[Senate Hearing 108-609]
[From the U.S. Government Publishing Office]
S. Hrg. 108-609
U.S.-CHINA RELATIONS:
STATUS OF REFORMS IN CHINA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON EAST ASIAN
AND PACIFIC AFFAIRS
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
APRIL 22, 2004
__________
Printed for the use of the Committee on Foreign Relations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
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COMMITTEE ON FOREIGN RELATIONS
RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee BILL NELSON, Florida
NORM COLEMAN, Minnesota JOHN D. ROCKEFELLER IV, West
JOHN E. SUNUNU, New Hampshire Virginia
JON S. CORZINE, New Jersey
Kenneth A. Myers, Jr., Staff Director
Antony J. Blinken, Democratic Staff Director
------
SUBCOMMITTEE ON EAST ASIAN
AND PACIFIC AFFAIRS
SAM BROWNBACK, Kansas, Chairman
LAMAR ALEXANDER, Tennessee JOHN F. KERRY, Massachusetts
CHUCK HAGEL, Nebraska JOHN D. ROCKEFELLER IV, West
GEORGE ALLEN, Virginia Virginia
GEORGE V. VOINOVICH, Ohio RUSSELL D. FEINGOLD, Wisconsin
JON S. CORZINE, New Jersey
(ii)
C O N T E N T S
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Page
Bottelier, Pieter, Johns Hopkins University (SAIS)............... 43
Prepared statement........................................... 45
Brownback, Hon. Sam, U.S. Senator from Kansas, opening statement. 1
Craner, Lorne W., Assistant Secretary of State for Democracy,
Human Rights and Labor......................................... 2
Prepared statement........................................... 4
Lawless, Richard P., Deputy Under Secretary of Defense,
International Security Affairs-Asia Pacific.................... 9
Lee, Thea M., chief international economist, American Federation
of Labor and Congress of Industrial Organizations (AFL-CIO).... 38
Prepared statement........................................... 40
Robinson, Roger W., Jr., chairman, U.S.-China Economic and
Security Review Commission; accompanied by C. Richard D'Amato,
vice chairman, U.S.-China Economic and Security Review
Commission..................................................... 17
Prepared statement........................................... 20
Waldron, Arthur, Lauder Professor of International Relations,
Department of History, University of Pennsylvania.............. 30
Prepared statement........................................... 33
Appendix
Responses to questions for the record submitted to Assistant
Secretary Lorne W. Craner by Senator Russell Feingold.......... 55
Prepared statement of Senator Russell D. Feingold................ 57
(iii)
U.S.-CHINA RELATIONS:
STATUS OF REFORMS IN CHINA
----------
Thursday, April 22, 2004
U.S. Senate,
Subcommittee on East Asian and Pacific Affairs,
Committee on Foreign Relations,
Washington, D.C.
The committee met, pursuant to notice, at 2:25 p.m. in Room
SD-106, Dirksen Senate Office Building, Hon. Sam Brownback
presiding.
Present: Senator Brownback.
OPENING STATEMENT OF HON. SAM BROWNBACK,
U.S. SENATOR FROM KANSAS
Senator Brownback. I will call to order this hearing on
China.
Since the passage of the bill granting Permanent Normal
Trade Relations (PNTR), in 2000, and China's accession to the
World Trade Organization, the WTO, in 2001, a key issue has
been whether or not China has made any meaningful progress in
the kind of reforms that are expected of a country like China.
Increasingly, China is becoming an aggressive and important
player in such areas as trade, geopolitical issues in Asia, and
the global war on terrorism. At the same time, internal social
stability in the PRC has become more problematic, including
greater labor unrest, growing misallocation of resources tied
to managed industrial policies, and more assertive public
dissatisfaction and discontent with official corruption and
lack of basic freedoms. For this reason China's current
policies, whether in trade and economics, human rights, or
geopolitical ambitions, demand close scrutiny because they
impact both U.S. national security policy and U.S. jobs.
Yesterday the United States and China held high level talks
on trade, a critical issue with high stakes for American
business and consumers alike. So, coming from a heavily
agricultural state, I'm aware of how important trade is to our
economy, especially trade with China. It's one of the world's
fastest growing economies; China has a growing market for U.S.
exports, including from my own state of Kansas. China is an
important provider of imported products for U.S. manufacturers
and consumers.
I want to note for Mr. Craner and those here--if we could
get order in the back of the room we'd appreciate that--this
last week I was traveling in Kansas and talking with a number
of individuals about what's taking place in China, and the
issue of outsourcing, the issue of lack of labor rights, the
issue of religious freedom, the issue of China, China, China
continues to come up on a very regular basis. You just look at
the statistics and you understand why China's total worldwide
exports were about $438 billion in 2003. The percentage of that
export which ended up in our market was about $163 billion, or
37 percent, over a third of all their exports. By contrast, our
exports from the U.S. were $714 billion, but our percentage
going to China was four percent. It's no wonder our trade
deficit with China will likely top $130 billion this year. It
is a huge amount.
At the hearing later on today we will have the chief
economist for the AFL-CIO testifying about their Section 301
case and the question of whether China is using labor in a
trade disrupting, illegal fashion. We may want to, and I will
try to express and we'll try to view the issue as well, of
currency manipulation that's taking place in China and hear
from other witnesses on that.
I welcome our two witnesses here today to testify about the
important relationship and what's taking place between the
United States and China. Our first witness is the Assistant
Secretary of Democracy, Human Rights and Labor at U.S.
Department of State, Mr. Lorne Craner.
Mr. Craner, before you begin I'd like to commend you for
your efforts to pass a resolution condemning China's human
rights practices and the U.N. Human Rights Commission. I think
that sends an important signal, and it's a proper signal, that
needs to be sent. That's not the easiest body to work within
but your efforts have had a great impact and I appreciate that
very much.
Our next witness will be Mr. Richard Lawless. He's the
Deputy Assistant Secretary for the Department of Defense. We
will go to him after Mr. Craner.
I want to welcome you to the committee, and I look forward
to your testimony.
STATEMENT OF LORNE W. CRANER, ASSISTANT SECRETARY OF STATE FOR
DEMOCRACY, HUMAN RIGHTS AND LABOR
Mr. Craner. Thank you Senator, very much, for holding this
important hearing. It's an excellent time to take a look at our
complex relations with the People's Republic of China and I'm
pleased to be here to answer your questions about human rights
conditions and the prospect for democracy there.
As the committee took note when it convened this hearing,
U.S.-China cooperation has improved steadily since early 2001.
After September 11, the Chinese government became an ally in
the global war on terror. It's been a key partner in
discussions about North Korea. But even as we find common
ground with China on these issues, we remain firm that there
are areas on which we have different views, such as
nonproliferation, and other areas such as Taiwan and Hong Kong
that involve partly my areas of responsibility: freedom and
human rights. We have not compromised when confronting China on
and pursuing a resolution of these issues.
June 4, less than two months from now, is the 15th
anniversary of the crackdown at Tiananmen Square. This will be
a somber anniversary. Fifteen years ago Americans and others
around the world watched in horror as the PLA fired on peaceful
students and workers who had captured the world's attention.
Certainly everyone who watched those events hoped that 15 years
hence China would be a very different place. But China's human
rights record remains poor. In the 15 years since, the Chinese
economy has continued to expand, and constraints on where one
can live and what one can do for a living have been relaxed,
but the freedom and rights that Tiananmen protestors asked for
still have not been realized.
In my tenure as Assistant Secretary of State for Democracy,
Human Rights and Labor we documented some progress in China in
2002, but we also documented backsliding on human rights in
2003. This backsliding prompted President Bush, as you noted
Senator, to authorize the State Department to pursue a
resolution criticizing China's human rights practices at the
Commission on Human Rights. As you also know, the Chinese
government was successful in getting a sufficient number of
members to vote in favor of a no-action motion, preventing the
commission from engaging in a healthy debate about the human
rights situation in China. But our work in Geneva is not in
vain. In pursuing a resolution at the commission during a time
of backsliding, we made a strong statement about our unwavering
concern over the human rights situation in China. Most
important, those who fight courageously every day to have their
voices heard know that the United States will not forsake them.
We have an obligation to speak out against the lack of freedom
and for protection of human rights in China because we see the
people of China doing it for themselves. And I believe we have
a responsibility to support these efforts and to try to expand
the political and legal space inside China.
The State Department, and in particular my bureau, is
currently administering $27.5 million in fiscal year 2002-2003
in core funding to support democracy, human rights and the rule
of law in China. At the end of the Clinton administration the
State Department had begun to discuss the possibility of
cooperating on legal reform projects in China. When President
Bush came to office we decided to rethink that program and to
craft a new approach to supporting freedom in China. Legal
reform, while important, is too narrow a focus for a
comprehensive China program. A U.S. program on China had to
support liberty as well as law. Let me give you a few examples
of the kind of things we're supporting.
Over the last five years, China's village elections, in
which non-Communists can run and win local office, have
received much publicity. We're supporting work to expand the
availability of those elections and have gone beyond that to
support those who want to see elections expanded to higher
levels.
Legal reform in China is an area where we see meaningful
change taking place. American NGOs continue to play an
important role in catalyzing all kinds of legal development in
China. The U.S. is supporting a wide array of efforts in this
area, including programs that focus on drafting key pieces of
legislation, a program to strengthen the use of evidence and
witness testimony in trials, a program that works on helping
villagers to challenge election fraud and abuse in the courts,
and programs that hone the advocacy skills of criminal defense
lawyers.
As the legal system has developed, the Chinese people are
becoming increasingly aware of their rights under the law, and
we're also supporting them. American NGOs are working with
Chinese sponsors to strengthen women's environmental and worker
rights. Americans and Chinese are conducting awareness and
public education campaigns so that average Chinese know whom to
go to when they need legal assistance. We are also determining
and monitoring compliance with international labor standards
through such U.S.-sponsored activities as my bureau's
partnership to eliminate sweatshops program, designed
specifically to address unacceptable working conditions in
manufacturing facilities producing for the U.S. market. And
we're supporting the expansion of and encouraging new ways to
think about the role of the media in China, as a provider of
information and a watchdog.
These rights and freedoms are occurring with increasing
frequency: Elections with independent candidates, activists
challenging the government, reporters courageously reporting
the truth--even at the risk of losing their jobs or going to
prison. Every day now we see such steps being taken by Chinese
in China. These steps give us reason to be optimistic but the
events that I described in the first half of my testimony also
make us realistic. We cannot sit back and assume that because
its economy is developing China is on an unwavering path to
democracy. If anything, the Chinese leadership has given no
indication that it might consider seriously the prospect of
following the path of South Korea, the Philippines, or Taiwan
in pursuing gradual reform toward full freedom of speech and
association, judicial independence, and free and fair
elections.
With that in mind, we continue to monitor closely the
situation in Hong Kong. We consistently urge Chinese and Hong
Kong leaders to listen to the Hong Kong people and respond to
their expressed aspirations for electoral reform and universal
suffrage. After all, as Vice President Cheney pointed out in
his remarks in China last week, China's actions in Hong Kong do
not affect only Hong Kong. Many nations, the U.S. among them,
have a significant investment in Hong Kong. The region's
continued stability and prosperity is predicated on its
continued rule of law and high degree of autonomy.
In sum, I am optimistically realistic, or realistically
optimistic, about the prospects for freedom in China. I agree
strongly with the President, the Vice President, and Secretary
Powell, all of whom have spoken often about the importance of
individual freedom and respect for human rights. With regard to
China, I believe our best policy is to speak out against human
rights abuses, as we did this month in Geneva, and to encourage
the reforms that are making significant inroads there.
Mr. Chairman, I'm pleased to take your questions. Thank
you.
[The prepared statement of Mr. Craner follows:]
Prepared Statement of Lorne W. Craner
I want to thank you, Senator Brownback, and the other members of
the Senate Foreign Relations Committee for holding this important
hearing. This is an excellent time to take a look at our complex
relationship with the People's Republic of China and I am pleased to be
here today to answer your questions about human rights conditions and
the prospects for democracy in China. I am also glad to have this
opportunity to share with you the Administration's assessment of these
important issues and to tell you what we have been doing to confront
the Chinese Government when it violates human rights in China and, as
Vice President Cheney said last week, to support the aspirations of all
Chinese people for freedom and democracy.
As the committee took note when it convened this hearing, U.S.-
China cooperation has improved steadily since the first months after
President Bush came to office and we confronted each other over the
mid-air collision of Chinese and American planes near Hainan Island.
After September 11, the Chinese Government became an ally in the Global
War on Terror. It has been a key partner in discussions about North
Korea. But even as we find common ground with China on these important
issues of national security, we remain firm that there are areas on
where our views differ, such as Hong Kong, Taiwan, proliferation, and
my area of responsibility: freedom and human rights. We have not
compromised when confronting China on and pursuing resolution of these
issues. As recently as last week, Vice President Cheney stood firm in
talking to China about these areas of disagreement and reminded his
counterparts in Beijing that ``it would be a mistake for us to
underestimate the extent of the differences'' between us.
June 4--less that two months from now--is the 15th anniversary of
the crackdown at Tiananmen Square. This will be a somber anniversary.
It will be somber not just because of the hundreds, if not thousands,
of lives lost in Beijing on the evening of June 3 and the morning of
June 4. The June 4th anniversary is a somber one because there will be
no public mourning in China for the lives lost there 15 years ago. The
family members of the students and citizens who died in and around
Tiananmen Square will not be able to gather there together to grieve
their loss. There will be no candles lit, no memorial wreathes laid, no
touching eulogies spoken. These mourners will receive no condolences
from their government. The Chinese nation will not be able to come
together in any public way to commemorate the lives that were lost on
June 4. Even to discuss such a thing, as we have seen recently in the
last few weeks, is to risk detention and imprisonment.
Fifteen years ago, Americans and others around the world watched in
collective horror as the People's Liberation Army fired on the peaceful
students and workers who had captured the world's attention for six
weeks. Certainly, everyone who watched those events unfold hoped that
15 years hence China would be a different place. We hoped that China,
15 years after Tiananmen, might be a country that was free and open, a
country where human rights are respected, a country where different
points of view could be shared without any fear of reprisal, and a
country where religious adherents of all faiths could pray openly in
whatever temple, church or mosque they chose. Of course, China today is
not such a country.
China's human rights record remains poor. In the 15 years since
1989, the Chinese economy has continued to expand, and constraints on
things like where one can live and what one can do for a living have
been relaxed. But the freedoms and rights that the Tiananmen protestors
asked for have still not been realized.
In fact, in my tenure as Assistant Secretary of State for
Democracy, Human Rights and Labor, my office has documented some
progress in 2002, but backsliding on human rights in 2003. The Chinese
Government's mistreatment of its citizens is manifest. Most recently,
we have noted increased surveillance of the Internet and detention of
those who express opinions about democracy. Democracy activists and
some spiritual or religious adherents, including Tibetan Buddists,
Uighur Muslims, Falun Gong practitioners, underground Protestants, and
Catholics loyal to the Vatican, continue to suffer harsh treatment. We
have received reports of religious adherents being mistreated or beaten
in prison. We have regularly raised the need for prison reform, the
right of children to receive religious training, and our extreme
disappointment over egregious abuses against religious groups. Mr.
Chairman, this administration has repeatedly--and at the highest
levels--expressed strong concern, publicly and privately, over the
detention of persons for the peaceful expression of their faith or
political views and over restrictions on religious freedom, and we will
continue to do so. We also continue to raise individual cases of
concern such as Uighur businesswoman Rebiya Kadeer, labor activists Yao
Fuxin and Xiao Yunliang and Tibetan monk Jigme Gyatso.
These concerns were deepened by the Chinese Government's failure to
carry out commitments made to U.S. officials during the December 2002
Human Rights Dialogue to work with the UN Special Rapporteurs on
torture and Religious Intolerance, the Working Group on Arbitrary
Detention, and the U.S. Commission on International Religious Freedom.
This backsliding prompted President Bush to authorize the State
Department to pursue a resolution criticizing China's human rights
practices at the meeting of the UN Human Rights Commission in Geneva
this month. Our resolution was carefully considered. While
acknowledging steps that China has taken that might result in improved
respect for the rights of its people, we urged members of the
commission to join us in expressing ``concern about continuing reports
of severe restrictions of freedom of assembly, association, expression,
conscience and religion, legal processes that continue to fall short of
international norms of due process and transparency, and arrests and
other severe sentences for those seeking to exercise their fundamental
rights.''
As the committee is aware, the Chinese Government was successful in
getting a sufficient number of members to vote in favor of a ``no-
action'' motion, preventing the commission from engaging in a healthy
debate about the sssshuman rights situation in China. But our work in
Geneva was not in vain. The UN Special Rapporteur on Torture will
indeed visit China at the end of June. And now the European Union is
factoring China's human rights situation more prominently in its
calculus of whether to lift its arms embargo against China. In pursuing
a resolution at the commission, we made a strong statement about our
unwavering concern over the human rights situation in China. Other
countries and the Chinese Government itself have been compelled to take
notice of our concern. And those who fight courageously every day to
have their voices heard know that the United States has not forsaken
and will not forsake them.
We have an obligation to speak out against the lack of freedom and
protection of human rights in China because we see the people of China
doing this for themselves on a weekly basis. We see newspaper editors
trying to push the boundaries for freedom of the press. We see
democracy activists speaking out for constitutional protections and
elections. We see lawyers who are fighting to make the legal system
live up to its own laws. We see workers trying to come together to
demand fair compensation. We see rural dwellers writing letters and
gathering at government offices to demand that corrupt local officials
step down. We see religious adherents risk their freedom to gather to
pray in house churches. We see Tibetans who maintain their allegiance
to the Dalai Lama and Catholics who maintains their allegiance to the
Pope.
In other words, we see individual, ordinary Chinese doing the
extraordinary week after week, month after month. And I believe that we
have the responsibility to support these extraordinary efforts and try
to expand the political and legal space so that individual Chinese can
keep pushing the boundaries.
The State Department and, in particular my bureau, is currently
administering $27.5 million to support democracy, human rights and the
rule of law in China. At the end of the Clinton administration, the
State Department began to discuss the possibility of cooperating on
legal reform projects in China. When President Bush came to office, the
State Department and my bureau decided to rethink that program, and we
crafted a new approach to supporting freedom in China. Legal reform,
while important, was too narrow a focus for a comprehensive China
program. A U.S. program on China had to support liberty as well as law.
Six years ago in 1998, when I was president of the International
Republican Institute, I testified before the Asia and Pacific
Subcommittee of the House International Relations Committee on the
value of promoting democracy and the rule of law in China. At that
time, the Congress was just considering democracy promotion as one
policy option to address human rights concerns in China. In that
testimony, I described to the committee the work that IRI had been
doing since 1993 to promote electoral, legislative and legal reform in
China. In five years of programming in China, IRI had seen rapid
expansion of village elections in China and a strong commitment to
developing sound, democratic procedures that allowed for open candidate
selection and secret ballot voting. On the legal side, IRI had assisted
the National People's Congress in developing more sophisticated
legislative drafting capabilities and had worked with China's first
legal aid service providers. I concluded:
I hope I have shown that electoral, legislative and legal
reforms under way in China are meaningful and are accelerating,
and organizations such as IRI can help catalyze them. Yet in
the same period these reforms have taken place, so too have the
Tienanamen verdict, and all the legal reforms to date haven't
gotten those dissidents out of jail.
I therefore come before you as an advocate, but not a zealot.
I am an advocate of broader American efforts to catalyze
Chinese reforms that are congruent with American values and
interests. At the same time, only a zealot would claim to know
how China will change. Democatic development in China may come
through the kind of incremental reforms I have described today.
It may also come more suddenly. Of one thing we can be certain:
Given the stakes involved, we would be wise to encourage every
possible source of change for China, including the potential
for change from within China.
Six years later, I am proud to say that we are now encouraging
``every possible source for change in China'' through the State
Department's China Democracy program.
The reforms that were under way in 1998 have definitely accelerated
and expanded. In 1998, American NGOs were addressing a fairly narrow
range of issues related to democracy and legal reform in China.
Elections at the village level were developing and taking root in a
meaningful way. Training on legislative drafting showed promise as a
means of strengthening China's legislature so that could serve as a
modest, but still effective check on central government power. Legal
aid was just beginning in China. Today, these reform have significantly
expanded and the State Department is supporting the organizations that
continue to work on these issues. But we also support new organizations
that are working to promote women's rights, labor rights, media reform
and host of other issues that show how the channels for promoting
reform in China have grown exponentially over the last few years.
In the area of direct elections, for example, we are now no longer
working to promote elections just at the village level. Since 1998, the
pressure to expand elections to higher levels of government has
increased significantly. In September 2003, a local official in Sichuan
Province received international attention when he tried to organize a
direct election for township magistrate despite a 2001 central
government ban on such activities. Though his efforts were derailed, we
believe that there are many other local officials who are willing to
keep pushing the envelope to expand direct election in China, and we
are able to support research and training that keep that mission alive.
Like elections, legal reform in China is another area where we see
meaningful change taking place. American NGOs and universities continue
to play an important role in catalyzing all kinds of legal developments
in China. The United States is supporting a wide array of efforts in
this area, including programs that focus on the drafting of key pieces
of legislation, such as new administrative litigation laws that enable
Chinese to sue the government, a program to strengthen the use of
evidence and witness testimony in trails, a program that works on
helping villagers to challenge election fraud and abuse in the courts,
and programs that hone the advocacy skills of criminal defense lawyers
and that help them think about ways to protect themselves from becoming
targets of the government if they handle sensitive, politically-charged
criminal cases.
As the legal system has developed, the Chinese people are becoming
increasingly aware of their rights under the law, and the United States
is supporting projects that increase this awareness. American NGOs are
working with Chinese partners to strengthen women's rights in China,
environmental rights and workers' rights. Americans and Chinese are
working together to provide better legal services to abused women and
workers who are injured on the job. They are working together to think
about how to enforce China's environmental protection laws in some of
the nation's and the world's most polluted cities.
