[Senate Hearing 106-635]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 106-635
 
 GIVING THE PEOPLE'S REPUBLIC OF CHINA PERMANENT MFN: IMPLICATIONS FOR 
                              U.S. POLICY

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 11, 2000

                               __________

       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
66-499 CC                   WASHINGTON : 2000




                     COMMITTEE ON FOREIGN RELATIONS

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

                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page

Kapp, Robert, president, U.S.-China Business Council, Washington, 
  DC.............................................................    23
    Prepared statement...........................................    26
    Article entitled ``Cutting Through the Smoke on China PNTR,'' 
      reprinted from the China Business Review, March-April 2000.    29
    Article entitled ``In Full and On Time,'' reprinted from the 
      China Business Review, Jan.-Feb. 2000......................    31
    Article entitled ``Slaying the China Dragon: The New China 
      Threat School,'' by Joe Barnes, research fellow, James A. 
      Baker Institute for Public Policy, Rice University.........    34
    Article entitled ``How Not to Handle China,'' by Owen 
      Harries, reprinted from The National Review, May 5, 1997...    43
    An Open Letter in Support of China PNTR from America's 
      Creative Industries, Feb. 23, 2000.........................    47
    An Open Letter from American Academic Specialists on China's 
      Economy and Society, entitled ``PNTR, WTO and Chinese Labor 
      Standards''................................................    48
Mastel, Dr. Greg, director, Global Economic Policy Project, New 
  American Foundation, Washington, DC............................    17
    Prepared statement...........................................    19
Waldron, Dr. Arthur, director, Asian Studies, American Enterprise 
  Institute, Washington, DC......................................    11
    Prepared statement...........................................    14
Wei Jingsheng, Chinese dissident, Columbia University, New York, 
  NY.............................................................     3
    Prepared statement...........................................     4

                  Additional Statements for the Record

American Forest and Paper Association............................    56
Human Rights Watch, statement of Washington director, Mike 
  Jendrzejczyk...................................................    58
    Draft text of U.S. Resolution on China to be presented at the 
      UN Commission on Human Rights..............................    62

                                 (iii)




 GIVING THE PEOPLE'S REPUBLIC OF CHINA PERMANENT MFN: IMPLICATIONS FOR 
                              U.S. POLICY

                              ----------                              


                        TUESDAY, APRIL 11, 2000

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:45 p.m. in room 
SD-106, Dirksen Senate Office Building, Hon. Jesse Helms 
(chairman of the committee) presiding.
    Present: Senators Helms, Thomas, Feingold, and Wellstone.
    The Chairman. The committee will come to order, and the 
absence of other Senators is due to all the lights you see over 
the clock. We have a vote in progress. I voted early so I could 
get here reasonably on time.
    Today's hearing by the Foreign Relations Committee will 
focus on the foreign policy implications of granting permanent 
most favored nation [MFN] trade status to Communist China. As 
the Senate prepares to vote on this issue, the ultimate 
question has got to be, will granting permanent most favored 
nation status to Communist China advance the foreign policy 
interest of the United States?
    Now, there is no question that giving permanent most 
favored nation trade status to China will perhaps advance the 
business interests of certain sectors of the U.S. corporate 
community, but care must be taken that we do not confuse their 
interest with the national interest, and they are not 
necessarily the same, and our principal national interest vis-
a-vis mainland China is seeking a democratizing China that 
conducts its foreign relations in a civilized fashion rather 
than one that behaves in a rogue fashion, as the Communist 
Chinese have done for the past 50 years.
    So we must ask ourselves, for example, will granting 
permanent most favored nation trade status to Communist China 
persuade its rulers, its Communist rulers, to walk back from 
their threats to invade Taiwan if Taiwan does not negotiate 
reunification with the Communist mainland? Will China cease its 
relentless military buildup in the Taiwan Strait? Will granting 
permanent most favored nation trade status serve to halt 
China's brazen land grabs in the Spratly Islands? Will it cause 
China to stop its reckless proliferation of weapons to its 
fellow criminal regimes around the world?
    Well, the historical evidence dictates a resounding ``no.'' 
The fact is, the United States has had normal trade relations 
with Communist China for the past 20 years, and yet Communist 
China's behavior on every one of these foreign policy fronts 
has worsened dramatically during these two decades.
    Indeed, Communist China has become more, not less 
threatening to Taiwan over the past 20 years, and 20 years ago 
Communist China was not making incursions across the maritime 
boundaries of the Philippines, but today it is, and according 
to information delivered to Congress by the CIA just 90 days 
ago, China's weapons proliferation continues apace in flat 
contradiction to testimony before this committee by the Clinton 
State Department in 1999.
    So, in sum, Communist China's foreign policy behavior has 
become increasingly antithetical to the United States' national 
interest during the past 20 years of so-called normal relations 
in trade. It is difficult to see how making the status quo 
permanent will cause any improvement whatsoever.
    Now then, the direction of China's foreign policy will 
hinge largely on whether China democratizes and begins to treat 
its own people better than under the existing Communist 
control, but here again, the Clinton administration's record of 
appeasement has yielded miserable results. In fact, China was 
demonstrably more reformist 15 years ago than it is today.
    In the mid and late 1980's, China's leadership expressed at 
least some sympathy for reform, and for the students and others 
who were demanding it. Now, these reformers were ousted, 
replaced by hard-line Stalinists who massacred the students and 
began a decade of brutal repression.
    The U.S. State Department's 1999 human rights report oddly 
enough says it all: ``The Chinese Government's poor human 
rights record deteriorated markedly throughout the year as the 
government intensified efforts to suppress dissent.''
    Now, some insist that the way to improve this miserable 
situation is to reward Communist China with permanent most 
favored nation trade status. Now, I see no justification for 
such an assertion. Now, perhaps our witnesses today can advise 
us as to how we can reverse the deteriorating circumstances.
    Now, on a related matter, many will recall that in February 
the administration refused to attend a hearing this committee 
had scheduled on Taiwan's annual defense request. Since that 
time, the administration has also failed to comply with last 
year's defense authorization bill, which required a report on 
Chinese military power by March 1. Meanwhile, China has issued 
its infamous white paper and continues to make provocative 
military deployments along its coast.
    So I am therefore announcing today that shortly after the 
upcoming recess this committee will hold a hearing on Taiwan's 
security, including the administration's compliance with, or 
shall we say noncompliance with the Taiwan Relations Act and 
other laws affecting Taiwan's security, and I trust that this 
time the administration will see fit to show up.
    Senator Biden is on his way, I am sure, so we will just 
stand at ease until he gets here.
    [Pause]
    The Chairman. I have had it whispered in my ear that 
Senator Biden has another meeting that he had scheduled. He 
will be further delayed in coming here, at which time he will 
make his statement, and he has suggested that we proceed.
    On our first panel, we welcome Mr. Wei Jingsheng, with whom 
I have just shaken hands. Mr. Wei is China's most prominent 
dissident, having spent a total of 19 years of his life in 
Chinese prisons and forced labor camps. Mr. Wei's prison 
letters were published in 1997 in his book, ``The Courage to 
Stand Alone: Letters from Prison and Other Writings.''
    Mr. Wei's exceptional courage, sir--in the face of a brutal 
and immoral regime is bound to humble anyone who takes for 
granted the freedoms enjoyed by the American people, and we are 
glad to hear from you and welcome you, and you may proceed.

 STATEMENT OF WEI JINGSHENG, COLUMBIA UNIVERSITY, NEW YORK, NY

    Mr.Wei [as translated by Dimon Liu]. Thank you, Mr. 
Chairman. Thank you, all Senators.
    It is often said that if China receives normal trading 
status they will become more moderate. Let's just say, if they 
receive such a status and see what they would be at.
    The last 2 years, since the demonstration has become more 
moderate toward China, the Chinese Government's attitude toward 
human rights has become more severe. This is the message I 
return just now from Geneva.
    If you give now China the permanent NTR, then this will be 
even fewer restraint on the Chinese Government, and human 
rights situation would deteriorate further.
    The Chinese enterprises have not become accustomed to the 
world market, and if you give China WTO then there will be a 
large number of Chinese enterprise that would go bankrupt.
    This is widely acknowledged by the Chinese Government, 
including Lee Pung. He does not dispute this conclusion. The 
economic situation in China now is very bad, and with a large, 
even a larger number of unemployment, then the Chinese economy 
may well become--may well collapse.
    The people's complaints are increasing, and most tyrants, 
they solve this political problem by waging an external war. 
Every day you hear that the Chinese Government are screaming 
wars against Taiwan. It happens under this political situation.
    There are people with conscience in the Chinese Communist 
Party. They do not want to wage a war against Taiwan, but in 
such a--in the current atmosphere, they can only say that the 
Chinese economy is very bad. They cannot afford to wage a war.
    The Chinese have been creating their own military 
technology. They also have stolen many military technology to 
mass production. All they need is capital. If you give them 
permanent NTR and allow them to enter into WTO, then you would 
give them credibility with which they can raise funds directly 
from the financial markets of New York and London.
    This thing has no advantage whatsoever for the Chinese 
people. Now, are there any advantages for the American people? 
Many Americans believe that if they give China WTO then they 
can enter the Chinese market. This is illusionary. China would 
not open their market to the West, and last year in Seattle you 
can see clearly that the Chinese Government will lead the Third 
World countries in amending the WTO regulations.
    If there is a war waged on the Taiwan Strait, then the 
question becomes, will the United States be dragged into this 
war? This has no advantage for America.
    If you look at it from the point of view of human rights, 
of democracy for China, from the interests, national interests 
of America, all economic interests of the United States, you 
can see there is no advantage whatsoever. This is my opinion.
    He wants to conclude his remarks now, and he awaits your 
questions.
    [The prepared statement of Mr. Wei follows:]

                  Prepared Statement of Wei Jingsheng

   statement on the occasion of the u.s. senate committee on foreign 
                  relations hearing on the pntr & wto
    The basic principle is simple. You do not reward children, adults, 
employees, business partners, enterprises, or countries for bad 
behavior. In the past two years, China has not become more lenient in 
the treatment of its citizens but rather more cruel. Giving the PRC 
PNTR now is removing the only effective restrain on bad behavior.
    Although many people are eager to separate business from foreign 
policy or human rights, as large and influential country as the United 
States is obligated not to view trade in isolation from other issues. 
Whenever the United States relaxes its stance on China, the Beijing 
regime seizes the opportunity to crackdown on dissent domestically. 
While in prison, I could myself measure the situation between the West 
and China based upon the treatment I received. Better treatment meant 
MFN was in question, that the USA was taking a more solid, critical 
stance, worse treatment meant exactly the opposite. In recent months 
the most salient example has been the repression of Falun Gong 
practitioners, however the Communist regime's cleanup campaign has 
certainly not been limited to this group alone. While the number of 
political an religious dissidents arrested rises, unemployment 
increases, and large numbers of the ``floating population'' are 
violently repatriated to their registered area of residence, the United 
States remains silent.
    U.S. negotiators might also have used their time in Beijing to 
address labor abuses in China. The most basic human rights of workers 
in China are not protected. Workers are not permitted to form 
independent Labor Unions. They toil like slaves, utterly unable to 
fight for better conditions and reasonable compensation. They might 
have obtained a guarantee that China will allow its workers to form 
unions, or to protect child laborers, or to terminate its laogai 
system. Instead, they are relying on the mechanisms within the WTO to 
retroactively reprimand China should the country violate WTO 
regulations. That China will violate regulations is certain, how well 
equipped the WTO is to react is less so.
    One argument we will hear today is that in addition to the benefits 
the USA can attain from WTO entry, the ordinary people of China will as 
well. It is true that a small number of Chinese do stand to benefit 
from WTO entry--why else would these batch of leaders be pushing so 
hard for WTO entry and WTO entry NOW? Should China enter the WTO, it 
would become easier for this small group to divert and embezzle the 
country's money and betray China's own interests. However, the corrupt 
elite don't represent ordinary people. China is notoriously rife with 
corruption. WTO lacks teeth to enforce compliance. WTO entry will 
simply export that corruption into the international marketplace. China 
will be able to set its own very poor precedent of non-compliance to 
WTO regulations, and export further corruption into the WTO itself.
    Domestically, ordinary Chinese businessmen, whether in state-run or 
private companies, would face competition from deep-pocketed and 
experienced businesses, and there will be an increased number of 
failures and bankruptcies. Even more Chinese workers will be laid off, 
and even more peasants will flood into the cities. The people of China 
know that their country's economy is already quite precarious. Many 
areas stand on the brink of collapse. How can it possibly withstand the 
shock of entering the WTO? Nearly everyone in China should be able to 
foresee this outcome. It's incredibly simple. Even those in power 
cannot deny it, and yet they do.
        short bio of wei jingsheng--the courage to stand alone:
    Wei was born in Beijing, in 1950. His father was a top general of 
the PLA, (PLA military intelligence, PLA Airforce, Civil Aviation 
Administration of China) As a child, he lived in the same compound as 
Mao, and made the rounds with his father when he visited top leaders, 
for Wei was bright and endearing to the elders. Wei was able to learn 
military strategies and insider politics at an early age, and from 
master practitioners. Most newspaper accounts of him as an electrician 
from the Beijing Zoo is true, and he is very proud of his status as a 
working man, for that was by choice. Remarkably, Wei is a rebel from 
the core of Chinese Communism, and that is why he was regarded with 
such alarm.
    At 16, Wei left Beijing at the height of the Cultural Revolution, 
and traveled widely in the North and Northeast country sides of China. 
For the first time, he saw with his own eyes how badly the people were 
treated, and how horribly they were living. It was during this time 
that he began to formulate his own opinions of the Chinese Communist 
Party and the future of China. By the time the Cultural Revolution had 
ended, he had finished his stint in the PLA, and several more years at 
his ancestral village in Anhui Province. The 10 years of chaos had left 
indelible marks.
    In 1976, after moving back to Beijing, Wei took a job at the 
Beijing Zoo. In 1978, many Cultural Revolution era youth began posting 
their writings on a remnant of an ancient city wall, which became known 
as the Democracy Wall. Wei posted his essay, ``The Fifth 
Modernization'' which critiqued that Deng Xiaopeng's four 
modernizations--agriculture, science, industry, national defense--were 
for naught without a fifth one--democracy. The essay caused a 
sensation, not only because its open assault on Communism, but also 
because the author dared to sign his name and put down his address. Wei 
joined a few friends in publishing an underground magazine called 
``Explorations.'' In its last issue before it was shut down, Wei wrote 
an article titled ``Democracy or a New Dictatorship?'' which identified 
Deng as the new dictator. Wei was arrested.
    In 1979, Wei was tried, convicted of ``counterrevolutionary 
crimes,'' and sentenced to death. During eight months on death row, Wei 
did not know if he was going to live through another day, until his 
sentence was commuted to 15 years. Deng offered to release him, if he 
would recant. Wei refused, explaining that he was right, and Deng was 
wrong. Most people were broken after one year in solitary confinement. 
Wei's lasted fully five years, but his spirit remained unbroken. He was 
then kept in two different forced labor camps, with guards closely 
watching him, and fellow prisoners instructed to beat him up. In 1993, 
he was released a few months short of his 15-year sentence for 
political effect as Beijing tried to secure the Olympics. Within six 
months, he was re-arrested. In November 1997, after a total of 19 years 
in prison, Wei was forced into exile. Wei maintains that he is not 
free, but that his exile is further punishment.
    Wei wears his prison years lightly, saying simply that it was his 
choice and he has no regrets. Wei's prison letters were published in 
1997 as ``The Courage to Stand Alone.''

    The Chairman. I think you are going to be embarrassed at 
what I am going to say, but please tell him that you did a 
great job.
    Ms. Liu. I did? Thank you very much.
    The Chairman. Seriously, Mr. Wei, I think it is fair to say 
that you have laid your life on the line for freedom in China. 
Of course, many thousands of us admire you for having done so, 
but the proponents of permanent most favored nation trade 
status are claiming that trade will bring freedom to the 
Chinese people. We hear it all the time. If you would just let 
them have permanent most favored nation trade status, then all 
is going to be hunky-dory. Can you translate hunky-dory?
    Mr. Wei. Trade can bring advantage to a country's economy, 
but trade and politics are two different matters.
    You can watch many countries that are very wealthy, but 
they do not necessarily have freedom. America, when it was 
founded, it was one of the poorer countries in the world, but 
it was founded in freedom.
    The reality is that it is freedom that will bring wealth to 
the people, and this is a truth which traders and businessmen 
ought to study history to learn its popular lessons.
    The Chairman. All right. I agree with you. I agree with you 
absolutely.
    But what do you think is the best way to bring freedom to 
China and the Chinese people?
    Mr. Wei. If you view a country based on the protection of 
human rights, as only under such condition can you bring 
freedom to the people.
    I want to add something, to say that wealth do not 
necessarily bring freedom to the people. For instance, in 
ancient Rome there are many slaves who live in very wealthy 
style. They have no freedom.
    American people do not want to become slaves. It is the 
same for the Chinese people. They like freedom. They do not 
want to live in unfree society.
    The Chairman. I agree with that.
    Now, the proponents of engagement--you always hear that 
word, engagement with China--have always claimed that 
engagement will bring positive changes to China, but it is 
widely acknowledged that the human rights situation is 
deteriorating in China. Is that correct?
    Mr. Wei. The only way that the human rights situation can 
improve is because the people fight for their rights.
    International community can help by helping those people 
who fight for their rights instead of--and not helping the 
tyrants to oppress the rights of the people.
    In the last 2 years, the Western governments, including the 
United States and European governments, have been backing off 
in their demands on the Chinese Government, and that is why the 
situation, human rights situation is deteriorating in China, 
especially when the help given to the people who fight for 
their rights are decreasing.
    The Chairman. Now, when our President, Mr. Clinton, tore up 
his own Executive order back in 1994 and delinked trade from 
political and religious freedoms in China, the President said 
he was going to be sure to pursue the censure of China's 
repression at the United Nations Human Rights Commission in 
Geneva. Then in 1998 he stopped doing even that, and last year 
the Communist dictatorship's appalling repression forced the 
President back to introducing a censure resolution at the 
Geneva commission.
    Now, you have just returned from monitoring this year's 
debate with China in Geneva. Can you assess how well criticism 
of China at the United Nations, which has not even passed, have 
worked as a substitute for using our economic leverage to press 
for freedom in China?
    Mr. Wei. Most people consider that being censored by the 
U.N. Human Rights Commission would give the tyrants a certain 
amount of pressure. To only rely on criticism alone cannot 
solve--cannot improve human rights conditions.
    Both last year and this year I have watched that the 
Chinese Government working very hard to lobby against censure. 
It is because they are concerned that there would be economic 
sanction. The only reason they are afraid of censure is because 
they are afraid criticism would follow by critical action, and 
if you tell them to begin with that there would not be economic 
sanction, why should they be afraid of your criticism?
    My conclusion is that censure at the United Nations 
Commission of Human Rights is important, but it must be 
followed by actions in economic arenas as well as in diplomatic 
arenas.
    The Chairman. Senator Wellstone.
    Senator Wellstone. Thank you, Mr. Chairman. Let me first of 
all--6 minutes? Let me thank Wei Jingsheng for being here. I am 
very proud to consider him a good friend.
    Before asking questions, Mr. Chairman, I thought I would 
just try to provide one clarification on this vote as I see it 
that is coming up, perhaps first in the House, and then 
depending on what happens in the House, in the Senate.
    The matter before us is whether or not we in the Congress 
still will reserve for ourselves the right to annually review 
most favored nation status with China. That is the vote. I am 
from an agricultural State, and you are as well, Mr. Chairman, 
and I think this has become deliberately confused by some.
    This is not about an embargo. We do not have an embargo. It 
is not about trade. We trade with China. It is not about tariff 
reductions. We have tariff reductions. The administration 
admits to that. The General Accounting Office has made that 
clear, on the basis of the 1979 bilateral agreement. We have 
all that.
    The question is whether or not we want to hold on to what 
leverage we have left dealing with human rights, and the 
question is whether or not we also want to hold on to leverage 
to make sure that China lives up to trade agreements.
    The first question for Wei, now, I gather in your testimony 
what you have said is that from the point of view of human 
rights, it is important that we maintain our annual review to 
keep some leverage and some pressure on the Chinese Government. 
Is that correct? Is that the first part of your testimony?
    Mr. Wei. I know that the annual review has caused many 
people impatience. The usual question is that as soon as we 
give them trading status every year, why should we review it 
every year? My question is that if we do not continue with the 
annual review, then what would the Chinese Government do?
    I use an analogy of the driver's license. You know, every 
year you get your license renewed, but the license itself acts 
as a restraint on your actions. If you had a driver who is a 
really lousy driver, and you say that we are not going to 
review your driver's license every year, we will just give you 
a permanent one, what would this driver do on the road? When we 
are facing a tyrant, we must act with most patience.
    In your own country, every year you watch your own 
President very closely. If he is not--he behave badly you can 
like him to leave.
    Senator Wellstone. Mr. Chairman, I am going to run out of 
time. I want to let Wei Jingsheng know that tomorrow there will 
be a really major gathering, in part led by labor, but also 
human rights community, and from the point of view of the 
citizens in our country, we see now where Wal-Mart is now in 
China.
    I think they are paying about 14 cents an hour, and you 
know, wage-earners in our country worry that companies can go 
there, and if people in China should stand up for their own 
rights and say, we deserve to make more for our families, they 
will wind up in prison, so you do see a connection between 
human rights in China, or lack of human rights, and also the 
conditions of working people in our country.
    On the United Nations Commission, I wanted to let Wei know, 
Mr. Chairman, that I think tomorrow there will be an effort, 
perhaps successful, to table the resolution at the Human Rights 
Commission in Geneva, which would be on human rights in China, 
but there will be yet another vote coming up I think on the 
18th.
    And Mr. Chairman, in part because of your support, I have a 
resolution with many Senators that I think I am going to be 
able to introduce to our committee meeting on Thursday which 
basically will be very strong in its condemnation of human 
rights violations and make it clear that the administration and 
the representatives of the European Union and other governments 
should aggressively enlist support.
    That means the President, our President making calls to 
some of these other governments. If we are serious about human 
rights, this is the right forum, and our own President ought to 
be making calls to other governments. This should not be 
symbolic, and I think we are going to have a strong statement, 
Mr. Chairman, Thursday in the Foreign Relations Committee.
    Mr. Wei. Thank you. American people are serious about human 
rights, but American politicians are not necessarily serious 
about human rights, and that is the same for the European 
politicians as well.
    The Chairman. Senator Feingold.
    Senator Feingold. Thank you, Mr. Chairman. I would like to 
thank you for holding this important hearing today, and I of 
course would like to thank all the witnesses, and especially 
thank Wei Jingsheng for being one of the most committed and 
powerful voices for human rights in China and for appearing 
before the committee today.
    I am especially pleased to be attending this hearing 
because I am also of the school of thought that believes there 
is value in debating the U.S.-China relationship, that there is 
value of periodically taking stock of just what sort of trading 
partner China represents, and that there is value in raising 
human rights issues each and every time the United States 
weighs its foreign policy choices, and so, Mr. Chairman, for 
these very reasons, I oppose granting permanent normal trade 
relations, what we used to call most favored nation status to 
the People's Republic of China.
    I do not want the Congress to relinquish our annual 
opportunity for debate, and for linking these important issues. 
I know that many people, including some in my own State, 
disagree. Some believe that increased trade and economic 
openness will gradually spill over into the spheres of civil 
and political liberty. Others simply fear missing out on the 
business opportunities to be seized in the vast Chinese market.
    But China, as you have said, sir, has benefited from a 
great deal of international trade and investment yet, according 
to the State Department, over the past year the country's human 
rights record has clearly deteriorated and, while I recognize 
the economic significance of China, I believe that U.S. policy 
can and should be a force for good, not just a force for 
profit.
    The question, many supporters of granting permanent normal 
trade relations [PNTR] to China believe that if China is drawn 
into a rule-governed regime like the WTO, China's Government 
will increasingly find that respect for the law is in its own 
interest. How would you evaluate the merits of that argument?
    Mr. Wei. If the Chinese Government recognize that obeying 
the law would be good for itself, then the Chinese Government 
would have long ago become a law-abiding Government. The 
Chinese Communist Government's attitude toward the rule of law 
is this: what is useful for them, they will use it. What is not 
useful for them, or not in their interests, they will 
disregard.
    Several days ago I was in a friend's house in Paris. I pick 
up casually a magazine published by the Chinese Government. The 
first, front page articles was how the Chinese Government would 
become the leader of the Third World countries in the WTO in 
changing the rules of the WTO that is to the advantage of the 
Third World countries.
    We would like the Chinese Communist Party, Communist 
Government entering into the WTO would have their action be 
restrained by the laws of WTO, but they wish to use this 
occasion to change the regulation of WTO in controlling other 
countries.
    My advice to businessmen is that they should listen more to 
the politicians on this issue, and do less rosy prediction. 
That is not based on reality.
    Senator Feingold. Thank you for that answer. I would be 
interested in knowing how you think a vote for PNTR in the U.S. 
Congress would be viewed by the Chinese people, particularly 
those Chinese people who are engaged in the struggle for 
greater freedom and basic human rights. Would they interpret 
the vote as an abandonment of U.S. efforts to keep pushing 
human rights in our relationship with China?
    Mr. Wei. For those people who are fighting for human 
rights, especially the friends who are fighting for human 
rights inside China, they do not--none of them want the U.S. 
Congress to give the permanent MFN to China so easily.
    We, including myself, all understand that we will live 
under the condition of doing the annual review of MFN, and 
currently there are tens of thousands of brothers and sisters 
in spirit are still languishing in jail. If you protect annual 
review of PNTR, is very, very important, even though it is 
never enough.
    Senator Feingold. Well, let me just thank you. The clarity 
of your answers is very helpful in countering the enormous 
lobbying push behind this effort, and I appreciate it.
    The Chairman. Thank you, Senator. I am going to let you go 
in just a minute, but is my impression correct that your father 
was a top General in the People's Liberation Army, and that you 
have been brought up on military strategies and politics--and 
policies?
    I understand that his father was a top General of the 
People's Liberation Army. Is that correct?
    Mr. Wei. [in English] Yes.
    The Chairman. And you were brought up on military 
strategies and internal politics and that sort of thing?
    Mr. Wei. It is true. Many of my schoolmates are now the 
strategists, military strategists for the Chinese Government.
    The Chairman. I see. Now, I want you to spend 2 or 3 
minutes, if you will, recounting the story of your life as you 
have dedicated it to struggling for democracy in your country, 
the treatment you have received, the imprisonment that you have 
suffered, et cetera. If you would do that for just 2 or 3 
minutes, I think it would be very useful for the record.
    Mr. Wei. My struggle for democracy did not start with 
myself. The fight for democracy in China has been going on for 
several generations.
    When I was 17, it is the same year when the Chinese 
Communist Party has been in power for 18 years, and many people 
had started to question why we have been fighting for so long 
for democracy, and yet the life of the Chinese people have not 
improved.
    At that time, when you talk about politics, you have to pay 
with your life. A friend of mine who is now helping me in 
Washington was almost executed. Even despite of the danger, 
many people still insist on trying to find a better way for 
China. The conclusion is that the Chinese has to adopt the 
imperfect system of democracy.
    Many people have different theory about how to achieve 
democracy for China. My own viewpoint is that the only way to 
achieve a democracy for China is for more Chinese people to 
understand what democracy is about, that they can choose for 
themselves.
    In 1978, I found an opportunity to express my views on 
democracy for more people to understand, and there was many 
friends of mine who worked with me in my struggle for 
democracy, and many of them went to jail. The rest you know 
about my situation in the United States.
    The Chairman. One final question. Do you think the PRC is 
going to wage war against Taiwan?
    Mr. Wei. When a war occur on miscalculation, this kind of 
war there are ways of preventing, but if this war is fought 
based on intention, this kind of war is very difficult to 
prevent.
    The fever for war for China has reached a high pitch. Many 
people have drawn analogy with Nazi era in the 1930's for war. 
I still believe there are ways to prevent this war, but we must 
work together.
    The Chairman. I agree, and thank you very much. It is a 
pleasure having you here, and I have enjoyed your testimony. 
Thank you very much.
    We will call the next panel. The second panel will consist 
of distinguished Americans, Dr. Arthur Waldron, director of 
Asian Studies at the American Enterprise Institute in 
Washington, Dr. Greg Mastel, director of Global Economic Policy 
Project at New America Foundation in Washington, and last and 
certainly not least, Mr. Robert Kapp, president of U.S.-China 
Business Council, Washington, DC.
    Senator Wellstone. Mr. Chairman, with your indulgence, 
might I just say to the panelists that I apologize, in about 5 
minutes I have to go for a conference call back home in 
Minnesota with some press, and so I apologize for leaving 
early, and I will read your testimony. Thank you for being 
here.
    Thank you, Mr. Chairman.
    The Chairman. Very well. We will miss you, and we thank you 
for coming.
    Dr. Waldron, it has been suggested that maybe it would be 
good if you led off, and if you will do that, I will appreciate 
it.

