[Senate Hearing 115-710]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-710

                AMERICAN LEADERSHIP IN THE ASIA PACIFIC

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

                                HEARINGS

                               BEFORE THE

                       SUBCOMMITTEE ON EAST ASIA,
                     THE PACIFIC, AND INTERNATIONAL
                          CYBERSECURITY POLICY

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION


             MARCH 29, MAY 24, JULY 12, NOVEMBER 14, 2017,
                            AND MAY 15, 2018
                               __________

       Printed for the use of the Committee on Foreign Relations


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                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
36-854 PDF                WASHINGTON : 2019  


                  COMMITTEE ON FOREIGN RELATIONS        

                BOB CORKER, Tennessee, Chairman        
JAMES E. RISCH, Idaho                BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida                 ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin               JEANNE SHAHEEN, New Hampshire
JEFF FLAKE, Arizona                  CHRISTOPHER A. COONS, Delaware
CORY GARDNER, Colorado               TOM UDALL, New Mexico
TODD, YOUNG, Indiana                 CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming               TIM KAINE, Virginia
JOHNNY ISAKSON, Georgia              EDWARD J. MARKEY, Massachusetts
ROB PORTMAN, Ohio                    JEFF MERKLEY, Oregon
RAND PAUL, Kentucky                  CORY A. BOOKER, New Jersey

                  Todd Womack, Staff Director        
            Jessica Lewis, Democratic Staff Director        
                    John Dutton, Chief Clerk        


            SUBCOMMITTEE ON EAST ASIA, THE PACIFIC,        
             AND INTERNATIONAL CYBERSECURITY POLICY        

                CORY GARDNER, Colorado, Chairman        
JAMES E. RISCH, Idaho                EDWARD J. MARKEY, Massachusetts
MARCO RUBIO, Florida                 JEFF MERKLEY, Oregon
JOHN BARRASSO, Wyoming               CHRISTOPHER MURPHY, Connecticut
JOHNNY ISAKSON, Georgia              TIM KAINE, Virginia

                              (ii)        

  


                            C O N T E N T S

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                                                                   Page

                AMERICAN LEADERSHIP IN THE ASIA-PACIFIC

Part 1: Security Issues--March 29, 2017

Gardner, Hon. Cory, U.S. Senator from Colorado...................     1


Markey, Hon. Edward J., U.S. Senator from Massachusetts..........     2


Forbes, Hon. Randy, Naval War College Foundation Senior 
  Distinguished Fellow, United States Naval War College, Newport, 
  RI.............................................................     4

    Prepared statement...........................................     6


Gallucci, Hon. Robert L., Distinguished Professor in Practice of 
  Diplomacy, Edmund A. Walsh School of Foreign Service, 
  Georgetown University, Washington, DC..........................    10

    Prepared statement...........................................    14


                              ----------                              


Part 2: Economic Issues--May 24, 2017


Gardner, Hon. Cory, U.S. Senator from Colorado...................    35


Markey, Hon. Edward J., U.S. Senator from Massachusetts..........    36


Portman, Hon. Rob, U.S. Senator from Ohio........................    37


Overby, Tami, Senior Vice President for Asia, U.S. Chamber of 
  Commerce, Washington, DC.......................................    38

    Prepared statement...........................................    39

    Annex: U.S. Chamber of Commerce Reports on U.S. Economic 
      Relations with China.......................................    45


Orr, Robert, Ph.D., Professor and Dean, School of Public Policy, 
  University of Maryland, College Park, MD.......................    46

    Prepared statement...........................................    49


                              ----------                              


Part 3: Promoting Democracy, Human Rights, and the Rule of Law--
  July 12, 2017


Gardner, Hon. Cory, U.S. Senator from Colorado...................    61


Markey, Hon. Edward J., U.S. Senator from Massachusetts..........    62


Hiebert, Murray, Senior Adviser and Deputy Director, Southeast 
  Asia Program, Center for Strategic and International Studies, 
  Washington, DC.................................................    64

    Prepared statement...........................................    66

                             (iii)        

Part 3: Promoting Democracy, Human Rights, and the Rule of Law--
  (continued) July 12, 2017


Mitchell, Hon. Derek, Senior Advisor to the Asia Center, U.S. 
  Institute of Peace, Washington, DC.............................    69

    Prepared statement...........................................    71


King, Hon. Robert R., Senior Adviser to the Korea Chair, Center 
  for Strategic and International Studies, Washington, DC........    77


                              ----------                              


Part 4: View from Beijing--November 14, 2017


Gardner, Hon. Cory, U.S. Senator from Colorado...................    97


Markey, Hon. Edward J., U.S. Senator from Massachusetts..........    98


Baucus, Hon. Max, former United States Ambassador to the People's 
  Republic of China, Bozeman, MT.................................   100

    Prepared statement...........................................   128


Pillsbury, Dr. Michael, senior fellow and director, Center for 
  Chinese Strategy, Hudson Institute, Washington, DC.............   105

    Prepared statement...........................................   130


Allison, Dr. Graham, Douglas Dillon Professor of Government, 
  Harvard Kennedy School, Cambridge, MA..........................   110

    Prepared statement...........................................   143

    Will Trump and Xi ``Solve'' North Korea, by Dr. Graham 
      Allison, Politico, November 8, 2017........................   148

    North Korea Crisis Presents Risk, But Also Opportunity for 
      U.S. and China; by Graham Allison and Michael Morell, 
      Cipher Brief, October 22, 2017.............................   151


                              ----------                              


Part 5: The Asia Reassurance Initiative Act--May 15, 2018


Gardner, Hon. Cory, U.S. Senator from Colorado...................   155


Markey, Hon. Edward J., U.S. Senator from Massachusetts..........   156


Wong, Alex N., Deputy Assistant Secretary, Bureau of East Asian 
  and Pacific Affairs, United States Department of State, 
  Washington, DC.................................................   158

    Prepared statement...........................................   160

    Responses to Additional Questions for the Record Submitted to 
      Alex N. Wong by Senator Tim Kaine..........................   187


Schriver, Hon. Randall G., Assistant Secretary, Asian and Pacific 
  Security Affairs, United States Department of Defense, 
  Washington, DC.................................................   162

    Prepared statement...........................................   163


 
           
               AMERICAN LEADERSHIP IN THE ASIA-PACIFIC--


                        PART 1: SECURITY ISSUES

                              ----------                              


                       WEDNESDAY, MARCH 29, 2017

                               U.S. Senate,
       Subcommittee on East Asia, The Pacific, and 
                International Cybersecurity Policy,
                            Committee on Foreign Relations,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:23 p.m. in 
Room SD-419, Dirksen Senate Office Building, Hon. Cory Gardner, 
chairman of the subcommittee, presiding.
    Present: Senators Gardner [presiding], Rubio, Portman, 
Markey, and Kaine.

            OPENING STATEMENT OF HON. CORY GARDNER, 
                   U.S. SENATOR FROM COLORADO

    The Chairman.  This hearing will come to order. Thank you 
very much to our two witnesses for being here and my colleagues 
for joining me. I apologize for the delay.
    Let me welcome you all to the first hearing for the Senate 
Foreign Relations Subcommittee on East Asia, the Pacific, and 
International Cybersecurity Policy in the 115th Congress.
    I am delighted to be partnering with Senator Markey in this 
Congress and want to welcome him as the ranking member of this 
subcommittee. Senator Cardin and I did great work through this 
committee over the last 2 years and look forward to doing the 
same with Senator Markey over the next 2 years. And I am sure 
we are going to have some great opportunities to collaborate to 
address the very important issues that come within this 
subcommittee's jurisdiction. And so thank you very much for the 
opportunity to be here.
    I do want just to start with a couple of words about the 
committee and the work that we will be doing.
    The new administration and the new Congress ushers a new 
era of challenges and opportunities in the Asia-Pacific. 
Despite the political changes in Washington, the U.S. policy 
imperatives remain the same. The Asia-Pacific region has been 
and will remain critical to the United States' economic and 
national security interests.
    By 2050, experts estimate that Asia will account for over 
half of the global population and over half of the world's 
gross domestic product. We cannot ignore the fundamental fact 
that this region is critical for U.S. economic growth and to 
create U.S. jobs through export opportunities.
    The security challenges in the region are complex and 
rapidly growing. In 2016, North Korea conducted two nuclear 
tests and a staggering 24 ballistic missile launches. Since 
2013, China has reclaimed over 3,000 acres of land in the South 
China Sea and has militarized these features, contrary to 
international law. The Islamic State has now established a firm 
foothold in Southeast Asia. Democracy, human rights, and rule 
of law are generally in retreat across the region despite some 
hopeful developments in countries such as Burma.
    So this year, instead of focusing on individual countries 
or specific issues, the subcommittee will conduct a four-part 
series that will examine American leadership in the Asia-
Pacific region from all perspectives: the security outlook, 
economic engagement, as well as projecting our country's values 
across the region.
    This series of hearings will also underpin and inform 
legislation that I am leading, the Asia Reassurance Initiative 
Act, or ARIA. ARIA will pursue three broad goals. First, it 
will strengthen U.S. security commitments to our allies and 
build partner capacity in the Asia-Pacific to deter aggression, 
project power, and combat terrorism. Second, it will promote 
economic cooperation and U.S. market access in the Asia-Pacific 
region as key to U.S. policy objectives in the region and 
essential for the growth of the U.S. economy and success of 
American businesses. Third, it will enshrine promotion of 
democracy, human rights, and transparency as key U.S. policy 
objectives in the Asia-Pacific region, particularly in 
Southeast Asia.
    With this in mind, our first hearing today is focused on 
security challenges in the Asia-Pacific, and we have two 
distinguished witnesses, Congressman Randy Forbes, who I had 
the--both of us had the privilege of serving with in the House 
of Representatives, and Ambassador Bob Gallucci to help us shed 
light on these very important issues. I look forward to your 
testimonies, and now turn to Ranking Member Senator Markey for 
his comments.