Americans and Chinese are conducting awareness and public education
campaigns so that average Chinese citizens know whom to call when they
need legal assistance. They are strategizing about how to use
litigation and test cases to challenge the Chinese legal legal system
to protect the rights that are on the books. And Americans and Chinese
are determining and monitoring compliance with international labor
standards, through such U.S.-sponsored activities as the Partnership to
Eliminate Sweatshops Program, designed specifically to address
unacceptable working conditions in manufacturing facilities that
produce for the U.S. market. For example, one project in China is aimed
at developing and testing an innovative model for worker-manager
relations through which up to 3,000 workers will be trained in three to
five factories in the toy and apparel industry; another focuses on
working to promote labor rights awareness in the Chinese business
community and Chinese business schools. I can't announce to you today a
final decision to deny or accept the AFL-CIO's section 301 petition
alleging that China's systemic failure to protect workers' human rights
constitutes an ``unreasonable'' trade practice. But I can assure you
that for our part, we are committed to continuing programs that
actively support ongoing reform in China's labor relations system,
improve labor conditions and protect worker rights, and strengthen the
capacity of the Chinese Government to develop laws and regulations to
implement internationally-recognized workers' rights and to promote
greater awareness of labor law among Chinese workers and employers.
As these rights awareness programs indicate, civil society is
growing in China. And the United States is supporting its expansion and
encouraging new ways of thinking about the role of the media as a
provider of information and a watchdog. Media reform was something that
no one contemplated when I spoke before the Congress in 1998 about
democratic reform in China. Market competition is pushing the news
media to none their investigative skills and report on stories about
which the public wants to read. The Nanfang media group, which is based
in media-savvy Guangzhou and publishes Southern Metropolis Daily and
Southern Weekend (China's most popular news weekly), has developed a
reputation as China's most progressive media group for its reporting on
corruption, HIV/AIDS and, most recently, SARS. Two editors of the paper
were recently tried on embezzlement charges. Many believe that these
cases are the result of the paper's aggressive reporting on sensitive
topics, and in an unprecedented move, a group of reporters and legal
scholars have filed an online petition asking the Government for a
retrial.
This petition is one of several similar open documents that we have
seen in recent months written by Chinese asking the Government to
reconsider its policy on a particular issue. Last spring, three young
Beijing law professors wrote a letter to the Government asking it to
reconsider the use of ``custody and repatriation'' centers to hold
people without residency permits, vagrants, and others. There followed
the death of a young college graduate, Sun Zhigang, who was beaten by
the police while being held in such a center. His death was widely
reported by the media. The Government executed a staff member of the
state facility and sentenced 17 others to long prison terms. At the
same time, the Government also agreed to disband these centers, marking
an important step for systemic reform of rights of the accused.
Incidentally, one of the drafters of this letter, Xu Zhiyong,
campaigned as an independent candidate for local People's Congress in
Beijing's Haidian district. He won election in December.
Other petitions have also circulated recently. This winter, Chinese
scholars and activists circulated an online petition to seek the
release of democracy activists who posted their thoughts on the
Internet. Also this past winter, another group of well-known scholars
wrote a letter to the Government asking it to clarify standards of
freedom of expression and what constitutes subversion under Chinese
law. The Government frequently uses subversion accusations to silence
democracy and human rights activists. Finally, in March, Dr. Jiang
Yanyong, whose name became public last spring when he contacted Western
news media to report that Beijing authorities were covering up the SARS
epidemic in China's capital, wrote a letter to the legislature asking
members to consider a review of the Tiananmen verdict.
These kinds of activities are taking place with increasingly
frequency in China. Elections with independent candidates, activists
who are challenging the Government to protect people's rights,
reporters who are courageously reporting the truth, even at the risk of
losing their job or going to prison--every day we are seeing these
steps being taken in China.
These steps give us reason to be optimistic at the prospect for
democracy in China. But the events that I described in the first half
of my testimony also remind us to be realistic. We cannot sit back and
assume that China is on an unwavering path toward democracy. If
anything, the Chinese leadership has given no indication that it might
consider seriously the prospect of following the path of South Korea,
the Philippines or Taiwan in pursuing gradual reform toward full
freedom of speech and association, religious freedom, judicial
independence, and free and fair elections. With that in mind, we
continue to watch the situation in Hong Kong. We consistently urge
Chinese and Hong Kong leaders to listen to the Hong Kong people and
respond to their expressed aspirations for electoral reform and
universal suffrage. After all, as the Vice President pointed out in his
remarks in China last week, China's actions in Hong Kong do not affect
only Hong Kong. Many nations, the U.S. among them, have a significant
investment of people and resources in Hong Kong. The region's continued
stability and prosperity is predicted on its continued rule of law and
high degree of autonomy.
In sum, I am optimistically realistic or realistically optimistic
about the prospects for freedom in China. I agree strongly with the
President, the Vice President, and Secretary Powell who have spoken
often about the importance of individual freedom and respect for human
rights for a strong polity and society. With regard to China, I believe
our best policy is to speak out against human rights abuses, as we did
this month in Geneva, and to encourage the reforms that are making such
significant inroads there, as we are doing annually through the State
Department's Democracy, Human Rights, and Rule of Law Program.
Mr. Chairman, members of the committee, I'm pleased to take your
questions now.
Senator Brownback. Thank you very much, Mr. Craner.
We'll go to our next witness first before doing questions.
Mr. Richard Lawless is Deputy Assistant Secretary of the
Department of Defense. And I appreciate very much you coming to
the committee and we're happy to receive your testimony.
STATEMENT OF RICHARD P. LAWLESS, DEPUTY UNDER SECRETARY OF
DEFENSE, INTERNATIONAL SECURITY AFFAIRS-ASIA PACIFIC
Mr. Lawless. Thank you indeed, Senator Brownback. It is
indeed a pleasure to appear at this hearing and have the
opportunity to address the important issue of PRC military
reforms.
I have a prepared initial statement, largely drawn from our
soon-to-be released Report to Congress on China's Military
Power. I would then be glad to answer any questions you may
have.
China's People's Liberation Army, the PLA, has embarked on
an ambitious, long-term military modernization effort to
develop capabilities to fight and win short duration, high
intensity conflicts along its periphery. China's defense
modernization encompasses the transformation of virtually all
aspects of its military establishment, to include weapons
systems, operational doctrine, institution building and
personnel reforms. In recent years the PLA has accelerated
reform and modernization so as to have at its disposal a
variety of credible military options to deter moves by Taiwan
toward permanent separation or, if required, to compel by force
the integration of Taiwan under mainland authority. A second
set of objectives though, no less important, includes
capabilities to deter, delay or disrupt third party
intervention in a cross-Strait military conflict.
The PLA has made progress in meeting these goals through
acquiring and deploying new weapons systems, promulgating new
doctrine for modern welfare, reforming institutions and
improving training. The PLA's determined focus on preparing for
conflict in the Taiwan Strait raises serious doubts over
Beijing's declared policy of seeking peaceful reunification
under the one country-two systems model. The growth of China's
economy has allowed the PRC to sustain annual double-digit
increases in its budget, with one exception, since 1990. The
officially announced budget in 2004 is more than $25 billion.
However, when off-budget funding for foreign weapons systems
procurement in particular is included, we estimate total
defense-related expenditures this year would be between $50 and
$70 billion, ranking China third in defense spending after the
United States and Russia.
China's military reform has also benefited from observing
U.S. operations; that is, combat operations. The PLA first
observed the revolution in military affairs from the 1991
Operation Desert Storm and studied how a technologically
inferior force could defend itself against a superior opponent
during Operation Allied Force over Kosovo. The PLA has likewise
studied operations Enduring Freedom and Iraqi Freedom. The PLA,
we believe, likely learned lessons on the application of
unmanned aerial vehicles for reconnaissance and strike
operations, the role of modern, well-trained special forces in
precision targeting and the importance of speed in modern
warfare. There are several key areas of reform within the PLA
which I'd like to emphasize today.
Joint Operations: PLA theorists and planners believe that
future campaigns will be conducted simultaneously on land, at
sea and in the air, space and electronic sphere. Therefore, the
PLA is improving its joint operations capabilities by
developing an integrated C\4\ISR network, a new command
structure and a joint logistics system.
Air Operations: The PLA Air Force is transitioning from a
defensive force to one with a modern offensive strike
capability. China's forced modernization plan and acquisition
strategy for its air forces have been aimed mainly at defeating
regional air forces, defending against aircraft operating at
long ranges from China's coast, denying U.S. Naval operations
and striking regional targets such as air bases and air defense
sites.
Missile Operations: In the area of conventional missile
operations, Beijing's growing conventional missile force
provides a strategic capability without the political and
practical constraints associated with nuclear-armed missiles.
The PLA's short-range ballistic missile, SRBM, force provides a
survivable and effective conventional strike force and
represents a real-time coercive option in the hands of the PRC
military.
China continues to improve quantitatively and qualitatively
the capabilities of its conventionally armed SRBM force. The
deployed inventory number is between 500 and 550 SRBMs, all
deployed opposite Taiwan. And this deployment is increasing at
the rate of 75 missiles per year. The accuracy and lethality of
this force also are expected to increase through the use of
satellite-aided guidance systems.
Naval Operations: In the area of naval operations, Beijing
realizes it must have forces available to respond rapidly to a
range of regional contingencies, and it is seeking to build a
balanced naval force for surface, anti-submarine, submarine,
air defense, mine and amphibious warfare.
In the area of C\4\ISR, China requires a survivable,
robust, reliable and sophisticated Command, Control,
Communications, Computer, Intelligence, Surveillance and
Reconnaissance, that is C\4\ISR, system. This will allow it to
collect, collate, integrate, manage and share access across a
network of all battle space information. The PLA is continuing
to upgrade its communication capabilities, which will rival the
most modern civil networks.
In the area of space, acquiring modern ISR systems remains
critical to Beijing's military modernization program. And it
supports the PLA's local war doctrine. Ongoing space-based
systems, with potential military applications include two new
remote sensing satellites, advanced imagery, reconnaissance and
earth resource systems with military applications, as well as
electronic intelligence, ELINT, or signals intelligence,
SIGINT, reconnaissance satellites. China is conducting
extensive studies and is seeking foreign assistance on small
satellites and micro satellites weighing less than 100
kilograms, for missions that include remote sensing and
networks of electro-optical and radar satellites.
In the area of counterspace developments, China is expected
to continue to enhance its satellite tracking and
identification network. According to press accounts, China can
use probably low-energy lasers to blind sensors on low Earth-
orbiting satellites, although whether this claim extends to
actual facilities at this point is unclear. China has
reportedly begun testing an anti-satellite, that is an ASAT,
system.
China's defense industrial base deserves special mention, I
believe. And I would like to conclude with some remarks about
that industry. China's defense industrial base, also known as
the National Defense Science, Technology and Industry, is a
redundant structure consisting of factories, institutes and
academies subordinate to the organizations that represent the
nuclear, aeronautics, electronics, ordnance, shipbuilding and
astronautics industries. The production factors are
represented, for export/import practices, by trading
corporations, with well-known names such as China Aerospace
Technology Import/Export Corporation (CATIC) and China North
Industries Corporation (NORINCO).
The export/import corporations are entities which
aggressively pursue contracts to sell PRC equipment overseas as
well as involve foreign companies in joint ventures in China.
The corporations are closely monitored by the State Department
for proliferation concerns. For example, CATIC was recently
sanctioned pursuant to the Iran Nonproliferation Act.
Mr. Chairman, this concludes my initial testimony, and I
would be glad to answer any questions you may have.
Senator Brownback. Thank you very much, Mr. Lawless. I'll
have questions for both you gentlemen.
We have a vote that's on right now, and I've got about four
minutes left in the vote. With your permission I'd like to put
us in recess while I run over and vote and then come back, if
you'd be willing to stay around for that period of time to
answer some questions. I would appreciate that.
This committee will be in recess for probably about ten to
15 minutes and I'll be right back.
[Whereupon, at 2:42 p.m. the hearing was recessed.]
[RECESS]
[The hearing resumed at 2:55 p.m.]
Senator Brownback. Gentlemen, thank you very much. Sorry
for the inconvenience.
Mr. Craner, let me start with you if I could. In the next
panel we'll have one of the chief economists for the AFL-CIO
who's filed a Section 301 case based on labor practices in
China and saying that those are an illegal trade advantage that
is being expressed or used by China. The administration will
have to make a decision whether or not to take this 301 case.
Have you, can you articulate a position or where you are in the
appraisal process of whether you will be making any
recommendations regarding this 301 case?
Mr. Craner. We're working with other agencies to come up
with a recommendation. As you know, the office of the United
States Trade Representative (USTR) has to announce a decision
by April 30, and so the right response is under discussion
between the State Department and other agencies. Clearly the
petition itself refers numerous times to the human rights
report that we put out. That report outlines that genuine
freedom of association and collective bargaining do not exist.
We all know that most workplaces have substandard conditions
and a high rate of accidents, and that wages, hours and safety
laws and regulations are generally not enforced.
Senator Brownback. When I first saw that suit was filed I
looked at it, and I thought about it, and then I read about it
again, and then I read about it again, and the more I read
about it, it seemed as if a number of things that were being
alleged were items that I'd been pushing on issues of human
rights, on issues of a lack of any sort of democracy in the
workplace, of any sort of rights in the workplace, and I
thought that while this was a different angle than I would have
taken at it, it seemed to me to be a very interesting angle,
one that hit at much of the same issues that I've been running
in against China for some period of time. I've been saying that
China's economic system is rampant capitalism without a
legitimate means for workers to be able to express themselves
in a system without balance, without morality. So I was looking
at that and that's why I was pleased to see that we'll have
that on the next panel. I know the administration has to make a
decision sometime soon; it will be a tough decision to make.
In addition, the currency case that the administration is
bringing against China seems to me to be a clearer, perhaps
easier, case to make. China's manipulating its currency, and by
that impacting the global marketplace, impacting us, but more--
it may have more of an impact on other countries that sell into
this market (Mexico and Central American for example) than it
does directly here. Because by the Chinese underpricing or
devaluing their currency, a baseball cap that comes in here
relative to Mexico appears to be cheaper. But that's not the
issue that would be assessed by your agency or department. I
would hope you could spend a great deal of time giving a lot of
thought about how bringing this 301 case forward could have
positive impacts in the field that you're concerned about, and
have done a very good job.
Mr. Craner. I can assure you myself and my staff and others
at the State Department have been spending a great deal of time
on this, including Secretary Powell. There's not a lot in the
petition that I don't find factually accurate. I have a
difference with one of the categories that they address, but as
I said, a lot of it has been drawn from documents that we
ourselves have put together. I think the issue is whether it
meets the 301 test and what remedies could be applied through
that process. We have been trying up to now, and we intended
even before this came up, to try and intensify the kind of
activities in China, both at the corporate level but also down
at the factory level, to try and improve conditions in China.
The Department of Labor has also been pursuing a pretty wide
program. I met with Secretary Chao about it just a few weeks
ago, especially in the area of mining safety, which clearly in
China is way substandard from what you see in almost any other
country in the world.
Senator Brownback. Are there other routes or remedies--you
brought cases in front of the U.N. Human Rights Commission, had
difficulty there; are there other avenues or venues that we can
pursue more aggressively, given the case we know that exists
currently, against the Chinese? You mentioned that the 301
would be a bit of a novel way of putting this forward. There's
a set of remedies that are available there that is not
available in other fields. Are there other fields we can
pursue?
Mr. Craner. Well, the areas I talked about in the last half
of my testimony are essentially new. Those are things that we
have been doing over the last two years and, though modest, at
a total of $27.5 million over three years, I would argue
they're already having a good effect in terms of getting people
in China to think a little more broadly. We encourage people in
China to think a little more broadly about what kind of society
they should live in, about their access to information, about
whether or not they should be able to organize, at least at the
factory level, about what their government ought to be doing
for them, and ultimately about the possibilities of electing
their own government. Those are all new questions that people
in China are starting to ask, and they are very good questions
to be asking. As a result of our doing the resolution, the
Chinese threatened to, and did indeed, cut off our human rights
dialogue, which was a formal, almost annual exercise that we
had been through. I made clear to them that if we were going to
have a dialogue it had to be based on results. In part because
of the fact that we had not been seeing results from that
dialogue, we hadn't had one in over a year. The President and
the National Security Advisor, Secretary of State Colin Powell,
Under Secretary Paula Dobriansky, and other officials in this
government not traditionally concerned with human rights, they
push these particular issues whenever they meet with the
Chinese. And I think over time we're beginning to have an
effect, partly because I think the Chinese are starting to
understand that at least in a public way they need to be
starting to get interested in these issues.
What do I mean by that? I mean that China, as you've heard,
wants to be a great power. And in today's world you cannot be a
great power without having an open society. It was fine 20 or
30 years ago to not have an open society and to try to be a
great power. The Soviet Union managed to do it. But to be
accepted as part of the club in today's world you cannot do
that and be repressive with your people. And I think they are
beginning to understand that.
Senator Brownback. One final thought on this and then I
would like to go to you, Mr. Lawless, if I could, is that, if
China sets and gets away with a low bar on how it treats its
own people in labor situations, in human rights situations--now
particularly I'm thinking in labor situations now--it drives
the rest of the world's bar down, and it has an impact on
workers in Honduras, it has an impact on workers all over the
world that are impacted having to compete with labor that's put
in very difficult situations in China. So the degree that we
can press on the Chinese aggressively here, and try to get more
rights and more opportunities for them, I think it will have, I
know it will have, a global impact. To the degree that we're
not successful will have a global impact as well.
Mr. Craner. I think you're right, and that's part of the
reason we press it, especially as we get closer to 2005 and the
end of quotas in places like a Bangladesh or a Guatemala or a
Haiti that have been able to export goods into the U.S. under
their quota.
When I talk to corporations that operate in Guatemala or
Bangladesh or Honduras, and I say where are you going in 2005,
they all say China because that's where the cheap labor is
going to be. But I would tell you one other thing that a lot of
these corporations tell me, which is a little counter-
intuitive, which is that they're looking for countries--
remember, a lot of these corporations have been through
scandals over the last five or ten years about the kind of
places their clothing or sneakers or whatever are
manufactured--and what they tell me is they're actually
starting to look for places that want to make an issue out of
better conditions for workers. Granted, these are name brand
firms like Patagonia or Reebok. But they're actually looking
for countries where the government is making an effort to jack
the standards up because they don't want to get caught in a
scandal two or three years from now about a rotten factory that
they're making their goods in. That's a good thing, that these
high end manufacturers are doing it. They are beginning to drag
along some of the lower end manufacturers. But, a lot of no-
name manufacturers, that doesn't really matter to them because
it's not going to hurt their brand name. So, we can encourage
better conditions in the factories, and we've also got to
encourage corporations to understand that better factory
conditions are good of their own name, because they don't want
to go through the kind of boycotts that some of these firms
have seen over the years because of the poor conditions in
which they manufacture. Many of them are beginning to
understand that.
Senator Brownback. It's a good point.
Mr. Lawless, you point to a defense industry in China,
doubling, I think you said, annual double-digit growth, and
it's defense spending on an annual basis, all but one year over
the last ten, I believe was your number, up to $50 to $70
billion in defense spending this year in China. Where are they
going with all of this defense spending? And do you see it
capping out any time soon?
Mr. Lawless. I guess really that is really the 64-thousand-
dollar question, Mr. Chairman. I think that the credible
breadth of the economic base that's being established there and
the growth in GDP and its ability to develop and acquire and
integrate advance technologies into this society and into this
economy gives us great pause for a concern as to where they can
take their industrial base for defense. So I don't know that we
see a capping out. They have simply the potential to devote an
increasingly greater amount of net resources to their defense
spending. They've shown the ability to spend hard currency very
aggressively when they want to acquire a given system or
technology. I think the combination of their ability to spend
hard currency in ever-increasing amounts, for example in their
weapons shopping excursions, the Soviet Union and other sources
of technology and weapons systems, coupled with the base that
now exists, gives us great pause for concern in the future in
what they're going to be able to do with that industrial base
and that economic base.
Senator Brownback. You were talking in your testimony about
it being a regional offensive projection, no longer a defensive
orientation, as I gather, but only a regional orientation. Do
you believe that's where it stops? Is it a regional offensive
projection or does it move on from that point? Or do we really
even know?
Mr. Lawless. I don't think we know the answer to that. We
do see clearly that the intention is to very rapidly, in most
cases more rapidly than we had originally projected, develop
the ability to flesh out that regional capability and
particularly the ability to project power offshore. The ability
to evolve from an essentially defensive system that would wage
a defensive war on one's own territory and the ability to
project force out, even regionally, is a very big step that
requires development of not only systems themselves but
doctrine and, as I mentioned, ideals and concepts of jointness,
ever increasing sophistication of the systems they bring to
bear. So I think for the near-term, as we watch the development
of this regional projection capability, that is in and of
itself a pause for concern.
Senator Brownback. If Chinese leadership does not change,
if it remains held in the small Communist party over the
foreseeable future, is China our most likely competitor
militarily that we see growing in the world today, if it
remains on the path that it's projecting today, with the
doctrinal change, with the shift in investment, with the
ability to integrate technology rapidly?
Mr. Lawless. It certainly would be working from the most
robust base in the world to do that. And so, I think the
combination of where they've grown their military today and the
economic and industrial base which they'll have to grow it out
in the future suggests that they would indeed become the main
competitor, both regionally and possibly globally.
Senator Brownback. So let's put the question another way.
In other words, is there anybody else who has the same set of
factors out there that would concern you as part of the
Department of Defense here?
Mr. Lawless. Not really in terms of projecting into the
future, no.
Senator Brownback. They're it.
Mr. Lawless. Pardon me?
Senator Brownback. They're it.
Mr. Lawless. Again, the combination of the growth of the
economy, which is truly impressive, and the ability to
integrate advanced technologies into that economy is something
that we haven't seen perhaps in recent history. I'm not
attempting to make a direct comparison to the former Soviet
Union, but the fact remains that this is a very robust economy
that is growing and establishing a very sophisticated
industrial base. I'm not sure that the Soviet Union is working
from the same basis at all. I think that's what gives folks
most pause for concern.
Senator Brownback. So that if they really wanted to turn it
on and aggressively turn on, even more aggressively turn on
this defense military--or this military industrial complex--
they could really move it rapidly?