   STATEMENT OF DR. ARTHUR WALDRON, DIRECTOR, ASIAN STUDIES, 
         AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC

    Dr. Waldron. Thank you, Mr. Chairman, Senators, ladies and 
gentlemen.
    Let me start with thanks and an observation about our 
fellow witness, Mr. Wei Jingsheng. I want to thank you for 
giving me an opportunity to explain why at present and in the 
form and context in which it is presented, I oppose the grant 
of permanent normal trade relations for the People's Republic 
of China, and to begin that explanation, let me say something 
about Mr. Wei. He, perhaps more than any other of the Chinese 
pro-democracy community, speaks clearly of the need for human 
rights and democracy, and is widely respected and admired in 
the West.
    But as we approach this vote, I hear more and more of a 
line which praises Wei but also undermines him a little bit. 
Yes, perhaps he is a man of great personal courage and 
idealism, but isn't he just a little bit extreme? Aren't the 
measures that he's counseling really counsels of perfection? 
Isn't he really an idealist, and isn't it essential that we 
people, practical people, recognize that paying serious 
attention to what he says will, in fact, undermine some of 
America's best interests?
    In other words, I think there is an attempt to smother 
Chinese dissent under a mound of fragrant bouquets, so the 
first thing I would say is, Wei Jingsheng is not some sort of 
starry-eyed idealist, but a practical man, and what he is 
telling us is pretty much the unvarnished truth.
    Now, what is the reality in China today? Well, of course, 
it is very complex. Some aspects are encouraging, some are 
worrying, and two aspects in particular worry me. One is the 
Government's increasing unwillingness to listen to its own 
people and its growing reliance on the use of force to maintain 
power, and the second, which flows from the first, is the 
current military buildup and the steady drumbeat of military 
threats against its neighbors, Taiwan most obviously, but not 
exclusively.
    In the last 12 months, we have seen numerous arrests of 
political and religious dissidents. We have seen the closures 
of journals and newspapers. We have seen Websites blocked at 
China's Internet portals, all of which are Government-
controlled, and in the past few days we have seen news of the 
miner's protest in the northeast, and also of the purge of the 
Academy of Sciences and other intellectual leaders. We have 
also had a statement from President Jiang Zemin, quote, ``we 
absolutely cannot implement the West's model of bourgeois 
democracy.''
    And finally, I would remind you of the 11 years of illegal 
house arrest for Zhao Ziyang, Jiang's predecessor as Chinese 
President, who has been confined to his house for the entire 
period since the Tiananmen massacre because at that time he 
favored compromise.
    Now, I think all of us will agree that these actions are 
morally contemptible, but is there anything more than that? Do 
we continue business as usual, or even better than usual, or do 
such facts have consequences? Well, the first point I would 
make is that stable governments, confident governments, 
governments whose mandates and legitimacy are clear, do not 
behave like this, so the first thing that this rising tide of 
protest suggests to me is that change is coming in China, and 
it is very important to us what form that change takes.
    Nor, I think, should we be surprised, as Mr. Wei mentioned, 
that a divided and oppressive government should attempt to 
divert popular attention away from the real and pressing issues 
by waving the flag. History is full of examples of such 
regimes. Most of them have failed to consolidate their 
political control, but a large number of them have managed to 
start wars.
    Now, how do we Americans deal with it? What we need is an 
integrated, all-around, and coherent policy in which all 
aspects of China, positive and negative, are brought together 
and dealt with in a consistent way, and the question I would 
ask is: Do we have such a policy today?
    Let me answer with an analogy. I think we have all had the 
experience of seeing a pretty picture in a catalogue and 
sending off for something from mail order, and to be fair, in 
most cases I think what we get is, in fact, what we ordered, 
but not always. Now, in this case I think you could say that 
the administration is showing us a picture of a very pretty, 
peaceable, profitable, and constructive relationship with 
China, and we are in effect sending away for it.
    We get the package, and we open it. We have all had this 
experience. Several odd bits of metal, fittings, nuts and 
bolts, incomprehensible directions and so forth, fall out of 
it. I have labored over this sort of thing, and sometimes you 
conclude that there is just no way you can put it together. I 
recently sent back something that was described as a bathroom 
scale to Ohio. It was absolutely impossible to make anything 
with it.
    Well, the China policy is very similar. The administration 
is promising that the steps they are taking are going to make 
things better, but no matter what the blurb, and no matter what 
the salesman, and no matter what the directions say, and no 
matter how you put it together, the current policy will not 
deliver the kind of China, or the kind of relationship with 
China that we want, and let me just briefly explain why.
    To prevent this militaristic approach that China is taking, 
this course, from plunging Asia into war, we need to integrate 
the different pieces of our policy, but the most significant 
effect of the PNTR measure is permanently to insulate trade 
relations with China from congressional scrutiny. In other 
words, far from unifying our policy and aggregating our 
concerns, we are pretending that economic issues exist in a 
vacuum and have nothing to do with anything else.
    Now, the administration argues that doing this, and 
encouraging trade, is going to contribute to more responsible 
behavior from China, but in fact the lesson has been the 
opposite. As China has increased its belligerency, this 
administration has responded with unprecedented concessions--
the one China policy, the ``three noes,'' the fast track on 
trade, the Presidential visit and so forth.
    Now, I do not doubt that any of those three things would 
have been done without the threat, so what is the lesson that 
we are teaching China, whether we intend to or not? We are 
teaching them, do bad things, and good things will happen.
    Now, PNTR is going to increase--it is going to create even 
stronger incentives for misbehavior, because if you remove the 
possibility that external aggression is going to have economic 
consequences, the aggressor has one less thing to worry about, 
and the chance of aggression is increased.
    Now, as a convinced free trader, and as an old-style 
economic liberal, I believe that from an economic point of view 
PNTR is very much in our and in China's economic interest, and 
I would support granting it if the security and human rights 
situation were improving, or even if the administration was 
taking coherent and persuasive steps to deal with those issues, 
but that is not the case right now and, that being the case, I 
believe that granting PNTR absent the security and human rights 
conditions will actually make things worse rather than making 
things better.
    Ambassador Jack Matlock in his memoir of service in Moscow 
noted that a key to Washington's policy in the eighties was 
that no economic concessions would be made to the USSR until 
satisfaction was achieved on a range of security issues. This 
was a sound and realistic policy, and it worked well.
    What would it take now to create a package in which PNTR 
would be acceptable? Let me make a few points. First, we need 
some signals from China. I would like to see a definitive 
repudiation of the use of force, coupled with the withdrawal of 
the missiles which are currently targeting Taiwan, something 
that would be verifiable with our satellites and so forth. I 
think that sort of a measure is indispensable if the current 
tension is to be reduced.
    I would also like to see signature, ratification, and 
enforcement of the chief international human rights 
conventions. Now, we Americans cannot deliver those things, but 
we can stress their indispensability. In their absence, though, 
we certainly need transparency and bipartisanship in China and 
Asia policy. Right now we have exclusive executive management 
of China policy, without consultation with Congress or 
explanation to the American people, and this is not acceptable.
    We need close scrutiny of existing trade and investment 
with China so as to exclude the People's Liberation Army 
military and security-run enterprises from the United States 
and from our capital markets.
    We need strong and credible reaffirmations by the President 
of American commitments to democracy in Asia, to political 
reform in China, and to the security of Taiwan, and here I mean 
deeds and not words. We must make it clear by our actions that 
Beijing's military threats and her military buildup lead only 
to a brick wall.
    Voting PNTR now, even as more missiles are being emplaced 
across from Taiwan--it is going on right now. I mean, whatever 
time it is over in China. They are pouring cement for these 
things. That sends the opposite message. It sends a message of 
complaisance and acquiescence, and that is a very, very 
dangerous message to send.
    Now, here the role of the Congress is critical. The 
prospect of an annual review of China's trading status will 
serve as a brake on Beijing, and brakes are very much needed, 
and the process itself provides an opportunity to discuss the 
crucial issues, even if the executive would prefer not to.
    One of our most eminent China hands, a career Foreign 
Service officer now retired, with long ambassadorial 
experience, recently stated--and I heartily agree with what he 
said--that the basic problem in our current China relationship 
was that Beijing did not understand and was not being forced to 
understand just how catastrophic would be any use by them of 
military force. This is a signal failure of the administration, 
its diplomatic personnel, and its policies.
    Beijing instead seems to imagine that a few missiles might 
be fired, say, at Taiwan, without much by way of U.S. reaction, 
without costs to China's numerous economic and political 
interests, and be successful in forcing Taipei to yield. Now, 
nothing, I would add, could be more dangerously far from the 
truth.
    PNTR, as part of a robust package that conveys that message 
loud and clear, is something that we should all support, but 
only in that form. Otherwise, whatever its intention, it will 
be read as a concession. It will make our problems worse, and 
it will increase the danger of war.
    Thank you.
    [The prepared statement of Dr. Waldron follows:]

                Prepared Statement of Dr. Arthur Waldron

    Mr. Chairman, Senators, Ladies and Gentlemen:
    Let me start with thanks, and with an observation about my fellow 
witness, Mr. Wei Jingsheng.
    I would like to thank you for giving me the opportunity today to 
explain why at present and the form and context in which it is 
presented I oppose the grant of Permanent Normal Trade Relations (PNTR) 
to the People's Republic of China.
    To begin that explanation, let me say also what an honor it is to 
share a witness table with the man who perhaps more than any other 
speaks clearly of the need for human rights and democracy in China, and 
for the United States to support its friends and allies in Asia. On 
human rights, the report this morning of the death in prison of a 
Chinese democracy activist, should serve as a reminder that the 
situation in China today is bad, and getting worse. And in a recent 
opinion column [``Strategic reasons for denying China entry to the 
WTO'' in the Washington Times National Weekly Edition March 27-April 2, 
2000, p. 33] Wei has explained how pressing it is for the United States 
to counter China's increasingly bold threats to use force.
    Now for his advocacy of human rights and democracy, and the 
nineteen years of his life served in the Chinese Gulag for that 
advocacy, Wei is by and large praised around the world. Why do I say 
``by and large?'' The reason is that as we approach the vote on PNTR, 
we hear more and more a line that seems to praise Wei but actually 
undermines him. To be sure, exponents of this approach say, Wei is a 
noble figure, of great personal courage and idealism. But isn't he just 
a tiny bit extreme? Aren't his views a little unrealistic, really 
counsels of perfection and not guides to action? In fact, isn't it the 
case that in the real world we practical people have to recognize that 
paying serious attention to what Wei says will in fact undermine 
America's best interests?
    The attempt is to smother Chinese dissident voices under a mound of 
fragrant bouquets, and Wei's is by no means the only voice thus being 
stifled, but his is perhaps the most authoritative and compelling, so 
let me start by saying: Wei Jingsheng is not some sort of starry-eyed 
idealist but rather a very practical man, and what he is telling us 
about China is not some moralizing fantasy, but rather pretty much the 
unvarnished truth. The issues he raises are in fact the most important 
ones currently facing China, and the United States, not only morally 
but also practically. We need to face them, but from the President on 
down, neither Washington nor Beijing is doing so.
    Instead of assessing the facts as accurately as we can and then 
tailoring policies and strategies accordingly, our policy makers are 
building on hopes.
    What is the reality of China today? It is of course complex. Some 
aspects are encouraging, some are worrying. Two aspects in particular 
worry me.
    The first is the Beijing government's increasing unwillingness to 
listen to its own people and its growing reliance on the use of force 
to maintain itself in power. The second, which flows from the first, is 
China's current military buildup and the steady drumbeat of military 
threats against its neighbors--Taiwan most obviously, but not 
exclusively.
    We have seen, over the past twelve months, the mass arrests of 
peaceful and law-abiding members of the China Democratic Party and the 
Falungong teaching; we have seen closures of hundreds of journals and 
newspapers; we have seen more and more websites blocked at China's 
internet portals, all of which are government controlled, and in the 
past few days we have learned of the February protest against 
corruption and unemployment by the miners at Yangjiagangzi in Liaoning, 
and the purge currently under way of such highly respected pro-reform 
Chinese intellectuals as Liu Junning, Wang Yan, and others. This purge 
comes on the heels of yet another statement by President Jiang Zemin 
that ``We absolutely cannot implement the West's model of bourgeois. 
democracy.'' And of course the eleven years of illegal house arrest 
continue for Zhao Ziyang, Jiang's predecessor as Chinese president, 
ousted for favoring compromise at the time of the Tiananmen protests.
    Now all of us will agree that these actions are morally 
contemptible. But is there anything more to it than that? Do we 
continue business as usual or better, or do such facts have 
consequences?
    What all this repression means is that change is closer than ever 
in China. Stable, confident governments, whose mandate and legitimacy 
are clear, do not behave like this. The question for us is the form the 
coming change will take: whether it will be peaceful and in the 
direction of greater participation and rights for China's people, or a 
lurch into deeper repression and more instability, or just a decline 
into disorder. All that remains to be seen. But make no mistake about 
it, things are going to change.
    Nor should it surprise us at all that China's current divided and 
repressive government should attempt to divert popular attention from 
the real and pressing issues by waving the flag. History is full of 
examples of such regimes and teaches us a lesson as well. Those regimes 
have rarely succeeded in pacifying their own people. But they have 
regularly managed to start wars. Over the past twelve months the threat 
of war from Beijing has become all too familiar, even routine. And it 
is backed up by an alarming increase in military budgets and 
procurement, much of which directly targets American forces.
    To deal with this we Americans require an integrated, all round, 
and coherent policy in which all aspects of China, positive and 
negative, are brought together and dealt with in a consistent way. Do 
we have such a policy today?
    Let me answer that with an analogy. I think we have all had the 
experience of finding a pretty picture in a mail order catalogue and 
sending off our order with high hopes. In this case the pretty picture 
is of a relationship with China that is peaceful, profitable, and 
mutually beneficial. Now to be fair to our friends in the mail order 
business, usually we are satisfied. But sometimes the following 
happens. A package arrives. Out of it tumbles say several precut pieces 
of metal, some fittings, several nuts and bolts in different sizes, a 
puzzling diagram and directions that resist every effort at 
decipherment. This is the image I would use to evoke the actual policy 
that our administration is currently pursuing ostensibly to deliver the 
pretty relationship in the catalogue picture.
    I've labored over such mail order kits and been derived to conclude 
that they simply did not provide what was needed--recently I sent what 
purported to be a bathroom scale back to Ohio in disgust--and that is 
what I would say about the China policy of which immediate PNTR is so 
conspicuous a component. No matter what the blurb and the salesmen and 
the directions say, or how you put it together, it will not deliver the 
kind of China or relationship with China that we all want. Here is why:
    If we are to prevent China's current increasingly militaristic 
course from plunging Asia into war, we need an integrated, indeed a 
seamless approach. But the whole point of the Administration's approach 
is to isolate PNTR and insulate it from every other aspect of the China 
relationship. The Administration pushed it forward even as Beijing 
issued its menacing White Paper on Taiwan and it has sought an early 
vote to prevent the measure from being entangled in the sorts of issues 
that Mr. Wei regularly mentions.
    The most significant effect of the measure, moreover, will be 
PERMANENTLY to insulate trade relations with China from Congressional 
scrutiny. In other words, far from unifying our policy and aggregating 
our concerns, we are pretending that economic issues exist in a vacuum 
and have nothing to do with anything else.
    The administration argues that this approach will contribute to 
more responsible behavior by China, but logic--and the evidence of the 
last several years--suggests that in fact the Administration policy is 
increasing the dangers in Asia.
    The Administration should be using all the tools at its disposal to 
persuade Beijing that the use and threat of force are gravely 
counterproductive; that they undermine China's economic and political 
interests, jeopardize ties with Washington, and will elicit firm 
responses.
    But in fact the lesson has been the opposite. As China has 
increased its belligerency, this Administration has responded with 
unprecedented concessions--the ``one China'' policy, the ``three 
noes'', the fast track on trade, the presidential visit, and so forth. 
I doubt any of those things would have been done absent Beijing's 
threat. So what is the lesson we are teaching: ``Do bad things and good 
things will happen.''
    PNTR will create even stronger incentives for Chinese misbehavior. 
For if you remove the possibility that external aggression will have 
economic consequences, then the aggressor will have one less thing to 
worry about--and the chance of aggression will be increased.
    I respect the good faith of the Clinton policy makers and as an 
American I am glad that our first response to threats is usually the 
attempt to conciliate. I would not want to change that. But our 
attempted conciliation of China under the rubric of ``engagement'' has 
had an effect precisely opposite to that intended.
    First, as we should all recognize clearly based on experience with 
Iran, Indonesia, and other such states, flows of foreign investment do 
not always lead to political liberalization. Instead, they can 
stabilize repressive regimes in the short to medium term making reform 
less pressing.
    But there is an even more immediate danger. The unlinking of 
economic and security concerns by the Clinton administration has served 
to convince the Chinese that we fear them and that we depend so much on 
their market and are so eager to invest that we will sacrifice our 
security interests in order to do so. And I can't really blame them for 
thinking that. But such a reading of the United States argues, in 
Beijing, that threats and aggression pay off.
    Lately Beijing has been raising the temperature even more and I 
worry that voting PNTR now might be read there as the final green light 
for some actual use of force, and thus lead to disaster.
    Now as a convinced free trader and old style economic liberal, I 
believe that from an economic point of view PNTR is very much in both 
our and China's economic interest and I would strongly support granting 
it IF the security and human rights situation were improving. That is 
not the case now, however. What is more, I believe, for the reasons 
explained above, that granting PNTR absent those conditions will make 
things worse and not better.
    Ambassador Jack Matlock, in his memoirs of service in Moscow, notes 
that a key to Washington's policy in the 1980s was that no economic 
concessions were to be made to the USSR until satisfaction was achieved 
on a range of security issues. This was a sound and realistic strategy 
and it worked very well.
    What would it take now to create a package in which PNTR would be 
acceptable? Let me make a few points:
    First, we need some signals from China. I would like to see a 
definitive repudiation of the use of force coupled with a withdrawal of 
the missiles currently targeting Taiwan. I would also like to see 
signature and ratification of the chief international human rights 
conventions.
    We Americans can't deliver those though we can stress their 
indispensability. In their absence, though, we need:
    Transparency and bipartisanship in Asia and China policy. The 
exclusive Executive management of China policy, without consultation 
with Congress or explanation to the American people, is not acceptable.
    Close scrutiny of existing trade and investment with China, to 
exclude PLA and military and security run enterprises from the United 
States and from capital markets.
    Strong and credible reaffirmations by the President of American 
commitments to democracy in Asia, political reform in China, and the 
security of Taiwan--and here I mean deeds and not words.
    We must make clear by our actions that Beijing's military threats 
and her military buildup lead only to a brick wall. Voting PNTR now, 
even as more missiles are being emplaced across from Taiwan is to send 
the opposite message--one of complaisance and acquiescence, and that is 
very dangerous indeed.
    The role of the Congress is critical. The prospect of an annual 
review of China's trading status will serve as a brake on Beijing--and 
brakes are very much needed right now--and the process itself provide 
an opportunity to discuss the crucial issues, even if the Executive 
would prefer not to.
    I started by saying that Wei Jingsheng is a practical man, in the 
sense that he does not fanatasize about China but instead tells the 
truth, both about the situation and what needs to be done. China's 
current military buildup and the threat it poses to American friends 
and interests is not a fantasy. Nor is a Chinese regime that listens to 
its people and acts as a good neighbor some impossible dream.
    The fantasy is to imagine that economic issues can somehow be 
insulated from the other parts of the picture. The fantasy is to 
imagine that removing the threat of consequences for oppression at home 
or military action abroad will improve Chinese behavior. Quite the 
opposite. Passing PNTR in a vacuum, without strong and unmistakable 
actions to address security and human rights concerns--and I mean 
actions, not just talk--sends a dangerous message, one that I fear, if 
heeded in Beijing, could provide the margin for a decision in favor of 
war, and disaster.
    One of our most eminent China hands, a career foreign service 
officer now retired, with long ambassadorial experience, recently 
stated, and I heartily agree with what he said, that the basic problem 
in our current China relationship was that Beijing did not understand, 
and was not being forced to understand, just how catastrophic would be 
any use by them of military force. This is a signal failure of the 
administration, its diplomatic personnel, and its policies. Beijing 
instead seems to imagine that a few missiles might be fired say at 
Taiwan without much by way of U.S. reaction, without costs to China's 
numerous economic and political interests, and be successful in forcing 
Taipei to yield. Nothing of course could be more dangerously far from 
the truth.
    PNTR as part of a robust package that conveys that message loud and 
clear is something we should all support, but only in that form. 
Otherwise it will be read as a concession, make our problems worse, and 
increase the danger of war.

    The Chairman. Thank you, sir.
    Mr. Mastel.

STATEMENT OF DR. GREG MASTEL, DIRECTOR, GLOBAL ECONOMIC POLICY 
        PROJECT, NEW AMERICA FOUNDATION, WASHINGTON, DC

    Dr. Mastel. Thank you, Mr. Chairman. I appreciate the 
opportunity to testify today regarding the prospect of granting 
permanent normal trade relations status to China and China's 
membership in the World Trade Organization to which it is 
linked.
    Given time limitations today, I plan to focus my remarks on 
the WTO accession agreement with China and, more specifically, 
the enormous problems the United States and the WTO are likely 
to face in enforcing the agreement.
    On paper, the WTO accession agreement negotiated between 
the United States and China has many positive features, but the 
question is, will China make good on those promises? 
Ultimately, WTO is a trade agreement. It has a detailed process 
for enforcing compliance, but, as the ongoing conflict between 
the United States and Europe on several agricultural issues 
demonstrates, the process has a number of flaws and 
implementation of promises and dispute settlement panel 
findings is far from automatic.
    The best indicator of China's willingness and ability to 
implement the promises it has made in a WTO context and its 
record in implementing other trade agreements. In the last 
decade, the United States and China have concluded a number of 
major trade agreements covering topics such as intellectual 
property and textile imports. In my written testimony for the 
record, I have included a detailed breakdown of China's record 
in implementing these agreements.
    My conclusion, that can immediately be drawn from the 
record, is that China has a poor record of keeping its trade 
promises. Every major trade agreement with the United States 
and China has been dogged by repeated incidences of Chinese 
noncompliance, sometimes open violation of the terms of the 
trade agreement.
    China's supporters often point to several understandings 
struck on intellectual property as evidence of China's 
willingness to keep its trade commitments. Without question, 
the United States has invested a much greater effort on 
enforcing agreements on this topic than on any other. In most 
other areas, the United States has not seriously challenged 
China's agreement violations. With regard to intellectual 
property piracy, however, the United States has formally 
threatened to impose trade sanctions on China on at least two 
occasions.
    As a result of this pressure, there is evidence that China 
has made an effort to curb piracy. As any informed observer 
would concede, however, piracy of intellectual property is 
often linked to Chinese Government ministries, the People's 
Liberation Army, and the relatives of Chinese leaders, remains 
a widespread problem.
    In fact, industry estimates of total losses resulting from 
piracy in China are higher today than they were when the 
Clinton administration first took action in 1995. Moreover, the 
progress that has been made is a direct result of repeated 
threats of sanctions by the United States. Without these 
threats, China is likely to have made little progress 
fulfilling its negotiated promises.
    Often, observers seem to assume that the WTO will 
automatically be able to improve China's compliance with trade 
agreements. There is no basis for this assumption. The WTO has 
potential strings over bilateral understandings of obligating 
China to meet a wide array of commitments and bringing some 
multilateral pressure on China to reform its trade policies.
    Unquestionably, these are positive features, but the WTO is 
not well-suited to policing China. The WTO is the ultimate 
rules-based market-oriented organization. The fundamental 
problem is that China is neither a rules-based country, nor a 
fully market-oriented economy.
    Given the arbitrary and nontransparent nature of the manner 
in which Chinese ministries often make trade policy, it may be 
difficult to even determine exactly what Chinese trade policy 
is in some areas, let alone actually to win a WTO dispute 
settlement panel finding against China. As a result, the WTO is 
likely to suffer from exactly the same type of compliance 
problems with China that have plagued the bilateral trade 
agreements with China, and the United States is likely to have 
given up one option, that of opposing trade sanctions, to 
enforce China's compliance.
    At some point, China should become a WTO member. In a 
perfect world, it would be wise, I think, to wait until--keep 
China outside the WTO for a few years to allow its legal system 
to mature and its economic reform progress to advance further, 
but policy is not made in a perfect world. Given the failure of 
bilateral negotiations to achieve U.S. trade objectives with 
China, I am cautiously willing to support China's WTO 
membership provided the United States invests the time and 
effort to enforce the agreement.
    Congress could play an important and critical role in 
ensuring that necessary time and energy is devoted to 
enforcement. In general, the Congress has taken much more 
interest in enforcing trade agreements than various 
administrations.
    In the case of the Clinton administration, much of the 
critical work has taken place in the last days of the 
administration, at a time when many administration officials 
seem eager, perhaps too eager, to complete China's WTO 
accession and convince Congress to vote for PNTR.
    PNTR is the Congress' major point of leverage vis-a-vis the 
administration in China. It would be wise for the Congress to 
withhold the vote on PNTR until the WTO accession process is 
complete. At the very least, the Congress should insist that 
the final WTO accession protocol pay particular attention to 
the enforcement issue, and pass legislation to ensure regular 
U.S. efforts to police enforcement.
    In closing, I would like to make one brief point regarding 
Taiwan's WTO accession. As they argue in an article in this 
week's Weekly Standard, which I ask to be included in the 
record, China has succeeded in holding up Taiwan's WTO 
accession as it negotiates the terms for its own accession. In 
my opinion, WTO members have been far too sensitive to China on 
this matter. What is more, there is good reason to fear further 
Chinese chicanery with regard to Taiwan's application.
    Whatever one's opinion about China's WTO application, there 
can be little argument that Taiwan should be in the WTO. It is 
incumbent on the U.S. Congress and the administration to ensure 
that Taiwan's membership is secured this year.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Mastel follows:]

