is why Article 24 cannot be 
restricted by another article, Article 22(4)--Mr. Chairman, I 
do not have to go into detail at all, because it is in my 
testimony on page 3 if you have time to read it.
    Senator Thomas. OK, fine.
    Ms. Ng. But Article 158, which is the heart of the matter--
--
    Senator Thomas. Let me see if I cannot--I understand the 
detail, but it seems to me, for those of us who are sort of 
interested in the future of how this works, that the broader 
thing is really in question, not the detail of this particular 
finding. But, rather, for instance, because of this, how often 
do you think there will be referrals to the Standing Committee? 
How much will this move things beyond the Court of Final Appeal 
in other issues?
    Ms. Ng. Mr. Chairman, the reason why I go into the details 
is because Mr. Cohen tried to say that the court had gone on 
some very wild interpretation.
    Senator Thomas. Right.
    Ms. Ng. But if the court had done so, then the lesson to 
learn is not to do so, not to deviate from the straight path of 
construction. But since the court had very carefully kept to 
all the most established rules of construction, for you to say 
that the court is wrong must mean that there is something wrong 
with the traditional rules.
    Now, is the court therefore to sensitize itself to what the 
Standing Committee is about to say? This is exactly what the 
legal profession is most concerned about; namely, judges in 
judging, in considering their judgment, will consider not just 
the law, but the political consequence of how their conclusions 
will be taken in Beijing.
    Now, it is said that judges ought to be more aware of 
social and economic consequences. But judges cannot, by the 
canons of the Common Law tradition, give a different view of 
the law, of the consequence of the law, if that follows from 
the interpretation of the law itself.
    Senator Thomas. Why do you think--and I am going to try and 
get you off the detail of it, because I think we are more 
concerned about the concept----
    Ms. Ng. Yes.
    Senator Thomas [continuing]. As to whether or not, in the 
future and in other issues, if someone in the authority in the 
government disagrees with the court decision, they will simply 
go on to Beijing.
    Ms. Ng. Yes, Mr. Chairman, the Basic Law is very restricted 
with referral. Namely, only the Court of Final Appeal can refer 
a provision to the Standing Committee for interpretation.
    Now, nobody has ever dreamt that the government, the 
executive, can refer a matter to the Standing Committee. Now 
the government says that it has power under certain other parts 
of the Basic Law, which merely empowers the chief executive to 
implement the Basic Law. Now, if that is to be accepted as the 
basis for referring matters to the Standing Committee, it would 
be a very easy path for the government to do so.
    Senator Thomas. Would you say, is there a separation 
between your final appeal judiciary function and the executive 
C.H. Tung function?
    Ms. Ng. In Hong Kong, our system has always been a 
separation of the judiciary, the legislature and the executive. 
The executive is bound by law. So the court has that 
supervision over the lawfulness of a government's action.
    If a government does not have to accept from the Hong Kong 
courts whether its action is lawful or not, but can go to 
Beijing, then the government will not be restricted by law.
    Senator Thomas. But is not that precisely what happened in 
this instance?
    Ms. Ng. Exactly, Mr. Chairman, that is precisely our 
concern.
    Senator Thomas. Yes.
    Ms. Ng. If the government thinks that the consequence, the 
social and economic consequence, is unbearable for Hong Kong, 
then the legal profession's position is that the government can 
seek an amendment of the law. This would be proper. It would 
leave the judicial process intact. And it would be protected by 
due process. We consider that to be a perfectly viable process, 
but it was not followed by the government.
    Senator Thomas. I understand. Let me go to Mr. Yates.
    You indicated, and I understand it, some concern about the 
dependence on trade. But is not that true with Singapore? Is 
not that true with a number of places? Hong Kong is going to be 
much like that, are they not? Nothing can change that, can it?
    Mr. Yates. Right. And in saying so, I would again emphasize 
I do not advocate that they raise barriers to control capital 
or flows of goods or information. It is difficult to say why 
Hong Kong was so heavily affected by the regional downturn, 
whereas Singapore, though affected, was not as deeply affected, 
without pointing to some of the differences between the two 
economic systems.
    One of the unfortunate easy reads on the Asian financial 
crisis was that places that have more controls fared better. 
Many people in the PRC have pointed to capital controls as an 
important reason why their economy was able to remain stable. 
Our friends in Malaysia sometimes say that because of controls, 
they were able to weather the storm better than some of their 
neighbors.
    Empirically, it is very difficult to say why Hong Kong was 
so profoundly affected. I only make the point to say that there 
are many forces beyond the control of the people in Hong Kong, 
as there will be for any economy that does not have the 
blessing of being as powerful as the United States. When global 
capital flows are flooding through the region, Hong Kong is 
going to be vulnerable.
    Senator Thomas. One of the reasons might have been the very 
high level of investment--perhaps over-investment--as opposed 
to the mainland.
    You mentioned in terms of the movement of goods and the 
security of that, that when we have evidence that there is 
something--how would you suggest that we be in a position to 
know whether there is evidence or not?
    Mr. Yates. Well, as far as I can understand our cooperation 
with the Government in Hong Kong has always been very effective 
in this area. Whether we have evidence that certain things 
happened in China, if we can verify where a product has ended 
up, if we have evidence through whatever means to say that we 
have got cause for concern, as in fact the Select Committee 
says we do have cause for concern, I believe that we do have 
the capability to enforce controls. Many times, companies 
themselves can recognize that something that they sent to a 
partner is no longer there.
    Senator Thomas. Of course, one of the conflicts we are 
running into now, in terms of technical equipment, is the 
companies want to do that and the government does not want them 
to do that. So that is not a very good way to have the 
protection.
    Mr. Yates. I do not think this is a perfect system.
    Senator Thomas. No. I understand that.
    Dr. Cohen, you seem to dwell on the issue of whether this 
issue was determined properly or not. Regardless of that, do 
not you think there is some weakness in the system if you are 
just going to refer it on, beyond the--I mean who is always 
going to make a judgment whether the judges were wrong? You 
have. You said they were wrong, so it should go on. Who is 
going to do that each time they make a decision?
    Dr. Cohen. In every Federal-type system--and the Hong Kong 
arrangements are a prototype of a Federal system--there has to 
be some institution, as you suggest, that interprets the 
written document. The allocation made by the parties that 
negotiated the Joint Declaration, and enacted in the Basic Law, 
left the power of final interpretation not to the Hong Kong 
courts, as the Washington Post reported erroneously the other 
day, but to the Standing Committee of the NPC in Beijing. They 
have the final interpretation--you cannot run a Federal system 
if you leave to the locality----
    Senator Thomas. There is no judicial autonomy, then, for 
Hong Kong?
    Dr. Cohen. No, that is not the case at all. This NPC 
interpretation has not changed the decision of this case----
    Senator Thomas. The decision does not have anything to do 
with it, in my view. It is the process we are talking about. 
You keep talking about the decision. You can almost say, I do 
not care what the decision is; the question is that somebody 
overruled this court and went on to another. And is that the 
process you want?
    Dr. Cohen. Could you run a Federal system in which the 
final determination of whether a matter was a Federal question 
is left to the Supreme Court of Wyoming? You cannot do it.
    Senator Thomas. We have a final court, do not we, right 
here in Washington?
    Dr. Cohen. That is right.
    Senator Thomas. OK. And that is what they would--is not 
that what the people of Hong Kong perceived that their Court of 
Final Appeal was?
    Dr. Cohen. I do not know what the people of Hong Kong were 
thinking when the Joint Declaration came out in 1984 and the 
Basic Law in 1990. But many people, including Martin Lee and 
others who participated in the negotiations of the Basic Law, 
were quite aware what Article 158 provides.
    Senator Thomas. Was not that an interpretation of the Basic 
Law, not judgments to be made on particular cases?
    Dr. Cohen. You see, the Standing Committee can make an 
interpretation by itself on its own.
    Senator Thomas. Yes.
    Dr. Cohen. It does not need the Hong Kong Government to 
stimulate that. It can be stimulated on its own.
    Senator Thomas. I see.
    Dr. Cohen. It can be stimulated by Ms. Ng or anyone. But 
the problem is, what is the relation of the court decision that 
has been made to a further application of that decision in the 
future. If you are a member of the Senate and the Supreme Court 
tomorrow makes an interpretation of legislation that either you 
or the President of the United States disagrees with, the 
Congress is perfectly open to enact a law correcting that 
interpretation. Nobody says that undermines the judicial 
process.
    Senator Thomas. We cannot send that judicial decision to 
some other court.
    Dr. Cohen. No.
    Senator Thomas. That is the Court of Final Appeal.
    Dr. Cohen. And for that case, it is over.
    Senator Thomas. Yes.
    Dr. Cohen. And that is the situation under the Basic Law. 
But you can look to the future and you can say that 
interpretation of the court is not one we agree with. We are 
not going to affect the court's decision but seek a new 
interpretation for future cases.
    Senator Thomas. No, that is true.
    Dr. Cohen. But, for the future, we will say you have got to 
have a different interpretation.
    Senator Thomas. And the legislature in Hong Kong could 
operate the similar way.
    Dr. Cohen. Absolutely.
    Ms. Ng. Indeed, Mr. Chairman, the National People's 
Congress can amend the Basic Law. And there is a provision in 
Article 159 for the Basic Law to be amended. In fact, ever 
since the government has said it cannot accept the social 
consequence of the decision of the court, the Bar's position 
had been that an amendment be sought of the Basic Law if it is 
felt that it does not correctly reflect the intent of the 
original provision.
    Senator Thomas. Your Legislative Council does not have the 
authority to do that.
    Ms. Ng. We cannot amend the Basic Law itself, because it 
was promulgated by the National People's Congress. But, Mr. 
Chairman, we do not have a Federal system. We have ``one 
country, two systems,'' which is a very different kind of 
thing.
    Senator Thomas. Yes. It would be interesting to hear what 
the British, how the British interpreted the Basic Law.
    Ms. Ng. I think, Mr. Chairman, one thing you can understand 
from the British is that there is no remedial--I think this is 
documented--that 158 is not designed to provide a mechanism to 
revise the Court of Final Appeal's decision. It is envisaged 
that at a certain point the Court of Final Appeal, if they 
decide that the conditions are met, a provision will be 
referred to the Standing Committee for interpretation. When the 
Standing Committee had given its interpretation, then the court 
would apply that particular interpretation.
    But if the court has already decided that it is not a 
matter for referring, it is not envisaged that the court's 
position can be overruled, in effect, by reinterpreting the 
provisions which the court has just interpreted.
    Senator Thomas. Let me see if I understand. I wrote to C.H. 
Tung about this. And I think he said that they instituted the 
referral, that the Government of Hong Kong instituted the 
referral; is that correct?
    Dr. Cohen. Yes. You see, the mechanism provided in the 
Basic Law was not observed. So if they had not done it, perhaps 
there would be no way to get the proper interpretation before 
the courts.
    Senator Thomas. I was going to say, who else could have 
done that? Is there any other appeal mechanism, other than the 
Court of Final Appeal?
    Dr. Cohen. This has nothing to do with the cases already 
decided. Once the Court of Final Appeal says, rightly or 
wrongly, we are not sending this case to Beijing before we make 
our decision, then it is over. That is their power. They have 
judicial autonomy. But it does not mean the rest of the world 
has to say, when confronted with the wrong interpretation, that 
in the future all cases must be governed by what may be a wrong 
interpretation. That is when the opportunity comes for the 
Standing Committee to say, in the future, we are going to have 
the right interpretation.
    Senator Thomas. Help me again; I do not quite understand. 
It was my understanding that the Court of Final Appeal had made 
their determination on this issue.
    Dr. Cohen. They had.
    Senator Thomas. Well, you just got through saying, once 
they made it, there was no appeal.
    Dr. Cohen. That is right. Once it is over, it is over, even 
if they----
    Senator Thomas. But there was an appeal, was there not?
    Ms. Ng. Indeed. Indeed. Of course, it is not an appeal, as 
such; it is a reinterpretation. The government--Mr. Chairman, 
you will find in the attachment, the documents attached, one of 
my newsletters to my constituents, dated the 23rd of May. And 
that gives a fairly detailed account. But what in fact happened 
was that the government then referred the matter to Beijing, to 
the Standing Committee, and asked them to reinterpret.
    Senator Thomas. It sounds like it is a way to appeal, 
though.
    Dr. Cohen. It is not an appeal. It has nothing to do with 
the case that was decided. It is an attempt to get an 
interpretation--not a reinterpretation by the Standing 
Committee, because they have never been given the chance to 
make the interpretation.
    Senator Thomas. No. But it is a reinterpretation of what 
the Court of Final Appeal said.
    Dr. Cohen. Yes. But not applicable to this matter. That is 
what is misleading. It is not an appeal. It does not overturn 
this case. All the litigants who won that case remain 
successful. It is a question for the future.
    Ms. Ng. Mr. Chairman, that is not quite right. We in the 
Hong Kong Legislature are going through this process. Now, it 
is a well understood Common Law principles that the court, once 
it has decided, does not only adjudicate as between the 
parties, but also decides a legal principle, and it applies to 
anybody who is in exactly the same position as the litigants.
    For example, if the court rules that illegitimate children 
are all included, then that principle will not only apply to 
the parties before the court, but all illegitimate children 
wherever they are. And that will hold good until it is either 
overturned or the law is amended so that it no longer is the 
case.
    Now, in the case before the court, this is not the 
situation. The situation was that only litigants known to the 
Director or Immigration were allowed to benefit from the 
decision of the Court of Final Appeal. In fact, if you look at 
the interpretation of the Standing Committee, in the very last 
paragraph it says that only people who were before the court 
before the judgment would benefit from the court's judgment.
    Senator Thomas. I see.
    Ms. Ng. So that anybody who comes after hte judgments, but 
before it is reinterpreted by the Standing Committee, will not 
benefit.
    Senator Thomas. Well, it is an interesting thing. And I 
must confess that it is awful easy for us Americans to see our 
system, which we generally support and agree to, and think that 
everyone else ought to be the same. And of course each one is 
different.
    But, frankly, it does seem as if this is a real issue in 
terms of not of this particular case, but of the system, and 
how much autonomy in the judicial area that they will have.
    Ms. Ng. Yes, indeed.
    Senator Thomas. You all have been very nice to do this. And 
even though you sort of do not have the same view, that makes 
it even more interesting.
    Ms. Ng. Mr. Chairman, I wonder if I could just add one 
short point.
    Senator Thomas. I have to go vote, so make it short, 
please.
    Ms. Ng. And that is that using 158 in this way is disputed 
very strongly, both by scholars in Hong Kong and in China. Now, 
if you can ask for a reinterpretation as the government claims, 
both before, during and after a judicial process, that would 
make life very difficult, indeed, in Hong Kong. And the 
question is not how often, but whether it is possible, and with 
what ease this can be done.
    Senator Thomas. I see.
    Dr. Cohen. Can I add one sentence, Mr. Chairman?
    Senator Thomas. Certainly.
    Dr. Cohen. Ms. Ng keeps talking about scholars, the legal 
profession. These people are all very divided. There are 
distinguished, able, responsible people on both sides, even 
within her profession.
    Senator Thomas. That is not unusual, is it?
    Dr. Cohen. Not at all.
    Senator Thomas. Particularly when we have two lawyers at 
the table.
    Thank you all very, very much. I appreciate it. The 
committee is adjourned.
    [The following statement was submitted for inclusion in the 
record.]

                Prepared Statement by Human Rights Watch

               threats to judicial autonomy in hong kong
    Only two years have passed since the reversion of Hong Kong from 
British to Chinese sovereignty on July 1, 1997, but the autonomy of 
Hong Kong's legal system is already in jeopardy. In May 1999 the 
government of the Hong Kong Special Administrative Region (HKSAR), 
unhappy with a ruling by the Court of Final Appeal, the region's 
highest court, over who from mainland China was eligible to settle in 
Hong Kong, asked the Standing Committee of the National People's 
Congress (NPC) in China to review the ruling. The Standing Committee 
overturned the court's decision on June 26.
    The threat to Hong Kong's judicial autonomy in this case comes less 
from the action of the NPC than from the political precedent set by the 
Hong Kong government and its chief executive, Tung Chee-Hwa, in turning 
to the NPC for an effective reversal of a court ruling it did not like. 
Members of Congress and the U.S. administration should raise their 
concerns with Mr. Tung and indicate that the implications of his 
actions go far beyond the ``right of abode'' question to the central 
question of whether Hong Kong's much-praised courts will retain any 
independence at all.
Background
    Under the Joint Declaration, the document hammered out by Britain 
and China that transferred Hong Kong to China, and the Basic Law, which 
serves as the constitution of the HKSAR, Hong Kong's autonomy was to be 
protected primarily through a legal and judicial system separate from 
that of China. One of the most controversial aspects of the Basic Law 
was the provision that the National People's Congress would have the 
final say over the law's interpretation, meaning that legally, the NPC 
could indeed challenge rulings by the Court of Final Appeal. Hong 
Kong's legal community and pro-democracy activists clearly recognized 
the danger this provision posed, but it was not clear how or under what 
circumstances the NPC would choose to invoke its authority. Few 
suspected that the danger would come from the Hong Kong government's 
inviting the NPC to intervene.
    Yet this is exactly what happened with the right of abode 
controversy. The Basic Law stipulates that persons of Chinese 
nationality born outside Hong Kong to parents who have permanent 
residency in the HKSAR would themselves be eligible for right of abode. 
Immediately following the transfer of sovereignty, a number of children 
and parents petitioned the Hong Kong government for recognition of this 
right. The Provisional Legislature, appointed by the Chinese 
government, passed a law, effective retroactively, to restrict this 
right. On January 29, 1999, the Court of Final Appeal issued a decision 
that gave the right of abode to a broader group of people than the 
HKSAR government chose to recognize. These included:

   Children born out of wedlock whose mothers do not have the 
        right of abode in Hong Kong but whose fathers do.
   Children whose parents did not have the right of abode in 
        Hong Kong at the time of their birth but who subsequently 
        acquired that right.

    The Hong Kong government expressed concerns about the number of 
people who could be eligible for entry into Hong Kong over the next ten 
years if the CFA's broader interpretation of the right of abode was 
allowd to stand. It also professed concern about the impact this influx 
would have on Hong Kong's social stability. It argued that Hong Kong 
did not have the resources to meet the housing, education, medical and 
health, and social welfare needs of the newcomers, although the numbers 
it used to make the argument were ludicrously overstated in the view of 
many legal scholars and social scientists.
    After Chinese government officials objected to the CFA ruling, and 
after the CFA's Chief Justice was forcel to issue an unprecedented 
``clarification'' of the ruling, Tung Chee-Hwa decided to seek an 
interpretation by the NPC's Standing Committee as a way of avoiding 
implementation of the court's decision. Turning to China to resolve a 
critically important legal dispute was not the only option open to the 
Hong Kong government, but it was by far the worst. It could have 
allowed the CFA decision to stand and then waited to see if the numbers 
of Chinese seeking right of abode bore any resemblance to its 
apocalyptic predictions. It could have sought a new ruling from the CFA 
through new cases. Even working through the SAR Legislative Council to 
seek an amendment to the Basic Law would have been preferable than 
inviting Chinese intervention in Hong Kong judicial matters.
    By turning to the NPC to bolster its own case, the Hong Kong 
government has set a dangerous precedent, effectively giving notice 
that any time the Court of Final Appeal rules in a way that the 
executive branch of the SAR finds objectionable, it will turn to China 
for assistance. This makes a mockery both of the notion of checks and 
balances within the SAR government as well as of Hong Kong autonomy 
itself.
    The NPC Standing Committee responded predictably to the HKSAR 
government's request for interpretation. In its decision adopted last 
week, it said the Court of Final Appeal should have itself asked the 
NPCSC for an interpretation of the controversial part of the Basic Law 
before it gave its final ruling. It also stated that the CFA's 
interpretation was in violation of the spirit of the Basic Law. It 
upheld the Hong Kong government's restrictive interpretation of the 
right of abode of mainland children, limiting it to those, who at the 
time of their birth, had at least one parent who was already a 
permanent Hong Kong resident. Anyone else would have to seek permission 
from relevant departments in the Chinese government and there was no 
guarantee that permission would be granted. This interpretation applies 
to relevant future cases handled by Hong Kong courts but does not 
affect those who have already obtained the right of abode as a result 
of the Hong Kong Court of Final Appeal's initial ruling in January 
1999.
    The key issue from a human rights perspective is not the right of 
abode per se. It is the independence of the Hong Kong courts. This 
precedent has the potential of opening a wide swathe of judicial 
rulings to attack and ``reinterpretation,'' particularly those that 
displease either the Chief Executive in Hong Kong or the government in 
Beijing.
    Human Rights Watch urges the Administration and Congress to raise 
concerns, privately and publicly, with Hong Kong and Beijing officials 
about threats to the rule of law and the independence of the Hong Kong 
judiciary. For example, this issue should be on the agenda of President 
Clinton's talks with Chief Executive Tung Chee-Hwa at the APEC summit 
in New Zealand in September. Members of the business community should 
also continue to speak out, recognizing the importance of Hong Kong's 
legal system to its prosperity and economic vitality.

    [Whereupon, at 3:30 p.m., the subcommittee adjourned, to 
reconvene at 10 a.m., July 21, 1999.]


                RECENT STRAINS IN TAIWAN/CHINA RELATIONS

                              ----------                              


                        WEDNESDAY, JULY 21, 1999

                           U.S. Senate,    
                 Subcommittee on East Asian
                               and Pacific Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m. in 
room SD-419, Dirksen Senate Office Building, Hon. Craig Thomas 
(chairman of the subcommittee) presiding.
    Present: Senators Thomas, Helms, Biden, Coverdell, Kerry, 
and Torricelli.
    Senator Thomas. The committee will come to order. I want to 
thank each of the witnesses for being here today. The 
subcommittee meets to evaluate and to discuss recent 
developments in the cross-strait relations between Taiwan and 
the People's Republic of China.
    On July 9, Taiwan's President Lee stated relations between 
Taiwan and the PRC should be conducted on the basis of a 
``state to state'' relationship, or at least a ``special state 
to state relationship.'' That statement, and subsequent 
amplifications from the foreign ministry and the Mainland 
Affairs Council, seemed to indicate that the ROC Government has 
moved away from its adherence to the one China policy, a policy 
that it has followed since the late forties.
    The reaction from the People's Republic was predictably 
strident. The PRC officials have accused the ROC of pursuing 
independence, in a flood of public statements, media reports, 
and press releases, the defense minister has made several 
public statements emphasizing the People's Republic position 
that it does not adjure to force: ``Should Taiwan declare 
independence the PLA is ready at any time to safeguard the 
territorial integrity of China and smash any attempts to 
separate the country.'' That was a quote.
    It is unclear whether the PRC will have a reaction over and 
above the rhetoric, such as the movement of troops bordering 
the Taiwan Strait, as was the case in 1996, or missile testing 
north and south of the island.
    This deterioration of cross-strait relations is very 
unfortunate. Recently, the two sides have resumed high level 
contacts after a 5-year hiatus. This resumption is important, 
because nothing is ever going to be resolved with the two 
sides, of course, sitting on each side of the strait without 
communications.
    Equally important, in my view, is that both sides should 
leave the United States as sort of an impartial party. As I 
have stressed in past trips both to the PRC and the ROC, we do 
not want to be caught in the middle of what is basically a 
bilateral issue.
    It is no surprise that Beijing and Taipei favor U.S. 
intervention that benefits their respective positions. However, 
there is little, if any, support for true mediation, that is, 
efforts by a neutral party to get both sides to give up 
significant parts of their respective negotiating positions to 
find a compromise.
    Putting us in the middle serves no useful purpose. The two 
sides tend to talk to us and not to each other, and any U.S. 
statement or effort to bring the sides together is more likely 
than not to be received negatively by one side or the other as 
favoring the opposite side. This result is a lose-lose 
situation, generally, for us. This is a matter that needs to be 
resolved by Taiwan and the People's Republic, hopefully in a 
peaceful manner--that has been our position, as I understand 
it--without being triangulated.
    Having said that, I cannot resist closing with some advice. 
First, the PRC. It would be in the country's best interest to 
adopt a low key approach to the recent statements. The 
statements have met, I think, with a relatively cool reception 
in international circles, and by exhibiting some self-control 
instead of indulging in an overreaction, as was the case in 
1996, Beijing could make some gains in how it is viewed in the 
Congress without expending a great deal of capital to do so.
    Perhaps more importantly is the fact that Beijing should 
remember that, while we wish to be left out of the cross-strait 
dialog, we are firmly committed to the premise that any 
solutions must be peaceful. Any attempt to settle the question 
with the barrel of a gun is a threat to the peace and stability 
of East Asia, and thus a direct threat to U.S. interests.
    Second, as for Taiwan, I would state that I do not believe 
that recent statements on Taiwan's status, even if they 
arguably reflect a de facto reality, have been helpful. In 
addition, I would like to caution Taipei against the tendency, 
which I have seen at some points, to sort of hide behind the 
skirts of the United States and say things that they would not, 
I think, say if they were not expecting the United States to be 
standing behind them in whatever those statements are, and that 
they expect us to come to the rescue.
    So that is kind of where we are, obviously there is a good 
deal of interest in this. It says here in this Washington 
Times, ``U.S. mulls cutoff of military aid to Taiwan.'' I do 
not know what it means. Here is one that says, ``U.S. seeks to 
mend Taiwan-China rift,'' and, of course, Secretary Roth is 
over there. This one says--this is New York Times--``Taiwan's 
new doctrine unintelligible to the Chinese,'' which indicates 
apparently they have not been able to figure out what it means.
    So obviously it is an issue of considerable importance, so 
gentlemen, thank you for coming. I think our purpose here is to 
get some ideas as to what this means, where we are from the 
standpoint of those groups you represent, and your experience, 
Mr. Ambassador, in terms of where you think we are and what we 
might do best to serve the collective interest of the United 
States and the People's Republic and, indeed, of Taiwan.
    So your statements will be carried in full in the record, 
and so if you want to comment, aside from that, that would be 
fine.
    Why don't we start with you, Mr. Yates, senior policy 
analyst, the Heritage Foundation, in Washington, DC.
    [The prepared statement of Senator Thomas follows:]

               Prepared Statement of Senator Craig Thomas

    Good Morning. Today the subcommittee meets to evaluate recent 
developments in cross-strait relations between Taiwan and the PRC. I 
will keep my statement short so that we can get to our witnesses.
    On July 9, 1999, Taiwan's President Lee Teng-hui stated in response 
to written questions submitted to him by Deutsche Welle that relations 
between Taiwan and the PRC should be conducted on the basis of a 
``state-to-state'' relationship ``or at least a special state-to-state 
relationship.'' That statement, and subsequent amplifications from the 
Foreign Ministry and the Mainland Affairs Council, seem to indicate 
that the ROC government has jettisoned its adherence to the ``one 
China'' policy--a policy it had followed since the late 1940's.
    The reaction from the PRC was predictably strident. PRC officials 
have accused the ROC of pursuing independence in a flood of public 
statements and media reports. Defense Minster Chi Haotian has made 
several public statements emphasizing the PRC's position that it does 
not abjure the use of force should Taiwan declare independence, and 
that the PLA is ``ready at any time to safeguard the territorial 
integrity of China and smash any attempts to separate the country.'' It 
is unclear whether the PRC will have a reaction over and above the 
rhetoric, such as a movement of troops to provinces bordering the 
Taiwan Strait, military exercises, or--as in 1996--missile tests north 
and south of the island.
    This deterioration in cross-strait relations is very unfortunate. 
Recently, the two sides had resumed their high-level contacts after a 
five-year hiatus. This resumption is important, because nothing is ever 
going to be solved by the two sides sitting on opposite shores of the 
Taiwan Strait staring glumly at each other.
    Equally important, in my view, is that both sides should leave the 
United States out of it. As I have stressed on past trips to both the 
PRC and ROC, we do not want to be caught in the middle of what is a 
truly bilateral issue. It is no surprise that both Beijing and Taipei 
favor U.S. intervention that benefits their respective positions. 
However, there is little, if any, support for true mediation--that is, 
efforts by a neutral party to get both sides to give up some 
significant parts of their respective negotiating positions in order to 
reach a compromise solution.
    Putting us in the middle serves no useful purpose. The two sides 
tend to talk through us, and not to each other. And any U.S. statement 
or effort to bring the sides together is more likely than not to be 
received negatively by one side as favoring the other. The result is 
often a lose-lose situation for us. This is a matter that needs to be 
resolved solely by Taiwan and the PRC, in a peaceful manner, without 
being triangulated.
    Having said that, though, I cannot resist closing with some advice 
for both sides. First, for the PRC, it would be in that country's own 
best interests to adopt a low-key approach to the recent statements 
from Taipei. The statements have met with a cold reception in 
international circles, and by exhibiting some self-control instead of 
indulging in an overreaction similar to its 1996 military exercises, 
Beijing could make some gains in how it is viewed in Congress without 
expending a lot of capital to do so.
    Perhaps more importantly though, is the fact that Beijing should 
remember that while we wish to be left out of the cross-strait dialog, 
we are firmly committed to the premise that any solution must be 
peaceful. Any attempts to settle the Taiwan question with the barrel of 
a gun is a threat to the peace and stability of East Asia, and thus a 
direct threat to U.S. interests.
    Second, as for Taiwan, I will state directly that I do not believe 
that the recent statements on Taiwan's status--even if they arguably 
reflect a de facto reality--have been at all helpful. In addition, I 
would like to caution Taipei against a tendency I have seen at some 
points during my tenure as chairman; it should not feel that it can 
hide behind our skirts and occasionally goad the mainland secure in the 
knowledge that we will somehow come to their rescue like a big brother.
    I look forward to the testimony of our witnesses this morning.