Mr. Lawless. I think it's a question of where they elect,
where they decide to invest their resources. When you work from
an economy of this size, with this growth rate, you perhaps
don't need to invest as, say, a North Korea or another country
would have to invest very high levels of GNP--GDP--to their
defense budget. You can still grow your military at very strong
rates over a period of ten or twenty years. So again, I concur
with what you just said.
Senator Brownback. I chair the Science, Space, Technology
subcommittee and, you know, we're looking at adjustments in our
space program. One of the things that we're going to hold a
hearing on in the future is other competitors in the space
field, and China's the one that really steps forward, and there
are others but China is a key one. What are they looking to do,
can you determine from a defense or military perspective in the
space program--other than what you were saying about imagery
targeting--are there other designs that you've been able to
determine from a military aspect of their space program?
Mr. Lawless. Well quite obviously they have a very
aggressive manned space program. They've made no doubt about
the fact that they intend to work and live in space. So I
believe that the combination of the resources they're devoting
right now, the fact that they're able to induce reasonably
sophisticated technologies where they can't home grow them and
the fact that they're devoting a lot of resources to
development of space capabilities, suggests that they see space
as an important area for security policy in the future.
Senator Brownback. For me, this wouldn't be much of
particular concern if it were a democracy, if it were an open
society, you'd look at it and you'd go, great, here's a
competitor and we will compete vigorously as well. It's when it
comes from a leadership that's very narrow and self-selected
and can move aggressively and--I don't want to say whimsically
but cavalierly--easily, that's when, you know, as a policy
maker I look at it and I just grow concerned. If it were a
democratic society, if it were an open society, I'd say, fine,
we'll compete. But this is what draws my greater concern.
Mr. Lawless. I would say in this year's China Military
Power Report, which is in the final stages of preparation, and
in fact I think we'll be able to deliver that in an early June
time frame this year, some larger relative portion is devoted
to the area of space and military use of space. And we make
some judgements in there as to where we think the Chinese plan
to take their programs, their security programs in space. So
we've anticipated that and have addressed that in this year's
report.
Senator Brownback. As almost a final question, it's one
that I want to put in the record, a Business Week article,
March 26, 2004, and this is regarding the pending government
contract to build Marine One. It's a helicopter for the White
House. And according to the article, one of the company's
that's vying for this contract had, as one of its development
partners, a Chinese company that helped design and assemble
some tail parts for its fleet of helicopters. That's no
problem. But the problem is that the development partner, the
China National Aerotechnology Import and Export Corporation,
was indicted by the U.S. Government in 1999 for illegally
buying and transferring machine tools to the Chinese military.
Now, this company is also barred by the State Department for
two years from any U.S. Government contract for technology
sales to Iran. I've got questions about that, but I wonder,
could you comment about the possibility of this group getting a
U.S. Government contract while it's working with this Chinese
company, or is this article inaccurate? If you could clarify
that I would appreciate it.
Mr. Lawless. I'm quite familiar with the procurement
itself. I'm not familiar with this aspect of it, and what I'd
like to do is take this under advisement and come back to you
with a more detailed response.
Senator Brownback. I would appreciate it if you would do
that because it caught my eye that this was sitting out there.
And again, you'd look at it one, I don't like it period, but it
also seems to come on the heel of several instances where we've
had trouble with technology transfers getting to China. And,
you know, we hope no scenario that's a military one ever
develops, but you just hate to see this continued violation in
technology transfer happening, particularly if we're involved
in funding any of it; we don't want to see that. So if you
could get back to me on that in more detail I would appreciate
that.
Mr. Lawless. I would do that, and if I could make one final
comment on this, I do agree with you in that technology leakage
and technology transfer becomes exponentially more dangerous to
us in the Chinese context when you do have an industry,
particularly a microtechnology industry and other aspects of
this commercial industry which are growing apace and are able
to induce and use this cream skimming technology, if you will.
So it's a very important problem for us and I think it's one
we're paying increasing attention to.
Senator Brownback. Thank you.
Gentlemen, thank you very much for joining me today. And I
appreciate very much your insights.
We have a second panel I'd like to call forward. Dr. Arthur
Waldron, Lauder Professor of International Relations,
University of Pennsylvania out of Philadelphia. Thea Lee, Chief
International Economist for the AFL-CIO. Mr. Pieter Bottelier,
Adjunct Professor of China Studies at Johns Hopkins. And Mr.
Roger W. Robinson, Jr., Chairman, U.S.-China Economic and
Security Review Commission out of Washington. He will be
accompanied by Mr. C. Richard D'Amato, Vice Chairman, U.S.-
China Economic and Security Review Commission.
I want to thank you all for joining us today. And I
appreciate very much you staying in here while the hour's
gotten late. Mr. Robinson, let's start off with you as Chairman
of the U.S.-China Economic and Security Review Commission, if
you wouldn't mind. We will put your complete statements in the
record, so you can summarize if you would choose to, that would
be just fine; then we'll have some questions afterwards.
Mr. Robinson.
STATEMENT OF ROGER W. ROBINSON, JR., CHAIRMAN, U.S.-CHINA
ECONOMIC AND SECURITY REVIEW COMMISSION; ACCOMPANIED BY C.
RICHARD D'AMATO, VICE CHAIRMAN, U.S.-CHINA ECONOMIC AND
SECURITY REVIEW COMMISSION
Mr. Robinson. Thank you very much, Mr. Chairman. We
appreciate this opportunity to testify on the work of the
commission and our assessment for the Congress of the priority
areas in U.S.-China relations. I'm joined at the table by
commission Vice Chairman Richard D'Amato, demonstrating the
strongly bipartisan nature of our views and the work of the
commission. I should also note at the outset that the views
expressed in this testimony are those of the commission's
Chairman and Vice Chairman and, except where specifically
stated, do not necessarily reflect the views of other
commissioners. The commission will be delivering its 2004
report to Congress next month, which will present the full
commission's consensus, findings, and recommendations in
fulfillment of our legislative mandate.
Today we want to highlight for the committee our
preliminary assessment of the priority areas of concern in
U.S.-China relations, those requiring the most immediate
attention of the Congress, and reinforce some of the
recommendations we've made to Congress on these topics over the
past year. We see the priority areas as follows: (1) effective
management of U.S.-China trade and investment; (2) the changing
dynamics of the cross-Strait relationship; (3) holding China to
its commitments on Hong Kong; and (4) China's pivotal role in
the North Korean nuclear crisis.
Before we address these specific areas, we would like to
offer our summary assessment of the current direction of U.S.-
China relations, at least with regard to the broad areas
covered by our mandate. In short, we believe that a number of
the current trends in U.S.-China relations have potential
negative implications for our long-term economic and national
security interests, and therefore that U.S. policies in these
areas are in need of urgent attention and course corrections.
We believe that the time is ripe for putting the U.S.-China
relationship on a more solid, sustainable footing from the
perspective of long-term U.S. interests. The U.S.-China
relationship is still in the relatively early stages of its
development and is marked by a fluid, rather than a static,
environment. The United States has played and continues to plan
an enormous role in the economic and technological development
of China. As we've documented through our hearings and reports,
U.S. trade investment and technology flows have been the
critical factor in China's rise as an economic power. We need
to employ the substantial leverage this provides to develop an
architecture that advances both country's long-term interests.
We have leverage now, and perhaps for the next decade, but this
may not always be the case. Within this framework, let me turn
to a discussion of the key near-term areas of concern and our
thinking on possible U.S. policy responses.
I'd like to begin with effective management of U.S.-China
trade and investment. First, our trade and investment
relationship with China, with current trends continuing and the
deficit expanding, is not just a trade issue for the United
States but a matter of our long-term economic health and
national security. Beyond these immediate challenges are the
implications for globalization writ large. The commission
believes that the U.S.-China economic relation is of such large
dimension that the future trends of globalization will depend
to a substantial degree on how we manage our economic relations
with China and shape the rules of the road, if you will, for
broader global trade relations. Our written testimony contains
numerous specific recommendations the commission has made to
the Congress on actions to right the imbalance in U.S.-China
trade. We meet today during the same week that a high level
trade dialogue took place in Washington between U.S. and
Chinese officials. As we understand, the Chinese side made
commitments to significantly improve their poor record of
protecting intellectual property rights and not to move forward
with a restrictive standard that would have been a barrier to
U.S. wireless goods. Time will tell whether these commitments
will be fulfilled. We've often seen China's trade promises,
particularly on IPR, be worth no more than the paper they're
written on. We also are concerned----
Senator Brownback. Sir, I've got to jump in. I think this
is the third or forth time around I've heard them commit to
protecting intellectual property rights more. I was in Bush I
of the trade rep's field; they promised then. I was here during
the Clinton years; they promised then. They're promising now.
You know what? At some point in time, you know, and that's what
you're saying but this is personally, for me, seeing this song
over a decade period of time and nothing has happened yet.
Please proceed.
Mr. Robinson. I don't disagree. We're also concerned that
several vital issues in U.S.-China trade, including China's
currency and subsidies policies were not on the table during
these talks.
Second, the changing dynamics of the cross-Strait
relationship. The committee's well aware of the significant
events in the Taiwan Strait over the past few months and the
growing tensions between the two sides, particularly following
President Chen's re-election last month. The state of cross-
Strait relations appears to be entering a new era, one that
will require new thinking by the administration and the
Congress. The Taiwan Relations Act has served U.S. interests
well over its 25-year history, and we as a government and
nation need to remain faithful to it, especially now when the
cross-Strait situation is as complex as it's ever been. In sum,
given the current economic and political trends in the Strait
that we've identified in our written testimony, developments
that call into question the status quo in cross-Strait
relations, we believe there's an immediate need for Congress
and the administration to review our policies toward Taiwan and
cross-Strait relations, and to determine an appropriate role
for the United States in reinvigorating the cross-Strait
dialogue.
Third, holding China to its commitments on Hong Kong. The
recent events in Hong Kong point to troubling signs of an
erosion of the autonomy promised Hong Kong by the mainland
under the One Country, Two Systems formula. These events have
no doubt played into developments in Taiwan, where such a
formula for any eventual unification has become a non-starter.
We know this committee is deeply concerned, as is the
commission, about the maintenance of Hong Kong's basic
freedoms. We urge the Congress and Administration to let the
Chinese leadership know that Beijing's moves to limit Hong
Kong's autonomy and democratic aspirations are not in any
party's long-term interest, and that U.S.-China relations will
be adversely affected by a continuation of Beijing's current
course.
And fourth, China's pivotal role in the North Korean
nuclear crisis. In the post-9/11 world there can be no doubt
that stemming the tide of the proliferation of weapons of mass
destruction and ballistic missiles is the highest national
priority for the United States. The commission's charge to
examine China's role in WMD proliferation is part of this
effort. North Korea is heavily dependent on Chinese assistance
in the form of fuel, financial aid, military-to-military ties,
and food. These facts clearly indicate that the considerable
leverage Beijing could exert over Pyongyong is evident, if it
chooses to use it. To date, however, China has been playing
more of a host than intermediary role in the Six-Party Talks
and does not appear to be pressing for its expeditious
resolution. Time is not on our side in confronting this crisis.
As the Six-Party Talks drag on, North Korea's nuclear weapons
and ballistic missile programs keep moving apace. As these
capabilities are attained, the prospects for achieving a
complete, verifiable and irreversible dismantlement by North
Korea are dimming substantially. In our view, the U.S.
government must make clear to China that its efforts in this
crisis are a key, if not the key, test of the U.S.-China
relationship. China's efforts in getting the Six-Party Talks
underway must be followed up by the active use of its
substantial leverage. In the event of continued stalemate and
lack of Chinese success in persuading North Korea to accept
these requirements, we believe the United States must develop
other policy options with our partners in the region to resolve
this highly critical situation in the near-term.
Mr. Chairman, we thank you for this opportunity to testify.
Through an appropriate mix of U.S. policies we're optimistic
that this complex relationship can be managed in such a way as
to minimize the downside risks and enhance the prospects of
moving China toward a more democratic and market-oriented
society to the benefit of both of our economic and national
security interests. Vice Chairman D'Amato and I will be pleased
to take your questions. Thank you.
[The joint statement of Mr. Robinson and Mr. D'Amato
follows:]
Prepared Statement of Roger W. Robinson, Jr., Chairman; and C. Richard
D'Amato, Vice Chairman, U.S.-China Economic & Security Review
Commission
Mr. Chairman and members of the committee:
Thank you for this opportunity to testify on the work of the
commission and our assessment for the Congress of the priority areas in
U.S.-China relations. We are submitting this as a joint statement by
the Chairman and Vice Chairman of the commission, as an expression of
the bipartisan nature of our views and the work of the commission.\1\
---------------------------------------------------------------------------
\1\ The views expressed in this testimony are those of the
commission's Chairman and Vice Chairman and, except where specifically
stated, do not necessarily reflect the views of other commissioners.
---------------------------------------------------------------------------
The commission was established in the Fall of 2000 to ``monitor,
investigate, and report to Congress on the national security
implications of the bilateral trade and economic relationship between
the United States and the People's Republic of China (PRC).'' We were,
to a large extent, a result of the decision by Congress earlier that
year to grant Permanent Normal Trade Relations (PNTR) to China. The
annual NTR debate in Congress had been the forum by which Congress took
stock of year-to-year developments in U.S.-China relations, and
ventilated concerns regarding areas where the relationship might be off
track. With the approval of PNTR, the House and Senate properly
recognized the importance of continuing Congress' annual assessment of
key areas of U.S.-China relations, given the growing stature of this
bilateral relationship.
Following the commission's first Report to Congress in July 2002,
Congress revised the commission's charter to focus our work on the
following areas: China's proliferation practices, China's economic
reforms and U.S. economic transfers to China, China's escalating energy
needs, Chinese firms' listing or trading in the U.S. capital markets,
U.S. investments into China, the regional economic and security impacts
of China's growing economic, military, and political clout, U.S.-China
bilateral programs on science and technology cooperation and agreements
on intellectual property rights and prison labor imports, China's
record of compliance with its World Trade Organization (WTO)
commitments, and the Chinese Government's efforts to control the media
and, through that, perceptions of the United States within China. This
extensive mandate reflects the complexity of U.S.-China relations, and
highlights the continuing need for the United States to carefully
manage this relationship.
The commission will deliver its 2004 report to Congress next month,
which will present its findings and recommendations in the issue areas
specified by Congress. We will also be answering the central theme of
our mandate to provide Congress with an overall assessment of ``the
national security implications of the bilateral trade and economic
relationship.'' We hope this analysis will prove useful for the
committee's and Congress's important deliberations on U.S.-China
policy. We would be pleased to come back to the committee to present
the full findings and recommendations of our report once it is
complete.
Today, we want to highlight for the committee our preliminary
assessment of the priority areas of concern in U.S.-China relations--
those requiring the most immediate attention of the Congress--and
reinforce some of the recommendations we have made to Congress on these
topics over the past year.
In sum, we see the priority areas as the following:
Effective management of U.S.-China trade and investment
The changing dynamics of the cross-Strait relationship
Holding China to its commitments on Hong Kong
China's pivotal role in the North Korean nuclear crisis
Before we address our specific concerns and recommendations in
these areas, we would like to offer our assessment of the current
direction of U.S.-China relations, at least with regard to the broad
areas covered by our mandate. In sum, we believe that a number of the
current trends in U.S.-China relations have potential negative
implications for our long-term economic and national security
interests, and therefore that U.S. policies in these areas are in need
of urgent attention and course corrections.
This assessment is somewhat counter to much of the conventional
wisdom in the United States today that characterizes U.S.-China
relations as having reached a positive new echelon in light of the
apparent cooperation between the two countries on anti-terrorism
initiatives and, in particular, confronting the North Korea nuclear
crisis. We recognize the importance of these developments and do not
dismiss their significance. Rather, we believe that there are long-term
trends in the relationship that give us cause for concern, but which
can be corrected given timely and sustained U.S. attention and effort.
In light of this assessment, we believe that the time is ripe for
putting the U.S.-China relationship on a more solid, sustainable
footing from the perspective of long-term U.S. interests. The U.S.-
China relationship is still in the relatively early stages of its
development and is marked by a fluid rather than static environment. To
use an analogy--the relationship is like a building where not only has
the paint not dried in any room, but the architectural plans are still
being revised. The United States has played--and continues to play--an
enormous role in the economic and technological development of China.
As we have documented through our hearings and reports, U.S. trade,
investment, and technology flows have been the critical factor in
China's rise as an economic power. We need to use the substantial
leverage this provides us to develop an architecture that advances both
countries' long-term interests. We have the leverage now and perhaps
for the next decade, but this may not always be the case.
When the Congress approved PNTR for China, the guiding premise was
that it would expand market access for U.S. goods and services and,
more fundamentally, would lead to economic reform in China and,
eventually, political reform. In this context, it was characterized as
in our ``national security interest'' to support China's accession to
the WTO. Having taken this significant step, the United States cannot
lose sight of these important assumptions, and we must configure our
policies toward China to help make these assumptions materialize--from
expanded trade opportunities for U.S. exporters and a mutually
beneficial trade relationship that sets global standards for fair
trade, to an open, more democratic society that can be an important
partner in addressing global. security challenges, including weapons
proliferation, terrorism, and, of course, a peaceful resolution of the
cross-Strait situation.
If we falter in the use of our economic and political influence now
to effect positive change in China, we will have squandered an historic
opportunity. We believe China demonstrated a willingness to move in a
positive direction, and to take substantial risks to do so, when it
entered the global economy. And there has been substantial market
liberalization in China as well as new laws improving property rights
for citizens. But China will likely not initiate the decisive measures
toward more meaningful economic and political reform without
substantial and sustained pressure from a United States willing to
utilize its tools of leverage and persuasion.
The Congress gave our commission an important and unique task--to
identify the scope of problems and shortcomings in key areas of the
U.S.-China relationship, and to make recommendations to Congress
concerning how to address these concerns. In this pursuit, the
commission can serve as an effective early warning mechanism to surface
economic and national security concerns before they become
unmanageable, and to recommend policy changes that can affect mid-
course corrections in U.S. policy where necessary.
Within this framework, we will now turn to a more detailed
discussion of the key areas of concern we see at the present time in
U.S.-China relations, and our thinking on possible U.S. policy
responses.
EFFECTIVE MANAGEMENT OF U.S.-CHINA TRADE AND INVESTMENT
Trade and investment flows constitute the core of U.S.-China
economic relations. Bringing these flows into proper balance will
significantly determine the benefits to the United States of this
important relationship. The challenge facing U.S. policymakers operates
at two levels. On one level there are the immediate problems associated
with the enormous trade deficit that the United States has with China
and the resulting consequences for the U.S. economy, particularly the
manufacturing sector. This requires attention to the issues of exchange
rates and currency manipulation, and addressing China's mercantilist
trade and industrial policies through vigorous enforcement of WTO and
U.S. trade laws.
But beyond these immediate challenges are the implications
associated with ``globalization.'' The commission believes that the
U.S.-China economic relationship is of such large dimensions that the
future trends of globalization will depend to a substantial degree on
how we manage our economic relations with China. It is reasonable to
believe that U.S.-China economic relations will shape ``the rules of
the road'' for broader global trade relations. If current failings are
remedied and the relationship is developed so as to provide broad-based
benefits for both sides, globalization will likely be affected in a
positive manner on a worldwide scale. If trade commitments and the rule
of law are honored, and trade is conducted with respect for labor
rights and environmental protection, the direction of globalization
will probably take a turn for the better worldwide. If not, the
opposite will likely eventuate.
The dominant feature of U.S.-China economic relations is the U.S.
goods trade deficit, which rose by more than 20 percent in 2003 to a
record $124 billion. The deficit with China now constitutes 23 percent
of the total U.S. goods trade deficit, and China is by far the largest
country component of the deficit. Moreover, U.S. trade with China--with
$28 billion in exports to China in 2003 as compared with $152 billion
in imports--is by far the United States' most lopsided trade
relationship as measured by the ratio of imports to exports. This trade
deficit is of major concern because (i) it has contributed to the
erosion of manufacturing jobs and the current jobless recovery in the
United States, and (ii) manufacturing is critical for the nation's
economic and national security.
Therefore, our trade and investment relationship with China--with
current trends continuing and the deficit expanding--is not just a
trade issue for the United States, but a matter of our long-term
economic health, and national security.
A key factor contributing to the deficit is the undervaluation of
the Chinese yuan against the U.S. dollar. This gives Chinese producers
a competitive advantage by making Chinese imports relatively less
expensive, and U.S. exports relatively more expensive. It also
undermines the profitability of U.S. manufacturers, thereby reducing
their investment spending while also giving them an incentive to shift
production to China. Economic fundamentals suggest that the Chinese
yuan is undervalued, with a growing consensus of economists estimating
the level of undervaluation to be anywhere from 15 to 40 percent.
However, China persistently intervenes in the foreign exchange market
to maintain the de facto peg of 8.28 yuan per dollar.
The 1988 Omnibus Trade and Competitiveness Act requires the
Secretary of the Treasury to report to the Senate Banking Committee
twice each year with an assessment of currency manipulation by trading
partners. The commission is greatly concerned that the Treasury
Department has repeatedly sidestepped a finding that China is
manipulating its currency, despite the mounting evidence to the
contrary.
To address this, the commission has recommended to Congress that if
the Treasury Department's efforts to effect an upward revaluation of
China's currency prove ineffective, Congress should use its legislative
powers to force action by the U.S. and Chinese Governments to address
this unfair and mercantilist trade practice. For the near future,
continued vigorous development of such legislative initiatives as were
outlined by members of Congress during our hearing, linking China's
performance on its exchange rate policies to its continued full access
to the U.S. market, appears essential to ensure the appropriate level
of effort by both governments to this matter.
