[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





 
 CHINA'S RISE: THE STRATEGIC IMPACT OF ITS ECONOMIC AND MILITARY GROWTH

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


                                HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON ASIA AND THE PACIFIC

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 17, 2015

                               __________

                           Serial No. 114-72

                               __________

        Printed for the use of the Committee on Foreign Affairs
        
        
        
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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       BRIAN HIGGINS, New York
MATT SALMON, Arizona                 KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina          ALAN GRAYSON, Florida
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                ALAN S. LOWENTHAL, California
RANDY K. WEBER SR., Texas            GRACE MENG, New York
SCOTT PERRY, Pennsylvania            LOIS FRANKEL, Florida
RON DeSANTIS, Florida                TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina         JOAQUIN CASTRO, Texas
TED S. YOHO, Florida                 ROBIN L. KELLY, Illinois
CURT CLAWSON, Florida                BRENDAN F. BOYLE, Pennsylvania
SCOTT DesJARLAIS, Tennessee
REID J. RIBBLE, Wisconsin
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
DANIEL DONOVAN, New York


     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

                  Subcommittee on Asia and the Pacific

                     MATT SALMON, Arizona Chairman
DANA ROHRABACHER, California         BRAD SHERMAN, California
STEVE CHABOT, Ohio                   AMI BERA, California
TOM MARINO, Pennsylvania             TULSI GABBARD, Hawaii
JEFF DUNCAN, South Carolina          ALAN S. LOWENTHAL, California
MO BROOKS, Alabama                   GERALD E. CONNOLLY, Virginia
SCOTT PERRY, Pennsylvania            GRACE MENG, New York
SCOTT DesJARLAIS, Tennessee









                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Derek M. Scissors, Ph.D., resident scholar, American Enterprise 
  Institute......................................................     6
Mr. Han Dongfang, founder and director, China Labour Bulletin....    22
Mr. Jerome A. Cohen, professor and co-director, U.S.-Asia Law 
  Institute, New York University School of Law...................    33
Adam Hersh, Ph.D., senior economist, Roosevelt Institute.........    40
Alison Kaufman, Ph.D., senior research scientist, China Studies 
  Division, CNA Corporation......................................    49

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Derek M. Scissors, Ph.D.: Prepared statement.....................     9
Mr. Han Dongfang: Prepared statement.............................    24
Mr. Jerome A. Cohen: Prepared statement..........................    36
Adam Hersh, Ph.D.: Prepared statement............................    43
Alison Kaufman, Ph.D.: Prepared statement........................    52

                                APPENDIX

Hearing notice...................................................    76
Hearing minutes..................................................    77