              STATEMENT OF HON. EDWARD J. MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. Thank you very much, Mr. Chairman, and I 
thank you for convening this hearing on U.S. security interests 
in the Asia-Pacific. And as you outlined, this is the first in 
a series of hearings that will underscore America's critical 
role in leading that dynamic region and addressing its 
challenges. And I am looking forward to our partnership over 
the next 2 years, Mr. Chairman. I think it is just an exciting 
time for Asia. And I think this series of hearings which we are 
going to be having is just going to lay the foundation for our 
ability to be able to make some intelligent decisions about 
what the role of the United States should be going forward.
    And to our distinguished witnesses, Randy Forbes--and you 
and I, Cory, we served in the House together. And Bob Gallucci 
is an old pal of mine and just about at the top of the list of 
any of the most distinguished commentators you can have on so 
many different subjects. It is hard to list them all. So it is 
an honor to have you here today, Bob.
    And it is hard to dispute that American leadership in the 
Asia-Pacific has brought sustained stability and unprecedented 
economic growth. Sustaining and broadening this progress will 
depend, however, on addressing major security challenges and 
strengthening respect for international rules and norms.
    Today, Asia-Pacific nations face significant challenges, 
particularly in the area of security. North Korea's nuclear and 
missile programs threaten regional security, as does the 
proliferation of weapons-usable material. Territorial disputes 
in the East and South China Seas, festering conflicts and 
insurgencies in parts of Southeast Asia, and threats ranging 
from cyber attacks to pandemic disease all demand the 
collective attention of Asia-Pacific nations.
    China's rapid development, achieved through economic 
integration, offers the hope of a cooperative and productive 
relationship with the United States and other nations in the 
Asia-Pacific.
    Yet, fundamental questions persist. Will China choose to 
cooperate to strengthen the regional order in the face of 
mutual security challenges? Or will Beijing choose to be a 
disrupter, undermining the very institutions, rules, and norms 
that have enabled its economic rise?
    First and foremost, the United States must take the lead in 
averting the threat of nuclear war. In particular, the United 
States must take a bold, new approach to address the threat 
from North Korea's growing nuclear and ballistic missile 
capabilities. Last year, North Korea tested two nuclear devices 
and carried out numerous ballistic missile tests. It is now 
accelerating efforts to develop a missile capable of striking 
the territory of the United States with a nuclear weapon.
    These growing capabilities represent a grave threat to the 
security of the American people and to our allies and partners 
in the region. Existing policy to address this threat has not 
succeeded. Sanctions and deterrence, while essential, have 
failed on their own to induce the Kim regime to constrain its 
nuclear and missile ambitions.
    Without a diplomatic track, North Korea is likely to 
continue exploiting divisions in the international community to 
steadily advance its nuclear and ballistic missile 
capabilities. Only a comprehensive strategy of coercive 
diplomacy, one that brings together economic pressure, military 
deterrence, and active negotiations stands a chance of 
achieving a nuclear-free Korean Peninsula.
    Instead of refusing to negotiate, the Trump administration 
should embark on such a strategy and must strengthen existing 
sanctions and bolster deterrence, but it must also reach out to 
North Korea to begin talks aimed at constraining, rolling back, 
and ultimately eliminating its nuclear and missile programs. If 
North Korea refuses or if negotiations fail due to Pyongyang's 
intransigence, then we should escalate economic and political 
pressure on the Kim regime and those who enable it. Without 
diplomacy, however, pressure is unlikely to succeed.
    Addressing the nuclear danger in the Asia-Pacific area will 
also require the United States to dissuade Japan and China from 
expanding spent fuel reprocessing efforts and discourage South 
Korea from following suit. Otherwise, these activities will 
result in the stockpiling of materials that can be used to 
build hundreds of thousands of nuclear weapons. Without a 
strong U.S. commitment to nuclear security and proliferation, 
East Asia could see a spiraling nuclear arms race that 
dramatically raises the likelihood of a nuclear catastrophe.
    Cybersecurity, other issues are all on the table. This 
region is, without question, rising to the very top of the 
security and strategic list of issues that the United States 
has to deal with.
    I am very much looking forward to this hearing, and I thank 
you, Mr. Chairman, for calling such a distinguished panel.
    The Chairman.  Thank you, Senator Markey.
    Our first witness is the Honorable Randy Forbes, who 
currently serves as the Senior Distinguished Fellow at the U.S. 
Naval War College. Congressman Forbes represented Virginia's 
4th congressional district from 2001 to 2017 and served as 
chairman of the House Armed Services Committee's Seapower and 
Projection Forces Subcommittee. During his service to our 
country, Congressman Forbes has been a true leader with regard 
to U.S. policy toward the Asia-Pacific region, and we are 
honored to have him here today.
    And our second witness is the Honorable Bob Gallucci, who 
currently serves as Distinguished Professor in the Practice of 
Diplomacy at Georgetown University's Walsh School of Foreign 
Service. Ambassador Gallucci brings 21 years of distinguished 
service in a variety of government positions, focusing on 
international security. As Ambassador-at-Large and Special 
Envoy for the U.S. Department of State, he dealt with the 
threats posed by the proliferation of ballistic missiles and 
weapons of mass destruction and was the chief U.S. negotiator 
during the North Korean nuclear crisis of 1994. I will note 
that Ambassador Gallucci testified before this committee in 
October of 2015 when we discussed North Korea helping lead to 
the unanimously supported bipartisan North Korea sanctions 
bill. And I am delighted to welcome you back to the committee.
    Congressman Forbes, if you would like to begin. Thank you 
very much for your testimony today.

 STATEMENT OF HON. RANDY FORBES, NAVAL WAR COLLEGE FOUNDATION 
 SENIOR DISTINGUISHED FELLOW, UNITED STATES NAVAL WAR COLLEGE, 
                          NEWPORT, RI

    Mr. Forbes. Thank you, Chairman Gardner and Ranking Member 
Markey, members of the subcommittee. It is an honor for me to 
be here. Thank you for having me. It is also a privilege for me 
to be here with Bob Gallucci this afternoon.
    In the 5 minutes that I have, I can only highlight perhaps 
the challenges that we have in this region, why this region is 
important. And I have submitted a number of recommendations in 
my written remarks, if they could be made part of the record.
    But I want to begin by saying that the topic you have 
chosen is not a crisis de jure. It is not going to go away 
tomorrow. It is not going to go away next week. The Indo-Asia-
Pacific region is going to require more attention and more 
resources from the United States over the coming decades, and 
if we do not do that, it will be not just at our peril but at 
the peril of the world.
    The current security outlook in the Asia-Pacific region is 
precarious at best. We know there are two main actors that are 
causing this. First of all, China, which now for almost 2 
decades has had an ambitious and unprovoked military buildup 
with now a very clear, discernible goal of supplanting the U.S. 
as the dominant military power in the region. The other thing 
that has been a sea change is their use of paramilitary 
activities in their gray zone aggression, which we have as yet 
not developed a sufficient policy to push back on. The result 
of their efforts has been de facto control of disputed waters, 
as you mentioned in your opening remarks, Mr. Chairman, the 
reclamation of 3,000 acres of features or land, which have gone 
somewhat unchallenged in their activity to do that.
    North Korea, as the ranking member also pointed out, poses 
an imminent and unpredictable threat not just to its neighbors, 
but now to the continental United States.
    Yet, even as we mention those two causes for concern, I do 
not think they adequately reflect the sea change that has taken 
place. When you look at China, it is not just the buildup that 
China has done. It is the way they have done that buildup. You 
are looking at advanced fighter aircraft and long-range cruise 
and ballistic missiles that threaten U.S. assets at greater 
ranges. They have credible capabilities to destroy, disable or 
reduce the effectiveness of our aircraft carriers, our regional 
airbases, and even deny us air superiority. Their electronic 
warfare, space operations, and cyber capabilities, when added 
to this, present a very concerning tapestry of concern for all 
of us.
    North Korea. In addition to their nuclear concerns, one of 
the major risks we have from a security point of view is the 
world has changed even in a decade. A decade ago, we were 
worried primarily with North Korea about, one, a single actor 
and, number two, a conventional war that might take place. 
Today, if you look at most strategists, when they are concerned 
about North Korea, they realize that any conflict we may have 
may have multiple actors involved, and we certainly look at 
multiple domains no longer will be limited to conventional war. 
We may very well be looking now at nuclear, cyber, and even 
space challenges that we have.
    Why is this region important?
    Well, if you just took former Secretary Carter or you took 
Admiral Harris, they would both say that this is the most 
consequential region for America's future. And in the coming 
decades in this region alone--you mentioned the trade that is 
going to take place there. But we are going to have in this 
region the largest armies of the world will camp here. The most 
powerful navies in the world will gather here. Over one-half of 
the world's commerce will take place here, but two-thirds of 
the world's commerce will travel through here. This is a 
maritime super highway, leading to the United States bringing 
good things or bad. Two superpowers will compete here to 
determine which world order will prevail. And most importantly, 
this is the region where the seeds of conflict that could most 
engulf the world will probably be planted.
    So I appreciate you having this hearing. And I want to just 
make a couple of recommendations and suggestions for you to 
consider.
    The first and foremost is that if you have a continuum 
between being reactionary and being strategic, this country, 
this committee, this Congress needs to move back to strategic 
thinking where we have a comprehensive strategic plan. And we 
need to demand not just the strategic plan and analysis, but 
also the assumptions that go into it. If we have faulty 
strategies, we will have faulty outcomes, and we can no longer 
outrun all of our problems.
    The second thing that I would recommend that we consider is 
that we once again put on the table and relook the INF Treaty 
and whether or not it is worth us continuing to examine this 
and to look at it.
    And then the final thing I think is going to be vital for 
us is rebuilding our presence in the Asia-Pacific area.
    I will be glad to elaborate on any of those in the question 
period of time. But my time is out. So thank you, gentlemen, 
for allowing me to be with you.
    And if it is okay, I would like to submit the full content 
of my written statement for the record.
    The Chairman.  Without objection.
    [Mr. Forbes's prepared statement follows:]