A second factor contributing to imbalances in U.S.-China trade are
China's mercantilist industrial and foreign direct investment policies,
the purpose of which appears to be to enhance the power of the Chinese
state. China has pursued industrial policies that involve a wide range
of measures including technology transfer requirements, government
subsidies, discriminatory tax relief, and limitations on market access
for foreign companies. The Chinese Government is currently targeting
the high tech, auto, and auto parts industries. The textile sector is
another industry of great concern as the ending of the multi-fiber
agreement (MFA) on January 1, 2005 promises to spur a massive shift of
textile production to China, which will likely decimate what remains of
the U.S. textile industry (which still employs 630,000 people), as well
as textile industries from Mexico to Bangladesh.
To counter these practices, the commission has recommended to
Congress that:
The United States Trade Representative and Department of
Commerce immediately undertake a comprehensive investigation of
China's system of government subsidies for manufacturing,
including tax incentives, preferential access to credit and
capital, subsidized utilities, and investment conditions
requiring technology transfers. USTR and Commerce should
provide the results of this investigation in a report that lays
out specific steps the U.S. Government can take to address
these practices through U.S. trade laws, WTO rights, and by
utilizing special safeguards China agreed to as part of its WTO
accession commitments.
The U.S. tax code be restructured to eliminate incentives
for U.S. business, particularly manufacturing, but also
services and high technology companies, to shift production,
services, research and technology off-shore.
Congress amend U.S. countervailing duty laws to make them
applicable to nonmarket economies, such as China.
The U.S. Government work with other interested WTO members
to convene an emergency session of the WTO to extend the Mult-
fiber Arrangement at least through 2008.
An essential part of our mandate--as well as U.S.-China trade
relations--is to assess China's progress in meeting its commitments as
a member of the WTO. China joined the WTO in December 2001. Its
accession agreement is extremely complex, reflecting the need for
special arrangements to address the fact that China joined the WTO
without having met the requirements of a market economy. To protect
against trade distortions and unfair trade practices resulting from
China's non-market status, China's WTO agreement includes a special
review mechanism to monitor China's compliance and special safeguard
provisions giving WTO members the right to protect themselves against
sudden surges of Chinese imports. It is critical that these agreements
be properly and vigorously implemented and enforced.
China has made progress in reducing tariffs and otherwise formally
meeting a large number of its WTO accession commitments, but
significant compliance shortfalls persist in a number of areas of key
importance to U.S. trade. In particular, China continues to provide
direct and indirect subsidies to Chinese producers, there is rampant
abuse and lax enforcement of intellectual property rights, foreign
firms face discriminatory tax treatment, there is poor transparency in
the adoption and application of regulations, and China uses unjustified
technical and safety standards to exclude foreign products.
We are also particularly dismayed with China's level of cooperation
with the WTO's Transitional Review Mechanism (TRM) for reviewing
China's WTO progress. As part of its accession agreement, China agreed
to be subject to this multilateral annual review of its compliance
record for the first eight years of its WTO membership, with a final
review after the tenth year. The TRM was an important provision of
China's accession agreement--one that U.S. negotiators strenuously
pressed for--because it was seen as a robust mechanism for both
monitoring China's compliance progress and for applying multilateral
pressure on China to correct deficiencies. Instead, however, China has
undermined the TRM during its first two years by refusing to fully
cooperate with and address WTO member questions and other efforts to
engage China in a dialogue on compliance shortfalls. It has simply not
served as the intended robust mechanism for combating China's
compliance shortfalls.
Therefore, the commission has recommended to Congress that USTR and
other appropriate U.S. Government officials undertake strenuous efforts
to reform the TRM process into a meaningful multilateral review and
measurement of China's compliance with its WTO commitments. If this is
unsuccessful, the U.S. Government should initiate a parallel process
with the EU, Japan, and other major trading partners to produce a
unified annual report by which to measure and record China's progress
toward compliance, which report should be provided to Congress as part
of USTR's annual report to Congress on this matter.
Though aware of these failings and problems, the U.S. Government
has not been sufficiently vigorous in enforcing U.S. trading rights
under either U.S. law or through the WTO. This is exemplified by the
administration's failure to use the China-specific safeguards available
to WTO members that protect against market disruptions by Chinese
imports. The International Trade Commission has conducted five Section
421 safeguard investigations against Chinese products, and in three
cases it found for the plaintiffs. Yet, in all three cases the
President refused to take action. These developments risk undermining
the Section 421 process, as companies may cease filing legitimate
petitions if, given the significant legal costs, they come to believe
the administration will not act. Moreover, the administration was slow
in implementing procedures for U.S. use of the WTO China-specific
textile safeguard, and first imposed the safeguard in December 2003 on
a select few categories of textiles, despite the enormous detrimental
impact of imports from China on the U.S. textile industry.
Overall, we are troubled by what we see as a general hesitancy
among WTO members with substantial trade relations with China to raise
legitimate trade disputes with China for fear of economic retaliation.
The United States finally broke the ice by bringing the first WTO trade
dispute against China on its preferential value-added tax (VAT)
treatment for domestically designed and produced semiconductors. We
hope this will open the door to other WTO members exercising their
rights under the WTO to address unfair Chinese trade practices. In
fact, the United States should be actively coordinating with its major
trading partners on areas of mutual concern regarding China's trade
practices.
In light of the above, the commission has recommended to Congress
that:
The Congress should press the administration to use the WTO
dispute settlement mechanism and/or U.S. trade laws, including
Section 301 provisions, to seek redress for China's practices
in the areas of exchange rate manipulation, denial of trading
and distribution rights, massive violations of intellectual
property rights (IPR) that have cost U.S. firms billions of
dollars, and government subsidies to export industries that
harm the competitiveness of U.S.-based manufacturing firms.
The U.S. Government should make optimum use of the special
Section 421 and textile safeguards negotiated as part of
China's WTO accession agreement. These important safeguards
were designed to prevent our domestic industries from being
injured by surges of Chinese exports.
We note that the commission has reported on the scope of
intellectual property rights abuses in China and the lack of
improvement in Chinese enforcement of IPR protections for the past two
years, and recommended WTO action. We strongly reiterate the need for
the U.S. Government to take more aggressive action in addressing this
vital trade issue.
In addition to addressing the problems of China's exchange rate
manipulation and its mercantilist trade and investment policies, U.S.
policymakers must turn their attention to China's impact on
globalization. In our eagerness to expand trade and investment, too
little attention has been given to this critical matter.
Trade and investment are not the ends of policy, but rather the
means by which we enhance our national well-being. It is not the size
per se of these flows that matters, but rather their impact. Just as
intellectual property rights are not self-organizing, it is time to
recognize that trade and investment rules must be placed in a framework
designed to deliver maximum well-being. Trade must be standards based,
and trade agreements with China and other countries must incorporate
labor rights and environmental standards. We note that the U.S. Trade
Representative, Ambassador Zoellick, vigorously embraced these concepts
in a recent editorial in the Washington Post (April 19, 2004).
Economic action must conform to the fundamental values that guide
us as a nation. To date, our policy toward globalization has tilted
toward letting the market determine our values, rather than having the
market conform to our standards and values.
We take note of the high-level trade dialogue taking place in
Washington this week between U.S. and Chinese officials, and are
hopeful it may result in a breakthrough. We are concerned, however,
that certain key issues--including China's currency and subsidies
policies--appear not to be on the table.
THE CHANGING DYNAMICS OF THE CROSS-STRAIT RELATIONSHIP
The committee is well aware of the significant events in the Taiwan
Strait over the past few months, and the growing tensions between the
two sides. Beginning with Taiwan President Chen Shui-bian's
announcement late last year that Taiwan would hold a national
referendum as part of its March 2004 presidential balloting, and
culminating in the dramatic reelection of President Chen last month,
the state of cross-Strait relations appears to be entering a new era,
one that will require new thinking by the administration and the
Congress.
This past December and February we held public hearings that
explored both the economic and security aspects of cross-Strait
relations and China's military modernization efforts. Members of our
commission traveled to the region last month and had a chance to talk
with high-level observers of the cross-Strait situation in Tokyo, Hong
Kong and Taipei. We also commissioned a study of China's acquisition
and integration of foreign weapons systems, which is published on our
website. The annual Department of Defense report on the cross-Strait
military balance, the 2003 Council on Foreign Relations Study of
China's Military Capabilities, and published reports of the U.S. Naval
War College on China's growing submarine warfare capability offer
additional useful perspectives.
China's modern arsenal includes a small but increasingly
sophisticated missile force that is of direct strategic concern. In the
Western Pacific theater, it is estimated that China has deployed some
five hundred short-range ballistic missiles that directly threaten
Taiwan and longer-range conventional missiles that could threaten Japan
and our forces deployed in the region. China's advanced naval and air
weapons systems--including surface ships, submarines, anti-ship
missiles, and advanced fighter aircraft--have been significantly
enhanced by infusions of foreign military technology, co-production
assistance and direct purchases, mainly from Russia. China's military
capabilities increasingly appear to be shaped to fit a Taiwan conflict
scenario and to target U.S. air and naval forces that could become
involved.
We conclude that China is steadily building its capacity to deter
Taiwan from taking steps that the PRC deems unacceptable movements
toward independence or consolidation of Taiwan's separate existence, to
coerce Taiwan into an accommodation, and, ultimately, to have a viable
option to settle the Taiwan issue by force of arms if necessary. A
significant component of its military modernization strategy is to
develop sufficient capabilities to deter U.S. military involvement in
any cross-Strait conflict.
The United States cannot wish away this capacity. We cannot assume
China will stay its hand because it has too much at stake economically
to risk military conflict over Taiwan. In our view, we should not think
of the 2008 Beijing Olympics as an insurance policy against Chinese
coercion of Taiwan.
We can certainly hope that the economic benefits China gains from
Taiwan investment and trade; the growing production and supply linkages
among China, Japan, other Asian economies and the United States; the
significant value to China of strong economic relations with the United
States; and China's own desire to be seen by the world as a power that
is ``peacefully rising'' will constrain China from using military
force. Hopes, or even reasonable expectations, do not, however, provide
a defense of vital U.S. interests. This is why it is more important now
than ever before for the United States to uphold its key obligations
under the Taiwan Relations Act (TRA) [22 USC 48], notably ``to maintain
the capacity to resist any resort to force or other forms of coercion
that would jeopardize the security, or the social or economic system,
of the people on Taiwan.''
Under the TRA, the additional U.S. responsibility to assist
Taiwan's military preparedness is set out clearly. The law requires the
United States to ``make available to Taiwan such defense articles and
defense services in such quantity as may be necessary to enable Taiwan
to maintain a sufficient self-defense capability.'' Notably, it further
requires that both ``[t]he President and the Congress shall determine
the nature and quantity of such defense articles and services based
solely upon their judgment of the needs of Taiwan.'' Thus, the TRA sets
out a unique joint role in the formulation of Taiwan policy for the
Congress and administration, including on arms transfers decisions,
demonstrating Congress' deep and abiding concerns regarding U.S. policy
in this area.
Despite the TRA's provisions, we believe that the Congress and
administration are not adequately coordinating in this area and that
there are other operational impediments to the United States' ability
to fulfill its important obligations to Taiwan.
In addition to providing vital defense support for Taiwan against
PRC military threats, the TRA further requires U.S. policy to support
the ``social'' and ``economic'' system of Taiwan. This is an area of
commitment the United States needs to be more alert to given current
developments.
There are a number of key trends developing across the Strait that
call for a reevaluation of how we implement our Taiwan policy. First,
there are two paradoxical trends: on the one hand, indirect cross-
Strait economic ties continue to grow with large flows of investment in
the mainland by Taiwan businesses and a stream of exports from Taiwan
to feed production platforms. On the other hand we see a deterioration
in the cross-Strait political situation, with both Beijing and Taipei
hardening in their positions.
There is also the PRC's coordinated campaign to continue to
``marginalize'' Taiwan in the region, both politically and
economically. Taiwan is being shut out of regional groupings such as
the ASEAN Plus One or ASEAN Plus Three (China-Japan-South Korea) forums
and unable to participate in regional trade arrangements like the
Bangkok Agreement or the China-ASEAN framework agreement on a free
trade area. Further, Taiwan has been unable to find regional economies
willing to engage in bilateral free trade arrangements, due largely to
PRC political pressure.
Moreover, there has been a gradual de-coupling of Taiwan's large
and growing investments in China from Taiwan, due to the lack of direct
transportation links across the Strait. Investors' interests are more
concentrated in the mainland and less in Taiwan--to the point where
some observers are asking whether Taiwan is becoming a ``portfolio
economy'' instead of a ``production economy.'' This has proven true for
foreign corporations in Taiwan as well as native Taiwan firms. We have
learned that in recent years the number of U.S. regional operational
headquarters in Taiwan has declined and offices downgraded to local
units.
The key political trend in Taiwan over the past 15 years has been
the development of a vibrant democracy with new institutional bases.
This is a valuable product of steady U.S. support for Taiwan, giving it
the space it needed to develop its social and economic system without
coercion from the PRC. The proof of the fundamental strength of that
democratic development was last month's Presidential election in
Taiwan, which we were privileged to monitor as part of our trip to the
region. The system was sorely tested but appears to have emerged intact
and resilient. Should Chen Shui-bian's narrow victory--one in which he
nevertheless received an absolute majority of the votes cast in an
election with heavy voter turnout--withstand its legal challenge, it
will appear to be vindication for Chen's campaign that stressed
Taiwan's separate identity and a mandate for his plans for
constitutional reform.
While the United States should be proud of its role in helping to
develop strong democratic institutions in Taiwan, Beijing appears
threatened by these developments. The State Council Taiwan Affairs
Office (TAO) has issued stern warnings that the path Chen Shui-bian is
laying out for constitutional reform--a referendum in 2006 and a new or
amended constitution in 2008--is tantamount to a ``timetable for Taiwan
independence.'' The TAO reiterated that no progress on cross-Strait
issues could be achieved unless and until Taiwan accepted Beijing's
``One China Principle.'' \2\ The prospects for China letting up on its
strategy of isolating Taiwan--by, for example, allowing Taiwan observer
status in the World Health Organization, where Taiwan's active
participation is clearly in the greater interest of China and the East
Asian region--are dim.
---------------------------------------------------------------------------
\2\ FBIS Translation of ``Text of Taiwan Affairs Office News
Conference on Taiwan Election, More,'' CPP20040414000027 Beijing CCTV-
4, in Mandarin, 14 April 2004.
---------------------------------------------------------------------------
The lack of trust across the Strait is palpable, and it goes both
ways. Aside from its campaign of isolating Taiwan, China's heavy-handed
interference in the political process in Hong Kong--discussed later in
this testimony--has only reinforced Chen Shui-bian's argument that the
``one country, two systems'' formula Beijing employed in Hong Kong and
has proposed for cross-Strait unification is totally unacceptable for
Taiwan. Chen said in his first inaugural speech in 2000 that he is
willing to talk with Beijing about a ``future one China.'' Beijing has
steadfastly rejected the implied premise of Chen's approach, taking the
position that it will only accept cross-Strait talks if Chen agrees as
a precondition that there is only ``one China'' now and that Taiwan is
part of it.
Mr. Chairman, in the face of these current difficulties in the
Taiwan Strait, we believe the U.S. ``One China Policy''--based on the
three Sino-U.S. communiques and the Taiwan Relations Act--is the
historic framework for conducting our official relations with Beijing
and our unofficial relations with Taiwan. We must remember that this
policy is U.S. policy, not Taiwan's, not China's. Our policy is
emphatically not the same thing as the PRC's ``One China Principle.''
The United States has not taken a position on the legal status of
Taiwan. The United States acknowledges Beijing's formulation but does
not necessarily embrace--or reject--the PRC's concept that ``there is
but one China in the world and Taiwan is part of China.'' It is also
true that the United States has stated it does not support Taiwan
independence, or two Chinas, or one China-one Taiwan--as President
Clinton reiterated in Shanghai during his visit there in 1998.
The Taiwan Relations Act has served U.S. interests well over its
25-year history, and we as a government and nation need to remain
faithful to it, especially now, when the cross-Strait situation is as
complex as it has ever been. The fundamentals must be remembered: our
decision to establish diplomatic relations with the PRC ``rests upon
the expectation that the future of Taiwan will be determined by
peaceful means.'' This expectation must be declared at every turn.
Given the current economic and political trends in the Strait that
we have outlined above--developments that call into question the state
of the ``status quo'' in cross-Strait relations--we believe there is an
immediate need for Congress and the Administration to review our
policies toward Taiwan and cross-Strait relations and to determine an
appropriate role for the United States in reinvigorating cross-Strait
dialogue.
Accordingly, we have recommended that Congress enhance its
oversight role in the implementation of the TRA. Executive Branch
officials should be invited to consult on intentions and report on
actions taken to implement the TRA through the regular committee
hearing process of the Congress, thereby allowing for appropriate
public debate on these important matters. This should include, at a
minimum, an annual report on Taiwan's request for any military aid and
a review of U.S.-Taiwan policy in light of the growing importance of
this issue in U S.-China relations.
We believe Congress should consider conducting a fresh assessment
of existing U.S. policy toward Taiwan, with particular attention to
whether all elements of the TRA are being effectively pursued. This
should include the coordination of our defense assistance to Taiwan,
how U.S. policy can better support Taiwan breaking out of the
international isolation the PRC seeks to impose on it, and examine what
steps can be taken to help ameliorate Taiwan's marginalization in the
Asian regional economy.
Further, we suggest that Congress consult with the administration
on whether the United States should become more directly engaged in
facilitating talks across the Taiwan Strait that could lead to direct
trade and transport links and/or other cross-Strait confidence building
measures. We will be providing more detailed recommendations on this to
Congress in our upcoming report.
HOLDING CHINA TO ITS COMMITMENTS ON HONG KONG
Mr. Chairman, more than 50,000 American citizens live and work in
Hong Kong. Over 1,100 American firms operate there, and the United
States has more than $38.5 billion in investments in the city. These
direct interests alone demand that the U.S. Government keep a close eye
on developments in Hong Kong; but there is much more at stake.
How Beijing lives up to the promise of the Sino-British Joint
Declaration of 1984 and the Hong Kong Basic Law of 1990 tells us much
about China's direction. We need to look at Hong Kong to gauge whether
China is evolving into the more open and tolerant power that China's
leadership would like us to believe isunfolding. Alternatively, are
China's leaders bent on ``nipping in the bud'' any domestic call for
democratic change--even in highly autonomous Hong Kong where such
change is anticipated under China's own laws--that is not of their own
making.
In response to popular calls for direct elections in 2007 for the
Chief Executive and 2008 for all of the Legislative Council, as allowed
under the Basic Law, the PRC's National People's Congress Standing
Committee has made some telling and worrisome moves in recent weeks.
First, on March 26, the Standing Committee decided on its own to
intervene in the question of whether and how changes to the methods of
selecting the Hong Kong Chief Executive and forming the Legislative
Council could be made. The decision of the Standing Committee to self-
initiate an interpretation of the Basic Law was itself a blow to Hong
Kong's separate legal and political systems.
The interpretation issued on April 6 was an additional setback for
Hong Kong democratic aspirations. It reinforced the message that no
changes would be made without the central authorities' approval, at the
beginning and the end of the process. A report by the Chief Executive
to the Standing Committee would have to start any process of change,
and the Standing Committee would then give direction as to whether and
how changes should be made. No initiative would be allowed to rest in
the hands of Hong Kong's legislature, which was ruled ineligible to
present any draft bill, even on implementing changes decided by
Beijing.
The Chief Executive's immediate action to submit a report to the
Standing Committee, on April 15, stating there is indeed a need for
change, has not been taken as a sign of progress among advocates of
greater democracy in Hong Kong. Rather, the principles laid down in the
report--reiterating the absolute authority of the Standing Committee in
all decisions relating to Hong Kong's Basic Law and elections;
emphasizing the need for a strong ``executive-led'' government--suggest
that the fix is in.
We hope we are wrong. We hope Beijing will recognize that its own
reputation as a modernizing power is at stake in Hong Kong; that not
just a handful of local democratic activists and ``troublemakers'' care
about what happens, but that the United States cares, and is paying
attention.
Under the Hong Kong Policy Act of 1992 [22 USC 66], the U.S.
Goverment has an obligation to assess whether Hong Kong's ``high degree
of autonomy'' and the solemn promise by Beijing to respect Hong Kong's
governing under the ``one country, two systems'' formula is genuine or
a charade. Hong Kong's future autonomy was set out in an international
agreement, the Sino-British Joint Declaration; granted by China's
National People's Congress; and legislated in the Basic Law. It may be
true that what the PRC Government giveth, they may taketh away. But
when Hong Kong's autonomy is diminished by the direct action of the
central authorities, the United States is obliged to take notice and
consider its policy options.
Directly invoking provisions of the Hong Kong Policy Act to suspend
certain aspects of U.S.-Hong Kong bilateral relations is an option
which may be considered. If the United States were to end its special
treatment of Hong Kong in some important areas--such as air services,
customs treatment, immigration quotas, visa issuance, export controls--
the principal pain would be felt in Hong Kong, however, not in Beijing.
The Congress and administration should continue to let the Chinese
leadership know that Beijing's moves to limit Hong Kong's autonomy and
democratic aspirations are not in any party's long-term interest. And
that U.S.-China relations will be adversely affected.
CHINA'S PIVOTAL ROLE IN THE NORTH KOREAN NUCLEAR CRISIS
The commission's charter calls on us to ``analyze and assess the
Chinese role in the proliferation of weapons of mass destruction (WMD)
and other weapons (including dual use technologies) to terrorist-
sponsoring states, and suggest possible steps which the United States
might take, including economic sanctions, to encourage the Chinese to
stop such practices.'' In the post-9/11 world, there can be no doubt
that stemming the tide of WMD proliferation is of the highest national
priority for the United States. The commission's charge to examine
China's role in WMD proliferation is part of this effort.
China has a checkered record at best on controlling its own
transfers of WMD-related technologies to states of proliferation
concern, including Iran, North Korea, and Pakistan, something we will
document in detail in our 2004 Report to Congress. But this past year
has been marked by a proliferation crisis in which China is now playing
the role of an intermediary--the North Korea nuclear crisis. Given the
gravity of the events unfolding in North Korea, the commission felt it
imperative to examine closely China's participation in efforts to
resolve this crisis. The key focus of our examination has been: What
are the U.S. goals for resolving this impasse? What leverage can China
wield to help bring about that outcome? Can we reasonably expect China
to be an effective partner? For the commission, the role China plays in
this crisis is a key, if not the key, test of the U.S.-China
relationship and pivotal to the future of global non-proliferation
policies.