 CHINA'S RISE: THE STRATEGIC IMPACT OF ITS ECONOMIC AND MILITARY GROWTH

                              ----------                              


                        WEDNESDAY, JUNE 17, 2015

                       House of Representatives,

                 Subcommittee on Asia and the Pacific,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 1:06 a.m., in 
room 2255, Rayburn House Office Building, Hon. Matt Salmon 
(chairman of the subcommittee) presiding.
    Mr. Salmon. The subcommittee will come to order. Let me 
start by recognizing myself and the ranking member to present 
our opening statements. Without objection, the members of the 
subcommittee can present brief remarks if they choose to or 
they can submit them for the record.
    And now I am going to yield myself as much time as I may 
consume to present my opening remarks.
    We can hardly discuss any major foreign policy issue 
without China coming up. Indeed, questions about China are on 
the top of everyone's minds. How stable is the Communist Party 
regime? How does China's land reclamation in the South China 
Sea affect prospects for peace or conflict? How can we deter 
China from hacking into our networks and stealing vital 
national security and economic information? Does China's 
activity reflect its growing global ambition or is it driven by 
domestic concerns for stability and security? What are the 
consequences of a slowdown of the Chinese economic machine on 
the U.S. economy?
    China is at a crossroads. Its quest for development and 
global influence has come at a high cost of alienating partners 
and allies alike. There are cracks in the foundation, and 
imbalances remain politically, economically, and militarily. 
China cannot forsake and undermine the same international order 
that has helped incubate its rise to prominence. It cannot 
forget the agreements that it should honor or the spirit in 
which they were made.
    I look forward to discussing these issues as I welcome our 
distinguished witnesses who traveled from as far as New York 
and Hong Kong to be here today.
    China has become a global economic powerhouse since it 
opened up in 1978. China's military operation and expenditures, 
vast manufacturing, as well as regional investment and global 
infrastructure projects reflect this well. But the IMF projects 
China's annual GDP growth to slow down to about 5.9 percent 
over the next 6 years. Experts attribute the slowdown to 
factors such as demographic changes, the coddling of state-
owned enterprises, a weak banking system, government 
corruption, and inadequate adherence to the rule of law.
    Major demographic challenges are forcing changes to China's 
long-term economic planning, including the legacy of its one-
child policy and increasing wealth gaps. The working class is 
simultaneously shrinking and demanding higher wages. Large debt 
loads throughout municipalities and provinces across the 
country mean that reckless infrastructure buildup is no longer 
viable for boosting GDP growth. The instruments that China used 
to finance its rise are no longer a reliable option for 
maintaining its position as a great economic power.
    Innovation and access to information are major contributors 
to economic growth, but these drivers have been stifled because 
of China's desire to control information to protect domestic 
stability, leaving China in a development dilemma. These issues 
cannot be addressed when people cannot express ideas freely and 
benefit from their hard work. China can only throw so much 
money to try to foster intangible skills that contribute to an 
innovation society.
    Instead, China resorts to stealing other nations' 
intellectual property, blatantly disregarding international 
norms, while stubbornly denying any malicious activity in 
cyberspace. Domestic drivers are protecting the governing power 
of the Chinese Communist Party. Continued economic growth and 
military modernization override its desire to curtail or halt 
such activity.
    China's cyber activity cannot persist without 
repercussions. Yet, the high payoff for this behavior, and 
frankly, our inability to devise proper responses, exacerbate 
the issue.
    Over the past 25 years, China has made great strides in 
military modernization, including a sustained 9.5 percent 
annual increase in military spending over the past decade. 
While it lacks combat experience and power projection 
capabilities, the People's Liberation Army attempts to address 
these shortcomings by conducting more noncombat operation 
overseas, participating in more international exercises, 
notably with Russia, and enhancing its ability to dominate 
territory in or around its waters. China's island-building 
activities contradict decades of international agreements in 
this arena and raise concerns and questions over its supposed 
peaceful rise.
    Under Xi Jinping's leadership, punishment and detention for 
the exercise of free speech and assembly has been increasing. 
The government not only strictly controls the Internet and 
limits people's political and social rights, it also pursues 
efforts to forcibly assimilate ethnic and religious minorities, 
such as the Uighurs in Xinjiang. Legislation such as the 
Foreign NGOs Administration Law also put at risk our NGOs' 
ability to operate in China.
    Promotion of human rights and protection of personal 
freedoms should continue to be an important aspect of our China 
policy. Under Xi Jinping's leadership, the world has seen a 
China that is both more internally restrictive and more 
internationally assertive. His predecessor, Deng Xiaoping, 
encouraged a low profile for China on the world stage, saying, 
``tao guang yang hui.'' Under Xi Jinping, however, China has 
embraced a higher international profile, changing its foreign 
affairs slogan to ``striving for achievements'' or ``fen fa you 
wei.''
    I have had the privilege to travel to China more than 40 
times, and I have had the honor to get to know many thoughtful, 
inspiring, innovative, and successful Chinese people. If I have 
learned anything from my years of engagement with China, it is 
that there is no one way to characterize a country that is so 
full of wonder and full of contradictions, full of frustration, 
yet full of potential.
    As the United States prepares for Xi Jinping's visit on 
September 1, I urge our Government to welcome China's active 
role in the world, but we must also temper China's impatience 
and assertiveness with expectations of reciprocity and 
responsibility.
    I now recognize the ranking member, Brad Sherman, for his 
remarks.
    Mr. Sherman. Thank you, Mr. Chairman. We are, of course, 
holding these hearings an hour early. I got about 1\1/2\ hours' 
notice of that. So let the record show that I was not 2 minutes 
late to these hearings. I was 58 minutes early.
    Mr. Salmon. Right.
    Mr. Sherman. And I would hope that members who wish to give 
short opening statements be allowed to do so whenever they are 
able to arrive.
    We have two great issues with China, economic and 
geopolitical. It is my observation that in our country, 
whenever we are making a decision, we tend to make it in lines 
with the institutional needs of the most powerful institution 
that cares about that policy. So in the area of military 
affairs, we tend to make decisions meeting the institutional 
needs of the Pentagon. In the area of economics, we tend to 
make decisions based upon the institutional needs of Wall 
Street and the corporate sector.
    And with regard to China, this has led to a bizarre 
schizophrenia where we are about to fight China for islets that 
are useless and not ours and make every possible concession on 
trade, while never talking about using trade to tell China they 
better not take islands if we care about the islands, which I 
am not sure we should. Islets, I might add.
    Look at the Pentagon as an institution. Every time since 
1898 when we have faced a uniformed nation-state as an 
adversary it has been a glorious outcome for our military 
forces, none more glorious than the defeat of the Soviet Union, 
which basically took place by facing them down rather than 
engaging in kinetic warfare. Every time since 1898 that we have 
faced an asymmetrical opponent, every time we have faced a 
nonuniformed adversary, it has been very painful for our 
Pentagon and military forces. We have not always lost, but 
since the Philippine insurrection, it has always been painful.
    So the Pentagon, if it is going to meet its institutional 
needs, needs to find a worthy adversary. There is only one, and 
that is China. And that is why every decision at the Pentagon 
is how can we ignore the Middle East and reconfigure our forces 
to pivot toward a confrontation with the People's Republic of 
China. Every decision as to what research to do, every decision 
as to how to procure, force configuration, it is all about how 
can we fight the war--or the face-off, hopefully, not a kinetic 
war--that will meet our institutional needs.
    China does not have to be the enemy, but it is the only 
enemy that meets the Pentagon's institutional needs. Keep in 
mind when it comes to these islets, there is no oil, they are 
worthless. If they are standing astride trade routes, those are 
trade routes in and out of Chinese ports. If China controls 
them, they will have the geopolitical, strategic capacity to 
blockade their own ports, but they do not stand in a position 
to interfere with U.S. trade with Japan, the Philippines, et 
cetera.
    And there is no oil. If there was any oil, it wouldn't be 
our oil. And Japan, for example, spends almost nothing of its 
GDP to defend the islets that don't have any oil, but if it was 
oil, it would be Japanese oil.
    And China is part of this. They are meeting their 
institutional needs by whipping up nationalism over useless 
islets.
    When it comes to trade, the trade deal that is before 
Congress now is the most incredible gift to China and the most 
incredible gift to Wall Street. China is not a party, so they 
have no cost, no commitments. They don't have to pay a penny 
for this deal. But what do they get?
    First, a declaration by the world that the trade agreements 
of the 21st century will allow, even encourage currency 
manipulation, which of course is their number one way of taking 
American jobs.
    Second, the rules of origin provision. Goods can be made, 
admittedly, 60 percent made in China, but that really means 80 
percent made in China in reality, finished in Japan, finished 
in Vietnam, and get fast tracked into the American market. So 
it is 80 percent of all the benefits of signing a free trade 
agreement with the United States and zero percent of the cost.
    I would point out that while we run a $300 billion trade 
deficit with China, Germany has a balanced trade relationship 
with China. If we had a balanced trade relationship with China 
there would be a labor shortage in this country. Companies 
would be desperate to hire more people, they would be raising 
wages, they would be hiring the barely unqualified and then 
training them. A higher percentage of GDP would be going to 
labor. Wall Street does not want that. And this agreement 
ensures that we will continue to have the wage stagnation, or 
from the other side, labor cost nonincrease that Wall Street 
would like to see.
    Finally, we have one tactic that we could be using against 
China and probably should, and that is, gather the 
information--they are hacking us all the time--gather the 
information that proves that their top 1,000 cadres are corrupt 
and expose that information, as is appropriate, whether it be 
those who are the insiders like or those who are on the outs, 
whether it be those who are popular locally, those who are not 
popular locally, whether it be that we demand concessions, 
otherwise we will expose, or whether we actually expose in 
order to undermine the regime's image that it is fighting for 
the Chinese people.
    Of course, we are reluctant to do that, just as we are 
reluctant to have any of the hundreds of tax cheats in our own 
country who are exposed in multimillion-dollar revelations from 
banks subject to our criminal law, but we need to have dossiers 
on the economic corruption of the top 1,000 Chinese officials.
    And I yield back.
    Mr. Salmon. Thank you.
    Let me just make a comment on the timing of the hearing. 
There really wasn't anything sinister afloat. They changed the 
votes to 3 o'clock today, which would have given us time for a 
15-minute hearing, which didn't do justice when we have got 
somebody that came all the way from Hong Kong to meet with us.
    So we apologize for the changes to the people testifying 
today and to members of the committee. We did the best we could 
today with a very difficult situation.
    I recognize Mr. Duncan.
    Mr. Duncan. I thank the chairman and apologize. I will have 
to leave, due to the schedule change, at 1:30.
    I think it is prudent that we remind ourselves of Proverbs 
22:7, which says the borrower is servant to the lender. China's 
actions in the Spratlys and the South China Sea are 
inexcusable, and what should the U.S. do about it, given that 
China is such a strong economic power? And what should the U.S. 
do about that? Definitely not unilaterally, but also possibly 
working with the Philippines that are dramatically affected 
with the incursion in the Spratlys that we see.
    China's posturing is alarming. China is attempting to 
reshape international economics as well as geopolitics. And one 
thing that concerns me that I hope this committee will delve 
into is China's, for lack of any word, gobbling up mineral 
rights around the globe, especially when it comes to rare earth 
minerals, which they understand and we fail to recognize enough 
that they are vital to the technical systems of today, such as 
your iPhone, your iPad, and all the technology that really 
drives our economy.
    So these are some things that I hope we delve into, and I 
appreciate the chairman for having this hearing. And I yield 
back.
    Mr. Salmon. Thank you.
    Mr. DesJarlais, did you have any opening comments?
    Mr. Perry.
    Mr. Perry. Sure. Thank you, Mr. Chairman.
    The U.S.-China relationship is entering a new phase. 
Beijing has become more confident, global, and assertive. In a 
relationship that has unique cooperative and competitive 
elements, no one, none will stress a relationship more than 
those concerning the South China Sea. American efforts to 
protect our interests against this newly aggressive China have 
been, in my opinion, ineffective. In official public 
statements, the Obama administration takes no position on the 
disputed formal territorial claims and then calls for peaceful 
resolution of disputes.
    American objectives for the South China Sea must be a part 
of a larger strategy toward China that welcomes a greater 
Chinese economic and diplomatic role. It can't just be rhetoric 
and talk about a pivot without any action. We must set clear 
boundaries on Chinese expansion of its territory by coercion or 
conquest, and on its ability to deny the United States full 
freedom of action in the Western Pacific.
    And with that, Mr. Chairman, I yield back.
    Mr. Salmon. Thank you.
    Now we get to the panel. Pursuant to Committee Rule 7, the 
members of the subcommittee will be permitted to submit written 
statements to be included in the official hearing record. 
Without objection, the hearing record will remain open for 7 
days to allow statements, questions, and extraneous materials 
for the record subject to length limitation in the rules.
    Okay. We are honored today to have the distinguished panel 
before the subcommittee. Dr. Derek Scissors is a resident 
scholar at the American Enterprise Institute where he focuses 
on Asian economic issues. One of Dr. Scissors' areas of 
specialty is the economy of China and Chinese-U.S. economic 
relations.
    Dr. Alison Kaufman is a senior research scientist at the 
CNA Corporation's China Strategic Issues Group. One of her 
areas of expertise is U.S. security cooperation in the region.
    Thank you for being here.
    Jerome Cohen is currently a professor of law at New York 
University School of Law as well as the co-director of the 
U.S.-Asia Law Institute. Mr. Cohen has practiced law and lived 
in China for decades, since before the country opened up to the 
world.
    Mr. Dongfang Han is currently the executive director of the 
China Labour Bulletin. Mr. Han helped to form China's first 
independent trade union in 1989, and in the aftermath of the 
crackdown following the Tiananmen Square protests, he was 
arrested and detained for nearly 2 years. He has led a long 
career as a voice for reform and rights in China.
    I really enjoyed my meeting in Hong Kong with you, and I am 
so excited about you being here today.
    Adam Hersh is a senior economist at the Roosevelt Institute 
and a visiting fellow at Columbia University's Institute for 
Policy Dialogue. Previously he was a senior economist at the 
Center for American Progress.
    And without objection, the record will remain open for 5 
business days during which members may submit materials for the 
permanent record.
    And you all understand the lighting system. You have 5 
minutes to speak. I don't do a heavy gavel. If you have a few 
seconds over, no problem. But the light turns amber when you 
have got about a minute left. Just be cognizant of that. When 
it turns red, it is like my wife tells me when I am speaking, 
it is time for this.
    So I appreciate you being here today. We are extremely 
happy to have you here. I am going to start on the left side of 
the dais with--my left, your right--Dr. Scissors.