                 Prepared Statement of J. Randy Forbes

    Chairman Gardner, Ranking Member Markey, members of the 
subcommittee, thank you for the work your subcommittee does and for the 
honor of appearing before you this afternoon. I am also very happy to 
be here with Robert Gallucci.
    The topic you have chosen for this hearing is both timely and 
critical.While the world's eyes seem rightly focused on the instability 
of North Korea's leadership and the actions of that leadership, it 
would be wrong to conclude that this was merely ``a crisis de jour.'' 
The security issues presented with North Korea and the entire Inda-
Asia-Pacific region will continue to require more attention and 
resources from the United States. We ignore this not just at our peril, 
but at the peril of the world.
    To say that I admire the expertise of each member of this 
subcommittee is not flattery, it is simply accurate. I read much of 
what you write, and I listen to much of what you say. My comments this 
afternoon are not offered with the arrogance of believing they are not 
without challenge.However, they are offered with my conviction that 
they are right, and with my hope that they will at least open avenues 
of thought which could assist in some small manner in preparing us as a 
nation for the challenges we will face in the Asia-Pacific area for 
decades to come.
    The current security outlook in the Asia-Pacific region is 
precarious at best. For decades, the peace and prosperity of the Asia-
Pacific region has been based upon the perception that the United 
States was both willing and able to intervene decisively to stop 
aggression by one country in that critical region against another.
    Today, more than at any point I can recall, that peace and 
prosperity is in jeopardy. The causes of present concern are well known 
to this committee.
    First, China is now almost two decades into an ambitious and 
unprovoked military buildup, with a clear goal of supplanting the 
United States as the dominant military power in the region. At the same 
time, it is using paramilitary forces to commit ``gray-zone'' 
aggressions against its neighbors and establish de facto control of 
disputed waters. The tangible result is that they have now reclaimed 
over 3,000 acres of land (features) in the South China Sea and they 
have militarized many of these features contrary to international law.
    Second, North Korea and the regime of Kim Jong Un continue to pose 
an imminent and unpredictable threat to their neighbors, while steadily 
pursuing a larger nuclear arsenal and the capability to threaten and 
potentially strike the continental United States.
    Yet, even these two causes for concern do not adequately reflect 
the sea change that has taken place regarding the security threat 
currently existing in the Asia-Pacific area.
    For example, it is not just that China has been engaged in a 
significant military buildup. It is the nature of that build up that is 
concerning. They have developed advanced fighter aircraft and long 
range cruise and ballistic missiles that can threaten U.S. assets at 
much greater ranges. They have credible capabilities to destroy, 
disable or reduce the effectiveness of U.S. aircraft carriers and to 
threaten regional air bases so as to deny air superiority. If you 
combine this with their advances in electronic warfare, space 
operations, and cyber capabilities a very concerning tapestry begins to 
unfold.
    Equally concerning is a new boldness and aggressiveness appearing 
in Chinese leadership, especially in their rising ranks. This is 
especially manifested in a growing willingness to disregard 
international laws and norms and to project their claims in ways 
creating more opportunity for possible confrontation.
    North Korea has always posed a problem because normal principles 
ofdiplomacy and asymmetrical coercion do not work well with irrational 
actors and that is what we face in North Korea. The difference between 
the threat we face today versus the threat we faced even a decade ago 
is quite substantial. A decade ago, we worried about a conflict in a 
single domain with a single actor. Today, a conflict most likely would 
involve multiple actors and would almost certainly involve multiple 
domains. A conflict could very well present the normal threat of 
conventional warfare but be combined with potential nuclear, cyber, or 
even space challenges.
    So why is this region so important?
    Many analysts including former U.S. Secretary of Defense Carter and 
the current PaCom commander, Admiral Harry Harris have called this 
``the most consequential region for America's future.'' It is easy to 
see why. In the coming decades, this is the region where the largest 
armies in the world will camp. This is the region where the most 
powerful navies in the world will gather. This is the region where over 
one half of the worlds commerce will take place and two thirds will 
travel. This is the region where a maritime superhighway ( transporting 
good or bad things) linking the Indian Subcontinent, Southeast Asia, 
Australia, Northeast Asia,, and the United States begins. This is the 
region where five of America's seven defense treaties is located. This 
is the region where two superpowers will compete to determine which 
world order will prevail. This is the region where the seeds of 
conflict that could most engulf the world will probably be planted.
    Recognizing the importance of this region is vital and I was one of 
the first to applaud the Obama administrat1on for doing so when it 
first announced its ``pivot'' to the Asia-Pacific area which was soon 
renamed the ``rebalance.'' Unfortunately, confusion about this policy 
was not limited to its name. When there is confusion in the 
articulation of a policy, our competitors and allies can look to how we 
resource that policy in an attempt to extrapolate what it means. 
Otherwise, they are left to define it for themselves which often means 
our competitors see in it their worst fears and our allies have 
expectations that are never realized. That is exactly what happened 
with the ``rebalance.''
    Since this hearing is focused on security issues, I have limited my 
analysis and comments to those issues. The scope prevents me from 
looking at other important issues such as human rights, trade, economic 
development goals, and the principles of democracy itself. Yet I know 
you realize the importance of all of these issues.
    From a security view, the rebalance was not only grossly under 
resourced but the signaling was very poor. One of the primary reasons 
for this was the failure to develop an adequate National Defense 
Strategy.According to testimony before the House Armed Services 
Seapower and Projection Forces Subcommittee, the primary document used 
to resource the military during much of the last administration was its 
2012 National Strategic Guidelines. Those Guidelines were fatally 
flawed with wrong assumptions. Four of those assumptions according to 
testimony later presented by the Chairman of the Joint Chiefs of Staff 
to the full House Armed Services Committee were:


 1. That Isis would not rebound and grow as it did

 2. That the U.S. would be out of Iraq and Afghanistan

 3. That the Chinese would not militarize as they did

 4. That the Russians would not rebuild at the rate they did


    The result among other shortfalls was that in 2007 the Navy could 
meet approximately 90 percent of our combatant commanders validated 
requests. Last year the Navy was able to meet less than 42 percent. A 
defense budget was presented that would have delayed the deployment of 
an aircraft carrier and remove cruisers from our fleet. There were 
major reductions in the army and the air force. Carrier gaps emerged 
and our surge capacity challenged. FONOPS were essentially prohibited 
between 2012 and 2015 and allowed only begrudgingly at other times.
    The Chinese felt they were virtually unchecked and our allies 
seriously questioned not just our capability but our resolve in the 
Asia-Pacific area. China and North Korea share responsibility for the 
growing instability we see in Asia. But at the same time, the stability 
of the international system is also being undermined by the fact that 
the willingness and ability of the United States to uphold it has 
fallen into doubt. The Obama Administration's ``rebalance'' to the 
Asia-Pacific signaled that Washington understood the importance of this 
region to U.S. interests. However, failure to adequately resource this 
effort-both at the Department of Defense and the State Department-
resulted in it falling short of hopes and expectations.
    So what recommendations can we offer for moving forward? While we 
certainly can not do everything, there is much we can do.
    I believe the most important thing this subcommittee and this 
congress can do is to build a new culture of strategic thinking. I am 
convinced that we will need to increase our defense spending. However, 
you can not just write a check to fix our security issues in the asia-
pacific area. We need first and foremost a comprehensive National 
Defense Strategy with a major part of it focused on the lndo-Asia-
Pacific arena.
    We can argue over nomenclature, but for the purposes of my 
comments, ``strategy'' is that endeavor by which we balance our ways, 
means, and desired ends. It is where we make trade offs and though it 
is not popular to say, take risks. I also agree with Lawrence 
Freedman's conclusion that its purpose is ``about getting more out of a 
situation than the starting balance of power would suggest.''
    ``Policies'' are the guidelines that help structure how decisions 
are made within the broader strategic architecture.
    ``Tactics'' are how we implement our decisions through action.
    Strategy should drive policy which should drive tactics. However, I 
fear that all too often in our country today we are reversing the order 
and becoming reactionary instead of strategic. There was a time when we 
could afford that error because we could essentially outrun our 
mistakes. That time has passed. There may have been a time when we 
could rely so/ey on our military strength. That time has passed. So too 
has the time when our strategy can be dictated by our budget.
    To be effective, a National Defense Strategy must be birthed in a 
marriage between Congress and the Administration. It must also be a 
holistic approach uniting every element of government power. You should 
no longer accept the ruse that you are not entitled to a strategy 
because it is like some secret football play that can not be disclosed 
until you have to use it. For a National Defense Strategy to work you 
must be able to articulate it so that policy makers feel comfortable 
resourcing it, so our allies know how to embrace it, and so our 
competitors know the lines not to cross.To do that, I would suggest the 
following:


 A. Require the Department of Defense to develop and present to 
        Congress a National Defense Strategy along with the basic 
        assumptions used to develop it. If the assumptions are wrong, 
        the Strategy will be flawed.

 B. Require the Department of Defense to show how its budget resources 
        that Strategy and the risks assumed if it is not so resourced.

 C. Ask for a plan from both the Department of Defense and the 
        Department of State as to how it plans to improve strategic 
        thinking. If it is not a priority to agency leadersh'tp, it 
        will not happen. If you are not seeing it in personnel 
        decisions, it will probably not happen.

 D. Require a cross agency review of Asia-Pacific policies with a task 
        force designed to develop policy guidelines and to ensure those 
        guidelines are compatible with the National Defense Strategy.


    Our U.S. security alliances are very durable but they need 
reinforcement. They need to know that the United States still knows how 
``to make the trains run on time,'' especially when it comes to 
national defense. Articulating a well-reasoned National Defense 
Strategy they can embrace and resourcing it to show an increased 
presence in the area will do much to strengthen these alliances. In 
addition, I would suggest the following:


 1. Continue to strengthen bilateral alliances with Japan and South 
        Korea, while also encouraging and enabling those two key allies 
        to cooperate more closely with one another on many issues of 
        mutual concern.

 2. Make clear our commitment to the security of Taiwan. Our allies 
        read our resolutions, so language can be important.

 3. Work with Prime Minister Duterte to sustain recent progress in US- 
        Philippines defense cooperation and, importantly, ensure that 
        American forces can continue to deploy to the Philippines in 
        support of both Philippine security and our broader security 
        objectives in the region. Despite recent bumps in the road, it 
        is still mutually beneficial to both countries to improve this 
        relationship.