The United States has clearly articulated that it seeks the
complete, verifiable, and irreversible dismantlement of North Korea's
nuclear programs. To achieve this proper outcome will require that the
parties to the Six Party Talks underway with North Korea--the United
States, Russia, Japan, South Korea, and China--present a strong and
unified position that this is the only acceptable outcome to ensure the
region's stability. But it is also necessary that China, North Korea's
principal ally and financial supporter, demonstrate a willingness to
exert its considerable leverage over North Korea to bring about this
outcome. At the present time, we have not witnessed the appropriate
level of effort from China that the situation warrants.
North Korea is heavily dependent on Chinese assistance in the form
of food and fuel. Our research indicates that China provides upwards of
90 percent of North Korea's oil and 40 percent of its food. Since 1996,
China has allocated somewhere between 25 to 33 percent of its foreign
assistance outlays to North Korea. Moreover, the North Korean and
Chinese militaries have long maintained close ties. These facts clearly
indicate the considerable leverage Beijing could exert over Pyongyang,
were it to choose to do so.
To date, however, China has been playing more of a host and
intermediary role in the Six Party Talks, and does not appear to be
pressing for its expeditious resolution. We certainly recognize the key
role China has played in getting the talks started, and U.S. officials
have on many occasions lauded China for this accomplishment. At the
same time, it has become increasingly evident that the current impasse
may not be broken without a considerably more forceful posture by the
Chinese.
To date, China has been opposed to sanctions in this case, and to
bringing the North Korea nuclear issue to the United Nations. Moreover,
China issued a cautionary statement regarding any decisive moves by the
United States and its allies in the context of the U.S.-led
Proliferation Security Initiative (PSI) that might provoke Pyongyang's
ire. In a telling statement, the Chinese Foreign Ministry has indicated
that China ``does not approve of sanctions, blockages and other
measures which are aimed at putting pressure on (North Korea) . . .
Doing so will not only be useless to solve the problem, but will
escalate antagonism and tension.'' \3\
---------------------------------------------------------------------------
\3\ Catherine Armitage, ``China condemns intercept plan,'' The
Weekend Australian, 12 July 2003, sec. LOCAL, 6.
---------------------------------------------------------------------------
Time is not on our side in confronting this crisis. As the Six
Party Talks drag on, North Korea's nuclear weapons and ballistic
missile programs keep moving apace. While we cannot be sure just how
far North Korea has progressed, there seems to be a growing consensus
that it already posses significant capabilities in this regard and will
advance considerably further within a matter of months. As these
capabilities are attained, the prospects for achieving a complete,
verifiable, and irreversible dismantlement by North Korea are dimming
substantially. The Six Party Talks must move forward with renewed
urgency, and with China playing a far more significant role--including
demonstrating a willingness to exert its considerable leverage with
North Korea--in obtaining an acceptable outcome.
The key question is not only whether China will be willing to exert
leverage in a meaningful way on North Korea, but whether China is
prepared to press the North Koreans to accept a robust and intrusive
dismantlement verification regime, an essential component of a
complete, verifiable, and irreversible dismantlement scenario. North
Korea's failure to comply with the 1994 Agreed Framework underscores
the absolute requirement for on-site inspections and verification.
Given China's posture to date on the PSI, not to mention its own
continuing proliferation problems, it is certainly a questionable
proposition. In fact, recent news reports indicate that Chinese
officials, following a meeting between the Chinese foreign minister and
North Korean leader Kim Jong Ii, informed a U.S. envoy that the onus
was on the United States to show more flexibility in resolving the
crisis.
In our view, the U.S. Government must make clear to China that its
efforts in this crisis are a key, if not the key, test of the U.S.-
China relationship. China's efforts in getting the Six Party Talks
underway must be followed up by the active use of its substantial
leverage to persuade North Korea to freeze its reprocessing efforts and
verflably dismantle its nuclear weapons and ballistic missile programs,
and to accommodate an intrusive international verification regime, to
ensure effective implementation of any agreement that is ultimately
reached. In the event of continued stalemate and lack of Chinese
success in persuading North Korea to accept these requirements, we
believe the United States must develop other policy options with our
partners in the region to resolve this highly critical situation.
CONCLUSION
Mr. Chairman and members of the committee, thank you again for this
opportunity to testify. It is now commonplace to assert that the U.S.-
China relationship will be our most significant bilateral relationship
during the 21st century. Our trade relations with China already have an
enormous impact on the U.S. economy, and the security challenges before
us are of the highest order. Through an appropriate mix of U.S.
policies, this complex relationship can be managed in such a way as to
minimize the downside risks, and enhance the prospects of moving China
toward a more democratic and marketoriented society, to the benefit of
both our economic and national security interests. If mismanaged,
bilateral tensions and the potential for conflict will surely grow.
As we stated at the outset, we have concluded that a number of the
current trends in U.S.-China relations are presently moving in a
troublesome direction. With a renewed and candid focus on the
relationship by the Congress, we are optimistic that U.S. policy toward
China can be put on a more solid, productive footing to tackle the
long-term challenges that lie ahead.
Senator Brownback. Well, I think you put your finger on the
right button on the right set of issues. Now, whether we will
see progress made is yet to be determined.
Mr. Robinson. You bet.
Senator Brownback. Let's see, let's go back up to the top
of the list. Dr. Waldron, delighted to have you here today.
Thank you for being here to testify. We'll run the clock at
about six minutes, that'll give you an idea, and if we can kind
of keep close to around that that will give us the chance to
have more active questions.
STATEMENT OF ARTHUR WALDRON, LAUDER PROFESSOR OF INTERNATIONAL
RELATIONS, DEPARTMENT OF HISTORY, UNIVERSITY OF PENNSYLVANIA
Mr. Waldron. Mr. Chairman, I will do my best. I prepared
these remarks yesterday; this morning I learned of the
testimony of Assistant Secretary of State James Kelly, one of
our best diplomats, to the House International Relations
Committee yesterday, and I wanted to quickly, and I have
inserted my additional remarks into my printed testimony and on
the disk, just say a things about this; this is specifically
about Taiwan.
In connection to what Mr. Robinson mentioned--the growing
desire of the people of Taiwan to assert their own identity--
Assistant Secretary Kelly said that this must be stopped; these
were his strong words. On the other hand, when it came to the
Chinese threats of use of force against the island, he stated
only that we strongly disagree with this approach. He did not
say that it must be stopped. And let me just quickly make a few
points.
The first is that under international law the United States
has never recognized Chinese sovereignty over Taiwan. That
continues to be our position, which is that the status of
Taiwan under international law remains to be determined.
Therefore, the question of independence seems rather odd. If we
don't recognize that it's part of China, what is it becoming
independent of?
The second point is that we have always insisted on only a
peaceful resolution of the issue. Period. And I would say, from
my background as a professor of strategy, that we must be
absolutely crystal clear on that point, there must be no wiggle
room.
The third point is that we must never allow Beijing to
believe that they are intimidating or manipulating us. My own
sense is that there is some intimidation going on. I would note
that I have learned informally that members of our American
Institute in Taiwan have privately been telling people that
there's going to be a war next year in the Taiwan Strait unless
President Chen is somehow reigned in, which I think is
unprofessional and probably inaccurate.
Fourth, I think the origin of this problem goes back to
some faulty diplomacy. Mr. Robinson mentioned the need to re-
examine the 1979 to 1982 framework, and I think that that is
correct. We've had a policy that expected one thing to happen:
We expected Taiwan to join China shortly after we broke
relations. She didn't do that; she democratized instead, and we
have a series of institutions that are simply incapable of
dealing with the current reality. Or, another way of putting
that would be to say that all we have now is a military policy,
and, oddly enough, we don't have a political policy with
respect to the island.
Now, having spoken about that very specifically--I felt I
couldn't let this pass without commenting on it--let me say a
little bit about the situation in China today. I think it's
more volatile than most people understand. Your chosen title
was ``Reform.'' Well frankly, I don't think reform is the word
to apply. I think something more like ``major change in several
dimensions but without any goal specified,'' or ``unplanned
change,'' is more appropriate. Clearly, all sorts of dynamic
forces have been released in China: intellectual, political,
economic, travel, all of these things. Yet if you ask a
Chinese, where are these going to lead, what is the end state
that we're trying to achieve, there's absolutely no clarity
about that at all. Are we aiming for a private, free enterprise
economy or not? Are we aiming for democratization or not?
There's complete, sort of agnosticism about the future, even as
the future is being created by these forces that are unleashed.
Now, let me speak briefly about political reform. Here I
think it's important to point out that one lesson of the end of
the Cold War is that regime type is critical. It's not the case
that it doesn't matter whether a country is a dictatorship or
not and that one can somehow deal with them economically and
militarily regardless of whether their people participate in
politics. The reason that we are no longer aiming thousands of
warheads at the Soviet Union and they not aiming them at us, it
doesn't have to do with SALT treaties, it doesn't have to do
with summits, it doesn't have to do with people-to-people
exchanges, although all of those things were important. The
reason is that the Soviet Union gave up communism, allowed
people to vote, made its currency convertible, established a
parliament, freed the press, and allowed political parties to
form. It transformed itself. And the result of that was peace
in a Eurasian continent which had previously been threatened by
massive destruction.
Now, China continues to be an extremely repressive regime.
And let me just mention one fact, which is the assistance that
American companies have given to the Chinese secret police in
creating a very, very sophisticated network for monitoring the
Internet, tracking individual users, blocking web sites; they
can even monitor cell phone conversations and text messaging,
store this material, search it with high-speed computers and
obtain profiles of what individuals do. Now, not all Chinese
are happy with this. According to Radio Free Asia there were
some 10 million people who participated in demonstrations,
thousands of demonstrations, at various places in China last
year. So my own feeling is that politically the situation is
rather challenging and that an enlightened government would, at
this point, have begun to make changes. But they have not done
that which implies that the change will come in a rather
surprising way.
Let me now turn quickly to the economy. First of all, it's
not a market economy, despite what the administration said
yesterday within their economic negotiations. There's no way
that China is a market economy. It's growing fast, but the
growth is based on exports, foreign investment, and massive
borrowing. In my written testimony I go into some detail about
the unsustainable levels of borrowing and debt that are being
created. I think that it is the consensus of experts on the
Chinese economy that it's headed for some kind of landing, hard
or soft. A crunch is going to come.
Now let me briefly say something about the military
buildup. I thought Mr. Lawless's testimony was excellent,
although, as he said to me in the break, it's just the tip of
the iceberg. The military is now the king-maker in China.
Politicians, those who want to advance, lavish money on the
military, create generals and so forth. The Chinese buildup is
substantial, and it does not affect just, for instance, say
Taiwan; it directly affects Japan, Korea, India, Indonesia, you
name it, even Russia. I always wonder why the Russians are
selling all of this stuff to China; they are, but it makes no
sense. And if this military rearmament were to continue without
some kind of countervailing rebalancing, we would have a very,
very serious situation in East Asia. Two specific points on
this: First, Americans should understand that the Chinese
military is the only one in the world that is being developed
specifically to fight the United States. If you look at, for
instance, the purchases of missiles from the former Soviet
Union, many of these have only one use, and that is to destroy
aircraft carriers, which they can do; we have no defense
against these supersonic missiles. Now, you might say that
their target was the aircraft carrier Charles de Gaulle, but I
don't think so. I think that they have the great American
carrier battle groups in mind, and, as I say, we have no
defense against this. This is certainly not a cause for
complacency.
The second point, and I thought your questioning of Mr.
Lawless brought this out, is that although many people will say
that China seeks only minimal deterrence and has no great power
ambitions, my own view is that there is no objective reason
that if the present regime stays in power--this is why regime
change is so important, or change of regime type--there's no
reason that China should not become every bit as strong and
threatening as the Soviet Union was at its height. Because, as
Mr. Lawless pointed out, the conditions that constrained the
Soviet Union, economic conditions and so forth, don't apply in
the case of China.
To conclude, received opinion in Washington troubles me a
bit because the opinion seems to be that, in spite of all of
these worrying indicators, change is going on, and the
democratization is eventually, she's going to come right in the
end and we'll all be friends. Let's say that I hope that
happens. However, the only way that China can be a positive
player in the region and in the world and be a real friend to
the United States is for her to abandon the Communist
dictatorship, as the USSR and the former satellites did,
introduce freedom and democracy, and redirect spending away
from things like the military and prestige projects and toward
the needs of the people. I would point out that as of September
of last year the average Chinese farmer had an income somewhere
between $300 and $400 U.S. per year--that's very, very low; the
average urban resident about $700 or $800.
Now, let's hope that these changes will occur. There's much
that we could do to help them occur, and we should. But we must
not stake our policy on the idea that they will occur. Things
could go well or they could go very wrong. And what we need is
a China policy that can deal with either outcome.
Thank you very much.
[The prepared statement of Mr. Waldron follows:]
Prepared Statement of Arthur Waldron
a note about taiwan
In light of Assistant Secretary of State James Kelly's remarks
yesterday to the House International Relations Committee, I would like
to preface my testimony with a few words that are not found in the
printed handout, but are on the disk.
First, it is important to realize that the United States has never
recognized Chinese sovereignty over Taiwan, whether that sovereignty
was claimed by Chiang Kai-shek's Republic of China government, which we
nevertheless recognized until 1979 as the legitimate government of
China, or by the People's Republic of China, whose claims to Taiwan we
only ``acknowledge'' but do not accept, as is clear in the transcripts
of Mr. Kissinger's discussions, and was reiterated by the Clinton
administration, when Press Secretary Mike McCurry was forced to correct
remarks to the contrary. Our consistent position is that the status of
Taiwan under international law ``remains to be determined.''
Therefore the phrase ``one China policy'' does not mean that we
recognize Taiwan as part of China: we do not. Rather, it means that
while we did recognize both East and West Germany, and could well
recognize both North and South Korea, in the case of China we have
decided that we can recognize only one government. That was a problem
only when Taipei presented itself as the government of all of China.
This it no longer does.
Yesterday Mr. Kelly, one of our finest diplomats, revealed the
growing confusion about our China and Taiwan policies when he stated
flatly that efforts by Taiwan to assert its own independent national
identity ``must be stopped''--strong words--while saying of China's
threats to use force against the island only that ``we strongly
disagree with the approach.'' He did not say that it ``must be
stopped.''
Clearly we are in a bind here. On the one hand we have never
recognized that Taiwan is part of China. Yet we are deeply concerned
lest it declare ``independence.'' Independence from what? Unless it is
a part of China, which we do not accept, it is already independent.
Briefly we have three problems here:
First, by responding as it has to democratic developments in
Taiwan, Washington risks bringing its commitment to democracy
into question.
Second, I have no doubt that the current concern in the
administration arises from China's increasing military strength
and growing talk about using it against Taiwan. To be frank, we
are appearing to be intimidated, something no great power
should ever allow. Of course we want cooperation from Taiwan on
avoiding conflict, but whom should we insist ``be stopped?''
Not so much Taiwan, as China--for it is China that has the
immense military and China that is making the threats of war.
It is not enough to ``strongly disagree'' with China's menacing
approach. We must make clear that we reject it, period.
Third, I think we have a lesson here in diplomatic plans gone
awry. When President Carter severed all relations with Taiwan
in 1979, his assumption, I think, was that the island, then
ruled autocratically, would become part of China through an
agreement over the heads of the people of Taiwan, between
Taipei's unelected leaders, and the unelected leaders in
Beijing.
We did not consider the possibility that Taiwan would reform and
liberalize and democratize. So not only did we fail to plan for such a
possibility, we gave away all sorts of things that would have helped us
to deal with that situation, for instance by failing to insist that
Taipei remain in the UN General Assembly.
Thinking we were stabilizing the situation, we unwittingly created
deep instability in the Taiwan Strait under the Carter administration.
Historical development took off in a direction we had scarcely
considered and for which we were unprepared. The answer today is not to
try to put things back the way they were--like King Canute,
proverbially lashing the incoming tide to force it to retreat--but
rather to begin to rethink our whole approach, dealing with the current
reality and not the failed expectations of thirty years ago.
INTRODUCTION
The situation in China today is more volatile than most observers
understand. ``Reform'' is not quite the word to apply to what is
happening there; something like ``unplanned but major change in several
dimensions'' would be more appropriate. For although economic,
political, and social forces have been released over the past quarter
century that will certainly take China somewhere, no one in China can
specify exactly to where that will be. No plan or roadmap exists. So
when change does come, as it most certainly will, most likely it will
be unexpected and discontinuous, which means that it will have the
potential to affect not only China, but also her neighbors, the world
economy, and direct interests of the United States and its friends and
allies.
NO PROGRESS ON POLITICAL REFORM
Politically, the Communist Party seems intent on maintaining its
slipping hold on power. No signs of progress are visible in areas such
as the establishment of real law and impartial courts, the freeing of
speech and political and religious activity, or the constitution of
legitimate government by voting at local and national levels. Quite the
opposite: political repression is, if anything, increasing. With the
help of American companies, China has created a highly sophisticated
system for monitoring the internet, tracking individual users, blocking
access to web sites. Thanks to powerful new computers and technology,
China's secret police even has the ability to monitor cell phone
conversations and text messaging, and to store and screen messages in
detail. This monitoring ability extends to an increasingly well
developed Chinese secret police network in the United States, operated
out of the Chinese embassy and consulates, and now so deeply rooted on
our university campuses that a Chinese dissident can be monitored by
Beijing almost as easily here as in China.
More conventionally, the freedom even of the Party-run press has,
if anything, been curtailed in the past year, with a number of editors
being fired, and some publications closed. Even respected academic
specialists in such areas as economics often find it impossible to
publish their opinions in the Chinese press, while nothing remotely
resembling dissent--or even USA Today style of editorials, one pro and
one con, is to be found.
This situation cannot last, for as Chinese sages taught thousands
of years ago, imposing dictatorship depends upon keeping the people
ignorant and tied to the land, as they were in the Qin dynasty (221-206
B.C.E.) and again under Mao Zedong (1949-1976). Since Mao's death new
forces have been unleashed, not least of which are intellectual and
political. China's educational institutions have begun to regain some
of their pre-Communist distinction. The number of highly educated
people has grown, and so has the number of those who have traveled or
lived abroad. In addition, Chinese people are beginning to own their
own dwellings, have a bit of money, and feel a stake in society. Put
simply, the system has begun to turn out citizens, or rather potential
citizens--for at the moment these educated and thoughtful people (like
the farmers, who also have a certain wisdom) are denied any meaningful
influence on how they are governed. Officials are appointed, not
elected--even mayors. At the top, no transition of rule has ever
occurred in the PRC that actually followed the Constitution or even the
rules of the Communist Party. The current ruler, Hu Jintao, was simply
designated by the late strong-man Deng Xiaoping, at the time of the
Tiananmen massacre, to succeed Jiang Zemin, who was installed in power
immediately--and quite illegally--while Premier Zhao Ziyang was placed
under house arrest (which continues). This lack of even a defined
system for choosing a leader is a powerful contrast to India (where
even a series of assassinations never disrupted constitutional rule),
Japan, South Korea, Taiwan, and numerous other countries. Politically
the Chinese system remains rather primitive and lacking in legitimacy.
It also quite evidently lacks any feeling of the urgency of reform.
One reason for this is that the leadership is deeply divided, and
things work best in the short term if everyone is allowed to do more or
less as they want. But that approach will work only in the short term.
As economic development makes China more complex, the need for
objective mechanisms, for choosing leaders responsive to popular needs
and wishes, and for resolving disputes objectively, will become
inescapable. Doing those things will require that the Communist Party
give up power.
If the Party does not move on its own, it will probably face
increasing internal division and popular turbulence, which may effect
the sort of change it is unwilling to carry out itself. That sort of
chaotic shift is worrying enough. But even more worrying is the
possibility that the Party will somehow retain control, and develop
China into a state having a dictatorial government having unfulfilled
territorial aspirations (see below), a sizeable treasury and military,
and no internal checks and balances.
The unwillingness of the Party to consider change is clear in its
approach to Hong Kong, to which it promised democracy in 1984. In the
past year or so, as the people of Hong Kong began to call for real
progress towards actually electing their government, Beijing seems to
have panicked and, in effect, torn up all its promises in favor of rule
from the center, intermediated by carefully selected pro-Beijing
locals. To some extent Beijing must be bluffing, for she lacks the
capacity to coerce Hong Kong (as she did her own capital in 1989)
without destroying the hub of her most advanced economic region. Yet so
strong is the instinct for control that the central government has
adopted quite astonishingly hard line talk and methods.
The same unwillingness is demonstrated in Beijing's policy toward
Taiwan, now a democracy, and a state having a national character and
identity quite different to that of the People's Republic. Taiwan would
like to coexist with China and enjoy the benefits such coexistence
would bring to both sides. For more than a dozen years the government
in Taipei has been offering to negotiate with China, but after a brief
start in 1993 in Singapore, Beijing has refused all offers to meet.
Instead, she has adopted a strategy of pressuring Washington, somehow,
to force Taiwan to do what she says--which is of course both impossible
and dangerous.
So, much as we may all hope for political reform leading to freedom
and democracy in China, and however much we may be heartened by the
occasional liberal straw in the wind, it is essential that we recognize
clearly the complete lack of progress in this area at least since 1989.
We should talk to the Chinese about this; we should never be bashful
about listing prisoners or condemning abuses--but we must not comfort
ourselves with the illusion that the present leaders are ``reformers.''
They are not. They are dictators, having aspirations to a sort of
totalitarianism they cannot achieve (this is evident in their approach
to religion), improvising expedients to stay in power, whatever it
takes--arrests, propaganda, whipping up xenophobia, even perhaps a
``Splendid Little War.'' These leaders are to be treated with great
care and caution, even as we are mindful of the precariousness of their
power.