   STATEMENT OF DEREK M. SCISSORS, PH.D., RESIDENT SCHOLAR, 
                 AMERICAN ENTERPRISE INSTITUTE

    Mr. Scissors. Thank you, Mr. Chairman, and thank you to the 
committee for inviting me here.
    I am going to start by saying that the chairman's remarks 
about the great variety in China apply to U.S. studies of China 
as well. There are other research communities represented here 
who have very different perspectives for very good reasons.
    From my perspective--and I title my written testimony not 
``China's Rise'' but ``China's Stall''--so the econperspective 
on China is quite different than perhaps the national security 
or the human rights perspective.
    To summarize it, the China stall is not unavoidable, but 
the problem is more than a decade old at this point. The 
government is going to report whatever it wants, the Chinese 
Government can report whatever economic statistics it likes, 
but by the end of this decade it will be unmistakable that 
China is no longer growing economically, unless significant 
market reforms are resumed.
    That is the theme of my presentation. It has a lot of 
implications, which hopefully we will get to in the rest of the 
hearing.
    Let me give some qualifiers. I am not saying China is about 
to collapse. That is a different argument. I think it is 
unjustified. China's economic situation of high debt and aging 
population--and you see a picture up on the board--inadequate 
local innovation, that is not a collapse situation. That is a 
stagnation situation. So people talking about collapse are 
saying different things than I am saying here.
    I do think, rather, that China can avoid this, can have 
another generation of rapid growth, which would be very 
impressive on the top of the one it has already had, but it has 
to go back to what got it there in the first place, which is--
should I yield my time to Congressman Rohrabacher?
    Mr. Salmon. Go ahead.
    Mr. Scissors. Okay. It has to go back to what got it there 
in the first place, which is individual property rights and 
competitive markets.
    And my third caveat would be is I don't really care about 
GDP. I certainly don't care about Chinese GDP. The Chinese 
Government doesn't tell the truth about their GDP growth. I 
don't think GDP is a very good measure. What matters, 
especially in mixed command-market economies, is how well you 
are delivering the goods to households. So what I care about 
when I am saying China is stagnating, I am not talking about 
what they are going to report in 2020. I am talking about 
household and personal income growth.
    Okay. So how am I saying this? The problems go back to 
2003. In that year the then new government under Hu Jintao 
pushes aside market reform in favor of public investment, 
directed and financed by the state, largely routed through 
state-owned enterprises. 2003 to 2008, China's economy is 
getting bigger and it is getting less healthy. The equivalent 
of my wife's comment is: At 190 pounds, you were fine, you 
didn't get stronger when you added the extra 20 pounds. She 
says that, I don't know, once in a while, this morning, 
yesterday, you name it. That is what was going on in China 2003 
to 2008.
    You didn't see that when the numbers were soaring, but when 
the financial crisis hit, China's vulnerability was much 
higher. They were much more vulnerable to a drop in excess 
demand, they were much more leveraged. They actually got 
structurally weaker in those 5 years even though they got 
bigger.
    Then they had a horrible crisis response, which is to order 
their banks, because they control the banks, to lend to 
everyone, without discrimination, when no one could make money. 
So you would think that the United States would be the champion 
of debt problems. The financial crisis starts here. We had 
private sector debt problems. We brought a lot of the private 
sector debt into the public sector. China's debt problems since 
2008 are much worse than ours, not even close. And I could give 
you some numbers, but I want to get to my implications of this.
    So what is the forecast for China's growth? When you have 
high debt and you have overspent, you don't have a return on 
capital. You have already wasted a ton of money, you have to 
use a lot of your money to pay back debt, that is not going to 
drive growth. Aging, public health problems, labor, which has 
been a big contributor to Chinese growth, is not going to drive 
growth. Environmental destruction, which means the land, which 
was the original driver of Chinese growth in the late 1970s and 
early 1980s, not going to drive growth.
    Innovation, which both the chairman and the ranking member, 
several members have talked about, it is a very rough 
transition to go from copying and stealing other people's 
technology to developing your own, and what China needs to push 
growth higher is to develop its own technology, but that can't 
be ordered the way espionage programs can be ordered. So that 
is not a clear source of growth either. In fact, I think it is 
much more likely we are going to be dealing with China stealing 
U.S. technology and information than we are China driving 
innovation.
    Sources of growth are pretty easy. China is going to 
stagnate. And the way to get away from that is reform, which 
they have talked about, but it requires fewer restrictions on 
labor mobility so people can go where the jobs are. That makes 
the Ministry of Public Security very uncomfortable. My 
colleague may discuss this. I don't mean to put any words in 
his mouth.
    They need a competitive financial system instead of one run 
by the state. They need a smaller state sector so that the 
private sector can actually compete in more industries. They 
need private rural land rights. The state owns all rural land. 
Individuals can't own rural land.
    So this is a very tall order, and they have a long, long 
way to go. And I have to be cynical here. I don't believe 
governments do things until they actually do them. IOUs don't 
cut it. So right now China is on a path to stagnation, not a 
path to reform.
    I don't really have time for implications. There are a lot. 
I will say that the economic impact on the U.S. is not very 
large. We can talk more about that. I think there are some 
important strategic issues. I am not qualified to talk about 
some of them. One of them I am. Ranking Member Sherman said 
correctly: We should be spending more resources gathering 
information. I wrote a paper about this a couple of years ago. 
We can have differences over what information we want to 
gather. But we have a China that could stall. We were caught 
off guard when the Soviet Union's economy didn't work. We 
shouldn't have that happen again.
    Thank you.
    [The prepared statement of Mr. Scissors follows:]
  
  
 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
                ----------                              

    Mr. Salmon. Thank you.
    Mr. Han.

  STATEMENT OF MR. HAN DONGFANG, FOUNDER AND DIRECTOR, CHINA 
                        LABOUR BULLETIN

    Mr. Han. Thank you, Mr. Chair. Likewise, I enjoyed our 
conversation in Hong Kong. I am here as a democracy activist 
based in Hong Kong for more than 20 years and fighting for 
better labor rights protection and democracy in China.
    I want to share with you what is behind the South China Sea 
conflict. What is changing, what is possible in China's 
society. Ten years ago, the China Labour Bulletin decided to go 
for a collective bargaining system in workplaces, and we fight 
for that instead of political freedom of association to take 
what the Chinese Government doesn't want to give.
    So during the 10 years, the first 5 years we did seminars 
and writing articles to promote this idea, but in the last 5 
years we got involved into 70 strike cases, we are able to make 
each of the 70 cases into a certain level of collective 
bargaining. And that proves something, that when we made that 
decision people were doubting, without freedom of association, 
whether you can do collective bargaining under a communist 
regime. We did so.
    So 10 years after, I have to say very proudly collective 
bargaining in workplaces in China is being accepted by 
different people in this country, including the government and 
official trade union and labor NGOs, and most importantly, the 
workers who are on strike. From wildcat strike without a clear 
agenda, without a clear strategy, they turn into very a clear 
strategy on their collective bargaining. So that makes labor 
relations much less confrontational than before.
    So that means if collective bargaining can happen under a 
communist regime, and the labor issue and labor movement even 
can be operated at some level in China, that was the most 
sensitive issue in the communist regime, if that can happen, I 
think there are many other things that can happen. If the 
government can allow these things to happen, many other things 
can happen. So I just want to share with you about that, and 
there are possibilities.
    And the second point I want to share is that China is a 
highly interest-oriented country. So you have a military, you 
have a Public Security Bureau, you have the state security, and 
you have workers, you have employers. And this country is 
highly operated with a market economy. So how can we deal with 
a highly self-interested society and politics as well? And that 
is one of the reasons, I have to say, why the labor movement 
became possible under the communist regime.
    And the other point I want to make is social media with the 
new technology. This is no longer as a tool. Social media is no 
longer as a tool. It is a way of living for hundreds of 
millions of Chinese people. That means controlling information 
for anyone, including the government and security, it is not 
possible. And hundreds of millions of Chinese people are 
receiving and sending out information, sharing information, 
sharing their desperation, their experiences with others over 
the Internet either with people they know or they don't know.
    So the new reality, the social media, really, really 
provided a huge opportunity and space for civil society to 
grow, and that is what I believe the future democracy and 
China's change will be based on. So therefore I would like to 
recommend to people who are working on the China-U.S. 
relationship, I would like to see as a democracy activist, I 
would like to see the U.S.-China relation have less hostility 
and more trust, and I really would like to see to build a 
strategic partnership, even in the South China Sea. Why not? It 
is possible.
    And second, I would like to see the U.S. devote more 
resources to help China develop the civil society movement, 
which is already growing, for example, the labor movement 
development. It will benefit both the U.S. workers and Chinese 
workers to have both sides higher income.
    So therefore I want to emphasize that the CCP, Chinese 
Government, is already changing into a new reality, and I 
believe China doesn't need to repeat what happened in Eastern 
Europe countries and the former Soviet Union. It can change the 
country for the better. So I would like to say that the civil 
society movement, it is very vulnerable and fragile, if 
anything happens between the U.S. and China military-wise, and 
that will be a disaster for the civil society to develop.
    Thank you, Mr. Chair.
    [The prepared statement of Mr. Han follows:]
    
 
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    Mr. Salmon. Thank you.
    Mr. Cohen.

 STATEMENT OF MR. JEROME A. COHEN, PROFESSOR AND CO-DIRECTOR, 
   U.S.-ASIA LAW INSTITUTE, NEW YORK UNIVERSITY SCHOOL OF LAW