STATEMENT OF STEPHEN J. YATES, SENIOR POLICY ANALYST, HERITAGE 
                   FOUNDATION, WASHINGTON, DC

    Mr. Yates. Thanks very much, Mr. Chairman. I appreciate the 
opportunity to share some thoughts on this topic, and I have 
submitted for the record a couple of past studies on U.S.-
Taiwan relations that I think might be helpful background, and 
I would request they be added to the record.
    I would begin by stating that I perhaps have a different 
interpretation of the implications of President Lee's statement 
than many of my friends that I have heard of late. I do not 
believe that President Lee's statement represents a change in 
policy, but I do see it as an attempt to try to change the 
rules of the game that has been going on between Taiwan, the 
mainland, and the United States, and there are many important 
reasons for this, and these causes I think have been missed in 
the fit of analysis that has occurred since President Lee 
spoke.
    Since 1991, President Lee was quite correct, the Republic 
of China had changed its constitution to renounce its claim of 
sovereignty over the rest of the mainland. In effect, for 8 
years we have been operating under a policy that from Taiwan's 
point of view is quite strained in calling it a one-China 
policy, and so President Lee's statement I think does not 
reflect a great departure from what the nationalist government 
had been claiming for the last 8 years.
    Still, I believe that the authorities in Taiwan have felt 
that they have been negotiating in good faith for several years 
to try to resume dialog under this notion of co-equal political 
entities, and that over time, Beijing and the United States 
have put them at a disadvantage in these negotiations.
    First, we have the President's statement of the ``three 
no's'' in Shanghai, which, regardless of the merits of this 
statement, was viewed as a setback by Taiwan in its 
international standing, or at least its standing vis-a-vis the 
mainland, and it seems to be a move by the United States to 
place Taiwan at a disadvantage in its negotiations with the 
mainland.
    Then we have, after the unfortunate embassy bombing and 
Premier Zhu Rongji's failed attempt to secure World Trade 
Organization membership here in April, an apparent change in 
position by the mainland, where it seems that they now oppose 
Taiwan's simultaneous accession to the WTO along with the 
mainland at the end of the year, assuming that can be achieved.
    Simultaneous accession seems to be more or less an accepted 
notion, and the WTO, it is important to note, is not a State-
based organization and, from Taipei's point of view, it is 
beginning to feel squeezed out of even the non-State-based 
international organizations.
    To my view, it is important to recognize the importance of 
face and dignity on both sides of the Taiwan Strait. If people 
in Beijing acknowledge that the people in Taiwan are Chinese, 
certainly they can understand this notion. China has its own 
feelings about a century of humiliation under international 
dominance, and it is constantly referred to when we engage in 
discussions with them.
    The representation of the students, throwing rocks at our 
embassy, was an actual honest outpouring of frustration of a 
younger generation that has witnessed great change in China, 
and feels it is not getting adequate respect from the 
international community, primarily the United States.
    They should certainly recognize the similar frustration on 
Taiwan, which seems to carry around this ignominious title of 
renegade province that is treated as some kind of international 
outcast. Taiwan has also experienced great change and success 
over recent decades, and many of its officials now at senior 
levels also want respect and dignity from the international 
community, but more importantly, from their counterpart, that 
claims to be their sovereign, and I think that this sense of 
dignity is an important concept that both sides should 
understand more.
    The solution to this is not to penalize Taiwan, but to 
understand the need to afford greater dignity in this process 
of negotiation. I believe President Lee's statement emphasizes 
the need for the United States and for Beijing to at least 
acknowledge that there is a government on Taiwan through which 
these negotiations need to proceed.
    I can find no example of peaceful unification in human 
history where two governments did not deal with one another 
directly. Perhaps a mind greater than mine will find an example 
of such, but I think that the reason German media was chosen 
for this interview was to make this point, that if people are 
serious about reunification, there is a process that needs to 
take place.
    First, you need to acknowledge a government exists. Then 
you need to recognize some element of legitimacy in that 
Government negotiating about reunification, and then the long, 
painful process of coming up with a political resolution can 
take place. I do not see any other way around this.
    Our policy on the Korean Peninsula seems to point in this 
direction, where we want both sides in that dispute to deal 
directly with one another, government to government. Why would 
reunification be different on the Taiwan-mainland situation?
    I think that President Lee has raised an uncomfortable 
issue, but nonetheless one that challenges us to say, if you 
believe that President Lee was wrong, or spoke inappropriately, 
how should the elected government in Taiwan negotiate with the 
mainland? Who should be their representative, and when we have 
two forces at play, one that threatens to use military force, 
one that threatens to use political speech, who is the 
legitimate provocateur in this conflict?
    I think the United States has been overly concerned about 
granting a blank check to Taiwan about what it might do to drag 
the United States in the conflict, and has unfortunately 
granted a blank check to Beijing to define its own terms of 
what constitutes a move toward independence, to define for the 
United States under what circumstances we would stand by while 
the mainland intimidates Taiwan into negotiations.
    I think that the blank check notion places concern in the 
wrong place. We should be more concerned about Washington 
abiding by the terms and conditions of the Taiwan Relations 
Act, a concern reflected in that headline article in the 
Washington Times.
    Our concern should also be about trying to deter force from 
being used to resolve political disputes, whether those 
disputes are in Tiananmen Square, or the Taiwan Strait. I think 
the United States' fundamental interests are served by trying 
to add a level of dignity to the people on Taiwan.
    They are a significant export market for our goods, more so 
than the 1.2 billion people on the mainland, they do have a 
democratic government, there are many elements of their system 
that serve as a wonderful example of how the principles we hold 
near and dear actually work.
    So I welcome President Lee's statement. I agree that it is 
an attempt to change the rules of the game, but I think that 
the rules of the game have been tilted too far in one 
direction, to the disadvantage of Taiwan in these negotiations.
    Thank you very much.
    [The prepared statement of Mr. Yates follows:]

               Prepared Statement of Stephen J. Yates \1\
---------------------------------------------------------------------------

    \1\ Members of the Heritage Foundation staff testify as individuals 
discussing their own independent research. The views expressed are 
their own, and do not reflect an institutional position for the 
Heritage Foundation or its board of trustees.
---------------------------------------------------------------------------
    Mr. Chairman and distinguished members of the Subcommittee, thank 
you for inviting me to address you on this topic of great consequence 
to American interests in Asia. I have submitted for the record two 
recent Heritage studies that explore in detail what I consider to be 
the myths and realities of U.S. Taiwan policy. Both studies outline my 
concerns with the policies of the Clinton administration, which I 
consider to be an unfortunate, and potentially dangerous, departure 
from past practice. I have also submitted a copy of a recent article 
that offers my initial assessment of President Lee's recent statement 
on cross-strait relations, the implications of which will be the focus 
of my testimony.
    Ever since July 9th, when Republic of China President Lee Teng-hui 
used the words ``state-to-state'' to describe relations between Taipei 
and Beijing, experts and officials in the United States have with 
exasperation and criticism questioned Lee's motives. They charge Lee 
with abandoning the so-called ``one China'' principle, which to their 
thinking is the thread holding together a precarious peace in Asia. It 
is regrettable that so many Americans have rushed to brand Lee a 
trouble-maker without more thoughtfully examining his statement or 
considering his motives.
    In fact President Lee's description of relations across the Taiwan 
Strait is not departure from past government policy, but it was an 
attempt to change the rules of the game managing relations with Beijing 
and Washington. There are three main reasons why President Lee felt the 
need to break new rhetorical ground and reassert the Republic of 
China's claim of sovereignty. First, Beijing began to unilaterally 
change the rules of the game, imposing its definition of China on 
international institutions and in dealings with the United States. 
Second, Washington, under the Clinton administration, seems to have 
forgotten how this game is played, and the importance of maintaining 
certain positions in the face of Beijing's bluster. Third, and perhaps 
most important, is the rising generation of leaders on Taiwan that 
demand greater respect from Washington and Beijing, and greater dignity 
in international affairs.
                      beijing's unilateral changes
    A major breakthrough occurred in cross-strait relations in 1993, 
when Taipei and Beijing agreed to send high-level former officials, in 
their capacity as heads of non-governmental cross-strait institutions, 
to Singapore to discuss ways to improve management of interactions 
between people on both sides of the Taiwan Strait. This meeting took 
place because both sides were able to set aside the contentious issue 
of how to define ``China,'' and focused instead on ``political 
entities'' meeting to address pragmatic non-political issues.
    Since the much lauded Singapore meeting in 1993, however, Beijing 
has seen fit to impose its particular definition of China on Taiwan and 
the world, in an attempt to squeeze Taiwan ever harder out of 
international society. Beyond United Nations membership, Beijing sought 
to exclude Taiwan from all state-based international organizations, and 
even obstruct Taiwan's participation in organizations that do not 
require statehood.
    After Chinese Premier Zhu Rongji failed last April to secure an 
agreement with the Clinton administration over China's membership in 
the World Trade Organization, and NATO forces mistakenly bombed China's 
embassy in Belgrade, Beijing has pushed very hard for concessions out 
of Washington on the WTO and especially Taiwan. Linking the two issues, 
Beijing cast aside previous acceptance of Taipei and Beijing 
simultaneously joining the WTO, and instead now insists that Taipei 
must wait until Beijing is a full member before its membership can be 
considered. It was bad enough that Beijing has been successful in using 
its political muscle to force Taipei to wait for simultaneous 
accession, but it is unacceptable to Taipei (and should be to the 
United States) that their membership be held up beyond the end of this 
year.
                          washington blunders
    While Taipei has come to expect intransigence from Beijing, many 
officials have become dismayed at how detrimental Washington's actions 
have been to their interests. Since the Nixon administration, 
Washington has tried to strike a balance between its interests on both 
sides of the Taiwan Strait by avoiding the question of sovereignty over 
Taiwan. In a 1972 agreement with Beijing, the United States 
``acknowledge[d] that all Chinese on either side of the Taiwan Strait 
maintain there is but one China and that Taiwan is a part of China.'' 
This is the origin of what many call the ``one China'' policy. It is 
critical to note, however, that the United States never adopted a ``one 
China'' policy of its own, but merely acknowledged the ``one China'' 
policies of both Beijing and Taipei.
    In 1979, when the U.S. established diplomatic relations with 
Beijing, Washington recognized ``the Government of the People's 
Republic of China as the sole legal Government of China.'' Again it is 
significant to note that the United States did not agree that Taiwan 
was part of the PRC, but only that Taipei was not a legal government of 
China. As in 1972, the United States only ``acknowledge[d] the Chinese 
position that there is but one China and Taiwan is part of China,'' and 
did not state that this was Washington's view.
    This may seem like a tedious parsing of words, but it is this 
carefully chosen language and loose definition of ``China'' that has 
allowed the United States to conduct affairs vital to its interests 
with both parties without getting in the middle of what is technically 
an unresolved civil war. These terms have allowed Taiwan and the 
Mainland to coexist, even under periods of intense hostility, without 
any combat-related loss of life in more than four decades.
    It wasn't until the Clinton administration that the United States 
adopted Beijing's definition of ``one China'' and Beijing's policy on 
Taiwan's membership in international organizations. Despite the 
dispatch of aircraft carrier battlegroups to Taiwan's side in 1996, 
Taipei has learned that the Clinton administration has forgotten how 
this war of words is played. Rather than supporting Taiwan while 
engaging with Beijing, the Clinton administration adopted policy 
guidelines in 1994 that sought to exclude Taiwan from most 
international organizations and block Taiwan's top leaders from 
entering the United States. In 1998, on the Chinese Mainland, President 
Clinton chose to declare Beijing's long-standing policy toward Taiwan 
as our own when he iterated the ``three no's''--no independence, no 
``two China'' policy, and no membership in state-based organizations.
    While this rhetorical concession may seem small to most Americans, 
its significance was not lost on either Beijing or Taipei. It was a 
clear signal to both that Washington's policy was tilting in Beijing's 
favor, leaving Taiwan isolated internationally and unacceptably 
vulnerable to coercion from Beijing. Taipei has tried to achieve some 
sense of equality in its dealings with Beijing, but this equal footing 
became a casualty of Clinton's ill-advised intervention.
                      taipei's demand for dignity
    The third factor leading to President Lee's statement has to do 
with domestic developments in Taiwan. Since moving its government to 
Taipei in the 1940's, the ROC has transformed an underdeveloped island 
into a major trading nation. During the cold war Taipei was a loyal 
ally of the United States in containing the spread of communism and 
remains a force for peace and stability in Asia. And since the 1980's, 
the ROC has transformed Taiwan's political system into one of the 
freest democracies in Asia. For all of Taiwan's success at expanding 
freedom while preserving stability and security, the people of Taiwan 
and their government believe they deserve a modicum of dignity and 
respect from abroad. And yet, they receive scant recognition from the 
United States or other members of the ``free world,'' and Beijing 
continues to brand Taiwan with the ignominious label ``renegade 
province.''
    Beijing should immediately identify, and even sympathize, with 
Taipei's demand for dignity and respect. After all, it was the People's 
Republic that was established in the wake of China's self-styled 
``century of national humiliation,'' where the Chinese people struggled 
for modernity and lost territory to foreign powers. More recently, a 
generation has grown up on the Mainland witnessing unprecedented change 
in economic, political, and diplomatic life. This younger generation 
knows more about CNN and cell phones than it does the cultural 
revolution. It is better educated, better paid, and more cosmopolitan 
than its elders, and yet passionately believes the United States 
prefers to ignore or insult China rather than accord it the respect due 
a significant rising power. Witness those who stoned the U.S. embassy 
in Beijing. These were not Maoists, but modern nationalists demanding 
that their interests and accomplishments be recognized.
    After fifty years of separation from the Mainland, it should not 
surprise Beijing to find similar sentiments on Taiwan. Taiwan has 
experienced phenomenal economic success and transformed into a 
democracy. It too has a generation of people who have grown up in an 
era of great change, but who have no memory of or affinity for the 
Mainland. Like its Mainland counterpart, this generation on Taiwan 
feels it is slighted by the world. Its interests and accomplishments 
are routinely ignored by its neighbors and supposed friends, but most 
especially by its neighbor who claims to be its sovereign, and these 
Taiwan patriots are going to stand idly by no longer.
    The key distinction between these two groups is that the Mainland 
nationalists are led by a generation of students, while the Taiwan 
patriots are led by a generation of accomplished adults, some of whom 
hold high government office. This rising tide in Taiwan does not demand 
independence as much as it demands that it be treated with dignity and 
respect--whether by Beijing or Washington. With the importance given to 
``face'' in Chinese culture, Beijing should understand this better than 
anyone.
    Given the unfavorable trend of recent events, from Washington 
weakness to Beijing belligerence, who can blame President Lee for 
standing up and reminding the world of the existence of his democratic 
government and what it stands for? The burden is on Lee's critics to 
come up with a more appropriate basis for Taiwan's democratic leaders 
to deal with Beijing.
                                 ______
                                 

       [From the Heritage Foundation Backgrounder, Oct. 13, 1998]

          Promoting Freedom and Security in U.S.-Taiwan Policy

                         (By Stephen J. Yates)

    On June 30, in what his advisers described as a ``low-key 
setting,'' President Bill Clinton surprised many in the United States, 
and especially in Taiwan, when he decided to summarize publicly his 
Administration's Taiwan policy while in Shanghai, China: ``we don't 
support independence for Taiwan, or two Chinas, or one Taiwan--one 
China. And we don't believe that Taiwan should be a member of any 
organization for which statehood is a requirement.''
    Although the President and his Administration view this iteration 
of what has become known as the ``Three No's'' as a restatement or 
clarification of long-standing U.S. policy, most media and 
congressional observers did not agree. The fact is that the President 
has changed U.S. policy toward Taiwan. His Shanghai statement departed 
from the carefully nuanced language of the past that has allowed the 
United States to conduct relations with both sides of the Taiwan Strait 
in a manner that promotes peace and prosperity.
    The free and democratic people of Taiwan and their supporters in 
the U.S. Congress might have expected more from a President who had 
traveled four times to the Republic of China on Taiwan before taking 
office without ever setting foot in the People's Republic of China on 
the mainland. The only positive thing to say is that Clinton's 
statement in Shanghai touched off a healthy debate over the merits of 
the long-standing U.S. policy toward Taiwan.
    The Administration's new Taiwan policy violates basic American 
values, misinterprets U.S. obligations under the 1979 Taiwan Relations 
Act (TRA) and three U.S.-China joint communiques, and increases the 
likelihood of conflict in the Taiwan Strait. It was formulated in an ad 
hoc and reactive manner, incorrectly identifying the debate about 
Taiwan independence as causing heightened tensions with China and the 
risk of war in the Strait. To correct these flaws, the Administration 
should return U.S.-China policy to the principles and policies outlined 
in the Taiwan Relations Act.
    Only when the United States resolves to deter aggression and 
promote democracy will a peaceful and democratic resolution of this 
conflict be possible.
                      from neglect to appeasement
    U.S. policy toward Taiwan is bound first by legal obligations under 
the 1979 Taiwan Relations Act and secondarily by diplomatic obligations 
outlined in three joint communiques signed with the People's Republic 
of China.\1\ The joint communiques place Taiwan issues within the 
context of broader U.S. relations with all of China. The United States 
acknowledges Beijing's view that Taiwan is a part of China, recognizes 
Beijing as the sole legal government of China, declares the U.S. 
interest in peaceful resolution of differences between Taipei and 
Beijing over Taiwan's status, and calls for the gradual reduction of 
arms sales to Taiwan as long as cross-Strait differences are being 
resolved peacefully.
---------------------------------------------------------------------------
    \1\ See Appendix, ``United States Legal Obligations to Taiwan Under 
the Taiwan Relations Act'' and ``Statements of United States Taiwan 
Policy in the Three Sino-U.S. Joint Communiques.''
---------------------------------------------------------------------------
    The Taiwan Relations Act identifies U.S. policy obligations more 
specifically. It obliges the United States to deter Beijing from 
militarily intimidating or invading Taiwan, to provide defensive arms 
for Taiwan's self-defense needs, to preserve and enhance the human 
rights of the Taiwan people, and to preserve and promote extensive, 
close, and friendly commercial, cultural, and other relations with the 
people of Taiwan.
    Each U.S. administration is charged with formulating its own 
strategy for conducting extensive, close, and friendly unofficial 
relations with Taiwan under this broad and sometimes ambiguous 
framework.\2\ The Clinton Administration's attempt at devising a Taiwan 
strategy; called the Taiwan Policy Review, was reported to Congress in 
September 1994. In that Policy Review, the Administration declared that 
top-level Taiwan officials could enter the United States for ``transit 
only'' and must not engage in any public activities while in this 
country. The policy placed draconian restrictions on where and with 
whom Taiwan's ``unofficial'' representative could conduct government-
to-government business, and declared as a matter of policy that the 
United States will not support Taiwan's membership in state-based 
international organizations. The President's ``Three No's'' in Shanghai 
on June 30 were consistent with this Taiwan Policy Review, but they do 
not follow the TRA-joint communique framework. Taiwan has become a 
casualty of the Clinton Administration's major China policy shift.
---------------------------------------------------------------------------
    \2\ See Appendix, ``Reagan Administration Interpretation of U.S. 
Policy Obligations to Taiwan'' and ``Clinton Administration 
Interpretation of U.S. Policy Obligations to Taiwan'' to contrast the 
approach different administrations have taken to implementing the same 
obligations.
---------------------------------------------------------------------------
    Surprisingly, President Clinton's ``constructive strategic 
partnership'' with China in 1998 stands in stark contrast with Governor 
Clinton's moralistic demonization of China and criticism of the Bush 
Administration's policy in 1992. In fact, in his 1992 campaign 
manifesto, Putting People First, Governor Clinton accused the Bush 
Administration of turning its back on those struggling for democracy in 
China. Clinton promised that his administration would ``never forge 
strategic relationships with dangerous, despotic regimes. It will 
understand that our foreign policy must promote democracy as well as 
stability. We cannot . . . ignore the link between the two.'' \3\ And 
yet, in 1998, President Clinton is trying to forge a strategic 
relationship with the ``dangerous, despotic'' government of China. In 
the six years between issuing Putting People First and building a 
``constructive strategic partnership,'' the interests of Taiwan's 
democracy have been sacrificed by neglect and by design.
---------------------------------------------------------------------------
    \3\ Governor Bill Clinton and Senator Albert Gore, Putting People 
First (New York: Times Books, 1992), p. 138.
---------------------------------------------------------------------------
    Administration Neglect. It took nearly two years for the Clinton 
Administration to issue its first comprehensive articulation of its 
policy toward Taiwan--the 1994 Taiwan Policy Review. This policy led to 
a crisis in May 1995, when Congress voted 493 to 1 to demand that the 
Administration grant Taiwan President Lee Teng-hui entry into the 
United States to deliver the commencement address at his alma mater, 
Cornell University, in June.\4\ Following the policy articulated in its 
Taiwan Policy Review, Administration officials, including Secretary of 
State Warren Christopher, had assured Beijing both publicly and 
privately that the United States would not grant President Lee an entry 
visa. After the congressional vote, the Administration was forced to 
reverse course and grant the visa.
---------------------------------------------------------------------------
    \4\ H. Con. Res. 53 passed the House (396-0) on May 2, 1995, and 
was agreed to by the Senate (97-1) on May 9, 1995.
---------------------------------------------------------------------------
    Beijing responded to President Lee's celebrated commencement 
address with a nine-month campaign of military intimidation against 
Taiwan.\5\ It was a failed attempt to undermine support for President 
Lee as he campaigned for re-election. In late February to early March 
1996, a reluctant Clinton Administration was forced to follow the legal 
obligations in the Taiwan Relations Act and deploy two aircraft carrier 
battlegroups to the Taiwan Strait to support Taiwan and deter Beijing 
from further military aggression.
---------------------------------------------------------------------------
    \5\ From June 1995 through March 1996, China engaged in a series of 
provocative military exercises which included the test firing of 
nuclear-capable missiles within 50 miles of Taiwan's two largest 
commercial ports. For additional details, see Richard D. Fisher, 
``China's Threats to Taiwan Challenge U.S. Leadership in Asia,'' 
Heritage Foundation Asian Studies Center Backgrounder No. 139, March 6, 
1996, and Richard D. Fisher, ``China's Missile Diplomacy: A Test of 
American Resolve in Asia,'' Heritage Foundation Backgrounder Update No. 
269, March 12, 1996.
---------------------------------------------------------------------------
    Administration Appeasement. Frightened by this brush with possible 
war with China, the Administration decided to change course again. 
Convinced that it had incurred Beijing's wrath by allowing President 
Lee to enter the United States, the Administration sent National 
Security Advisor Anthony Lake to Beijing in July 1996 to begin the 
process of tilting U.S.-China policy back again toward Beijing. Taiwan 
would be sacrificed in this transformation of Clinton Administration 
China policy from condemnation to appeasement. Indeed, after being 
threatened by China's flagrant displays of military aggression in 1995 
and 1996, the President rewarded Beijing with two high-profile summit 
meetings and a pro-Beijing presidential statement of Taiwan policy (the 
``Three No's''). Beijing then began pressuring Taiwan's leadership to 
``face reality'' and reunify with China.\6\
---------------------------------------------------------------------------
    \6\ Days after Clinton's Shanghai statement, Beijing Foreign 
Ministry spokesman Tang Guoqiang said that Clinton's statement has 
``positive implications for the resolution of the Taiwan question,'' 
and added: ``We hope that Taiwan authorities will get a clear 
understanding of the situation, face reality and place importance on 
the national [Beijing's] interest.'' See ``China Tells Taiwan to `Face 
Reality'; Reunification Talks Urged,'' The Washington Post, July 10, 
1998, p. A28.
---------------------------------------------------------------------------
    By appeasing Beijing with policies like silencing Taiwan officials 
when they go abroad and barring them from private visits to the United 
States, the Administration only invites conflict between Beijing and 
Congress. By stating U.S. opposition to Taiwan independence and non-
support for Taiwan's membership in almost all international 
organizations, the Administration risks polarizing Taiwan's domestic 
politics and provoking the kind of public debate and international 
activity that both the Administration and Beijing hope to avoid. The 
United States becomes an accomplice in Beijing's campaign to isolate 
Taiwan diplomatically; and it hides Taiwan's democracy under a bushel 
instead of using it as an example of what free people can achieve in a 
Chinese society. Finally, by failing to protect security and promote 
freedom in Taiwan, the Clinton Administration's China policy runs 
counter to long-standing U.S. interests in the Asia-Pacific region and 
violates the spirit, if not the letter, of U.S. law.
              myth vs. reality in clinton's taiwan policy
    The Clinton Administration's Taiwan policy--as outlined in the 1994 
Taiwan Policy Review and the President's Shanghai statement of the 
``Three No's''--is based on several faulty assumptions, a 
misinterpretation of U.S. obligations under the Taiwan Relations Act 
and the three joint communiques, and the misreading of current 
developments in Taiwan. The faulty assumptions, or myths, upon which 
the Administration's Taiwan policy rests make the cross-Strait 
relationship less stable and U.S. policy goals less achievable.

    MYTH #1: Avoiding conflict with Beijing at all costs will lead to 
peace in the Taiwan Strait.
    REALITY: Appeasing Beijing only invites increased demands and 
future aggression.

    The key lesson the Administration's officials drew from the 1995-
1996 confrontation with China over Taiwan was the paramount need to 
devise policies that, no matter the cost, would avoid conflict with 
China. The priority placed on avoiding conflict has led to further 
concessions, such as the ``Three No's'' in Shanghai.
    But adopting the ``Three No's'' Taiwan policy has not guaranteed 
peace. Instead, it has guaranteed new calls from Beijing for further 
concessions, and should future conflict occur, Taiwan will be at a 
greater disadvantage. As long as Beijing is determined to use force if 
necessary and Washington is determined to avoid conflict at all costs, 
Beijing will continue to threaten to use force against Taiwan. 
Washington's policy of appeasement will trap the Administration in a 
cycle of appeasing China for any aggression toward Taiwan.