A PRECARIOUS ECONOMY
Economically, China is in the midst of an unsustainable boom and
headed for a hard or a soft landing, depending upon policy. China's
astronomical growth rates are not entirely credible, and, to the extent
they are real, they do not represent healthy growth. By and large they
are the product of three factors: (1) exports, which as we know, are
soaring; (2) foreign investment, which is fine so long as it does not
substitute for the development of Chinese entrepreneurship. Sadly, a
good half of China's exports are accounted for by firms having foreign
participation, and in some key sectors foreign ownership is greater
than Chinese (in Information Technology, for example, Taiwanese
investors own roughly 70% of China's capacity), and (3) massive state
investment, based on government-directed borrowing from the state-owned
banks (the only place Chinese can put their savings)--such borrowing
goes heavily to support loss-making state enterprises, rather than to
genuinely profitable uses. Chinese growth, in other words, is not being
created by increased productivity and efficiency, the proverbial
``assignment of goods to their highest paid uses,'' but rather by a
torrent of capital investment, both foreign and state, much of which is
misallocated and thus wasted.
To be more specific, last year in 2003 non-farm investment
increased at three times the rate of GDP. So far this year that rate
has doubled again. Year on year it is up 53% in the first two months of
2004. Investment by state enterprises is up 55% with investment in
industry up an astonishing 79%. Purchases of building materials in the
first two months of this year grew at an annualized rate of 137%.
Chinese demand for oil--a commodity of which the globe has only a
limited supply--has now passed that of Japan, to stand second to our
own country, which consumes roughly four times as much. Not
surprisingly world commodity prices are beginning to rise in response.
But this is artificial demand, driven above all by state directed
loans to state enterprises. It is not the product, as some would have
us believe, of dynamic ``free enterprise'' or ``entrepreneurship'' in
China. If anything, the entrepreneurial class, is being squeezed out
and denied capital of which it could make good use, by extravagant
state lending (only 1% of which goes to the private sector) and by
foreign investment, which often receives preferential treatment.
The result of all this is of course insolvency in the banking
system (experts disagree about the exact percentage of bad loans, but
an estimate of one third would be conservative) and growing government
debt. Local currency loans through February of this year alone rose by
20.7% year to year, to $1.98 trillion. New loans in the past year alone
amount to one quarter of GDP. Total government debt, including unfunded
liabilities for unemployment, for medical care, and retirement for
state workers, is of course far larger.
Although plans are regularly announced to reduce the rate of growth
of debt, purge the banks of non-performing loans, rein in over-
investment, and so forth, so far these have little to show. China is of
course not the only country where fiscal irresponsibility may be
politically expedient. But in today's world she is nearly unique in the
all-important role that governments, central and local, play in
deciding, not always very rationally, what will be invested and where.
So even though countries such as the United States and Japan also face
massive fiscal and debt problems, in both of them the economy as a
whole is sound and productive. Both are host to dozens and dozens of
world-class global companies, and have been for many years. If we count
twenty-eight years from the creation of the Ministry of International
Trade and Industry in Japan in 1949, we reach 1977, by which time Japan
already boasted such players as Honda, Fujitsu, Kyocera, NEC, and
others. By contrast, count the same number of years from Mao's death in
1976, when so-called ``reform'' began, and you reach the present--and
the worrying realization that even after all that time, China has yet
to produce a genuinely world-class competitive company, whether private
or state owned.
Most worrying, perhaps, is the rapid growth in regional and
personal inequalities of income owed to state misallocation of
resources, and to massive corruption. In September of last year rural
incomes in China averaged $217 U.S., while urban incomes were at $766
U.S. Hundreds of millions of farmers remain dirt poor and deprived of
all political rights as well. Tens of millions of unemployed rural
workers roam the urban areas, sleeping on streets, working at
construction and other hard labor, or trading, without any provision
for health, education, or even wages. (Official estimates of
unemployment are now touching 14%). Nor is the typical Chinese urbanite
the fashionable young woman one reads of so often, stopping in at a
fashionable Shanghai boutique to spend $400 on a pair of the latest
shoes. Urban life has a much more uniformly early industrial revolution
shade of gray about it than we often realize.
So we have a vicious circle. Population and unemployment are
rising, which pose an obvious threat to order in China. Unwilling to
unleash the private sector, which already accounts for half to two
thirds of new jobs in some areas, the state insists on taking the
precious savings of the impoverished Chinese people and pouring them
into make-work projects that may absorb some labor for a while, but are
unlikely ever to be profitable, which is to say, provide real long-term
jobs. The money thus wasted cannot be recovered: it is a vast, wasted,
opportunity cost. Nor does China have the resources to continue to
waste money at such a rate.
As one economist at the Chinese State Development Bank recently put
it, ``All the characteristics of China's financial industry today are
similar to those found in Thailand before the Asian financial crisis
[of 1997]. The probability of a crisis erupting in China is rising.''
This comment, by a well qualified Chinese economist, deserves careful
note.
Sooner or later a crunch will come, with the ordinary people being
the chief victims--as the perpetrators will mostly have expatriated
first their money and then themselves ahead of time. We can only guess
about the consequences for the rest of the world, and for the Chinese
regime.
MILITARY BUILDUP
Finally, and perhaps most importantly, China is engaged in a
massive military buildup, to which both Washington and China's
neighbors unaccountably pay far from adequate attention.
Ever since the sack of Beijing by the People's Liberation Army in
June of 1989, that army has been dissatisfied and ashamed of what it
did. I have been told as much personally by a very senior Chinese
military commander. Chinese join the army to protect their country, not
to kill their fellow citizens. Furthermore, ever since Mao died in
1976, and his chosen successors were swept away by a coup d'etat of the
8341 unit, or capital bodyguard division, the military has been the
ultimate kingmaker in China. Put these two facts together, and it
becomes clear why over the past dozen years or so members of the
Chinese Communist ruling elite who lack military ties have been so
eager to create them.
Since the Tiananmen massacre, the PLA has been given immense budget
increases, difficult to estimate but obvious when one considers new
military hardware, the space program (which has strong military
dimension), and huge increases in research and development and military
production capability. Jiang Zemin, China's former president who
retains a great deal of power today as Chairman of the Military
Commission, created numerous field and flag level officers in a bid to
win loyalty. Now, evidently, Jiang's ostensible successor, Hu Jintao
has also established his own military headquarters, in the Western
Hills, in an attempt to counterbalance Jiang's continuing influence
over the military and security apparatus.
At the same time the military has been given a new mission: not so
much national defense (as no country seems to have any desire to attack
China) but rather national expansion, or as it would be put in China,
``recovery'' of lost national territories--to most of which Beijing
holds only the most tenuous of claims. Hence we have seen repeated
Chinese probes into the Japanese Senkaku Island chain (Diaoyutai in
Chinese) which have deeply irritated Tokyo and, along with the
acquisition of nuclear weapons by North Korea, evidently set Japan on a
course toward military self-sufficiency: very bad news for Beijing. We
have seen ``archaeological'' research carried out that reassigns the
ancient Korean kingdom of Koguryo to the ``Chinese'' world, which would
mean that Korea almost to the 38th parallel would be Chinese. This is a
difficult move to judge, but it is hard to resist the conclusion that
it prepares the way for possible intervention to prevent Korean
unification. On the Indian border, China has proved most unforthcoming
about territories occupied in the 1962 war--and some territory given to
China by Pakistan. As with Japan, Beijing's condescending and ham-
fisted approach to India has led to terrible strategic consequences, in
the form of a nuclear armed India alert to its national interests.
Without Chinese assistance, the Pakistani nuclear program would have
been little more than blackboards and some smart physicists. In the
South China Sea, China is asserting sovereignty over various reefs and
islands, some seized from Vietnam, another from the Philippines,
probably with a view to declaring the entire area territorial waters.
And of course there is Taiwan, against which China is carrying out an
unprecedented military buildup. She will soon possess more advanced
fighter aircraft than Taiwan does; her submarine and surface fleets are
growing, and she has roughly 500 missiles--one for every 45,000
Taiwanese--aimed at the island. Russia seems not yet to have grasped
fully the potential threat to her interests that this newly well-armed
China poses (Moscow, after all, is a major source of weapons and
technology), but that realization may come soon. Added together, all of
this portends increasing tension and danger in Asia, as China attempts
to shift the military balance decisively in her favor--an action,
however, more likely to elicit a balancing coalition than lead to
success.
Most importantly, however, Americans should understand that the new
Chinese military is the only one being developed anywhere in the world
today that is specifically configured to fight the United States of
America. Thus China has gone to great lengths to acquire supersonic
missiles from Russia that were originally designed by the USSR to
destroy American aircraft carriers. Her researchers are deeply involved
in identifying potential weaknesses in the American military. She is
working hard on counter-stealth technologies, lasers, cruise missiles,
space surveillance, and weapons that target our vulnerable
communications and other links. Many argue that China seeks only
minimal deterrence and a certain degree of influence in Asia, But that
does not account for the vast scale of, for instance, her ICBM and
space programs, nor for her development of specific systems to target
American forces. My own view is that no objective reason exists why
China, if she stays on her present course, should not eventually pose
an even greater threat to the United States and its friends and allies
than did the Soviet Union.
CONCLUSION
Received opinion in Washington appears to be, overwhelmingly, that
in spite of the worrying indicators I have mentioned, China is in a
process of change and democratization that will make her eventually
into our close friend, rather than competitor or adversary. Most people
remain highly bullish about the Chinese economy, despite the warning
lights I have mentioned. American business has made itself increasingly
dependent upon China, regularly provides technologies it should not
(e.g. for internet surveillance) and increasingly lobbies for Chinese
wishes in Washington. Many also believe that U.S. policy mistakes
(support for Taiwan, for example) rather than Chinese political
competition and strategic debates, explain whatever difficulties or
menaces may seem to appear. The result is an extraordinary degree of
complacency in the face of potentially real threats.
Those threats may never become real, but if they do not, the reason
is likely to be more than just good luck. It will be the result of
serious American and allied action to cut off Chinese access to
advanced military technology, enhance the defensive and deterrent
abilities of the free countries in Asia that are our real friends, and
straight talk with the Chinese government.
In the longer run, the only assurance of our interests and those of
our Asian friends and allies will be for China to abandon Communist
dictatorship, as the USSR and its former satellite states did,
introduce freedom and democracy, and redirect spending away from
prestige projects (such as the Olympics and extravagant new buildings
in Beijing and Shanghai) and toward the still-pressing needs of her
people.
This may occur. The U.S. can do much to help it to occur, and
should. But we must not count on its occurring. Things could go very
well, or they could go very wrong. We need a China policy that can deal
with either outcome.
Senator Brownback. Thank you very much for those insightful
comments.
Ms. Lee, good to see you again. I look forward to your
testimony. I don't know if you caught the earlier panel, but
we've already spoken some about the case that's been put
forward. I look forward to hearing your specifics about that
case.
STATEMENT OF THEA M. LEE, CHIEF INTERNATIONAL ECONOMIST,
AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL
ORGANIZATIONS
Ms. Lee. Thank you so much, Mr. Chairman, for the
invitation to come today and testify on behalf of the AFL-CIO.
We appreciate that. And I also appreciate your personal
interest and concern in the issues that we've raised with
respect to workers' rights and human rights.
I want to talk today about a crucial issue in the U.S.-
China economic relationship that we believe has not received
the attention it deserves from this or previous
administrations, and that is, as you've said, the brutal
repression of workers' rights by the Chinese Government and the
impact of that repression on American workers. This is
particularly important this week, as Mr. Robinson noted, since
we've just concluded a very high level annual meeting, the
Joint Commission on Commerce and Trade. From all the press
reports, it appears that workers' rights was not even on the
agenda, from the point of view of the Bush administration,
while other issues, such as intellectual property rights
protections and some sectoral market access issues were
discussed. Another issue that did not appear to be on the
agenda was the Chinese Government's manipulation and
undervaluation of its currency. These two issues together, the
currency undervaluation and the workers' rights repression, to
us are the two key economic problems in the U.S.-China
relationship that account together for many of the hundreds of
thousands of U.S. jobs that are lost due to this economic
relationship. We are disappointed that the administration chose
not to put a priority on these important issues in these high
level talks.
As you know, on March 16 the AFL-CIO filed a Section 301
petition with the U.S. Trade Representative, alleging that
China's violation of workers' rights is an unfair trade
practice under U.S. trade law. This is the first time that
Section 301 has ever been used in that way. We think this is a
really important innovation and an important message, both to
our own Government and to the Chinese Government, that the
unfair cost advantage that comes from repressing the human
rights of workers is contributing to the $124 billion trade
deficit the United States has with China, the highest bilateral
trade deficit between any two countries in the history of the
world. This unfair cost advantage contributes to the hundreds
of thousands of U.S. jobs lost. We think we've clearly met the
standard of Section 301, that this is a burden and restriction
on U.S. commerce and that there's a persistent pattern of
violation of workers' rights on the part of the Chinese
government.
If we don't address the systematic, egregious and
institutionalized repression of workers' rights in China, we'll
continue to lose hundreds of thousands of good jobs here. We're
creating conditions of desperation and exploitation in China
and fundamentally altering the nature of global labor
competition in the rest of the world. Workers in developing
countries, that I think Mr. Craner mentioned earlier, are
impacted by the kinds of competition that we will or won't
tolerate with respect to China, and I know you mentioned that
as well. So our petition seeks to ensure that our Government
will give this issue the priority it deserves in its economic
dialogue with the Chinese Government.
Chinese Vice Premier Wu Yi said this week to The New York
Times that the allegations in our petition are groundless and
she invited the AFL-CIO to come to China to see for ourselves
what the conditions are. In response to her charge that the
allegations are groundless, as you know, the documentation in
the petition is quite extensive and credible and, as Mr. Craner
said, relies heavily on extremely credible sources, such as the
U.S. State Department, the International Labor Organization,
the International Confederation of Free Trade Unions, The New
York Times, The Washington Post, and so on. We're very
confident that the evidence that we've put together will stand
up to scrutiny. We also would be very interested in being able
to go to China and further investigate some of the allegations
that were made. We've always said in the past to the Chinese
Government that if we are to go to China we want to be able to
have access to Chinese labor dissidents who are in jail, as
well as the official union representatives. We want to be able
to meet with workers on our own terms without any kind of
government supervision or restriction and to bring our own
translators and so on. So if we can meet all those conditions
we would be very happy to go to China and investigate further.
As you know, the allegations have to do with the denial of
freedom of association, the right to bargain collectively;
Chinese workers simply don't have the right to organize an
independent union. They are limited to the government-
controlled body, the All China Federation of Trade Unions.
Workers who attempt to strike or organize unions independent of
that body have been arrested, imprisoned, beaten and tortured.
Even speaking out at the workplace has been often grounds for
severe reprisals and arrest.
We've very concerned about the conditions of forced labor,
essentially, that exist for many migrant workers. As we've
discussed, the migrant workers in China work under a system
where they're disempowered and vulnerable, often caught between
unscrupulous employers and an indifferent government.
The Chinese Government has simply failed to enforce its own
labor laws with respect to minimum wage, maximum hours of work,
and health and safety. The results are that workers are left
really defenseless at the workplace, and this is simply an
unacceptable situation.
We don't challenge the fact of low wages in China. We
understand that a developing country with an excess supply of
poorly educated rural workers will have low wages. We
understand that even if China were to fully enforce workers'
rights we wouldn't completely close the wage gap between
Chinese and American workers. But we think it would surely
narrow. And what the AFL-CIO petition challenges is the
incremental cost advantage that comes from the brutal and
undemocratic repression of workers' human rights. That
incremental advantage is illegitimate under universal norms of
human rights and it's illegitimate under U.S. trade laws.
The AFL-CIO petition shows what the economic burden is on
the United States, that there's a cost advantage of between 10
and 77 percent that comes specifically from the repression of
workers' rights. We ask the President to take trade measures
that will offset this illegitimate advantage, to negotiate an
agreement with the Chinese Government to meet concrete
benchmarks of compliance with workers' rights. As those
benchmarks are met, the tariff can be gradually reduced.
And third, we ask the President not to enter into new WTO
agreements until the WTO incorporates enforceable workers'
rights as a condition of WTO membership, so that we can have
protection for workers' rights throughout the trading system
through multilateral rules. Global rules should fairly enforce
basic workers' rights to ensure that competition does not
reward and encourage repression of human rights at the
workplace.
I thank you very much for your attention, and I look
forward to your questions.
[The prepared statement of Ms. Lee follows:]
Prepared Statement of Thea M. Lee
Mr. Chairman, members of the subcommittee, I want to thank you for
the opportunity to testify today on a crucial issue in the U.S.-China
economic relationship that has not received the attention it deserves--
from this or previous administrations: the brutal repression of
workers' rights by the Chinese government and the impact of that
repression on American workers.
This is particularly important now, as the U.S. and Chinese
governments conclude a high-level annual meeting, the Joint Commission
on Commerce and Trade. From early press reports, it does not appear
that workers' rights are on the agenda, while other issues, such as
intellectual property rights protection and market access were
scheduled to be discussed. Another key issue that does not appear to be
on the agenda is the Chinese government's manipulation and
undervaluation of its currency, which we believe is also adversely
affecting American workers, producers, and jobs.
On March 16th, the AFL-CIO filed an unprecedented petition with the
United States Trade Representative under Section 301 of the Trade Act
of 1974, asking the Trade Representative to take action to end the
Chinese government's repression of the human rights of its factory
workers.
This marks the first time in the history of Section 301 that a
petition has invoked the violation of workers' rights as an unfair
trade practice, although it is quite common for corporations or the
government to use Section 301 to challenge commercial unfair trade
practices, such as illegal subsidies or violations of intellectual
property rights.
The petition shows, first, that the Chinese government engages in a
``persistent pattern'' of denying the fundamental rights of its factory
workers.\1\ Second, it demonstrates that China's violation of workers'
rights artificially reduces wages and production costs in China and, as
a result, displaces hundreds of thousands of manufacturing jobs in the
United States. This unfair cost advantage has contributed to the
stunning bilateral trade deficit with China, which hit $124 billion in
2003--the highest bilateral trade deficit between any two countries in
the history of the world. Under the terms of Section 301, we argue that
this clearly ``burdens and restricts'' U.S. commerce.
---------------------------------------------------------------------------
\1\ The internationally recognized workers' rights enumerated under
Section 301 include freedom of association and the right to organize
and bargain collectively, prohibitions on child and forced labor, and
acceptable conditions with respect to minimum wages, hours of work, and
health and safety.
---------------------------------------------------------------------------
China's brutal repression of workers' rights is, in our view, the
most important issue in the U.S.-China trade relationship. Failure to
address the systematic, egregious, and institutionalized repression of
workers' rights in China costs hundreds of thousands of good jobs here,
creates conditions of desperation and exploitation in China, and
fundamentally alters the nature of global labor competition in the rest
of the world. The AFL-CIO's 301 petition seeks to ensure that our
government will give this issue the priority it deserves in its
economic dialogue with the Chinese government.
CHINA DENIES WORKERS' RIGHTS
There is overwhelming evidence that the Chinese Government denies
the workers' rights covered by Section 301. The petition amasses
evidence from the U.S. State Department, the International Labor
Organization (ILO), labor unions, academics, newspaper accounts, and
human rights groups.
China denies freedom of association and the right to bargain
collectively. The Chinese Government relentlessly represses attempts to
organize unions that are independent of the government-controlled All-
China Federation of Trade Unions (ACFTU). The ACFTU is officially and
legally subservient to the Communist Party and to local officials who
profit from export enterprises. Workers who attempt to strike or
organize unions independent of the ACFTU have been arrested,
imprisoned, beaten, and tortured. Even workers who have spoken out
against corrupt managers or who have attempted to publicize workplace
problems have been subject to severe reprisals and arrest.
Conditions of forced labor are widespread. Many of the workers in
China's export sector are temporary migrants from the countryside, who
work under a system of internal passports that is similar to the pass
system in apartheid-era South Africa. Factory workers are permanently
registered to live in their rural villages, and have few civil or
political rights when they work temporarily in factory towns and
cities. Upon arrival to the factories, migrant workers become heavily
indebted in order to pay large ``deposits'' and other fees to their
employers. They lose their deposit if they quit without the employer's
consent. They are thereby essentially turned into bonded laborers who
cannot leave their employment without incurring large and
disproportionate penalties. The wages, conditions of work, and hours
often turn out to be quite inferior to what is promised upon arrival,
meaning that workers have clearly not entered into a free labor market,
with fairly enforced rules.
China does not enforce its own laws with respect to minimum wages,
maximum hours, and workplace safety and health. Many manufacturers in
China, including multinational corporations, pay their workers much
less than the minimum wage standards set by the central and provincial
governments. It is apparently common for companies to keep double and
triple sets of books, to hide this practice. Workplace safety and
health practices are atrocious, and China has the highest rate of
industrial deaths and accidents in the world. Government officials
simply do not enforce their own laws on wages, hours, and safety and
health.
The AFL-CIO's petition does not challenge China's right to compete
in the global economy on the basis of low wages. It is natural for a
developing country with an excess supply of poorly educated rural
workers to have low wages. We fully understand that even if China fully
enforced its workers' rights, the wage gap between Chinese and American
workers would not disappear. But it would surely narrow. The AFL-CIO
challenge is specifically to the incremental cost advantage that comes
from the brutal and undemocratic repression of workers' human rights.
That increment is an illegitimate advantage under universal norms of
human rights. And it is illegitimate under U.S. trade law as well.
THE BURDEN ON U.S. COMMERCE
U.S. workers today have to compete with factory workers who are
forced to work under lawless working conditions. And it is taking a
toll. The manufacturing sector in the U.S. has been losing jobs for 43
straight months. The U.S. has lost a staggering 2.8 million
manufacturing jobs since early 2001.
The AFL-CIO petition shows that China's violations of workers'
rights gives Chinese manufacturers a cost advantage ranging between 10
percent and 77 percent of overall production costs. We estimate that
the illegitimate cost advantage displaces approximately 727,000 jobs in
the United States.
These are very conservative estimates. We used the most
conservative assumptions to estimate the wage reduction that results
from the Chinese government's repression of independent unions and its
failure to enforce its own minimum wage laws. Then we applied the trade
model used by the U.S. International Trade Commission to translate that
figure into an impact on U.S. output, prices, and jobs.