 4. Continue to work with our ANZUS allies, Australia and New Zealand, 
        and in particular explore additional options for forward 
        deploying or forward staging American forces and conducting 
        combined training in the region. This includes integrated 
        maintenance and ground support operations as well as greater 
        integration of 5th generation fighter deployments.

 5. Seek to develop closer ties with countries like India, Vietnam, and 
        others that share many of our security concerns and could be 
        enabled to play a bigger role in maintaining regional 
        stability.

 6. For too long, the Asia-Pacific has not been prioritized within the 
        State Department security assistance budget in a way that is 
        commensurate with its level of importance to U.S. interests. 
        Indeed, in recent years, the entire region has received only 1 
        percent of U.S. Foreign Military Financing. If we conclude that 
        this may be the ``most consequential region for America's 
        future'' we should strongly consider proposals for an Asia-
        Pacific Stability Initiative as a budget mechanism similar to 
        the European Reassurance Initiative with the goal of devoting 
        additional resources to our interests in the Pacific.

 7. We certainly must send additional funding to DOD to invest in 
        munitions, resiliency, sustainment, and capabilities that 
        Pacific Command needs. However, i would also advocate for 
        increasing targeted Foreign Military Financing and 
        International Education and Training funding to help enhance 
        the militaries of partners like the Philippines, Thailand, 
        Vietnam, Indonesia, and Malaysia.

 8. Routinize Freedom of Navigation Operations (FONOPS).

 9. Reconsider the efficacy of the Intermediate-range Nuclear Forces 
        (INF) Treaty. Since 1987, the United States has complied with 
        the bilateral Intermediate-range Nuclear Forces (INF) Treaty 
        with Russia, which prohibits either party from fielding certain 
        types of surface-to-surface missiles. At the same time, China 
        has deployed over 1000 of these missiles, according to DoD 
        reports to Congress, and uses them to menace our allies and 
        partners and our own forward deployed forces in the region. In 
        light of this fact, and the recent testimony by Gen. Paul 
        Selva, Vice Chairman of the Joint Chiefs of Staff, that Russia 
        is actively violating the INF Treaty, I believe this committee 
        should begin reassessing whether continued adherence to the INF 
        Treaty is in the interest of our country. As a member of the 
        House Armed Services Committee's Strategic Forces Subcommittee, 
        I tasked the DoD with reassessing the military implications, 
        but I believe it is incumbent upon this committee to further 
        explore the diplomatic and broader foreign policy 
        considerations.

 10. Support efforts to restore US military readiness and better 
        prepare it for threats. While I realize the importance of 
        focusing on matters of foreign policy that fall clearly within 
        the purview of the Senate Foreign Relations Committee, I would 
        be remiss if I did not remind members of the committee that 
        deterrence, which I believe is the primary contributor to peace 
        and prosperity, is predicated upon the belief that our country 
        is both willing and able to stand up to aggression. To deter 
        aggression in the Asia-Pacific, we must make it clear to would-
        be aggressors that we not only remain committed to the region, 
        but also will be able to effectively project power into the 
        region, deny aggressors their objectives, and impose costs and 
        punishments upon them. Current shortfalls in U.S. military 
        readiness-such as insufficient stockpiles of precision-guided 
        munitions, and forgone training and maintenance- are seriously 
        undermining our ability to respond to and defeat aggression. 
        This, in turn, undermines our ability to deter it.

 11. Finally, no discussion of Asia-Pacific security issues would be 
        complete without at least discussing the rise of Islamic 
        extremism. If one thing is increasingly clear there is no 
        single magical response now available to eradicate this 
        dangerous evil. We must continue to foster partnerships not 
        just with our allies but also with other actors within the 
        region who suffer from its effects. In the cross agency review 
        I addressed earlier, I would specifically laser in on joint 
        efforts to cut off the funding streams for these organizations. 
        Removing the financing is like removing the oxygen from a room, 
        it makes it almost impossible for the organization to survive 
        or grow.


    Once again, thank you for the opportunity to appear before you and 
thank you for what you do for our country.


    The Chairman.  And I would just note that your testimony, 
along with Ambassador Gallucci's, if people who are listening 
to the hearing have the opportunity to read it, I think both of 
them are very well done. So thank you very much for the time 
and effort you put into the testimonies. Thank you. And both 
will be put in the record in full.
    Ambassador Gallucci?

 STATEMENT OF HON. ROBERT L. GALLUCCI, DISTINGUISHED PROFESSOR 
IN THE PRACTICE OF DIPLOMACY, EDMUND A. WALSH SCHOOL OF FOREIGN 
        SERVICE, GEORGETOWN UNIVERSITY, WASHINGTON, D.C.