                 Prepared Statement of Dr. Greg Mastel

    Mr. Chairman and Members of the Committee, my name is Greg Mastel 
and I am Director of the Global Economic Policy Project at the New 
America Foundation.
    I appreciate the opportunity to testify today before the Committee 
regarding the prospect of granting Permanent Normal Trade Relations 
status to China and China's membership in the World Trade Organization 
(WTO).
    Over the last ten years, I have worked and written extensively on a 
number of topics related to U.S. trade policy toward China. I have 
thoughts on a number of issues raised here today, including the large 
and growing U.S. bilateral trade deficit with China.
    I plan, however, to focus my remarks on the WTO accession agreement 
with China and, more specifically, the enormous problems that the 
United States and the WTO are likely to face in enforcing that 
agreement.
                      the wto accession agreement
    Trade agreements are by their nature compromises. As a result, they 
are normally not ``perfect'' from any individual perspective. The 
agreement with China is no exception. Unquestionably, a number of 
provisions could be improved. Chinese tariffs could be lowered beyond 
the 17 percent China has agreed to. Foreign telecommunications firms 
and banks could be granted more leeway to operate in China. It is 
possible that subsequent negotiations between China and other WTO 
members may improve the terms on these or other issues.
    On paper, however, the ``deal'' negotiated between Washington and 
Beijing has a good deal to commend it. China does agree to substantial 
tariff cuts. China does commit to substantial new market access for 
agricultural products. U.S. banks and insurance firms are promised 
substantially increased access to Chinese consumers.
    Unfortunately, the problem in negotiating trade agreements with 
China in recent years has not been convincing China to promise 
improvements, it has been getting China to fulfill its promises. 
Already, Chinese press reports indicate that China does not plan to 
rigorously fulfill the agricultural provisions in the WTO accession 
agreement.
    A careful examination of the four recent major trade agreements the 
United States has struck with China strongly suggests that compliance 
problems have been serious.
                      intellectual property--1992
    One of the best-known agreements between the United States and 
China involves protection of intellectual property--patented, 
copyrighted, and trademarked material. The United States has sought 
improved protection of intellectual property from China for many years.
    After the threat of sanctions, the Bush administration convinced 
China to undertake a sweeping update of its laws protecting 
intellectual property. China brought its intellectual property 
protection regime largely into compliance with accepted western norms.
    Unfortunately, these legal changes had little discernible impact on 
the ground. Chinese piracy of music recording, computer programs, and 
films grew at an alarming rate at least through the mid-1990s. Movies 
and computer programs made by Chinese pirates turned up as far away as 
Canada and Eastern Europe.
    After trying to address matters through quiet consultations, the 
Clinton administration threatened to impose trade sanctions in 1995 
unless the situation improved. As the deadline for sanctions 
approached, China agreed to step up enforcement efforts.
    A year later, however, it was apparent that China's promises had 
resulted in little improvement. Once again, the Clinton administration 
threatened sanctions. After much complaint, the Chinese agreed to a 
much more specific enforcement regime.
    With consistent pressure from the United States, China has 
regularly produced records of pirate operations shut down and held 
press demonstrations with steamrollers crushing pirated CDs. Although 
these demonstrations do show at least some ongoing effort to attack the 
problem of piracy, they also demonstrate that piracy continues at a 
high level. Although it is difficult to precisely measure, U.S. 
pressure has won some results, but the U.S. industry estimates that 
losses to piracy today are greater than they were when the topic of 
enforcement was raised in 1995.
    Two points warrant further attention in the context of enforcement.
    From the outset, it has been clear that provincial leaders, the 
families of leading Chinese officials, and even the Chinese military 
have been directly involved in intellectual property piracy. Pirates 
reportedly set up facilities to make illegal CDs on People's Liberation 
Army bases. Apparently, basing operations on PLA bases was a 
particularly effective method to avoid internal security police that 
aimed to shut down pirate facilities. In short, piracy of intellectual 
property has not been solely the province of street level criminals, 
elements of the Chinese government also appear to be involved in 
piracy.
    Second, one intellectual property problem directly involves the 
government. One item that Chinese officials explicitly promised to 
address in 1995, 1996, and again in March of 1999 is that of government 
Ministries using illegally copied computer software. According to first 
hand reports, government ministries routinely illegally copy computer 
software for their use. Such an ongoing problem within the government 
calls into question the sincerity of China's commitment to fulfill its 
agreement with the United States on intellectual property protection.
    In many ways, the efforts made to enforce the agreement on piracy 
of intellectual property are unique. Both the private sector and the 
Clinton administration have made enforcement of this agreement a 
priority for the better part of a decade. Still, glaring enforcement 
problems remain. If it had not been for the ongoing, high-level 
enforcement effort by the United States, there is no reason to believe 
that China would have made a serious effort to fulfill the promises 
made in 1992.
                          market access--1992
    Unfortunately, the high level commitment made to enforce the 
intellectual property agreement has not been repeated on other 
agreements. A sweeping agreement struck with China in 1992 on market 
access issues is a case in point.
    Through the early 1990s, China followed an unabashedly 
protectionist trade policy excluding many foreign products with a 
number of trade barriers. Under threat of sanctions similar to those 
used on intellectual property, the Bush administration successfully 
negotiated a sweeping market access agreement with China aimed at 
lowering trade barriers and creating new opportunities for U.S. 
exports.
    In its latest reports on the subject, the Clinton administration 
states that China has ``generally'' fulfilled its commitments. On some 
of the easily verifiable matters covered by the agreement, like 
elimination of formal barriers and lowering tariffs, China does seem to 
have implemented the agreement. In a number of other areas, however, 
there have been glaring and obvious problems. Due to space limitations, 
only three--all acknowledged by the Clinton administration--will be 
discussed here.
    First, China agreed in 1992 to eliminate all import substitution 
policies--policies that aim to substitute domestic production for 
imports. In formal state plans on automobiles and pharmaceuticals 
approved by Chinese economic policy makers at the highest levels, 
import substitution requirements were specifically included. Similar 
policies are included in lower level Ministry directives on a number of 
products, including power generation equipment and electronics 
products.
    Import substitution is perhaps the most direct form of 
protectionism possible and it was officially renounced in 1992. Still, 
time and time again the Chinese government has ignored this commitment.
    China also agreed to phase out an entire class of barriers, import 
licenses, and not raise new barriers. Shortly, after import licenses 
were phased out, however, China announced a suspiciously similar set of 
import registration requirements for many of the products previously 
covered by import licenses. A number of new trade barriers on products 
ranging from electricity generating equipment to pharmaceuticals have 
also sprung up.
    Finally, China agreed to make all laws and regulations relevant to 
foreign trade public--a major change in a country where many 
regulations and policies are not made part of the pubic record. Many 
such directives are now publicly available. Yet, this seemingly 
elementary provision has also not been implemented in a number of 
areas, including government procurement regulations.
    Taken separately, it is difficult to estimate the economic 
importance of each of these violations. It is clear, however, that they 
are clear, unambiguous examples of the Chinese government directly 
violating the terms of the 1992 market access agreement. These charges 
have been officially made for a number of years, and the Chinese 
govermnent has offered no denial or explanation.
    In their defense, Clinton administration officials argue that it is 
difficult to pursue these matters because other U.S. government 
agencies have other priorities and many private sector companies do not 
support action. It is certainly true that many U.S. companies are not 
anxious to have the United States threaten trade sanctions that may 
compromise their business in China to address trade issues that do not 
directly concern them. For instance, some companies also expressed 
concern over sanctions to stop intellectual property piracy. If, 
however, agency indifference and private sector grumbling are 
sufficient to halt enforcement of trade agreements, it is doubtful that 
any trade agreements, particularly with countries that are willing to 
intimidate U.S. companies, will ever be enforced.
                          textile transhipment
    For decades, trade in textile and apparel has been governed by a 
special trading arrangement known as the Multi Fiber Agreement (MFA). 
Under the MFA, importers and exporters of textiles negotiate what 
amount to specific quotas on textile imports on a bilateral basis. As 
the world's largest textile exporter and the world's largest importer, 
China and the United States, respectively, both participate in the MFA 
and concluded a parallel bilateral agreement in 1994.
    For some years, there have been persistent reports of transshipment 
of textiles and apparel by Chinese entities to avoid MFA limits. In 
essence, transshipment involves Chinese companies labeling textiles 
made in China as having originated elsewhere, usually Hong Kong or 
Macao, to avoid MFA limits. Given the illegal nature of transshipment, 
accurate figures are not available on the scope of the problem. A past 
U.S. Customs Commissioner estimated that transshipment from China into 
the U.S. market amounted to about $2 billion worth of imports annually. 
A more recent Customs study noted that as much as $10 billion in 
Chinese textile exports were not officially accounted for--much of this 
undoubtedly found it's way into the U.S. market.
    This issue deserves particular attention in connection with any 
discussion on the size of the U.S. trade deficit with China. A number 
of individuals, I believe incorrectly, argue that the size of the U.S. 
trade deficit with China is greatly exaggerated. Invariably, the 
analysts that take this position simply ignore the issue of textile 
transshipment. If the findings of the U.S. Customs Service are correct 
with regard to transshipment, it means that official U.S. statistics on 
the trade deficit with China actually underestimate the deficit by 
several billion dollars per year because they overlook Chinese textile 
exports illegally transshipped through Hong Kong and Macao.
    The Customs Service has undertaken a number of enforcement efforts 
to address transshipment over the years, including reducing China's 
official MFA quotas as a penalty for transshipment. In 1997, China and 
the U.S. reached a four-year Textile Trade Agreement that, among other 
things, reduced quotas in fourteen apparel and fabric categories where 
there were repeated instances of transshipment and strengthened 
penalties for transshipment. Nevertheless, in May 1998, USTR and 
Customs brought action against China for violation of the agreement, 
imposing $5 million in charges on textiles illegally transshipped.
    Each year, a list of Chinese, Macao and Hong Kong companies 
involved in transshipment is also released. On the most recent list, 23 
of the 26 companies assessed penalties for illegal transshipment were 
from China, Hong Kong or Macao, and 27 of the 32 companies under 
investigation were from China, Hong Kong or Macao. Despite these 
efforts, the problem of transshipment unquestionably continues.
    Whatever one's views on the desirability of the MFA, China's record 
of tolerating massive transshipment of textiles and apparel to avoid 
MFA quotas is hardly an encouraging example of China's record of trade 
agreement compliance.
                              prison labor
    Similar problems have been identified with regard to China's 
exports of goods made with prison labor. China has an extensive system 
of prison work camps that produce products ranging from apparel to 
tools and machinery. Often, prison work forces are leased to private 
sector firms to assemble or manufacture various products. Under a 1930s 
U.S. law, it is illegal to import into the United States products made 
with prison or forced labor.
    Over the years, there have been persistent allegations that a 
number of imports from China violated this law. In 1992, the Bush 
administration concluded a bilateral agreement to halt the export of 
forced labor goods to the United States and to hold periodic 
consultations between Customs officials from both countries.
    Despite the agreement, advocacy groups interested in the topic of 
prison labor have produced evidence that various Chinese companies 
exporting to the United States are involved in prison labor commerce, 
found evidence that various products made with prison labor have been 
imported into the United States, and done hidden camera investigations 
in China indicating that Chinese companies are prepared to export 
prison labor products to the United States.
    Because it is very hard to distinguish prison labor goods from 
other goods in commerce, it is impossible to make a credible estimate 
of the size of the problem. However, the State Department's 1998 report 
on Human Rights Practices in China found that Chinese cooperation under 
the 1992 agreement had been ``inadequate'' and that when complaints 
were brought by the U.S., ``the Ministry of Justice refused the 
request, ignored it, or simply denied the allegations made without 
further elaboration.'' The report also notes that Chinese officials 
have attempted to unilaterally define Chinese work camps as not covered 
by the 1992 agreement--an interpretation that renders the agreement 
virtually meaningless.
                         can china be trusted?
    After reviewing the available evidence, it is clear that there have 
been serious enforcement/compliance issues involving every recent trade 
agreement concluded with China. In some cases, it can be credibly 
argued that the agreement still resulted in an on-balance improvement 
in the relevant Chinese trade practices. That said, China's 
implementation fell far short of fulfilling the letter and spirit of 
all trade agreements. Without an extensive U.S. enforcement effort on 
intellectual property, most of the progress that has been made would 
likely never have come about.
    China's defenders often claim that China's record is no worse than 
that of other countries. Without question, it is true that a number of 
U.S. trading partners appear to have cheated on trade agreements over 
the years. Japan is most often cited as an example.
    It is difficult, however, to find another example of a trading 
partner with which there have been serious compliance problems with 
every significant trade agreement negotiated. Further, it can certainly 
be said that--regardless of problems with other trading partners--the 
problem with China is serious enough to raise questions about the 
wisdom of U.S. trade policy toward China. The United States can 
correctly be faulted for generally placing too much emphasis on 
negotiating new trade agreements and too little on enforcing the 
agreements negotiated. That weakness in U.S. trade policy, however, is 
hardly a reason to ignore trade cheating or negotiate agreements 
without consideration of enforcement.
    The problem of poor enforcement/implementation of trade agreements 
in China appears to go beyond a simple matter of countries ignoring 
provisions of trade agreements so as not to offend important domestic 
constituencies. As many Chinese leaders have conceded China lacks a 
reliable rule of law. In the trade arena, this means that it is 
difficult or impossible for any entity in the Beijing government to 
direct policy changes that bind China's diverse collection of 
Ministries, State Owned Enterprises, and provincial governments.
    Unfortunately, although international pressure may at times be 
helpful, the WTO is not a magical solution to this problem. The WTO is 
the ultimate in an international, rule-of-law based institution. It is 
unclear that it will be able to police a country that operates without 
a rule-of-law. Trade policies in China are often made in secret without 
a paper trail. It may well be impossible to even document the existence 
of objectionable Chinese trade practices much less win a WTO dispute 
settlement panel against them.
    To some, problems of enforcement may seem to be a rather trivial 
concern. These critics should keep in mind that none of the benefits 
ascribed to a WTO agreement with China will be achieved without 
enforcement. In fact, if China simply ignores the terms of the WTO as 
it has other agreements the benefits could be quite limited; the damage 
done to the credibility of the WTO under this scenario, however, could 
be lasting and serious.
    Critics would also do well to keep in mind that there is no 
guarantee that the current relatively reform minded leaders in Beijing 
will prevail. Given the uncertainties of Chinese politics, it is 
certainly possible to imagine a much less reform oriented regime, 
perhaps one led by the military or hard line elements, emerging in 
China. Instead of using the WTO as a springboard for domestic reform, 
such a regime could use the WTO as a shield to block foreign sanctions 
against their policies. Such a regime would pose enormous WTO 
enforcement problems as well as challenges on many other fronts.
    In fact, membership in the WTO will only help Chinese reformers, 
like Zhu Rhongji, reform China's economy if it is enforced. Viewed from 
this perspective, a vigorous, ongoing effort to enforce the WTO in 
China may be the best thing the United States could do to further the 
cause of reform in China.
    Unfortunately, as the above examples demonstrate, the record of the 
United States in carrying out such enforcement efforts is far from 
reassuring. Historically, efforts to enforce trade agreements have been 
transient and unpredictable, often blocked by other government 
priorities or concerns of some U.S. companies that tough enforcement 
actions might compromise their specific interests.
    In light of this record on enforcement and China's weak compliance 
record, the Congress would do the United States and, ultimately, 
Chinese reformers a favor by creating vigorous enforcement procedures 
as a quid pro quo for approving permanent MFN for China. This could 
take the form of annual reviews, in which the Congress has a direct 
role, backed up by the promise of trade action to ensure that 
enforcement of the WTO remains a priority of the United States.
    Given the highly politicized context in which this issue will be 
considered, it is easy to imagine the discussion being dominated by 
partisan politics. This would be truly unfortunate and likely result in 
a poor outcome. All sides would do well to remember that the trade 
arrangement will last well beyond the election year. China's membership 
in the WTO seems likely this year, but the task of bringing China into 
compliance with the WTO's provisions will likely take decades. A 
successful effort will take the ongoing effort of Congresses and 
administrations that will not be elected for years to come. If Congress 
and this administration can build an ongoing framework to ensure 
attention to these important issues, they will do future Congressmen, 
future Presidents, the cause of reform in China, and America as a whole 
a great service.
    Thank you for the opportunity to testify.

    The Chairman. Thank you, sir. Very well.
    Bob, Mr. Kapp, glad to see you again.

 STATEMENT OF MR. ROBERT KAPP, PRESIDENT, U.S.-CHINA BUSINESS 
                    COUNCIL, WASHINGTON, DC

    Mr. Kapp. Thank you, Senator. It is good to be back. As 
usual, I wait until the last minute to think about what to say 
in oral testimony and, as a result, I am going to race quickly 
through a mixture of points, some of which are reflected in my 
written work and in the attachments that went with that, and 
others of which reflect my thinking about our discussions 
today.
    The Chairman. By the way, all the prepared testimony of 
each of you will be printed in full in the report that will be 
given to every Senator.
    Mr. Kapp. Thank you very much.
    So here are a series of rapidly delivered ideas.
    I would suggest that those who object most strongly to 
conditions which they find offensive or troubling or morally 
problematic in China ought to be at the forefront of the effort 
to establish PNTR for China.
    The fact is that the WTO agreement that the United States 
signed with China last November is the single most positive and 
impressive example of favorable American influence over China's 
domestic behavior that we have seen since the establishment of 
diplomatic relations.
    The range of commitments that China has undertaken, at 
great pain and after great political struggle within the 
regime, to changing the way in which this regime relates to the 
citizens of its country in the area of economic affairs, and 
the commitments to eliminate the cronyism and the favoritism 
and the secrecy of the economic process which has so stymied 
American and other foreign economic participants in China over 
the years, are in fact extraordinarily positive developments 
with greater implications for the future improvement of China's 
domestic behavior by our standards than anything the United 
States has done in the previous 20 years.
    I might move on to say, and I know that Mr. Mastel knows 
this very well; we all do, that the issue before us is not 
whether China gets into the WTO. If China settles with the 
Europeans and the six or seven other trade partners, China will 
enter the WTO. The Congress is not voting on that. The Congress 
is voting on whether the United States shall provide full WTO 
member treatment to China when China enters and, by doing so, 
receive from China the full WTO member treatment whose 
advantages that we secured at the negotiating table last 
November.
    If the United States says no to PNTR, the Germans and the 
French and the Dutch and the Australians and the British and 
the Japanese and everybody else in the WTO will receive, 
delivered on a silver platter, the economic opportunities that 
China granted in negotiations with the United States last 
November, and we will say, after 13 years of bitter 
negotiations with the Chinese, ``Sorry, we do not want it after 
all.''
    The issue of the PNTR vote is this: Does the United States 
choose to realize for its own citizens the economic 
opportunities embodied in the agreement we signed with China 
last November after 13 years--advantages which will be 
delivered to every other WTO member upon accession, whether we 
avail ourselves of those opportunities or not. At the risk of 
sounding dramatic, I would say that to turn down PNTR under 
those circumstances would be a form of unilateral economic 
disarmament.
    Moving on. PNTR is not a favor to China. We do not have to 
spend a lot of time on that today. The United States did not 
make concessions in this agreement that we signed with the 
Chinese last November. The Chinese did. Tariff reductions, 
market openings, all the things that make this an 
extraordinarily powerful trade agreement--and no question about 
it, it is a trade agreement--do not represent a favor to China. 
They represent an opportunity for the United States which it is 
up to the Congress to grasp or to reject.
    Now, on a couple of other points that have dominated the 
discussion today, let me mention to you a conversation I had 
not 45 minutes before coming over here with a figure of 
considerable reputation in the Chinese human rights community. 
I called and said, ``The silence of the organized Chinese human 
rights community in this country is perplexing to me. Are there 
no voices, pro or con, on PNTR?''
    The answer was in essence, ``We have decided, after great 
debate, to remain mute on the subject. The differences of 
opinion are very, very great.'' Said the person to me, ``Take 
the situation in China. The liberal intellectuals, the people 
in the forefront of the move to the market economy and in the 
move to a more open civil society, they want PNTR, they want 
full U.S. participation in this economy as a WTO member.
    ``On the other hand, those whose loved ones are in jail and 
under the crushing hand of the State, understandably''--and I 
personally understand this, of course--``are seeking for any 
lever that can be found with which to compel the Chinese regime 
to release and to treat humanely their loved ones.''
    That brings me, since we are already at the yellow light 
time, to the issue of leverage. I do not understand, Mr. 
Chairman, how we can say that we should consign China to yet 
more of the same American treatment which we have accorded or 
imposed upon China over the last 20 years if that very 
treatment by definition has been a failure.
    That is to say, as I say in my written testimony, if China 
is as iniquitous and as full of horror and malfeasance as the 
anti-NPTR forces maintain so stoutly that it is, why would 
anyone consign China to more of the same old treatment? The 
same old treatment has been a failure.
    If somebody wanted to come out of it and say, ``All right, 
let's cancel MFN, or NTR, let's cancel normal trade with China, 
let's hit 'em where it hurts,'' at least to me it seems it 
would be more honest, or at least a more logically consistent 
argument.
    But to say that we should not bring China, in our own 
treatment of China, within the structures of international 
obligation backed by international sanction, under a set of 
rules and obligations defined by the entire world community, 
with the United States as perhaps the most important single 
drafter of those WTO codes; but instead should consign China to 
more of the failed treatment of annual review, which over 20 
years has in fact by the anti-PNTR forces' own standards done 
nothing to improve the situation there, simply defies my 
understanding. I would welcome a chance to discuss it with our 
fellow witnesses and with members of the committee now or 
later.
    Thank you very much for your courtesy in receiving me 
today.
    [The prepared statement of Mr. Kapp follows:]