And the burden on U.S. workers goes far beyond the number of jobs
lost. Twenty-five percent of displaced workers in the U.S. are still
without a job six months after losing their jobs. Many of those who are
fortunate enough to find new jobs suffer big losses of income, with
two-thirds earning less on their new jobs. And these figures on lost
wages are from the years before the bottom fell out of the labor market
in the last three years, when it has become even more difficult to
transition into decent-paying jobs.
CHINA'S MANUFACTURING CAPACITY
While U.S. manufacturing workers have faced catastrophic losses,
China's manufacturing output, exports, and productive capacity have
grown at unprecedented, accelerating rates--and are poised to grow even
more explosively in the next five years. It is much easier to keep jobs
from leaving than it is to bring them back once they are gone. For this
reason, the USTR should act now to prevent the imminent, irreversible
loss of U.S. jobs due to China's illegitimate exploitation of its
factory workers.
Even though China is still in a relatively early stage of
industrialization, it is already the second leading exporter to the
United States, surpassed only by Canada. China's exports to the United
States now exceed the exports of such industrial powerhouses as Japan,
Germany, and the United Kingdom, and may soon surpass even Canada's.
China's exports to the United States also exceed those of Mexico, the
low-wage export platform immediately across our border.
Unlike Mexico and other emerging export platforms, China has made
``the crucial leap'' from assembly of electronic and other consumer
goods for global and domestic markets, to manufacturing the components
for those goods, including the fabrication of computer chips. Guangdong
Province encompasses the largest such production base for electronics
in the world.
China now leads the world in the production of televisions,
refrigerators, cameras, bicycles, motorbikes, desktop computers,
computer cables and other components, microwave ovens, DVD players,
cell phones, cigarette lighters, cotton textiles, and countless other
manufactured products--and China's lead is growing at an accelerating
pace.
China's exports of textile and apparel goods have increased 320
percent in the last two years, while U.S. employment in those sectors
has fallen by 323,000. In the first eleven months of 2003, China's
production of computers grew by 105.5%. Its production of micro-
computers grew by 84.9%, power-generating equipment by 72.5%, optical
communication equipment by 54.3%, air conditioners by 43.2%,
semiconductor integrated circuits by 38.6%, metal-cutting machine tools
by 34.1%, motor vehicles by 33%, chemical equipment by 30.5%, fax
machines by 30.2%, household refrigerators by 27.3%, household washing
machines by 27%, cell phones by 24.5%, electric motors by 26.8%
electric-driven tools by 26.2%, steel products by 21.5%, and plastic
products by 17%. China's output of many manufactured products showed
accelerating growth in the later months of 2003.China has now become an
export powerhouse in high-tech computers and electronics and machine
parts, not just low-tech toys and garments.
But even while productivity rose rapidly in China in the last
decade, the real wages of China's factory workers stagnated. The
manufacturing boom in China has not been a train carrying China's
workers into the middle class. China's workers can't bargain for higher
wages because they lack basic workers' rights.
THE U.S. MUST ACT
The President had 45 days from the date when the AFL-CIO filed its
petition, March 16th, to decide whether to accept the petition and
launch an investigation. If he denies the petition, he must state his
reasons. He must declare either that China does not violate its
workers' rights, or that China's violation of its workers' rights has
no adverse effect on U.S. workers. Either declaration would contradict
the overwhelming evidence presented in the AFL-CIO petition. Indeed,
the President had authority under Section 301 to take action on his own
initiative even without the AFL-CIO petition, but he has chosen not to
do so. The only Section 301 case initiated by this Administration to
date has been on intellectual property rights violations in the
Ukraine.
Section 301 authorizes the President to take any actions within his
Constitutional powers to enforce fair competition and protect workers'
rights overseas. The AFL-CIO petition asks that the President take
three actions to remedy China's persistent denial of workers' rights:
First, the President should impose trade measures against
China that are sufficiently large to induce China to enforce
workers' rights and to offset the unfair competition caused by
China's violations. The AFL-CIO is not asking for protectionist
barriers. If China enforces the basic workers' rights agreed by
the international community, then it can enjoy normal access to
U.S. markets, and it can create jobs that don't assault human
dignity.
Second, in that non-protectionist spirit, the AFL-CIO asks
that the President negotiate an agreement with China to phase
out the trade measures in incremental steps, as China comes
into compliance with concrete workers' rights benchmarks--
benchmarks that are specific and verifiable by the ILO, the
United Nations agency responsible for promulgating and
monitoring international labor rights.
Third, the AFL-CIO asks that the President enter into no new
WTO agreements until the WTO incorporates enforceable core
workers' rights as a condition of WTO membership. It is
essential that workers' rights be protected throughout the
trading system, ideally through multilateral rules.
Global rules should fairly enforce basic workers' rights--to ensure
that global competition does not reward and encourage repression of
fundamental human rights at the workplace. I thank you for your
attention, and I look forward to your questions.
Senator Brownback. Thank you very much, Ms. Lee, for bring
this forward and addressing an issue that I care about a great
deal in a different form and in a novel way.
Mr. Bottelier, thank you very much for being here, welcome.
And I look forward to your statement.
STATEMENT OF PIETER BOTTELIER,
JOHNS HOPKINS UNIVERSITY (SAIS)
Mr. Bottelier. Thank you, Mr. Chairman, and thank you for
inviting me to participate in this panel. I will limit my
comments to the specifics in the AFL-CIO petition, and I have
not addressed the currency manipulation issue that you are
interested in. Should you wish to address questions to me on
that subject I'm ready to respond.
Senator Brownback. Okay.
Mr. Bottelier. Let me preface my comments by saying that I
believe job losses to plant relocation and outsourcing
certainly due to unfair trade practices are an extremely
serious issue for the U.S. And I also believe that we cannot
take it for granted that every job lost will be automatically
replaced, even in a growing economy. However, blaming U.S. job
losses to any significant degree on China's alleged repression
of workers' rights is not going to get us very far. I do not
believe that the repression of workers' rights in China--and I
certainly do not deny all the facts in the AFL-CIO report--is a
significant source of unfair cost advantage to many producers
in China.
The petition's conclusions on the measurement of job losses
in the U.S. hinges critically on the estimate of the margin by
which China's alleged persistent repression of workers' rights
depresses Chinese wages below the level that would otherwise
prevail. The petition estimates that Chinese wages would rise
by 90 to 595 percent if there were no repression of workers'
rights in China. I have at least three serious problems with
that.
First, the estimate of the underpayment, 90 to 595 percent.
One absurd implication of this estimate is that if it were
true, probably the majority of Chinese enterprises engaged in
exports or even in local trade would have to disappear. These
are margins so big they far exceed the profit margins of
Chinese firms, which are typically very low. The implication of
this allegation is that somehow these Chinese workers that
would then not be employed would be better off in other
circumstances.
The second objection I have, Mr. Chairman, is that the
petition assumes, without even raising the issue, that all
these alleged cost advantages generated by the suppression of
workers's rights are automatically passed on to the buyer; the
buyer in the U.S. or the buyer elsewhere. That's an assumption
that flies in the face, I would say, of logic. To the extent
employers can succeed in pocketing that rent that they create
that way, themselves, they would certainly do so. There is no
reason to assume that automatically all cost advantages would
be passed on to the buyer. And that's the basis of the case.
The third point I wish to bring to your attention, Mr.
Chairman, is that a share of Chinese exports to the U.S. is
generated by U.S. companies located in China. There are no
statistics on that. I personally estimate that somewhere
between 12 and 15 percent of Chinese exports to the U.S.
originate from U.S.-owned plants in China. Now, the petition
doesn't mention that, but if the petition were to recognize
that fact, it implies that the suppression of workers' rights
is equally conducted by U.S.-owned plants in China, and that
the U.S. would somehow need the cooperation of the Chinese
Government to get U.S. companies in China to stop the
suppression of those rights. That seems to be a rather absurd
implication of the way the petition has been formulated.
Finally, and perhaps somewhat philosophically, if I may,
the petition does not really take into account that China is in
a relatively early stage of development, sometimes in economics
called the ``Lewis Phase of Industrialization.'' During that
phase a vast number of rural workers remain outside the modern
economy. In this respect China's current stage of labor market
development is comparable to that of Britain in the Industrial
Revolution and the U.S. in the 19th century. There were few, if
any workers' rights in either country in those days. There's no
reason to believe that free labor unions and the right to
strike would improve average industrial wages in China today.
The petition employs assumptions about the effect of
independent unions and strike threats on wage levels that are
not consistent with the realities in China.
Finally, the estimates of the degree to which people are
receiving less than they should in China are somewhat shaky and
contradict, I think, other indicators. We know from many
statements and statistics that the average standard of living
in China, including rural people but more particularly urban
people, is rising fast. The world has never seen a population
increasing living standards on such a vast scale, so fast. This
also leads to massive transfers of worker savings from the
urban areas to the rural areas. Last year, according to the
Chinese banking statistics, almost $40 billion of savings was
transferred by urban migrant workers to their families in rural
areas, almost nine percent more than the year before. Clearly,
that is a significant source of income that could not have been
transferred if urban wages are suppressed to a pure survival
level.
Another fact is that, according to my information, whereas
all cities have different standards for minimum wages--and
these are not laws, these are standards--they are enforced to
varying degrees. In some areas, for example in Shanghai, the
minimum standard is 570 RMB per month. My contacts in Shanghai,
and these include private companies, tell me that Shanghai is
pretty effective in enforcing the standards there.
Another dimension I would like to mention, if you give me a
second, is the suggestion that the underpayment of Chinese
workers is somehow supported or condoned or at least abetted by
the Chinese Government. This, I think, is a misstatement of the
facts. It's clear that there are problems in China,
particularly with regard to those migrants who enter the urban
labor market for the first time; they have no negotiating
power, but the average wages in China are, in fact, rising very
rapidly. The abuses that do occur are recognized by the present
government, both Prime Minister Wen Jiabo and President Hu
Jintao have repeatedly stated that they want to end these
practices and have invested a lot of political capital in
trying to redress some of the problems.
One final very brief comment on the so-called bondage of
Chinese laborers through the hukou system, that is, the
internal passport system. I believe that the report is
seriously out of date. It quotes sources of many years ago. The
hukou system in China is, in fact, on its way out; there is an
official committee that is studying how it should be modified
or abolished and in some areas of China it has officially been
abolished already on an experimental basis.
I'd like to leave it at that, Mr. Chairman. I'm ready to
take your questions.
[The prepared statement of Mr. Bottelier follows:]
Prepared Statement of Pieter Bottelier
COMMENTS ON THE AFL-CIO SECTION 301 PETITION AGAINST CHINA DATED 3/16/04
Conclusions:
1. The economic analysis underlying the calculation of job losses in
the U.S. due to China's alleged ``Persistent Suppression of Workers
Rights'' is defective and deceptive.
2. The suggestion that China's Government knowingly supports or at
least abets the suppression of workers rights, so as to allow Chinese
industries to gain unfair competitive advantage, is not adequately
substantiated; there are important indications that China's Government,
led by President Hu Jintao and PM Wen Jiabao is making serious efforts
to combat such abuses of workers rights as do occur (other than the ban
on strikes and the prohibition of independent unions).
3. China's Government does indeed prohibit independent labor unions
and generally does not permit labor strikes. These factors were known
and understood at the time the U.S. negotiated the terms of China's
entry into the WTO and the U.S. Congress passed the PNTR legislation in
2001. If the U.S. had wanted to accuse China of unfair competition due
to a ``Persistent Suppression of Workers Rights'' under section 301 of
the 1974 Trade Law, it should have done so much earlier. If anything,
labor conditions in China, though still very poor in many respects,
particularly with regard to unskilled or semi-skilled rural migrant
labor, are generally improving and in many industries better today than
they were at the time China entered the WTO. The low pay of migrant
labor is only one of many factors that keep production costs low in
many manufacturing and service industries in China.
4. The relentlessly negative picture of labor conditions in China
presented in the petition is based on a selective use of data and
sources; moreover, much of the information used is out of date.
5. It would be more important and more productive for the U.S. to
focus on other violations by China of fair trade rules and to approach
the issue of job losses in the U.S. due to globalization in a
different, more strategic way. There are many things the U.S. can do
internally to make the economy more efficient and to lower production
costs.
1. The economic analysis is defective and deceptive.
1. The petition's conclusions on job losses in the U.S. hinge
critically on the estimate of the margin by which China's
alleged ``persistent repression of workers' rights'' depresses
Chinese wages below the level that would prevail in the absence
of such repression. The petition estimates that local wages
would rise by 90 to 595 percent if there were no repression.
There are at least three problems with this:
(a) The estimate of ``under-payment'' is not
credible--most Chinese manufacturing industries/exports
would not be able to survive if they had to pay their
workers 90-595 percent more than they are paying now.
One absurd implication of this is that the bulk of
China's enterprises ought not to exist and that Chinese
workers, whose rights are being repressed, would
somehow be better off if these enterprises didn't
exist.
(b) The petition assumes, without questioning or
substantiation, that all of the production cost
advantages resulting from labor repression--estimated
at 10-77 percent--are always fully passed on to the
customer (local or foreign). Why would the seller do
this if he can keep at least part of the ``rent'' for
himself, as must be possible in some cases? If all or
part of the unfair cost advantages are pocketed by the
Chinese firm or its owner (often a local Government),
the petition's central argument is seriously
undermined.
(c) The petition makes no allowance for the fact that
U.S. companies operating in China account for an
estimated 12-15 percent of China's exports to the U.S.
Are those companies also violating Chinese workers'
rights? If they don't, the petition's calculations of
unfair cost advantages and associated job losses in the
U.S. need to be adjusted. If they do, another absurd
implication of the petition is that the U.S. Government
requires punitive duties on all Chinese exports to the
U.S. (and cooperation from China's Government) to get
U.S. companies in China to stop suppressing Chinese
workers' rights.
2. The petition does not take into account that China is at a
relatively early stage (sometimes called the ``Lewis phase'')
of industrialization. During this stage a vast number of rural
surplus workers remain outside the ``modern'' economy. In this
respect, China's current stage of labor market development is
comparable to that of Britain during its industrial revolution
and the U.S. in the 19th century. There were few if any
``workers' rights'' in either country in those days. There is
no reason to believe that free labor unions and the right to
strike would improve average industrial wages in China today.
The petition employs assumptions about the effect of
independent unions and strike threats on wage levels that are
not consistent with present labor market conditions in
China.\1\
---------------------------------------------------------------------------
\1\ To illustrate this point two quotes from Upton Sinclair's, The
Jungle (1906) describing the terrible conditions in Chicago's
meatpacking industry and the ineffectiveness of labor unions at that
time: ``She was in another canning factory and her work was to trim the
meat of those diseased cattle that Jurgis had been told about not long
before. She was shut up in one of the rooms where the people seldom saw
the daylight; beneath her were the chilling rooms, where the meat was
frozen, and above her were the cooking rooms; and so she stood on an
ice-cold floor, while her head was often so hot that she could scarcely
breathe. Trimming beef off the bones by the hundred-weight, while
standing up from early morning till late at night, with heavy boots on
and the floor always damp and full of puddles, liable to be thrown out
of work indefinitely because of a slackening in the trade, liable again
to be kept overtime in rush season, and be worked till she trembled in
every nerve and lost her grip on her slimy knife, and gave herself a
poisoned wound.'' ``Of course she stopped paying her dues to the union.
She lost all interest in the union, and cursed herself for a fool that
she had ever been dragged into one.''
3. The petition's estimates of unfair cost advantages in
China due to the alleged non-observance of minimum wage
standards are shaky. Nobody seriously disputes that average
real incomes and living standards in China, especially in urban
areas, have improved dramatically over the past 20 years and
continue to rise at a rate that the world has rarely seen
anywhere, any time. How do we reconcile the petition's picture
of utter misery and Government-sanctioned bondage and
deprivation in China's factories with this? How do we explain
the RMB 374 billion that was transferred by urban migrant
workers to their families in rural villages in 2003 (8.7
percent more than in 2002) according to China's banking
statistics? Most Chinese researchers agree that real wages at
the very bottom of China's urban labor market--the point where
most urban migrants enter--have risen only very slowly or
stagnated at around RMB 500-600 p.m. for many years. No serious
researchers (Chinese or foreign) dispute, however, that average
real wages (and living conditions) for skilled and experienced
workers are improving, sometimes rapidly, in most urban areas,
and not only in factories owned by foreigners. The current
standard minimum wage in Shanghai (excluding overtime and
benefits such as lunch and transportation subsidy) is RMB 570
p.m. According to my sources, the minimum wage standard is
reasonably well enforced in Shanghai and in other big cities.
There are, moreover, many known and documented cases of Chinese
firms improving labor conditions for their workers in order to
be able to retain them or to attract better qualified people.
2. Is China's Government condoning the repression of
workers' rights?
1. The petition either states or implies that China's
Government supports, condones or at least abets the repression
of workers' rights for economic advantage. This is a
misrepresentation of the facts. It is true that migrant workers
in China, especially those who are just entering the market,
are often subjected to abuse and discriminatory practices. (Is
the situation in the U.S. with regard immigrant labor from
Latin America any better?) It is probably also true that local
Governments in China are often aware of labor abuses when they
occur, but chose not to intervene, either because they benefit
from the situation, or because they are unable to correct the
problem. However, this is not Government policy. President Hu
Jintao and PM Wen Jiabao have both stated repeatedly that the
Government wishes to eliminate labor abuses and there is ample
evidence of efforts in this regard.
2. The petition's characterization of China's ``internal
passport'' (hukou) system is out of date. Rather than using the
system for labor repression (bondage) as stated in the
petition, the Chinese Government is actively working to reform
the system. There is an official Government study group charged
with recommending policies how best to modify or abolish the
system (which, as the petition points out, dates back to the
Mao years). In several parts of Zhejiang (currently the
Province with the most advanced private enterprise development
in China) the hukou system was abolished on an experimental
basis last year. Many cities have begun to use the hukou system
as a fiscal revenue instrument instead of a labor control
instrument. The entire hukou system is likely to disappear in
the coming years and be replaced by a national ID card system.
The ID card system is already in use in some parts of China.
3. Ironically, the petition asserts that the hukou system
artificially depresses wages in China. The opposite is more
likely to be the case. If the hukou system works the way the
petition describes it, namely by restricting the flow of rural
surplus labor to the cities, abolishing the system would
probably increase the supply of migrant labor and thus depress
urban wages.
3. China's policy on independent labor unions and labor
strikes.
1. The petition has the facts right, but the interpretation
wrong. China is afraid that free labor unions could undermine
the (constitutional) power monopoly of the CCP (as happened in
Poland under Walesa's Solidarity movement in the 1980s) and
thus become a threat to social stability. However despicable or
deplorable one may find this Chinese perspective on the risk of
independent labor unions, it is China's reality today and the
U.S. knew all about this when it negotiated the terms for
China's entry into the WTO and when Congress passed the PNTR
legislation. The fundamentals of China's political system may
not change dramatically any time soon, but the dynamics of the
ongoing social and economic change processes, will undoubtedly
contribute to further improvements in average living standards
and in widening freedoms for the vast majority of its
population. Foreign enterprises operating in China account some
50% of China's exports. Many of these enterprises contribute
actively to the improvement of labor conditions in China.
2. The petition's assumption that independent labor unions
and the right to strike would significantly improve wages and
other labor conditions in China (and thus reduce unfair costs
advantages) is not realistic as long as there are massive
numbers of rural surplus labor and urban unemployed (see
footnote 1).
4. The petition's unqualified and relentlessly negative
picture of labor conditions in China.
1. I am sure that there are quite a few factories in China
that retain some or all of the terrible conditions for workers
as described in the petition. But, by not acknowledging or even
hinting, that the situation is highly variable between
industries and areas--and in any event changing, generally for
the better--the petition undermines its own credibility. The
petition presents evidence and data in a highly selective way.
Only the most ardent China critics--often people with little or
no real knowledge of the country--will accept the petition's
description of labor conditions in China without question.
2. On some less important points, the petition is just plain
wrong. For example, on page 64 it states that ``Chinese
citizens have no alternative to depositing their savings in the
state-owned banks''. That was probably substantially true until
about ten years ago. Today Chinese citizens can and do own
stock, cars, houses, etc. and if they any savings left, they
can buy insurance or deposit them in many different banks. From
December 2006 they can also deposit their savings in foreign
banks in China if they wish, under WTO conditions. Chinese
citizens can also obtain passports for personal travel abroad
and take out foreign exchange for that purpose. The limits on
what may be taken out of the country for personal travel have
recently been increased significantly.
5. Comments on China's unfair trade practices and job
losses in the U.S.
1. The ``repression of workers' rights'' in China is almost
certainly not a significant source of unfair cost advantage for
many producers in China. More important in my opinion are
China's lax enforcement of IPR and the pervasive counterfeiting
of both foreign and domestic products. Another way in which
some Chinese state-owned enterprises may gain unfair advantage
is through quasi-fiscal loans from state banks. Banking reform
has still not progressed to the point where all state
enterprises face genuinely hard budget constraints, like non-
state enterprises. Completion of China's banking system reform
will probably take several more years. It is still possible for
some state enterprises in some situations to offload some or
all of their losses on state banks, thereby adding to the NPL
problem. To the extent they succeed in doing so, they may be in
a position to under-price their competitors unfairly. I think
that it would be more important and more productive for the
U.S. and other trading partners of China to focus on compliance
with WTO commitments that China has made regarding IPR
protection, legal system development and banking reform.
2. Job losses due to globalization in general are undoubtedly
a serious issue for the U.S. and other rich countries--we
cannot take it for granted that every job lost will
automatically replaced by another one elsewhere in the economy.
Blaming U.S. job losses to any significant degree on China's
alleged repression of workers' rights, however, is not going to
get us very far. Opponents of the AFL-CIO Petition could argue
that U.S. production costs are unduly high, because of
excessive CEO compensation, enormous waste in energy use and in
the country's health care system, serious problems in public
education, etc. Addressing U.S. unemployment problems is going
to require a more strategic approach than what the AFL-CIO is
proposing in its Petition.