    MYTH #2: The debate about independence within Taiwan is the primary 
source of instability in the Taiwan Strait.
    REALITY: Beijing's military modernization efforts and its threat to 
use force against Taiwan are the primary sources of danger and 
instability in the Taiwan Strait.

    Two former Clinton Assistant Secretaries of Defense, Joseph S. Nye, 
Jr., and Chas W. Freeman, Jr., have identified Taiwan's ``steps toward 
independence'' as the primary threat to peace and stability in cross-
Strait relations and U.S.-China relations. Both also have advocated 
that the United States discourage decisions and actions by Taipei (such 
as a declaration of independence or public referendum on the definition 
of Taiwan's identity) that could leave Beijing with little choice but 
to react militarily.\7\
---------------------------------------------------------------------------
    \7\ Joseph S. Nye, Jr., ``A Taiwan Deal,'' The Washington Post, 
March 8, 1998; Chas W. Freeman, Jr., ``Preventing War in the Taiwan 
Strait,'' Foreign Affairs, July/August 1998, pp. 6-11[10].
---------------------------------------------------------------------------
    The reality is that China is militarizing even as Taiwan is 
democratizing. China seeks to impose its will by force or intimidation; 
Taiwan debates whether to allow its people to exercise their right of 
self-determination. The independence debate is an outgrowth of Taiwan's 
democratic development. Democracy has opened the way for people to 
debate how best to constitute their government and how to define their 
national identity. It is a matter of freedom of expression and self-
determination. If Taiwan formally declares independence, the mainland 
has stated repeatedly that it is likely to use military force against 
Taiwan. But this does not make the use of force legitimate or just. The 
side that threatens to use military force to impose its will on another 
can be identified legitimately as the source of danger and instability 
in a dispute. The People's Liberation Army, not democracy, is the 
problem.

    MYTH #3: The independence movement is tempting the Taiwan people to 
separate formally and permanently from China.
    REALITY: Beijing's military intimidation keeps the people of Taiwan 
from considering reunification.

    Administration officials seem to assume that the people of Taiwan, 
persuaded by a populist campaign for independence and a belief that the 
United States will unconditionally guarantee their security, are 
exercising their right to self-determination flippantly and with no 
regard for the consequences. The truth is that independence rhetoric 
gains an audience in Taiwan not as the result of a proactive campaign, 
but as a consequence of Beijing's heavy-handed use of the military to 
intimidate those it deems under its sovereign control.
    The brutal crackdown on democracy activists in Tiananmen Square on 
June 4, 1989, and thereafter dashed the Taiwan people's belief that the 
Communist Party--after a decade of free-market economic reforms--was 
becoming more tolerant of democracy. The use of military exercises to 
intimidate the Taiwan electorate prior to the 1996 presidential 
election fatally undermined Beijing's professed determination to seek 
peaceful reunification.
    These flagrant displays of force have done far more to turn the 
people of Taiwan away from considering reunification than has the 
independence debate within Taiwan. To turn the Taiwan people away from 
talk of independence, Beijing needs to emphasize what it is prepared to 
do for Taiwan, rather than what it is prepared to do to Taiwan.

    MYTH #4: Since Henry Kissinger's 1971 trip to China, the United 
States has consistently opposed Taiwan independence.
    REALITY: No such opposition is stated in the Taiwan Relations Act 
or any joint communique.

    Administration officials have indicated that, as early as 1971, 
National Security Advisor Henry Kissinger stated that the U.S. did not 
support independence for Taiwan. They also point out that Ronald Reagan 
declared in the 1982 U.S. ``People's Republic of China Joint Communique 
that the United States did not have a one-China, one-Taiwan, or two-
Chinas policy.\8\ However, the reality is that even if Kissinger did 
state U.S. opposition to Taiwan independence in his meetings with 
China's top leadership in 1971, his word could bind only the policy of 
the Nixon Administration.
---------------------------------------------------------------------------
    \8\ High-level Administration official speaking on background at 
July 23, 1998, National Press Club symposium hosted by the United 
States China Policy Foundation. Quote from ``New Trends in U.S.-China 
Relations,'' Lecture Notes, United States China Policy Foundation, 
Washington, D.C., August 1998.
---------------------------------------------------------------------------
    The President alone has the authority to bind future 
administrations by signing laws, treaties, and communiques. Opposition 
to Taiwan independence simply is not stated anywhere in the Taiwan 
Relations Act or joint communiques. Given the fact that Beijing and 
Taipei both objected strenuously to Taiwan independence at the time 
each of these documents entered into force, the only reasonable 
explanation for the omission of such a policy from these documents is 
that Washington objected to stating its opposition to Taiwan 
independence. Even in the 1982 communique--in which the United States 
declares that it has no intention of ``pursuing a policy of `two 
Chinas' or `one China, one Taiwan' ''--the United States does not state 
its objection to such an outcome, only its intention not to create that 
outcome.

    MYTH #5: Taiwan President Lee Teng-hui advocates permanent 
separation from China.
    REALITY: President Lee advocates eventual reunification with China 
after the mainland has undergone a democratic transformation.

    The Republic of China (ROC) has never ceased to exist since its 
establishment in 1911. After its Nationalist government fled to Taiwan 
in 1949, the ROC capital was established in Taipei and was recognized 
by the United States as the legal government of all of China until 
1978. President Lee's position that the ROC has been an independent 
sovereign state since 1911, and that Taipei effectively governs Taiwan 
and its surrounding islands (not the Chinese mainland), is closer to 
reality than either Beijing's or Washington's official position.
    Lee's assertion of ROC sovereignty does not translate into a call 
for permanent separation from the mainland. Indeed, the ROC 
constitution and the platform of Lee's Nationalist (Kuomintang) Party 
declare an official policy of eventual reunification. Lee's 
contribution is his insistence that reunification can take place only 
after the mainland undergoes a democratic political transformation. If 
President Clinton believes his own past assertions about China moving 
inevitably toward democracy, how can his Administration view Lee's 
position as unreasonable?
    The tragedy of this myth is that President Clinton and Chinese 
President Jiang Zemin risk wasting the best opportunity to date (as 
well as for the foreseeable future) to negotiate a peaceful settlement 
of many controversial cross-Strait issues with an enormously popular, 
democratically elected, and native-born leader of Taiwan. Instead, 
Clinton has chosen to follow Jiang's lead in undermining Lee's 
legitimacy and questioning his intentions.

    MYTH #6: The United States legally should not be permitting 
Taiwan's president or other top leaders to make private visits to, or 
engage in public activities in, the United States.
    REALITY: Such a policy has no basis in principle or law.

    Administration officials have argued, as in the Taiwan Policy 
Review, that for the United States to be consistent with its unofficial 
relationship with Taiwan, visits as opposed to transits by Taiwan's top 
leadership must not be permitted. Moreover, while in transit, Taiwan's 
top leaders are not permitted to engage in public activities.
    There are two critical problems with this policy. First, it 
violates Section 221 of U.S. Public Law 103-416, which provides that 
the President of Taiwan and any other high-level official of Taiwan 
shall be welcome in the United States at any time to discuss a host of 
important bilateral issues.\9\ Second, the Clinton Administration has 
allowed the heads of other states and non-states with which the United 
States does not maintain diplomatic relations to visit the United 
States and engage in public activities. Most notably, Fidel Castro was 
welcomed in New York City by Members of Congress and permitted to speak 
publicly there, and Yasser Arafat met with President Clinton in the 
White House.
---------------------------------------------------------------------------
    \9\ H.R. 783, the Immigration and Nationality Technical Corrections 
Act of 1994, was signed into law (Public Law 103-416) by President 
Clinton on October 25, 1994, one month after the announcement of the 
Administration's Taiwan Policy Review. Ironically, Section 221 of this 
act was a key provision in the congressional resolution (H. Con. Res. 
53) that forced the Clinton Administration to contradict its Taiwan 
Policy Review and grant Taiwan President Lee Teng-hui an entry visa for 
his private visit to Cornell University in June 1995.

    MYTH #7: The United States should not support Taiwan's membership 
in state-based international organizations.
    REALITY: This policy violates the spirit of the Taiwan Relations 
Act and has no basis in principle or law.

    President Clinton stated in Shanghai that ``we don't believe that 
Taiwan should be a member of any organization for which statehood is a 
requirement.'' Supporters of this Administration policy assert (as does 
Beijing) that in order to be consistent with the so-called one-China 
policy, the United States must oppose Taiwan's membership in 
organizations that admit only states.
    The reality is that the United States has no such policy, and the 
Administration's policy of excluding Taiwan from most international 
organizations does not follow from the Taiwan Relations Act and the 
three joint communiques. Aside from the fact that lack of official U.S. 
diplomatic relations does not change Taiwan from a state to a non-state 
any more than it does Cuba, Taiwan's participation in international 
organizations receives no mention in any of the joint communiques and 
is mentioned only once in the Taiwan Relations Act. Section 4(d) of the 
TRA states that ``nothing in this act may be construed as a basis for 
supporting the exclusion or expulsion of Taiwan from continued 
membership in any . . . international organization.'' To be consistent 
with the TRA, if the United States is to have any policy at all 
concerning Taiwan's participation in international organizations, it 
should err on the side of supporting Taiwan's membership.
           restoring clarity and consistency to taiwan policy
    Inconsistency and neglect have characterized Clinton's Taiwan 
policy for too long. Ill-conceived and politically untenable policies 
with regard to the travel, public activities, and meetings of high-
level Taiwan officials in the United States, as well as positions taken 
on Taiwan's international participation and internal political debate, 
have undermined U.S. credibility. To restore clarity and consistency to 
U.S. policy toward Taiwan, the Administration and Congress should take 
every opportunity to:

   Promote process, not outcomes, in the cross-Strait dispute. 
        The United States should not take a policy position that 
        prejudices the outcome of the cross-Strait standoff. It should 
        neither endorse nor oppose Taiwan's independence or 
        reunification with the mainland; it should insist only that any 
        eventual resolution of this conflict come through peaceful 
        means and with the consent of the people of Taiwan.
   Distinguish between long-term obligations and short-term 
        Administration policy. To avoid miscalculation and 
        miscommunication with both Taipei and Beijing, the United 
        States should make clear to both sides which aspects of Taiwan 
        policy constitute long-term binding obligations and which 
        reflect the Administration's chosen interpretation of how to 
        implement those obligations. It would be useful for Members of 
        Congress to tell officials in Taipei and Beijing that the 
        measures advocated in the Taiwan Policy Review are the short-
        term policy of the Clinton Administration, and may be rescinded 
        or replaced by a future Administration.
   Deter Beijing's military aggression. The United States must 
        recognize that China's military modernization efforts and its 
        willingness to use force to impose its will on Taiwan are the 
        primary sources of danger and instability in the Taiwan Strait. 
        The TRA requires the President and Congress to ensure that the 
        United States has the capability to deter and, if necessary, 
        defeat any potential Chinese threat to Taiwan's security and 
        U.S. interests in Asia. In addition, the TRA instructs the 
        United States to sell Taiwan arms of a defensive nature in 
        order to provide for its own self-defense needs. Adequate 
        deterrence is the best guarantee against military intimidation 
        or attack.
   Promote Taiwan's democracy in China and abroad. If the 
        United States is to have any credibility at all in advocating 
        democracy on the Chinese mainland, it must properly recognize 
        and reward the Taiwan people for their success in establishing 
        a democracy. The Taiwan people deserve better than a well-armed 
        cold shoulder from Beijing and exile from the international 
        community. Taiwan should be held up as an example of what free 
        people can achieve in a Chinese society. The United States 
        should make clear that democracy allows for the free and open 
        debate of controversial views, such as independence. It should 
        not view such a debate as just cause for Chinese military 
        intimidation.
                               conclusion
    American policy toward Taiwan has challenged nearly every President 
since Harry Truman. Effective presidential leadership requires a broad 
strategic vision within which to define Taiwan's role. Even President 
Jimmy Carter was convinced of the need to preserve U.S. options 
regarding Taiwan when he signed the 1979 Taiwan Relations Act into law.
    Unfortunately, President Clinton has no such strategic vision and 
has approached Taiwan policy in an ad hoc and reactive manner. If the 
Administration truly wishes to avoid military conflict in the Taiwan 
Strait, it must shelve the restrictive recommendations of its own 
Taiwan Policy Review and faithfully implement the spirit and the letter 
of the 1979 Taiwan Relations Act.
    Only if the United States resolves to deter aggression and promote 
democracy will it be possible for the 50-year standoff across the 
Taiwan Strait to be resolved peacefully and with the consent of the 
Taiwan people.

                               [Appendix]

 united states legal obligations to taiwan under the taiwan relations 
              act \10\ (p.l 96-8, approved april 10, 1979)
---------------------------------------------------------------------------
    \10\ See http://ait.org.tw/tra.html.
---------------------------------------------------------------------------
   Preserve and promote extensive, close, and friendly 
        commercial, cultural, and other relations between the people of 
        the United States and the people of Taiwan.
   Consider any effort to determine the future of Taiwan by 
        other than peaceful means, including boycotts or embargoes, a 
        threat to regional peace and security and of grave concern to 
        the United States.
   Provide Taiwan with arms of a defensive character, based 
        solely upon the judgment of the President and Congress of the 
        needs of Taiwan.
   Maintain the U.S. capacity to resist any resort to force or 
        other forms of coercion that would jeopardize the security, or 
        the social or economic system, of the people of Taiwan.
   Preserve and enhance the human rights of all the people on 
        Taiwan.
   Do not support the exclusion or expulsion of Taiwan from 
        membership in any international organization.
statements of united states taiwan policy in the three sino-u.s. joint 
     communiques shanghai communique, signed february 28, 1972 \11\
---------------------------------------------------------------------------
    \11\ See http://ait.org.tw/shanghai.html.
---------------------------------------------------------------------------
   The United States acknowledges that all Chinese on either 
        side of the Taiwan Strait maintain there is but one China and 
        that Taiwan is a part of China. The United States government 
        does not challenge that position.
   It reaffirms its interest in a peaceful settlement of the 
        Taiwan question by the Chinese themselves.
   It affirms the ultimate objective of the withdrawal of all 
        United States forces and military installations from Taiwan.
         normalization communique, signed january 1, 1979 \12\
---------------------------------------------------------------------------
    \12\ See http://ait.org.tw/prc.html.
---------------------------------------------------------------------------
   The United States of America recognizes the government of 
        the People's Republic of China as the sole legal government of 
        China. Within this context, the people of the United States 
        will maintain cultural, commercial, and other unofficial 
        relations with the people of Taiwan.
         arms to taiwan communique, signed august 17, 1982 \13\
---------------------------------------------------------------------------
    \13\ See http://ait.org.tw/817.html.
---------------------------------------------------------------------------
   The United States government has no intention of . . . 
        pursuing a policy of ``two Chinas'' or ``one China, one 
        Taiwan.''
   The United States government understands and appreciates the 
        Chinese policy of striving for a peaceful resolution of the 
        Taiwan question.
   The United States government states that it does not seek to 
        carry out a long-term policy of arms sales to Taiwan.
   The two governments will make every effort to adopt measures 
        and create conditions conducive to the thorough settlement of 
        this issue.
  reagan administration interpretation of u.s. policy obligations to 
                              taiwan \14\
---------------------------------------------------------------------------
    \14\ Robert L. Downen, The Tattered China Card; Reality or Illusion 
in United States Strategy? (Washington, D.C.; Council for Social and 
Economic Studies, Inc., 1984), p. 125.
---------------------------------------------------------------------------
(Known as the Six Assurances of the United States to the Republic of 
        China on Taiwan) July 14, 1982
   The United States has not agreed to set a date for ending 
        arms sales to Taiwan;
   Has not agreed to hold prior consultations with Beijing on 
        arms sales to Taiwan;
   Will not play any mediation role between Taipei and Beijing;
   Has not agreed to revise the Taiwan Relations Act;
   Has not altered its position regarding sovereignty over 
        Taiwan;
   Will not exert pressure on Taiwan to enter into negotiations 
        with Beijing.
  clinton administration interpretation of u.s. policy obligations to 
                              taiwan \15\
---------------------------------------------------------------------------
    \15\ See testimony of Assistant Secretary of State Winston Lord and 
others in hearings, Review of U.S. Policy Toward Taiwan, Subcommittee 
on East Asian and Pacific Affairs, Committee on Foreign Relations, U.S. 
Senate, 103rd Cong., 2nd Sess., September 27, 1994.
---------------------------------------------------------------------------
(Known as the Taiwan Policy Review) As Reported to Congress in 
        September 1994
   Consistent with our unofficial relationship, visits as 
        opposed to transits, by Taiwan's top leadership will not be 
        permitted.
   While in transit, Taiwan's top leadership shall conduct no 
        public activities.
   Taiwan Representative is not permitted access to State 
        Department, Old Executive Office Building, or White House.
   U.S. will not support Taiwan membership in organizations 
        that admit only states.
   U.S. will actively support Taiwan's membership in 
        international organizations which do not require statehood and 
        will look for ways for Taiwan's voice to be heard in others.
   U.S. officials authorized to travel to Taiwan may meet with 
        officials at whatever level necessary to achieve their 
        objectives.
   U.S. Cabinet officials from economic and technical 
        departments may meet with Taiwan representatives in official 
        settings.
   State Department officials from economic and technical 
        divisions must meet with Taiwan representatives in unofficial 
        settings.
   U.S. and Taiwan will conduct sub-cabinet economic dialogue.
   U.S. will send high-level officials from U.S. economic and 
        technical agencies to visit Taiwan.
                                 ______
                                 

       [From the Heritage Foundation Backgrounder, Apr. 16, 1999]

   The Taiwan Relations Act After 20 Years: Keys to Past and Future 
                                Success

                         (By Stephen J. Yates)

    Signed into law on April 10, 1979, the Taiwan Relations Act (TRA, 
Public Law 96-8) was born of the need of the United States to find a 
way to protect its significant security and commercial interests in the 
Republic of China (ROC) on Taiwan in the wake of President Jimmy 
Carter's termination of diplomatic relations and a mutual defense 
treaty of 25 years.\1\ Provoked by the lack of prior consultation and 
the inadequacy of the Carter Administration's proposed legislation, 
lawmakers from both parties in Congress worked together to craft a bill 
that truly tackled the challenge of allowing for diplomatic relations 
with mainland China while maintaining all substantive relations with 
Taipei.
---------------------------------------------------------------------------
    \1\ See Excerpts cited in Appendix I; full text available at http:/
/ait.org.twa/ait/tra.html.
---------------------------------------------------------------------------
    The Taiwan Relations Act has played an indispensable role in 
shaping American policy toward Taiwan and U.S. strategy in Asia. It 
represents America's best ideals and safeguards fundamental security 
and commercial interests. The TRA is unique in purpose and form. It is 
the only law to govern nearly every aspect of U.S. relations with a 
foreign government in the absence of diplomatic relations. It sets 
forth clear policy goals and establishes an institutional framework 
sufficient to meet those objectives.
    The fact that the Taiwan Relations Act remains in force today, 
without amendment, is a testament to the wisdom and foresight of its 
drafters. Who in 1979 could have foreseen the dramatic changes that 
would transform Taiwan, China, and the world over the next 20 years? 
Taiwan is now a vibrant democracy. China is gradually adopting market 
reforms. The Soviet Union is no more. Yet through it all, the Taiwan 
Relations Act remains constant, relevant, and effective.
    Although many things have changed, some things remain the same. 
Taiwan is still a much more significant export market for U.S. goods 
than is China. The United States still concludes government-to-
government business with Taipei, though such dealings are conducted via 
a private non-profit corporation, the American Institute in Taiwan, 
instead of through normal diplomatic channels. The United States 
continues to provide Taiwan with defensive arms, and such transfers 
remain as objectionable to Beijing now as they were in 1979. A fragile 
peace survives in the Taiwan Strait. None of this would have been 
possible, as Ronald Reagan noted in 1980, had it not been for ``the 
timely action of the Congress, reflecting the strong support of the 
American people for Taiwan.'' \2\
---------------------------------------------------------------------------
    \2\ Statement by Ronald Reagan, Los Angeles, California, August 25, 
1980, p. 6.
---------------------------------------------------------------------------
                  origins of the taiwan relations act
    On December 15, 1978, President Carter announced that as of January 
1, 1979, the United States would end its diplomatic relationship with 
the Republic of China on Taiwan and instead recognize the government in 
Beijing as the sole legal government of all of China. The announcement 
came as quite a shock to many in Taiwan and in United States, but it 
could not have been entirely unexpected. Ever since President Richard 
Nixon's opening to China in 1972 and the signing of the Shanghai 
Communique, the U.S. government had been seeking to find a way to 
establish relations with Beijing without sacrificing significant 
American interests in Taiwan. It was well-known that this was a high 
priority for the Carter Administration. Although a majority of 
Americans seemed to support President Carter's efforts to improve 
relations with Beijing--efforts which were born more of a fear of 
Soviet expansion than of dissatisfaction with Taiwan--his 
administration had fallen woefully short in addressing America's 
continuing interests in Taiwan.
    The Administration hastily produced the initial draft of the Taiwan 
Relations Act soon after the President's December 15 announcement. The 
proposed legislation was then passed to the foreign affairs committees 
in the House and Senate.
    Members of the Senate Foreign Relations Committee expressed concern 
over the haste with which the Administration had moved late in 1978, as 
well as with the lack of consultation with Congress and the lack of 
adequate consultation between the United States and its allies. The 
committee's report pointedly noted that the bill as submitted by the 
Administration contained no reference to the interests of United States 
in Taiwan's security, and lacked any reference to the sale of defensive 
arms to Taiwan. \3\
---------------------------------------------------------------------------
    \3\ Excerpts from Senate report as cited in Lester L. Wolff and 
David L. Simon, eds., A Legislative History of the Taiwan Relations Act 
with Supplement, prepared by Touro College, Pacific Community 
Institute, August 1993, p. 13.
---------------------------------------------------------------------------
    The House Foreign Affairs Committee expressed similar views in its 
report. It emphasized that the executive branch bill failed to address 
Taiwan's security needs and did not provide an adequate legal 
foundation for continuing the broad scope of nongovernmental activities 
that constitute the great bulk of relations between United States and 
Taiwan.\4\
---------------------------------------------------------------------------
    \4\ Excerpts from House report as cited in Wolff and Simon, eds., 
Legislative History, p. 15.
---------------------------------------------------------------------------
    Fortunately, Congress was swift and effective in its response. In 
February and March 1979, Congress redrafted, debated, and passed by 
overwhelming majorities the version of the Taiwan Relations Act that 
has governed U.S. relations with Taiwan successfully for the past 20 
years.
                 objectives of the taiwan relations act
    Congressional debate over the Carter Administration's proposed 
legislation emphasized the inadequacies of the bill and the 
unacceptable manner in which the Carter Administration dealt with 
Taiwan issues in the process of normalizing relations with China. 
Congressional remedies focused primarily on three areas: providing for 
Taiwan's security, providing a sufficient legal framework for continued 
relations, and formalizing congressional oversight. Along the way, 
other congressional priorities, like human rights interests and 
Taiwan's membership in international organizations, were also 
addressed.\5\
---------------------------------------------------------------------------
    \5\ For text of TRA sections relevant to these issues, see excerpts 
cited in Appendix I.
---------------------------------------------------------------------------
                     objective #1: taiwan security
    The lack of a policy to address Taiwan's security needs was the 
most glaring shortcoming of the Carter Administration's proposal. Given 
that Taiwan for 25 years had been a partner with the United States to a 
mutual defense treaty, this was a shocking omission. The Carter bill 
did not even mention arms sales or address the U.S. interest in 
Taiwan's security. Unable to secure a renunciation of force from 
Beijing, the Administration seemed to rely almost entirely on Beijing's 
understanding that Washington expected peace in the Taiwan Strait.
    Congress filled this void with a policy that declared peace in the 
Taiwan Strait a matter of international concern, linked diplomatic 
recognition of Beijing with peaceful treatment of Taiwan, considered 
any non-peaceful action a threat to regional peace and security, 
provided for the sale to Taiwan of arms sufficient for self-defense, 
and committed the U.S. to maintain the capacity to resist any resort to 
force or coercion against Taiwan.
    Broadening the U.S. view of Taiwan's security blunted Beijing's 
claim that Taiwan's status was solely an internal matter, but it also 
made clear to U.S. policymakers what would happen if the United States 
failed to honor its commitments to Taiwan. As Senator Robert Dole (R-
KA) noted, ``If the Taiwanese question is not resolved in favor of 
freedom and independence, then . . . none of the nations who rely on 
the strength of America and the good faith of our commitments to 
dissuade stronger and more aggressive alliances . . . can hope for 
freedom of choice in a secure and stable future.'' \6\
---------------------------------------------------------------------------
    \6\ S. 2132, March 7, 1979, cited in Wolff and Simon, eds., 
Legislative History, p. 19.
---------------------------------------------------------------------------
    Understanding the importance of protecting Taiwan's security, 
Congress then turned its attention to deterring acts of aggression 
against Taiwan. Diplomatic recognition of Beijing was linked to the 
expectation that China would use only peaceful means in dealing with 
Taiwan. Building on the language of the 1954 Mutual Defense Treaty, 
Congress declared any use of force or coercion against Taiwan, 
including boycott and embargo, to be a threat to regional peace and 
security and of grave concern to the United States.
    Beyond these diplomatic deterrents, Congress made clear that the 
United States would continue to sell arms to Taiwan, that these arms 
would support a sufficient self-defense, and that China would have no 
veto over such sales. During committee debate, Representative Robert 
Lagomarsino (R-CA) made the point crystal clear: ``If President Carter 
is going to abrogate the defense treaty with Taiwan, the least we can 
do is sell arms to willing buyers on Taiwan.'' \7\
---------------------------------------------------------------------------
    \7\ H. 1153, March 8, 1979, cited in ibid., p. 103.
---------------------------------------------------------------------------
    ``[We] do not mean that we will deliver to [Taiwan] outmoded, 
outdated, horse-drawn vehicles,'' emphasized Representative Lester 
Wolff (D-NY). ``We mean that we will deliver to them appropriate 
equipment which is necessary to the defense of Taiwan.'' \8\ 
Representative Edward Derwinski (R-IL) added during final floor debate 
that ``This provision is meant to ensure that Taiwan's defense needs 
are determined by its authorities and those of the United States 
without regard to the views of the PRC.'' \9\
---------------------------------------------------------------------------
    \8\ H. 1183, March 8, 1979, cited in ibid., p. 125.
    \9\ H. 1743, March 28, 1979, cited in ibid., p. 96.
---------------------------------------------------------------------------
    The final element of security strategy came in the form of an 
amendment offered by Representative Dan Quayle (R-IN). The Quayle 
amendment made sure that, in addition to assisting Taiwan's self-
defense, the United States would maintain its own capacity to resist 
any resort to force or other coercion that would jeopardize either 
Taiwan's security or its social or economic system.\10\ U.S. readiness 
to resist mainland aggression or coercion against Taiwan serves the 
purpose of increasing the cost and complication of any plans by China 
to threaten Taiwan's security or economic and social stability.
---------------------------------------------------------------------------
    \10\ See TRA Section 2(b)(6), cited in Appendix I.
---------------------------------------------------------------------------
            objective #2: framework for continued relations
    To maintain the extensive, close, and friendly relations Americans 
have enjoyed with the people of Taiwan, a new legal framework had to be 
created to reflect Taiwan's new status. Taiwan would need to continue 
to be treated as a friendly government under U.S. domestic law in order 
to facilitate trade and to maintain bilateral agreements.
    Senator John Glenn (D-OH) explained that ``any benefits the United 
States decides to confer on Taiwan by statute can be conferred without 
regard to Taiwan's international legal identity'' \11\ Senator Glenn 
also expressed the need for specificity in this new legal framework in 
order to provide a stable and predictable commercial environment, and 
declared that ``American interests in our moral obligation demands that 
we assist Taiwan adapting to these changed conditions.'' \12\
---------------------------------------------------------------------------
    \11\ S. 2123, March 7, 1979, cited in Wolff and Simon, eds., 
Legislative History, p. 203.
    \12\ S. 2123, March 7, 1979, cited in ibid., p. 46.
---------------------------------------------------------------------------
    To take the place of the U.S. Embassy, a new diplomatic instrument 
was created--the American Institute in Taiwan (AIT). The Institute is a 
private organization, incorporated in the District of Columbia. It is 
funded by the U.S. government, and the members of its board of trustees 
are appointed by the Secretary of State. Modeled after Japan's 
representative office in Taipei, the AIT functions in many respects as 
a consulate, managing travel documents, facilitating communication with 
local authorities, and representing the United States in concluding 
commercial and other agreements.
    During congressional debate over the new Institute, many lawmakers 
lamented that the Carter Administration had not succeeded in 
maintaining a liaison office in Taipei similar to the one that had 
functioned in Beijing prior to 1979. The AIT has functioned very 
effectively over the past 20 years, putting to rest concerns that its 
perceived lack of standing would hinder Washington's ability to conduct 
``unofficial'' government business.
                 objective #3: congressional oversight
    In response to the secretive and inadequate manner in which the 
Carter Administration dealt with Taiwan in the process of formalizing 
relations with China, Congress felt the need to establish clearly its 
oversight and consultative role with the executive branch in managing 
future relations with Taiwan. Representative L. H. Fountain (D-NC) 
summarized well the sentiment of many of his colleagues when he scolded 
the Administration, saying, ``I hope this legislation is seen by the 
President and his advisers as a forthright and compelling response by 
the Congress to his . . . singlehanded recognition of Red China . . . 
without consulting meaningfully ahead of time with the Congress.'' \13\
---------------------------------------------------------------------------
    \13\ H. 1744, March 28, 1979, cited in ibid., p. 269.
---------------------------------------------------------------------------
    In addition to assigning various committees to oversee different 
aspects of U.S.-Taiwan policy, Congress also included a very important 
reporting and consultation mechanism. The TRA requires that the 
President inform Congress promptly of any anticipated danger to Taiwan 
and then consult with Congress to devise an appropriate response. 
Representative William Broomfield (R-MI) clarified the intent behind 
this provision--that the President should ``promptly inform the 
Congress of anticipated dangers and should not await their actual 
occurrence.'' \14\ The Administration is to report promptly any 
military capabilities that might threaten Taiwan or any perceived 
efforts to undermine Taiwan's social or economic system.
---------------------------------------------------------------------------
    \14\ H. 1151, March 8, 1979, cited in ibid., p. 144.
---------------------------------------------------------------------------
    Given the clear intent behind this provision, it is difficult to 
understand how Beijing's 1996 missile tests did not elicit a formal 
Administration report to Congress. The missile tests certainly have had 
a significant impact on Taiwan's economic and political system, yet the 
Clinton Administration never provided a formal report in compliance 
with the TRA.
                       objective #4: human rights
    In 1979, Taiwan was not a democracy. It was a one-party 
authoritarian state under martial law. Much of the discussion of Taiwan 
and human rights in the context of the TRA debate focused on resisting 
the Communist threat. Representative Derwinski expressed such a view 
while arguing for final passage of the TRA, declaring that ``any effort 
by the People's Republic of China (PRC) to impose restrictions on 
Taiwan or encroach on its people would constitute a violation of the 
human rights of the people on Taiwan.'' \15\
---------------------------------------------------------------------------
    \15\ H. 1743, March 28, 1979, cited in ibid., p. 114.
---------------------------------------------------------------------------
    Many Members, however, expressed concern about the lack of 
democracy and political liberty on Taiwan. Representative Jim Leach (R-
IA) urged the Congress to advocate ``majority rule based on respect for 
individual rights'' for the Taiwanese people. \16\ Senator Claiborne 
Pell (D-RI) urged the new American Institute in Taiwan to promote 
political liberties in Taiwan such as ``freedom of speech, freedom of 
the press, [and] freedom to take part in government.'' \17\ These human 
rights admonitions are the only part of the TRA debate that express 
dissatisfaction with the Taiwan government.
---------------------------------------------------------------------------
    \16\ H. 1164, March 8, 1979, cited in ibid., p. 114.
    \17\ S. 2152, March 7, 1979, cited in ibid., p. 112.
---------------------------------------------------------------------------
    Thankfully, with wise leadership and dedicated citizens, Taiwan has 
transformed itself into a vibrant democracy. Now that concerns about 
political liberty are largely resolved, Congress should return its 
attention to the right of the Taiwan people to live free from military 
threat and Communist encroachment.
        objective #5: membership in international organizations
    The clearest statement in the TRA concerning Taiwan's membership in 
international organizations unfortunately is phrased in negative 
language. Section 4(d) of the Act states that nothing in the Act should 
be construed as supporting the expulsion or exclusion of Taiwan from 
any international organization.
    The legislative history indicates, however, that in 1979 Congress 
viewed Taiwan's continued membership in international organizations as 
conducive to Taiwan's stability and economic security. Representative 
Eldon Rudd (R-AZ) expressed this view the first time the TRA came to 
the House floor for a vote: ``It is important that Taiwan's economic 
security not be threatened, even indirectly, by President Carter's 
unilateral and unexpected move. Stability is crucial, and this can be 
encouraged by U.S. insistence that Taiwan remain a member of . . . 
international organizations.'' \18\
---------------------------------------------------------------------------
    \18\ H. 1256, March 13, 1979, cited in ibid., p. 76.
---------------------------------------------------------------------------
    In the 1980s and 1990s, debate has focused more on whether Taiwan 
should be admitted to, rather than expelled from, a variety of 
international organizations ranging from the United Nations to the 
World Trade Organization. With U.S. support, Taiwan became a member of 
the Asian Development Bank and the Asia Pacific Economic Cooperation 
(APEC) forum. But the United States has not actively supported Taiwan's 
membership in the World Bank, International Monetary Fund, World Health 
Organization, or United Nations.
    As a matter of policy, the Clinton Administration does not support 
Taiwan's membership in international organizations that require 
statehood. This policy seems to be at odds with the TRA. If, as the TRA 
clearly states, the absence of diplomatic relations shall not affect 
Taiwan's status under U.S. law or the application of international 
agreements entered into with the United States, why should it undermine 
U.S. support for Taiwan's membership in international organizations?
                how the tra has advanced u.s. interests
    The Taiwan Relations Act has proved to be a surprisingly effective 
guide for U.S. policy. Over the past 20 years, the TRA has allowed the 
United States to preserve peace, promote freedom, and maintain 
flexibility in balancing its relations and interests with the 
governments on both sides of the Taiwan Strait. The TRA has been a 
source of clarity and consistency for U.S. policy from administration 
to administration, Democrat and Republican alike. It has maintained its 
relevance in the face of changing politics at home and in Taiwan, and 
remains an important safeguard against any Administration's sacrificing 
U.S. interests in Taiwan in pursuit of improved relations with Beijing.
    The TRA has advanced U.S. interests in the following areas:

   Providing Deterrence. By deterring aggression by the 
        mainland, the U.S. has protected Taiwan from being forced into 
        negotiations with China under the threat of armed attack or 
        other forms of coercion. In 1995 and 1996, China tested 
        America's resolve by conducting provocative military exercises 
        and missile tests in Taiwan's vicinity. The Clinton 
        Administration initially downplayed the threat of these 
        ``tests'' to Taiwan's security, even when some Chinese 
        officials provocatively questioned whether the United States 
        would be willing to risk American lives in Taiwan's defense. 
        U.S. determination to uphold the Taiwan Relations Act was made 
        clear in March 1996 when China undertook threatening military 
        exercises on the eve of Taiwan's presidential election. 
        Emboldened by the mandates of the TRA, the United States 
        responded with its most powerful show of military force toward 
        China since the Taiwan Strait crises of the 1950s. The U.S. 
        Navy deployed two aircraft carriers and 36 ships and submarines 
        in support.
   Fostering Freedom. The TRA maintains the stable and secure 
        environment within which Taiwan has transformed itself into one 
        of the world's leading free-market democracies. Taiwan's 
        democratic transition is a blessing to its people, but it is 
        also a critical factor in American strategy as the United 
        States seeks to balance its interests across the Strait. 
        Taiwan's democracy is an important example to the mainland of 
        how to expand political freedom and increase social stability. 
        Taipei's economic success is also an important example to 
        Beijing, and Washington should remember that the 21 million 
        people on Taiwan buy nearly twice as much in American goods as 
        do the 1.2 billion people on the mainland.
   Preserving Flexibility. The TRA also preserves U.S. 
        diplomatic flexibility as China-Taiwan relations evolve. Taiwan 
        no longer claims sovereignty over the mainland; \19\ but 
        Taipei's search for greater international status has led to 
        accusations from Beijing that Taiwan seeks independence, and 
        China has threatened to respond with war to a declaration of 
        independence. In June of last year, President Clinton tilted 
        U.S. policy toward China when he said that the U.S. does not 
        support independence for Taiwan. This tilt was unnecessary.\20\ 
        The brilliance of the TRA is that it does not require amendment 
        to adjust to new realities in Taiwan. Policies as outlined in 
        the TRA are clear enough to protect U.S. interests and flexible 
        enough to allow the United States to have substantive relations 
        with both sides of the Taiwan Strait. Because the TRA at its 
        core addresses U.S. policy interests, not outcomes, its 
        efficacy would not be affected substantially by the existence 
        or absence of diplomatic relations. Taiwan's development toward 
        democracy only enhances the relevance of the TRA. The TRA is 
        now more than a shield against Communism--it is a guardian of 
        democracy.
---------------------------------------------------------------------------
    \19\ In 1991, President Lee Teng-hui ended the ``period of national 
mobilization for suppression of the communist rebellion,'' and the 
Republic of China ceased to claim sovereignty over all of China. 
Instead, the ROC asserted that there is one China, but two equal 
political entities.
    \20\ Stephen J. Yates, ``Promoting Freedom and Security in U.S.-
Taiwan Policy,'' Heritage Foundation Backgrounder No. 1226, October 13, 
1998, p. 1.
---------------------------------------------------------------------------
                   faithful implementation of the tra
    To honor American commitments made under the Taiwan Relations Act, 
Congress and the Clinton Administration should strive to enhance 
Taiwan's freedom and security. For 20 years, the TRA has provided a 
security umbrella that has facilitated Taiwan's impressive economic 
expansion and democratization. To protect these gains and continue 
faithfully to implement the TRA, the United States should:

   Urge Beijing to renounce the use of force against Taiwan. 
        Beijing's military modernization, provocative live-fire 
        exercises, and concentration of missiles opposite Taiwan pose a 
        direct threat to regional peace and stability and contradict 
        Beijing's stated policy of peaceful reunification. Given the 
        U.S. expectation that Taiwan's future will be determined by 
        peaceful means, seeking a renunciation of force from Beijing is 
        the least the U.S. should do under such circumstances.
   Sell Taiwan missile defense system and technology. Under the 
        terms of the Taiwan Relations Act, the United States is legally 
        required to assist Taiwan in providing for its self-defense. 
        Considering China's provocative military exercises and nuclear-
        capable missile tests near Taiwan in 1995 and 1996, and China's 
        increased deployment of missiles near Taiwan, providing 
        assistance for Taiwan's missile defense is both appropriate and 
        consistent with the TRA.
   Actively support Taiwan's membership in international 
        organizations. The United States should not aid--either 
        intentionally or inadvertently--China's attempts to interfere 
        with the ability of Taiwan officials to conduct foreign 
        relations. With a strong economy and vibrant democracy, Taiwan 
        is clearly prepared to make significant contributions to the 
        international community through institutions involved in trade, 
        economic development, and humanitarian assistance. Beijing's 
        success in shutting Taiwan out of the international community 
        has limited Taiwan's ability to offer such advice and 
        assistance to other Asian economies.
   Promote Taiwan's democracy in China and abroad. Consistent 
        with its interest in human rights on Taiwan, the United States 
        must properly recognize and reward the Taiwan people for their 
        success in establishing a democracy. Taiwan should be held up 
        as an example of what free people can achieve in a Chinese 
        society. One way to do this is to treat Taiwan's leaders 
        officially with the respect appropriate to duly elected 
        representatives of a thriving democracy. Nothing in the TRA or 
        in communiques with China prevents allowing these leaders to 
        enter the United States in their official capacities or 
        prohibits conducting meetings with them in official venues. But 
        such courtesies--routinely extended even to unfriendly states--
        are routinely denied the leaders of America's long-time friend 
        and ally.
                               conclusion
    In 1979, there was great concern about the political, economic, and 
security cost to American interests that would have to be paid in the 
process of normalizing relations with Beijing. Some doubted whether any 
arrangement short of the previous Mutual Defense Treaty and normal 
diplomatic relations would adequately protect American interests in 
Asia or in Taiwan. But the TRA has survived the test of time, without 
significant amendment and in the face of constant criticism from 
Beijing. Indeed, the Taiwan Relations Act has exceeded expectations in 
delivering a working, if unofficial, relationship with the people and 
government of Taiwan that has provided more continuity than change in 
the bilateral relationship.
    Today, as President Clinton works to create a strategic partnership 
with China, many in Congress are concerned, as were their colleagues in 
1979, that such a partnership may come at the expense of Taiwan's 
security or other American commitments outlined in the TRA. It is an 
appropriate time for Members of Congress to reflect on the masterful 
language of the TRA that has maintained a consistently clear expression 
of American interests and policy. The prescience of the authors of the 
TRA is demonstrated by how well this 20-year-old language fits the new 
challenges of today.
    It is up to Congress to keep America committed to the simple goals 
of the Taiwan Relations Act: to deter aggression from the mainland, 
promote economic freedom, and protect the human rights of the people of 
Taiwan. Ronald Reagan described American commitments under the IRA as a 
``moral obligation'' to a long-time friend and ally. Consistent with 
this sentiment, the United States must do all it can to help the 
democratic people of Taiwan live free from military coercion and to 
guarantee Taiwan's ability to make an appropriate contribution to 
global institutions that promote peace and prosperity.
    The Taiwan Relations Act is an example of American foreign policy 
at its best. There is no better way to mark the 20th anniversary of its 
enactment than to reaffirm the U.S. commitment to its honorable goals 
and to restore clarity and consistency to America's China policy.

                              [Appendix I]

 Excerpts from the Taiwan Relations Act (P.L. 96-8, approved April 10, 
                               1979) \21\
---------------------------------------------------------------------------

    \21\ See http://ait.org.tw/ait/tra.html.
---------------------------------------------------------------------------
    Sec. 2(b)(1) It is the policy of the United States to preserve and 
promote extensive, close, and friendly commercial, cultural, and other 
relations between the people of the United States and the people on 
Taiwan;
    Sec. 2(b)(2) to declare that peace and stability in the area are in 
the political, security, and economic interests of the United States, 
and are matters of international concern;
    Sec. 2(b)(3) to make clear that the United States decision to 
establish diplomatic relations with the People's Republic of China 
rests upon the expectation that the future of Taiwan will be determined 
by peaceful means;
    Sec. 2(b)(4) to consider any effort to determine the future of 
Taiwan by other than peaceful means, including by boycotts or 
embargoes, a threat to the peace and security of the Western Pacific 
area and of grave concern to the United States;
    Sec. 2(b)(5) to provide Taiwan with arms of a defensive character;
    Sec. 2(b)(6) to maintain the capacity of the United States to 
resist any resort to force or other forms of coercion that would 
jeopardize the security, or the social or economic system, of the 
people on Taiwan.
    Sec. 2(c) Nothing contained in this Act shall contravene the 
interest of the United States in human rights, especially with respect 
to human rights of all the approximately eighteen million inhabitants 
of Taiwan. The preservation and enhancement of the human rights of all 
people on Taiwan are hereby reaffirmed as objectives of the United 
States.
    Sec. 3(a) The United States will make available to Taiwan such 
defense articles and defense services in such quantity as may be 
necessary to enable Taiwan to maintain a sufficient self-defense 
capability.
    Sec. 3(b) The President and the Congress shall determine the nature 
and quantity of such defense articles and services based solely upon 
their judgement of the needs of Taiwan, in accordance with procedure 
established by law.
    Sec. 3(c) The President is directed to inform the Congress promptly 
of any threat to the security or the social or economic system of the 
people on Taiwan and any danger to the interests of the United States 
arising therefrom. The President and the Congress shall determine, in 
accordance with constitutional processes, appropriate action by the 
United States in response to any such danger.
    Sec. 4(a) The absence of diplomatic relations or recognition shall 
not affect the application of the laws of the United States with 
respect to Taiwan, and the laws of the United States shall apply with 
respect to Taiwan in the manner that the laws of the United States 
applied with respect to Taiwan prior to January 1, 1979.
    Sec. 4(d) Nothing in this Act may be construed as a basis for 
supporting the exclusion or expulsion of Taiwan from continued 
membership in any international financial institution or any other 
international organization.
    Sec. 6(a) Programs, transactions, and other relations conducted or 
carried out by the President or any agency of the United States 
Government with respect to Taiwan shall, in the manner and to the 
extent directed by the President, be conducted and carried out by or 
through The American Institute in Taiwan . . . or such comparable 
successor nongovernmental entity as the President shall designate.
    Sec. 14(a) The Committee on Foreign Affairs of the House of 
Representatives, the Committee on Foreign Relations of the Senate, and 
other appropriate committees of the Congress shall monitor--(1) the 
implementation of the provisions of this Act; (2) the operation and 
procedures of the Institute; (3) the legal and technical aspects of the 
continuing relationship between the United States and Taiwan; and (4) 
the implementation of the policies of the United States concerning 
security and cooperation in East Asia.

                             [Appendix II]

    ``Six Assurances of the United States to the Republic of China on 
Taiwan,'' July 14, 1982 \22\
---------------------------------------------------------------------------
    \22\ Robert L. Downen, The Tattered China Card: Reality or Illusion 
in United States Strategy? (Washington, D.C.: Council for Social and 
Economic Studies, Inc., 1984), p. 125.

    The United States has not agreed to set a date for ending arms 
sales to Taiwan;
    Has not agreed to hold prior consultations with Beijing on arms 
sales to Taiwan;
    Will not play any mediation role between Taipei and Beijing;
    Has not agreed to revise the Taiwan Relations Act;
    Has not altered its position regarding sovereignty over Taiwan;
    Will not exert pressure on Taiwan to enter into negotiations with 
Beijing.
                                 ______
                                 

              [From the Los Angeles Times, July 13, 1999]

                   It's More Like a Change in Posture

                         (By Stephen J. Yates)

    Taiwan President Lee Teng-hui raised a lot of eyebrows--and 
Beijing's ire--when he declared that Taiwan's relations with China 
should be viewed as ``country-to-country, or at least as special state-
to-state relations.'' Many have taken Lee's statement, made in an 
interview with a German radio station Saturday, as a provocative 
departure from Taipei's long-standing ``one-China'' policy. But the 
statement reflects more a change in posture than in policy toward the 
Chinese mainland.
    Lee broke new ground by being the first president of the Republic 
of China on Taiwan to publicly describe Taipei's relationship with 
Beijing as ``state-to-state.'' Past references have usually been 
couched in innocuous terms like ``two co-equal political entities.'' 
Even if a departure from past practice, Lee's remarks are a more 
accurate reflection of current reality than the strained fancy of 
``one-China,'' and represent a legitimate basis for eventual 
reunification with the mainland.
    A more complete translation of Lee's statement reveals the context 
within which his remarks were made. When asked to respond to Beijing's 
continued reference to Taiwan as a renegade province, Lee said, ``Ever 
since the constitutional revisions of 1991, cross-Strait relations have 
been classified as country-to-country, or at least a special state-to-
state relationship, as opposed to an internal ``one China'' 
relationship between a legal government and a renegade group, or a 
central government and a regional government.''
    In 1949, Chiang Kai-shek's ROC government lost the mainland, 
retreated to Taiwan and has governed the island ever since. For 30 
years the U.S. officially entertained Taipei's fanciful notion that it 
was sovereign over all of China. Since 1979, the U.S. has entertained 
Beijing's equally fanciful claim that it is sovereign over all of 
Taiwan.
    As long as both Beijing and Taipei claimed that Taiwan was part of 
China under one (albeit differently defined) China, both parties and 
the U.S. could pretend they had a ``one-China'' policy. This all 
changed in 1991, as President Lee said, when Taipei ceased to claim 
sovereignty over all of the mainland.
    While Beijing portrays Lee's remarks as further evidence of his 
sympathy for Taiwan's independence, and American officials anxiously 
await Lee's retirement to the golf course next spring, both fail to 
answer the question President Lee raises: What is the nature of 
Taipei's current and future relationship with Beijing?
    As uncomfortable as Lee's remarks may be for some, they reflect 
truth. And truth is a stable foundation on which to build a common 
future. Officials on all sides of this problem need to face the reality 
that a country that is not divided does not need to unify.
    Taiwan is not a renegade province but an economy based on free-
market principles, a government that is democratically elected, and a 
society that has evolved separately from the rest of China. In this 
regard President Lee's remarks are a welcome provocation; even if his 
remarks' substance does not represent a significant departure from his 
government's policy since 1991, there is a difference in the directness 
and tone of his comments. Some may wonder why Lee would raise these 
issues in this manner now, at a time when U.S.-China relations are 
already strained and nationalism is on the rise in Beijing.
    Perhaps Lee's remarks are designed to position his party favorably 
in negotiations with the mainland when People's Republic of China 
representative Wang Daohan arrives in Taipei in October, and in the 
upcoming presidential election in Taiwan next March. No future 
president is likely to hold the mandate Lee possesses. He is the first 
native Taiwanese and first directly elected president of the Republic 
of China. He already holds an honorable place in history, but charting 
a future course for relations with the mainland will be his legacy--for 
good or for ill.
    By staking out a strong position, Lee has invited world leaders to 
recognize the magnitude of the challenge facing both sides of the 
Taiwan Strait.

    Senator Thomas. Thank you, Mr. Yates.
    Ambassador Lilley.

 STATEMENT OF HON. JAMES R. LILLEY, DIRECTOR FOR ASIAN POLICY 
     STUDIES, AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC

    Ambassador Lilley. I would like to have put in the record 
an editorial from the People's Daily, 22 June, 1999, 17 days 
before Lee Teng-hui's statement. I think if people read this 
they will see without sentimentality or wishful thinking or 
anecdotalism what the Chinese are really all about, how they 
feel about us, how they feel about our foreign policy. It is 
important that we get a grasp of this. It all happened before 
Lee Teng-hui's statement, so I would like to have this put in 
the record. This is an authoritative party statement in the 
People's Daily by the Observer.
    Senator Thomas. It will be in the record.
    [The information referred to follows:]

           Lord of the Earth--Excerpts Followed by Full Text

    After the bombing of the Chinese Embassy in Belgrade, the depiction 
of America's foreign policy in the official Communist Party newspaper 
became particularly vivid. The U.S. was likened to Nazi Germany in 
eight specific ways in a long article that concluded that the pursuit 
of such Nazi-like policies would end in ``complete failure.'' \1\
---------------------------------------------------------------------------
    \1\ Observer, ``We Urge Hegemonism Today To Take a Look at the 
Mirror of History,'' People's Daily, June 22, 1999.
---------------------------------------------------------------------------
    In lieu of excerpting many other articles that also describe U.S. 
foreign policy as a search for world domination, this one will be 
quoted in sufficient detail to provide the Chinese assessment of 
American goals clearly. It begins by asking rhetorically how the U.S. 
today and Nazi Germany are alike:

    1. First, their self-centeredness and ambition to seek hegemony are 
exactly the same. In his notorious book, ``Mein Kampf,'' Hitler 
advocated ``ethnic superiority'' and ``living space,'' maintaining that 
human society was one that observed the law of the jungle, and that 
ethnic Germans should expand and become the ``lords of the earth.'' If 
we ask which country in the world wants to be the ``lords of the 
earth'' like Nazi Germany did in the past, there is only one answer, 
namely the United States, which upholds hegemonism.
    2. Second, the United States has outdone Nazi Germany with respect 
to increasing military budgets and expanding its armament. Although the 
United States has yet to launch a new world war, the size of its 
armament expansion and the frequency of its use of military strength 
overseas have far exceeded those of Nazi Germany in the past.
    3. Third . . . when Hitler came to power, he made anti-Communism 
both his strategic goal and tactical means for realizing his ambitions 
of engaging in arms expansion and war preparations and of contending 
for world hegemony. . . . It was also precisely under the guise of 
possessing ``common values'' that the United States and Japan have 
reinforced their military alliance, so that the latter will play the 
role of the ``NATO of the Far East.'' What substantive differences are 
there between this kind of expansionist tactic and the Nazism of the 
past?
    4. Fourth, the trend toward replacing global international 
organizations with military alliances is not without precedent. After 
World War I, on the proposal of then-US President Wilson, 44 countries 
formed the League of Nations in 1920 . . . Germany was a permanent 
member of the league's executive council. It withdrew from the league 
in October 1933 due to restrictions on its program of arms expansion 
and war preparations. . . . Of course, the United States and its allies 
will not withdraw from the United Nations. But is not the way they have 
repeatedly bypassed the United Nations and wantonly intervened in other 
countries through their military alliance or bloc very similar to the 
Fascist way of Germany. . . .?
    5. Fifth, the strategic priorities and directions of global 
expansion are basically similar. Hitler made Europe a strategic 
priority . . . Today, Europe is also the US global strategic priority . 
. . the United States has reinforced its military alliance with Japan 
in Asia, making Japan an important accomplice in its armed intervention 
against other Asian countries. This is also an attempt to gain control 
of the European and Asian continents from the Western and Eastern 
fronts, with the ultimate goal of fulfilling its strategy of dominating 
the world.
    6. Sixth, the methods they employed in dismembering other 
countries' territories and encroaching upon their sovereignty through 
exploiting their ethnic contradictions were very similar. Hitler, to 
secure the passageway for taking over the Balkans, plotted in June 1937 
the ``Green Project'' of annexing Czechoslovakia by employing its 
ethnic issues. Czechoslovakia was a multiethnic country and its 
Sudetenland was inhabited by some Germans . . .'' Gorpel [name as 
transliterated] clamored that 3.5 million Germans in Sudetenland were 
``tortured'' and Germany could not afford to ``watch as an onlooker.'' 
. . . In less than five months, Nazi Germany took over the entire 
Czechoslovakia. Today, the US-led NATO is attempting to dismember and 
control the Federal Republic of Yugoslavia by taking advantage of its 
ethnic problems. . . . Is it not exceedingly clear from what the United 
States and NATO did during the Kosovo crisis who was acting like Nazi 
Germany?
    7. Seventh, utilization of advanced technology to slaughter 
peaceful citizens is by no means less barbaric. . . . Hitler not only 
used in war what were considered to be the most advanced weapons of the 
time, such as airplanes, tanks, and long-range artillery, to massacre 
peaceful citizens in anti-fascist countries, but also built 
concentration camps in Auschwitz and in other areas to slaughter Jews 
and prisoners of war with ``advanced'' technology. Executioners drove 
hundreds and thousands of people into gas chambers and poured cyanide 
through air holes in the roof, killing them all. Today, the US 
hegemonists used high-tech weapons to attack the FRY's civilian 
facilities several hundred miles away from the battlefield or with 
laser and global position system several thousand meters above the sky, 
treating innocent and peaceful citizens as live targets. The flagrant 
use of missiles by the US-led NATO to attack the Chinese embassy in 
Yugoslavia was a barbaric atrocity that the then Nazi Germany had not 
dared to commit.
    8. Eighth, there is no difference between brazen undermining of 
international law and aggressive acts. What is the difference between 
the modern day hegemonists who willfully undermine international law 
and the erstwhile Nazi Germany?
    9. When we read world history, we know that many empires that had 
dominated for some time finally ended in decline. Particularly in this 
century, the worldwide colonial system that the Western powers built 
for several hundreds of years has collapsed. They employ the wishful 
thinking that fortune is now on their side and that it seems to be the 
turn of the United States--the sole superpower in the world--to 
dominate the world and to become ``the master of the globe . . . Even 
though they may run rampant for a while, they will eventually end in 
complete failure.''