                  Prepared Statement of Robert A. Kapp

    Mr. Chairman, members of the Committee:
    I am grateful for the opportunity to speak to you today.
    I am Robert Kapp. president of the United States-China Business 
Council. The Council, established in 1973, serves more than 250 leading 
U.S. companies from its Washington headquarters and its field offices 
in Beijing, Shanghai and Hong Kong with a combination of direct 
business advisory assistance, publications including The China Business 
Review, meetings and conferences, and public policy research and 
advocacy.
    I have attached a number of additional documents for the 
Committee's review, and hope that they will be of interest to Members. 
A number of my comments in this testimony are keyed to the attached 
materials.
    I. China's multiple image in the United States and the problem of 
perspective. (Busy Readers Proceed Directly to II. below)
    Mr. Chairman, I must tell you that I hope I am in the right room, 
at the right hearing.
    When I accepted the Committee's invitation to testify, I received a 
confirming note indicating that the hearing was entitled, ``Permanent 
Normal Trade Status: Implications for U.S. Policy Toward China.'' Four 
days later, as I prepared to write my thoughts, I checked the Foreign 
Relations Committee website to confirm details of the hearing, and was 
surprised to discover that the hearing was now called, ``Rewarding the 
People's Republic of China with Permanent MFN: Implications for U.S. 
Policy.''
    That curious difference in naming this hearing, small and yet 
heavily laden with interpretive intent, is a metaphor for much of our 
nation's habit in perceiving China. Since the U.S.-China encounter 
began in the mid-nineteenth century, it has been difficult for 
Americans to separate what they see in China from what they want to see 
in China or what they want to believe about China. ``Wishful thinking'' 
has vied with ``demonization'' for far longer than the oldest of us in 
this room can personally remember. That's true for people in business, 
in politics, in religion, in the media, and in much of American 
society.
    A century ago, the United States Congress was knee-deep in high-
intensity debate over China. The issue then was closing American 
borders to immigrants from China, a policy first enacted into law in 
the Geary Act of 1892 and impelled both by demands from labor 
organizations and by widespread hostility in American life toward the 
Chinese and their alien ways.
    The leader of the American Federation of Labor published a pamphlet 
on the subject in 1902: ``Some Reasons for Chinese Exclusion, Meat vs. 
Rice, American Manhood Against Asiatic Coolieism: Which Shall 
Survive?''
    The U.S. Commissioner-General of Immigration and former head of the 
Knights of Labor, Terence Powderly, said in 1901, ``No graver danger 
has ever menaced the working men of America than that which faces them 
when the possibility of lowering the bars at our seaports and border-
lines to the Chinese is presented.''
    Senator Teller of Colorado weighed in: ``If I knew the passage of a 
proper exclusion bill would destroy every dollar's worth of trade 
between us and China, I should vote for the exclusion bill. I know that 
the trade between here and China is not worth the admission of Chinese 
hordes into this country, and if I had to choose between the two I 
should take the exclusion.''
    A hundred years later, passions still swirl. Members of this 
Committee know well that analysis of things Chinese is now an industry 
in Washington. Armies of analysts ponder and project China's behavior, 
usually along eye-glazingly familiar lines.
    Rather than attempt to swim in that stream today, I have chosen to 
append to my testimony two thoughtful essays, neither by a so-called 
``China expert,'' on the ways in which we have been debating about 
China in the U.S. at the end of the twentieth century. One essay, from 
the conservative National Review, is by the editor of The National 
Interest, Owen Harries. The other is by a member of the Baker Institute 
at Rice University. I believe both perspectives are worthy of the 
Committee's attention.
    II. The key point on why PNTR should be approved is that the 
economic merits are compelling. The terms of China's WTO accession, as 
brilliantly concluded after negotiations that have spanned the Reagan, 
Bush and Clinton presidencies, are very, very good. No amount of 
politicking and strategizing and spinning and horse trading and looking 
for cover can obscure the breadth of the economic breakthroughs 
embodied in our WTO agreement with China. Senators by now have plenty 
of access to the content of the agreement; it is available publicly, at 
the U.S.-China Business Council website, www.uschina.org.
    With its decision on PNTR, Congress will either bring home to the 
American people the genuine equality of economic market opportunity in 
China for American farmers, American workers, and American companies 
that we won on paper at the bargaining table last fall, or it will cede 
that equality of opportunity to our competitors in Japan, Europe, and 
elsewhere while the U.S. walks away. If we treat WTO member China 
differently than we treat the remaining 133 WTO members, we don't 
receive China's WTO terms in return. That, above all, is why Congress 
should pass PNTR.
    This point is further developed in the attached article, entitled 
``In Full and on Time.'' Since that article was penned, I am pleased to 
note how much more fully Members of the House and Senate have come to 
appreciate that essential starting point. Let me, therefore, move on.
    III. PNTR is not a ``favor'' to China. It is not a ``reward'' for 
Chinese behavior, ``bad'' or ``good.'' It is not a ``blank check'' for 
China. These anti-PNTR rhetorical devices are just that: rhetorical 
devices. Their authors know full well that the real issue in PNTR is 
whether the U.S. gains the benefits of China's commitments--made at our 
insistence--to wide-ranging reductions of trade barriers and to 
improvements in the ways that the Chinese economy will engage with the 
world economy. The ``reward'' to be reaped or rejected is a reward to 
the United States.
    Much of the silliness about ``rewarding'' China stems from a long-
running and long-stoked confusion about what Congress is deciding in 
the PNTR vote. This PNTR vote is not, as Members are coming more and 
more to understand, about whether to ``let China in'' to the WTO. 
Congress doesn't vote on that. We arm-wrestled China to a strong WTO 
agreement last fall; we got what we demanded, much of it very, very 
painful to China and bitterly opposed by many powerful groups within 
China. We signed because we were legitimately satisfied with what China 
agreed to. Period. Congress does not legislate the content of that 
agreement, and it does not vote on whether China enters the WTO; the 
WTO's members decide that, and the U.S. will support entry.
    IV. Dealing with the mythic problem of ``leverage.'' One can 
understand the reluctance of the Congress to relinquish roles it has 
exercised in the past. That, I think, is partly the origin of the 
notion that it is necessary to retain the current Jackson-Vanik system 
of annual review of U.S. tariff policy toward China, even at the price 
of unilateral economic disarmament in the post-accession Chinese 
economic environment.
    To be blunt, the ``leverage'' issue is an issue of convenience. 
Because it can never be conclusively shown to exist, it can live 
forever in some minds, and it can be used forever to pursue certain 
policy goals or agendas.
    It reminds me of the notion that if you stare at the sky long 
enough you will see flying horses. If you don't see them, it only means 
you haven't stared at the sky long enough. Keep staring.
    Let me put it simply: If China after twenty years of annual MFN/NTR 
review is as terrible a place, as full of iniquity and as offensive to 
our sensibilities as PNTR's organized opponents say it is, why would 
anyone in his or her right mind consign China to more of the very same 
American treatment that has in his or her view so totally failed to 
change China for the better?
    In fact, there is more ``leverage'' in this WTO package than the 
United States has ever achieved with China before. China's agreement to 
open its economy to unprecedented levels of foreign participation; to 
abide by WTO prescriptions that strike to the heart of the way its 
economy will function and its regime will deal with its own citizens; 
to eliminate discriminatory conduct and develop transparency of 
procedure; to axe such offensive habits as the requirement that foreign 
companies transfer technology in order to do business in China or that 
they export their products from China--this commitment, backed by WTO 
provisions for dispute resolution and multilaterally-imposed sanctions 
represents a degree of real ``leverage'' far more significant than the 
mythical power with which some PNTR opponents endow the current annual 
renewal exercise.
    If this is painful to admit, so be it. The nagging disconnection 
between influence, is an uncomfortable one that approving PNTR will not 
entirely erase.
    V. Other key arguments thrown against Congressional approval of 
PNTR have proven gossamer as this debate has unfolded. I deal with them 
mostly in the attached article, ``Cutting Through the Smoke.'' That 
article speaks to the ``Great Sucking Sound'' prediction of 
catastrophic loss of U.S. employment if PNTR passes. The fact is that 
whether the Chinese economy grows at 10 percent a year or shrinks at 10 
percent a year is going to have far more to do with the impact of U.S.-
China trade on U.S. employment than anything in China's WTO accession 
package. And the fact is that whether the U.S. economy continues to 
move ahead in the manner of its current long-running advance or 
encounters tougher sledding in the future will have far more to do with 
overall U.S. employment levels than will developments in U.S.-China 
trade.
    ``Cutting Through the Smoke'' also takes up the claim that our 1979 
bilateral trade agreement with China automatically ensures that the 
U.S. will reap the full benefits of China's WTO commitments without 
treating China as a full WTO member. (Two publications not attached 
here, GAO report 00-94, March 2000 and the new Institute of 
International Economics Policy Brief Number 00-3, ``American Access to 
China's Market: The Congressional Vote on PNTR,'' issued April 10, 
provide an authoritative decent burial for this mistaken assertion.)
    VI. On the demand that Congress turn PNTR down out of solicitous 
concern for the welfare of China's laboring population, I commend to 
Members' attention the attached open letter from twelve distinguished 
American academic specialists on China's economy and society, entitled 
``PNTR, WTO and Chinese Labor Standards.'' With regard to the towering 
environmental challenges which a rapidly modernizing China faces, I 
simply ask whether denying to Americans the access to China's market 
for many of the services that buttress economic efficiency, waste 
reduction, pollution control, and more sophisticated assessment of the 
costs of economic and social development will make a positive 
difference to these enormous problems. Does tilting China's market away 
from American corporations that apply advanced environmental standards 
to their operations worldwide, while other countries' enterprises with 
less stringent standards remain free to operate, advance China's 
environmental progress? Could anyone maintain with a straight face that 
the long-term policy goal of drawing China into international 
commitments on the environment will be made easier if the U.S. turns 
its back at the last moment on the results of 13 years of negotiation 
with the PRC over the WTO issue?
    VII. On the notion that China cannot and will not live up to its 
commitments under international agreements, in which the intellectual 
property issue is commonly alluded to, I refer Members to the attached 
open letter from the full range of associations of U.S. firms in the 
``creative industries,'' calling for China's WTO inclusion and for 
passage of PNTR in full recognition of the current inadequacies of 
intellectual property protection in China. These associations are the 
ones that prosecuted America's case against China over IPR in 1995 and 
1996. They address the ``China doesn't abide by its commitments'' 
challenge well, and I hope Members will take the time to consider their 
views.
    VIII. Conclusion. Mr. Chairman, the overheated debate over PNTR for 
China, with the spectre of an election year hanging overhead, threatens 
to drown the core issues of the PNTR decision in an ocean of hyperbole. 
We need to resist those distractions. I believe the national interest 
will be better served by a decision to approve PNTR on its humbler 
merits.
    Loading down the PNTR issue with all the baggage of America's 
dilemmas over China's modernization will not resolve those dilemmas.
    Framing the PNTR decision as part of a strategic U.S. effort to 
bring about what is sometimes called ``regime change'' in China is an 
exercise in futility.
    Mobilizing thousands of constituents against a pending decision not 
to change U.S. tariffs on imports from one nation, on the spurious 
grounds that the decision is a ``favor'' to Chinese malefactors, is 
certainly the right and the privilege of PNTR's opponents in our free 
society, but it is not the foundation of effective policy.
    On the other hand, attributing to PNTR miraculous powers to rout 
the forces of evil and bring about the Millennium is not a wise choice 
either.
    Approving PNTR is not going to bring peace or war between the PRC 
and Taiwan. It is not going to create a multi-party electoral democracy 
in Beijing. It is not going to establish habeas corpus or judicial 
review in China. It is not going to get people out of jail--or put 
people in jail.
    It is not going to validate the assertions of the legions of 
``China Threat'' advocates. Nor will it transform China into an earnest 
ally of the United States against enemies seen or unseen.
    If the PNTR issue does have significance beyond the absolutely 
critical economic merits that I have touched on above, I would suggest 
the implications are twofold.
    First, we should expect that progress with China on the many other 
issues of contention that we face will be more difficult to achieve if 
the United States turns away at the very last moment from a signed 
agreement thirteen years in the making, in which China painfully agreed 
to a vast laundry list of U.S. demands that strike to the heart of 
China's economic system and even touch on the PRC's political future.
    Passing PNTR does not guarantee the successful resolution of our 
differences on many other troubling issues. I am confident, however, 
that killing PNTR will have a long-lasting and negative impact on 
prospects for management of those conflicts.
    Second, and most important, whether we like it or not the humble 
PNTR vote has become a defining moment in the determination of 
America's response to China's gigantic and perplexing post-Mao effort 
at rapid modernization based on expansion of market economics and 
integration with the world economy.
    China will enter the WTO, on terms we have largely framed. It will 
accommodate itself to the requirements the WTO imposes on all members, 
or pay a heavy price if it fails to do so.
    Will the U.S. welcome China's inclusion under the standards the 
world imposes upon it, helping to ensure China's evolution along paths 
that Americans hope it will travel while at the same time maximizing 
the resulting domestic economic advantages?
    Or will the U.S. tread, at the beginning of the 21st century, a 
path all too similar to that advocated by Senator Teller of Colorado at 
the start of the last century, as quoted at the beginning of this 
testimony? I have every confidence that the Congress will take the 
right path. Thank you.

                                 ______
                                 

      [Reprinted from The China Business Review, March-April 2000]

                Cutting Through the Smoke on China PNTR

     (By Robert A. Kapp, President, The US-China Business Council)

    We are now far enough into the national debate about Congress's 
vote on Permanent Normal Trade Relations (PNTR) for China to be able to 
see the dimensions, the main arguments, of the discussion. Whether by 
intent or out of ignorance, a number of confusions remain--in the 
media, in the Congress, and perhaps in the public mind--about what PNTR 
is, what Congress's decision is, and what the implications of the 
outcome in the Congress will be. Let me try to address the main 
confusions.
    1. Congress's vote on PNTR is not a vote on whether China becomes a 
member of the world Trade Organizalion or not. The 133 member countries 
and territories of the WTO decide that. Having concluded the impressive 
US-China agreement of last November, the United States will support 
China's access when China finishes its remaining bilateral WTO deals 
and the WTO accession process kicks in. Since the vote is not on 
whether we ``permit'' China to enter the WTO or not, the vote is not a 
``gift to China.''
    2. Establishing a different NTR for China than we provide to all 
other WTO members is discriminatory. WTO members may not discriminate 
in their treatment of one another. The United States treasures that 
core WTO requirement, because it prevents other countries from 
discriminating against our goods, services, and investments. But if we 
discriminate against another WTO member, that member is entitled to 
discriminate against us. All members of the WTO extend permanent 
unconditional NTR to all other members, and receive that treatment in 
return. US treatment of China in a different manner from the treatment 
of other WTO members will punish our workers, our producers, our 
farmers, our exporters, and even our consumers.
    3. Failure to provide PNTR--full WTO member treatment--to China as 
it enters the WTO is unilateral American economic dlisarmanient in 
favor of our global competitors. If the United States discriminates 
against China by establishing a different, non-permanent form of NTR 
for this one country, the US forfeits its right to avail itself of the 
massive economic and commercial concessions that China has agreed to--
in our negotiation with the PRC--as conditions of China's entry into 
the WTO. China's commitments to open its markets, end discrimination 
against foreign goods and businesses, open hitherto closed sectors to 
international participation, and so on--plus its obligation to submit 
to WTO disciplines and binding WTO dispute resolution--will be 
available to every WTO member except the United States if we walk away 
from our one obligation--to treat China like a WTO member when China 
enters the WTO.
    4. The claim that we can deny PNTR to China and still enjoy all the 
economic and commercial advantages that the other 133 WTO members will 
enjoy when China joins, thanks to our 1979 trade agreement with China 
that calls for reciprocal MFN, is false. The 1979 US-China trade 
agreement, signed at the moment diplomatic relations began and before 
there was a significant US-China trade or investment relationship, is a 
couple of pages long. Its MFN provision deals only with reciprocal 
exchange of lowest standard tariffs, on goods. In China's upcoming WTO 
accession, lower tariffs are only one of many factors: the great bulk 
of the benefits China has agreed to provide to the world as it enters 
WTO are non-tariff related, and none of those, including WTO dispute-
resolution processes, is available to the United States through the 
1979 three-pager. By this point in this debate, it is simply 
inconceivable that those who continue to peddle this ``We get it all 
anyway'' line don't know better.
    That line is also demeaning to the United States: ``Let the 
Europeans and the Asians level the playing field for all of us by 
establishing PNTR with China themselves; we'll get the goods through 
the back door.'' Wrong on the merits, and wrong on what it implies 
about the United States in world affairs. Even if the statement were 
true, which it isn't, the United States should lead, not hide in the 
pleats of somebody else's skirts on issues involving global economic 
stability.
    5. China's WTO accession does not spell automatic loss of US jobs, 
as PNTR's opponents say it does, any more than it automatically spells 
a gigantic expansion of US employment. Evocations of the ``Great 
Sucking Sound'' debate over NAFTA a few years ago will not wash. Leave 
aside the fact that China's WTO accession involves no US economic 
concessions at all, and leave aside the fact that NAFTA has bolstered 
employment in some US sectors. Even five minutes' consideration will 
tell the youngest novice that the situation with China is not as simple 
as the ``Sucking Sound'' forces continue to suggest. Consider:

   Massive lowering of Chinese tariffs is likely to diminish 
        the pressure to invest in-country that some foreign companies 
        now face, simply to get their products into the Chinese market. 
        If your product is no longer hit with tariffs that price you 
        out of China's market, you may decide to ship into China from 
        the United States, or from another production facility already 
        operating somewhere else.

   The percentage of total production costs accounted for by 
        labor varies from product to product. Most US investment abroad 
        is rooted in calculations other than labor cost. If companies 
        really consider low labor costs to be the sole factor in their 
        decisions, they will move to many countries before they go to 
        China. In fact, for the most part, US exports to the world do 
        not consist of labor-intensive products, but rather of products 
        of US technological strength, design and marketing skill, and 
        production efficiency.

   Yes, China's investment climate for foreign firms is going 
        to improve with WTO entry. For example, at US insistence, China 
        has agreed to prohibit existing practices that require foreign 
        firms to transfer advanced production technology or export a 
        portion of their PRC-produced goods simply in order to be 
        allowed to operate in China at all. But these very concessions 
        that China has now made were until recently the cherished aims 
        of the same US political forces that now insist on denying them 
        to our own people. Would they rather, as will be the case if 
        PNTR is not approved, that US firms continue to be forced to 
        transfer technology and export their products from China? What 
        does that do for US employment?

   As one astute Congressman noted in a PNTR hearing in mid-
        February, every trade agreement, like every technological 
        innovation or product invention or change in market conditions, 
        brings gains and losses. This is the real truth, but perhaps 
        because it's a balanced view it gets short shrift in the 
        assault on PNTR. No attempt to assess the implications of 
        China's presence in the WTO should count the presumed negatives 
        without taking account of the presumed positives stemming from 
        enormous expansion of US market access in China.

    6. The PNTR vote is simply not about US approval or disapproval of 
elements of China's internal behavior that some Americans find 
repellent. Saying that it is doesn't make it so. This notion that 
enacting a US policy to reap the benefits of a splendid trade agreement 
is somehow the same as stamping the seal of approval on objectionable 
political or government practices in China is just hopelessly 
wrongheaded. It is hard, sometimes, to believe that those making this 
case really fail to understand that PNTR is not a gift to China--it's a 
reward to the United States.
    This argument seems to be particularly seductive in Congress, whose 
members must meet the aroused concerns of voters on a thousand issues 
and who are presumed to be able to do something about each of them. The 
fact is that neither China's WTO admission, in which Congress has no 
say, nor the establishment of full WTO-member trade relations between 
the US and China, in which Congress has the say, is likely to make 
adirect and short-term difference to the long menu of ``hot button'' 
US-China issues. Again, those who continue to argue that PNTR is some 
sort of US ``approval'' of injustice--and that denial of PNTR would be 
a fruitful way for the US to combat evil--ought to know better and, in 
my experience, in most cases usually do know better.
                         the meaning for china
    On the other hand, let's look ahead a little, beyond this spring, 
beyond this November. The long-term implications for positive social 
and institutional change in China embedded in China's WTO agreement 
with the US are incalculably great, and have been ignored by both sides 
in the American debate--a debate which, as usual, paints China in 
fantasies of black and white.
    Simply put, what China has agreed to at our insistence is the 
greatest single step in the direction of a market economy--with all the 
institutional reforms that this will demand--in the history of the 
People's Republic of China. Listen to the words of Pieter Botteier, 
who, as the World Bank's Chief of Mission in China through much of the 
1990s, came face to face every day with the immensity of China's 
challenges in shedding the burden of Soviet-style economics and 
reaching toward the market economy:

          The bilateral US-China WTO accession agreement of November 
        1999 is a historic breakthrough in China's economic 
        modernization drive. It marks the first time since the start of 
        market reforms under Deng Xiaoping in 1978 (and probably the 
        first time in Chinese history) that a comprehensive set of 
        domestic reform targets became the subject of a formal 
        international agreement with, when WTO membership kicks in, 
        powerful multilateral legal sanction.

    The Americans who are the most dissatisfied with aspects of China's 
internal situation should be the most vigorous of all of us in 
insisting on full US involvement in the WTO-assisted evolution of 
China's economic and social systems.
                   the current debate in perspective
    A century ago, the United States Congress was knee-deep in high-
intensity debate over China. The issue then was closing American 
borders to immigrants from China, a policy first enacted into law in 
the Geary Act of 1892 and impelled both by demands from labor 
organizations and by widespread hostility in American life toward the 
Chinese and their alien ways.
    The leader of the American Federation of Labor published a pamphlet 
on the subject in 1902: ``Some Reasons for Chinese Exclusion, Meat vs. 
Rice, American Manhood Against Asiatic Coolieism: Which Shall 
Survive?'' The US Commissioner-General of Immigration and former head 
of the Knights of Labor, Terence Powderly, said in 1901, ``No graver 
danger has ever menaced the workingmen of America than that which faces 
them when the possibility of lowering the bars at our seaports and 
border-lines to the Chinese is presented.'' Senator Teller of Colorado 
weighed in: ``If I knew the passage of a proper exclusion bill would 
destroy every dollar's worth of trade between us and China, I should 
vote for the exclusion bill. I know that the trade between here and 
China is not worth the admission of Chinese hordes into this country, 
and if I had to choose between the two I should take the exclusion.''
    The PNTR Debate of the year 2000 is not about ``Oriental 
exclusion,'' as the Americans of 100 years ago called it. But it is 
nonetheless eerily similar in the degree of emotionalism, the intensity 
of the antagonism, and the complexity of the multiple domestic agendas 
again surrounding a China policy issue within our country. Our 
ambivalence toward China is unchanging, reflected again in the booming 
assaults now under way against the humble decision facing the Congress: 
to continue without threat of revocation a standard, non-discriminatory 
tariff regime for Chinese products entering the United States.
    On the merits, PNTR brings equality of commercial and economic 
opportunity to the United States; without it we forego those chances. 
Both sides in this debate know that. This simple truth, and the facts 
discussed above, will ultimately prevail over the carefully crafted 
misstatements and diversions of PNTR's well-armed opponents. But it is 
dear from the escalating conflict over PNTR that now confronts us that 
this truth and these facts cannot be restated often enough.

                                 ______
                                 

   [Reprinted from The China Business Review, January-February 2000]

                          In Full and On Time

     (By Robert A. Kapp, President, The US-China Business Council)

    After ten years of furious but sporadic activity on the periphery 
of the US-China relationship, the US Congress has arrived at its moment 
in the sun. It, and only it, will decide in the year 2000 a critical 
issue of American international economic and foreign policy, an issue 
with powerful implications for American national security as well. This 
decision entails more than the enjoyment of critical economic 
opportunities for Americans in the international economy. Much, much 
larger questions about the future of the US-China relationship and 
China's role in world affairs--and about China's evolution along paths 
that all Americans hope China will choose--revolve around this fateful 
legislative decision.
    The decision is, of course, whether to accord to the People's 
Republic of China Full WTO Member Treatment, in the form of PNTR--
permanent Normal Trade Relations treatment for imports from China.
            the us-china wto agreement of november 15, 1999
    The US-China agreement on the terms of China's WTO accession 
reached in November 1999 is the single most significant example of 
positive US influence on China's behavior since the establishment of 
diplomatic relations in 1979. It demonstrates the power of effective 
negotiation, and the value of real, hard-nosed, and professional 
engagement with China on issues of substance and detail. ``Sending 
messages to China'' has never brought about the level of commitment to 
internal change that this carefully wrought and wide-ranging agreement 
has accomplished.
    With the remarkable US-China bilateral agreement in hand, China's 
full-fledged participation in the global rules-based trading system is 
a very big step closer. The United States will now support China's WTO 
entry when the WTO makes its final decision, since Uncle Sam secured 
from China the concessions and commitments necessary to defend and 
advance the interests of US producers, farmers, exporters, service 
providers, investors, and consumers.
    The market-opening commitments secured by American negotiators in 
November will be included in the final documents defining China's WTO 
accession, and cannot be weakened.
    With China's accession to the WTO now in view, the rest of the 
WTO's 135 members are ready to enjoy the broad array of opportunities 
opening to them. From Day One of China's WTO membership, they will 
automatically provide to China and receive from China Full WTO Member 
Treatment in all areas defined by the WTO's own codes and by China's 
specific commitments.
    Will the United States now grasp the opportunities our own 
negotiators have wrought, or will the United States choose to turn away 
from key elements of that package of opportunities, even as our 
competitors enjoy them?--That is the question before Congress.
            the wto: the rule of law in international trade
    The WTO, like its predecessor the General Agreement on Tariffs and 
Trade (GATT), is the world's common defense against international trade 
anarchy and economic chaos, which helped drive the world to 
totalitarianism and war in the 1930s. WTO rules and commitments 
liberate market forces and open markets, while providing safeguards 
against predatory trade practices that violate agreed-upon norms of 
openness and reciprocity.
    At the core of the WTO compact are the common extension of WTO 
rights to, and the common acceptance of WTO obligations by, all 
members.
    This is PNTR--Permanent Normal Trade Relations, as we call it in 
the United States. The first lines of the first provision of WTO rules 
require each WTO member to extend to all other WTO members the best 
trade treatment it offers to any of them--in other words, Permanent 
NTR. Giving and receiving PNTR is the cornerstone of the WTO 
relationship among members, a relationship that in its turn extends 
far, far beyond tariffs.
    To fail to extend PNTR to another WTO member is to refuse to extend 
Full WTO Member Treatment--and to forfeit, in turn, the member-to-
member WTO relationship.
    For other countries, this is a non-problem; Full WTO Member 
Treatment is automatic for any new WTO member.
    For the United States, it's different. In 1974, seeking to compel 
the now-defunct Soviet Union to permit the emigration of certain Soviet 
citizens, the United States enacted into law the Jackson-Vanik 
Amendment to that year's Trade Act. Jackson-Vanik mandates one-year-at-
a-time extension by the White House of plain-vanilla NTR tariffs on 
goods from non-market economies, with the presidential extension 
vulnerable in any year to congressional overturn on any grounds.
    After the United States and China opened diplomatic relations and 
signed a bilateral trade agreement in 1979, US-China relations 
developed in a Cold War environment of common concern over Soviet 
intentions. Jackson-Vanik's provisions for possible cancellation of 
standard American tariffs lay dormant for ten years.
    Since 1990, following the televised tragedy of Tiananmen, the 
nation has witnessed a decade of annual summer fireworks over an 
inevitable legislative proposal to kill NTR, close American markets to 
Chinese imports, and push US-China relations onto the rocks.
    Each year, however, those who have led the fight to kill US-China 
trade have failed. In recent years the strong margin of victory in the 
United States for advocates of continued non-preferential trade 
relations with China has reflected the broad bipartisan consensus that 
stable economic engagement with China offered a more promising avenue 
for the pursuit of American material and ethical interests with the PRC 
than did a unilateral declaration of economic war.
                           a critical choice
    With the US and Chinese governments now agreed in writing on 
China's remarkable commitments to market-opening and internal economic 
reform as conditions of WTO accession, however, Congress faces new 
issues.
    Now, Congress must decide not whether to destroy existing economic 
relations with China, but whether to sustain Normal Trade Relations 
over the long term, and whether to support the building of a more 
secure and durable US economic relationship with a China now bound by 
its obligations to WTO rules and standards.
    As China approaches WTO accession, heavily on American terms, the 
US Congress has the choice:

          Do we bring home to American exporters, farmers, workers, and 
        consumers the benefits of China's massive commitments to open 
        its markets, permit foreign participation in formerly closed 
        economic sectors, reduce tariff and non-tariff barriers, reform 
        its standards of economic conduct, and submit to the binding 
        obligations of WTO rules and regulations that the United States 
        has done so much to design?

          Or do we say to China, ``Thanks for the concessions; we don't 
        want them after all.
          ``Thanks for the detailed commitments rapidly to open your 
        markets and dismantle the apparatus of discrimination against 
        us, rooted in ancient history and Leninist secrecy and Maoist 
        dreams of self-sufficiency. We don't want those commitments, 
        either.

          ``Thanks for the historic decisions you have made--at our 
        insistence--to drive the Chinese economy rapidly away from 
        Stalin-Mao economics and toward market economics, whose 
        principles lie at the core of Americans' conceptions of social 
        and economic justice. Those decisions, on second thought, don't 
        merit our endorsement.

          ``And, by the way, about all those iniquities we've objected 
        to for so long: the partiality of your legal and judicial 
        system, the intolerable bureaucratic obstacles to economic 
        cooperation, the opacity of your decisionmaking processes--we 
        prefer to live with them after all. We know you're going to 
        improve your behavior toward the rest of the WTO's members, 
        including our toughest competitors. But don't worry about us: 
        we'll stick to the old system, arm wrestling alone with you to 
        the brink of trade war instead of turning to the world's 
        dispute-resolution mechanisms when we've got a gripe.''

    That is America's choice as we approach the PNTR decision.
    The choice is about delivering to Americans the fruits of what we 
have ourselves achieved at the negotiating table.
    It is about realizing American opportunities in the global economy, 
instead of ``sending messages'' abroad while handing hard-won, real 
opportunities to our competitors.
    It is about encouraging the evolutionary changes within China that 
American critics of the PRC have long demanded, instead of providing 
aid and comfort to the defenders of a beleaguered status quo inside 
China that congressional critics have denounced unremittingly for more 
than a decade.
    It is time to approve PNTR, end the numbing annual NTR exercise, 
and bring home to American producers, farmers, exporters, investors, 
and consumers the benefits our negotiators have finally won--IN FULL 
AND ONTIME.

                                 ______
                                 

     China and Long-Range Asia Energy Security: An Analysis of the 
  Political, Economic and Technological Factors Shaping Asian Energy 
                                Markets

         Slaying the China Dragon: The New China Threat School

 (By Joe Barnes, Research Fellow, James A. Baker Institute for Public 
                        Policy, Rice University)

``. . . China, rapidly becoming the globe's second most powerful 
nation, will be a predominant force as the world takes shape in the new 
millennium. As such, it is bound to be no strategic friend of the 
United States, but a long term adversary.''

        --Richard Bernstein and Ross H. Munro, Foreign Affairs.

``The United States and China are not on a collision course. They have 
already collided.''

        --Jacob Heilbrunn, The New Republic.

``We must contain China.''

        --Charles Krauthammer, Time.