    Mr. Cohen. I want to congratulate the chairman and members 
of the committee for opening statements that were eloquent, 
comprehensive, and stimulating, and I think I have learned a 
lot just from listening to my two colleagues.
    My own remarks will focus first on the domestic scene, and 
secondly on China's foreign policy, which is our most immediate 
problem.
    On the domestic scene, I think between the chairman's 
statement and what we have heard here, I don't have to recite a 
whole chain of challenges, but it helps to remember them 
because I am neither on the side of the collapsists who think 
China is on the verge of demise or those who think China is 
going to dominate the world. I think actually, because its 
vulnerabilities are accumulating and beginning to outweigh its 
assets, that China may have peaked in terms of the world's fear 
of China and respect for it.
    It doesn't mean, however, that this government is going to 
disappear. When we remember the example of North Korea, even 
they are able to hang on indefinitely. So we shouldn't 
underestimate the viability of this government, but we have to 
think about what it is likely to do.
    The sad thing from the point of view of China's leaders is 
these people represent a Communist Party that after 65 years of 
ups and downs really has to be credited with making huge 
economic and social progress. On the other hand, the speed of 
that progress has led to many of their problems. They are 
victims of their own success, and they have not devised a 
system that is adequate for dealing with these questions, 
whether you call it democratic or democratic dictatorship or 
whatever. And these leaders are afraid. They are like cats on a 
hot tin roof. Despite their many accomplishments, they fear 
overthrow. And June 4, 1989, in which Mr. Han took part, was a 
too vivid reminder for them.
    So they engage in repression, and the repression has gotten 
worse in the last 3 years under Mr. Xi Jinping. He will appear 
here in September, a very attractive character, able person. 
But the fact is we have to understand the repressive policies 
in which he is engaged. I have many friends in prison in China. 
I have many who are exiles who cannot go back to China. These 
are often the cream of Chinese society. They are the best 
future of China.
    Repression cannot go on forever. If we look at the example 
of Taiwan, when I first went to Taiwan in 1961, Chiang Kai-
shek's son was head of the secret police. He was a killer. By 
the mid-1980s, when he was in charge of the government he had 
inherited from his father, he was beginning to be a modernizer. 
He saw you can't go on using repression. You have to begin to 
develop social, economic, political, and legal institutions 
that can process the grievances that accumulate inevitably with 
progress. And he started off what now has become the vibrant 
democracy in Taiwan.
    And that is something I wish Mr. Xi Jinping and his 
colleagues could expend more energy on. But their natural turn 
is repression. And we are going to see this perhaps for 8 more 
years if he can remain in office, despite his anticorruption 
campaign's implications, et cetera. I think somebody has to 
assert the time has come for domestic reform of a serious 
nature.
    But let me talk about the international situation. You 
know, it is easy to exaggerate, with the current concern over 
China's policy toward the South China Sea, how terrible their 
foreign policy may be, et cetera, but we really need to keep an 
overview. And I think China and the U.S. are ready to continue 
cooperation on many subjects, particularly environment, climate 
problems, et cetera. I think with the coming Strategic and 
Economic Dialogue we will see continuing efforts to compromise 
on many of the controversial issues that plague us.
    China has entered the WTO in largely a constructive way, 
and although it hasn't completed complying with all its 
obligations, I think that is a good example of China as a full 
participant in the world process. On the other hand, as was 
mentioned, the so-called foreign NGO law that is being prepared 
is going to wreak havoc with China's foreign relations. It is 
going to cover much more than NGOs. Every university is 
covered. Their definition of NGO is very, very broad.
    And the institution in China that is going to administer 
this is the Ministry of Public Security, the police, not the 
Ministry of Civil Affairs that used to be responsible for these 
problems exclusively. And that may be the best hope for seeing 
revisions of the law before it is passed, because other Chinese 
institutions are very jealous of the authority of the police 
organizations in China. And we should note, the budget for the 
police organizations in China exceeds, every year now, the 
budget for the national military. That is a pretty sobering 
reflection of the repression that is going on.
    But the most important questions are serious ones that 
plague us today. It used to be the East China Sea with Japan, 
but it is noteworthy we don't hear much about that now, and 
there is a lesson in that, because we could see the same result 
if we play our cards right with the South China Sea.
    It seems to me the South China Sea issue has to lead to 
what to me as a international law professor and lawyer is very 
obvious. Different countries have different views about the 
rights and wrongs of the international law issues involved 
about the specs of Earth and the Spratlys and Paracels, et 
cetera. The obvious answer, as it is in the East China Sea 
between Japan and China, is turn to international law. Turn not 
only to assertions that we are right and there is no dispute we 
are right because we are right, that is just nonsense. 
International law also presents institutions for resolving 
these questions.
    We don't have that when we look at cyber attacks, we have 
no rules yet for that, and we have no institutions for applying 
those rules. But we do have that with the Law of the Sea. That 
is what UNCLOS is. And I hope that you will try to use your 
influence with the Senate to make a final successful effort for 
the U.S. finally to accede to UNCLOS, because right now we are 
denied the opportunity to do what the Philippines has done.
    I admire enormously what the Philippines has done. They had 
the guts to bring China to an arbitration under the Law of the 
Sea institutions, and China is legally committed to take part 
and certainly to observe whatever decision comes out of these 
impartial experts who are arbitrating the Philippine dispute 
with China.
    Early next year we will at least have a decision whether 
this tribunal has jurisdiction over the case, and I think it 
will probably find it does have and it will go on to answer 
some of the questions that currently plague us. Do you want to 
know what an island is compared to a reef, compared to a rock? 
These questions may well be answered through the Philippine 
arbitration. Is the nine-dash line a bunch of hooey, as many of 
us think it is? Well, we can look to the Philippine arbitration 
perhaps to answer that. This is just an example of what 
international law institutions can do if they are invoked.
    The sad thing is the Philippines stands by itself right 
now. Japan may be saying: We will hold your coat and we hope 
you win. That is certainly Vietnam's view. And we have others. 
Taiwan, of course, is excluded from formal participation, but 
they too should be taking initiative. This is the time for 
using international institutions and imagination.
    There are so many ways available, in the light of 
international law precedents, for solving these problems. You 
can decide to do an inventory of all these features and decide 
which are reefs, which are rocks, which are islands entitled to 
a full panoply of Law of the Sea benefits, Continental Shelf, 
exclusive economic zone, and all that. We can have diplomats 
decide we will divide up, we will share jurisdiction, we will 
share resources in some ways.
    But the diplomats are in a stalemate. We have heard the use 
of stalemate to describe the domestic situation in China, 
stalling. Well, we have a stalled political situation 
internationally, and the United States and Japan and Taiwan, as 
well as the Philippines, and even Vietnam, which behind the 
scenes sides with the Philippines, have to use the existing 
institutions, and I hope that your committee will use its 
influence to make more of the opportunities that exist.
    So that is the burden of what I have to say.
    [The prepared statement of Mr. Cohen follows:]
    
    

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    Mr. Salmon. Thank you very much.
    Dr. Hersh.

  STATEMENT OF ADAM HERSH, PH.D., SENIOR ECONOMIST, ROOSEVELT 
                           INSTITUTE

    Mr. Hersh. Thank you, Chairman Salmon, Ranking Member 
Sherman, thank you for inviting me to testify today.
    China's rising geoeconomic and geopolitical significance 
and what it means for the United States could not be a more 
timely or important topic, particularly as our Nation considers 
how to proceed with the Trans-Pacific Partnership trade 
agreement.
    Let me begin with a point of agreement on this issue. The 
rules for how our economy works, who gets to write those rules, 
this is of fundamental importance to the United States' 
economic future. The divisions we saw in last week's historic 
TPA/TAA vote here in the House reveal how much the rules matter 
to people. Some point to this outcome as a sign of a broken 
Congress, but I submit this was Congress doing its work.
    Rather, what is broken is the relationship between Congress 
and the executive branch, particularly the USTR, and how 
divided constitutional authorities to make international 
agreements work in practice in our Government. When the rules 
matter this much, we should take the time to get them right, 
rather than trying to bulldoze through Congress whatever rules 
USTR and the corporate lobbyists that negotiate these 
agreements with them, supposedly on our behalf.
    What we know about this agreement is that it has less to do 
with freeing trade, creating jobs, raising wages, or 
rebalancing geopolitics than it does with rewriting the global 
economic rules to favor corporations, CEOs, and shareholders at 
the expense of almost everybody else. Unless Congress acts to 
change this balance of power with the executive, we should 
expect more of the same confrontational politics and 
uncertainty over policy when what we really need is to reach 
agreements that meet our national imperatives through 
cooperation and inclusion.
    I will make two points today. My first point is that the 
most fundamental thing for national security is a strong 
national economy, and TPP would weaken our economic base, leave 
us more unequal overall, and reinforce the global race to the 
bottom in social and environmental standards, commercial 
standards, and taxation. My second point is that TPP fails the 
geostrategic rationale for checking China's rise on many 
fronts.
    On my first point, estimates of TPP's economic impact say 
it would raise U.S. GDP by $88 billion by the year 2025. This 
amount is less than the statistical rounding error when we 
calculate GDP for the United States. If each of you chose a pet 
infrastructure project in your district and decided to fund 
that, it would have a bigger economic impact over the next year 
than TPP will have 10 years from now.
    TPP's big changes are not to lower traditional barriers 
between countries, but to change how the economic rules work 
within countries. I detail this in more detail in my written 
testimony, but I will highlight the investor-state dispute 
settlement as one of the major issues of the agreement.
    Here I will note that progressives like Senator Elizabeth 
Warren and my boss, Nobel Prize-winning economist Joseph 
Stiglitz, are aligned with scholars from the Cato Institute and 
editors from The Economist magazine in agreeing that ISDS goes 
too far in empowering global corporations against the 
sovereignty of the public to regulate in its interest. What 
ISDS does is provide an implicit subsidy for foreign investors 
to move their investments offshore and makes it more difficult 
for our partners to raise the standards that we say we care 
much about.
    My second major point is that TPP fails the geostrategic 
rationale for keeping China in check. This is a 20th century 
cold war containment strategy aimed at a 21st century problem 
where the United States is no longer the center of the world 
economy. For this to work, it would need to do two things. It 
would need to truly set high standards and it would need to 
largely exclude China from the benefits of this trade bloc. 
This would let TPP countries get a bigger share of the 
supposedly higher standard trade and investment happening in 
the region and entice China to raise itself toward TPP 
standards, but it does neither of these.
    On the first test, TPP makes no meaningful advances over 
the status quo of recent trade agreements. It leaves in place 
the same woefully toothless mechanism to enforce standards on 
labor rights, environmental protections, and accountability for 
state-owned enterprises. And TPP foregoes the opportunity to 
discipline currency manipulation for trade advantage, which is 
a pervasive practice, not just in China but across the Asia 
region.
    On the second test, TPP cannot feasibly exclude China from 
the benefits of the agreement. China is already more integrated 
with TPP countries than the United States. Its total trade with 
non-NAFTA TPP members is nearly double that what the United 
States has with the same group of countries. What this means is 
that either by investing directly in or trading Chinese-
produced content through TPP countries, deeper and growing 
integration with China will mean that Chinese producers can 
enjoy access to TPP's market access without reciprocating the 
same market opening to U.S. businesses and workers. In fact, 
the Chinese officials I talk to are about as enthusiastic for 
TPP as any business lobbyist here in Washington.
    China's transformation under authoritarian capitalism, its 
ongoing nonmarket economic structure, its expanding 
geopolitical influence, these all pose real challenges for the 
United States and for the future of open societies around the 
world. But TPP does not provide answers to these challenges.
    Finally, our own unforced errors in foreign economic 
relations are much for damaging the U.S. reputation in the 
region than your vote on TPA and slowing down the process for 
negotiating TPP. Here, I am looking at things like Congress' 
failure to enact internationally negotiated IMF reforms and to 
this administration's diplomatic debacle in trying to strong-
arm our allies into boycotting China's Asian Infrastructure 
Investment Bank. When this is how we treat our friends, it is 
no wonder the United States has a reputation problem in the 
world.
    This strategic choice cost us an opportunity to write the 
economic rules with China. Instead, it left us isolated from 
the international community and left China to write the rules 
on its own.
    These problems do not end with TPP. A multitude of other 
agreements are underway with the same basic template, from a 
mega regional agreement with the European Union, to the trade 
in services agreement, to bilateral investment treaties with 
China itself. These will determine whether we grow with broadly 
shared prosperity or continue down our economic path that 
produces high and rising inequality and low economic 
opportunity.
    Strengthening international relations is essential for 
ongoing U.S. leadership in the world. So is getting these rules 
right. No American should relish a failure to build deeper and 
more open relations with our partners, nor should we retreat 
from trying. But getting to a deal that serves more than the 
narrow interests of powerful multinational corporations 
requires that Americans be willing to walk away from the TPP 
agreement that we have on the table now.
    Thank you.
    [The prepared statement of Mr. Hersh follows:]
    
 
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    Mr. Salmon. Thank you.
    Dr. Kaufman.