    Although this article harsher intone and more intemperate than 
others, it does not deviate much in substance from Chinese authors who 
condemn the ``hegemonic'' goals of the United States.

                               Full Text

Renmin Ribao in Chinese 22 Jun 99 P 6

 Observer's Article (guan cha jia wen zhang ``We Urge Hegemonism Today 
               To Take a Look at the Mirror of History''

    The US-led NATO, brutally trampling on the UN Charter and norms 
governing international relations and depending on its economic, 
technological, and especially military superiority, recently used force 
against the Federal Republic of Yugoslavia [FRY], a sovereign state 
outside the territories of NATO members, by bombing the country 
inhumanly and indiscriminately for more than two months. This 
aggressive war has evoked the wrath of people around the world and 
brightened people's eyes. More and more people can now see clearly the 
ferocious features of hegemonism and its ambition of seeking world 
hegemony.
    To put a halo on this unjust war, the United States and NATO used 
the mainstream media in the West for their misleading and demagogic 
propaganda, doing their utmost to exaggerate the FRY's ``ethnic 
cleansing'' and ``oppression of human rights'' in Kosovo. They even 
regarded the FRY and its leader as contemporary Nazi Germany and 
Hitler, saying that the reason why NATO must strike at the FRY was that 
they had learned the ``tragic lesson'' of appeasing Hitler 60 years 
ago.
    When they succeeded with their indiscriminate bombings but suffered 
disastrous political and moral defeat and had to declare a suspension 
of their bombings, they intensified their efforts in fanning up hatred 
against the FRY leader who dared to stand up to NATO's aggression, 
clamoring that he should ``turn himself in'' to the International Court 
of Justice. They also openly ``appealed'' to the FRY people to 
overthrow the FRY Government, saying such things as ``so long as your 
country is still ruled by a prosecuted war criminal,'' we the American 
lords will not spend a dime to help you ``rebuild'' your homes. This is 
strange indeed. The war initiator now wants to take the war victim to 
the International Court of Justice. It is true that the FRY people need 
to ``rebuild'' their homes. But just tell me: Just who destroyed their 
homes? Are the United States and NATO not the ones that caused 
thousands upon thousands of civilian casualties, destroyed huge numbers 
of civilian facilities, and inflicted economic losses reaching hundreds 
of billions of US dollars during the barbaric bombings that went on for 
78 days on end? No wonder Marset, a Spanish EU parliamentarian, who, 
after NATO suspended its bombing, filed a suit at the International 
Court of Justice, accusing NATO Secretary General and US President of 
being ``guilty of war crimes'' against the FRY. As for the preposterous 
propaganda of comparing the FRY and its leader as the modern Nazi 
Germany and Hitler, it is simply untenable. Nevertheless, since the 
United States and NATO accused others of being the modern Nazi Germany 
and Hitler, they should have the courage to take a look at the mirror 
of history and compare their hegemonist conduct today and the conduct 
of Nazi Germany in the past to see whether or not there is a striking 
resemblance in many ways. Doing so is useful for the power holders 
themselves who seek hegemony.
    We would like to explain with some facts in the following respects:
    First, their self-centeredness and ambition to seek hegemony are 
exactly the same. In his notorious book, ``Mein Kampf,'' Hitler 
advocated ``ethnic superiority'' and ``living space,'' maintaining that 
human society was one that observed the law of the jungle, and that 
ethnic German should expand and become the ``lords of the earth.'' 
Hitler classified human races in the world into these three: ``the 
creator, the inheritor, and the destroyer of civilization.'' He 
preached that Aryan-North European Germans were a superior race of 
noble descent, and that German, the best of the best, should have the 
power to rule the world. If we ask which country in the world wants to 
be the ``lords of the earth'' like Nazi Germany did in the past, there 
is only one answer, namely the United States, which upholds hegemonism. 
During the Cold War, the United States regarded itself as the ``leader 
of the free world.'' When the Cold War ended following the 
disintegration of the Soviet Union, the United States even considered 
itself to be the savior leading the whole world. Last year, the United 
States stated in the report, ``The Strategy for National Security in 
the New Century,'' that the objective of the United States in the 21st 
century is ``to lead the whole world,'' and that it will never tolerate 
any big country or country bloc challenging its leading status. Last 
February, the US leader openly stressed that the foothold of US foreign 
policy in the 21st century is that the world ``must have, and can only 
have, one leadership,'' and that ``the United States is most capable of 
leading this world.''
    US power holders have also classified countries in the world into 
three:
    1) Allies of the United States; 2) big countries such as China and 
Russia; and 3) the so-called ``rogue countries.'' To seek world 
hegemony, the United States has wildly attempted to incorporate all 
socialist countries and developing countries into the US-led ``free 
world system,'' which fully complies with the interests of the US 
monopoly capital; and has exercised all kinds of pressure on whoever 
disobeys the United States, and has even used force against them in a 
big way. Is this not very similar to the Nazi Germany that tried to 
conquer and dominate the world?
    Second, the United States has outdone Nazi Germany with respect to 
increasing military budgets and expanding its armament. Immediately 
after Hitler assumed power in 1933, he did everything he could to break 
the restrictions which the Treaty of Versailles imposed on Germany's 
rearmament after World War I. During the 1933-1936 period, the number 
of Germany Army soldiers increased from 300,000 to 462,000, the number 
of airplanes increased from 368 to 4,021, and the budget of the Navy 
increased from DM190 million to more than DM650 million. It was through 
this mammoth war machine that Nazi Germany annexed Austria and 
Czechoslovakia and then launched World War II shortly afterward. Today 
the United States is the super military power in the world. The United 
States once cut its military budget after the Cold War during which the 
US and Soviet military blocs confronted each other. In recent years, 
however, the United States has substantially increased its military 
budget, emphasizing that military strength is the ``core support for 
the global role,'' and that US military strength must have the 
``overwhelming strategic superiority.'' In order to pursue its 
aggressive war against the FRY, the United States recently increased 
its military budget by $11.7 billion. Consequently the United States' 
actual military budget for fiscal year 1999 has reached as high as 
$287.9 billion, or about 1.5 times the combined military budgets of the 
European Union, Japan, Russia, and China. The United States will 
continue to increase its military budgets by $112 billion in the next 
six years. While developing its National Missile Defense (NMD) and 
Theater Missile Defense (TMD), the United States has also been making 
great efforts to develop all kinds of high-tech offensive weapons. 
Since the nineties, the United States has used its military strength 
overseas on more than 40 occasions. Following the ``Desert Fox'' 
campaign against Iraq last year, the United States and its allies have 
again circumvented the United Nations and attacked the FRY with its 
aerial tomahawks this year. Although the United States has yet to 
launch a new world war, the size of its armament expansion and the 
frequency of its use of military strength overseas have far exceeded 
those of Nazi Germany in the past.
    Third, there is no difference whatsoever between the formation of 
military alliances under the banner of anti-Communism and encroachment 
upon the territorial sovereignty of other countries. When Hitler came 
to power, he made anti-Communism both his strategic goal and tactical 
means for realizing his ambitions of engaging in arms expansion and war 
preparations and of contending for world hegemony. Under the banner of 
anti-Communism, he first smashed the trammels imposed on Germany by the 
``Treaty of Versailles.'' Hitler confided in his trusted aides: ``We 
should use the specter of Bolshevism to rein in the Versailles 
countries, so that they will believe Germany is a decisive fortress 
against Red calamities. This is the only way for us to weather the 
crisis, break away from the `Treaty of Versailles,' and rearm 
ourselves.'' He capitalized on the anti-Soviet and anti-Communist 
psychology of Britain, France, and other countries to stage the 
``Munich Putsch,'' and unscrupulously incited German troops to annex 
small and weak European countries. Germany, Italy, and Japan even 
formed an anti-Communist alliance to brazenly carry out armed 
intervention in the Spanish Civil War, invade Abysinia, and wage a 
large-scale aggression against China . . . [ellipses as published], 
eventually leading to the outbreak of World War II. After World War II, 
the United States invaded Korea and Vietnam, organized mercenary troops 
to invade Cuba, and established the NATO military alliance and the US-
Japan alliance. All of these were undertaken under the banner of anti-
Communism. The United States and its allies now give wide publicity to 
so-called ``democracy'' and ``human rights'' and advocate ``fighting 
for values.'' This is directed against socialist countries, as well as 
developing countries that are not socialist but that do not obey the 
United States. Moreover, the United States uses ``common values'' as a 
bonding agent for consolidating its relations with its allies. It was 
precisely under the slogan of ``fighting for values'' that US-led NATO 
launched barbaric air attacks against the FRY, in an attempt to 
incorporate this ``red fortress of Europe'' into the so-called 
``Western democratic community.'' It was also precisely under the guise 
of possessing ``common values'' that the United States and Japan have 
reinforced their military alliance, so that the latter will play the 
role of the ``NATO of the Far East.'' What substantive differences are 
there between this kind of expansionist tactic and the Nazism of the 
past?
    Fourth, the trend toward replacing global international 
organizations with military alliances is not without precedent. After 
World War I, on the proposal of then-US President Wilson, 44 countries 
formed the League of Nations in 1920 to handle the division of the 
post-war spoils among the great powers. The United States did not join 
the league because of congressional displeasure with the manipulation 
by Britain and France and the inequitable distribution of the spoils. 
Germany was a permanent member of the league's executive council. It 
withdrew from the league in October 1933 due to restrictions on its 
program of arms expansion and war preparations. Japan in the East also 
withdrew in the same year because the League of Nations did not 
recognize the ``Manchukuo'' that it was fostering. In 1937, Italy 
joined the German-Japanese anti-Communist alliance and withdrew from 
the League of Nations. After their withdrawal from the League of 
Nations, Germany, Italy, and Japan formed a Fascist group of ``Axis 
Powers,'' serving as the hotbeds of another world war in Europe and 
Asia. The United Nations formed after World War II was fundamentally 
different from the League of Nations. The formulation of the ``UN 
Charter'' and the birth of the United Nations reflected the common 
desire of people in all countries to sue for peace, increase 
cooperation, and promote development after having endured the ravages 
of two world wars. The objectives and principles of the ``UN Charter,'' 
in particular, have become universally acknowledged norms governing 
international relations today. However, the United States, one of the 
founding members of the United Nations, has adopted a pragmatic policy 
toward this broadly representative and authoritative international 
organization. Should the need arise, it would try to manipulate and 
take advantage of the United Nations and would carry out its hegemonic 
plot under the banner of this international organization. If it does 
not need the United Nations, especially if it feels that the latter is 
getting in its way, it would bypass it, trample upon the objectives and 
principles of the ``UN Charter,'' and wantonly impose so-called 
``sanctions'' against other countries through the NATO military 
alliance that it leads as well as through the Western bloc, going so 
far as to flagrantly resort to force. The heads of NATO countries have 
even claimed that if the United Nations does not allow itself to be 
manipulated, they will separately form a so-called ``Alliance of 
Democratic Countries.'' Of course, the United States and its allies 
will not withdraw from the United Nations. But is not the way they have 
repeatedly bypassed the United Nations and wantonly intervened in other 
countries through their military alliance or bloc very similar to the 
Fascist way of Germany, Italy, Japan of the past?
    Fifth, the strategic priorities and directions of global expansion 
are basically similar. From the 16th to 19th centuries, old-line 
colonial powers primarily fought for colonies abroad. Nazi Germany 
thought that the colonial system of European powers was an ``inverted 
pyramid.'' It believed that most European nations, despite their large 
colonies abroad, were weak and had limited weapons, and that it could 
dominate the world if it gained control of Europe. Accordingly, Hitler 
made Europe a strategic priority from the outset. After forming the 
anti-Communist alliance, Germany, Italy, and Japan thought it necessary 
to gain control of the European and Asian continents if they were to 
conquer the world. During World War II, Nazi Germany and Fascist Japan, 
in a vain attempt to conquer other countries, joined forces in South 
Asia but were ultimately routed. Today, Europe is also the US global 
strategic priority. With the admission into NATO of Poland, 
Czechoslovakia, and Hungary in March this year, the United States 
formed a circle around the FRY, which insists on being independent. 
Later, the United States found an excuse to launch an armed 
intervention against the FRY. One of its purposes was to open the way 
for NATO's continued eastward expansion by first gaining control of the 
strategically important Balkans and then steadily moving toward gaining 
control of the entire Europe, including Russia. Meanwhile, the United 
States has reinforced its military alliance with Japan in Asia, making 
Japan an important accomplice in its armed intervention against other 
Asian countries. This is also an attempt to gain control of the 
European and Asian continents from the Western and Eastern fronts, with 
the ultimate goal of fulfilling its strategy of dominating the world.
    Sixth, the methods they employed in dismembering other countries' 
territories and encroaching upon their sovereignty through exploiting 
their ethnic contradictions were very similar. Hitler, to secure the 
passageway for taking over the Balkans, plotted in June 1937 the 
``Green Project'' of annexing Czechoslovakia by employing its ethnic 
issues. Czechoslovakia was a multiethnic country and its Sudetenland 
was inhabited by some Germans. Taking advantage of this, Germany, 
through the ``Sudeten German Party,'' put forward the ``demand'' that 
Sudetenland should become fully ``autonomous,'' and that all the 
officials there should be Germans. When members of the party rebelled 
and clashed with the Czech police, Germany started its propaganda 
machine to smear the Czechs, saying that they embarked on ``ethnic 
oppression.'' Gorpel [name as transliterated] clamored that 3.5 million 
Germans in Sudetenland were ``tortured'' and Germany could not afford 
to ``watch as an onlooker.'' In September 1938, under Hitler's war 
threat, Britain and France adopted an appeasement policy and signed 
with the German and Italian fascists the sinful ``Munich Agreement,'' 
under which all the Czech troops must pull out from Sudetenland within 
10 days and the entire Sudetenland and its military and industrial 
facilities were handed over to Germany. Within one month after the 
``International Committee'' formed by the above four countries 
stationed in Czechoslovak, all other Czech regions also went to 
Germany. In less than five months, Nazi Germany took over the entire 
Czechoslovakia. Today, the US-led NATO is attempting to dismember and 
control the FRY by taking advantage of its ethnic problems. While the 
ethnic issue in Kosovo is quite complex, it nevertheless is the FRY's 
internal issue that should be addressed justly on the basis of 
respecting the FRY's sovereignty and territorial integrity and the 
legitimate rights and interests of people of all ethnic groups in 
Kosovo. Kosovo is a province of the FRY Serbia and the Serbs regard it 
as their political and cultural cradle. After the Ottoman Empire 
invaded it in the 14th century, many Albanians moved there en masse. 
When Serbia declared independence in 1878, Kosovo became part of the 
country. During World War II, Italy took over Kosovo. After the war, it 
became part of Serbia again. With its inhabitants most Albanians, 
Kosovo became an autonomous province in 1963. The Albanians began to 
demand full ``independence'' in 1981 and established the ``Republic of 
Kosovo'' in 1991. Ever since February 1998, the so-called ``Kosovo 
Liberation Army'' [KLA] which had overt and covert support from the 
West, has had numerous armed clashes with the FRY army and police 
forces. Thus, the United States and NATO, while going all out to accuse 
the FRY for engaging in ``ethnic cleansing,'' were prepared to use 
force against the FRY. During the talks held in the French city of 
Rambouillet last February, NATO forced the FRY to accept the 
``Rambouillet Agreement'' which favors and supports the Albanian 
secessionists. It is just natural that the FRY refused to accept the 
agreement. Then, the US-led NATO began its so-called ``air strikes'' 
against the FRY. Is it not exceedingly clear from what the United 
States and NATO did during the Kosovo crisis who was acting like Nazi 
Germany?
    Seventh, utilization of advanced technology to slaughter peaceful 
citizens is by no means less barbaric. Advanced science and technology 
are the result of civilization created by human society, which should 
be used to benefit mankind. But when they are in the hands of 
colonialists, imperialists, and hegemonists, they become the 
``advanced'' weapons and means for their aggression, expansion, and 
slaughtering of peaceful citizens. In those years, Hitler not only used 
in war what were considered to be the most advanced weapons of the 
time, such as airplanes, tanks, and long-range artillery, to massacre 
peaceful citizens in anti-fascist countries, but also built 
concentration camps in Auschwitz and in other areas to slaughter Jews 
and prisoners of war with ``advanced'' technology. Executioners drove 
hundreds and thousands of people into gas chambers and poured cyanide 
through air holes in the roof, killing them all. Today, the US 
hegemonists used high-tech weapons to attack the FRY's civilian 
facilities several hundred miles away from the battlefield or with 
laser and global position system several thousand meters above the sky, 
treating innocent and peaceful citizens as live targets. The flagrant 
use of missiles by the US-led NATO to attack the Chinese embassy in 
Yugoslavia was a barbaric atrocity that the then Nazi Germany had not 
dared to commit. During the US air raids, it dropped a large number of 
radioactive depleted uranium bullets, which could lead to leukemia and 
to various deformities in newborn babies, and cluster bombs, which were 
banned by the Geneva Convention. This not only caused heavy casualties 
among the FRY people but also created a long-term and disastrous impact 
on the ecological environment in all of Europe. That the United States 
uses modern advanced technology to carry out an unjust war and to 
massacre peaceful citizens is a blasphemy and challenge to human 
civilization, which fully exposes the barbarity of today's hegemonists.
    Eighth, there is no difference between brazen undermining of 
international law and aggressive acts. Some 30 countries were affected 
during World War I with 40 million casualties. After the war, the 
international community sought to stop wars through international 
treaties. In 1928 some countries signed the ``General Treaty on 
Abolishment of War as an Instrument of National Policy,'' or the ``Non-
War Convention'' for short. Germany also joined this convention. This 
treaty opposed the use of war to settle international disputes and to 
make war a means to implement national policy internationally; it also 
stipulated that all disputes between nations should be settled through 
peaceful means. However, no sooner was Hitler in power than Germany 
scrapped all international treaties that inhibited its aggression and 
embarked on a massive aggression and expansion. After the end of World 
War II, fascist war criminals were finally sent to the trial court of 
history. According to the ``Nurenberg Verdict,'' ``any country that 
uses war as an instrument of national policy will be considered as 
violating the treaty'' following the signing of the ``Non-War Treaty;'' 
and ``any one who engages in planning and carrying out war that brings 
about unavoidable and terrible results should be considered as engaging 
in criminal acts.'' Sixty countries were implicated in World War II in 
which the number of people killed in the war alone topped 50 million. 
After the war, the international community formulated a series of norms 
governing international relations to avoid the repeat of the tragedy of 
war. The ``United Nations Charter,'' adopted in 1945, called on member 
nations to abide by the principle of using peaceful means to settle 
international disputes; not to use or threaten to use force against 
other countries; and not to interfere in any other countries' affairs 
that in essence fall under internal jurisdiction. It is up to the 
United Nations Security Council to decide on whether to adopt military 
action to maintain and restore international peace and security. The 
United Nations General Assembly adopted in 1949 the ``Resolution on the 
Draft Declaration on the State's Rights and Obligations,'' which 
stipulated not to use force to infringe on other countries' territorial 
integrity and political independence. In 1965 the United Nations 
General Assembly passed the ``Declaration on Not Interfering in Other 
Countries' Internal Affairs and on Protecting Their Independence and 
Sovereignty,'' which stipulated that no country should use economic, 
political, or any other measures to threaten other countries or to 
subjugate other countries in the area of exercising sovereignty or to 
interfere in other countries' internal disturbances. These stipulations 
were defined as the basic principles of international law in relevant 
declarations at the 1970 United Nations General Assembly. These norms 
governing international relations were, however, trampled upon at will 
by hegemonists. The US-led NATO used force to interfere in another 
country's ``internal disburbances'' without being restrained by the 
United Nations. NATO had used force to destroy the peaceful homes of 
another country's people and now they are attempting to force another 
country to submit to their will in the name of post war 
``reconstruction.'' These are all hegemonist acts that nakedly violate 
international law. The US Chicago Tribune recently carried an article 
by Wolf Rocker [name as transliterated], who was a prosecutor at the 
Nuremberg War Crime Trial. This article hit the nail on the head by 
pointing out that ``rectification of an anti-humane act through 
slaughter is not convincing in and of itself,'' which is nothing but 
``an excuse for ignoring international law, for arrogantly asserting 
one's own right of domination and hegemonist position.'' The US 
launching a war of aggression against Yugoslavia violated the ``United 
Nations Charter'' and constituted a serious criminal act ``whose aim 
was to show that it can call the shots in the world.''
    What is the difference between the modern day hegemonists who 
willfully undermine international law and the erstwhile Nazi Germany? 
When we read world history, we know that many empires that had 
dominated for some time finally ended in decline. Particularly in this 
century, the worldwide colonial system that the Western powers built 
for several hundreds of years has collapsed. The delusion of a ``long 
thriving of the fortunes of military might'' harbored by the German, 
Italian, and Japanese fascists who tried to dominate and enslave the 
people of the world turned into a bubble. But the US hegemonists have 
failed to draw a genuine and ``painful lesson'' from world history. 
They again mistakenly judged the development and changes in the 
international situation following the end of the Cold War. They employ 
the wishful thinking that fortune is now on their side and that it 
seems to be the turn of the United States--the sole superpower in the 
world--to dominate the world and to become ``the master of the globe.''
    The US hegemonists, however, were completely mistaken. Today's 
world is one for all peoples of the world. All nationalities in the 
world should all be equal and live in harmony. Every sovereign state, 
whether big or small, strong or weak, regardless of different social 
and political systems, development modes, cultural traditions and 
values, is an equal member in the international community. Every 
country's internal affairs should be managed by its people and brook no 
wanton interference from any outside forces. Disputes between nations 
should be settled through peaceful talks and allow no use of force nor 
brook the threat of the use of force. International affairs and global 
issues should be settled through discussions and consultations by 
various countries in the world and no country should be allowed to 
impose itself upon the international community and decide all by 
itself. All in all, the call for maintaining world peace, promoting 
common development, for establishing a new international political and 
economic order that is fair and rational, and for fundamentally 
changing an old order marked by the big and powerful bullying the small 
and the weak and by the rich oppressing the poor is becoming a strong 
wish and a just appeal among all the people in the world and an 
unstoppable historical tide. Looking back to the past and looking 
ahead, we can clearly see that, despite history's twists and turns in 
its development, its general trend is toward progress and civilization, 
which is an objective law that cannot be changed by the people's will. 
The various actions that the United States adopted to realize its 
global strategy to dominate the world are tantamount to making enemies 
with all countries and people who love peace, which run against the 
historical tide that is rushing ahead as well as the development trend 
of a multi-polar world. Even though they may run rampant for a while, 
they will eventually end in complete failure. If the US hegemonists go 
it alone and persist in their foolhardy ways, they will surely follow 
the track of the old colonialists and fascists of yore and cannot 
escape from the judgement of history, justice, and law.

    Ambassador Lilley. You cannot separate Taiwan from Kosovo, 
and certainly the Chinese in this document have said we are 
worse than Adolph Hitler and the Holocaust.
    I notice that Mr. Roth and Dr. Lieberthal are going to go 
over to China to talk about various issues involving Taiwan and 
other places. In this context Kosovo was an ideological issue 
from the beginning. China attacked us for interfering in a 
sovereign State Yugoslavia on behalf of a minority the 
Albanians who sought independence, and we used military power 
to do this.
    This is a neuralgic issue with China. What gave it an 
emotional push was the Belgrade Embassy bombing. This then set 
off a frenzy of activity and became a major issue in Chinese 
foreign policy. When you add the Lee Teng-hui statement, then 
you have a rolling momentum.
    Let me briefly go to Lee's statement. Lee's statement is 
part of the Chinese great game of correct names. Confucius, 
said, ``rectify names lest great affairs of State cannot be 
handled.'' Names are important to China. As far as the United 
States is concerned, we had better stay out of that complex 
game, because I do not think we will ever understand it.
    If the game goes too far, of course we then can exert some 
influence, but it seems to me that this is primarily a 
complicated Chinese back-and-forth.
    Second, I agree with Steve Yates that--and I will put it 
more crudely, that Lee Teng-hui is raising the ante. Both sides 
started off with one China, in 1992 your interpretation, our 
interpretation, and this led to the Singapore talks in 1993 and 
continued through to 1998 when Koo Chen-fu of Taiwan went to 
Beijing.
    What Lee Teng-hui is saying is, we agreed originally on 
this formula in 1993. You changed it with your 16-character 
definition, which said in effect that the only China is the 
PRC, and that Taiwan is a province of the PRC, and this is the 
definition of one China. This, of course, goes directly against 
what Taiwan is trying to accomplish.
    So Lee fired back at them and said equal and special state-
to-state relations. He was still for a one China under the 
right conditions. He basically stuck to his three-point 
guidelines, namely, first stage, talks, and Lee has insisted 
that the talks continue, second stage, agreements between the 
two sides, third stage, discussion of unification.
    My own sense now as far as American is concerned is, it 
should be very important for us to back off and change the 
subject to WTO. Get WTO on a fast track, get China in, and get 
Taiwan in. We have a very troubled premier in China who gave us 
a very good deal in April, which we turned down. Premier Zhu 
Rongji has been given the authority by Jiang Zemin to not only 
reform the domestic economy but to work out a WTO deal. This 
means to keep the Taiwan-China economic relationship going, 
which is critical to both China and Taiwan.
    In order to do this, he has had to turn over foreign 
policy, national security to the hard liners and the 
propagandists, hence, this statement.
    What the United States has to watch out for right now, and 
it is reflected in the Washington Times article, is that we are 
going to start to turn the screws on Taiwan to make them move 
back from their statement and to engage Beijing on what has 
been termed interim agreements.
    I think Mr. Roth initiated that term. The U.S. then is, in 
effect, pressuring Taiwan, and is apparently using arms sales 
and contracts as leverage to push Taiwan into this 
relationship. We have to be very careful on that. It goes 
against the TRA, and if we push Taiwan too hard we will not 
decrease the chances of war, but probably increase them. The 
relation of the military balance right now is in China's favor. 
I have the statistics here if you would like to see them.
    And as long as the U.S. remains involved, there is not any 
real military option, but if Taiwan is stripped of its military 
capability, or downgraded, and if missile defense talks are 
canceled, and if we cancel the E2T, this could change the whole 
nature of our contacts with Taiwan. My sense is we will begin 
to weaken and widen the power balance, which in my experience 
is an invitation for adventurous military action.
    There is another thing we Americans should pay very close 
attention to in this whole game between China and Taiwan. It 
goes back to the Confucian statement on correct names. Rhetoric 
and gong-banging, Chinese opera, thrust and parry, threats, 
gamesmanship, pull-back, advance, are very much part of this 
game.
    I would say rhetoric is probably 75 to 80 percent. We have 
gone through this for about 41 years now. In fact the last time 
anybody got killed in combat was in 1958, in the Quemoi crisis. 
This is not Kosovo, Korea, or Kashmir.
    I do not however rule out the dangers of military 
confrontation. We have to be very conscious of that. But if you 
examine the record, there is a lot of rhetoric, and the United 
States often gets drawn into the rhetoric. We have a certain 
fascination with this whole nomenclature business, of for 
instance state-to-state relations. The Chinese have a pretty 
clear idea of the way they say it in Chinese. The New York 
Times was a bit off base on a number of items in this mornings 
paper. There is a way of being quite specific in the Chinese 
language.
    But I want to get back to how one exerts leverage. The 
Washington Times says E2T aircraft are being held up, the U.S. 
defense delegation to Taiwan has been postponed, maybe all 
contacts with the Taiwan authorities will now be handled 
through AIT, and there will be no more direct contacts between 
defense at the lower levels with Taiwan. This is a pressure 
device. We have to decide whether we are using this leverage to 
punish and to pressure Taiwan. Then what are we going to do to 
China at the same time.
    China has already cut off all military contacts with us. 
They have told our ships to stay out of Hong Kong. They have 
demanded compensation for the bombing, and this is in fact 
justified. They have delivered this horrific 22 June propaganda 
blast against us.
    What we seem to be doing with China is negotiating the size 
of the compensation package for our accidental bombing. This is 
fine, but there is a difference in the way we manage the rest 
of the relationship. We should look at that very carefully.
    Having said this, I do think that the timing of Taiwan's 
statement was off. I do not think Taiwan should pick a time 
between the PRC's party congress--I mean, their party 
anniversary on 1 July and the politburo conferences in August 
to drop a verbal bombshell on them. No matter how this is 
interpreted, it was provocative to the Chinese.
    Taiwan was raising the ante and getting the negotiations 
back on an equal basis. Also there is tremendous support in 
Taiwan for Lee Teng-hui's position. The polls, as I see it, 
show that he has about 73 percent support. What Lee is trying 
to do is to undercut his political opposition in Taiwan.
    Another aspect of this that we do not adequately understand 
is the enormous number of high-level contacts that go on 
between Taiwan and China every day outside of these semi-
official talks. The number of Chinese leaders and businessmen 
and Taiwan businessmen that deal with each other at the highest 
level, while discussing investment, there exists a dynamic 
there that few Americans understand.
    We tend to deal with the rhetoric and the movement of naval 
ships and planes, and do not really understand the full flow of 
dialog between the two sides. We do not have to get involved in 
this. We do not know enough about it.
    Finally, I would make these two points. First of all, it is 
very important the PRC notice that this issue is being debated 
democratically in Taiwan. Lee Teng-hui is coopting his 
opposition, the DPP, [Democratic Progressive Party] and also 
another independent politician, James Soong, who is laying out 
a new agenda for China relations with Taiwan, which in effect 
opens up the three communications, does not push for Taiwan 
entry into the United Nations, and says Taiwan is not ready for 
TMD.
    These three positions are positions that China desires. 
Soong has laid these positions out and has challenged Lee Teng-
hui. Let us see how the democratic process handles this. It 
will be very instructive for China to watch how this plays out.
    So what I would add to what you have said, Mr. Chairman, is 
that the Chinese have an old expression about when you come to 
the brink. You step back from the brink and the seas will widen 
and the skies will open. That to me is good advice.
    Thank you.
    Senator Thomas. We have been joined by the ranking member 
of the full committee, Senator Biden. It is good to see you, 
sir. If you have any comment we will be glad to hear it.
    Senator Biden. I just thank you for letting me sit in on 
the subcommittee.
    Senator Thomas. Senator Kerry has also joined us, the 
ranking member of the subcommittee. Senator.
    Senator Kerry. Mr. Chairman, thank you. I am not going to 
interrupt the flow of witnesses with an opening statement at 
this point, but I do think this is obviously on its face a very 
important clarification hearing, and there are some key issues 
we are all deeply concerned about, based upon Lee's most recent 
statements, and I look forward to exploring that.
    Senator Thomas. Thank you.
    I am not sure I mentioned we of course invited Secretary 
Roth to be here, and he called. He is in China as a matter of 
fact and so was unable to be here, but not because he did not 
choose to.
    Dr. Gong.