                    1989: the year the trouble began
    Since the end of the Cold War, no issue in foreign affairs has so 
agitated the American political class and policy elite as China. From 
Democratic candidate Bill Clinton's excoriation of then-President 
George Bush for ``coddling dictators'' in 1992 to Republican 
accusations today that the Clinton Administration has all but betrayed 
our national security for the sake of campaign contributions, China has 
emerged as our most politically divisive foreign policy issue. The 
yearly Congressional review of China's Most Favored Nation (MFN) 
trading status ensures that Sino-American relations remain the near-
constant subject of partisan contention, much of it vociferous. The 
debate within the foreign affairs establishment--never short of 
ambitious young intellectuals eager to make their mark or superannuated 
policy-makers quick to find fault with their successors--has been 
perhaps higher in tone but no less heated. Leading foreign affairs 
journals and more general interest magazines have poured forth a 
literal avalanche of work on China, embracing all shades of opinion. 
Not since the late 1940s and early 1950s, when the question of ``who 
lost China?'' gave rise to furious recrimination, have our relations 
with Beijing been the subject of so sharp a domestic debate.
    China, of course, loomed large in the American mind long before Mao 
Tse Tung's seizure of power in 1949. By then China had been the object 
of American missionary zeal and commercial ambition for the better part 
of the century. Our views of the Chinese themselves were admittedly 
complex, even schizophrenic: Pearl S. Buck's long-suffering heroine O-
Lan vied in the American imagination with Sax Rohmer's sinister Fu-
Manchu. But much more was at work than cultural fascination. With the 
Spanish-American War, the United States had become a full-fledged 
Pacific power. Strategic considerations--often of the highest order--
began to play an important role in our policy towards to China. Japan's 
invasion of China, for instance, was the leading cause of deteriorating 
US-Japanese relations during the 1930s and, eventually, of the 1941-45 
Pacific War.
    Clearly, however, the Sino-American relationship assumed a new 
importance and intensity after the Communist takeover. In Korea, after 
all, Chinese troops fought our own. A decade later, fear of such direct 
conflict with Beijing constrained the Johnson Administration's freedom 
of action in Vietnam. President Nixon's approach to China in the early 
1970s was surely one of the most stunning coups in American diplomatic 
history. The strategic partnership he forged with Beijing remained a 
linchpin in American foreign policy throughout the Ford, Carter and 
Reagan Administrations. But the periods of emnity and entente, 
dramatically different as they were, shared in fact a powerful common 
element: each was driven in large part by our efforts to counter Soviet 
expansion. When we perceived Beijing as Moscow's partner or surrogate, 
our policies towards Beijing took on a confrontational guise. When we 
saw an opportunity, as a result of the falling out between the Soviet 
Union and China, to make common cause with Beijing against Moscow, we 
seized it. There was, therefore, a fundamental consistency in American 
foreign policy towards China, one that found equal expression in 
exchanges of gunfire on the Korean peninsula and of toasts in the Great 
Hall of the People alike. This consistency, in turn, drew on a broad 
intellectual and political consensus in support of containment of 
communism and in general and of the Soviet Union in particular.
    1989 marked another watershed in Sino-American relations. The 
Tianenman Square incident of that year was, by any standard, an 
unmitigated public relations disaster of the first order for Beijing in 
the United States, not least because of the savage contrast it struck 
with the peaceful revolutions that swept Central and Eastern Europe in 
succeeding months.
    But 1989 was more than just the year of Tianenman Square and the 
image of a lone protester confronting a tank etched indelibly on the 
American mind. It was also the year of other famous images, not least 
those of Germans celebrating the fall of the Berlin Wall--in short, as 
good a date as any for the end of the Cold War. With or without 
Tianenman, the 1990s would have witnessed a review of the Sino-American 
relationship in both Beijing and Washington, if only because that 
relationship was based in large part on a strategic fact--the immediate 
Soviet threat to both countries--that had passed irretrievably into 
history. The opposite also holds true. Had the Cold War not been coming 
to an end, our response to Tianenman would almost certainly have been 
less severe or, at least, less protracted. Whatever our moral outrage, 
we would still have required Beijing's support against our prime enemy, 
Moscow.
    Relations between the United States and China since 1989 can be 
described, charitably, as troubled. George Bush--former American envoy 
to Beijing and, as the quip went, our ``desk officer for China''--
struggled manfully to maintain the strength of the Beijing-Washington 
relationship. Given the public and congressional outcry over Tianenman, 
he enjoyed only mixed success. Bush's decision, for instance, to send a 
secret mission to Beijing just weeks after the incident caused a storm 
of protest when it was made public. But there were limits, too, even to 
Bush's personal commitment to maintaining Sino-American relations on an 
even keel. In 1992, in the midst of his ultimately unsuccessful 
reelection campaign, Bush went so far as to authorize the sale of 150 
F-16 fighter aircraft to Taiwan, a step that infuriated Beijing.
    During Bill Clinton's first term, Washington's relations with 
Beijing went from bad to worse. The new Administration's effort to make 
good on its campaign promises by linking human rights to trade led to 
new heights of acrimony on both sides of the Pacific. Combined with 
fierce disputes over trade and proliferation, the result was a 
relationship very nearly in free fall. The nadir was reached in 1995-
1996, when China held a number of exercises in the Taiwan Straits with 
the clear intent of influencing the Taiwanese presidential election. At 
the height of the crisis, the United States dispatched two aircraft 
carrier groups to within striking distance of the Straits in a naked 
display of American military might.
    The years since 1996 have seen a slow if marked improvement in 
Sino-American relations, the result, in part, of a concerted effort by 
the Clinton Administration to avoid, in its policies towards Beijing, 
the pitfalls--some would say pratfalls--of its first term. Whether this 
improvement--symbolized by much-expanded high-level contacts between 
Beijing and Washington, including reciprocal state visits by Clinton 
and Chinese leader Jiang Zemin--can weather the latest storm prompted 
by accusations of Chinese nuclear espionage against the United States 
is, however, far from clear.
    There are signs, for instance, that Republicans may see the issue 
of American policy towards China as a potent one politically. This 
creates the strong possibility that 2000 will see a bizarre inversion 
of 1992, with a GOP candidate lashing likely Democratic nominee Al Gore 
for being ``soft'' on Beijing. There are limits to the extent to a 
Republican President can pursue harshly anti-Beijing policies. Big 
business, long a major constituency of and lavish contributor to the 
GOP, would surely oppose measures that endanger its commercial links to 
China. But a successful Republican Presidential candidate might well, 
like Clinton eight years earlier, find himself saddled in office by 
campaign promises impossible to fulfil without doing severe and perhaps 
irreparable damage to Sino-American relations.
    Looking ahead, one thing is certain: our policy towards Beijing 
will remain, for the foreseeable future, the object both of 
intellectual dispute and political wrangling.
                          policy nobody likes
    As Edward Luttwak wryly notes, our China policy since 1989, and 
especially since Clinton's assumption of the Presidency, displays one 
remarkably abiding characteristic: nobody much likes it. American 
businessmen with interests in China detest the tensions caused by our 
stress on human rights--a stress which human rights activists, in turn, 
deride as hollow. Christian fundamentalists bewail our unwillingness to 
punish China for persecuting their co-religionists on the other side of 
the Pacific. Trade unions leaders rail against unfair Chinese trade 
practices, particularly the use of so-called ``slave labor.'' And 
foreign policy experts of all stripes are harsh on what they call the 
intellectual incoherence and day-to-day inconsistency of our overall 
approach towards Beijing.
    That approach, certainly, appears to be a sort of policy-by-
default. ``Engagement,'' as it is most commonly called, reduces to a 
disaggregation of American policy towards China into its component 
parts. Human rights, export promotion, weapons proliferation, trade 
disputes, regional conflicts: all have important parts in our bilateral 
agenda with Beijing. But none--at least since President Clinton 
publicly jettisoned human rights as the cornerstone of our policy 
towards China in 1994--has clear precedent over the others. The 
objective appears to be to keep dialogue open and to avoid an 
irreparable break between Beijing and Washington. By these not 
inconsiderable standards, the policy may be judged a qualified success. 
And, insofar as it manages, however fitfully and imperfectly, to 
balance the demands of important domestic interests groups, our policy 
has, at least until now, prevented the formation of a political 
coalition sufficiently strong and durable to shift American policy 
towards China onto a decidedly confrontational course.
    But our China policy is not pretty. It seems to careen between 
high-minded homilies about human rights and crass pressure to secure 
major contracts for American firms; between vague talk of a ``strategic 
partnership'' with Beijing and blunt gunboat diplomacy. The result has 
been private unease and public irritability in Beijing and Washington 
alike. Our policy appears to be poised, intellectually, between an 
acceptance of China's rise as a great power and an attempt to limit 
that rise. There is more than a little truth, then, to the critics' 
accusations of incoherence and inconsistency.
                           the new cassandras
    Recently, perhaps the most vocal and certainly the most 
controversial of those critics have been members of what could be 
called the New China Threat School. Munro and Bernstein's The Coming 
Conflict with China is perhaps the best-known popular expression of 
this view. Their work and others like it fall into a traditional genre: 
the polemic, falling somewhere between alarmist and apocalyptic in 
tone, warning of an emerging threat to American power. Difficult as it 
is to imagine today, just over a decade ago the rise of Japan was being 
similarly described as an inevitable adversary of the United States. 
Less than a decade before that, other commentators were bewailing the 
inability of Western democracies to counter the Soviet threat. Japan, 
of course, has now been enfeebled by ten years of economic stagnation 
and political paralysis; last seen, the Western democracies were still 
thriving while the Soviet Union had slipped into oblivion. But each 
alarmist theory had its moment at the center of conversation among the 
sort of experts, small in number but influential in foreign policy, who 
talk about such things. Whatever their other merits, tracts like Munro 
and Bernstein's are impressive examples of intellectual 
entrepreneurship at its most provocative and timely.
    Warnings of China's emergence as a great power have, moreover, 
occurred at a time of immense excitement among observers and 
theoreticians of international affairs. The decade since the collapse 
of the Soviet empire has seen the emergence, in fact, of an entire 
intellectual cottage industry dedicated to describing the post-Cold War 
system and the United States' role in it. Fukuyama's ``end of 
history,'' Krauthammer's ``unipolar moment,'' Huntington's ``clash of 
civilizations'': these are just a few of entries in what could be 
called an ongoing contest for what could be called the George F. Kennan 
Award for Historical Memorability. The ``China Threat'' school is 
merely part of a larger field.
    But there is more--much more--to the calls, implicit or explicit, 
to ``contain'' the Chinese threat. Some of the impetus clearly arises 
from residual Cold War attitudes. With the fall of the Soviet Union, 
China remains the only important state in the world still adhering, 
however tenuously, to Marxist-Leninism as a doctrine. Communism was, 
for over forty years, the avatar of anti-Americanism. Old mind-sets die 
no easier among politicians or pundits than they do among the general 
public.
    There is, in addition, a suggestion of opportunism to demands for a 
more confrontational approach to China. An enemy, after all, can be a 
very useful thing to have from a political point of view, particularly 
when contrasted with something as conceptually muddled and rhetorically 
mushy as ``engagement.'' There are those on the American Right who have 
not forgotten the role that anti-communism played in giving 
conservatism not just high purpose but electoral success. The nostalgia 
for Ronald Reagan's steadfast--and popular--opposition to the ``evil 
empire'' is palpable in American conservative circles.
    This is as true among conservative intellectuals as it is among 
their ideological soul-mates in the political arena. One of the most 
extraordinary developments of the last 25 years in the realm of public 
policy in general and of foreign policy in particular has been the 
intellectual ascendancy of the Right. The late 1970s and 1980s saw the 
creation of an apparatus of well-financed think-tanks, provocative 
journals, impressive scholars and influential pundits. In the foreign 
policy arena, at least, the end of the Cold War has left much of this 
apparatus adrift. The Soviet threat gave the intellectual Right not 
just much of its raison dietre but also real access to political power. 
One need not be conspiratorial or even cynical to grasp the appeal of 
the China threat theory among those for whom the collapse of the Soviet 
Union has not just removed a cause, but also influence.
                            theory, anyone?
    But the critique of our current policy of engagement and calls for 
a tougher line toward Beijing clearly go beyond nostalgia or 
opportunism. It possesses undeniable intellectual weight--a strength 
deriving from its close association with a particular view of 
international relations, realism, that enjoys great prestige among 
policy-makers and academics alike. This is no place to discuss so 
sophisticated a theory as realism in detail. Its literature, reaching 
from Thucydides through Morgenthau to Waltz, is rich and varied. 
Suffice it to say, at great oversimplification, that realism posits 
both a view of human nature--pessimistic--and a view of interstate 
relations--adversarial--that places the struggle for power at the 
center of international relations. It stands in stark contrast to its 
chief theoretical alternative, liberalism, which is no less 
distinguished in its heritage, tracing its lineage back at least to 
Kant. Liberalism--again at gross simplification--holds a more sanguine 
view of human nature and a conception of interstate relations that 
stresses the role of domestic regimes and international institutions in 
creating common interests and encouraging joint action.
    For realists, the logic of eventual American conflict with China is 
implacable. With the demise of the Soviet Union, the grounds for Sino-
American cooperation have been swept away. China's huge population, 
growing economic power, geographic position and imperial tradition have 
poised it for claim to great power status. And that claim, realists 
argue, will inevitably bring it into conflict with the United States, 
first in the Far East, and then globally. Liberalism, in contrast, 
suggests a different outcome for China's emergence as a great power. 
Pointing to China's ongoing economic reforms, its moves, however 
fitful, towards contested elections at the local level and its 
increasing integration into international institutions, liberals see 
growing grounds for Sino-American cooperation.
    The issue of China's growing dependency on imported oil highlights 
the divergence of these theoretical views. Realists focus on that 
dependency as a potential cause for future Sino-American conflict, as 
China seeks to project power into vital sea-lanes and create 
relationships with exporters of the Persian Gulf. From a liberal point 
of view, in contrast, China's growing dependency on imported oil may 
actually increase Sino-American cooperation because the two countries 
will share a common interest in secure sea-lanes and a stable Persian 
Gulf. The facts are identical; the interpretations are polar opposites.
    The purpose of this essay is not to resolve the theoretical 
conflicts between liberalism and realism, already worried to death by 
generations of experts. We may rest assured that the dispute will 
continue to fuel intellectual fires for years, even decades to come, 
with much heat if scant illumination. But from a purely pragmatic point 
of view, we should remember that the evidence for either view is at 
best mixed.
    Realists are right, at the end of a century which has seen two 
world war that left tens of millions dead and a third global conflict, 
the Cold War, that brought mankind to the brink of a thermonuclear 
exchange, to bring a certain pessimistic cast of mind to international 
affairs. They are also correct to point out that the record of the last 
century in terms of accommodating new great powers--Germany and Japan--
is cautionary. And they are no less right to dismiss the grander claims 
of liberals as, on more than rare occasion, as naive, premature, or 
both. Conflict, as witness the Balkans, Persian Gulf, and Central 
Africa, remains a staple of international affairs. The democratic 
revolution that seemed to be sweeping the world in the early 1990s has 
stalled in places like Russia and hardly touched vast realms in Africa 
and Asia. And the Far Eastern financial crisis has directed a severe 
and unexpected blow at the breathless assumptions about the benefits of 
economic integration. Even if there is a universal and irresistible 
historical trend towards the acknowledgment of individual autonomy as 
embodied by liberal democracy and free markets, there is no way of 
knowing how long this vast process will take to unfold or what 
particular path it will follow. In the meantime, of course, there is 
American foreign policy to make.
    But, as Owen Harries has pointed out, for all its strengths, 
realism risks falling into a rigid, mechanistic view of human affairs 
at variance with the facts of history. In particular, it underestimates 
the importance of regime type and national leadership in international 
affairs. Surely the nature and personalities of Nazi Germany and 
Stalinist Russia played some role--and perhaps a decisive one--in the 
tragic course of 20th century history. Moreover, the post-Cold War era 
has evolved in ways difficult to square with a strict realist view of 
international affairs. Germany, freed in large part from its dependency 
on the United States, has not attempted to rearm and reassert its 
dominance in Europe; indeed, Germany has actually cut defense 
expenditures, elected a leftist government, and moved to surrender 
additional sovereignty to the European Union. Japan, a more ambiguous 
case given its concerns about China, has also failed to move decisively 
away from the United States, as would be predicted by realist theory. 
Indeed, in 1996, Tokyo further deepened its military alliance with 
Washington.
    As a practical matter, the conduct of American foreign policy has 
rarely approached the theoretical purity of either realism or 
liberalism. From Roosevelt's declaration of the Four Freedoms as part 
of the Anglo-American effort to defeat Hitler's bid to rule Europe to 
George Bush's invocation of rule of international law in support of a 
similar effort to block Saddam in the Persian Gulf, American foreign 
policy has blended both views. This has caused strains at times. In 
some cases--notably during the Vietnam War, when our claims to be 
fighting in defense of democracy proved increasingly unconvincing--
those strains rose to the level of crisis. But, however uneasy, the mix 
of liberalism and realism has been an abiding characteristic of 
American foreign throughout much of our history.
    This holds true our policy towards China today. Realists are 
certainly right in identifying a strong liberal strain in Clinton 
foreign policy. The emphasis on Sino-American commerce, for instance, 
is not merely an attempt to please business interests; it also reflects 
a deeper belief that freer trade serves both as a strong disincentive 
to military conflict but also, more profoundly, as a solvent of 
authoritarian rule. The emphasis on human rights is similarly only in 
part an effort to placate vocal domestic constituencies; it also 
embodies yet another belief--that the day of China's ultimate 
democratization will be hurried by tendering support, however 
rhetorical, to political reform in Beijing. Finally, our policy towards 
China is part of a broader Clinton approach--rather clumsily called 
``democratic enlargement''--that unabashedly partakes of the liberal 
tradition.
    Yet even the Clinton Administration's liberalism is hardly 
absolute. Whether from conviction or expediency, the Administration has 
supported defense budgets that put American military expenditures at a 
level equal to next five or six largest in the world combined. The 
Administration has, in fact, sought an increase in Pentagon spending of 
$110 billion over the next 6 years. It has also agreed to the 
development, in the face of fierce criticism by both Moscow and 
Beijing, of an anti-ballistic missile system that has long been a pet 
cause of the political Right. When it comes to China, the Clinton 
Administration has actually increased American military cooperation 
with Japan and, when the Taiwan Straits incident arose in 1996, 
indulged in a display of old-fashioned gunboat diplomacy. The liberal 
glove contains a realist fist--even in the hand of Bill Clinton.
                     the (non) case for containment
    Advocates of the China threat school, then, make much of their case 
on contested theoretical and ambiguous historical grounds. Their 
criticism, moreover, of current American policy towards Beijing surely 
exaggerates the role that a liberal view of international affairs plays 
in it. But what of their more specific claims of a Chinese threat to 
American interests in East Asia and more broadly?
    One thing must be admitted at the outset: there is much to dislike 
about the regime in Beijing. China's apologists in the United States--
businessmen and academics alike--would be wise to admit as much, if 
only to bolster their own credibility. The facts are undeniable. 
China's government remains very much a dictatorship, if communist only 
in name Beijing's human rights record is, in a word, execrable. And its 
hypersensitivity on matters of territorial integrity, however 
understandable from a historical perspective, represents a constant 
source of potential conflict over Taiwan. There is, in addition, 
certainly no shortage of statements, official and semi-official, 
stressing China's adamantine opposition to American dominance in the 
Far East.
    But some perspective is useful. Beijing may indeed be 
authoritarian, but so too are American allies like Saudi Arabia and 
Egypt. Its human rights record, bad as it has been, should be compared 
to that of two democracies, Turkey and India, whose respective actions 
against Kurd and Kashmiri separatists have been marked at times by 
extraordinary brutality. The Taiwan question is, of course, a 
contentious one. But is also one where the United States has formally 
accepted China's basic position--that there is only one China, with 
Beijing as its capital--for close to 30 years. Finally, Chinese 
observers too would have no problem finding any number of statements by 
American political leaders and foreign policy experts that are 
inflammatory-by any reasonable standard. Calls for the maintenance of 
America dominance, not just in East Asia, but globally, represent a 
respectable and indeed influential position in our ongoing foreign 
policy debate. At a minimum, American observers who insist on the 
importance of containing China's emerging power should not be surprised 
if the Chinese, in turn, object. This is not an exercise in ``moral 
equivalency'' but a matter of simple common sense.
    Those warning of the Chinese threat also exaggerate its current and 
future economic strength. Though it managed to avoid the worst effects 
of the East Asian financial crisis that began in 1997, China has seen 
her growth rate sharply reduced. As Nicholas Lardy points out, China's 
economic reforms are woefully incomplete. Property rights are unclear. 
Rule of law is rudimentary. Prices are not yet fully decontrolled. The 
fiscal regime is primitive. Inefficient state-owned enterprises remain 
a drag on the economy in general and the banking system in particular. 
The latter is, by any reasonable accounting standard, insolvent. 
Recapitalization of China's banking system will require the dedication 
of immense resources over the next decade.
    Future Chinese economic growth depends, critically, upon moving 
forward on a broad front of reform. Yet any number of those reforms can 
cause short-term economic dislocations and, at least potentially, 
public unrest. The energy sector is a case in point: full 
liberalization might mean shutting down a part of domestic oil 
production and discharging several hundred thousand workers. For the 
government in Beijing, navigating the transition to a more open 
economy, in the energy sector and elsewhere, is full of immense risk 
and excruciating choice. The regime has clearly staked much of its 
claim for legitimacy on its ability to generate jobs and raise living 
standards in a country that remains, we must never forget, one of 
immense poverty. China may, indeed, surpass the United States in GDP 
over the course of the next twenty, thirty or forty years. But such a 
bald statement obscures both the difficulties confronting China today 
and the uncertainties facing it in the future.
    There has also been undue alarm over China's current and future 
military capabilities. The subject of her defense expenditures has 
generated a sub-literature of its own, with estimates of total military 
spending ranging from $9 to $90 billion in 1996. Even at the higher, 
almost certainly inflated figure, Beijing's defense expenditures are 
perhaps a third of our own. More moderate estimates put China's 
expenditures below Japan's. To speak, as some do, of a Chinese massive 
military build-up is to overstate the case; defense expenditures as a 
percentage of the total budget may actually have declined from the 
early 1980s through the mid-1990s. Nonetheless, recent spending is 
indeed up, modernization is underway, and a clear emphasis on upgrading 
China's naval and air forces in particular is apparent. But Beijing is 
far from dedicating--at least yet--the resources necessary to represent 
a plausible military rival to the United States. She is certainly not 
even approaching the massive commitment undertaken by the Soviet Union 
to stay abreast of the United States in the Cold War. Much of her 
military materiel is obsolete; many of her personnel are poorly 
trained. She is at least a decade away from an aircraft carrier, much 
less the complex and integrated array of vessels, aircraft and 
communications systems that are the modern carrier group. Despite the 
purchase, in the 1990s, of advanced fighter aircraft from Russia, her 
effective air power remains inferior to that of both the United States 
and Japan. Even a Chinese invasion of a Taiwan undefended by the United 
States would be an extremely risky proposition, stretching Beijing's 
capabilities to their limits.
        a case of false historic analogy: let me count the ways
    Not all who warn of a looming Chinese threat also call for a policy 
of containment, at least explicitly. Bernstein and Munro, for instance, 
eschew the term. But, as Charles Maynes points out, there is a curious 
inconsistency in their arguments and others like them. If conflict with 
China, as they say, is inevitable, then surely we should act now to 
contain her, while she is still relatively poor and weak. Berstein and 
Munro, in other words, lack the policy courage of their theoretical 
convictions. Containment is an obvious--perhaps even necessary--logical 
consequence of any theory positing an inevitable conflict between the 
United States and China.
    ``Containment,'' of course, immediately conjures up our Cold War 
struggle with the Soviet Union. But the analogy could not be more 
inaccurate or, for that matter, insidious. Even a cursory comparison of 
the two cases reveals precisely how dramatically the Chinese ``threat'' 
of today differs from that of the Soviet Union during the Cold War.
    The first key difference is one already briefly discussed: military 
capability. The Soviet Union ended World War II with an institution--
the Red Army--that could lay highly plausible claim to being the most 
powerful land force in the world. While technologically inferior to 
United States even in the late 1940s, the Soviet Union was able, by 
dint of immense human and financial sacrifice, to field conventional 
forces, especially in Europe, that represented a direct challenge to 
the United States. This was certainly the view of American defense 
planners of the 1950s and 60s who opted for a massive nuclear deterrent 
at least in part out of fear that the Soviet Union could win a ground 
war in Europe. China, for all the talk of its military build-up, 
possesses no such rough parity with the United States. It is years, 
perhaps even decades, away from being able to challenge American 
military supremacy even in East Asia.
    A second key difference between the Soviet Union in the late 1940s 
and China today is the question of expansionist intent. The Soviet 
Union was, in the late 1940s, a truly imperial power. It had just 
created by force of arms a series of subject states around its 
boarders. Any challenge to Moscow's imperial authority--whether in East 
Germany in 1953, Hungary in 1956 or Czechoslovakia in 1968--met with a 
prompt and ruthless Soviet response. China, in contrast, possesses no 
such empire. While it has a number of territorial disputes that put it 
at odds with its neighbors--the Spratly Islands are a case in point--
Beijing has, since the early 1980s, adopted a conscious policy of 
conciliation with bordering states. Taiwan, as always, is an exception 
and a very dangerous one. Even there, Beijing's claim to sovereignty is 
both qualitatively and quantitatively different from Moscow's efforts 
after World War II to carve out an empire from formerly independent 
states in Central and Eastern Europe.
    A third important difference is the lack today of any institutional 
rivalry between the United States and China. The Soviet Union not only 
challenged the United States directly by virtue of its military force 
and imperial ambition. It also created a series of institutions--the 
Warsaw Pact and COMECON chief among them--that attempted to create an 
alternate international architecture to the one forged by the United 
States in such bodies as NATO, the World Bank, and IMF. China has made 
no such attempt. The one institutional forum in which it laid claim 
with some success to leadership--the Non-Aligned Movement--has fallen 
into irrelevancy with the end of the Cold War. Indeed, over recent 
years China has sought membership in institutions, like the IMF, the 
WTO and APEC where the United States wields considerable and often 
decisive influence. Given our influence in such organizations, the idea 
that the Chinese might attempt, say, to take over the IMF is simply 
ludicrous. Put crudely, these institutions may be run as a 
partnerships--but in each the United States remains very much the first 
among equals.
    A fourth critical difference between the Soviet Union of the late 
1940s and the China today is the absence of any substantive ideological 
conflict. The Soviet Union embodied a coherent and, for many around the 
world, attractive alternative to consumer capitalism and liberal 
democracy. Communist parties found widespread support not just in the 
Third World but in Western Europe; even intellectuals in the United 
States were not immune to Marxist-Leninism's ideological appeal. Today, 
China offers no such ideological alternative. Beijing's nominal 
communism is, even at home, widely perceived to be a mere facade. It 
certainly possesses no appeal outside its borders. Indeed, insofar 
there is an ideological component to Sino-American relations, it is the 
extent to which American ideology represents a threat to the Beijing 
regime. The occasional Chinese campaigns against ``Western values,'' 
for instance, are symptoms not of ideological strength but weakness. 
However slowly and unevenly, Chinese society is in fact acquiring 
characteristics--above all, a taste for consumer goods and a stress on 
individuality--that have long been hallmarks of the West and, 
especially, the United States.
    In sum, the Soviet Union represented a systemic threat to the 
United States--an alternative, centered in and supported by Moscow, 
which provided the intellectual framework, institutional underpinnings, 
and military means to challenge us. Today, no such alternative exists. 
China, certainly, offers none. This reflects a truth identified by John 
Ikenberry, who argues that the end of the Cold War can best be 
described as a collapse by the Soviet Union and its satellites into the 
liberal international system developed by the United States and our 
allies after World War II. That system is, of course, neither universal 
nor perfect. Certain countries--failed states in Africa, for instance, 
or rogue regimes like Iraq--fall largely outside it. And others--China 
and Russia being important cases in point--have only been partially 
integrated into it. But that system today faces no real challenge. 
There is, quite simply, nowhere else to go.
    This has important--and painful--consequences for China. Both the 
political legitimacy of its regime and the potential ability of its 
military to challenge the United States depend on sustained long-term 
economic growth. But the domestic liberalization and global integration 
required to achieve growth threaten both that legitimacy and that 
ability. The difficulties of domestic liberalization, already 
discussed, pose acute challenges to the regime in Beijing. But 
integration into the global economy also presents its own challenges. 
One--the ability of economic developments outside China to seriously 
affect domestic performance--has been driven home by the East Asian 
financial crisis. But there is another: the constraint integration 
imposes on any Chinese effort to challenge the United States. One need 
not be a liberal true believer to realize that China's dependence on 
international trade and investment flows raises incalculably the costs 
of any direct challenge to the United States. Armed conflict in the 
Taiwan Straits or the South China Sea could exact simply huge economic 
costs--costs which the Soviet Union, committed to a policy of autarky 
within its own bloc, did not have to consider in its policies toward 
the United States. Unlike the Soviet Union, China must compete with the 
United States within a system that we largely created and that we 
continue to dominate.
    Energy is an important and emblematic case in point.
    Economic growth, domestic liberalization and international 
integration will, by all counts, lead to an immense increase in China's 
oil imports. Barring an ability to challenge the U.S. navy decades away 
by any estimate, China will find her strategic options limited; in 
particular, her vulnerability to American maritime power will increase, 
not decrease, with the passage of time. Any threat to East Asian sea-
lanes would affect not just delivery of oil to Japan or Taiwan but to 
China herself. Any effort to challenge American preeminence in the 
Persian Gulf, similarly, would risk a disruption of supply and a sharp 
rise in her import bills. The latter point again shows the difference 
between the China of today and the Soviet Union during the Cold War. 
Moscow, a major oil exporter, actually stood to gain from a certain 
amount of instability in the Persian Gulf the precise opposite holds 
true of China, an oil importer.
                               conclusion
    China in 1999, therefore, is far from being the threat represented 
by the Soviet Union of the late 1940s. Policies that pretend as much 
risk causing great and unnecessary mischief in Sino-American relations. 
To embark on a containment policy against China now--even on a 
rhetorical level--would prompt a sharp and negative response from 
Beijing, creating precisely the atmosphere of resentment and mistrust 
most likely to lead to conflict. If we go in search of an enemy, we 
shall surely find one.
    But what of the future? Will the China of 2010 or 2020 represent 
the real threat to the United States that she does not today? Much, 
clearly, will depend on the precise course that China takes in the 
years and decades ahead. And here we move into the realm of 
speculation. Will China evolve into a more democratic polity and open 
society? Will its regime settle into a centralized dictatorship, shed 
of residual Marxist-Leninist trappings perhaps, but rich and ambitious 
enough to flex its regional muscles? Will it, unable to meet the 
political and, especially, economic aspirations of its people, slip 
into bellicose nationalism in order to provide governmental legitimacy 
and national cohesion? Or will it slide further, into fractious 
regionalism or even civil war? Any of these scenarios is plausible; 
each has important ramifications for Sino-American relations; each has 
its supporters among experts. Which and who are right? The honest, if 
uncomfortable, answer is that we simply do not know.
    A comparison with the United States is illuminating. Our 
constitutional structure dates to 1787. Our legal system, based on 
English common law, reaches back centuries before. We were last invaded 
by a foreign power during the War of 1812. Our only civil war ended in 
1865. The younger of our two major political parties was founded in 
1854. And our economic system, though the subject of some welfarist 
tinkering at the margins, has been resolutely capitalist from our very 
beginnings and unabashedly consumerist since at least the 1920s. For 
all our national fixation on trends, both mega and minor, Americans can 
be fairly confident that, in 25 years, our constitutional, legal, 
political and economic systems will be much the same as they are today.
    Nothing of the sort can be said about China, past or future. This 
century alone, it has saw the overthrow of a centuries' old imperial 
dynasty; endured a twenty-year long civil war between Communist and 
Nationalist parties; suffered invasion by Japan; experienced imposition 
of a Marxist-Leninist dictatorship; survived the chaos of Mao's 
cultural revolution; and, under Deng Xiaoping, witnessed the reversal 
of 30 years of collectivist economic policy. Given the extraordinary 
challenges today confronting China and the painful decisions facing her 
government, any predictions about China's future are, at very best, 
tentative.
    That is the bad news. The good is news is that the United States 
can afford the luxury of waiting. The contrast with the aftermath of 
World War II could not be sharper. The containment policy developed 
then was the creation, we would be wise to recall, not of a theoretical 
meditation on the nature of international relations but of stark 
necessity. Huge Soviet armies in Central Europe, a totalitarian regime 
of proven aggressive intent in Moscow, civil war in Greece, major 
communist movements in Italy and France, impoverished allies and 
devastated former enemies alike dependent on our largesse: these were 
just some of the facts facing the Truman Administration as what is now 
known as containment took shape. No such challenge, no such necessity, 
exists when it comes to China today. Our political stability, economic 
might, military dominance and far-flung web of formal alliances and 
informal relationships not only give us immense power; they give us, 
when it comes to China, time.
    This is not to suggest that we should take a passive attitude 
towards China; nor, for that matter, that we may expect our relations 
with Beijing to be unruffled. Key issues--the ``usual suspects'' of 
post-Cold War China policy: proliferation, human rights, trade--will 
remain the cause of dispute, often bitter, between the two countries. 
Indeed, one issue--Taiwan--could, if mismanaged, bring about direct 
military conflict between the United States and China.
    On balance, we have more to gain than to lose by further 
integrating China into the world economic system. At a minimum, such 
integration raises the costs of direct conflict with the United States. 
At a maximum, it may help move China's internal dynamic in directions 
congruent with our values and consistent with our interests. WTO 
accession, once the necessary assurances on continued economic reform 
are obtained, is an important next step in the direction of China's 
economic integration. So is possible eventual membership in, say, the 
G-7, when China makes additional steps towards economic and political 
liberalization. But even as we ease China's full integration into the 
international economic system, we must also maintain the military 
establishment and strategic alliances necessary to counter a Chinese 
threat if and when it should arise.
    In other words, our policy towards China will remain in many ways 
unsatisfactory--an uneasy mix of liberal hope and realist fear, an 
unhappy blend of professed friendship and potential rivalry. But, as 
Luttwak points out, the inconsistency of such a policy may in point of 
fact be its strength. It accurately reflects the imponderables 
associated with China's future. Above all, it keeps our options open.
    One thing is certain: the current alarm being sounded about China 
in Washington is surely exaggerated. A gunboat or two in the Spratly 
Islands do not represent a challenge to U.S. Naval dominance. A few 
dozen Chinese missile targeted at the United States do not alter the 
world's strategic balance. And the idea that a country might seek to 
steal our military secrets is neither particularly new nor especially 
shocking.
    The calls, implicit or explicit, for a containment policy against 
China are nothing less than folly. We should recall precisely, exactly, 
how much our earlier containment policy cost us: a hundred thousand 
dead Americans in places like Korea and Vietnam, trillions in defense 
expenditures, constant fear of a nuclear exchange, and the erosion of 
civil liberties here at home. To embark on a similar policy towards 
China would surely require more than the beefed-up pacific alliances 
and bolstered military capabilities that its supporters seem to 
suggest. Indeed, it would require a well-nigh complete revision of 
American foreign policy as we know it today.
    If, in fact, China's inevitable challenge to the United States is 
being fueled by access to international markets, we would presumably be 
wise to constrain that access in any way we can, a step that would 
require a full reversal of our long-standing support for liberalization 
of trade and investment. This would mean not just denying China access 
to American markets but also urging the Europeans and the Japanese to 
close their own. Any containment policy against China would also 
dictate a search for powerful allies in an anti-Beijing coalition. 
India and Russia would clearly be two obvious candidates. Both would 
undoubtedly demand concessions for their cooperation. In the case of 
India, we would likely be asked to accept Delhi's membership in the 
world's ``nuclear club.'' Any alliance with Russia would similarly 
entail concessions to Moscow--commitments, say, to cease NATO expansion 
and give a green light to a freer Russian hand in Central Asia.
    And for what? To counter a threat which has not yet emerged, may 
not arise, and, even should it occur, will do so slowly. Constant 
comparisons of Chinese and American military capabilities ten or twenty 
years hence, for instance, seem to suggest that we will stand idly by 
during the interim, unable to increase military spending, accelerate 
development of new weapons, or adjust our strategic doctrines. The call 
for containment, at one level, is not just based on a conspicuous 
underestimation of American power. It also derives from what appears to 
be a near-contempt for our ability, as a nation, to respond flexibly 
and effectively when and if challenges to that power arise.
    Those promoting a hard-line towards China should reread the words 
of then-Secretary of State John Quincy Adams in 1821: ``Wherever the 
standard of freedom or independence has been or shall be unfurled, 
there will her (America's) heart, her benedictions, and her prayers be. 
But she goes not abroad in search of monsters to slay.'' Adams' 
statement, made in large part to counter Henry Clay's accusations that 
he lacked sympathy with the ongoing struggle against Spanish colonial 
rule in Latin America, can be read as a critique of precisely the sort 
of idealism that realists by and large repudiate. But it can be read 
more generally, too, as a call for prudence and modesty--in short, 
conservatism--in the conduct of our international affairs, qualities 
sorely lacking among those, ironically on the Right, calling for the 
containment of China. The monster they would have us slay is a Chinese 
dragon they have created from dubious theory and selective evidence--
one that bears little relationship to the creature, complex in its 
current circumstances and uncertain in its future prospects, still 
emerging on the other side of the Pacific.