    Ambassador Gallucci.  Thank you, Mr. Chairman. Thank you, 
Ranking Member Markey. It is good to be here. I appreciate the 
opportunity to share some thoughts.
    I want to address briefly three topics: first, the U.S.-
China relationship, the security dimension writ large; second, 
the North Korea threat and what to do about it; and third, the 
issue of nuclear terrorism and the impact accumulations of 
plutonium may have on the shape of that issue.
    First, with respect to China, I ought to note that there is 
nothing that I heard from my distinguished colleague that I 
would separate myself from, and I would like to associate 
myself with his interpretation of the importance of that region 
and the importance of how we are responding to the threat in 
that region.
    It has struck me that the traditional and conventional 
wisdom about China over the last 20 years has been fairly 
consistent across administrations. In general terms, China is 
characterized as a great power, and the recommendation is we 
see China as a great power, not a rising power, that we 
recognize that China has legitimate political, economic, and 
security interests in the Asia-Pacific region, that we embrace 
cooperation and competition with China and regard it as 
potentially a healthy part of our relationship, but at the end 
of the day, we avoid confrontation, particularly military 
confrontation, with China.
    Different administrations have approached China in 
different ways with different emphases and different catch 
phrases to describe the U.S.-China relationship. But beneath 
all that are some structural realities that we really need to 
appreciate if we want to protect U.S. interests.
    The first is the U.S. has, for more than 100 years, an 
interest in having access to the countries of Asia and free 
transit of the waters of the Pacific. The U.S. has in the past 
and should always in the future oppose any attempt in the Asia-
Pacific region at hegemony that would, by definition, threaten 
American access. See here, of course that as the context for 
the militarization of the South China Sea and East China Sea 
issues with China.
    China's comparable view, looking at the United States is to 
take a posture that resists what China sees as a U.S. effort at 
containment. They look at our alliance system with Korea, 
Japan, Australia, New Zealand, and the Philippines and see us 
attempting encirclement. They look at our continued support for 
Taiwan's independence, notwithstanding the One China policy, 
and see that as a threat as well. They look at our ballistic 
missile defense efforts and see that as an effort at denying 
them a secure second strike deterrent. And they look even at 
and imagine that our conventional prompt global strike 
capability, such as it is, also threatens their strategic 
forces.
    The truth is that both countries have reason to be wary of 
each other. China is, in fact, looking to expand its influence 
in the Asia-Pacific region, and we are, indeed, interested in 
limiting that influence, whether we call it containment or not.
    China's military naval expansion and modernization in 
conventional forces is evidence of this and the detail that has 
been presented by Mr. Forbes. Survivable strategic nuclear 
forces is an objective of China and has been for more than a 
decade, and we see that in their move to have mobile systems of 
extended range and perhaps to MIRV their ICBM forces. And 
third, the growth of asymmetric capabilities, particularly in 
cyber and space, to counter U.S. comparative advantages in 
other areas. All this suggests that China does not wish to cede 
military advantage to the United States in any escalating 
crisis.
    This all leads to my greatest concern with China, and it is 
not a North Korean contingency. It is a Taiwan contingency. 
This may come about as the Chinese look to stir nationalism in 
the face of less than desired economic performance, or it could 
come about as a result of a bit of adventurism from the 
Taiwanese trying to get out from under a One China policy. But 
however it would happen, Chinese capabilities have been growing 
and they are designed specifically to prevent U.S. local 
domination at the conventional level and to deter us from 
escalation to the nuclear level.
    The clear prescription for the United States is that it 
needs to address the conventional capability and counter 
asymmetric moves by the Chinese and to keep the nuclear 
threshold with China just as high as possible.
    I would say about the Taiwanese contingency, should it 
arise, that we well understand how important Taiwan is to 
China. It is not at all clear and it has not been at various 
times that the Chinese understand our commitment to Taiwan. 
That creates certain dangers that we should not be innocent of, 
and it makes meetings, such as the one coming up, between the 
leader of the United States and the leader of China extremely 
important, and words in that meeting will matter a lot.
    North Korea. The United States should look for ways to 
block the North Korean plan to mate nuclear weapons with 
intercontinental range ballistic missiles, both for the direct 
security of the United States of America and also for the 
credibility of our alliances that I mentioned before, 
particularly the extended deterrence which these countries 
depend upon. The vulnerability of the United States, 
particularly as we have been highlighting it, that is coming 
down the road as the North Koreans develop this capability is 
threatening to our allies and to the extended deterrence. Can 
they still rely on us when we are vulnerable to the North 
Koreans?
    I would note that the enthusiasm some have shown to deal 
with this through left of launch and other rather exciting 
military options, whether or not we could actually pull them 
off, should really be considered very carefully. We have lived 
with vulnerability to ICBMs for 60 years or more, first Soviet 
ICBMs, then Chinese ICBMs, and then Russian ICBMs. At one 
point, Russia had 30,000 nuclear weapons aimed at us. Right 
now, we think North Korea has about 12. So if we are going to 
decide we can deter the Soviet Union and China for decades, but 
we cannot manage North Korea because Kim Jong Un may be non-
rational, non-deterrable, we should really examine that 
carefully if we propose to go to war as an alternative to 
depend upon deterrence. It may be the wise thing to do. I think 
everybody would love to have defense at this point. I think 
that would make a great deal of sense, but we do not have 
defense. We do not have a non-leaky defense.
    That leads to the question of what are we most worried 
about here and we are worried about two types of developments. 
One is an escalation from an incident either at sea, the 
shelling of an island, the sinking of a ship, something that 
causes a confrontation. Under the current circumstances, we do 
not know how the North Koreans think about their nuclear 
weapons. We do not know what they think they are good for. They 
may think they are good for deterring the South Koreans and the 
Americans from responding in that case. They would be wrong, 
tragically wrong, but the outcome would not be good.
    The second thing we need to worry about I think--and maybe 
it is even more important--is transfer. 10 years ago, the North 
Koreans transferred a plutonium production reactor to Syria. It 
was crushed by the Israelis. If it had not been crushed, that 
reactor could be providing plutonium not only to Syrians, but 
to others who have traipsed through Syria. And these are pretty 
unsavory folks. And that is an image that goes to nuclear 
terrorism that we do not like to contemplate. So we need to 
somehow impress upon the North Koreans that is not a move we 
want to see again.
    The prescription. Three boxes typically and for a long 
time: containment, military action, engagement.
    Containment includes all kinds of things that are good 
ideas. It includes sanctions, tougher sanctions, pressure on 
the Chinese. It includes all this. Very smart, indeed. It 
includes military exercises. It includes cyber activity. All 
this is containment. The problem is we do not have any reason 
to believe really with any confidence it will bring down the 
regime, block the weapons program, or force them to the 
negotiating table in a positive frame of mind. So what we can 
be sure of is while they are containing them, they will 
continue to grow. This is not like fine wine. With the passage 
of time, it does not get better.
    Military force. I do not need to say much about that except 
to say it cannot be cheap, and would it mean a whole war? We 
cannot tell, but it cannot be cheap. And we do not want to--I 
do not think--move to that unless we really do not have another 
alternative to deal with the threat.
    Engagement. There is an awful lot of talk about how 
engagement always fails or always has failed. I believe that is 
too simple a characterization. The deal that some of us were 
involved in 23 years ago or so is one that held for about a 
decade and froze their plutonium production capability. That 
was good as an outcome. Did they cheat? Absolutely they cheated 
in the area that we were not watching them in and that was in 
the plutonium area. But we certainly caught them at cheating.
    Do they understand they cheated? I am fairly certain from 
track 2 conversations the answer is no. They believe we failed 
to perform. What they have told us in many settings is that 
that deal was supposed to create a new relationship, normal 
relations between Pyongyang and Washington. It did not. We did 
not anticipate normal relations. That regime was not a regime 
which we are going to have a normal relationship with.
    So the question is, what do we do? Do we go into 
negotiations? And what is it that would lead us to successful 
outcomes? I only have two points to make here.
    One is we had better insist that the outcome of the 
negotiations continues to be for us a non-nuclear weapons 
state. We cannot legitimize North Korean nuclear weapons by 
having an objective, the current program. A freeze could be a 
good interim step, but it cannot be the end game.
    The second thing is I cannot imagine us addressing the 
North Korean concern why it has nuclear weapons to deter regime 
change by the United States of America. I cannot imagine 
addressing that concern without a normal relationship between 
North Korea and the United States, and I cannot imagine a 
normal relationship unless they improve their human rights 
record in a dramatic way. This will not be easy, but that is 
the only way I can see it.
    Finally, if I can say a couple words on the nuclear 
terrorism issue. The nuclear terrorism issue is one of, most 
analysts say, high consequence, low probability as an event in 
international security and our national security. High 
consequence we do not need to focus on. We all know why that 
would be true. Low probability? The short answer to why this 
has not happened over decades--and I have always worried about 
it--is because it is hard to do, and it is not hard to do 
anymore because it is hard to design a weapon, it is hard to 
build a weapon, or it is hard to deliver a weapon. It is hard 
to get the fissile material to drive the weapon. If that should 
change, that would be the game changer, and that is why I have 
included it in the hearing today.
    For me, the current plan in Northeast Asia, three countries 
can produce a game changer in nuclear terrorism. First, the 
Japanese have what you might call a plutonium overhang--that is 
to say, a stockpile of plutonium they own--of 44 tons. That is 
enough easily for untalented designers to make over 7,000 
nuclear weapons, probably more than we have. As striking as 
that is--and you may wonder what they plan to do with 44 tons. 
Well, they plan to make more separated plutonium by running a 
new reprocessing plant at Rokkasho. That is not a good idea, 
and we need to engage the Japanese over what they plan to do 
with this plutonium. After Fukashima, they do not have a huge 
operating reactor program. They do not have a breeder program. 
They have very little thermal recycle. But whatever thermal 
recycle they do will involve the movement of plutonium around 
Japan. That is material that can be used to drive nuclear 
weapons if it disappears. All this material in transit cannot 
be a good idea.
    Interestingly, China has contracted with France to build a 
plant of the same size the Japanese are intending to open. The 
Chinese would be doing what the Japanese would be doing, which 
is moving plutonium around their cities and around the country. 
More material from which nuclear weapons can be made would be 
moving around China, would be moving around Japan.
    And the last piece is South Korea, which has a serious 
nuclear energy program, would like to do the same thing with 
plutonium largely, I would submit, because their neighbors are 
doing it.
    This is a time in which we have with the Japanese an 
agreement for cooperation, which expires next year. We have an 
opportunity to talk to them about this, not to terminate the 
agreement, but to talk to them about how they plan to use this 
plutonium and use it up. This is an opportunity here also to 
propose to Seoul, to Beijing, and to Tokyo that they consider--
consider at least--a moratorium on reprocessing and plutonium 
separation that would save us from moving into a situation in 
which terrorism becomes not only a high consequence but also a 
high probability event rather than a low probability event.
    Thank you very much.
    [Ambassador Gallucci's prepared statement follows:]