   STATEMENT OF DR. GERRIT W. GONG, DIRECTOR, ASIAN STUDIES, 
 CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES, WASHINGTON, DC

    Dr. Gong. Mr. Chairman, a moment ago Ambassador Lilley 
talked about gong-banging. I assume he meant that 
metaphorically.
    I am delighted to join you and this committee, and without 
minimizing cross-strait tensions, I want today to focus on the 
opportunities in the current situation, and I will do so by 
asking us to consider fundamental U.S. anchor interests in the 
spirit of your opening statement.
    First, the opportunity. Beijing and Washington are 
reestablishing positive contact which reduces possible 
misunderstanding over Taiwan. President Clinton and President 
Jiang have reiterated established positions and expressed hope 
for bilateral progress.
    As you mentioned, State Department and American Institute 
and Taiwan senior officials are on their way to Beijing and 
Taipei. Initial conversations with President Lee are putting 
his remarks in the context of current de facto and dejure 
realities. This sets the groundwork for constructive 
clarification by Mr. Koo Chen-fu, chairman of Taiwan's Exchange 
Foundation, in preparation for the expected October visit of 
Mr. Wang Daohan from the PRC.
    Sino-U.S. market access talks will proceed, which will 
hopefully contribute to both Beijing and Taipei joining the WTO 
this year. There is impetus for upcoming high level meetings, 
including between Secretary Albright, Chinese Foreign Minister 
Tong this weekend in Singapore, and between President Clinton 
and President Jiang in Auckland this September.
    What Washington, Beijing, and Taipei share is a basic 
interest in Taiwan Strait peace, prosperity, and stability. We 
can promote this together by preserving the dynamic framework 
that both sides of the strait consider themselves part of a 
single China, the definition of which remains under discussion, 
and that their dynamic relationship will not be changed by 
force, will not be changed by unilateral timetables for 
communication, and will not be changed by unilateral 
declarations of independence. That is what we have in common.
    The U.S. can contribute, as we said, Mr. Chairman, in the 
spirit of your opening remarks, Beijing and Taipei together 
pursuing these common interests, when we adhere to six anchor 
interests. They are in my statement. Let me review them 
quickly.
    First, it is in the U.S. interest for there to be an 
equilibrium of confidence between the two sides of the Taiwan 
Strait. This equilibrium of confidence means both sides can 
determine the pace and scope of their interaction peacefully. 
They both need a credible military defense for a minimal sense 
of security in order to engage in cross-strait dialog free of 
intimidation or coercion. Both sides should feel the U.S. is 
evenhanded. Neither side should feel pressured into 
negotiations or arrangements, especially imposed unification 
timetables or interim agreement.
    Second, it is in the U.S. interest that neither Taipei nor 
Beijing shift its responsibility for cross-strait peace and 
communication here to Washington. We have an interest to 
minimize the tendency, (a) by some in Beijing to underestimate 
our resolve, or to assume that we could somehow simply deliver 
Taiwan, and (b) at the same time, by some in Taipei to 
overestimate the nature or scope of U.S. support, or assume 
that Washington could sell out Taiwan.
    Third, it is in the U.S. interest that we encourage an 
environment for Beijing and Taipei to engage in constructive 
direct dialog. Many levels and authorized channels of 
communication will be necessary for Taipei and Beijing to deal 
directly with each other over their differences.
    This does not mean direct or indirect pressure on either 
Beijing or Taipei for dialog or for unrealistic U.S. 
expectations or responsibilities placed on cross-strait dialog. 
There is some tendency, I think, for us to put so much hope on 
cross-strait dialog that there might be an unrealistic hope for 
what it might accomplish in the short term.
    As we have just heard, intentionally undermining the 
confidence of Beijing or Taipei as a means to promote this 
dialog will be counterproductive. Consistent, confirmed, 
authoritative messages between the two sides of the Taiwan 
Strait are required to build cross-strait trust and confidence 
on a solid foundation.
    Let me say, at appropriate times and in appropriate ways 
broadening cross-strait dialog could increase understanding. As 
I have testified before, at some point some Beijing-Taipei 
military-military dialog through established cross-strait 
channels could foster basic and then, perhaps, over time, more 
far-reaching confidence-building measures. That is military-to-
military discussion between the two sides at an appropriate 
time.
    Third, it is in the U.S. interest that other Asian Pacific 
countries publicly state their interest in regional peace, 
security, and stability. All countries in north and southeast 
interests have a stake in maintaining the change in the region 
occur peacefully, and in so stating.
    Fifth, in our domestic sphere, it is in the U.S. interest 
that U.S. politics not become a dispute resolution mechanism 
for Beijing-Taipei issues. Healthy discussion of the 
alternative merits of different policy approaches is a hallmark 
of our democracy, but it is not in our interest to allow 
Washington domestic politics to become the dispute resolution 
for issues better addressed directly by the involved parties.
    Sixth, it is in the U.S. interest that we review U.S. 
obligations under the three communiques under the Taiwan 
Relations Act so U.S. adjustments to evolving strategic 
circumstances do not surprise either side. This is required so 
Washington can meet defense commitments that contribute to 
rather than detract from China-Taiwan understanding and cross-
strait stability.
    Now, in conclusion, let me say again, our current 
opportunity is for U.S. leadership to secure the reaffirmation 
of all parties in their shared interest in cross-strait peace, 
stability, and prosperity. This will occur within a dynamic 
framework that (a) both sides of the strait consider themselves 
a single China, as I said, the definition of which is still 
being worked through, and (b), their dynamic relationship will 
not be changed by force, by unilateral timetables for 
unification, or by unilateral declarations of independence.
    Extreme care is required so this opportunity to affirm 
common interests is not squandered in a reactive rush to policy 
overclarification. It is not in the U.S. interest, nor is it in 
our capability, to impose a solution between China and Taiwan. 
Both power and principle demand we maintain a balance between 
realities and creative ambiguities across the Taiwan Strait.
    This is hard for us, because we want clarity, because we 
want to solve issues once and for all, but this is a Chinese 
issue that the Chinese themselves must solve. We can contribute 
to a framework to that end, and we do so by placing that 
framework on a basis of anchor U.S. interests consistent, as I 
said, with our interests and our values.
    Thank you.
    [The prepared statement of Dr. Gong follows:]

                Prepared Statement of Dr. Gerrit W. Gong

             u.s. anchor interests across the taiwan strait
Current Opportunities
    Thank you, Mr. Chairman and members of this committee, for the 
opportunity to testify on a timely issue vital to the U.S. interest in 
Asia-Pacific peace, stability, and prosperity.
    Without minimizing cross-strait tensions, I want today to focus on 
opportunities in the current situation.
    Beijing and Washington are re-establishing positive contact, which 
reduces possible miscalculation over Taiwan. In their phone 
conversation, President Clinton and President Jiang reiterated 
established positions and expressed hope for bilateral progress. Senior 
State Department and AIT (American Institute in Taiwan) officials are 
on their way to Beijing and Taipei, respectively.
    Initial conversations with President Lee and other senior Taiwan 
officials are putting his remarks in the context of current de facto 
and de jure realities. This sets the groundwork for constructive 
clarification by Mr. Koo Chen-fu, chairman of Taiwan's Straits Exchange 
Foundation, in preparation for the expected October visit of the 
chairman of the PRC's Association for Relations Across the Taiwan 
Straits Mr. Wang Daohan.
    Sino-U.S. market access talks are proceeding, which will hopefully 
contribute to both Beijing and Taipei joining the World Trade 
Organization (WTO) this year. There is impetus for upcoming high-level 
meetings including between Secretary Albright and Chinese Foreign 
Minister Tang this weekend in Singapore and President Clinton and 
President Jiang this September in Auckland.
    This kind of communication is essential to address fundamental 
differences in perception and interest between Beijing and Washington. 
Let me illustrate. Just prior to kick-off of the Women's World Cup 
final between China and the United States, a televised formation of 
U.S. F-18 fighter jets overflew the Rose Bowl. What most Americans 
would see as an innocent if exuberant symbol of national pride some 
Beijing viewers could interpret as a potentially threatening symbol of 
assertive U.S. values or military capability. These perceptual and 
interest differences underlie divergent U.S. and PRC interpretations of 
the May 7, 1999, accidental bombing of the PRC embassy in Belgrade; 
similarly, they underlie often divergent U.S. and PRC approaches to 
Taiwan.
    Where Washington, Beijing, and Taipei do not diverge is in the 
shared interest that Taiwan Strait peace, prosperity, and stability be 
promoted. This requires preserving the dynamic framework that both 
sides of the strait consider themselves part of a single China (the 
definition of which remains under discussion) and that their dynamic 
relationship will not be changed by force, by unilateral timetables for 
unification, or by unilateral declarations of independence.
    President Jiang Zemin says he does not want Taiwan to become an 
Asian Kosovo. In such matters, Chinese memory is too long when it 
interprets every international action through a historical lens that 
presumes intent to bully or humiliate China. In such matters, U.S. 
memory is too short when it fails to perceive how arrogant and short-
sighted American triumphalism can appear.
    Recent statements by President Lee Teng-hui regarding Taiwan's 
political status underscore significant changes in both China and 
Taiwan since the U.S. first acknowledged in the 1972 Shanghai 
communique that all Chinese on either side of the Taiwan Strait 
maintain there is but one China and that Taiwan is a part of China. 
Taipei says it is clarifying and specifying, that its mainland policy 
remains intact. Beijing remains suspicious that Taiwan is using 
semantics to further separation from China.
    If the changes over the past three decades are viewed positively 
both China and Taiwan have a chance to create new cross-strait 
opportunities, possibly including regarding a single Chinese nation, as 
both the PRC and Taiwan have suggested. Or these changes could 
precipitate crisis if they are taken negatively.
Six U.S. Anchor Interests
    The U.S. facilitates Beijing and Taipei pursuing the positive by 
adhering to four U.S. ``no's'' (including no use of force) and six U.S. 
``yes's.''
    These six U.S. ``yes's'' include the following U.S. anchor 
interests for cross-strait relations:

   preserve an equilibrium of confidence;
   make Taipei and Beijing responsible to maintain their 
        cooperation and competition;
   encourage Beijing and Taipei to engage each other directly;
   prompt other Asia-Pacific countries to state publicly their 
        interest in peaceful dispute resolution;
   prevent U.S. domestic politics from becoming an alternative 
        dispute resolution mechanism for Beijing-Taipei issues; and
   anticipate changing U.S. strategic and technological 
        obligations under the three U.S.-PRC communiques and Taiwan 
        Relations Act to maximize stability and minimize tension.

    Each of these American anchor interests is worth elaborating 
briefly.

  1. An equilibrium of confidence means both sides of the Taiwan Strait 
        can determine the pace and scope of their interaction 
        peacefully.

    Both Beijing and Taipei need a credible military defense for a 
minimal sense of security in order to engage in cross-strait dialogue 
free of intimidation or coercion. Both sides should feel the U.S. is 
even-handed in its approach. Neither side should be pressured into 
negotiations or arrangements--including imposed reunification 
timetables or interim agreements.
    Some argue that U.S. interest in Beijing-Taipei relations is based 
primarily on power. They say China and the U.S. are natural competitors 
in Asia and maintenance of the Taiwan Strait status quo is therefore a 
U.S. strategic interest. Others argue that U.S. interest in Beijing-
Taipei relations is founded on principle--either in the free democratic 
expression of the 21 million people in Taiwan or in the eventual 
unification of ``one China.''
    The U.S. interest is, in fact, a combination of both power and 
principle. The U.S. should thus reject any challenge to the status quo 
by force, and discourage Taiwan independence, while leaving it to 
Beijing and Taipei to create the positive conditions necessary to 
entice peaceful unification.

  2. The responsibility of Taipei and Beijing for their continuing 
        relations means neither side should be allowed to shift its 
        responsibility for cross-strait peace and communication to 
        Washington.

    The U.S. interest is to minimize the tendency by (a) some in 
Beijing to underestimate U.S. resolve or to assume that Washington 
could simply ``deliver'' Taiwan and (b) some in Taipei to overestimate 
the nature or scope of U.S. support or to assume that Washington could 
``sell out'' Taiwan.
    The U.S. deployment of two aircraft carrier battle groups on one 
occasion and President Clinton's enunciation of three no's, including 
no U.S. support for Taiwan independence on another occasion, 
demonstrate that the U.S. will challenge those who engage in 
provocative or threatening behavior on either side of the strait. 
Though Beijing-Taipei competition will continue, the U.S. interest is 
to build margins of safety, not just limits of tension.

  3. Encourage an environment for Beijing and Taipei to engage in 
        constructive direct dialogue. Many levels and authorized 
        channels of communication will be necessary for Taipei and 
        Beijing to deal directly with their differences.

    This does not mean direct or indirect pressure on either Beijing or 
Taipei for dialogue, nor unrealistic U.S. expectations or 
responsibilities placed on cross-strait dialogue. Intentionally 
undermining the confidence of Beijing or Taipei as a means to promote 
cross-strait dialogue will be counter-productive. Consistent, 
confirmed, authoritative messages between the two sides of the Taiwan 
Strait are required to build cross-strait trust and confidence on a 
solid foundation.
    At appropriate times and ways, broadening cross-strait dialogue 
could increase Beijing-Taipei understanding. For example, as I have 
previously testified, some Beijing-Taipei military to military 
dialogue, through established cross-strait channels, could foster basic 
and than more far-reaching confidence building measures.
    In any case, positive developments in relations between Beijing and 
Washington, Beijing and Taipei, or Taipei and Washington need not be 
zero-sum. Indeed, some practical linkage remains between the pace and 
scope for improved U.S.-PRC relations and U.S.-Taiwan relations and the 
pace and scope for improved Beijing-Taiwan cross-strait dialogue.

  4. Encourage other Asia-Pacific countries to state publicly their 
        interest in regional peace, security, and stability.

    All countries in Northeast and Southeast Asia have a stake in 
maintaining change in the region occur peacefully, and they need to say 
so. This does not mean other countries should take sides in what they 
may see as a Chinese political issue. But there is a danger to all the 
region if non-peaceful means are employed to resolved questioned 
borders, territorial lines, or other disputes. While formal Asia-
Pacific collective security agreements have yet to be developed, 
emerging regional institutions should see a collective interest in 
peaceful dispute resolution, including if necessary issues touching 
sovereign concerns.

  5. In the domestic sphere, prevent U.S. politics from becoming a 
        dispute resolution mechanism for Beijing-Taipei issues.

    As the Cox Commission demonstrated, a bipartisan working consensus 
can reflect basic U.S. security, political, economic, and human rights 
interests. In cross-strait matters, such a U.S. bipartisan working 
consensus can transcend domestic U.S. politics, thereby dealing 
responsibly with important China-Taiwan developments, especially those 
determined by factors beyond the U.S.
    Healthy discussion of the alternative merits of different policy 
approaches is a hallmark of U.S. democracy, but it is not in the U.S. 
interest to allow Washington domestic politics to become the dispute 
resolution mechanism for issues better addressed directly by the 
involved parties.

  6. Review U.S. obligations under the three U.S.-PRC communiques and 
        Taiwan Relations Act so U.S. adjustments to evolving strategic 
        circumstances do not surprise either side. This is required so 
        Washington can meet defense commitments that contribute, rather 
        than detract from, China-Taiwan understanding and Taiwan Strait 
        stability.

    New patterns of cooperative engagement capability; of dealing with 
classic time, distance, and weight issues are ``theaters'' and ``front 
lines'' are redefined; of establishing credible U.S. political presence 
and commitment when U.S. forces may not be immediately visible or 
deployed in-area--these and many other emerging issues will shape the 
nature of competition and conflict in ways which will require periodic 
security enhancement updates to U.S. commitments within the three Sino-
U.S. communiques and Taiwan Relations Act.
Conclusion
    Crisis and opportunity can go together, especially when dealing 
with China and Taiwan. The tendency to react to crisis and to miss 
potential opportunity can be ameliorated by focusing on U.S. anchor 
interests. The current opportunity is for U.S. leadership to secure the 
reaffirmation of all parties in their shared interest in cross-strait 
peace, stability, and prosperity. This will occur within a dynamic 
framework that (a) both sides of the strait consider themselves part of 
a single China (the definition of which remains under discussion) and 
(b) their dynamic relationship will not be changed by force, by 
unilateral timetables for unification, or by unilateral declarations of 
independence.
    Extreme care is required so this opportunity to reaffirm basic 
common interests is not squandered in a rush to policy over-
clarification. Such could counter-
productively lose the dynamic tension between realities and creative 
ambiguities which can and should continue to serve U.S. interests on 
both sides of the Taiwan Strait so well.
    Thank you very much.

    Senator Thomas. Senator Coverdell, welcome. Do you have any 
comment you would like to make?
    Senator Coverdell. I do not. I think we should proceed.
    Senator Thomas. Very well. Thank you. We will take some 
questions and try to keep a time limit on those.
    Mr. Yates, you seem to question the one-China statement as 
not being very realistic. Is that not the position of the 
United States?
    Mr. Yates. I do not believe, until the Clinton 
administration, that any administration had said the United 
States has a one-China policy. We had always acknowledged that 
both sides of the Taiwan Strait had a one-China policy, and 
while they both maintained it, it was a useful framework for us 
to avoid difficult issues and move forward with substantive 
dialog in exchange.
    I think that it is difficult for the United States to claim 
there is a one-China policy without the burden being placed on 
us to define it, and I do not think that we have an interest in 
doing so.
    One of the difficulties in the one-China statement, even if 
it is the policy, is that in Chinese there are two different 
words for referring to China. One is ``zhonghua,'' which kind 
of refers more to the grand culture of the nation, the people's 
emphasis on a common tradition, and the other is ``zhongguo,'' 
which is more emphasis on country, emphasis on political 
entity, and it is difficult for us in English to toy with these 
subtle differences.
    Similarly, there is a difficulty in taking words like 
State, country, and nation, which have different meanings in 
international relations theory to English-speaking people, but 
do not go easily back into Chinese, into the framework that 
they have been using to engage in this dialog, so even when 
President Lee uses the words, state-to-state, when he uses 
those Chinese words, if you look across the American media, 
they were translated as nation-to-nation, country-to-country, 
and state-to-state, and I think there are important 
distinctions in those, so for me I do not believe that the one-
China slogan is particularly useful.
    Senator Thomas. You do not think that is in the 
communiques?
    Mr. Yates. I think in the communiques we acknowledge 
China's claim of sovereignty, and we acknowledge that both 
sides maintain that there is but one China, and it is very 
clear that we have tried to avoid answering that question in 
specificity in my analysis.
    Senator Thomas. You indicated there needs to be government-
to-government negotiations. There have been negotiations going 
on across the strait. Isn't that government to government?
    Mr. Yates. Most of the high profile negotiations I am aware 
of go through two quasi-governmental organizations. Clearly, 
they are endowed with the authority to negotiate on what are 
usually more mundane issues.
    There has been a controversy about the two sides resuming 
this dialog, because Beijing would like to discuss political 
issues, which apparently means some kind of discussion for a 
political resolution of the status of Taiwan, and Taiwan says 
we will take on the political dialog, but we want to discuss 
democratization of the mainland.
    My point is, until there is a formal statement from the 
mainland that acknowledges that a government exists on Taipei, 
I do not believe you can take the mainland's desire for 
unification very seriously. I just do not see any path toward 
unification that does not acknowledge the existence of a 
government and attributes some element of legitimacy to it 
before you engage in the dialog.
    Senator Thomas. It is a little naive to suggest there is no 
government there.
    Ambassador Lilley, do you think there is any particular 
meaning to the timing on the Taiwan pronouncement?
    Ambassador Lilley. I think so, but I would first like to 
make one statement, that the United States, in its 
normalization communique and its August 1982 communique 
recognized the PRC as the sole legal Government of China.
    But as far as the timing is concerned, I believe a number 
of factors converged. One was the upcoming cross-strait talks 
between China and Taiwan, and the need to raise the ante before 
those talks started. Lee Teng-hui saw that Beijing was trying 
to establish its own interpretation of what China defined as 
one China, so he was raising the ante.
    Number 2, he has got a domestic political situation which 
drove him to try to isolate his opposition, as I mentioned, 
James Soong, and to bring in 70 percent of the Taiwan voters 
behind him. It was a political process where he is trying to 
gain leverage.
    And third, I do not think you can separate all this from 
Kosovo. The United States took a position in Kosovo which was 
very interesting to Taiwan, namely, the U.S. does intervene 
militarily in a situation where there are great human rights 
violations, and even genocide. The U.S. moved in with military 
force to bring about an autonomous situation protected by NATO 
power. This disturbed Beijing very much, and this sort of 
precedent fit into President Lee's definition of his own 
predicament. He wanted to establish this legacy of autonomy and 
equality before he steps down.
    Senator Thomas. Senator Kerry.
    Senator Kerry. Would you say, Ambassador Lilley, that--does 
this represent the question in a lot of people's minds? Is sort 
of sorting through the terminology Mr. Yates was talking about, 
and the word, zhonghua, and what it means, State, nation, 
country, and so forth, is it your judgment that this is a new 
statement of some kind, or is this really the continuation of 
policy that Taiwan now insists they were sort of articulating?
    Ambassador Lilley. I think, Senator, it is both. It is 
expanding on understandings which Lee Teng-hui has been pushing 
for a long time. It is the continuity from equal political 
entities to Taiwan as a sovereign State. The ROC was founded as 
a state in 1912, before the PRC was founded in 1949. These 
arguments Lee Teng-hui has raised consistently.
    What is different is the use of the term, specifically, 
state-to-state relations or special state-to-state relations, 
and this set off Beijing's real concerns. The PRC saw it as 
another push in the direction of getting equality for Taiwan 
and perhaps working toward a U.N. seat and equal and earlier 
access to the World Trade Organization, perhaps even the World 
Bank. The PRC felt it really had to move in and stop this both 
decisively and early.
    But again, I say both, sir.
    Senator Thomas. You are nodding, Dr. Gong. Let me read 
you--this is a letter that I received from Mr. Chen, 
representing the office here in Washington, and he says, he 
references the interview and he says, ``President Lee's 
statement represents a pragmatic assessment of current 
realities,'' and he repeats what you were just saying. ``The 
ROC was established in 1912 and remains a sovereign State. The 
Chinese Communists established the People's Republic of China 
in 1949, but the PRC's jurisdiction has never extended over 
Taiwan . . .''.
    And then he says, and I think this is important, ``It is 
also important to note that our President's statement 
represents a continuation of policy. President Lee stated in 
the interview that the cross-strait issue cannot be simply 
resolved by unification or independence. The crux of the issue 
is the political system. The ROC is the first to achieve 
democratization in all Chinese societies. We hope that the PRC 
would begin democratic reform to create better conditions for a 
democratic unification. Before that, we wish to maintain the 
status quo.''
    In short, President Lee's statement was intended to shed 
light on the current state of cross-strait relations, and to 
reiterate that there has been no change or revision in our 
mainland China policy.
    [The letter, with enclosures, that Senator Thomas refers to 
follows.]

        Taipei Economic and Cultural Representative
                               Office in the United States,
                                     Washington, DC, July 14, 1999.

The Honorable Craig Thomas
United States Senate,
Washington, DC.

    Dear Senator Thomas:

    Today I am writing to inform you of a significant declaration of my 
country's policy regarding our relations with the communist China.
    In a recent interview with the Deutsche Welle (Voice of Germany), 
President Lee Teng-hui of my country, the Republic of China (ROC), 
stated that relations between the two sides of the Taiwan Strait should 
be characterized as a ``special state-to-state relationship.''
    President Lee's statement represents a pragmatic assessment of 
current realities. The ROC was established in 1912 and remains a 
sovereign state. The Chinese communists established the People's 
Republic of China (PRC) in 1949, but the PRC's jurisdiction has never 
extended over Taiwan, Penghu, Kinmen or Matsu, which comprise the area 
ruled by the ROC government. It is an indisputable political and 
historical fact that the ROC and the PRC are separate governments 
ruling respectively the Taiwan area and the mainland area. In other 
words, two states--ROC and PRC--co-exist in a Chinese nation.
    It is also important to note that our president's statement 
represents a continuation of policy. President Lee stated in the 
interview that the cross-Strait issue cannot be simply solved by 
unification or independence. The crux of the issue is the political 
system. The ROC is the first to achieve democratization in all Chinese 
societies. We hope that the PRC would begin democratic reform to create 
better conditions for a democratic unification. Before that we wish to 
maintain the status quo. In short, President Lee's statement was 
intended to shed light on the current state of cross-Strait relations, 
and to reiterate that there has been no change or revision in our 
mainland China policy.
    In the Guidelines for National Unification promulgated in 1991, we 
declared that the two sides of the Taiwan Strait were ``two equal 
political entities.'' We had hoped this formulation would help the two 
sides temporarily set aside disputes over sovereignty and create 
extended opportunities for interactions. However, Beijing has responded 
to our goodwill with hostility ever since. It has time and again 
expanded the definition of its ``one China'' policy by equating the PRC 
to China and saying that Taiwan is a part of the PRC.
    The abnormal relations between the two sides are caused by 
Beijing's refusal to face reality. At the dawn of the 21st century, 
relations between the two sides should be clearly defined based on 
objective political and legal reality, so that the two sides will be 
able to avoid disputes over the meaning of ``one China.''
    We earnestly hope that President Lee's statement will provide new 
insight into the unique nature of the relations between the two sides 
of the Taiwan Strait and help form a solid basis for further dialogue 
between the PRC and the ROC. Your continued support for my country is 
indispensable, and I look forward to having the opportunity to brief 
you more fully on this issue in the future.
    With best regards,

            Sincerely,
                        Stephen S. F. Chen, Representative.