                                 ______
                                 

                [From The National Review, May 5, 1997]

                        The Anti-China Syndrome

                        How Not to Handle China

                           (By Owen Harries)

As China grows in economic and military power, Americans are asking 
whether it is our competitor or our enemy.

    Since the end of the Cold War, many Americans have been suffering 
from an enemy-deprivation syndrome. This is not surprising. After all, 
for fifty years they had experienced a clearly identified, formidable, 
and generally agreed upon enemy. That enemy provided a simply grasped 
organizing principle for thinking about foreign policy, and its sudden 
disappearance threatened disorientation and discord. It imbued foreign 
policy with a sense of heroic moral purpose, and without it things 
seemed likely to become mundane and boring.
    Thatever the mixture of motives, as soon as the initial euphoria 
over the Soviet Union's collapse had passed, most of the American 
foreign policy cognoscenti--and especially a large section of its 
conservative component--began to search for a substitute enemy. For a 
short while, Japan was favored. Scores of authoritative books and 
hundreds of closely argued articles were written about the impending 
``clash'' between it and the United States. But then a Japan that had 
been presented as an irresistible juggernaut suddenly faltered. Its 
economy lost momentum, its politics became a shambles, and it was no 
longer a credible enemy.
    Temporarily at a loss, some then tried to fill the gap by a process 
of aggregation. If a single powerful and convincing enemy was not 
available then perhaps several small ones added together might do--
North Korea, Iran, Iraq, Libya, Serbia, and so on. But it soon became 
clear that a lizard, a hyena, and a couple of skunks did not add up to 
a dragon. Nor did Islamic fundamentalism really work, for, again, its 
multiple, divided agents lacked the heft and presence to be convincing 
rivals.
    At this point some turned back to Russia as a dependable candidate 
for the role of principal enemy. True, its economy was in a pitiful 
state, its military performance in Chechnya was abysmal, and its whole 
social fabric was in tatters; but it certainly rcsonated, and if one 
was prepared to take the long view it still had adversarial potential. 
That at least, seemed to be the assumption of those who took up the 
cause of the eastward expansion of NATO with enthusiasm. As one of the 
most honest of them--Peter Rodman'' put it, ``The only potential great-
power security problem in Central Europe is the lengthening shadow of 
Russian strength. . . . Russia is a force of nature; all this is 
inevitable.''
    But although Russia is potentially dangerous and needs careful 
handling, in the way that a wounded animal does, a declining ex-
superpower making a serious stab at becoming a democracy is not really 
well suited to play the role of a principal enemy. Certainly it does 
not capture a combative imagination with the same conviction as a 
coming superpower that is performing spectacularly economically, that 
is still governed by an obnoxious regime, that frequently says nasty 
things about the United States, and that encompasses over one-fifth of 
the earth's population--which is to say, China.
    It is not surprising, then, that there is now widespread support 
for the view that China is America's main enemy, that the two countries 
are on a collision course, and that the only sensible policy for the 
United States to follow is a tough and hostile one. In the words of The 
New Republic's editors, we ``must engage China adversarially.'' 
Anything else will amount to appeasement or ``coddling.''
    Things may indeed turn out that way. Perhaps China really is evil, 
hostile, and aggressive. But there is another possibility, and it is 
that asserting these things will be selffulfilling. If you insist on 
treating another country as an enemy, it is likely to become one. All 
the more reason, then, to look carefully at the arguments advanced for 
treating China in this way, and to consider what can be said against 
them.
    1. China as Aspiring Global Hegemon. ``Most experts agree,'' the 
editors of The Weekly Standard assure us, ``that China aims . . . in 
the long term to challenge America's position as the dominant power in 
the world.''
    China's supposed appetite for global power is based on no empirical 
evidence whatsoever. China has been singularly unambitious beyond its 
region. Its most conspicuous venture in this respect was a half-hearted 
and incompetent effort to establish a presence in Africa more than 
three decades ago. True., in recent years China has sold arms to a 
number of countries outside the region, but if that is to be taken as 
evidence of hegemonic ambitions, then a number of Western powers--even 
Israel and Sweden--would qualify.
    The global-hegemony claim is based essentially not on empirical 
evidence but on a ``logic of the system'' argument, which maintains 
that rivalry is inevitable between the dominant power and the next 
strongest state, especially if the latter is an ascendant power. In 
their new book, The Ccming Conflict with China, Richard Bernstein and 
Ross H. Munro set this out explicitly: ``China, soon to be the globe's 
second most powerful nation, will be a predominating force as the world 
takes shape in the new millennium, and, as such, it is bound to be no 
longer a strategic friend of the United States but a long-term 
adversary.'' The words ``as such, it is bound to be'' assume an 
includable logic of cause amid effect. Sometimes (though not by 
Bernstein and Munro) this claim is bolstered by reference to the 
notorious Anglo-German rivalry at the beginning of this century, when 
England as the dominant power was challenged by the German arriviste.
    What is to be said about this systemic argument? First, it is true 
that a certain amount of friction between a hegemon in being and a 
rapidly rising state is virtually inevitable. Indeed, a certain amount 
of friction between any two powerful states that have regular 
intercourse is inevitable. But that by no means implies an unavoidable 
and continuing adversarial relationship. At the time of the Anglo-
German rivalry there existed another--and, in the long run, more 
formidable--challenger to British supremacy, namely the United States. 
Yet Britain and the United States did not become deadly enemies; on the 
contrary, they got on rather well and ultimately became allies. That 
relationship alone refutes the ``inevitable'' argument--and serves as a 
reminder that the Anglo-German rivalry required an exceptionally vain 
and foolish Kaiser Wilhelm in order to flourish.
    One further point: Americans, more than any other people, should be 
wary of arguing that being or aspiring to be a global hegemon is 
necessarily evidence of sin and sufficient cause for enmity. For were 
that so, every state in the world would have cause to regard the United 
States as its enemy.
    2. China as Aspiring Regional Hegemon. The charge that China is set 
on becoming a regional hegemon is based on empirical evidence: on an 
alleged pattern of assertive, intimidatory, and acquisitive behavior, 
particularly toward Taiwan, Japan, and certain islands in the South 
China Sea. What can be said about this evidence?
    First, to the extent that China is assertive in its region, there 
is nothing peculiar or pathological in its behavior. This is the way 
ascending powers--democratic as well as authoritarian--normally behave. 
If their efforts become egregious, they have to be checked; if they are 
reasonably modest and restrained, it is wise to cut them some slack.
    Second, by historical standards, China's recent and current 
assertiveness is modest. Taiwan apart (of which more below), it has 
mainly manifested itself with respect to uninhabited or sparsely 
inhabited islands whose ownership is in dispute: the Senkaku Islands 
(claimed by China, Japan, and Taiwan), the Paracel Islands (claimed by 
China and Vietnam), and Mischief Reef in the Spratly Islands (claimed 
by China and the Philippines).
    Even if Chinese restraint does not necessarily reflect modest 
ambition, it does represent a rational and healthy sense of the power 
realities that will continue to exist well into the next century. We 
are, after all, talking about a country that, as Robert S. Ross pointed 
out in the March/April issue of Foreign Affairs, does not possess a 
single aircraft carrier, and will not possess one for a decade or so. 
The South China Sea is strategically important, and should the Chinese 
attempt to dominate it, they would have to be reminded of their very 
limited capacity to project power. But, in the meantime, vigilance 
rather than enmity is what is required.
    Third, Taiwan is a special case. Handling the issue has involved an 
implicit bargain: Peking will leave the island alone to enjoy de facto 
autonomy as long as Washington and Taipei do not force the issue of its 
ultimate status.
    When China mounted a major show of force against Taiwan in March 
1996, it was not in an effort to upset the balance represented by that 
bargain but as a reaction to its having been already upset by Taipei 
and Washington--by President Lee's campaign to have Taiwan readmitted 
to the United Nations (which would have been tantamount to recognizing 
its independence), by the Clinton Administration's allowing President 
Lee to visit the United States and so burnish Taiwan's independent 
image, and by a $6 million sale of F-16 fighter planes to Taiwan. Ill-
judged, ugly, and dangerous as was the Chinese intimidation, it was a 
reaction. It was not evidence of a determination to change the status 
quo. While the United States has a political, moral, and economic 
interest in safeguarding the de facto autonomy of Taiwan, there is 
ground for thinking long and hard--about the costs that would be 
involved and what American interests would be served--before assuming 
any obligation to support its formal independence.
    One further point about Taiwan: While Americans tend to think of 
the issue primarily as a political question involving legal status and 
freedom from outside interference--and it is certainly that--for the 
Chinese it is also, and unavoidably, a major strategic issue. For, as 
Ross reminds us, the island is indeed the equivalent of an ``unsinkable 
aircraft carrier,'' only ninety or so miles off China's coast. To the 
extent that Americans are sensitive about Castro's Cuba (which is badly 
armed compared to Taiwan, and which has had no superpower patron for 
the last six years), they should be able to appreciate China's 
apprehension about Taiwan.
    3. The Chinese Arms Buildup. Much is made of what The New Republic 
calls China's ``program of massive militarization,'' a program that it 
is alleged to be implementing ``frantically.'' The Weekly Standard 
emphasizes that ``China is the only major world power increasing rather 
than decreasing its defense spending.'' Arthur Waldron, writing in 
Commentary, sees this as ``part and parcel of the regime's major shift 
. . . toward repression and irredentism.''
    China certainly has increased its defense budget, though how much 
of that increase reflects inflation and the need to keep the military 
content through increased pay is in dispute among specialists. 
Certainly, too, there have been serious and successful efforts to 
acquire modern weaponry from Russia and Europe: SU-27 fighter aircraft, 
quiet submarines, destroyers equipped with cruise missiles, and so on.
    That said, these points are relevant: 1) The increases have been 
made to a defense budget that had been severely depressed by the 
prolonged economic calamity of the Cultural Revolution. 2) The 
modernization was to replace an arsenal that was antiquated. Just how 
far behind the Chinese were became fully and shockingly evident to them 
through America's swift and militarily crushing victory in the Gulf 
War. 3) The buildup also reflects the unusual conjunction of the 
availability of greatly increased funds on the Chinese side and the 
ready availability of modern weapons for sale on the Russian side. 4) 
However ``massive'' the Chinese program is, the U.S. defense budget is 
still as large as the next five or six largest defense budgets in the 
world combined. 5) Given the backwardness of Chinese technology and the 
limitation of what can be achieved by purchases abroad, it will take a 
long time for China to acquire a defense force that is fully 
modernized, even in today's sense of that term. The New Republic 
editorializes that ``It is only a matter of decades before China 
becomes the other military superpower on earth.'' But as Harold Wilson 
so nearly said, a ``matter of decades'' is a long time in politics. By 
the time those decades have passed, the United States itself will have 
made further vast technological advances.
    4. China as Human Rights Violator. One justification for hostility 
toward China, and perhaps the one with the greatest popular appeal, is 
that its regime is oppressive and shows little respect for human 
rights.
    How concern for human rights translates into foreign policy is a 
complicated matter. While individuals or single-issue organizations are 
free to take an absolute position on the question, governments are not. 
Governments have to balance the claims of human rights against other 
concerns which also have a moral content (peace, security, order, 
prosperity). Their place in the hierarchy of interests will vary--
sometimes it will be high, sometimes it will have to give way to other 
compelling interests. To the moral absolutist the result will seem 
cynical, and governments regularly invite such a response because they 
persist in speaking of human rights in absolutist terms that they 
cannot, in the nature of things, honor.
    True, there will be some terrible occasions when the violation of 
human rights will be so horrendous that the absolutist moral approach 
becomes--or should become--compelling. Such was the case with the 
murderous regimes of Hitler and Stalin. But mercifully they are the 
exceptions, not the rule. China today does not constitute such an 
exception. According to Bernstein and Munro, the best estimate of the 
number of political prisoners in China currently is 3,000. In a 
population of 1.3 billion, this amounts to 0.00023 per cent, which is 
hardly the equivalent of the Gulag or the Nazi concentration camps. 
Ironically, back in the early 1970s, when most Americans, liberals and 
realists alike, were enthusiastically applauding the U.S. opening to 
China, the Maoist regime was in the same league as the Hitlerite and 
Stalinist regimes.
    China today can more reasonably he compared to Indonesia or Saudi 
Arabia--or India. Of the latter, a recent Council on Foreign Relations 
report states: ``Thousands of Kashmiris have been killed by the 
security forces. On occasion Indian units have used lethal force 
against peaceful demonstrators and burned down entire neighborhoods.'' 
It is perhaps worth noting that, far from suggesting that the United 
States should condemn and penalize India, this report recommends that 
we develop a ``closer strategic relationship'' with that country. While 
one would certainly not want to make a similar proposal in the case of 
China, it would seem sensible to stop short of ostracism.
    One last point: While China's human-rights performance continues to 
be poor, in important respects the trend is positive. There have been 
significant improvements in terms of the rule of law, grass-roots 
democracy, and media freedom. Already it is absurd to apply the term 
``totalitarian'' to the regime, as The New Republic does. While nothing 
is certain, and while there is no established direct causal 
relationship between economic advance and political liberalization, 
there is certainly a strong correlation between the two. There are 
therefore real grounds for being optimistic about the likelihood that 
freedom and respect for human rights in China will increase steadily--
perhaps dramatically--over the next decade.
    5. The Hostility of China's Political Elite. Bernstein and Munro 
place a great deal of emphasis on the character of the Chinese ruling 
elite in explaining the hostility that exists between China and the 
United States. That elite has become strongly anti-American. It shows a 
pattern of ``irritability, defensiveness, harshness, and defiance of 
American opinion.'' It uses words like ``hegemonism,'' ``subversion,'' 
and ``interference'' with regard to the United States. This elderly 
elite is characterized as secretive, intolerant, reflexively defensive, 
and chauvinistic.
    During the second half of the Cold War, these characteristics and 
the anti-Americanism that flowed from them were held in check by the 
need for American support against a threatening Russia. But now, with 
that threat removed and with China's power rapidly increasing, the 
elite feels no need to keep its true feelings secret. Indeed, they can 
be turned to advantage. For with Communism dead, there is need for a 
substitute ideology to mobilize support and legitimize the power of the 
elite. What better substitute than the true and tried formula of 
emotional, chauvinistic nationalism, directed against an alien 
superpower?
    This analysis deserves at least three comments. First, it may well 
contain significant elements of truth. But, second, with a closed and 
secretive elite it is diflicult to be certain what those elements are. 
We knew, or thought we knew, much more about the Soviet elite (all 
those years of dedicated Kremlinology!) than we know about the Chinese 
elite--and yet almost all of us were utterly surprised by its supine 
behavior in the final crisis of the Soviet system. That experience 
alone should counsel caution in basing policy on one's supposed 
understanding of the psychology and motivation of a closed and 
secretive elite.
    A third point also suggests caution. The charges that the Chinese 
elite directs against the United States are in many respects strikingly 
similar to the charges that Bernstein and Munro (and other Americans) 
make against the Chinese. Each accuses the other of hegemonistic 
designs, interference, threatening behavior, military buildup, and the 
like. This raises the question of what, in each case, is cause and what 
is effect. Americans quote Chinese statements to establish that the 
United States must reconcile itself to the enmity of Peking; but it is 
very likely that analysts in China are simultaneously quoting Bernstein 
and Munro to establish that American enmity must be taken as a given. 
Is there not the real danger of a vicious circle here?
    6. China's Interference in American Domestic Politics. The 
inclination to treat China as an enemy has been significantly 
strengthened by the current charges of Chinese government interference 
in America's domestic political process. There is no reason to doubt 
that these charges are true. That said, however, outrage should be 
tempered by the recognition that if such interference justifies 
condemnation, then many, many countries have grounds for condemning the 
United States. For Over fifty years the United States has itself 
interfered in the domestic affairs of other countries on a more or less 
regular basis--not only Third World countries and not only 
dictatorships, but developed Western countries, including democracies. 
The Christian Democratic Party of Italy, for example, was massively 
supported by the CIA in its early days, and there has been much 
intervention in the domestic affairs of countries as varied as Greece, 
Chile, and the Philippines.
    I am aware that pointing this out is likely to draw the charge that 
one is assuming a ``moral equivalence.'' But if it is not to become an 
intimidatory device inhibiting free discussion, this is a charge that 
has to be resorted to with great care. If the United States is always 
treated as a special case, if what is condemned in others is condoned 
in America's case because its superior ends justify means that would 
otherwise be unacceptable, it becomes difficult to discuss issues 
sensibly. What may have been appropriate in the exceptional 
circumstances of coping with the ``evil empire'' of yesterday is not 
appropriate in the more mundane world of today.
    In their article ``Toward a Neo-Reaganite Foreign Policy'' (Foreign 
Affairs, July/August 1996), William Kristol and Robert Kagan maintained 
that ``it is hard to imagine conservatives achieving a lasting 
political realignment in this country without . . . a coherent set of 
foreign-policy principles that at least bear some resemblance to those 
proposed by Reagan. The remoralization of America at home ultimately 
requires the remoralization of American foreign policy.'' Again, they 
argue that ``Deprived of the support of an elevated patriotism, bereft 
of the ability to appeal to national honor, conservatives will 
ultimately fail in their effort to govern America.''
    This represents an interesting approach to foreign policy, one that 
seems to start with the political needs of conservatives rather than 
the national interest of the United States. Given the tide of the 
Kristol-Kagan article, it should be pointed out that this was not 
Ronald Reagan's approach to foreign policy. His priority was defeating 
the evil empire, an enemy in being, not finding a foreign policy that 
would serve conservative interests.
    More to the point, the kind of priority represented by Kristol and 
Kagan--the need to find a stirring cause that will ``remoralize'' 
America--is almost certain to produce an enemy and identify an 
inspiring conflict between good and evil. As Walter Lippmann once 
observed, ``For the most part we do not first see and then define, we 
define first and then we see.'' It is difficult to escape the 
conclusion that something of this sort typifies much current American 
thinking about China. It is a dangerous approach to foreign policy.