                Prepared Statement of Robert L. Gallucci

    I want to thank the Chairman of the subcommittee for this 
opportunity to share my views on some of the issues that impact U.S. 
national security in the Asia-Pacific region. I plan to limit my 
comments to the security dimensions of the U.S.-China relationship writ 
large, the threat posed by North Korea's nuclear weapons and ballistic 
missile programs, and the implications for nuclear terrorism of 
significant plutonium stocks accumulating in the civilian nuclear power 
programs of China, Japan and the Republic of Korea.
U.S.-China Relations
    For the last two decades or so, successive U.S. administrations 
have sought to characterize the preferred relationship between China 
and the U.S. in a way that recognized China as a great power with 
legitimate political, economic and security interests in the Asia-
pacific region. We would expect competition in each of those spheres, 
but also cooperation to the benefit of both countries, while avoiding 
military confrontation. Successive administrations have placed the 
emphasis on different aspects of our relations with China, and used 
different catch phrases to capture the preferred image of the 
relationship, but all recognized an inevitable tension between the 
desired peaceful, constructive competition and cooperation they sought, 
and the potential for relations to deteriorate to armed conflict.
    Just beneath this imagery lie the interests of nations and 
perceptions of leaders in both countries. The U.S. has always had a 
vital interest in preserving political and economic access to the 
countries of Asia, and thus it has opposed any attempt at hegemony in 
the region. It is this concern, that China will try to establish a 
sphere of influence which would exclude the U.S., that is the backdrop 
to American interpretations of contemporary moves by China in the Asia-
Pacific. China's militarization of its claims in the South China sea, 
and in its contest with Japan over the islands both claim in the East 
China Sea, give substance to that concern.
    From China's perspective, U.S. moves fit a narrative of attempted 
containment of China, one where the U.S. looks for opportunities to 
prevent China from protecting its legitimate interests, interests that 
are proximate to the Chinese mainland and a pacific ocean away from the 
continental U.S.. Evidence of the perceived U.S. security strategy is 
seen in our alliances with Japan, the ROK, Australia and the 
Philippines, our continued support for Taiwan's independence, and 
specific military programs which seem to be aimed at undercutting 
China's nuclear deterrent, particularly our ballistic missile defense 
and the imagined strategic implications of plans for a conventional 
prompt global strike capability.
    The truth, of course, is that the U.S. does seek to limit Chinese 
influence, and we are not at all certain that China is the status quo 
power it claims to be. Both countries have reason to be wary. The 
alliance structure on which we and our allies depend for our security 
is based on extended deterrence, our ability to credibly defend our 
allies from aggression, to include the use of nuclear weapons.first.if 
necessary. The Chinese, for their part, have evolved over decades from 
accepting America's ability to dominate in any critical confrontation 
by resort to the threat of a disarming first strike with nuclear 
weapons, to asserting their ability to deter the U.S. from nuclear 
intimidation by finally achieving a survivable retaliatory capability.
    Since the U.S. has not acknowledged that China, like Russia, has an 
assured destruction capability vis a vis the U.S., there is then the 
possibility of a catastrophic miscalculation in a crisis involving the 
vital interests of both parties. That crisis is most likely to occur 
not over the Korean peninsular, but Taiwan. Taiwan's status is a core 
interest of China, and that it not be changed by China's use of force 
is critical to the credibility of American assurances to Taiwan--and to 
our alliance credibility everywhere. Scenarios leading to a 
confrontation over Taiwan can begin in Beijing if, for example, the 
Chinese leadership felt the need to stoke nationalistic fervor to 
distract attention from poor economic performance, or in Taipei, if the 
leadership there saw an opportunity to get out from under the "one 
China" policy of Beijing and Washington. The message here is to be very 
careful in a Taiwan contingency, and for the U.S. to keep the nuclear 
threshold with China as high as possible by maintaining robust 
conventional force capabilities to counter Chinese military and naval 
modernization aimed specifically at overcoming a U.S. defense of 
Taiwan.
    So the effort at a balanced policy with China should continue, one 
where we respect its global economic and political importance, and 
recognize its growing military capability, but avoid even the 
appearance of retreat in its face.
North Korea
    North Korea's nuclear weapons and ballistic missile programs 
directly threaten our allies, the Republic of Korea and Japan, and in a 
few years we expect they will pose the same threat to the United 
States. Preventing the latter ought to be a policy objective of the 
U.S., both for the security of the American people and the credibility 
of the deterrent we extend to our allies. That said, we should also 
recognize that we have lived with the threat of nuclear armed ICBMs 
pointed at us from the Soviet Union, now Russia, and China for many 
decades without any effective ballistic missile defense (BMD), 
including years in which we were not entirely comfortable with the 
rationality of the leadership we hoped to deter with our own strategic 
nuclear forces. In short, relying on deterrence to deal with the North 
Korean threat is less desirable than an effective BMD, but plausibly 
more attractive than a major war to remove that threat in the absence 
of such BMD.
    In terms of scenarios about which we should be concerned, a strike 
out of the blue from the North seems most unlikely, but the escalation 
of an incident between North and South at sea or near the DMZ seems 
quite plausible, particularly since we really have no idea what North 
Korea thinks nuclear weapons are good for. If they imagine that their 
ability to strike with nuclear weapons will deter the South and the 
U.S. from a conventional engagement following a provocation from the 
North, they would be mistaken, and tragically so. We need to remember 
that we and other states have lived with our own nuclear weapons for a 
long time, and at least some of them have come to appreciate the 
delicacy and nuance of deterrent calculations. We should not assume 
that the leadership in Pyongyang could be so described.
    Among developments we need to be most concerned about in terms of 
probability of occurrence and magnitude of impact, is the transfer by 
North Korea of nuclear weapons materials or technology to another state 
or terrorist group. This occurred a decade ago when the North built a 
plutonium production reactor in Syria. Fissile material was denied to 
the Syrians, and others who might have gotten their hands on it, by an 
Israeli air strike that flattened the facility before the reactor went 
critical. But it is this type of activity, selling fissile material, 
the equipment or technology to produce it, nuclear weapons components 
or designs, or even the weapons themselves, that would create the 
nightmare scenario of nuclear terrorism we most fear. Taking an early 
opportunity to underline for Pyongyang that such transfers will be met 
with a swift retaliatory response would be a good idea.
    Policy prescriptions generally fall into three options: 
containment, military force and negotiation. The dilemma has been that 
containment has been seen as too passive, allowing the threat to grow, 
military force to costly, particularly now that the North has nuclear 
weapons, and negotiation ineffective, as many judge the North to have 
cheated on past deals. But these options should not be regarded as 
mutually exclusive, and perhaps a strategy built from each of them has 
some chance of success.
    Containment has been our default posture, involving sanctions, 
pressure on China to allow them to work, and even to apply the kind of 
additional pressure on Pyongyang that only China can. Military 
exercises and planning with our allies, the ROK and Japan, are an 
essential element of this posture in order to keep our alliances 
strong. Also included here are "non-kinetic" moves, such as cyber 
attacks, from which we should expect retaliation in kind. But so far, 
we have no reason to believe that this approach will either block the 
accumulation of fissile material and nuclear weapons, or the testing of 
nuclear weapons and extended range ballistic missiles, much less cause 
the regime to collapse.
    Military force to prevent the emergence of a nuclear weapons 
capability was seriously contemplated and prepared for in 1994 during 
the Clinton administrationand the negotiations that led to the Agreed 
Framework. It was not pursued because the North eventually accepted a 
halt to its plutonium program that lasted a decade. Now that the North 
has had five nuclear tests and manufactured perhaps a dozen weapons, 
along with ballistic missiles that could plausibly deliver them to 
South Korea and Japan, the stakes are quite a bit higher. As the North 
moves to solid fueled, mobile missiles for its ICBM capability, the 
"left of launch" option becomes more challenging, and our ballistic 
missile defense capability regionally, and for the U.S. homeland, is 
leaky at best. While this should not discourage any genuine pre- 
emptive strike on the North, that is, to prevent an imminent launch 
against the U.S. or its allies, it should cause us to think hard before 
attempting regime change or even choosing a preventive strike aimed at 
delaying the emergence of an ICBM capability.
    Negotiations are seen by many observers as a failed policy, 
unlikely to succeed with a regime that cannot be trusted. 
Interestingly, the North appears to feel the same way. In fact, there 
is no question that the North cheated on the 1994 deal by buying 
uranium enrichment equipment and technology from Pakistan, thus 
allowing it to produce one kind of fissile material as it stopped 
producing another. But there is also no question that the deal stopped 
a plutonium production program which, each year, we estimated would 
have been producing enough fissile material, by the year 2000, for 
forty nuclear weapons. As it turned out, because of the deal, by 2000, 
the North had no nuclear weapons. For its part, the North plausibly 
thought that the Agreed Framework would result in normal relations with 
the U.S., and thus remove the need to acquire nuclear weapons as a way 
to deter us from attempting regime change. It may as plausibly be 
argued that they hedged that bet with the uranium enrichment deal with 
Pakistan and concluded early in the Bush Administration that a hostile 
relationship with the U.S. still existed and so nuclear weapons were 
still required.
    Of course, these propositions may not be accurate and the North may 
now, if not decades ago, have less benign reasons for wanting nuclear 
weapons. The question is whether or not it would be prudent to find out 
by engaging in negotiations. If we decide to explore that route, we 
should be carful to keep the object a nuclear weapons free North Korea. 
This would not mean shunning interim steps involving freezes of various 
types, but it would mean rejecting the North's position that it will 
never give up its nuclear weapons. Were we to accept that position and 
enter protracted negotiations, we would legitimize the North Korean 
nuclear weapons program and create domestic political pressure in the 
South and in Japan to follow suit.
    We should also recognize that if there is a route to a non-nuclear 
North Korea via some sort of settlement, the deal will have to address 
the North's concern about a U.S. led effort to change the regime in 
Pyongyang. It will have to give the North what it believes it gets from 
nuclear weapons. The outcome would have to be the establishment of 
normal relations between the U.S. and the DPRK, to include a peace 
treaty to replace the armistice, but also establishment of diplomatic, 
political and economic ties. And this is only plausible if the North 
adopts human rights standards in its treatment of its own people that 
are acceptable to the international community. None of this will be 
easy.
    How these three approaches can be integrated, or deciding if 
tougher sanctions need to proceed serious negotiations, or whether 
robust military exercises and maintaining the threat of military action 
are useful or destructive of engagement are tactical questions worthy 
of discussion. It is worth noting, though, that our unwillingness to 
move to the negotiating table on the heels of a North Korean nuclear or 
ballistic missile test reflects a concern that we not be perceived at 
home or abroad as rushing to talk after being threatened. And the 
leadership in the North may well take a similar position.
Nuclear Terrorism
    It has been said that nuclear terrorism is a very high consequence, 
but very low probability event. The first part of the proposition is 
certainly true. The technology of seventy years ago produced an event 
that instantaneously killed thirty thousand people in one city, and 
many times more than that died in the following weeks.Nothing else that 
we know of, natural or man made, except perhaps a meteor strike, can do 
that: that much death in an instant.
    The second part of the proposition is arguably true because, to 
begin with, we have not seen a nuclear weapon detonated by a terrorist 
over those seventy years. And the reason we have not is certainly not 
because there have not been, and are not now, terrorist organizations 
that have sought to acquire a nuclear weapon. We know that they have, 
and have reason to believe that they will continue to try. The obstacle 
to their success has been the difficulty of acquiring a nuclear weapon 
or the fissile material to make one--an improvised nuclear device 
(IND). This situation, what makes nuclear terrorism a low probability 
event, may be about to change because of decisions made in Northeast 
Asia about how to pursue electrical power production from nuclear 
energy.
    Japan now owns forty-four tonnes of separated plutonium, of which 
about twenty percent (nine tonnes) is stored in Japan. The rest, eighty 
percent (35tonnes), is stored in France and the United Kingdom, where 
it was separated from Japanese spent fuel. The plutonium stored in 
Europe is supposed to be shipped back to Japan by the end of the 
decade. All this plutonium--easily more than enough for seven thousand 
nuclear weapons--was separated from spent fuel produced in Japanese 
nuclear power reactors so that it might be used in Japan's fast breeder 
reactor development program or recycled for use in some of Japan's 
current generation of thermal nuclear reactors. But Japan has abandoned 
its operation and development of fast breeder reactors and, post-
Fukashima, it will likely only operate a few reactors with a mix of 
plutonium and uranium in their fuel. There is, then, no clear plan 
about what to do with thousands of nuclear weapons worth of plutonium 
that will be stockpiled in Japan.
    If this were not bad enough, Japan is currently planning to start 
up a new reprocessing plant at Rokkasho that will produce even more 
separated plutonium. Since there is already a plutonium "overhang," the 
Japanese are considering running the new plant at 20% capacity, which 
would still produce one and one-half tonnes of plutonium each year, 
enough for at least an additional two hundred and fifty nuclear 
weapons.
    There are at least two concerns here. First, Japan's neighbors, 
China and South Korea, worry that Japan is accumulating all this 
plutonium as part of a hedging strategy, aimed at greatly shortening 
the time it would take to build a credible nuclear weapons arsenal 
should the decision be made in Tokyo to abandon the country's non-
nuclear weapons status and leave the NPT.
    Whatever may be thought of that, it is the second concern that 
relates to nuclear terrorism. To the extent that Japan seeks to fuel 
its nuclear power reactors with a mixture of plutonium and uranium--as 
opposed to simply using low enriched uranium--it will be planning on 
the regular circulation of nuclear weapons material in civilian 
facilities, with civilian security, for an indefinite period. Depending 
on how many reactors it eventually so fuels, plutonium will become 
vulnerable to theft in multiple locations and in transit around the 
countryside. This cannot be a good idea.
    The U.S. could choose to try and influence Japanese thinking since 
the U.S.-Japan agreement for nuclear cooperation is up for renewal next 
year. If neither country objects, it will automatically renew. But 
against the backdrop of renewal of the agreement, the U.S. could engage 
Tokyo in discussion about the wisdom of a new reprocessing facility 
opening in the next few years, and generally about recycle as compared 
to other methods of dealing with its growing plutonium stockpile.
    At the same time the civil plutonium issue is playing out in Japan, 
China has negotiated with France for the purchase of a reprocessing 
plant to handle spent fuel form its civilian nuclear energy sector. The 
plant would be the same size as Rokkasho, separating enough plutonium 
each year to make more than a thousand nuclear weapons. Again, if all 
went according to plan, some portion of that plutonium would be mixed 
with uranium and be moving about China to fuel China's growing nuclear 
power program. This would be another challenge to physical security; 
another opportunity for the nuclear terrorist.
    Finally, there is the Republic Korea, which has a substantial 
nuclear power program and the desire to do what its neighbors plan to 
do, separate plutonium from spent commercial nuclear fuel. However, 
since the ROK's agreement for nuclear cooperation with the U.S. 
requires U.S. approval before reprocessing, the decision to do so has 
been put off a bit as both sides consider the "proliferation 
resistance" of the technology that the South proposes to use in 
reprocessing. But if the outcome is yet another reprocessing plant in 
Northeast Asia separating plutonium from spent fuel, it is difficult 
not to see this facility as presenting yet another opportunity for the 
acquisition of fissile material by terrorist groups seeking to 
manufacture one or more nuclear weapons.
    Interestingly, when the U.S. Blue Ribbon Commission Report of 2012 
considered the economics of reprocessing, it found no good argument for 
separating plutonium from spent fuel. Not even waste management 
concerns would justify reprocessing, especially if dry, cement storage 
were adopted until a politically acceptable long term storage site 
could be found. This all suggests that perhaps if the three counties 
involved here, Japan, China and South Korea, all of whom are watching 
the decisions taken in the other capitols, were to agree on a 
moratorium on reprocessing of spent fuel for civilian purposes, it 
would make the region and the world a safer place.