3. I fully support efforts to improve occupational safety and
health standards (OSH) in all factories around the world,
through the WTO or otherwise. Unfortunately, after citing many
OSH horror stories in Chinese factories, the petition drops the
OSH issue in its final analysis on the ground that there is
empirical evidence to suggest that improved OSH standards may
be cost-neutral or even contribute to cost reductions over
time. If the AFL-CIO has the interests of Chinese workers at
heart, it should press the OSH standards issue, not drop it.
The petition is also silent on cost advantages that some
Chinese producers may enjoy as a result of inadequate
environmental controls. Again, I would support efforts by the
U.S. and by China's other trading partners to improve
environmental standards in China and their enforcement, even if
that in some cases leads to cost increases.
Senator Brownback. Thank you very much for the very
thoughtful comments that you put forward. The whole panel has
been very good on an area that I've had a lot of questions
about, so I appreciate the tutorial from each of you.
Mr. Robinson, let me start with you on this. Do we know, or
do you know what percent of total foreign investment going to
developing countries goes to China? In other words, of the
whole global Foreign Direct Investment (FDI), or maybe Dr.
Waldron, if you know this number, how much of it's pouring into
China versus going to Honduras, other developing countries? Do
we know that number?
Mr. Waldron. I don't know the number but I do seem to
recall a news item a while ago saying that China had overtaken
the United States as the most-favored destination for
investment. We can get that number, certainly.
Mr. Bottelier. I don't know it, Mr. Chairman, precisely,
but let me answer by saying, the number varies from year to
year. China has come on extraordinarily strong as a recipient
of FDI in the last few years and, as Mr. Robinson mentioned,
received more FDI than the United States last year, and this
year, probably. My guess is that the total amount of FDI
flowing to developing countries--we have to distinguish between
Europe, United States, Japan--that China would probably receive
about a quarter, at least a quarter at the present time.
Ms. Lee. A lot more than that.
Senator Brownback. I want to focus in on the developing
countries because here's the thought that I'm working with on
this, is that you've got a global economy that's clearly
integrating very, very rapidly. I mean, it moves and it moves
rapidly and capital moves. But China has become such a great
suction for Foreign Direct Investment that it has significant
impacts on that score throughout the developing world in quite
a profound way.
Mr. D'Amato. There's no question, Mr. Chairman, that China
is exceeding the net in-flow from developing countries because,
for example, we're worried about Mexico ceding its textile
advantage to the Chinese because of China's lower labor costs
coming up, that if the multi-fiber agreement does end on time,
this year, that the chances of most of the countries of Asia
losing textile share to China will be apparent. So it looks
like the in-flow of FDI into China is exceeding, you know, most
of that that's going to the rest of the developing world.
Mr. Robinson. I would just chime in, Mr. Chairman, that the
number's about $50 billion, and that sucking sound you hear in
your mind is real. This is the largest flow of Foreign Direct
Investment on the globe, I believe. Now, what percentage it is
of the developing world, we'll take a look at that and be back
to you on it. But leave it to say that this has got to be
having a deleterious affect on some of these other emerging
market economies that I think you're getting to.
Senator Brownback. I'm getting to that and plus, this is
about two years ago, I did a trip through India and China, and
I was just comparing those two countries' Foreign Direct
Investment, and India was a paltry amount relative to what
China was. Now, I think India's has been growing substantially
the last couple of years, but it still has not been in
comparison to China. And then, I started to hear now from
Central American countries saying this thesis: Look, we engaged
democracy and open societies ten, 15 years ago, and we aren't
living any better today than we were ten or 15 years ago. Why?
What's happening here? Well, it appears as if, you know, while
we were saying yes, you should do that and you've got to open
the society and create systems where you can grow, but that
China is pulling so much of that in that we're just not seeing
that spread much anywhere around the world.
Mr. Waldron. Could I just add, I think one of the things
that troubles me the most about this is that China has what is
euphemistically described as a disciplined workforce. And she
is competing with lots of countries, new democracies, where
workers actually have rights. Now, the sad fact is that most
investors are quite happy to have a disciplined workforce. They
don't want strikes. They're quite happy if the secret police
takes away somebody who's making trouble. They will supply all
sorts of rationalizations, but the real point is that it's much
easier to do business in a certain type of dictatorship than it
is in a democracy. Yet it's overwhelmingly in the interest of
the United States that we should support other democracies with
trade, with investment, and so forth. And I think the
administration and the government should think very, very
seriously about how to do this.
One of my colleagues at Penn, who is a law professor, said
that he expects, within ten or 15 years, that the issue of
workers' rights will become an integral part of international
trade law. And if that should happen then this very, very
worrying issue would begin to be addressed. But I do think, as
an American, that it is terrible to see countries that have
made the sacrifices and taken the risks to become democratic
and to give their workers rights then lose out in the
competition for foreign capital to countries having these
workforces which are basically under police supervision.
Senator Brownback. Mr. Bottelier, respond to that thought.
I would ask, what are your thoughts about that?
Mr. Bottelier. Okay. May I preface that, Mr. Chairman, by
just one more comment on these FDI numbers? I think it's
important. China is indeed a huge absorber of FDI. Number one
comment that I would like to make, that China now has also
become a large source of outgoing FDI. It's the largest amongst
developing countries of outgoing FDI, that few people have
focused on. Secondly, in the 80s and the early 90s, 60 to 70
percent of all the FDI going in China came from overseas
Chinese, mainly Hong Kong, Taiwan, Thailand, Indonesia. Even
today, about half of the FDI going into China is from overseas
Chinese. Furthermore, to qualify the numbers, it is estimated
that perhaps 20 to 30 percent of the total FDI going into China
is in fact Chinese money that is being recycled through Hong
Kong or the United States in order to take advantage of certain
privileges extended to foreign investment rather than domestic
investment.
Senator Brownback. Good, good, excellent point.
Mr. Bottelier. The number is a bit more. And finally,
perhaps the most important point, a lot of FDI goes to China
because the domestic financial intermediation in that country
is still so undeveloped that bank loans tend to be not easily
available to private enterprises or non-state enterprises. Most
of them still go to state enterprises and now increasingly
mortgages. Once the domestic banking system and the stock
exchanges and the bond markets develop, then you will see that
there is much less need for foreign investment money to sustain
the same level of investments. The FDI record levels partly
reflect defective domestic financial intermediation.
Senator Brownback. Mr. Bottelier, though, respond to the
comment that China's disciplined workforce is one that gives it
an advantage over a democratized Central or South American
workforce?
Mr. Bottelier. Well, I think the discipline to which Mr.
Robinson referred is probably an element but less and less so.
The Chinese labor force is, by Asian standards, East Asian
standards and South Asian standards, a disciplined labor force
in the sense that the people are well trained, Chinese workers
are generally very literate, have relatively high health
standard; this is a long tradition, their life expectancy is
higher than in most Asian countries and the Chinese are
extraordinarily industrious people.
Ms. Lee. Oh, please.
Mr. Bottelier. And entrepreneurial people. I'm not an
advocate for China here, but we should realize that there's
more to China than cheap labor. Another factor which is now
beginning to play a significant role is the relationship
between all these foreign investments located in China. It is
the intra-China supply lines that allow newcomers to reduce
their costs, not only because labor is good and cheap but
because everybody else is there. So intra-China supply lines
between manufacturing industries allow cost advantages that
other developing countries, with far less foreign investments,
don't have.
Senator Brownback. Ms. Lee?
Ms. Lee. If I may just say, I think it's really an insult
to talk about workers in China as industrious and hard working
as opposed to oppressed. Of course they're industrious and hard
working and of course they're good workers and they're smart
and so on, but the reason that foreign investment floods to
China is a combination of many factors, including other kinds
of commercial advantages, a large marketplace, and so on, but I
think you cannot underplay the level of oppression in China.
You said you don't challenge the facts that are in the petition
that the State Department has documented. I just think it's
really appalling to talk about the advantages of Chinese labor
in terms of level of hard work. Workers in China are denied
their basic human rights. They're not allowed to form unions.
They're not allowed to even advocate for unions. They're not
allowed, in some cases, to even ask for the wages that they're
due, and they're treated abominably both by their employers and
by their own government. And I challenge many of the arguments
you make. I'm surprised, Mr. Bottelier, to hear your critique,
and I guess I'm wondering what the implication is, whether
you're saying that there's no wage advantage whatsoever that
comes from the denial of workers' right of freedom of
association, the failure to enforce minimum wage and hours of
work and health and safety laws, or are you saying that the
particular estimate that we have is too high? We can talk about
what the particular estimate is, but to say that there's no
advantage whatsoever, there's no cost advantage, I think
threatens credibility because then you have to ask the
question, why is it that companies don't pay decent wages? Why
is it that the Chinese government by law prohibits unions from
forming, prohibits workers from exercising their rights? And is
there no economic advantage whatsoever to doing that? I find
that very, very hard to believe, and I'd be surprised if that's
really the argument that you're making.
Mr. Waldron. Could I just second what Ms. Lee has said? I'm
really ashamed to hear American spokesmen or business spokesmen
gloss over the fact that China is now one of the most
repressive countries in the world and their labor force is
certainly under very close observation and supervision. And my
own view is that we need something like the Sullivan Principles
that we applied to South Africa to regulate the activities of
American business there with respect to the treatment of labor.
And I would add, of course, on another point that the
activities of American business in facilitating the development
of the Chinese military industrial complex have also been a
very serious problem. But to run through a list of how hard
working, industrious, healthy and so forth the Chinese workers
are while suggesting that somehow they have no awareness they
are oppressed is simply wrong. We all know any number of union
leaders who have been arrested. We know that there is strong
labor awareness, and we also know that the Chinese secret
police cracks down on this very, very hard.
Senator Brownback. It's a tough topic. Ms. Lee, let me ask
you a question that I had a gentleman pose to me this morning,
if the administration agrees with proceeding forward with the
301 case, and hearing it, that we will not get support
internationally in the developing world because many people in
the developing countries will say, well, that may be China now,
but we're going to be next, and it will be about our not having
the same worker wages or rights in our area as they do in the
United States so we're not going to support you on step one
because we think we're step two or three down the road. How do
you respond to that?
Ms. Lee. Well, that's a really interesting question. I
don't know the answer at the moment because we haven't had
official conversations with governments in developing countries
on this specific issue. What we have had is conversations with
unions in developing countries around this issue, and with the
International Confederation of Free Trade Unions (ICFTU), which
is the international labor body which we belong to. ICFTU
represents about 150 million workers worldwide, about two-
thirds of whom are in developing countries, and it has been
very supportive of our workers' rights petition. Most of what
we hear from unions in developing countries is that they are
terrified competing with China. They're very supportive of an
action that would, in fact, challenge China to be more
democratic, to respect basic ILO core labor standards, to bring
its laws into compliance with international standards. So
certainly workers in developing countries have a keen
understanding of the same exact kind of challenges that
American workers are facing. They're losing their jobs to China
because China's not a democracy, because China violates human
rights. We'd like to see some of their governments, we
certainly will be in contact, more specific contact with our
union counterparts in developing countries and also in
industrialized countries to see if we can get them to lobby
their governments to support the petition.
Senator Brownback. Have any come forward yet to support, in
any developing countries?
Ms. Lee. We haven't had that specific conversation yet at
this time. But we expect that there will be some support
internationally because even in Cancun, at the last WTO
ministerial meeting, many trade union representatives,
including myself, met with some developing country governments,
most of whom were fixated on the problem, the challenge of
competing with China, particularly in 2005 when the textile and
apparel quotas are scheduled to be lifted. And there were
governments in Africa and the Caribbean that were very, very
concerned what the competitive impact on them would be, and
they were more interested in talking to us about workers'
rights provisions in the WTO than they've ever been in the
past.
Senator Brownback. I haven't been a fan, historically, of
labor agreements as part of trade agreements. I've always felt
like these are things that should be separated. Yet what I'm
seeing develop is a constellation of issues, particularly
focused on China, that just makes me increasingly concerned
with it, so that I'm looking aghast and saying what else? How
else should we address this set of issues? And maybe it all
works through. I'm hoping for that, that it all works on
through, but I'm been hoping for that for a number of years
now, and I haven't seen anything. And so that's why I'm
wondering if we're going to have to take other actions that
maybe previously had not been thought of for the issues of
addressing China, but also for addressing equality and
democratization issues around the world that we're running into
our own rhetoric in places where we ought to be able to stand
up and say, you do this and life does improve.
Mr. Bottelier, you present some very sound, I think,
arguments on some of these things, as well. I mean, like once
you get a concentration in China it tends to grow; when if you
don't have that same concentration in other places, it would
have less ability to attract the capital, and so I respect the
thought and the fundamental economic forces. There are a set of
very big issues here that are circling around China, and much
of it, I think, could be resolved if they would embrace
democratization, if they would embrace human rights. And then,
you know, guys like me would let up and say if that's the way
the market's going to compete, it will compete, and we're all
going to compete fairly in it. It just doesn't seem like that's
what's taking place. And then the product of our policy
decisions, or lack of policy decisions, then grows and its
importance and our options lessen as the years move forward. I
think Mr. Robinson was saying we may have about ten years to
really influence China and its direction and pass that. The
engine has enough fuel on its own to do what it chooses to do
at that point in time.
I want to thank you all for being here and for hanging in
through this. I would invite each of you, if you have
particular policy thoughts that you think we should be putting
forward to implement some of the ideas that you're putting
forward, to get them to us.
Dr. Waldron, you mentioned the Sullivan Principles. Mr.
Robinson, I thought you really put your finger on the issues. I
didn't hear with the same clarity okay, do this, this and this
afterwards.
I think, Ms. Lee, I understand clearly your point of view
is certify the case, would be it.
And Mr. Bottelier, if you see items that we should move
forward with, let us know as well.
This is an area of growing concern, policy-wise. It's a
growing concern politically across the country. The nation
knows that we are heavily dependent upon China, and we're
getting cheap goods from there, but they don't like it. They
don't particularly like that set up.
And while the outsourcing issue is getting a lot of play as
well, as it should, I think it needs some real good economic
examination as to the actual outsourcing/insourcing issue. It
still reflects more of an internal, deeper feeling, like we're
just too dependent upon a place that's just not structurally
the way we think it should be. And not stable structurally,
when you're ruled by a small party elite that has the ability
to move rapidly in unpredictable fashions, and that's a
discomforting thing to many, many of us.
Mr. D'Amato.
Mr. D'Amato. I just wanted to say, Mr. Chairman, the
commission will have its report for you in about a month, and
it will have a lot of very specific recommendations and things
we think the Congress ought to be doing to take a look at these
issues and to move to the Executive Branch as well, down the
road. Because we do think that leverage is important here. The
Chinese do respond to leverage but leverage has got to be
strong, sustained.
Senator Brownback. And real.
Mr. D'Amato. And real, absolutely. And that's what's going
to have to make the difference. But those are the
recommendations that we will be providing for you.
Senator Brownback. Yes, it's not a jawboning process. This
is playing with real dollars here and real lives, and we have
to make it substantial and direct and felt for action to occur.
Mr. D'Amato. Right.
Senator Brownback. Thank you. Thank you all very much for
attending.
The hearing is adjourned.
[Whereupon, at 4:19 p.m. the hearing was adjourned.]
A P P E N D I X
----------
Responses to Questions for the Record Submitted to Assistant Secretary
Lorne W. Craner by Senator Russell Feingold
Question. The Congressional Executive Commission on China stated in
their 2003 annual report that ``working conditions and respect for
worker rights in China were frequently in violation of China's own
laws, especially those governing wages and overtime pay, work hours and
overtime hours, and workplace health and safety.'' What are the
obstacles to the enforcement of China's own laws? What steps are you
taking to encourage China to both enforce its existing labor laws and
expand worker protection?
Answer. The 2003 annual human rights report noted ``widespread
official corruption and efforts by local officials to attract and keep
taxpaying, job-producing enterprises that might otherwise locate
elsewhere undercut enforcement of the minimum wage provisions.'' There
are national laws governing working hours, but these laws are often not
enforced, particularly in private enterprises that can rely on a vast
supply of low-skilled migrant labor. A Work Safety Act was enacted in
2002 and nearly 70 field offices of the State Administration for Work
Safety exist throughout the country, but enforcement is the
responsibility of lower-level governments and is weak. The absence of
genuinely representative trade unions exacerbates this state of affairs
by depriving workers of a powerful voice that could defend their rights
in the workplace.
The U.S. Departments of State and Labor are funding projects in
China totaling approximately $10 million to improve labor laws,
strengthen their enforcement, raise labor awareness, provide legal aid
to workers, and improve mine safety and health.
Question. It has been reported that much of the labor abuse occurs
in foreign-owned factories in China's coastal provinces. News reports
discuss how factory managers hold two accounting books--one reflecting
the reality of the factory and one book, which distorts the hours and
workplace conditions to show their foreign clients. What should be done
to pressure the Chinese government and foreign companies to monitor
their factories more closely to ensure that labor codes of conduct are
being followed? Can more be done to encourage companies operating in
China to prioritize labor conditions?
Answer. The U.S. Government is committed to supporting socially
responsible business practices and encouraging good labor practices in
China. The U.S. Departments of State and Labor are funding projects in
China totaling approximately $10 million to improve labor laws,
strengthen their enforcement, raise labor awareness, provide legal aid
to workers, and improve mine safety and health. Projects to foster
socially acceptable practices are being carried out by organizations
selected through open competition.
In March, representatives of major international buyers in the
footwear and apparel industry met with our Ambassador in Beijing to
discuss ways to improve enforcement of labor law in their Chinese
supply chains. The Ambassador said he would raise their concerns in his
own meetings with Chinese government officials. We are exploring
holding a national conference on socially responsible practices in
China in the near future.
Question. According to recent news reports, the People's Republic
of China continues to assert that they will set the pace of reform in
Hong Kong on their own schedule. Democracy activists believe that
Beijing is gradually reneging on their guarantee of broad autonomy and
that their demands for direct elections are being dismissed. What
leverage will you use to pressure the Chinese government to respect the
political rights of the people of Hong Kong?
Answer. It is longstanding United States Government (USG) policy
that the Hong Kong Government should move toward greater
democratization, through electoral reform and universal suffrage, as
provided for in the Basic Law. We were deeply disappointed by the
recent National People's Congress decision that effectively ruled out
the possibility of universal suffrage for the Chief Executive in 2007
and the Legislative Council in 2008. This decision does not adequately
reflect the strongly expressed wishes of the Hong Kong people for
universal suffrage and democratization and threatens to undermine the
high degree of autonomy guaranteed to Hong Kong in the Basic Law.
We will continue to support electoral reform and universal suffrage
in Hong Kong, in keeping with the Basic Law's own goals. Hong Kong
Consul General James Keith, Ambassador Clark Randt and other senior USG
officials regularly express our views on this issue, stressing that
international confidence in Hong Kong is predicated on its rule of law
and high degree of autonomy. Vice President Cheney made this point to
his counterparts during his April trip to China. In the months ahead,
the United States will continue to monitor the situation in Hong Kong
with the goal of supporting Hong Kong's democratization process.
Question. China has recently suspended its human rights dialogue
with the United States following a proposed UN resolution by the Bush
Administration that criticized China's human rights practices. How can
we continue to make progress on these issues dispite this Chinese
action?
Answer. Since the defeat of China's no-action motion in 1995 and a
close vote on the resolution itself, the Chinese have equated
sponsorship of a China resolution at the United Nations Commission on
Human Rights with ``confrontation'' and suspended the U.S.-China Human
Rights Dialogue in retaliation. We were not surprised that they did so
this year, but felt that China's backsliding on human rights in 2003
fully warranted bringing up China's human rights record before the
world's preeminent human rights forum.
Key human rights issues are being raised in channels other that the
Human Rights Dialogue by senior officials. for example, Vice President
Cheney raised human rights concerns during his April trip to Beijing.
We have already begun to press China to resume the dialogue,
pointing out that it is China's own strongly held and often expressed
view that dialogue, not ``confrontation,'' is the most effective way to
resolve differences on human rights. We are hopeful that China will
agree to resume the dialogue sometime later this year. We are also
making the point to Chinese officials that only progress made as a
result of dialogue will denable us to forego an resolution next year
and that resuming the dialogue is in both of our interests.
Prepared Statement of Senator Russell D. Feingold
I would like to thank Senator Brownback for convening this
important hearing on the status of reforms in China.
Sadly, evidence of positive human rights reforms is sparse. Despite
U.S. pressure on the Chinese government, it appears that the human
rights situation continues to deteriorate. Refusing to distinguish
between peaceful and violent dissent, the Chinese government punishes
those who dare to speak out for political and civil rights, and works
to silence those demanding basic labor rights.
A flurry of press reports have documented China's labor conditions,
and revealed a persistent and widespread suppression of labor rights in
China. China's labor activists continue to be accused of ``subversion
of the state'' and to be imprisoned, tortured and beaten by
authorities. Too many Chinese workers suffer from inhumane working
conditions, confronting gas explosions, mine flooding, and toxic fumes
at work, and laboring at machinery without proper safeguards in their
workplaces. They have no national minimum wage or overtime pay, nor do
they have the ability to seek recourse for these injustices. While the
Chinese Constitution ostensibly provides for freedom of association,
Chinese workers in practice are not free to organize or bargain
collectively.
Wisconsin alone has lost approximately 80,000 manufacturing jobs
since 2002, many of which have moved to China. There is a growing
consensus in my state that abysmal labor conditions in China are
creating an impossible playing field, one where U.S. workers cannot
compete, and should not compete. The Chinese government's unwillingness
to check these labor abuses appear to be undermining our own
manufacturing base in Wisconsin.
In addition to problems with labor rights, the People's Republic of
China continues to violate the political and civil rights of its
citizens. The state refuses to allow the people of Hong Kong to elect
their own representatives despite the overwhelming support for direct
elections, and continues to persecute the ethnic Uighurs and Tibetans,
repressing all political, religious and cultural expression.
When it comes to these fundamental human rights issues, where is
the reform? Where is the progress? What more can Congress do? I look
forward to the panelists' insights on how the U.S. government can play
a greater role in encouraging reforms in China.