                                 ______
                                 

    An Open Letter In Support of China PNTR From America's Creative 
                     Industries--February 23, 2000

    America's creative industries strongly support Congressional 
approval of Permanent Normal Trade Relations (PNTR) for China.
    We are writing in response to suggestions that China's alleged 
failure to live up to its commitments under the 1995 U.S.-China 
Intellectual Property Rights Agreement should disqualify it from 
membership in the World Trade Organization and from the benefits of 
full WTO membership treatment, embodied in PNTR.
    In the 1990s, America's copyright industries took the lead in 
pressing the case against China's serious violations of U.S. 
intellectual property rights; in particular, the massive export of 
pirate and counterfeit optical media and other pirated products 
throughout the world. Widespread abuse of intellectual property rights 
was causing billions of dollars in losses each year to American 
creative industries and to the U.S. economy. Working with the U.S. 
Government, we spared no effort to bring about the 1995 bilateral 
intellectual property rights agreement, and to ensure that China abided 
by those commitments, which resulted in the 1996 China enforcement 
``Action Plan.''
    Having worked so hard in the last decade to force the issue of 
intellectual property rights protection upon a reluctant China, why do 
we stand united in support of PNTR for China today?

   Because we are convinced from our own experience that 
        inclusion of China within the framework of multilateral rules 
        and obligations embodied in the WTO is the single best 
        instrument we have to ensure continuing improvement in China's 
        protection of intellectual property;

   Because we know, first hand, that multilateral enforcement 
        through the WTO offers a far more promising method of ensuring 
        continued progress in China's intellectual property environment 
        than does the threat of unilateral retaliation against China;

   Because China committed in the WTO negotiating process to 
        bring its copyright (and other IPR sectors') regime into 
        compliance with its substantive and enforcement obligations 
        under the WTO Agreement on Trade-Related Intellectual Property 
        Rights (TRIPS), and to do so immediately upon accession. We 
        believe China has commenced its efforts to meet this 
        commitment.

   While piracy remains very high within the domestic Chinese 
        market, China met its principal commitment under the 1996 
        Action Plan--to stem the flow of exports that were disrupting 
        other developed markets on a global basis;

   Because the U.S. copyright sector, so critical to America's 
        economic strength today, will cede to our global competitors 
        the massive opportunities America has won at the negotiating 
        table if the United States does not establish full WTO member 
        treatment for China in the form of PNTR.

    In spite of real progress on intellectual property protection since 
the 1996 agreement, problems in China remain, as they do in many 
countries with which the U.S. trades. Chinese companies themselves, an 
increasing number of which likewise depend upon intellectual property 
protection, are recognizing the importance of Chinese adherence to 
international standards of protection, as embodied in the TRIPS 
Agreement. This trend will only accelerate through PNTR and Chinese 
accession to the WTO. Looking ahead, America's ability to address China 
within the framework of the WTO is a vital tool for the preservation of 
our economic rights and the advancement of our national interests.
    We are encouraged by the concern expressed about China's record on 
IPR enforcement and submit that the best way to drive improvements in 
Chinese performance is to approve PNTR, and to hold regular hearings to 
ensure that China is meeting its various obligations, including, in 
particular, the enforcement obligations that it will undertake pursuant 
to the TRIPS Agreement by which it will become bound.
    The companies and associations most vigorous in insisting on 
improvement of China's intellectual property rights regime over the 
past decade are united in support of PNTR in the year 2000. We do not 
accept the suggestion that China's intellectual property track record 
since the signing of the 1996 bilateral agreement constitutes a 
justification for Congressional rejection of PNTR in the year 2000. 
Indeed, we believe that PNTR and the entry of China into the WTO will 
serve to advance the cause of intellectual property protection in 
China, a matter of considerable importance to America's creative 
workforce.
    We strongly urge Congress to support China PNTR in 2000.

            Sincerely,

Robert Holleyman, II, President and CEO, Business Software Alliance.

Kathy Morgan, Chairman, AFMA.

Hilary Rosen, President and CEO, Recording Industry Association of 
        America.

Patricia Schroeder, President and CEO, Association of American 
        Publishers.

Ken Wasch, President, Software and Information Industry Association.

Douglas Lowenstein, President, Interactive Digital Software 
        Association.

Edward Murphy, President and CEO, National Music Publishers' 
        Association.

Eric Smith, President, International Intellectual Property Alliance.

Jack Valenti, President and CEO, Motion Picture Association of America.

                                 ______
                                 

                 PNTR, WTO and Chinese Labor Standards

 an open letter from american academic specialists on china's economy 
                              and society
    China's workers need higher labor standards, but opposing Permanent 
Normal Trade Relations for China is not going to help. To the contrary, 
China's participation in the WTO and the implementation of full WTO-
member relations between the United States and China through the 
passage of Permanent Normal Trade Relations (PNTR) offer greater, more 
dependable prospects for progress on this long-term challenge.
    Normal trade relations in the context of China's membership in the 
World Trade Organization (WTO) are an important way for China to raise 
the standard of living of its people. WTO membership will also 
contribute to the development of a law based system in economic 
relations.
    China's low wages and often poor working conditions are mostly the 
result of China's poverty. Child labor similarly is more the product of 
families so poor that the small extra income these children bring in is 
important to family survival. China's failure to regularly and 
vigorously enforce its existing laws against child labor and poor labor 
standards reflects a system of law that is only slowly being 
reestablished after decades of neglect.
    With China on the brink of entry into the WTO, what is needed is an 
energetic effort to help China enforce its own laws and to strengthen 
its legal system in general. Efforts of this sort have been underway 
for some time through bilateral and multilateral public and private 
bodies and have already born modest fruit.
    Attempts to enforce labor laws by means of trade sanctions are by 
contrast a weak and blunt instrument for enforcing China's labor 
standards. Opposing PNTR and WTO membership for China would undermine 
the very forces that are contributing to rising standards for Chinese 
labor and enforcement of its existing labor laws. Denial of normal 
trading relations and resort to sanctions are also easily prey to abuse 
by special interests desirous of disguising their true protectionist 
purpose.
    Whoever may benefit from a sanctions approach to trade with China, 
it will certainly not be Chinese workers or their children.

            Signers (listed alphabetically):

Loren Brandt, Professor of Economics, University of Toronto

        Author, ``Redistribution in a Decentralizing Economy: Growth 
        and Inflation in China,'' Journal of Political Economy, April 
        2000; ``Markets, Human Capital and Income Inequality in 
        China,'' forthcoming.

Thomas R. Gottschang, Associate Professor and Chair, Department of 
Economics, College of the Holy Cross, Research Associate, Fairbank 
Center for East Asian Research, Harvard University

        Editor: Du Runsheng, Reform and Development in Rural China (New 
        York: St. Martin's Press, 1995); Co-author: ``Institutional 
        Change in Transitional Economies: The Case of Accounting in 
        China,'' Comparative Economic Studies (Winter 1998).

Doug Guthrie, Associate Professor of Sociology, New York University

        Author, Dragon in a Three-Piece Suit: The Emergence of 
        Capitalism in China (Princeton, 1999); ``The Evidence is Clear: 
        Foreign Investment Spurs Workplace Reform in China'' (Chronicle 
        of Higher Education. March 2000).

Gary H. Jefferson, Carl Marks Professor of International Trade and 
Finance, Graduate School of International Economics and Finance, 
Brandeis University

        Co-editor, Enterprise Reform in China: Ownership, Transition, 
        and Performance, 1999.

Lawrence I. Lau, Kwoh-Ting Li Professor of Economic Development, 
Department of Economics, Stanford University

        Co-author, ``China's Foreign Economic Relations,'' China Review 
        1997: ``The China-United States Bilateral Trade Balance: How 
        Big Is It Really?,'' Pacific Economic Review, Vol. 3, No. 1, 
        February 1998; ``New Estimates of the United States-China 
        Bilateral Balances,'' March, 1999.

Barry Naughton, Professor, Graduate School of International Relations & 
Pacific Studies, University of California, San Diego

        Author: Growing Out of the Plan: Chinese Economic Reform. 1978-
        1993 (Cambridge University Press, 1995); The China Circle: 
        Economics and Technology in the PRC, Taiwan, and Hong Kong 
        (Brookings Institution Press, 1997).

Dwight Perkins, H.H. Burbank Professor of Political Economy, Harvard 
University

        Author, ``How China's Economic Transformation Shapes Its 
        Future,'' in Ezra Vogel, editor, Living With China: U.S.-China 
        Relations in the Twenty-First Century, WW Norton, 1997; China: 
        Asia's Next Economic Giant, (Henry M. Jackson Lectures) 
        University of Washington Press, 1986, 1989.

Thomas G. Rawski, Professor of Economics and History, University of 
Pittsburgh

        Author, Economic Growth and Employment in China. N.Y.: Oxford 
        University Press (for the World Bank), 1979; ``China: Prospects 
        for Full Employment.'' Employment and Training Papers. no. 4Z 
        International Labour Office, Geneva. 1999.

Bruce L. Reynolds, Professor of Economics, Union College

        Author, Chinese Economic Reform: How Far, How Fast? (Harcourt, 
        1988); ``China's Integration into World Capital Markets'' 
        (forthcoming); Editor, China Economic Review, Cornell 
        University.

Scott Rozelle, Associate Professor, Department of Agricultural and 
Resource Economics, University of California, Davis, Chair, Committee 
of Professional Relations with the People's Republic of China, American 
Agricultural Economics Association

        Co-author, ``China's Food Economy to the 21st Century: Supply, 
        Demand, and Trade,'' Economic Development and Cultural Change, 
        July 1999; Co-author, ``How China Will NOT Starve the World,'' 
        Choice. First Quarter 1996; Co-author, ``Liberalization and 
        Rural Market Integration in China,'' American Journal of 
        Agricultural Economics (May 1997).

Ezra F. Vogel, Henry Ford II Professor of Social Sciences, Harvard 
University

        Author: One Step Ahead in China: Guangdong Under Reform (1989); 
        Editor, Living With China: U.S.-China Relations in the Twenty-
        First Century (1997).

Martin King Whyte, Professor of Sociology and International Affairs, 
The George Washington University

        Author, ``The Changing Role of Workers,'' in The Paradox of 
        China's Post-Mao Reforms. ed. R. MacFarquhar and M. Goldman 
        (1999); ``Human Rights Trends and Coercive Family Planning in 
        the People's Republic of China,'' Issues and Studies. August, 
        1998.

    The Chairman. Thank you, sir. I hear what you are saying, 
but I am not sure I agree with it. I myself have participated 
in many, many messages directly to the leaders of China.
    I have done it through ambassadors and so forth and so on. 
And there are many of us who have said, look, let them know 
that if they will ease up on the human rights problems, and if 
they do this and do that, then they come back and say, well, 
you know, that's a good idea, or something like that, and we 
will get to it. The check is in the mail, in other words. And 
nothing happens.
    But are you saying that if we, the United States, let them 
in, that that is going to be different, or that leadership will 
be different, or will they continue to be the abusive people 
that they are, putting in jail good men like this one, Mr. Wei.
    Mr. Kapp. Senator, I respectfully point out that we do not 
vote on whether to let them in. They are going to get in. The 
vote is on NPTR----
    The Chairman. Oh, of course.
    Mr. Kapp. OK. Well, but it is a serious difference, because 
the whole argument behind the idea that this is a favor to 
China all too often revolves around the mistaken assertion that 
we have it within our power to let them in or not.
    But leaving that aside, you know, I gave a talk last April 
just before the Premier came to Washington, when we all thought 
the WTO deal was about to close, and I said over breakfast that 
it was inevitable, and in the nature of the process here in 
Washington, that this issue is going to be inflated and 
inflated and inflated with more and more hyperbolic claims on 
the pro side and the anti side, and that it was almost 
unavoidable in the nature of the process.
    And a journalist came up to me right afterwards and she 
said, ``in other words, Mr. Kapp, you are saying business is 
going to lie and cheat and deceive in order to get what it 
wants,'' and I said, no, that is not what I am saying. What I 
am saying is that there is a self-inflationary process in the 
rhetoric that surrounds an issue like this when you are trying 
to get it through the Congress.
    What I tried to say in the end of my testimony is that it 
is better not to load the WTO-PNTR issue down with all the 
dilemmas of the American engagement of a modernizing and 
rapidly changing China, because the PNTR vehicle is not the one 
to bear that load, and if you expect all those things to be 
either made better or made worse, it is creating a false 
illusion.
    The Chairman. It seems to me everything has been done by 
the Chinese people themselves, and by people who want China to 
do right, and they pay no damn attention to the abuses. They 
just go right on throwing people in jail and even worse than 
that.
    Let me see. Dr. Waldron, I want to turn to you for just a 
minute. We all want there to be a--how to say it, a change in 
the direction of reform and democracy, hoping, parenthetically, 
there is going to be some change and reform and democracy.
    The conventional wisdom is that we can encourage Chinese 
reformers through trade and appeasement. I gather from what you 
said you do not agree with that.
    Dr. Waldron. Well, Mr. Chairman, I think there is a very 
simple fact that we sometimes lose track of, and that is, 
imagine that there is a debate going on in China, and one 
person is a general, or a sort of hot-shot civilian, military 
type, and he says, look, we can get what we want, we can fix 
Taiwan, all the rest, just do what I say. Fire some missiles.
    And the other one is somebody who is in favor of opening up 
the system, privatizing, increasing participation and so forth, 
and he says no, don't do that. That is going to cause trouble 
with the United States.
    But the military guy wins, and he fires missiles, and the 
United States then responds by engagement, by making 
concessions to China. Now, whose hand do we strengthen in the 
internal debate by doing that? We strengthen the person who 
advocated the military steps, and we weaken the person who is 
saying no, this is going to cause trouble.
    The best thing that we can do, one of the things that we 
can do and that we should try to do--I was thinking this the 
other day. I was looking at a highway out the window from a 
hotel in Hartford, Connecticut, and there were hundreds of cars 
going onto Route 84, and I thought, well, China is speeding 
right along on the entrance ramp to military modernization and 
getting what it wants through threats. What have we got to do 
if we are going to help the people who are on the right side?
    We have got to basically jack-knife a tractor trailer right 
on that entrance ramp and make it clear, make it clear that 
that does not lead anywhere, that if you use threats against 
the United States and against our friends, and you buildup 
missiles and you emplace missiles which are clearly intended to 
threaten Taiwan and other U.S. friends, that is going to lead 
to nothing but trouble. That is going to get you nothing.
    If we do that, then the people with cooler heads will be 
able to say, now look, why don't we take--why don't we look for 
that exit there that says peace and cooperation. Let's take 
that one.
    The people in the West who argue that at a time when China 
is ramping up the military threats, that we should respond with 
unconditional economic engagement are unwittingly strengthening 
the hands of the very people that we want to weaken. We have 
got to get that straight. The way you help the good guys is by 
hurting the bad guys. If you yield to the bad guys, that hurts 
the good guys.
    The Chairman. You also call for a unified and coherent 
policy toward China. Tell me how to do that.
    Dr. Waldron. Well, this--I was interested in what Dr. Kapp 
was saying, because he makes a really legitimate point, which 
is that in many ways economics is not the vehicle for dealing 
with all of these things. If you have got a military problem, 
you ought to deal with it militarily.
    But I think it is fair to say that the administration is 
treating economic policy really as a substitute for security 
policy. At a time when you have just had the white paper 
threatening Taiwan, they said, look, we have got to have a vote 
on NPTR, and we have got to have it before all of this other 
extraneous stuff starts clouding the waters. Well, that is a 
completely inappropriate reaction.
    If the administration would show that they had a consistent 
approach which dealt with--and Bob used this word--hyperbolic 
claims, well, the claim that China is spending an awful lot on 
warfare and emplacing missiles and so forth, that is not a 
hyperbolic claim. That is a fact. We have got to deal with 
that.
    And as this unnamed ambassador that I am quoting, who is a 
senior and a very nonpartisan figure, it should be said, as he 
pointed out, that message about the futility of force is not 
getting through, and to pass PNTR now, saying, well, look, put 
the blinders on, don't look at the missiles, don't look at the 
threats, don't look at the arrests, just put the blinders on 
and go for PNTR, that tells China--that sends exactly the wrong 
message to China.
    Because then they start saying, look, those Americans are 
so eager to have trade with us, those big businesses are so 
powerful in America, they need our markets so much, they want 
to invest so much that, hell, we can probably do some stuff and 
we will get away with it, because we have now rendered them so 
dependent on us economically. It is absolutely the wrong 
message.
    The Chairman. All right. Dr. Mastel, beyond Beijing's 
promises in its trade agreements with the United States last 
fall, what specific steps must we insist China take to make it 
live by the rules of the WTO?
    Dr. Mastel. Well, that is no small task. We have not been 
able to get China to live by the rules of any agreement we have 
struck so far, and the WTO--I think it is very important to 
understand this. People tend to act as though the WTO somehow 
will magically transform China into a law-abiding country. In 
fact, that is simply not the case.
    The WTO is a law-abiding institution that is built by 
countries that have a strong rule of law, like the U.S. and 
Europe, so it is actually assumed as a precondition. I think it 
will be very difficult for the WTO to kind of digest China, if 
you will, that their system is so different from that conceived 
by the WTO it will be very, very difficult for the WTO to bring 
a rule of law to China. It would work much better, I think, if 
the rule of law already existed.
    I mean, I think it is a very questionable case that the WTO 
can somehow import a rule of law into China. I suspect the only 
way to make real progress with China is committing oneself, the 
country, to a very long, extensive campaign.
    Many people think that WTO membership for China will 
somehow put trade issues behind us. In fact, my guess is in 10 
years trade issues will be more important with the U.S. and 
China than they are today, just because the WTO will provide a 
new forum, but it will not solve the problems, and the fact is 
that unless you are committed to taking a hard campaign that 
will last probably 10, 20 years, to try to implement the WTO on 
the ground in China, it will not make much difference at all.
    And my concern is, I am not sure that we are committed to 
that kind of a campaign. You know, we have a tendency in this 
country to sign an agreement, have a fresh lease, have a party, 
and that is it, and come back in 10 years, not much has 
happened. That should not be a surprise, but it always is, and 
it seems to me that this is a surprise we should not let 
ourselves make, we should not let ourselves make this time.
    One last thing. We have talked a lot about reform in China. 
Keep in mind, if the WTO is going to make any difference for 
reformers in China, if it is to advance the cause of economic 
reform, it will do so because it is enforced. An unenforced 
agreement makes no difference at all. If you want to help Zhu 
Rongji advance the cause in China, you should pay close 
attention to the details of enforcement, because otherwise--
that is the only way it will make any difference at all.
    The Chairman. Would free elections do anything to help the 
situation in China, from our standpoint?
    Dr. Mastel. I think free elections in China would be an 
enormous step forward. They would make China into more of a 
rule-of-law based country, I think, but I think it is a very 
long ways away, and in fact, you know, free elections in Taiwan 
seem to have actually set things back a ways, so I see it as a 
very distant prospect in China, unfortunately.
    The Chairman. Well, I very often tell the distinguished 
witnesses that very often when I go to make a speech, the best 
speech I never made I make driving home. Why didn't I say so-
and-so? I am going to give each of you a couple of minutes to 
say anything that is on your mind that you did not say the 
first time.
    Mr. Kapp, you go first.
    Mr. Kapp. Senator, I want to read you a letter. We told our 
companies in China to ask anybody working for them if they 
would like to drop us a note about their lives as related to 
working for a U.S. company in China, so let me just read you 
one. I have got a stack here, but this is a nice one.

    I have been working in the x company for more than 4 years. 
Like many of my peers and friends I share a same feeling that 
we have benefited so much in terms of living standards, career, 
personal capability and common beliefs, and many more from its 
unique culture.
    The most striking thing about the experience of working for 
a U.S. multinational is that your world has an ever broad and 
new perspective to approach problems and look at things around. 
A key attitude took place when I entered x company, for it is 
where I realized the efficiency and effectiveness of a modern 
corporate system, where human resources and personal 
performance and initiatives are considered the most valuable 
asset, where mutual and equal respect and smooth communication 
is prevailing, where you will never be overlooked or judged 
simply by your title or position.
    No exception would there be that staff of x company would 
be impressed with the ample learning and self-challenging 
opportunities.
    It is no exaggeration to say that x company is a social 
university for personal maturity and aptitude growth, so to 
speak. Being exposed to vastly adequate working resources and 
competent human talents keeps you being constantly motivated to 
enhance learning and surpass.
    What is equally amazing is the harmony of different 
cultures. No matter what your skin color is, white, black, or 
yellow, you would see friendship and hospitality overwhelming. 
Despite the vast differences in belief and cultures, staff in x 
company channel and contribute all their talents and efforts 
toward the unanimous goal of building business success and 
contribute to our kernel value to be the most preferred 
supplier and most innovative enterprise.
    We may well believe this world would definitely be a better 
one through more communication and cooperation. People from 
every corner of the world could enjoy the sunlight of peace, 
respect, and friendship as much as we have here with x company, 
a U.S. multinational.

    Mr. Kapp. This is the end of this employee's letter.
    That is just an example of the ways in which the presence 
of American business working in China makes a positive 
difference in individual lives and, I believe, in a modest way, 
in the process of China's gigantic transformation, which is far 
from over.
    Thank you.
    The Chairman. Dr. Mastel.
    Dr. Mastel. I am glad for the chance to do this, actually, 
because ironically the thing I feel most strongly about right 
now was not in my testimony, or barely was, and that is 
Taiwan's WTO application.
    We talked about the ``one China'' policy a bit today. It 
seems to me one of the perhaps most ridiculous outcomes of that 
policy is the situation with Taiwan and the WTO. Taiwan is 
universally regarded as a great candidate for WTO membership. 
It is a market economy. It is rule-of-law based. It would make 
an excellent WTO member. We all agree on that, and Taiwan has 
studiously negotiated with all of its trading partners to 
resolve any outstanding issues over a number of years. There is 
only one reason why Taiwan is not in the WTO now. That is 
because China does not want it in the WTO, at least not before 
it is a member.
    We have for many years taken China's word that once they 
get in the WTO they will let Taiwan in. We have taken that as 
kind of a resolution to this problem. Now it appears more and 
more likely that in fact China will still say no, or will still 
try to stop Taiwan's admission to the WTO, even if it gets 
membership.
    I think that is an outrage that we should not tolerate. It 
is another example of China breaking its word on trade, and it 
is in a case where literally, as I say, it makes no sense to 
allow this kind of injustice to go forward. Taiwan should be in 
the WTO. There is no good reason for it not to be. It is 
something the U.S. should care about and should commit itself 
to achieving.
    The Chairman. Well, last but not least.
    Dr. Waldron. Well, thank you. I would second--actually, 
second what both of them have said, because I think that yes, 
American business, working for an American company is good, but 
one reason American companies are good is that they come from a 
society in which abiding by law and taking people seriously as 
having innate rights is deeply imbued, and I think that we 
really have to look out for the interests of Taiwan.
    But the chief issue that is facing us right now with 
China--really, it has two pieces. One piece is that there are 
real domestic problems there. The leadership is not very good, 
and they are coming really to the limit of what they can do 
easily. I think there is real potential for kind of seismic 
shifts there, and this is translating into security threats, 
and they are not just directed at Taiwan. They are directed at 
other countries, Southeast Asia, the South China Sea, Japan, so 
forth and so on.
    And I was interested that Mr. Wei views an analogy with the 
way the Nazi Government stirred up a kind of war fever, and 
actually a very, very great China specialist, Professor Yu 
Ying-shin, now at Princeton, perhaps the most respected of 
Chinese intellectuals, has used the same analogy. He has talked 
about Chinese fascism, and the fact that a kind of xenophobic 
nationalism can be very, very dangerous, and that really in a 
way is the thing that we are not dealing with.
    We are telling ourselves that economic relations are 
somehow going to solve this, but they are not. The only thing 
that is going to solve it is going to be a change of regime 
type in China, just as European security really became possible 
only when--it really became possible only when the Soviet Union 
went down, only when communism was gotten rid of. Then you 
began to have real peace in Europe. The same is true for China.
    Now, you asked about free elections. I would like to just--
I did not quite understand Dr. Mastel's answer to that. I think 
the time is long past when there should be free elections in 
China. This is a country that is richly endowed with enormously 
talented people who are full of public spirit and are eager to 
serve their country. Think of these people who have just been 
purged from the Academy of Sciences, leading political 
thinkers, leading economists and so forth, not to mention 
people like Wei Jingsheng, many of whom are still in jail, the 
leaders of the democracy movement.
    Would it not make a lot more sense to bring them in and 
say, how can we improve our system? Let us plan a transition so 
that the kind of democracy that many of us Communists actually 
believed was coming in 1950 and 1949, that that can happen.
    Now, people say China is somehow not ready. Next week, I am 
going to Mongolia, where parliamentary elections are coming. 
Are you going to tell me that Mongolia is more ready for 
democracy than China? Are you going to tell me that Nigeria is 
more ready, that South Africa is more ready, that Chile is more 
ready, Iran?
    I mean, China is one of a very small handful of countries 
that have not yet embraced the democratic process, and as far 
as I am concerned, and I believe that if you had pluralization 
in China and you had genuine liberalization and democratic 
opening, that pressure within the society would be reduced, and 
the result would be a better life for the Chinese and fewer 
threats abroad.
    If all those Chinese farmers voted, you can believe that in 
the parliament there would be a lot of discussion of whether 
what China needed was a space station, or whether maybe you 
needed rural schools, rural hospitals, something about the 
environmental crisis.
    Think of the money. Fifty-plus billion are being spent on 
military acquisitions in China, and you have people who are 
supposed to live on $20 and $30 a month. This is the basic root 
of the problem.
    And as for America, well, of course, we cannot remake 
China, but we must not do harm, and to look at the thing as if 
somehow economics was the sort of panacea, and the only 
dimension, is wrong. We have to build a structure which deals 
with political issues, the security issues, the human rights 
issues, as well as the economic issues, and if I see that, then 
I think we can push forward with this PNTR.
    The Chairman. I want to know if this lady was translating--
were you translating this for him? I saw him nodding. Does he 
agree?
    Ms. Liu. Most everything.
    The Chairman. Most definitely, she said.
    Well, I have--Dot Helms and I have--Dot being my best 
friend for the past 57 years, we have a great friend in North 
Carolina. Her name is Ruth Graham. Her husband's name is Billy, 
and you know who I am talking about. Ruth was born in China, 
and every time we have a hearing I hear from her, because she 
loves the Chinese people. She was born there and she grew up 
there, partially.
    Well, I also love the Chinese people. I have worked with 
Chinese students in the United States ever since I came to the 
Senate, and I once took George Bush to North Carolina State 
University to look at some technological instruction going on 
there, and I expected to see people from Rocky Mount and 
Wilmington and Raleigh and Durham, and all but one of them were 
from China, which tells you something about the Chinese people.
    But in any case, I am glad we had this dialog today, and I 
am enormously grateful to all three of you for coming and, of 
course, I am enormously, enormously grateful to you, Mr. Wei, 
and to the lady who translated for you.
    I appreciate you coming, and--oh, by the way, we are going 
to leave the record open for a couple of days for Senators who 
are in other committee meetings and could not get here, who may 
file a few questions with you, and I hope you will respond to 
them.
    If there be no further business to come before the 
committee, we stand in recess.
    [Whereupon, at 4:13 p.m., the committee adjourned.]