    The Chairman.  Thank you, Ambassador, and thanks again to 
both of you for your testimony.
    Ambassador Gallucci, I have to give you a little bit of a 
hard time. We have a typed copy of your presentation. I think 
you have a handwritten copy of your presentation. Is that 
correct? Good job. All I am saying is I could not even read my 
handwriting that I am writing now, let alone get through----
    Ambassador Gallucci.  I have suffered for decades with 
boards and others telling me that I am supposed to type out my 
remarks. But I have a fountain pen here, Mr. Chairman. 
[Laughter.]
    Ambassador Gallucci.  And that is what I write my notes 
with.
    The Chairman.  Very good. Well, again, thank you for your 
testimony.
    And I will start with this. Congressman Forbes, in your 
testimony you talked about the spectrum of reactionary and to 
the strategy. And in your testimony, you say I believe the most 
important thing this subcommittee and this Congress can do is 
to build a new culture of strategic thinking. You go on to say, 
so too is the time when our strategy can be dictated--gone is 
the time when our strategy can be dictated by our budget.
    And so part of the effort that I want to put behind this 
initiative, this ARIA initiative, is to make sure that working 
with the administration, we are laying out a clear strategy 
that transcends any timeline of a two-term presidency but goes 
to the long-term strategic thinking of this country that can be 
filled out with the policies and the tactics that then follow. 
So I appreciate your comment and testimony on that.
    One of the things that we need include, of course, in the 
Asia Reassurance Initiative is a conversation about how to 
address and deal with North Korea. Two weeks ago, Secretary 
Tillerson said the following in Seoul: ``The U.S. commitment to 
our allies is unwavering. In the face of North Korea's grave 
and escalating global threat, it is important for me to consult 
with our friends and chart a path that secures the peace. Let 
me be very clear. The policy of strategic patience has ended. 
We are exploring a new range of diplomatic, security, and 
economic measures. All options are on the table. North Korea 
must understand that the only path to a secure, economically 
prosperous future is to abandon its development of nuclear 
weapons, ballistic missiles, and other weapons of mass 
destruction.''
    You are in the Oval Office. Secretary Tillerson is there 
with the President. What do you tell the Trump administration 
that they should be pursuing? What should their policy be 
toward North Korea and how will it differ than that of 
strategic patience?
    Mr. Forbes. Well, I would tell them a number of things, and 
I would begin with exactly what you said on a comprehensive 
strategic plan. That comprehensive strategic plan does not 
exist right now. I do not think we have a culture of even 
strategic thinking right now, and I do not think we have had it 
for years. So it is not just the Trump administration versus 
the Obama administration.
    I think it is absolutely crucial that we get out of this 
mode that I think we have kind of slipped into as a Nation 
where we are reacting to situations and things as opposed to 
getting that comprehensive strategy. And it is not just from 
the Pentagon. I think we need a cross-agency review to make 
sure that we have a comprehensive strategy on our agencies.
    And so what I would tell anyone with the administration is, 
let us develop that. Let us put a priority on that. And I would 
suggest to each of you that when someone comes over from the 
Pentagon or from an agency and they tell you this is our guy 
for a strategy, they have got a problem because it needs to be 
a culture that we create and not just individual designations. 
And then you also need behind that the assumptions that go into 
that strategy.
    Now, let me move forward to say what should that strategy 
look like. I think one of the things that Bob said that I 
absolutely agree with is that words matter. And I think our 
rhetoric needs to be just as strategic as our military 
operations. And we need to walk in with goals that we want to 
accomplish with our rhetoric and what we say, and we need to 
realize who we are talking to. Even when we are talking to an 
actor like North Korea who, as Bob mentioned, most of us think 
is irrational, his words matter, and we have to listen to those 
words. Even if we do not believe the words, we have to see what 
the words are representing to us. So the first thing that I 
would say is we do not want to create a crisis situation by 
narrowing down timelines. And so I think we have to be very 
careful on our rhetoric.
    The second thing is I think we have to realize that when we 
are trying to communicate resolve to the North Koreans, it is 
not just what we do to the North Koreans, but it is what we do 
to the Chinese and everyone else in that region. And one of the 
things that I was very concerned about is when we had, first, 
the pivot to the Asia-Pacific area, and then the rebalance to 
the Asia-Pacific area, it was never resourced. So when I talk 
to our allies or our competitors in that region, they all saw 
different things in that. And I think it is very important for 
us to communicate to North Korea the resolve that we have.
    I think the other thing I would tell the Secretary is that 
he needs to go in and we need to continue talks. Regardless of 
whether North Korea said they do not want talks, it is to their 
benefit to have those talks. I think we need to continue to 
explore them. And when we go in, I think it is important that 
we have a mixture not just of sticks but also of incentives as 
well because I think you have to realize that when we go in, we 
need to do that.
    And the final thing I would say is I think we need to 
continue with the sanctions and to recognize these two things 
about sanctions. Sanctions are not always easily measurable 
because sometimes you can only measure sanctions over a longer 
period of time, and sometimes they have effects that were not 
our desired effects but were still beneficial effects.
    But the other great thing about sanctions, if we are going 
to succeed in North Korea, we have got to have and create 
partnerships in that area to help us with that. Sanctions 
sometimes are a very low-cost admission into that partnership 
world where we may not get some of our allies, some of our 
partners to say we want to walk in on a military basis, but 
they will say we will walk in and support sanctions to get 
there.
    The Chairman.  Ambassador Gallucci, I am out of time. Did 
you want to add anything to that, or do you want to come back 
and address that?
    Ambassador Gallucci.  There is one point I would like to 
make and it is a question of tactics right now. It is I think 
much in discussion in this town. And that is if we think 
negotiations may eventually be where we want to end up as 
opposed to military confrontation, is it wise, prudent for us 
to get there by first launching a new round of tougher 
sanctions because there are things and sanctions we can do that 
we have not done. These sanctions that we have in place are 
nontrivial, but they are not as tough, for example, as some of 
what we did in the case of Iran. And there are things we can 
imagine, particularly financial sanctions, that would put more 
pressure on Pyongyang.
    The question I would like to put before the committee is, 
is it wise to say let us do that first? Let us have a period of 
tougher sanctions, more pressure, and then go to negotiations. 
I think that is a dominant view. What I would like to suggest 
is that if that were us on the other end, we, for example, do 
not really particularly want to go to the negotiating table on 
the heels of a nuclear test or on the heels of a long-range 
ballistic missile test because it appears both domestically and 
internationally as though we are being pressured to the table. 
And that is not the way a negotiator likes to go to a table. 
Not surprisingly, the North Koreans have a similar view, and 
they would like for us not to introduce our effort at 
engagement by first starting with sanctions.
    So as we consider whether we want to have a tougher round 
of sanctions, recognize that if we decide we do, there is going 
to probably have to be a period in which nothing happens except 
their programs continue to build. We have to recognize that 
when nothing happens, something happens. That is all.
    The Chairman.  Senator Markey?
    Senator Markey. Thank you, Mr. Chairman.
    Ambassador Gallucci, over the past several years, I have 
been concerned about the risk of inadvertent nuclear war on the 
Korean Peninsula. Statements about plans to target North 
Korea's leaders and its nuclear arsenal heighten that risk. For 
example, last September, the South Korean Defense Minister 
revealed South Korea's plan to, quote, use precision missile 
capabilities to target the enemy's facilities in major areas, 
as well as eliminating the enemy's leadership.
    South Korea has a legitimate desire to defend itself 
against the prospect of an unprovoked North Korean nuclear 
strike. Nevertheless, plans for preemptive force create 
pressure on all actors to go first in a crisis. As your 
colleague, Victor Cha recently said, everyone is put in a use 
it or lose it'' situation.
    How would you recommend, Mr. Ambassador, the United States 
and South Korea balance the need for robust deterrence with the 
need to reduce the risk of miscalculation and inadvertent 
nuclear war?
    Ambassador Gallucci.  Thank you.
    I think it would be wise to begin by making a distinction, 
although it sounds a tad academic, between a preventive strike 
and a preemptive strike because it is really not so academic.
    I think that if the DNI were to walk into the Oval Office 
and tell the President that there is a missile on the pad and 
it has got a nuclear warhead and it has either got Tokyo or 
Seoul or Washington or New York, everybody would expect the 
United States of America to do what it could to strike that 
missile before it was launched. And international law and 
ethics would endorse the move because preemption is legitimate, 
prudent, wise, just, et cetera.
    But that is typically not what we are talking about and 
probably not what the South Koreans were talking about. They 
were talking about an emerging or evolving capability which we 
would rather not see in an enemy and we would rather strike 
before that capability is actually achieved. That is a 
preventive strike.
    The distinction, if people are uncomfortable with this, was 
quite important at the time of the second Gulf War when that 
was not preemption. That was a preventive strike. And law and 
ethics were not on our side. Neither, by the way, was politics 
or prudence in my view.
    Similarly now, I would be very careful about the idea that 
simply grabbing onto the words ``that is not going to happen'' 
and strangling that baby in the crib before it becomes capable 
of threatening us with real capability is not something that we 
should leap to do. It will not be free. You cannot expect there 
will not be a response from the North and that that response 
will not ultimately involve a second Korean War.
    So the first point I want to make about this is that that 
enthusiasm to block the threat one has to focus on. And that is 
one of the reasons why I think we ought to be clear about what 
our true defense--defense as in defense by denial--capability 
is. And it is quite limited. Even though it is a layered 
defense in the region, it is leaky. If you talk about 