STATEMENT OF ALISON KAUFMAN, PH.D., SENIOR RESEARCH SCIENTIST, 
            CHINA STUDIES DIVISION, CNA CORPORATION

    Ms. Kaufman. Thank you very much for having me here today. 
I am going to give the usual caveat that the views I express 
are my own, not those necessarily of CNA, the United States 
Navy, the Department of Defense, or in fact anyone but myself. 
So I state that for the record.
    In my testimony today I have been asked to talk about 
Chinese security affairs, and the first point I want to make is 
that actually, in the Chinese view, everything we are talking 
about today is part of security affairs. Xi Jinping has been 
very clear about that, but it is actually quite a longstanding 
trend in Chinese views, that internal security, external 
security, economics, diplomacy, law, military, all of it is 
part of what they consider to be their security problem.
    And so when Chinese decisionmakers think about securing 
their nation, they are also thinking about how to balance all 
of those things with one another. So I would assume that when 
Chinese decisionmakers sit down they actually say: Here are all 
these problems we have, how are we going to make these work 
together to strengthen China and make it more powerful?
    That said, I have been asked today to talk more on the 
military side of things and more traditional view of security. 
So today I am going to raise three questions. First, what are 
some of the security issues that Chinese leaders appear to be 
worrying about the most right now? Second, what are they doing 
about them? And third, what does this mean for the United 
States?
    So first, what are Chinese leaders worried about? They draw 
their worries from the past, the present, and the future. All 
countries do this. The Chinese are especially concerned with 
the past in many ways for shaping their view of what the future 
may hold. Based on the past, they worry that China's 
sovereignty, its territory, its international stature and 
reputation, its self-determination, and its internal stability 
are always, constantly, under threat. It is a very deep 
existential anxiety. There is also a longstanding view that 
Western powers, in particular the United States, have vested 
interests in China maintaining a degree of insecurity. So this 
is a starting point, I think, for many aspects of U.S.-China 
relations.
    Based on the present, they look around them, and they worry 
that China's global interests are now expanding faster than 
their own ability to secure those interests. China's economic 
growth, especially, increasingly depends on the ability to 
protect overseas investments and workers--we heard a little bit 
about that today--to secure sea lanes that carry its energy and 
trade, and to manage transnational crisis and national 
disaster.
    Then, looking to the future--and here we are lucky that 
China's Government and affiliated organizations have very 
recently published fairly authoritative texts outlining what 
sorts of problems they think the future holds, not just for 
them but for the world--they see a world in which crisis that 
could escalate to conflict or war lurks everywhere, in which 
security issues are very, very complex and transnational and 
will often require cooperation and coordination, both within 
the Chinese establishment and also with foreign countries, and 
in which their ability to win at information-based warfare is 
going to require advanced capabilities in the maritime, cyber, 
and space domains.
    So what are they doing about these security concerns in the 
military domain? Obviously, you are very familiar, I think, 
with the military modernization program that has been going on 
for many years. The annual DOD report to Congress, I think, 
summarizes that very, very well.
    In addition to that, the Chinese People's Liberation Army, 
the PLA, has a very, very long task list. Again, they published 
it recently. I would not want to have that long a task list. Of 
course they are supposed to be very good at warfighting and, of 
course, solidify any reunification with Taiwan. They are also 
supposed to take on crisis management, international security 
corporation, internal security, humanitarian assistance, 
disaster relief, rights and interest protection, which is both 
a new and an old language, support for national economic 
development, and a whole host of other things.
    This is a very long list that they have to undertake, and 
Xi Jinping clearly does not think the PLA is ready to take this 
on. So in addition to the longstanding military modernization 
program, Xi also has announced dozens of areas of institutional 
reform within the Chinese military. Among others, it is a very 
long list, but among others this includes improving joint 
operations doctrine and capabilities, rebalancing the force 
structure more toward maritime, air force, and second 
artillery--their strategic nuclear force--building up defense 
R&D, improving their human capital, which has been a 
longstanding concern, and also improving the PLA's internal 
discipline and reaffirming its party loyalty.
    These are all tasks that Xi has set before them in 2013, 
and in the intervening couple of years, and I think going 
forward for the next several, we are going to see a lot of 
changes coming out of the institutional aspects of the Chinese 
military.
    We have also, obviously, seen the reorganization of China's 
civilian maritime law enforcement organizations--we have been 
hearing a lot about that--their white hulls, using nonmilitary 
vessels to conduct law enforcement operations, and also the 
establishment of a top-level national security commission or 
committee with Xi Jinping at the head whose exact mandate is 
still rather unclear to us.
    China has also been undertaking these moves to secure what 
it calls its maritime rights and interests, particularly in the 
South China Sea. I am not going to belabor that because I think 
everyone is very familiar with those points. But one point to 
make there is that those moves, of course, make neighboring 
countries very unhappy. And partly in response, they are also 
investing now in their white hull capabilities, their civilian 
coast guards, things like that, and in some cases their 
military capabilities, and they are also enhancing their 
military partnerships across the region and beyond, including 
with the U.S.
    So what does this mean for the United States? Well, I think 
a key challenge for the U.S., for the United States Government, 
for policymakers is figuring out how to manage these 
insecurities within the U.S.-China relationship. That doesn't 
necessarily mean conceding to or accommodating these 
insecurities, but it means encouraging China's productive 
cooperation and a greater sense of security in areas where 
those concerns are convergent with U.S. interests, and 
dissuading China from feeling more secure in areas where these 
concerns and interests may diverge from those of the United 
States.
    Obviously, in areas such as counterpiracy, peacekeeping, 
noncombatant evacuations, avoiding accidental crises, all of 
these problems that go along with China's expanding global 
economic footprint, there are a lot of areas in which it may 
make sense to support a more secure China. A China that is more 
invested in burden sharing on things like counterpiracy, 
peacekeeping, and so on, may be more aware of the cost of 
losing those opportunities. A China that feels included in 
international efforts, including international legal 
institutions, as some of the other people here have been 
talking about, may be less suspicious of international 
partners, more willing to speak with them within those venues, 
and also less likely to strike out on its own.
    That said, obviously, the way that China is currently going 
about dealing with many of its other security concerns is not 
compatible with U.S. policy and interests, and China's 
leadership has framed a lot of those issues in terms that would 
make it very hard now for them to easily walk back. This 
language of rights and interests is very powerful in China. It 
is hard for them to step back from it now that they have 
employed it.
    Here, I think the U.S. path needs to be to show China that, 
in fact, China's own security interests, all the interests we 
talked about here at the table, are actually at cross-purposes, 
that China can't secure some of those interests through its 
current approach without seriously compromising some of the 
others. So China can't simultaneously maintain stable economic 
relations with its neighbors or with other countries in the 
world while aggressively pursuing its territorial claims.
    China can't expect international law to work for it 
sometimes and not accept its jurisdiction at other times. And 
China can't expect other countries to simply accept that PLA 
modernization is not a threat without engaging in much greater 
and more credible transparency about the PLA's capabilities and 
intentions.
    The costs of these self-contradicting behaviors should be 
high, and they should be a focal point, in my opinion, for U.S. 
discussions with China and U.S. cooperation with other 
countries in the region. I believe that the U.S. should be 
prepared to use all instruments of national power in tandem, 
economic, diplomatic, military, other instruments, to persuade 
China of what these costs might be.
    Thank you.
    [The prepared statement of Ms. Kaufman follows:]
    