                              ----------                              


             Additional Statements Submitted for the Record


    Prepared Statement of the American Forest and Paper Association

                      china's accession to the wto
    The U.S. forest products industry strongly supports China's 
accession to the World Trade Organization (WTO), and urges timely 
Congressional approval of Permanent Normal Trade Relations (PNTR) for 
China.
    China holds great promise as a major export market for U.S. wood 
and paper products. However, Chinese tariffs in our sector are among 
the highest in the world. Those high tariffs--coupled with a broad 
range of nontariff barriers--currently inhibit our industry's ability 
to take advantage of the potential that is inherent in China's huge 
population, relatively low per capita consumption of wood and paper 
products, shortage of quality housing, economic growth and burgeoning 
middle class.
    Bringing China into the WTO rules-based trading system, under the 
market access conditions that were agreed bilaterally in November 1999, 
should significantly enhance export prospects for U.S. producers of 
wood and paper products. At the same time, China's integration into the 
global trading system will strengthen the economic and political forces 
which are changing Chinese society, and thereby advance important 
American security, social and human rights interests.
U.S.-China Bilateral Market Access Agreement
   The bilateral WTO accession agreement concluded last 
        November between the U.S. and China will reduce most Chinese 
        paper and wood tariffs to the 5-7.5% level, with some tariffs 
        as low as 1-2%. Most of these rates will be achieved by 2003. 
        This is well below current levels of 12-18% on wood and 15-25% 
        on paper products.

   China agreed that if an Accelerated Tariff Liberalization 
        (ATL) agreement is reached in the WTO, China will join the 
        forest products initiative upon accession. While an ATL 
        agreement was not reached in Seattle, this suggests that China 
        is not opposed to elimination of wood and paper tariffs not 
        later than 2005. It is therefore critical that this opportunity 
        for tariff elimination in a huge market not be lost.

   U.S. companies' ability to do business in China is currently 
        limited by restrictions on trading rights (importing and 
        exporting) and distribution of imported products. Within three 
        years, any entity will be able to import forest products into 
        any part of China and engage in the full range of distribution 
        services.

   The agreement requires that China extend to U.S. forest 
        products suppliers any preferential treatment it provides to 
        other countries.
Permanent Normal Trade Relations for China
   The U.S. forest products industry has long supported the 
        normalization of U.S. commercial relations with China. As China 
        prepares to join the WTO, it is essential that Congress grant 
        permanent, unconditional trade status to ensure that U.S. 
        exporters and investors get the full benefits of the very 
        favorable bilateral market access agreement and the other 
        commitments China makes as a condition of its accession.
The Importance of China's Paper and Wood Market to U.S. Suppliers
   China's membership in the WTO, with its system of rules and 
        obligations, will give U.S. exporters a means for addressing 
        inconsistent, discriminatory and trade-distorting practices 
        that have made doing business in China very difficult.

   China already has access to our market, since U.S. tariffs 
        on forest product imports are at zero or very low. WTO 
        accession on the terms of the U.S.-China bilateral market 
        access agreement will ensure a more level playing field on 
        tariffs.

   The removal of tariff and nontariff barriers to China's 
        market is expected to provide significant export opportunities 
        for U.S. producers of paper and wood products. Because China is 
        deficient in forest resources, with limited potential for 
        extending its own fiber supply, its need to import paper and 
        wood products is expected to increase substantially as it 
        pursues economic and industrial expansion.

   Pulp and Paper Products: U.S. pulp, paper, paperboard and 
        converted products exported to China totaled more than 800,000 
        metric tons in 1998, with a value of $430 million (there is 
        also significant trans-shipment through Hong Kong). In 1998, 
        China was the only Far East market which saw an increase in 
        U.S. exports despite the effects of the Asian financial crisis 
        (U.S. exports to all other markets in the region dropped 
        sharply).

   Over the past decade, China has experienced the world's 
        fastest paper and paperboard consumption growth. However, 
        production capacity has not kept up with this growth. 
        Projections by the Food and Agricultural Organization (FAO) 
        show that China's paper and paperboard consumption will 
        continue to grow strongly over the next decade and that the gap 
        between supply and demand will continue to widen and be filled 
        by imports.

   Wood Products: Exports of solid wood to China will approach 
        $60 million in 1999, up from $41 million in 1998. Most products 
        are imported in the form of logs or lumber and re-manufactured 
        in China for use in interior applications such as furniture, 
        flooring, doors and windows. These markets should continue to 
        grow as more Chinese can afford to upgrade their current 
        dwellings or purchase new housing.

   Almost no U.S. wood is used in housing construction, but 
        this could change as the Chinese government has launched an 
        ambitious, market-oriented housing reform plan to privatize and 
        increase the quality of Chinese housing. AF&PA is participating 
        in the revision of the Chinese design standard for timber frame 
        construction with the Chinese Ministry of Construction, and 
        using our membership in the U.S.-China Residential Building 
        Council to increase pressure on China to allow greater use and 
        importation of U.S. wood building products.

   In order for U.S. products to compete in both interior and 
        housing construction areas, high Chinese tariffs must be 
        eliminated. U.S. value-added interior products such as 
        flooring, veneer, molding and millwork, windows and doors 
        cannot compete in local markets when facing an 18% tariff on 
        top of the Chinese VAT tax.

   Price competitiveness in building materials is foremost in 
        Chinese purchasing decisions, and U.S. wood products are 
        competing against locally produced materials such as steel and 
        concrete. Without tariff elimination and major building code 
        changes, it will remain difficult for U.S. manufacturers to 
        compete effectively in this growing and increasingly prosperous 
        market.

                                 ______
                                 

  Prepared Statement of Mike Jendrzejczyk, Washington Director, Human 
                              Rights Watch

             china's accession to the wto and human rights
    Human Rights Watch does not take a position on trade agreements per 
se, and does not endorse any particular trade agreement, including the 
one signed by the U.S. and China last November. However, we believe 
that the WTO process should be used to push for human rights 
improvements. Broader trade with China can be consistent with advancing 
human rights, but only if it is combined with effective, sustained 
pressure on China to respect basic civil and political rights.
    In my testimony today, I would like to describe the recent 
deterioration of human rights conditions in China, assess the possible 
long-term impact of WTO membership on China's human rights performance, 
and present our recommendations to Congress as you consider the 
question of extending permanent Normal Trade Relations to China and the 
broader policy implications of this important decision.
                           the wto and china
    As a WTO member, China will commit itself to respecting global 
trading rules. This is a step towards China's integration into the 
international system regulating not only trade relations but also 
governments' treatment of their own citizens. Restructuring China's 
economy to fit WTO standards will give a boost to those within China 
arguing that it must further open up both politically and economically 
if it is to be a respected member of the international community.
    But WTO membership will not itself lead to political changes. It 
could be an important catalyst for change over the long run if combined 
with consistent pressure from outside China. For instance, greater 
transparency in economic matters could increase demands and 
expectations from within China for more openness in other areas.
    China is a long way from having a legal and court system that 
functions independently of the Party and the State. Demands to 
modernize China's legal system to handle commercial disputes, protect 
contracts and combat corruption could help lay the groundwork for an 
independent judiciary and the rule of law that might extend to the 
political and security realms. As the World Bank has pointed out, 
``economic reforms have made legal rules matter'' in China.
    The closing of thousands of state-run enterprises--there are 
currently about 300,000, nearly half of them industrial--could push 
workers to insist on greater collective decision-making on workplace 
issues and the need for a social safety net. They may increasingly 
insist on exercising the worker rights guaranteed in the U.N. 
International Covenant on Economic, Social and Cultural Rights. (China 
signed this treaty in October 1997, but has not yet ratified it.) The 
official national employment rate is about eight percent, and in some 
rural areas it's much higher. A rise in the unemployment rate may 
create more instability in the short run, with the authorities clamping 
down on attempts by workers to organize. But eventually the government 
may be forced to create channels for workers to negotiate over their 
grievances. The alternative to allowing greater freedom of association 
is to risk disaffected workers turning against the state.
    But I must emphasize that WTO membership in itself will not 
guarantee the rule of law, respect for worker rights, or meaningful 
political reform. Economic openness could be accompanied by tight 
restrictions on basic freedoms and a lack of governmental 
accountability. The Chinese government might seek to build the rule of 
law in the economic sphere while simultaneously continuing to pervert 
and undermine the rule of law elsewhere. For example, Chinese 
authorities claim to be upholding the ``rule of law'' by arresting and 
throwing in jail pro-democracy activists, and the nationwide crackdown 
on the Falun Gong movement has been cloaked in rhetoric about the 
``rule of law.''
    We believe the U.S. and China's other major trading partners must 
increase pressure on Beijing for significant improvements in human 
rights. It makes little sense to bring China into the WTO and expect it 
to abide by global trading rules when Beijing flaunts international 
rules of human rights with impunity. China must be moved to go beyond 
opening its markets to opening its jails, easing restrictions on the 
press and the Internet, and protecting the rights of workers.
                   human rights developments in china
    There has been a clear deterioration of human rights conditions in 
China. A tightening of controls on basic freedoms began in late 1998, 
escalated throughout 1999, and has continued into the new year. The 
range of the crackdown suggests that a nationally coordinated campaign 
is underway to shut down all peaceful opposition in the name of 
maintaining ``social stability.''
    Among the elements of the crackdown are:

   an intensified attack on all organizations that the Chinese 
        Communist Party perceives as a threat to its rule;

   a series of regulations that constrain free association, 
        assembly and religious expression;

   the ongoing arrest of Tibet ``splittists'' and tightened 
        secular control of Tibetan Buddhism;

   the stepped up pace of arrests and executions of activists 
        in Xinjiang. Even a prominent Uighur businesswoman, Ms. Rebiya 
        Kadeer, was detained last August and given an eight year prison 
        sentence by the Urumqi Intermediate Court on March 10, 2000. 
        Her case has been highlighted by the Congressional Human Rights 
        Committee, and by Rep. Nethercutt and Rep. Porter in their 
        concurrent resolution calling for her immediate release;

   ongoing attempts to interfere with the free flow of 
        information at home and abroad, through new restrictions on the 
        Internet and threats against academic research in open sources. 
        We welcomed the release of the respected scholar, Song Yongyi, 
        but his arbitrary arrest and detention are a clear reminder of 
        the capriciousness of the ``rule of law'' in China and the 
        dangers of conducting research into sensitive subjects.

    I would like to provide the Committee with a few examples to 
illustrate the depth and breadth of the current crackdown.
    On November 23, 1998, former premier Li Peng issued a statement 
that effectively banned opposition political parties. The following 
month, the courts gave heavy sentences to three leading members of the 
China Democracy Party (CDP), an open, peaceful opposition Party that 
had announced its formation prior to President Clinton's visit to China 
in June 1998. Veteran dissident Xu Wenli in Beijing, Qin Yongmin in 
Hubei province, and Wang Youcai in Zhejiang were sentenced to thirteen, 
twelve and eleven years respectively for ``conspiring to subvert state 
power.'' The government's largely successful attempts to destroy the 
CDP have resulted in long prison sentences for its members in Beijing, 
Shanghai, and at least eight other provinces. In all, some twenty-five 
China Democracy Party members have been sentenced since December 1998 
after trials lacking adequate procedural safeguards and closed in all 
but name. Others have been tried but not yet sentenced; at least a 
dozen more are still in detention.
    Other attempts to organize groups outside official control have 
also been stifled. In November 1999, Aun Jun, an attorney who formed an 
organization called ``Corruption Watch'' to expose local corruption, 
was put on trial. The verdict has yet to be announced. He had attempted 
to legally register the organization with the Ministry of Civil 
Affairs, but it was banned. The China Development Union, set up to 
promote political and environmental reform, was quashed and its leader, 
Peng Ming, was sentenced last February to an eighteen-month term for 
allegedly soliciting prostitution.
    Throughout China, leaders of worker and peasant protests calling 
for workers rights have been detained. Also, those trying to organize 
workers, or protesting against exorbitant fees and taxes, corruption, 
or fixed local elections have been arrested and given sentences of up 
to ten years. It's worth noting that China has not ratified key ILO 
(International Labor Organization) conventions protecting the rights of 
free association (87), the right to organize and bargain collectively 
(98), or on the abolition of forced labor (105). Of these, I might add 
that the U.S. has only ratified the ILO convention on forced labor.
    Restrictions on religious freedom have increased. The crackdown on 
Falun Gong clearly violates China's conmiitments to respect 
internationally-guaranteed rights of freedom of belief, expression, 
association and assembly. Members of Falun Gong were briefly detained 
by the thousands for ``reeducation'' after the group was officially 
banned on July 22, 1999, though most have since been released. Millions 
of Falun Gong books were confiscated and destroyed. At least 111 Falun 
Gong members, according to China's State Council, have been formally 
arrested though few details are known at this time. Sentences 
officially confirmed have ranged from three to eighteen years. 
President Jiang has made it clear that the suppression of the Falun 
Gong remains a high priority as part of the government's broader effort 
to control all organizations. The number of Falun Gong members--between 
two and seventy million in China--their ability to organize, and their 
use of modern tools of communication have made the Falun Gong movement 
especially threatening.
    In early January 2000, Premier Zhu Rongji and State Councillor 
Ismail Amat gave speeches stressing the importance of control of 
religion to the stability of the state, and resistance to ``hostile 
foreign forces'' which they say use religion to undermine China's 
solidarity. Throughout the past year, there have been sporadic reports 
of arrests and detentions of Catholics and Protestants. Campaigns to 
register Catholic congregations in Hebei and Zhejiang provinces forced 
many worshipers into hiding. In an attempt to reaffirm the independence 
from the papacy of the official Catholic Church in China, the 
government's Religious Affairs Bureau and the Bishops' Conference of 
the Catholic Church in China arranged the ordination of five bishops 
last month, without seeking papal approval. At least ninety-five 
Protestant house church leaders were detained early in 1999.
    Those released from prison still risk official harassment and 
intimidation. On March 29, 2000 Bao Tong, the former Chinese Central 
Committee member and senior aide to Zhao Ziyang, released a letter to 
the Chinese authorities protesting increased monitoring and harassment 
since the beginning of this year. Bao was released from prison in 1996, 
after being imprisoned during the student protests in 1989, and was 
then kept under house arrest for one year. When his political rights 
were finally restored in May 1998, Bao Tong began speaking out against 
government and Communist Party policies. In his recent letter, he 
declares: ``My personal freedom has been limited and violated. Day and 
night, whenever I step out of my home, there are always six people 
closely following me.'' He also complains that reporters interviewing 
him have been warned they would be punished, and that his phone service 
has been cut at the time of important political anniversaries. His 
treatment violates guarantees of free expression contained in the 
Chinese constitution.
                        controls on the internet
    The government's attempts to control the Internet have ominous 
implications for U.S. businesses seeking to expand operations in China 
under the terms of the new U.S.-China trade agreement. In January 1999, 
new regulations were issued requiring bars and cafes with Internet 
access to register and inform the police about their customers. By May, 
the Ministry of State Security was able to track individual E-mail 
accounts through monitoring devices on Internet Service Providers. 
Internet bulletin boards were subject to round-the-clock monitoring; 
several were closed for hosting political discussions or postings 
critical of government policies.
    Last month, the government of Shanghai took the lead requiring 
corporate Internet users to register with the police, or face a fine. 
On January 26, 2000 new regulations retroactive to January 1 prohibited 
the transmittal of state secrets on the Web or through E-mail. The 
restrictions make both users and Website owners liable for infractions. 
The broad language of the state secrets law invites selective 
application against anyone out of favor with the government. In 
addition, new regulations prohibit websites from independently 
compiling news or interviewing reporters; instead, they can only carry 
news already compiled by domestic newspapers.
    I should add that the publishing and print media have also been 
more tightly supervised. Last fall, local newspapers and magazines were 
put under Communist Party control. And the State Press and Publications 
Administration banned foreign investment in wholesale book publication 
and distribution, and limited the right to distribute textbooks, 
political documents, and the writing of China's leaders to a handful of 
enterprises.
           recommendations to congress and the administration
    We urge the Congress and the Administration to couple efforts to 
make China a more reliable trading partner with serious parallel 
pressure on China to comply with its international human rights 
obligations. The WTO process itself can be a useful source of leverage, 
along with other channels of pressure.
(1) Permanent NTR
    China has lobbied for several years for an end to the annual review 
of its trade status under the Jackson-Vanik amendment of the Trade Act 
of 1974, and as part of the WTO deal President Clinton has pledged to 
give China permanent Normal Trade Relations status. We believe that in 
exchange for PNTR, Congress should insist on reciprocal concrete steps 
on human rights by China.
    Congress should set concrete, meaningful and realistic human rights 
conditions that China must meet before receiving permanent NTR. The 
president should be required to certify that these conditions have been 
met, and this could happen any time following China's accession to the 
WTO. For example, China should be required to:

   ratify the two United Nations human rights treaties it has 
        signed: the International Covenant on Civil and Political 
        Rights, signed in October 1998, and the International Covenant 
        on Economic, Social and Cultural Rights;

   take steps to begin dismantling the huge system of 
        ``reeducation through labor,'' which allows officials to 
        sentence thousands of citizens to labor camps each year for up 
        to three years without judicial review. A commission could be 
        established for this purpose, and the U.S. and the U.N. could 
        offer to provide support with technical assistance and rule of 
        law programs;

   open up Tibet and Xinjiang to regular, unhindered access by 
        U.N. human rights and humanitarian agencies, foreign 
        journalists, and independent monitors;

   review the sentences of more than 2,000 ``counter-
        revolutionaries'' convicted under provisions of the Chinese law 
        repealed in March 1997, with a view towards releasing most of 
        them.

    Getting China to meet these conditions is possible, if the 
Administration engages in the kind of intensive, high level 
negotiations with Beijing it conducted to finalize the trade agreement 
last November.
    To replace the annual trade status review, we would strongly 
support creation of a new mechanism, such as a special commission 
appointed either by both houses of Congress or jointly by Congress and 
the executive branch, to report annually on China's compliance with 
human rights and labor rights norms. This should be more than a pro 
forma process. An annual report should trigger, at a minimum, debate 
and recommendations for U.S. bilateral and multilateral policy 
initiatives.
(2) U.N. Commission on Human Rights
    We applauded the Administration's decision in January to sponsor a 
critical resolution on China at the annual meeting of the United 
Nations Commission on Human Rights in Geneva, which is now underway. In 
announcing this decision, the State Department correctly noted that 
`China's human rights record has continued to deteriorate . . . Our 
goal in sponsoring a China resolution is to foster increased respect 
for human rights in China.''
    Indeed, when confronted with a credible threat of a debate and vote 
in Geneva in the past, China has taken limited but important positive 
steps on human rights. It has also expended major effort worldwide to 
keep any critical resolution off the Conmiission's agenda--including by 
threatening to cut off trade deals or investment opportunities to 
governments that might support action. This effort has been stepped up 
since 1995, when a China resolution came within only one vote of being 
adopted. Last year, the Administration put forward a resolution, under 
Congressional pressure, only at the very last minute. The European 
Union (EU) refused to sponsor the measure, and China succeeded in 
squelching any debate by getting the Commission to adopt a ``no 
action'' motion (twenty two to seventeen, with fourteen abstentions.)
    In order to have any chance at getting a debate and vote this year, 
the Administration will have to engage in serious, high level lobbying 
of other Commission members and potential cosponsors, such as Canada, 
Australia, Japan, and governments in Central and Latin America. The 
European Parliament recently adopted a strong resolution calling on the 
EU to cosponsor action in Geneva. But the European Union has thus far 
not announced its decision on cosponsorship. We urge President Clinton 
to match his commitment to WTO with a similar commitment to wage an 
effective campaign in Geneva.
    At a speech on WTO and China at the Wilson Center on February 2, 
Sandy Berger, the president's national security advisor, said that Mr. 
Clinton will be ``actively and deeply engaged'' in the WTO fight. We 
urge the president to be just as actively and personally engaged in 
lobbying other governments at the highest levels on behalf of the U.N. 
Geneva resolution. This is vitally needed to counter a diplomatic and 
media campaign that China has already begun in order to defeat the 
resolution.
    Members of Congress can also play a key role by contacting 
officials in other governments to urge their support at the Commission. 
A draft of the U.S. text being circulated in Geneva is attached, for 
your information.
(3) Code of Conduct for Companies
    China's entry into the WTO, and the implementation of the new 
bilateral agreement with the U.S., will lead to greater American 
private investment in China. We urge Congress to enact legislation 
originally introduced as early as 1991, and most recently in the House 
in 1995, outlining principles for a ``code of conduct'' for U.S. 
companies operating in China.
    The legislation should express the sense of Congress that U.S. 
companies should, among other things, prohibit the use of forced labor 
in their factories or by their subcontractors in China, prohibit a 
police or military presence in the workplace, protect workers' rights 
of free association, assembly and religion, discourage compulsory 
political indoctrination, and promote freedom of expression by workers 
including their freedom to seek and receive information of all kinds 
through any media--in writing, orally, or through the Internet. The 
``code of conduct'' bill should contain a registration and reporting 
procedure, and require an annual report to Congress and the 
Organization for Economic Cooperation and Development (OECD) on the 
level of adherence to the principles by U.S. companies.
(4) Labor Secretary to China
    U.S. Secretary of Labor Alexis Herman was invited to visit China by 
her counterpart, the Chinese labor minister, when he came to 
Washington, D.C., last March. We hope the Committee will urge her to 
travel to China this spring in order to conduct a high-level dialogue 
on China's labor practices, including protection of key worker rights, 
the cases of detained workers and labor organizers, and the creation of 
social safety nets. She would be the first U.S. labor secretary ever to 
visit China. Members of the Committee might also offer to accompany 
Secretary Herman on the trip.

   Draft Text of U.S. Resolution on China to be Presented at the UN 
                       Commission on Human Rights

                   situation of human rights in china
    The Commission on Human rights,
    Reaffirming that all member states have an obligation to promote 
and protect human rights and fundamental freedoms as stated in the 
Charter of the United Nations and as elaborated in the Universal 
Declaration of Human Rights, the International Covenants on Human 
Rights and other applicable human rights instruments, (c/cn.4/1999/
1.22, pp 1)
    Mindful that China is a party to the International Convention on 
the Elimination of all Forms of Racial Discrimination, the Convention 
on the Elimination of all Forms of Discrimination Against Women, the 
Convention Against Torture and Other Cruel, Inhuman or Degrading 
Treatment or Punishment, the Convention on the Rights of the Child, and 
the Convention Relating to the Status of Refugees and its Protocol of 
1967 (1/22, pp 2, amended)
    Noting that China has reaffirmed its support for the Universal 
Declaration of Human Rights and, in the past three years, signed both 
the International Covenant on Economic, Social, and Cultural Rights and 
the International Covenant on Civil and Political Rights, although it 
has yet to ratify either, (1.22, pp 3, updated)
    Recognizing the significant transformation Chinese society has 
undergone since the introduction of the reform policies, including the 
reduction of government interference in the everyday lives of most 
citizens and the successful efforts of the Government of China in 
economic development and in reducing the numbers of Chinese living in 
extreme poverty, thus enhancing the enjoyment of economic and social 
rights, (1.22, pp 5, amended)
    Taking note of the reports of the Special Rapporteurs on the 
Question of Torture and other Cruel, Inhuman or Degrading Treatment or 
Punishment (c/cn.4/xxxx/x), on Freedom of Opinion and Expression (c/
cn.4/xxxx/xx), on the Independence of Judges and Lawyers (c/cn.4/xxxx/
xx), on Violence Against Women (c/cn.4/xxxx/xx), on Extra-Judicial, 
Summary or Arbitrary Executions (c/cn.4/xxxx/xx) and on all Forms of 
Intolerance and of Discrimination Based on Religion or Belief (c/cn.4/
xxxx/xx) as well as the reports of the Working group on Arbitrary 
Detention (c/cn.4/xxxx/xx and add. 1 ?) And the Working Group on 
Enforced or Involuntary Disappearances (c/cn.4/xxxx/xx), (to be updated 
as appropriate)

Welcomes:
    (A) The readiness of the Government of China to exchange 
information on human rights issues;
    (B) Progress on the codification of China's legal practice, 
including changes to China's criminal procedure law;
    (C) China's continued expressed interest/intent to proceed promptly 
with ratification of the International Covenant on Civil and Political 
rights and the International Covenant on Economic, Social and Cultural 
Rights; (1/22, op 1, updated);
    (D) Continuing efforts at poverty alleviation and economic 
development that have improved economic and social rights for many 
Chinese citizens; (new)
2. Expresses its concern
    (A) At continuing reports of violations of human rights and 
fundamental freedoms in China and severe restrictions on the rights of 
citizens to the freedoms of non-violent assembly, association, 
expression, conscience and religion as well as to due legal process and 
to a fair trial, including harsh sentences for some seeking to exercise 
their rights; (1.2. op 2a, updated)
    (B) At increased restriction on the exercise of cultural, religious 
and other freedoms of Tibetans; (1.22, op 2b)
    (C) At the harsh crackdown during the past year on members of the 
China Democracy Party and others who sought to exercise their 
internationally recognized rights of association, expression and 
participation on political life (new);
    (D) At the severe measures taken to restrict the peaceful 
activities of Buddhists, Muslims, Christians and others, including 
Falun Gong adherents who, in pursuing non-violent spiritual interests, 
sought to exercise their internationally recognized rights of belief 
and peaceful assembly, (new);
3. Calls upon the government of China
    (A) To enhance the observance of all human rights, including worker 
rights and rights of refugees, in accordance with its obligations under 
the human rights conventions to which it is a party, and as a member of 
the ILO, and to ratify in the near future the International Covenant on 
Civil and Political Rights and the International Covenant on economic, 
social and cultural rights; (1.22, op 3a, amended)
    (B) To take further measures to improve the impartial 
administration of justice and the rule of law; (1.22, op 3b)
    (C) To release political prisoners, including persons imprisoned 
for non-violent counter-revolutionary activity; (1.22, op 3c)
    (D) To permit the peaceful activities of Buddhists, Muslims, 
Christians and others who seek to exercise their internationally 
recognized rights of belief and peaceful assembly; (new)
    (E) To preserve and protect the distinct cultural, ethnic, 
linguistic and religious identity of Tibetans and others; (1.22, op 3d)
    (F) To develop meaningful bilateral dialogues with countries or 
regional groupings which seek them with a view to reaching further 
positive developments before the next session of the Commission on 
Human Rights; (1.22, op 3f amended)
4. Decides to continue its consideration of the situation of Human 
        Rights in China at its fifty-seventh session. (1.22, op 4, 
        updated)

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