    [Enclosures].

  Responses to Questions Submitted by Deutsche Welle to Lee Teng-hui, 
               President, Republic of China, July 9, 1999

    Question 1. Your Excellency, Taiwan's economy is a success story 
admired around the world. Another impressive success in recent years 
has been Taiwan's democratic achievements. However, Taiwan is 
considered by Beijing's government as a ``renegade province.'' This is 
a cause for permanent tensions and threats against your island from the 
mainland. How do you cope with these dangers?
    Answer: I will answer your question from the historical and legal 
viewpoints. There has been an impasse in cross-strait relations because 
the Beijing authorities ignore the very fact that the two sides are two 
different jurisdictions and that the Chinese mainland continues to pose 
a military threat against us. The historical fact is that since the 
establishment of the Chinese communist regime in 1949, it has never 
ruled the territories under the Republic of China (ROC) jurisdiction; 
Taiwan, Penghu, Kinmen, and Matsu.
    In the 1991 constitutional amendment, Article 10 of the Additional 
Articles (now Article 11) limits the area covered by the Constitution 
to that of the Taiwan area, and recognizes the legitimacy of the rule 
of the People's Republic of China on the Chinese mainland. Articles 1 
and 4 of the Additional Articles clearly stipulate that the members of 
the Legislative Yuan and the National Assembly shall be elected from 
the Taiwan area only.
    The 1992 constitutional amendments further stipulate in Article 2 
of the Additional Articles that the president and the vice president 
shall be popularly elected by the people of the Taiwan area. Thus, the 
reconfigured national agencies represent only the people of the Taiwan 
area. The legitimacy of the rule of the country comes from the mandate 
of the Taiwan people and has nothing to do with the people on the 
mainland.
    The 1991 constitutional amendments have placed cross-strait 
relations as a state-to-state relationship or at least a special state-
to-state relationship, rather than an internal relationship between a 
legitimate government and a renegade group, or between a central 
government and a local government. Thus, the Beijing authorities' 
characterization of Taiwan as a ``renegade province'' is historically 
and legally untrue.
    In the face of cross-strait developments, we will continue to 
prudently advance cross-strait exchanges and actively promote dialogue 
and consultations. Moreover, we will continue to further develop our 
democratic system, pursue stable economic growth, and actively 
strengthen contacts with the international community, so as to ensure 
our survival and development.
    We believe that consolidating mutual trust through exchanges and 
fostering stable relations through mutual trust is the most effective 
way to resolve a crisis. Taiwan and the Chinese mainland should develop 
a win-win relationship based upon reciprocity and mutual benefit.

    Question 2. Declaring Taiwan an independent state does not seem to 
be a realistic option, and Beijing's ``one country, two systems'' 
formula is not acceptable for the majority of people in Taiwan. Is 
there any room for compromise between these two lines of policy? And if 
there is, what does it look like?
    Answer: I have already explained very clearly that the Republic of 
China has been a sovereign state since it was founded in 1912. 
Moreover, in 1991, amendments to the Constitution placed cross-strait 
relations as a special state-to-state relationship. Consequently, there 
is no need to declare independence. The resolution of cross-strait 
issues hinges on the issue of different systems. We cannot look at 
issues related to the two sides simply from the perspective of 
unification or independence. Progression from an integration of systems 
to a gradual political integration is the most natural and most 
suitable choice to guarantee the welfare of all Chinese people. At 
present, the ROC has become the first democracy in the Chinese 
community. We would like to take a more active role in the Chinese 
mainland's modernization process; therefore, we hope that the 
authorities there can proceed with democratic reform to create 
favorable conditions for democratic unification. This is the direction 
of our efforts. We want to maintain the status quo, and maintain peace 
with Beijing on this foundation.

    Question 3. The treatment of Hong Kong as a ``Special 
Administrative Zone,'' since its handover from the British in summer 
1997, and the treatment of Macau after its return from Portugal in 
December this year, may be considered by the Chinese mainland as a 
rehearsal for the larger event of taking over Taiwan in a peaceful 
manner. Isn't this a tempting idea for the outside world--by solving 
the Chinese problem that otherwise poses as a great long-term danger to 
your region?
    Answer: The root of the Chinese problem affecting regional security 
lies not in the return of Hong Kong and Macau to the Chinese mainland, 
nor whether Taiwan will return to its fold. The ROC on Taiwan is not a 
colony of any nation. This is how Taiwan differs from Hong Kong and 
Macau. The crucial question is the Chinese mainland's overemphasis on 
nationalism and its failure to implement democracy. The Chinese 
mainland has not only conducted smear campaigns and saber rattling 
against us, but has also refused to renounce the use of force against 
Taiwan. Furthermore, it has tried everywhere to minimize the ROC's 
international presence. This overbearing attitude does not promote a 
harmonious relationship across the Strait, nor is it beneficial to 
stability in the Asia-Pacific region. The Chinese mainland has placed 
an excessive emphasis on nationalism and continuously advances military 
expansionism. Under these circumstances, there can be no doubt that 
such acts would arouse suspicion from neighboring countries. A long-
term resolution is to replace totalitarian rule on the mainland with 
democracy, thus easing tension in the region.
    The Chinese mainland's promise of a ``one country, two systems'' 
formula for Hong Kong and Macau is irrelevant to Taiwan, since the 
formula contains intrinsic contradictions, violates the basic 
principles of democracy, and denies the existence of the Republic of 
China. Although the Chinese mainland has attempted to apply the ``one 
country, two systems'' formula to the ROC, as it has in Hong Kong and 
Macau, Taiwan is neither Hong Kong nor Macau. Hong Kong and Macau were 
colonies, but the ROC is a sovereign, independent state. Taiwan is 
basically different from Hong Kong and Macau. Only when a free and 
democratic system has been implemented on both sides of the Taiwan 
Strait will the peace and security of Asia be ensured.

    Question 4. If everything goes wrong and the situation gets out of 
control on both sides of the Strait between Taiwan and the Chinese 
mainland, to the effect that military actions start, by what means and 
on whom, aside from the Taiwanese themselves, would you rely for your 
defense in such a war?
    Answer: All issues between the two sides of the Strait should be 
resolved by peaceful means. This is our firm and consistent position, 
as well as the expectation of the international community. The ROC 
announced the termination of the Period of National Mobilization for 
the Suppression of the Communist Rebellion in 1991, renouncing the use 
of force to achieve national unification and intending to resolve 
difference through peaceful means. However, the Beijing authorities 
have never been willing to renounce plans or preparations for using 
force to resolve issues between the two sides. This has caused serious 
cross-strait tensions and is the key threat to the region's security. 
The international community should urge the Beijing authorities to 
renounce the use of force against Taiwan, use peaceful means to resolve 
disputes, and join in safeguarding stability in this region.
    The situation in the Taiwan Strait and the security of the Asia-
Pacific region are inseparable. Therefore, on April 8, 1999, at a 
meeting of our National Unification Council, I offered my idea on 
``establishing a mechanism for cross-strait peace and stability.'' Our 
hope is that both sides will achieve beneficial interaction through 
exchanges and consultations, promote bilateral relations and thus 
ensure the security and peace of both sides and the region.
    In addition to stressing the close and inseparable linkage between 
the stability of the Taiwan Strait and the peace of the Asia-Pacific 
region, the ROC values our cooperation with the United States. For many 
years, the United States has made necessary defensive weapons available 
to the ROC. Exchanges in every area of economics, culture, science, and 
technology have continued to grow. In the foreseeable future, the 
cooperation in security between the Republic of China and the United 
States will still be one of the important factors for maintaining 
stability in the Taiwan Strait.

    Question 5. The United States and other Western countries are 
fascinated by the huge market of the Chinese mainland. This will likely 
diminish their support for Taiwan. Does this mean that Taiwan's future 
will be gloomy?
    Answer: Acting in their own self-interest, many countries have in 
recent years strengthened trade relations with the Chinese mainland. 
That is understandable. However, we should not overlook the fact that 
trade relations between the ROC and other Western countries including 
the U.S. are also very close. For example, the ROC is the seventh 
largest trading partner and export market of the United States. 
Currently, the ROC's total imports from the U.S. have varied from 1.3 
to 1.6 times those of the Chinese mainland. Furthermore, if we examine 
the internal developments in the Chinese mainland, we see the emergence 
of many structural economic problems. Because the future overall 
development of the Chinese mainland is filled with many uncertainties, 
we should closely monitor any changes.
    In contrast to the uncertainties on the Chinese mainland, 
development in Taiwan is quite stable. Taiwan is important for two 
reasons: its safeguarding of democracy and human rights and its 
important strategic position in the Western Pacific region. Most of the 
people in the world today value democracy and human rights and expect 
the Chinese mainland to do the same.
    Democracy and human rights are important pursuits of countries 
throughout the world. The world also expects the same of the Chinese 
mainland. Over the years, we have promoted political democracy, 
actively participated in the international community, and greatly 
improved cross-strait relations. For these efforts we have gained the 
world affirmation. We believe the Taiwan experience can serve as a 
catalyst for the modernization and democratization of the Chinese 
mainland.
    Taiwan is strategically located in the sea-lanes controlling 
maritime shipping in the Western Pacific region, and is thus important 
to the U.S., Japan, and South East Asia. Therefore, Taiwan plays a 
crucial role whether it be in the cross-strait relationship or in 
regional stability.

    Question 6. In spite of the deep political rift between Taipei and 
Beijing, Taiwan's economy is heavily engaged in the economy of the 
People's Republic of China through investments worth billions of U.S. 
dollars. This kind of involvement in the mainland makes Taiwan prone to 
economic blackmail by Beijing. How could you possibly prevent such a 
movement by Beijing's leadership?
    Answer: Investments on the mainland by Taiwan enterprises are 
gradually forming an upstream, midstream, and downstream network. 
Indeed, this has already exerted some competitive pressure on our 
economy. Therefore, we need to consider how we can maintain our 
competitive advantage and the autonomy of Taiwan's economy, during the 
process of developing economic and trade relations between the two 
sides of the Taiwan Strait.
    Fundamentally, the economies of Taiwan and the Chinese mainland are 
complementary, rather than competitive. I have proposed the policy of 
``patience over haste, steady progress over a long term'' as the 
principle directing cross-strait relations. The goal is to establish 
reasonable regulations for investments on the mainland with a rational 
and moderate disposition. These regulations include limiting 
investments in areas of high technology and basic infrastructure, and 
conducting more scrupulous assessments and examinations of large-scale 
investment worth over U.S. $50 million.
    On the other hand, we have also promoted construction of science-
based industrial parks to upgrade Taiwan's industry. At the present 
time, high-tech products account for over 40 percent of our exports. 
The ROC government has also initiated the privatization of state-run 
enterprises and encouraged the private sector to participate in public 
construction, in order to create more domestic investment opportunities 
for enterprises. Hopefully, enterprises will ``leave their bases in 
Taiwan,'' so that Taiwan's economy will continue to grow.

    Question 7. The Chinese mainland is struggling with many serious 
economic and social problems, as there are growing numbers of jobless 
people and shrinking reserves of foreign exchange. The Beijing 
government may feel forced to devaluate the renminbi to avoid major 
economic difficulties and the resulting social unrest. Wouldn't such a 
devaluation of the renminbi cause a serious economic backlash for 
Taiwan?
    Answer: The Chinese mainland imposes many regulatory measures on 
foreign exchange. Thus, even if the renminbi is allowed to depreciate, 
we do not expect the situation to get out of control, because the 
economies of Taiwan and the Chinese mainland are complementary, rather 
than competitive. Although a devaluation might place certain mainland 
products in price competition with ours, an increase of exports from 
the mainland would actually increase demand for intermediate products 
from Taiwan, therefore, Taiwan's exports would not be markedly 
affected.
    However, expectations that the depreciation of the renminbi could 
possibly cause the New Taiwan (NT) dollar to fall, which would have a 
direct or indirect destabilizing effect on our foreign exchange and 
stock markets. Therefore, we will take steps to explain to our citizens 
that a devalued renminbi will not significantly impact Taiwan's 
economy. The fluctuations of the NT dollar and the renminbi are not 
necessarily related. However, a problem of concern is whether the 
depreciation of the renminbi will affect the financial situation of 
Taiwan businessmen on the Chinese mainland, which, in turn, may affect 
Taiwan. We are fully prepared for this possibility.

    Question 8. Would the ROC still be interested in purchasing German 
submarines?
    Answer: We have discussed this issue with your government for quite 
some time; however, your government, wary of Beijing's attitude, has 
not yet approved the sale of submarines to the ROC. Beijing has 
deployed more than a hundred old and new submarines in the East China 
Sea. In such a vast area, it is questionable that the number of 
submarines we could purchase would be adequate to defend Taiwan on a 
submarine-to-submarine basis. Moreover, countering submarines with 
submarines is a rather difficult defense strategy, the effectiveness of 
which requires further consideration.
                                 ______
                                 

 Explanation on President Lee's Remarks in An Interview With the Voice 
                        of Germany--July 9, 1999

    During an interview with the Voice of Germany (Duetsche Welle) this 
afternoon (July 9), President Lee described cross-strait ties as a 
``state-to-state'' relationship or a ``special state-to-state 
relationship.'' We hereby stress the following points:

    1. The Republic of China has been a sovereign state ever since its 
founding in 1912. Following the establishment of the People's Republic 
of China in 1949, the two sides of the Taiwan Strait have been under 
divided rule and separate jurisdiction. This is an objective historical 
fact. The Republic of China on Taiwan is by no means a ``renegade 
province'' as claimed by the PRC.
    2. The ROC terminated the Period of National Mobilization for the 
Suppression of the Communist Rebellion in 1991. After several 
amendments to the Constitution, the effective jurisdiction of the ROC 
under the Constitution now covers only Taiwan, Penghu, Kinmen and 
Matsu. This is a statement of the legal fact.
    3. Our mainland policy has remained unchanged. The ROC will 
continue to promote cross-strait exchanges according to existing 
policies to develop cross-strait relations based on reciprocity and 
mutual benefits. There will be no changes to our current ``no haste, be 
patient'' and the ``three direct links'' policies for the moment.
    4. Peace and stability of the Taiwan Strait are inseparable from 
the security of the Asia-Pacific region. We hope Beijing will not 
threaten Taiwan with military means and suppress or blockade our 
diplomatic space in the international arena because such moves will not 
promote sound interaction between the two sides of the Taiwan Strait.
                                 ______
                                 

                     [Press Release, July 12, 1999]

                        Mainland Affairs Council

    In a recent interview with a foreign radio station, President Lee 
Teng-hui stated that relations between the two sides of the Taiwan 
Strait should be characterized as a ``special state-to-state 
relationship.'' This declaration will provide an important basis for 
the normalization of cross-strait relations in the next century.
    President Lee's declaration carries a three-fold significance.
    First, it is pragmatic. Although the Chinese communists established 
the People's Republic of China in 1949, its jurisdiction has never 
extended over Taiwan, Penghu, Kinmen, and Matsu, the area ruled by the 
government of the Republic of China. Since the revision of the 
constitution in 1991, the president, the vice president, and the 
people's representatives at all levels of government in the Republic of 
China have been directly elected by the people, and the legitimate 
right to govern the state has thus been derived only from the people of 
the Taiwan area. Therefore, it is an indisputable political and 
historical fact that the ROC and the PRC are separate governments 
ruling respectively the Taiwan area, and the mainland area.
    Second, the declaration represents a continuity of policy. Under 
President Lee's leadership, the ROC's mainland China policy has 
progressed in full conformity with mainstream public opinion amid a 
growing consensus forged among the ruling and opposition parties. 
President Lee's declaration is primarily a clarification of the current 
state of cross-strait relations. There has been no significant change 
or revision in our mainland China policy, and Taipei will continue to 
promote the ongoing exchanges and dialogue between the two sides.
    Third, it is innovative. In the Guidelines for National Unification 
published in 1991, we have declared that the two sides of the Taiwan 
Strait are two equal political entities. This definition was 
established to temporarily set aside disputes over sovereignty, and 
create extended opportunities for interactions between the two sides. 
Subsequently, in a show of goodwill, we have adopted a series of policy 
adjustments, including terminating the Period of National Mobilization 
for Suppression of the Communist Rebellion, promoting consultations, 
expanding exchanges, and formulating the Statute Governing Relations 
between the People of the Taiwan Area and the Mainland Area.
    However, as we review events over the past few years, it is clear 
that Beijing has responded to our goodwill with hostility. It has time 
and again expanded the definition of its ``one China'' policy. Under 
the guise of its Hong Kong and Macau models, Beijing has attempted to 
apply its ``one country, two systems'' formula to Taiwan. At the same 
time, Beijing has test-launched missiles into the Taiwan Strait. It has 
verbally disparaged and militarily intimidated us. Beijing even cooked 
up excuses to suspend the institutionalized cross-strait consultations 
and exchanges. It has purposely procrastinated in resolving the issue 
of disorderly cross-strait exchanges. Overall, it has used every 
imaginable method to minimize the ROC's existence in the international 
community.
    The abnormal relations between the two sides are caused by 
Beijing's refusal to face reality. At the dawn of the 21st century, 
relations between the two sides should be clearly defined based on 
objective political and legal reality, so that the two sides will be 
able to avoid disputes over the meaning of ``one China,'' thereby 
opening a new page for interactions between them under an innovative 
concept. It is believed that Taipei and Beijing can, on an equal 
footing, discuss any issues that the two sides currently face, 
including political consultations that the Chinese mainland has always 
advocated.
    The cross-strait relationship is ``special'' because it involves 
the national sentiment and cultural factors, which are present in no 
other relationships. Thus, an equal and normalized cross-strait 
relationship should be better and closer than other country-to-country 
relationships. Based on the foundation and the channels already 
established, and through constructive dialogue, institutionalized 
consultations, and orderly exchanges, we are willing to develop a 
framework for a peaceful, stable and long-term relationship that will 
enable both sides of the Strait and the region to benefit on reciprocal 
terms. We would like to call on the mainland authorities to face the 
cross-strait reality that has existed for many years and pragmatically 
work with us to usher in a new era of beneficial interaction between 
the two sides in the 21st century.

    Senator Thomas. That is consistent with what you are 
saying, but is it inconsistent with itself? Do you follow me, 
and is that statement--I mean, can you have both? Can you say 
that they are sort of distinguishing the democracy, they are 
distinguishing their desire to have reform prior to any 
unification, therefore to maintain the status quo at the same 
time as they say there has been no change or revision? Is that 
a change or a revision, or is that in effect what they have 
been saying all along?
    Dr. Gong. As was just noted, there is in my view both 
continuity and change in the statements. That continuity and 
change reflects the fact that the outside realities have some 
continuity and some change.
    Senator Kerry. Isn't that the reality always, though? 
Haven't we always faced that reality? I mean, in a sense, 
everybody has been dancing on eggshells about this issue for a 
long time, because nobody wants to offend anybody. Our own 
policy carries a purposeful ambiguity, and we always have, and 
the truth is that as you get down to the crunch, whether or not 
there is going to be a real series of talks, you cannot walk on 
eggshells any more. Am I wrong?
    Dr. Gong. That is why I stress the framework which 
established the broad parameters for some of the ambiguities 
which I think have been creative and useful and perhaps 
politically necessary, and that is why I think the opportunity 
in the current situation is, as you are suggesting, not to 
focus overly on semantics, although semantics are important, 
but to recognize the broader opportunities to move forward.
    And part of those opportunities are not getting wound 
around a specific term, but also recognizing that there are 
some differences of nuance in the way those terms are being 
used. It would be wrong to imply there was no change, but it 
would also be wrong to imply that that change means that 
everything that has been done so far has somehow been thrown 
out the window.
    Senator Kerry. Did you want to also respond, Ambassador 
Lilley?
    Ambassador Lilley. I would say this pragmatic reference 
means that Taiwan has an independent army, independent judicial 
system, independent recognition by 29 countries. Taiwan is in 
effect a sovereign State.
    Taiwan is saying now, this should be the basis for cross-
strait discussion. Beijing is saying Taiwan is a province of 
China, and is part of our China. The United States recognizes 
the PRC as the sole legal Government of China. Now both sides 
come at each other.
    If I can suggest something on this, what we really want to 
do is to get them both to pull back from this verbal 
confrontation and change the subject, because otherwise we are 
going to get bogged down in an endless Chinese slanging match 
on these kinds of verbal issues.
    But I do not believe that turning the screws on Taiwan, 
using arms sales, is going to get us anywhere on this one, and 
can be a dangerous tactic. As I said, we really are changing 
the balance of power and inviting military adventurism. We are 
being drawn into this now, we are getting pushed, around by 
China, and then we tend to push around the smaller element 
Taiwan. It is much easier to push around Taiwan than to push 
around China, believe me, I know. They become the easy way out.
    But Lee Teng-hui has set out what he considers to be the 
three elements of unification. The first is contact, and he 
says, I want contact with China.
    Second, let us reach agreements on a whole series of 
understandings dealing with trade, dealing with illegal 
immigration, dealing with notaries. Let us work these things 
out together.
    And third, when we get these two stages done, we will start 
talking unification on the basis of democracy, and free market, 
and rising standards of living.
    Again, the Chinese claim that is insincere. Lee is just 
postponing the issue. The Chinese want the Americans to get 
involved and pull Lee back.
    My own sense is that both sides may be working this out 
right now in a very Chinese way, and we ought to step back and 
let them do it, but then, as Gerrit Gong says, lay down our 
principles. You will not use force, you will not declare 
independence, and you will keep talking to each other.
    Senator Thomas. Thank you. The chairman of the full 
committee and the ranking member have been gracious enough, and 
so we will just go by arrival.
    Senator Coverdell.
    Senator Coverdell. Ambassador Lilley, would you expand--you 
said, expand on pulling back. Expand on what you are saying the 
United States should do there, and then you said the two 
parties need to come together, and they need to effect a 
change. Elaborate on that.
    Ambassador Lilley. I think, Senator, the temptation for the 
United States, when we see a crisis brewing, is to become 
involved because we are the world's greatest problem-solvers. 
You have probably seen these various proposals that have been 
floated by certain people at Harvard and various other 
universities suggesting a way that we should solve this Chinese 
problem, and how the two Chinese sides should cooperate to work 
themselves through it. My own sense is, back away from that.
    As Gerrit said, we have got our national interest involved, 
we protect those interests, and we ought to lay out what those 
interests are, but we are not going to get involved in twisting 
arms as we seem to be doing now in Taiwan, or, probably more 
dangerous, buying off goodwill in Beijing by taking it out of 
Taiwan's hide. We have to be very careful with, so that is what 
I am basically saying.
    Senator Coverdell. OK. Now, move on to affecting change. 
You said they have to step back.
    Ambassador Lilley. Well, right now they are rushing to the 
brink, and Beijing used this kind of unfortunate terminology to 
Taiwan--pull yourself back from the brink before you go over 
it. Then PRC followed up with the announcement about the 
neutron bomb, and made lots of other threatening noises.
    This is not helpful at all. That kind of threat is not 
going to get them any substantial progress with Taiwan.
    In terms of Taiwan, the formula that I have seen work, and 
I go back to the eighties, when I was involved in this process, 
and maybe this is even blowing our own horn, is that then we 
developed a strong relationship with Taiwan and Taiwan had a 
lot of confidence in us. We also opened up our relationships 
with China constructively. Then the two sides moved closer 
together. There was the great breakthroughs that came in 1987 
which changed the whole situation across the Taiwan Strait, and 
the United States played, a positive role. Support Taiwan, 
engagement with Beijing, and let them work out their own 
arrangements, which they can do very effectively.
    So we also have a role to play because we are involved. The 
Taiwan Relations Act, the recognition of China, provide a legal 
basis for our involvement. But there is a way our involvement 
can be handled skillfully and not clumsily. What has happened 
recently is we have reacted rather erratically.
    Senator Coverdell. You mentioned that we have a tendency 
to--and that is our problem-solving mode in operation, engage 
quickly. In fact, a number of the articles I have read over the 
last several days actually augment that. They are suggesting 
that, if anything, we have not been engaged enough, and we are 
allowing the situation to deteriorate because we are not 
properly engaged.
    If the course that we pursue is not what you are 
recommending, sort of step back, adhere to central principles 
but basically push toward a Chinese resolution of it, what do 
you foresee happening if we do not take your advice and we in 
fact pursue the advice that is sort of contemporary thought, 
and that is, rush in?
    Ambassador Lilley. Well, I think you used one adverb that I 
would like to support, properly engaged. We are engaged all 
right. It is whether we are properly engaged or not.
    My sense is that in the past, we have acted boldly and 
suddenly, as we did in March 1996 when we sent the aircraft 
carriers in and China fired the nuclear capable missiles and 
had live fire exercises. Both sides then backed off and tried 
to arrange a relationship with China, as you recall, which 
became a constructive strategic partnership. That was to be the 
new basis.
    Now we have got to move decisively and quickly on World 
Trade Organization entry. This is crucial to China. It is 
important in their own internal struggles, and it is a good 
deal for the United States as well. Analysts tell us that it 
is. It is here where we want to focus your energies. This is 
not a sovereignty issue. This is all about money, economy, 
liberalization, opening markets, breaking down barriers to 
trade, and eliminating nontariff barriers. This is where we 
have to spend our energy, and as Gerrit said, we are starting 
to move in that direction.
    If important people going over to China--David Aaron of 
Commerce is going over there, Roth, Lieberthal, hopefully are 
beginning to focus on dealing with the real issue of Asia, 
including China's economic stability and prosperity. These are 
the real issue now, and we have not been paying enough 
attention to it.
    Senator Coverdell. I thank the chairman.
    Senator Thomas. Senator Biden.
    Senator Biden. I would yield to the Senator from New 
Jersey.
    Senator Thomas. Senator Torricelli.
    Senator Torricelli. I now feel the enormous compulsion to 
say something extraordinary.
    Senator Biden. You can say it about us.
    Senator Torricelli. Only a week ago in Beijing I expressed 
how helpful I thought it was that Taiwan had not become an 
impediment on the World Trade Organization membership for the 
PRC, at the relatively benign transfer of power in Hong Kong, 
and expressed my own hopes that the missile deployments in the 
Strait of Taiwan might be reconsidered.
    It appeared to me that things were moving along amicably, 
as best as could be expected, and then these statements, this 
apparent verbal revision of policy. It is still hard, and I 
know you have been approached on this question several times, 
for me to understand why, from the Taipei perspective, this was 
a moment for these statements, and what could be achieved.
    After all, there is a great deal in this for Taiwan as 
well, for investment in the mainland is going very well, their 
continued travel, the cultural and social intercourse that is 
taking place. It is hard for me to imagine that on whatever 
ledger in Taipei was being constructed, taking this moment to 
make these statements made a lot of sense for anybody.
    Could you revisit that again?
    Dr. Gong. Senator, it seems that there are three arenas 
which are being operated in at the same time, and it is not 
surprising for us. Everyone has domestic politics, everyone has 
some, in the Taiwan-PRC case, cross-strait relationship to be 
concerned about, and everyone has to be interested in what is 
happening in the international environment.
    I myself believe that it is primarily the first two areas, 
domestic politics and the cross-strait relationship 
discussions, dialog that was coming up, that were the prime 
motivating factors for the timing of the statement.
    If you look at it in terms of international factors, 
clearly it is not a very opportune time, as we have all said, 
and therefore one has to look to more a domestic focus. It 
seems to me that is also our opportunity. We have things said 
in our domestic campaigns that sometimes are reflective of 
concerns that we have in more local circumstances that we ask 
others to take with a certain grain of salt, because they 
reflect certain concerns that we have internally.
    The Chinese have those concerns, the Japanese, everybody 
has those concerns, and one of the aspects of maturity in 
international politics is, you understand sometimes that things 
are done in a local context.
    This has, of course, an added dimension. The added 
dimension is that those statements made by President Lee also 
potentially affect the relationship across the strait, and it 
was in that context, as well as the international context, that 
Beijing had to react, had to restate its positions, and then I 
think following President Clinton's phone call with President 
Jiang, understood there was a limit to how far, whatever the 
statements were, the reaction needed to be.
    Our opportunity is whatever the statements, not to react to 
them at this point and to, as it were, put them into the 
appropriate context, and I think that is why your question is 
so important.
    Senator Torricelli. But like a lot of problems, there are 
opportunities here for everybody. I have joined with Senator 
Helms in a commitment to ensure the defensive capabilities of 
Taiwan, in my belief that the people of Taiwan should be able 
to make a dispassionate judgment about their future and enter 
into discussions with the PRC without the threat of 
intimidation.
    That is still my position, and I feel it very strongly, 
that if Taiwan is to have the benefit of a relationship with 
the United States that assures freedom from intimidation, it 
also requires an action with responsibility.
    There is an opportunity now for President Lee to recommit 
himself to that level of responsibility. I also think there is 
an opportunity here for the PRC that they are attempting to 
demonstrate with Hong Kong and now Macao they can demonstrate 
by reacting to events in Taiwan with restraint, and thereby 
demonstrate, again, the level of political maturity and 
commitment to a future of integration on a peaceful basis.
    Dr. Gong. I could not agree more. That was the essence of 
my prepared statement.
    Ambassador Lilley. I would just like to add one thing, 
Senator. There is a human factor in all of this. The German 
correspondent asked Lee Teng-hui a very provocative question, 
are you a renegade province of China, and you could just see 
Lee's blood boiling. There is a certain amount of impulsiveness 
in Lee, as we have detected in the past, and then there was 
also a desire, as we know very well in our own society, for his 
underlings to protect and explain the boss. They had to protect 
him on this issue but in fact initially they compounded the 
problem.
    What I have read recently is more of a discernible but 
subtle move to recapture the original arrangements on one China 
of 1997 prior to Singapore. Having upped the ante by both sides 
and laid it on the table, they are now hopefully beginning to 
move, let us say, from a negative to a more positive cross-
strait thinking, and I think that is moving in the right 
direction.
    Senator Torricelli. Something good could still emerge from 
a very unfortunate set of circumstances.
    Dr. Gong. That is my thinking. There is an opportunity. It 
comes from a clear statement of U.S. principles and interests.
    Senator Torricelli. Thank you.
    [The prepared statement of Senator Torricelli follows:]