    
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    Mr. Salmon. Thank you.
    Given the fact that one of the reasons we moved the hearing 
today was because they called a 2 o'clock mandatory conference 
for Republicans, and with my colleagues on the Republican side, 
I want to give them an opportunity to ask questions before they 
have to leave, so I am going to start with them.
    Mr. DesJarlais, you were here first, so go ahead.
    Mr. DesJarlais. Thank you, Mr. Chairman.
    And I thank the panel for your insightful testimony. It was 
very helpful and very informative.
    Dr. Kaufman, you were kind of wrapping up your testimony 
regarding the Spratlys and the concerns of Malaysia, Vietnam, 
Taiwan, Philippines, and others with what they may see as 
aggression. What would be the consequences for the United 
States and the region if China were to establish de facto 
control over the South China Sea?
    Ms. Kaufman. You always start with the hard questions.
    I think the challenge for the U.S. is that other countries 
in the region are watching to see, of course, what the U.S. 
will do, regardless of the nature of the U.S.' formal 
commitment. I mean, in the case of the Philippines, the U.S. 
has a treaty alliance. I am not an expert on the terms of 
those, but there is not necessarily an expectation that the 
U.S. would be involved in an actual conflict. But I think that 
everyone is waiting to see if the U.S. will back up what it has 
said is unacceptable in terms of international law and in terms 
of U.S. policy and partnerships.
    And so I tend to think that if the U.S. did nothing, I 
mean, if China establishes these long-term plans and the U.S. 
continues to pursue relationships in all of these other 
domains, that countries in the region will say: Well, you must 
not really mean it.
    I think that everyone understands the very, very difficult 
military position that the U.S. is in, and people I have talked 
to in the region are, I think, clear about the fact that this 
is a very difficult dilemma. I don't think anyone thinks that 
the U.S. is dying to come in and take care of this problem. So 
I think they recognize that. But I think that a failure to 
react on other fronts to instill any kind of pain for doing 
these things that we said are unacceptable would be a problem 
for us.
    Mr. DesJarlais. Thank you.
    And I was going to ask a few more questions along that 
line, but, Dr. Hersh, I heard your comments on TPP. I wanted to 
get maybe a different perspective.
    Dr. Scissors, do you have an opinion in regards to the 
Trans-Pacific Partnership trade deal that is currently being 
negotiated, whether it has potential to considerably increase 
U.S. economic engagement in the region? And would you 
specifically view this potential deal as an opportunity to 
promote democratic values in the region?
    And, Mr. Han, I will switch to you to answer that after Dr. 
Scissors' comments.
    Mr. Scissors. Well, I seem to be constrained more than my 
fellow panelists because I haven't seen the document, so I 
don't know what is in it and I don't whether I like it. A lot 
of the critics of TPP apparently don't care what is in it.
    I would love TPP to be a strong free trade agreement. I am 
an absolute free trader. That is what I want. I don't know what 
is in it. It is very hard to talk about gains. The studies that 
are done on TPP make very anodyne, weak, I don't mean weak like 
wrong, I mean just they have to be very cautious in their 
assumptions is not very helpful.
    I think that if TPP is a strong agreement, which is 
uncertain, it is a very powerful template for U.S. economic 
expansion going forward because it will be used as a basis for 
the TTIP and other agreements. So just looking at the gains 
from TPP as just the start for the U.S. economy, again, this is 
if it is a good agreement, I think what we can say as a 
secondary matter, because I am interested in the economics more 
than I am in U.S. leadership, is that if we don't move forward 
with TPP we are reduced to the status of mercenaries in Asia.
    What East Asia cares about is economic development. This is 
the major initiative on the table. We have a number of Asian 
countries who are already parties. There are others who want to 
join. If it is no good, we have also blown our economic 
leadership. If we don't pass it, we have blown our economic 
leadership. And that leaves us as the people you call when 
there is a firefight, not the people who come to bring 
prosperity.
    So I can't endorse TPP because I am not allowed to read it 
yet, but I can endorse the fact that we need a major economic 
initiative in the region very badly, and I am very hopeful that 
TPP is that initiative.
    Mr. DesJarlais. Thank you.
    Mr. Han, you can take the reminder of the time.
    Mr. Han. The TPP depends on what is that aiming to. If it 
is pure economical, I don't have much opinion on that. But if 
it is about excluding China, there may be another impact or 
another intention, that will make me doubt whether, one, you 
can make China as a better international player, economically 
and politically; second, the Chinese workers and Chinese people 
will get benefit from this TPP, which my colleague mentioned 
that it may make Chinese workers' rights better.
    And that reminds me of CSR, corporate social 
responsibility, which has been around for many years. That is 
much closer to enterprises, and that enterprise is self-
policing, but it becomes something else. It never really 
benefits Chinese workers.
    Now, as I said earlier, that workers in China are already 
taking their fate in their own hands, and Chinese civil society 
development also is very fast developing. And Chinese people 
are trying to take everything into our hands and that Chinese 
Government has to listen to more and more. If TPP is for the 
purpose of isolating or targetting China, excluding China, then 
I don't see much benefit Chinese people will have.
    Thank you.
    Mr. DesJarlais. Thank you. Yield back.
    Mr. Salmon. Thank you.
    Mr. Sherman.
    Mr. Sherman. Thank you. I do want to chime in on the 
economic analysis of TPP and TPA.
    First, I mean, economists have kind of blinders on. First 
they look at how TPP will change the status quo. What they 
don't look at is its number one affect, which is to lock in 
those portions of the status quo that it locks in.
    So if TPP said nothing but there is no change and the 
United States is locked into the trade policy that has governed 
us over the last 30 or 40 disastrous years, that would be a 
huge agreement. If it said nothing but from now on America will 
never effectively complain about currency manipulation, that is 
huge.
    Now, we have never done it. I mean, we talk about it a 
little bit or chatter. So the biggest effect of TPP is to lock 
in a rejection of worrying about focusing and responding to 
currency manipulation or going the Warren Buffett route of 
saying, if you want to export to the United States, well, 
whenever there is an export from the United States, we give the 
exporter a chit, and if you want to bring something in, you 
need to buy one of those chits.
    So if the agreement did nothing more than lock us into all 
the bad decisions we have made, it would be bad enough. The 
other thing the economists don't look at is the rules of origin 
because, as Dr. Scissors points out, he is not allowed to read 
the agreement. If you go to the basement, you will see, and I 
can't reveal exactly what the numbers are here, that goods that 
are 60 percent made in China, admittedly, which means actually 
70, 80, 85 percent made in China, get into the country duty 
free.
    So all the economic analysis is based on what is going to 
be produced in Japan, what is going to be produced in Vietnam. 
There is no analysis of what is going to be produced in China 
and finished in Japan or Vietnam, or slap a ``Made in Vietnam'' 
sticker on it. So I would be very surprised if it increased our 
GDP at all.
    The next point I want to make is what the Chinese 
Government lacks is any ideological support for its existence, 
any source of a mandate from heaven. We survived the Great 
Depression, as did every other traditional democracy, because 
even with bad results, we had a system people agreed to.
    Now, the divine right of kings works pretty well. People 
believe it. Democracy has stood the test of time where it has 
got its root in. Islamic theocracy seems to be able to survive 
U.S. sanctions more or less. And the Communist religion, when 
you are truly the vanguard of the proletariat, was sufficient 
to allow Stalin and Lenin to survive even when there were very 
bad times for the people of the Soviet Union.
    In contrast, this government is not the vanguard of the 
proletariat. It may be many things, but they are not that. So 
as long as they deliver tremendous economic growth, what is not 
to like? But if they face anything like we faced in the 1930s, 
they have got to retreat to what they are already retreating 
to, which is nationalism, xenophobia, and you better support 
us, otherwise China will lose the islets. And there is oil 
under those islets. And you better believe that because you 
better believe that you ought to keep us in power.
    Mr. Cohen, you mentioned the Philippines is taking China to 
the international tribunal, and the Chinese are more or less 
accepting that process?
    Mr. Cohen. They are thumbing their nose at it.
    Mr. Sherman. Okay. I am glad I asked the question.
    Also, Mr. Cohen, describe for me how corrupt are the top 
2,000 people in the Chinese Government, and when they are 
corrupt, what do they put their money into? Is it Swiss 
chateaus, is it Rolex watches? Because if you want to undermine 
any government anywhere in the world, it is not enough to say 
they are corrupt. People love the details. The Kardashians, 
every detail. But at least they are not corrupt. At least they 
are not governmental. So lifestyles of the rich, famous, and 
corrupt, what would we see if we could make the TV show?
    Mr. Cohen. Well, shall I answer that question, Mr. 
Chairman?
    Mr. Salmon. Yes. In fact, it is your opportunity to answer. 
You answer however you feel.
    Mr. Cohen. I want to first comment on the first point you 
made, Mr. Sherman, of course, as you know so well, this concern 
about the TPP and economic relations generally with China 
involves politics every bit of the way. I have three quick 
observations on that.
    One is we have to recognize our failure to open the IMF, 
the World Bank, the Asian Development Bank to greater Chinese 
participation to reflect the new Chinese achievement.
    Second, on the TPP, process is as important as substance, 
and as far as I know, this is a nontransparent process. And I 
am a citizen, I believe in human rights, and I really am 
concerned about my inability to know what the TPP really 
contains. And I realize there are problems in negotiating with 
11 other countries if you don't keep things secret, but how do 
you expect public support for any agreement where the public is 
being uninformed?
    And this is a bad precedent for other governments. Taiwan 
is in a stalemate now in its cross-strait relations with the 
mainland because of the fact the people in Taiwan have risen up 
in the Sunflower Movement, as it was called, against the 
failure----
    Mr. Sherman. Mr. Cohen, we do have limited time. If you 
could focus on the question I asked about corruption.
    Mr. Cohen. Well, that was not the only one.
    Mr. Sherman. It is the only one I asked you to answer, but 
go ahead.
    Mr. Cohen. In any event, on corruption, what we now know 
after almost 3 years of an intense campaign by the leadership 
of Mr. Xi Jinping is that there is far more corruption in China 
than the outer world had realized. And this represents a crisis 
for them because if he continues to pursue the so-called 
tigers, like Mr. Zhou Yongkang, who was just dispatched to life 
imprisonment, and he goes beyond his own enemies like Zhou 
Yongkang to, in an objective fashion, pursue other leaders in 
China, this can lead to the destruction of the party.
    On the other hand, if he doesn't pursue these people, it is 
going to lose public support. And leaders before him, and he 
also has agreed, failure to pursue corruption is a life-or-
death question for the party. They may get through the next 8 
years of his term, but it is not going to go far beyond that.
    So I think you put your finger on a critical issue, and the 
problem is for us what to do. Right now China is asking us to 
find and return to China people the Government of China is 
pursuing as being corrupt elements. And the U.S., not having an 
extradition treaty with China because we can't send people back 
to a legal system we don't trust, doesn't know what to do. We 
were going to have the head of the Chinese anticorruption 
campaign visit Washington at this time, but because of 
inability to make an agreement on how we are going to handle 
their demands to send back as many as 150 leading people, he is 
not coming.
    The other problem is, what is corruption? Much of what 
passes for corruption in the eyes of the Chinese people may not 
be direct bribery, but it is the use of Guanxi, relationships. 
If I am the son of a leading member of the Communist Party, 
everybody knows that when I try to make a deal, and it offers 
so many opportunities. And they have gone into every kind of 
business. It isn't just they spend the money on luxury things. 
They are making hundreds of millions of dollars.
    And one problem is what can you do about family networks--
Xi Jinping himself has this problem in his own family. He has 
got people who have made lots of money by using their access to 
the top. So this is a huge problem for China. It may be a life-
or-death struggle.
    Mr. Sherman. Thank you.
    We are debating whether to withdraw from the Middle East 
all military force right now on the floor, so I am going to 
have to go to the floor. I yield back.
    Mr. Salmon. Thank you, Mr. Chairman.
    I am going to yield to Mr. Perry.
    Mr. Perry. Thank you, Mr. Chairman.
    And as my good friend from Sherman Oaks is leaving the 
room, I must say that I found it curious that the statement 
that China, as being the vanguard of the proletariat, would be 
concerned in times of peril in keeping their power and they 
would say to their citizens, ``Well, you must be with us 
because there is oil under those islands,'' it seems to me, in 
my lifetime, they said, ``You must be with us or you end up in 
jail.'' And that is what works, and that is what will work in 
the future if there are times of peril.
    But that having been said, I came here thinking that we 
would talk about aircraft carriers and increased economic 
activity such that the West and the United States in particular 
would find it problematic and itself behind.
    But looking at some of the statistics here, you look at 
GDP, and, Dr. Scissors, with all due respect, at least some of 
these numbers, from 10.4 in 2010 to 7.4 in 2014, and looking at 
in the next 6 years down to 5.9, looking at birthrates from 5.8 
per woman in 1964 to 1.6 in 2012, and then looking at the labor 
force shrinking by one-fifth over the next 50 years, I thought 
maybe we would discuss like we believe in--well, a lot of us, 
there are a lot that don't--but there are a lot of us that 
believe in capitalism in the United States and that this is 
free democracy and free trade and capitalism has done well for 
the West and our system is the best and it has lasted and 
endured the longest of the longest of modern governments 
because of that, and we have always kind of eschewed Communism 
as a moribund program that simply can't work over the long 
haul.
    And with those statistics and with the concern in America 
today of a rising China and so on and so forth, I would 
actually like to ask you, Dr. Scissors and Mr. Cohen, in 
particular, what you think, like how long do we have to wait? 
If we believe that what we have is right and what they have is 
wrong and cannot endure, are we close to the end? Is the end 50 
years away? Ten years? When will it collapse under its own 
weight? When will it pull the Soviet Union and unexpectedly, as 
you said, we won't be ready? Is there something on the horizon 
that some people see and some people don't?
    Mr. Scissors. As I said in my opening remarks, I know the 
timing of the hearing messed a few things up, I am a stagnation 
guy, not a collapse guy. The mixed economy that China has 
doesn't lend itself to acute economic crises. Some of my 
colleagues are experts on politics. I am not. But some of the 
statistics you cited, for people who believe in GDP, first of 
all, I think the party is exaggerating their GDP growth, but 
even then, it is on a straight line down, the growth. Aging, 
debt, all of it says stagnation.
    And we have seen that countries can stay stuck for a long 
time without instability. None of them are middle-income 
countries run by the Communist Party. North Korea is just poor. 
It is kind of more remarkable that they have had not very much 
instability there.
    But I think in terms of the challenge to the United States, 
the challenge to competitive market capitalism when we practice 
it properly, that challenge is already going away. The Chinese 
model is already fading. I was sitting in front of the Congress 
in 2009 when people were panicked that China was going to take 
over the world, and I think that panic has receded considerably 
and it is going to continue to recede.
    So I don't know enough about Chinese politics to say, 
``Hey, I think the economic stagnation is going to breed a 
collapse.'' It is possible. Ranking Member Sherman just said, 
my colleagues have said, the party has survived on delivering 
the goods economically and they are not going to be able to 
unless they change course.
    But what I can say is, to echo Professor Cohen, I think 
China has peaked economically. And the economic challenge to 
the United States is not going to go away, China is not 
suddenly going to become small, but the fear that we have had 
of China overtaking us, eclipsing the way we do things, that in 
my view is already gone, and if it isn't already gone, it will 
be gone for almost everyone in a few years.
    Mr. Perry. Dr. Cohen, quickly.
    And if I get time, Dr. Hersh, I would like to hear your 
comments as well.
    Mr. Hersh. We began engaging China post-1989 Tiananmen 
massacre with the idea that commerce would lead to political 
changes of a more evolutionary basis, and that happened here in 
Washington. We had our own version of the Long March to get 
China permanent normal trade relations and then to get China 
into the WTO. China has certainly integrated itself into the 
global trade and investment system over this time, but I don't 
think we have seen the political changes that we thought would 
flow from these economic changes and more integration with the 
ideas and technologies of the outside world.
    Has this created pressures for political change? Maybe, but 
not necessarily in the ways that we had expected. Those who are 
successful in the new China, in China, Inc. are greatly 
supportive of the way that the government has prosecuted its 
policymaking and secured its position and power. But this 
growth and transformation has also unleashed the most rapid 
increase in inequality almost that the world has ever 
experienced, and this is creating real risk for social and 
political instability that I don't think we have good forecasts 
for how those might disrupt China's political system.
    There is clearly quite a bit of economic gain to be had 
from economic integration with China, as well as other partners 
in the region, but who benefits from that, how the gains are to 
be distributed depends entirely on the kinds of rules that we 
set in these international agreements.
    Mr. Cohen. I could answer just a little bit.
    Mr. Salmon. Time from the gentleman has expired. We 
probably need to get to the next questioner, Mr. Rohrabacher.
    Mr. Rohrabacher. Yes, thank you.
    Well, I have sat through these sessions where people are 
predicting that if we do certain things economically for China 
that that would result in the type of political reform then and 
reform toward making a country less antagonistic and more 
benevolent than they would be otherwise.
    We have now had about 20 years to see if that theory works, 
and I think that it has been a resounding failure, all the 
things that were promised us if we just bolster the economic 
situation of China by permitting a trade agreement, which 
obviously has enriched and empowered that China. Do they have 
free labor unions now? No. Do they have opposition parties? No. 
Does China today have fewer territorial claims and is less 
provocative toward their neighbors? No. I just heard all of 
these predictions, and they turned out to be not true.
    Now, I know that Mr. Cohen has suggested that you have to 
give the Chinese Communist Party credit, at least look at what 
they have done. No. No. The fact is that the Chinese people 
could well have been living better today had we not had a 
Communist Chinese dictatorship over them and bolstered it a 
number of years ago. I think they didn't have the same kind of 
dictatorship in other countries that had Chinese-type of 
backgrounds, and those people prospered and yet have freedom at 
the same time, or at least a greater degree of freedom than you 
have in the mainland of China.
    So let me suggest that when we are talking about the TPP, 
we hear some of the same rhetoric about the TPP, how it is 
going to bring this prosperity and better trained jobs, and I 
think that all the farmers in America thought that we would be 
feeding China, and now China is a massive food exporter to the 
United States and putting some of our people out of work.
    And by the way, when you talk about the TPP, at least with 
most-favored-nation status, we pretty well knew what exactly 
that meant. People keep using phrases like ``free trade'' with 
the TPP. How do we know it is free trade? We don't even know if 
it is free trade at all. Even with MFN or WTO it wasn't free 
trade with China. With China, we ended up with, of course, 
letting them in most-favored-nation status and into the WTO.
    We basically have a clique that is able to manipulate the 
trade now and has enriched the clique. But as Mr. Han was 
suggesting, there are a lot of people left out of the clique 
and they don't have any economic rights at all.
    So I would just like to leave it with this. And maybe, we 
have got about 1\1/2\ minutes now, if you have to bet on which 
change, what is going to happen? This fellow over here is a 
stagnation guy instead of a collapse guy. What about the rest 
of you? Are you collapse guys or stagnation guys? And I would 
just like to hear that simple answer from all of you here, Mr. 
Han first, then Mr. Cohen, and right on down. Are you a 
collapse guy or a stagnation guy? Are they going to collapse 
and then the democrats are going to take over and have a 
democratic free society or is it going to stagnate?
    Mr. Han. I would like to say it is a process. It is not a 
flip of the hand thing. It is a process. As I said earlier in 
my talk, workers without freedom of association, we are getting 
rights to collective bargaining. And now collective bargaining, 
this idea, is being accepted more and more.
    Mr. Rohrabacher. I agree with you that it is a process, and 
that means that a process, as we determine what will happen and 
what the process will be, we will determine whether or not a 
Communist, strong Communist Party that threatens the rest of 
the world still continues in power. We will determine it, 
because it is a process, that we will impact as we impacted it 
with MFN and WTO in a way that strengthened the hand of the 
despots.
    Mr. Cohen, are you a stagnation guy or a collapse guy?
    Mr. Cohen. Right now I think the Chinese Government is 
threatened with Brezhnev kind of administration of the economy 
that ultimately led to collapse in the Soviet Union, but we 
shouldn't underestimate the imagination and dynamism of the 
Chinese leaders in meeting some of these international economic 
problems. The AIIB and related institutions are an example of 
their giving an imaginative response that put the U.S. 
Government back on its heels with surprise.
    So I think I agree with Mr. Han that the current situation 
is a struggle, it is up for grabs. And I think I agree with 
you, Mr. Rohrabacher, about what we do can have a profound 
influence.
    But I do want to point out, apropos of what you said 
earlier, that the Chiang Kai-shek regime in Taiwan was as harsh 
a military dictatorship as we see now on the mainland. The Park 
Chung-hee administration in South Korea was similar. I opposed 
both of them very actively. But the fact is, as an objective 