           Prepared Statement of Senator Robert G. Torricelli

    For years, Congress has strongly supported Taiwan's emergence onto 
the international arena. As Taiwan's democratic process and economy 
flourished, China grew hostile towards its new international standing. 
The 1996 Taiwan Strait crisis demonstrated that we must maintain a 
delicate balance in preserving regional security and stability. That is 
why President Lee's statements last week that China must deal with 
Taiwan on a state-to-state basis caused concern.
    For several reasons, I believe that the statements were unnecessary 
and poorly timed. First, we all recognize that Taiwan is a thriving 
democracy of 22 million people. The citizens of Taiwan have the right 
to select their own leaders, practice their religion, and speak freely. 
As a leader in technology and international trade, Taiwan is our 7th 
largest trading partner, and the 19th largest economy in the world.
    Second, the accidental bombing of the Chinese Embassy has strained 
U.S.-China relations, and WTO negotiations remain on hold pending the 
resolution of this issue. Hardliners in China may try to use these 
issues to undermine relations with the U.S. Taiwan would not be served 
by these developments. Third, China reportedly undertook military 
exercises in response to President Lee's statements. I firmly believe 
that China should refrain from military threats and exercises that 
force a response from the U.S. No one will benefit from a repeat of the 
1996 crisis. At a minimum, it could harm Taiwan's economy. At worst, it 
could provoke military conflict.
    Finally, we all recognize that the peaceful resolution of Taiwan's 
status is important to the people of Taiwan, the U.S., and China. The 
people of Taiwan have a right to determine their own future by peaceful 
means, but the only way to achieve this goal is through continued 
dialogue between China and Taiwan. High-level talks resumed last year 
after a 5-year hiatus, and the October talks in Taiwan between Wang 
Daohan and Koo Chenfu must take place. Statements by any party, which 
inject uncertainty into the U.S.-China-Taiwan relationship, have the 
potential to destabilize the region and setback diplomatic efforts on 
several fronts.
    However poorly timed, the statements cannot detract from the U.S.', 
and my, fundamental and strong support for the people of Taiwan. Like 
members of a family, allies will engage in disagreements, but no one 
should interpret differences of opinion as the weakening of 
longstanding friendships and alliances. In light of China's hostile 
response, it is critical that the U.S. reaffirm its commitment to 
Taiwan. We should encourage dialogue between Taiwan and China and 
continue to uphold our commitments under the Taiwan Relations Act. The 
Act recognizes the right of the Taiwanese people to determine their own 
future by peaceful means, and affirms our commitment to preserve and 
enhance the human rights of the Taiwanese people. It commits us to 
protect Taiwan's security through the sale of defensive means, and 
oppose its exclusion from membership in any international organization. 
This year, I joined several of my colleagues in co-sponsoring 
resolutions which recognized these commitments.
    Consistent with my long-standing support for upholding Taiwan's 
security, I co-sponsored the Taiwan Security Enhancement Act with 
Senator Helms. This bill requires the President to take steps to 
enhance military cooperation between the U.S. and Taiwan, and address 
Taiwan's defense needs. I remain firmly committed to the principles in 
the bill. Since 1949, when the United States first officially 
recognized the Taiwanese Government, we have enjoyed a close bond that 
has survived for almost 50 years. Now is the time to reaffirm our 
relationship with Taiwan and concurrently pursue greater regional 
security.

    Senator Thomas. Mr. Chairman.
    The Chairman. You know, I stopped by here to pay my 
respects to all three of you, and thank you for coming, and I 
still do that.
    What puzzles me is that everybody backs away from the one 
central problem, and that is all of that nuclear information 
that China received from us. I think they have got their chest 
poked out and they are saying, ``I dare you to hit me.''
    Now, you talk about a rogue nation. I cannot think of 
anything worse than what has been done to Tibet, and what has 
been done to China's own citizens, those who dare to object to 
what is going on in their country, and I think these people 
just are determined, perhaps to rule that entire part of the 
world.
    Now, I do not think anybody has suggested that Taiwan has 
ever been or wanted to be a military threat to mainland China. 
If that has happened, it certainly escaped me. What China does 
not like is that Taiwan has been such a success in business and 
free enterprise and all the rest of it, and they are mad about 
that.
    Now, if they had not gotten that information about our 
nuclear capabilities, the secrets, if you want to call them 
that, I doubt that there would be any real ruckus going on 
today.
    But the ``one-China'' aspect, I am glad that kind of 
attitude did not exist when the United States pulled away from 
Great Britain. I could hear the House of Commons talk about 
``one England,'' or whatever.
    I think Taiwan deserves to be free, and it is going to take 
some belt-tightening, and maybe it will frighten some people, 
but I am one who thinks we ought to stand loyally behind 
Taiwan, who has done harm to nobody that I know about, and Mr. 
Chairman, thank you for letting me come, and I ask that a 
statement that I had prepared be included in the record.
    Senator Thomas. Without objection.
    [The prepared statement of Senator Helms follows:]

               Prepared Statement of Senator Jesse Helms

    Mr. Chairman, President Lee and Taiwan's government have been 
exceedingly helpful to those of us who support the people on Taiwan by 
clearing away some of the uncertainty that has surrounded Taiwan's 
status for years.
    By having the courage to state the obvious--that the Republic of 
China on Taiwan is a de facto sovereign state, the distinguished 
President Lee has created an opportunity to break free from the 
anachronistic, Beijing-inspired ``one-China'' policy which has 
imprisoned U.S. policy toward China and Taiwan for years.
    The ``one-China'' notion that crept into existence in 1972 has 
always been a puzzling fiction. But even if one accepted its Cold War 
strategic rationale, the end of the Cold War surely should have 
diminished the notion that it was somehow essential to bow and scrape 
to Red China by parroting Beijing's concocted diplomatic construction.
    Developments in Taiwan demonstrate that the ``one-China'' gambit is 
even more than an insensible departure from reality. In 1991, the 
Republic of China on Taiwan abandoned its claims to sovereignty over 
all of China, providing unmistakable implications that there are two 
Chinese governmental entities.
    Moreover, during Taiwan's years of stunning democratic development, 
a model for the future of Chinese civilization has made crystal clear 
the fact that the 21 million people of Taiwan do not consider 
themselves part of the People's Republic of China.
    Despite all of this, the Clinton Administration did everything it 
could to drive the United States even deeper into the ``one-China'' 
hole--a good example is the Clinton Administration's caving into 
Beijing's ``3 Noes'' demand last summer.
    Now, in response to President Lee's remarks and Beijing's 
threatening bluster, the Clinton Administration has, once again, tilted 
nervously toward Beijing--first by trotting out the banal ``one-China'' 
language, then repeating Red China's ``3-Noes'' dictum--twice! Not 
until this past Thursday, after days of prodding, did the 
administration finally bring itself back to a degree of common sense by 
restating U.S. defense commitments to Taiwan under the Taiwan Relations 
Act.
    At a time when the United States should be seizing every 
opportunity to break free of Beijing's definition of ``one-China'' (not 
to mention making pointed reminders to Beijing regarding our long-
standing defense obligations to Taiwan) the Clinton Administration is 
paralyzed by its own anachronistic policy, better known as appeasement.
    Mr. Chairman, I am among the growing number of Americans who are 
weary of watching our good friends on Taiwan left twisting in the wind 
by the Clinton strategists for surrender. Now is the time to support 
President Lee and the people of Taiwan for their moral courage in 
standing up for themselves in the face of Red China's bullying.

    Senator Thomas. Thank you very much, sir. We appreciate 
your coming.
    Ambassador Lilley, we sort of narrow in on the relationship 
issue between across the strait, but we have lots of issues 
with the PRC, don't we? We are talking about WTO, we are 
talking about North Korea, we are talking about trade, we are 
talking about lots of things, so I guess I am just concerned 
that we focus entirely on the Taiwan thing. It sort of detracts 
us from the other things we are seeking to do.
    How do you react to that?
    Ambassador Lilley. Well, Senator, I think you are 
absolutely right, there are deadly serious issues in Asia, and 
you mentioned probably most deadly is North Korea, an awful 
country up there. What it is doing to us is frightening. We 
have got to deal with that, and we have got to deal with it 
now, and we have got to get the Chinese on board.
    The engagement with China, on these intricate issues, for 
instance World Trade Organization entry, is crucial. We have 
got a time limit on WTO entry. It has got to be done quickly, 
and it has got to be voted on by the Congress. We have got to 
get it all through before the Seattle meeting in November. 
There are a couple of meetings, one APEC, one ASEAN taking 
place, which will give us an opportunity to push WTO entry, and 
that has to be a major thrust of what we do.
    The difficulty we have with China, is that on the one side 
we have some basic principles that are involved in Taiwan, and 
these are essentially, we will not see a democracy overthrown 
by force when we have the ability to do something about it
    The second is that we do believe in the free market system, 
and we believe in the prosperity and the stability of Asia. 
These are our principles. On their side, they have made big 
noises about the dominance of sovereignty and unity. That to 
them trumps everything.
    These two principles have come into play now both in Kosovo 
and Taiwan. They do not have to be confrontational. We can have 
our principles, they can have theirs, and there is a huge 
middle ground between the two where you can deal with one 
another, and that is where we should be working right now.
    But if you do read this article which I have put into the 
record, you will see that we have a big problem with them, and 
there is no way we can ignore it. It is a serious problem 
involving basic conceptual view of rules of the road of the 
world. So we cannot downgrade this propaganda.
    We did try to do this in 1997 and 1998, in sort of hypeda 
summitry, which tried to take these differences and push them 
aside, and bring up instead the human rights business, but 
unfortunately nothing changed in China. In fact, the situation 
probably got worse, but this became a centerpiece of our 
accomplishments in China while the real issues were sitting 
there bubbling up underneath us.
    A focus on those is essential. We really cannot be drawn 
into this endless argument over names and who changed them and 
who is responsible, and how can we influence the outcome?
    Things may have started to turn around. As we know, we are 
sending delegates to China to talk about other subjects. We see 
the stock market going up in Taipei and we see the beginnings 
of a pulling out of this quagmire of words and threats. The key 
issue to watch is whether Wang Daohan of the PRC goes through 
with his meeting in Taipei in September or October. We have 
been pushing hard for it. It is symbolic, but it is important, 
too.
    Senator Thomas. Senator Coverdell.
    Senator Coverdell. I want to keep going back. Elaborate 
on--you tied Kosovo to attitudes in Taiwan, Ambassador Lilley. 
Expand on that. I mean, I understand the fundamental concepts 
you were outlining, but I am a little taken aback that that 
could have been enlarged to the degree you are talking about, 
or at least that is the inference in Taiwan.
    Ambassador Lilley. Well, Senator, I am putting in the 
record a long statement the Chinese made on 22 June, which 
explained their position on Kosovo and their attitude toward 
us, which helps to understand their position they are taking on 
Taiwan.
    I mentioned earlier that this is a central issue to them, 
and they believe that the United States is trying to change the 
face of the world, including them, by introducing military 
force into a sovereign nation in favor of an ethnic minority. 
This is to them the issue. The emotional part following with 
the accidental bombing of their embassy.
    They then see Lee Teng-hui in their view taking advantage 
of this by pushing the envelope on state-to-state relations. It 
is a combination of things which that they see as spinning out 
of their control.
    It is what happened in March 1996, when they tried these 
live fire exercises. They saw the situation slipping away from 
them. President Lee Teng-hui had had a successful trip to the 
United States, Japan wanted him next, France wanted him after 
that, there was the movement toward trying to get Taiwan into 
the United Nations, trying to get into the World Bank.
    They sensed that the situation was building up to their 
disadvantage, and they had to act dramatically to halt what 
they thought was a momentum that was against their interests.
    Dr. Gong. May I give maybe a kind of folk illustration, I 
think, of the fundamental perceptual difference that might 
exist that underlies some of these concerns?
    If one starts with the bombing of the PRC Embassy in 
Belgrade and looks at it from the United States perspective, we 
have all read carefully the statements that indicate how 
through a series of very unfortunate mistakes we ended up 
bombing a PRC Embassy.
    If one looks at that from a different perspective and 
assumes it was done intentionally for any number of different 
reasons, then you have, as it were, the very famous picture 
that we all know of the old woman and the younger woman. Recall 
that picture. You look at the picture, and depending upon which 
way you look at it, it can be an older woman or a younger 
woman.
    There was something that caught my attention, and maybe you 
saw the same thing, that illustrates this on the very practical 
level. We watched, as many people did, the women's soccer final 
a couple of weeks ago on Saturday, and here was the largest 
women's sporting event ever to be assembled. The President of 
the United States attended. We had 90,000 people, plus a 
television viewing audience here, 100 million potential viewers 
in China. There were two teams that were fairly evenly matched, 
on 22 different occasions. The United States had won 11 times, 
had lost 5 times. This was going to be a great match.
    Do you recall how the visual image began for that match? It 
began with a televised formation of F-18 fighter jets 
overflying the Rose Bowl in Pasadena, and for most Americans, 
that would be a very innocent, almost natural sign of our 
exuberant national pride.
    But imagine if you were a Chinese person watching this in 
China, and you had a series of concerns about the bombing. What 
if you had told your team this was a chance to kind of make up 
for things.
    And then the Americans, seemingly in your face, fly a set 
of fighter planes over the stadium. I would dare say almost no 
one here would have thought of this as a threatening and 
provocative gesture. In fact, I would say it was not. It was a 
very natural thing. The President was there. This is the way we 
show respect to our leaders. And yet that same visual image 
could communicate something very, very different.
    I am not say that we walk around on eggshells, always 
apologizing for the way we do things, but I am saying that we 
do need to be very careful in the way that we phrase things and 
think of things, and that we also on occasion think somebody 
else may have a very different lens through which they are 
viewing the picture.
    It may be the wrong lens, but it is useful for us to have 
in perspective both of those things. I think that is the 
underlying question we are addressing. It is specific issues, 
but more importantly, the fundamental structures by which we 
interpret them, and that is where we need to have some forward 
progress in Sino-U.S. and also in Sino-U.S.-Taiwan relations.
    Senator Thomas. Senator Torricelli.
    Senator Torricelli. I will confess, the issue of the planes 
did not occur to me. Did you actually see that in the Chinese 
press?
    Dr. Gong. To tell you the truth, I do not know if the feed 
was the same, but I was struck, as I watched the game strictly 
from a sports perspective on that.
    I had, as you may have known, felt that it was important 
prior to that match that there be a visible symbol gesture of 
goodwill and cooperation, and my institution had volunteered to 
send a set of red rose bouquets so that Team USA could give 
them visibly to Team China, in hopes that Team China would also 
reciprocate, so that regardless of what happened on the playing 
field, there was a visual image that sports could be sports and 
politics be something else, and so while I do not know, 
Senator, specifically whether that feed was taken----
    Senator Torricelli. Well, given the sensitivities on the 
bombing of the embassy in Belgrade, in retrospect it was not a 
good thing to do.
    Dr. Gong. We did it innocently.
    Senator Torricelli. I know it was innocent, but it was 
regrettable if it was so misinterpreted.
    With the return of Macao, would it be any of your 
expectations that Beijing may now intend to set some timetable 
or deadline formally to deal with the issue of Taiwan? In my 
visits to Beijing, the return of Macao seemed to loom larger in 
the mind than I had imagined, and all conversations were 
centered on almost building momentum of Hong Kong, to Macao, to 
Taiwan. Does a framework exist, after this Macao deadline 
passes, that should concern us?
    Mr. Yates. Senator, if I may, there has been kind of a 
natural progression in the attitudes and attention of the 
people moving in the direction you suggest.
    I, in my own view though, as I listen to what is said from 
Beijing about Taiwan, I do not sense a desire to place a 
timetable on reunification. In my view, regrettably, I think 
there has been too little substantive thought on the process of 
reunification. I think their top priority is trying to kill the 
independence movement, as they perceive it, and then once they 
have thoroughly destroyed the independence movement in their 
mind, then they will begin to change to the mode of 
reunification.
    So if there is a timetable in place on reunification, I do 
not believe that they are even thinking about that right now, 
though I do agree with your initial point that attention, once 
Macao reunifies, something I do not think is going to be 
terribly controversial, then you do have Taiwan left, what they 
consider to be the last part of their country to be unified.
    But if I could, to also return for a moment to your 
previous question about, why now, and what were some of the 
motivations on Taipei's part for making a statement on this 
right now, I would say that there have been a few international 
events that had been indicating to them that keeping the status 
quo as it had been evolving was going to be terribly to their 
disadvantage.
    Ambassador Lilley mentioned the human part of it. In my 
earlier statement I tried to make that same point, that while 
China has a sense of a century of humiliation and wanting to 
stand up and command some kind of respect and dignity, many 
people in Taiwan want to as well, and I do not think any 
government in Taiwan is going to last very long if they do not 
respect the desire of their people to try to get this kind of 
dignity and recognition.
    The most open example of that is membership in 
international organizations. Beijing and now the United States 
have taken the position that we will not support their 
membership in State-based organizations, so that rules out the 
United Nations.
    I think that there had kind of been a subtle change about 
the World Trade Organization, something that is not State-
based. I think the solution and the problem here are linked at 
least in this way. In order to build confidence in Taiwan about 
Beijing's goodwill, it could go a long way by endorsing 
Taiwan's membership in the World Trade Organization, not just 
saying it does not oppose it, not just talking about order. 
This is not a State-based organization. It should meet all the 
criteria. If they are serious about reunification, if they are 
serious about communicating goodwill to the people of Taiwan, 
there is an opportunity.
    What I think is the fundamental origin of this frustration 
is the feeling of being squeezed out unfairly, and that by 
allowing Beijing's definition of one China to be the rule 
internationally, that they would ultimately be squeezed out 
completely.
    They felt this way on the President's statement in 
Shanghai, on the three no's, they felt that there was going to 
be outside interference on the Papua-New Guinea recognition, 
when Australia spoke very strongly trying to undermine the 
switch in diplomatic recognition, there was just a sense that 
they were losing control of their destiny in these 
international organizations, and I think any government has to 
try to push for this dignity.
    Senator Torricelli. But in fact, if there is ever reason to 
believe on the World Trade Organization that for Taiwan things 
were going to work out quite well, if there is a complication 
added, it was added by these statements.
    Mr. Yates. The complication I saw in the World Trade 
Organization was after the embassy bombing Beijing had gone a 
long way to undermining the delinkage of politics from trade 
that had taken place in this country for about 10 years, and 
that by linking so strongly the WTO negotiations with the 
political explanation of the embassy bombing, it was delaying 
that process.
    And if there is this assumption that seems to be at play 
that Beijing must go first, the longer we delay resolution of 
Beijing's status, the longer we delay Taiwan, and since the 
timetable is so short on even Beijing's, implicitly this is 
pushing Taiwan into the next round of negotiations.
    Ambassador Lilley. May I add something to that, Senator? I 
think on the timetable business this is always used by the 
Chinese as a leverage. They have changed course on this issue.
    Chairman Mao originally said 100 years in the 1970's. It 
did not make that much difference. When a leading American 
politician asked Jiang Zemin if that policy had changed, 
apparently Jiang Zemin said no, there is now only 87 years.
    But they tend, when the military heavies get involved in 
the national security and foreign policy area, to bring up this 
subject. They are playing to the American audience to try to 
get us excited enough to make concessions to them on this or 
they might turn to military means.
    This is what they are working on. It is important for the 
United States in this game to discredit those elements that 
adopt these extreme positions. We did this in March 1996, when 
we gave them a black eye on their war games in the Taiwan 
Strait. We sent the carriers in, and they disengaged. They 
claimed a victory, but everybody knew that they had lost.
    By making economics the priority despite this hard line 
group in China, you can establish ascendancy over them. The 
people working the economic problem are not as enthusiastic as 
the hard line dinosaurs are on Taiwan, they see that it is more 
important than establishing timetables for unification is 
getting along with Taiwan economically.
    Investment in Taiwan has fallen off in the first 5 months 
of this year. China wants to get it back. They want to start 
these three contacts going. There are a lot of issues the 
Chinese want to accomplish within the framework that exists 
now.
    But there are always going to be threats on timetable, and 
they will unfortunately be repeated by Chinese apologists in 
the United States.
    Dr. Gong. May I just underscore, Senator, the opportunity 
which is inherent in your question. In part, what you are 
asking, I believe, is how do we establish a structure--that was 
your word--so that we maximize the chance that people will 
indeed focus on peace, prosperity, and that which they have in 
common.
    It would be unfortunate if in overreacting to a concern 
about potential statements on state-to-state relations that 
lead toward independence, the pendulum swung too much in the 
other direction and said, in order to avoid that it is a 
problem, we have to establish some timetable for unification, 
particularly after December 20 of this year, when Macao reverts 
to PRC sovereignty.
    The opportunity, therefore, is to say that neither 
timetable, if it is imposed, nor unilateral statements on 
independence are acceptable, and by establishing that as part 
of the same process, we in essence provide a framework which I 
think keeps us focused on the principles and interests which 
are key to us.
    Senator Torricelli. Thank you.
    Senator Thomas. I just have one other observation. Do you 
think President Lee would have made those statements if he did 
not believe that the U.S. would be right there behind him, as 
they were in 1996?
    In other words, do we sometimes provide for a little extra 
antagonism on the part of the Taiwanese because we have 
committed to their defense?
    Mr. Yates. Perhaps President Lee feels an increase in 
courage in making those statements, but I think that this is 
what Lee Teng-hui believes, and I think that someone of his 
life experience understands the stakes in this.
    No president, past or future, is going to have the mandate 
President Lee has. He is the first native Taiwan-born 
President, the first democratically elected President. He has 
got his place in history. This is to put his mark on mainland 
affairs for his successors, and I think he understands that 
lives are at stake, fortunes are at stake, and I am one who 
believes he probably would have said something like this even 
if the United States were not around.
    Dr. Gong. I had the privilege and pleasure of being invited 
to President Lee's inauguration, and had the opportunity to be 
in Taipei during that rather momentous occasion, and I think 
there is no doubt that this is a man of principle, and it is 
also a man who understands power, and it is that combination 
which I think has resulted in his putting together domestic 
issues, cross-strait issues, and the international environment 
issues, in a way that reflects his understanding of where the 
U.S. is, but also the limits to that, and as we said, there is 
a core principle which is involved here.
    Ambassador Lilley. And there is another element, Mr. 
Chairman, and that is an emotional element, and Beijing has an 
unfortunate practice of putting out the most venomous 
propaganda. The hard liners have run that propaganda 
department. They have poured this venom all over Lee Teng-hui, 
just as they did with the Dalai Lama and Chris Patton, and on 
some people around this room.
    They really denigrate Lee, and he is a proud man. They have 
called him everything from a traitor, to a splittist, to a 
running dog. There are welts all over him. Words, as the 
Chinese say, are part of reality and when they are used in 
extremis there can be a cost to pay.
    I remember once, Lee said to me back in 1984, when we took 
a long trip around the island together, just ourselves and our 
wives, and Lee said, even before the opening to China in 1987, 
I have no problems in bringing the Chinese over here in trade, 
culture, sports. This was well before it was policy and in fact 
at that time, it was almost subversive.
    But he said, there is one thing that I, for my people, I am 
concerned about. I do not want them controlling Taiwan because 
my people would never stand for it.
    He said, given their track record, it could not work. We 
went through the agonies of the the February 1947 incident, 
thousands of our people killed. Taiwan watched the Great Leap 
Forward, and millions died in China. Then Taiwan watched the 
madness of the Cultural Revolution and later Taiwan saw 
Tiananmen.
    There is persuasive factor that China can use and it is 
very Chinese. It goes back to the core of their idea of 
humanity namely, that you attract people to you not by 
threatening but by offering them inducements to join you. China 
has not crossed that barrier yet, and I hope that perhaps that 
this incident, watching a democratic election take place in 
Taiwan, discussing the issue of unification, would be helpful 
for China to try to understand the process.
    Senator Thomas. I hope so, too. Thank you.
    Senator Coverdell.
    Senator Coverdell. I am finished.
    Senator Thomas. Well, gentlemen, thank you. Obviously we 
are faced with a very important issue. We are committed, and I 
am glad we are, to this being a peaceful settlement, and we are 
committed to Taiwan to the extent that that will happen. I 
think we are committed to improve our relationship with the 
People's Republic. Obviously that is good for all of us.
    So it will be a difficult task, but we appreciate your 
time, appreciate your input, and we thank you very much for 
being here.
    [Whereupon, at 11:25 a.m., the subcommittee adjourned.]

                                  