observer, I have to say that for a certain period, as a 
government gets going, dictatorship seems to enable economic 
progress, but that very economic progress leads to the kind of 
ferment that we are beginning to witness in China. And what the 
outcome of that ferment will be is really in part up to us, 
mostly up to the Chinese people.
    Mr. Rohrabacher. And the difference, of course, is those 
two dictatorships did not pose an ever-enlarging threat to 
their neighbors and to the peace of the world. Chiang Kai-shek 
didn't threaten, I don't think, he didn't threaten anybody, and 
after he got to Taiwan--well, we could go into that--and 
neither did South Korea.
    China poses a huge threat. The building of these islands 
and then making greater declarations of ownership of 
territorial rights, if there is anything that is a threat to 
the peace of the world, and our administration hasn't said 
anything about that. By the way, Putin occupies a given small, 
tiny area of Ukraine because it is made up of pro-Russian 
people and he has gone there protecting those pro-Russian 
people. Shouldn't have done it, but you hear this is a 
monstrous invasion. China makes claims of 100 times more 
territory than that, that would cut Japan and Korea off from 
their trading routes, and you don't hear anybody complaining 
about that.
    Better go on to the last time. Collapse or are we going to 
stagnation?
    Mr. Hersh. I don't know if I would go to stagnation, but 
definitely a slowdown. The organic forces in China's economy 
that have led to such rapid growth to this point, those are not 
going to continue, although China will continue to grow at a 
healthy pace. Where China's economy is already coequal in size 
to the United States, that means it is going to continue to 
pull away from----
    Mr. Rohrabacher. Unless, of course, we are so stupid that 
we keep bolstering this same dictatorial government that 
threatens the word.
    Dr. Kaufman.
    Ms. Kaufman. I think that historically we have not seen 
very many successful democratic transitions that haven't taken 
place either as a result of leadership decisions or war. I 
think that many people in China were paying a lot of attention 
to what happened in 2011, and I don't think that they find the 
outcome of the Arab Spring very appealing. I think that a lot 
of people are pretty unhappy with certain aspects of the CCP, 
but I don't think that many people see very many viable 
alternatives.
    Mr. Rohrabacher. Okay. One last thought, Mr. Chairman. That 
is, we had a turning point in the history of the world, and 
there were two of them in close proximity. One was the collapse 
of the Soviet Union. I am proud to have been part of Ronald 
Reagan's team in the White House for 7\1/2\ years with him, 
served as special assistant, and did everything we could to 
bring down the Soviet Union. And it came down in a peaceful way 
without having direct fights between Soviet troops and American 
troops. What a great accomplishment that was.
    We could have had the same type of accomplishment in China, 
but Reagan was no longer President. Herbert Walker Bush was 
President. And at Tiananmen Square, it is my belief, Mr. 
Chairman, had Ronald Reagan been President, he would have 
picked up the phone, as his intelligence officer said, they are 
about to unleash the army on Tiananmen Square, and Reagan would 
have said: If you want unleash the army on Tiananmen Square, no 
more open markets, no more investment, no more credits, all the 
deals are off. And they wouldn't have put the army in and we 
would have a democratic China today that wasn't threatening the 
peace of the world.
    Yes, it is a process, and we need to play our part.
    Thank you very much.
    Mr. Salmon. Thank you.
    Save myself for last.
    I, as a young man, did a mission for the Mormon Church in 
Taiwan and spent 2 years there, during the time when Chiang 
Ching-kuo, Chiang Kai-shek's son, was the President, and there 
was no freedom of speech, there was no right to assemble, and 
there was really no freedom of the press per se. And so I lived 
that up close and personal. I was there in 1979 when Jimmy 
Carter severed diplomatic ties with Taiwan, normalized 
relations with China. And at that time we clearly advocated a 
one-China policy, and we have done that ever since.
    Things have changed now. Taiwan is not anymore an 
autocratic, authoritarian regime. It is now a thriving 
democracy. And a lot of the policies that we have toward Taiwan 
right now seem to be kind of outdated.
    And I am just wondering, I know, Mr. Cohen, you have been a 
strong advocate, as I have in the past, on the one-China 
policy, but we have seen how the one-China policy really works 
with Hong Kong, where they said it was going to be one China, 
two systems, and that is a joke. It is a real joke, because 
they don't even have the ability to choose their own Chief 
Executive. That is delivered to them from Beijing. You get to 
pick, but you get to pick from the candidates that we choose. 
There is no universal suffrage, not really, not in Hong Kong.
    And the people on Taiwan, they have watched that. And as 
they think about a peaceful reunification one day and they see 
how Hong Kong is treated, they are thinking, ``Not on your 
life, we don't want to go under those kind of circumstances, we 
have a thriving democracy that works.''
    And then I see how Taiwan tries to do a magnanimous gesture 
during the Ebola outbreak and they offer their support to the 
World Health Organization, and what happens? Politics, lousy, 
stupid politics.
    Same thing with their ability to be able to join the all-
hands-on-deck call for fighting terrorism globally. They can't 
participate in Interpol. In fact, I dropped a bill just 
recently and it was marked up in the full committee on Foreign 
Affairs that says that they should have observer status in 
Interpol. Why not? I mean, it is ludicrous.
    Some of the walking on egg shells that we do to try to 
appease China on this one-China policy thing seems to be really 
unsustainable, and I am wondering, is it time for us to look at 
maybe tweaking that a little bit.
    Mr. Cohen, what are your thoughts?
    Mr. Cohen. The time is coming, because next year, as you 
know, President Ma steps down. No matter who replaces him, and 
it is likely to be the DPP candidate, this is going to create a 
new kind of difficulty in cross-strait relations. We have had a 
pretty good ride the last 7 years because Ma has made so many 
agreements without prejudicing the security of Taiwan. But he 
has reached the limit, and the people of Taiwan, as you know, 
are expressing they want to have more say in Taiwan's future.
    Mr. Salmon. Tired of it.
    Mr. Cohen. China may be getting more nationalistic and less 
patient. So I am afraid you are going to have to give this more 
attention over the next few years, because there is going to be 
a return of tension over Taiwan that may make the South China 
Sea look like less of a threat in comparison.
    Mr. Salmon. Well, Mr. Cohen, I remember vividly when Lee 
Teng-hui was being sworn in as the first freely elected 
President of Taiwan, Beijing responded by lobbing missiles into 
the Taiwan Strait. Now, while we had a policy of strategic 
ambiguity, which was the policy we have kind of articulated for 
decades, President Clinton kind of erased some of that 
ambiguity by sending the Nimitz down the Taiwan Strait to give 
a little bit of clarity. And what happened was we deescalated 
the tensions in the region.
    But I am just not sure right now that this administration 
is even up to that, of giving any kind of clarity on what 
exactly we are going to do to uphold the Taiwan Relations Act.
    Dr. Scissors, do you have a comment?
    Mr. Scissors. This is a very quick, and it is intentionally 
cheeky, but it is also real. If you finish the TPP and you let 
Taiwan join before China, you have done something to change 
your recognition of the two countries.
    Mr. Salmon. Right. And honestly, Dr. Scissors, there is a 
lot of dialogue. We did a delegation over to China, Taiwan, 
Japan just a couple of years ago, and then we did another 
meeting about 3 months ago with Ed Royce, and the topic of 
Taiwan coming in the second round of TPP came up. There was 
support across the board, from both Republicans and Democrats. 
I think if you polled Members across the board in the Congress, 
you would find far more support for Taiwan coming into the TPP 
ahead of mainland China. I think you would find that support 
very robust.
    Mr. Scissors. Right.
    Mr. Salmon. Some of these international bodies, I think, 
really need to have the input that Taiwan has, and we could 
probably do that without jeopardizing our sacred one-China 
policy. But is there a way for us to maybe tweak that a little 
bit?
    Mr. Cohen. I have been urging Taiwan to do more on its own. 
For example, Taiwan, as you know, occupies the biggest island 
in the Spratlys. I think, since President Ma is an expert in 
public international law and is about to retire from office, he 
ought to lead an effort to come up with imaginative proposals 
beyond the general language he has already given us on May 25 
that would encourage a settlement of these issues. We need 
imagination.
    Taiwan should make its way back by becoming a host to the 
other contending nations and turning Itu Aba of a conference 
center, a negotiation, a workshop dialogue center that will 
promote, I think, the kinds of solutions that people aren't 
putting forth now. People are just talking about strengthening 
their militaries. And while that is useful and necessary, we 
have got to do a lot more. We have to have more imaginative 
solutions.
    And here is a way for Taiwan to help, just the way they 
managed to make a fisheries agreement with Japan in the East 
China See. Imaginative, vigorous diplomacy on Taiwan's part, in 
addition to our support, I think would be very important.
    Mr. Salmon. Thank you, Mr. Cohen.
    Mr. Han, we had a great meeting with several of the 
business leaders, as well as some of the, I think, Hong Kong 
greats. We met with Martin Lee, we met with Anson Chan when I 
was there. And it was coincidental because I was there for the 
1997 handover ceremony and I met with Martin Lee back then, so 
it kind of felt like deja vu a little bit, or as a great 
baseball player once said, deja vu all over again.
    But do you think that the opportunity for suffrage, 
universal suffrage in Hong Kong, will come to fruition in your 
lifetime?
    Mr. Han. Not only Hong Kong, but China as well, I believe 
so. But the real opportunity and the hope is the changing of 
mainland China. Hong Kong cannot get full democracy without 
China becoming democracy. That is not possible. So I count on 
China.
    And I agree with Mr. Rohrabacher, who said China did not 
answer to the international community for nearly anything. And 
China, to my understanding about this government, they will not 
answer positively to military responses. But one thing I am 
sure I already see that myself experiencing this: Chinese 
Government is already answering to its own people, although it 
is not full. For example, they arrest lawyers, they arrest 
journalists, but they are answering to hundreds of millions of 
workers' demands to the right to collective bargaining, and the 
next one will be naturally, slowly develop into freedom of 
association, a union, maybe not purely freedom of association, 
but with a solely collective bargaining-oriented trade union.
    So if Chinese Government can answer and will answer to 100 
million of Chinese workers, I do believe, even if they don't 
answer to the U.S. military, but they will have to become more 
and more democratic.
    Mr. Salmon. Well, I thank you. This has been a very 
invigorating conversation. I appreciate all the patience on the 
part of the witnesses today for the time changes. I apologize 
for doing that to you, but we just thought it was so important 
to get this done, especially because Mr. Han is not here all 
the time. So we wanted to make sure that we got it done today, 
so it necessitated us moving the time. So thank you very much 
and thank you so much for your patience.
    This committee is adjourned.
    [Whereupon, at 2:47 p.m., the subcommittee was adjourned.]
                                     

                                     

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