continental ballistic missile defense, it is even more leaky. 
And we have to understand that is not something we can rely on, 
I do not think, at this point. Maybe some day in the future, we 
can. That is driving us back to ask, well, do we want to launch 
a preventive strike?
    Senator Markey. So a preventive strike strategy in your 
opinion leads more likely to miscalculation and accidental 
nuclear war.
    Ambassador Gallucci.  You are putting pretty good words in 
my mouth I would say, which is to say that I believe that----
    Senator Markey. I know what I did. All I did was just ask 
my question.
    Ambassador Gallucci.  I understand. [Laughter.]
    Ambassador Gallucci.  I understand.
    But what I think is possible is that notwithstanding the 
fact that we do not know what North Koreans think nuclear 
weapons are good for, one of the things they probably are good 
for is a way of deterring an attempt at regime change. And 
whatever we decided to do or the South decided to do, if there 
was ambiguity over that point, then an accident certainly could 
happen.
    Senator Markey. And again, just so I can get back to this 
kind of theological question, do you believe the United States 
should continue to demand that North Korea agree to 
denuclearize before we talk, or do you think we should launch 
exploratory talks while continuing to bolster deterrence and 
strengthen the existing sanctions?
    Ambassador Gallucci.  I have a colleague who put it this 
way, that we should have no conditions on talking about talks. 
So we should agree to meet without conditions. At that point, 
before getting into protracted negotiations, I think we need to 
be clear that if those negotiations succeed, for us that would 
have to mean that North Korea would give up its nuclear weapons 
and nuclear weapons program. It does not mean that they have to 
agree to that in the beginning. That is the outcome of the 
negotiation. But we cannot, in my view, wisely enter a 
negotiation in which we will regard it as successful if we 
ended up with a nuclear weapons state in North Korea. I think 
that would not be good for the alliance with Japan or the 
alliance with the Republic of Korea, nor would it be good for 
the United States of America.
    Senator Markey. And how do we convince Kim that 
denuclearization is not the same as regime change?
    Ambassador Gallucci.  In my experience, which is----
    Senator Markey. Saddam, Qaddafi, no nukes.
    Ambassador Gallucci.  I understand.
    Senator Markey. You die. So how do you deal with that 
dynamic?
    Ambassador Gallucci.  In fact, because there is this 
history, that history has been thrown at us in track 2 and 
track 1 and a half meetings at least, which is to say look what 
you did in Libya, look what you did in Iraq. How can we be sure 
you will not do that to us? So quite on point. I get that.
    The answer is that the only way you could be sure--you, 
North Koreans could be sure--is if we succeeded in normalizing 
relations. In other words, that outcome, which is not 
structurally prohibited here--there is no reason why we could 
not. There is an obstacle to it and it is the character of the 
regime. So if you want to characterize the change that has to 
take place to allow normal relations to exist between our two 
countries as regime change, yes, you have defined it that way.
    But I would submit that this does not mean that North Korea 
has to become a Jeffersonian democracy. We have relations with 
countries whose values on these issues are quite different than 
our own. It is just that North Korea is so far from even 
minimally meeting international standards on human rights that 
it seems to me implausible that we would have a normal 
relationship----
    Senator Markey. Again, my time is expiring.
    So would you say that if they, as part of those talks, 
agreed to denuclearization, that we could also agree 
simultaneously at that early stage of the negotiations that 
regime change would not be a part of our agenda?
    Ambassador Gallucci.  Yes. A change in the regime but not 
regime change. In other words, we need the regime to change the 
way it treats its own people, but not a regime change.
    Senator Markey. But Kim could stay.
    Ambassador Gallucci.  To me, that is not the problem.
    Senator Markey. That is not a problem. Interesting.
    Thank you, Mr. Chairman.
    The Chairman.  Senator Portman?
    Senator Portman. Thank you, Mr. Chairman.
    And, Professor, thank you for your insights. And, Randy, 
good to see you.
    These are tumultuous times all over the world. Are they 
not? And Asia is no exception.
    I want to focus a little on the South China Sea and what is 
going on there. There was a map provided. You may have been 
responsible for this, but it was part of our prep. And it shows 
where China claims territorial waters, which really comes right 
up to the borders, of course, of many of our allies, including 
the Philippines and Malaysia, right up next to Indonesia, 
Vietnam, of course. We have heard a lot about China creating a 
military base out of a coral reef in disputed waters. I saw in 
your testimony you both addressed this a little bit, but I 
would like to drill down a little bit more.
    First, what concerns you the most about what they are doing 
in the South China Sea and the East China Sea for that matter? 
What is the greatest threat to our national security interests? 
Maybe, Congressman Forbes, you could start.
    Mr. Forbes. The thing that concerns me the most, Senator, 
is the new boldness and aggression that we are hearing not just 
from their leadership but the second tier of leaders that are 
coming back. I think we have left a vacuum there over the last 
several years. And that is why in my recommendations I said one 
of the things that we have to do minimally about those 
territories, first of all, we have to reach a legal conclusion 
which we have not reached as a country yet as to the status of 
those features.
    But the second thing is we have got to routinize the FONOPS 
operations that we are doing. One of the wonderful things about 
what we all do is we get to work with some wonderful people on 
both sides of the aisle. And most of the people that I work 
with, whether Democrat, Republican, or Independent, agree that 
we make huge mistakes when we have allowed that vacuum to go 
because then when we actually do take action, all of a sudden 
you risk a much greater conflict than you would have had 
before.
    The second thing that I would say is that we have got to 
increase not just our presence but the readiness especially of 
our Navy. Almost anyone who looks at this believes that the 
next decade or two decades, it is going to be the Navy. Let me 
just give you one picture, Senator, that I think says it.
    In 2007, we could meet 90 percent of the validated 
requirements of our combatant commanders. Last year, we met 
less than 42 percent. That is a big concern and a big problem 
when we see China building up the way they have been and us not 
keeping up the pace with what we need to do with the Navy 
because if we have that vacuum, they look at the same reports 
we do. They can be very concerned when we have got surge 
problems, when we have carrier gap problems that are out there. 
I think we have to turn that around and turn it around quickly.
    Last thing. We have got to make sure it is not just number 
of ships but it is the readiness of those ships in terms of 
munitions and those kinds of things that I think we need to do 
in very, very short order and very quickly.
    Senator Portman. So let me just try to summarize quickly. 
One, we need a strategy, and that strategy has to include what 
our goals are for the region. And as you said, even 
definitionally, what does this mean? Is what they are doing a 
violation of international laws or not? And I assume you would 
also add to that working with our allies in the region who have 
considerable interest in this and are very concerned about the 
direction.
    And then second is we have to have the capability to 
respond, which that capability has been eroded, and PACOM would 
I think agree with you on your sense that we just do not have 
the readiness even if we have some of the ships. And they are 
not adequately represented in the region.
    Maybe, Professor, you could talk a little about what--I 
mean, why does this matter? What are our interests in the South 
China Sea?
    Ambassador Gallucci.  Congressman, it appears to me that I 
could separate the response into two pieces. One is what are 
the intrinsic military and naval implications of what the 
Chinese did and how does that affect our operations in the 
region. And the second is the political significance.
    On the first, it occurs to me that I should note that I 
spent 3 years on the faculty of the National War College 
learning that I should never do what I just said and that I 
should recognize the limits of my own experience. So I actually 
do not want to speak to that, but I believe there is a 
statement that could be made, not by me, about how this might 
complicate operations, the militarization of those pieces of 
territory. I do not want to call them islands.
    Politically, though, I feel much more comfortable saying 
that the image of the Chinese doing this and behaving in other 
ways that suggests they are unconcerned about judgments about 
their consistency with international law, they are prepared to 
press the Japanese on islands, which everyone seems to regard 
are properly administered at least by Japan if not owned by 
Japan. The willingness to challenge the United States' 
commitment and the mutual security treaty to extend to those 
islands--that all this paints a picture of a China that is 
moving out in the region and presenting an image of threat to 
not only our allies, but I would say also our friends in 
Southeast Asia. So this is in my view ominous and deserves to 
be met by the United States.
    I was kind of general in my comments because I am really 
uncertain about how far to push this except politically I feel 
confident that the image we wish to project is as a country 
continually maintaining a commitment to the region and to our 
presence in the region, and that we are not going to be pushed 
off by hegemonic moves by China, to put it bluntly.
    Senator Portman. And to the consequences, keeping those sea 
lanes open obviously has a major impact on international 
commerce and the possibility that China could control those sea 
lanes obviously is a commercial, as well as a national security 
threat. Would you not say?
    Ambassador Gallucci.  Sure.
    Senator Portman. And so we have a longstanding interest in 
this not just in the South China Sea but the Straits of Hormuz. 
Wherever we are in a position, we have been able to help all 
countries to be able to engage in international commerce.
    I guess the final question I would have--and my time is 
expiring here. Thank you, guys, for indulging me. Is it too 
late with regard to the South China Sea? We talked about North 
Korea earlier. Is it too late for us to take action and to 
address these concerns that both of you raised and deal with 
the threats that the allies in the region feel?
    Mr. Forbes. Senator, I absolutely do not think it is too 
late. If we had more time, I could tell you that in 1970, 1972, 
1973, 1974, we would have felt the same way about the United 
States military, and then we look at what happened to them by 
1990 and 1991 when we went into Kuwait and we had turned it all 
around. And this Congress did that with three major things. We 
put stealth airplanes in, guided munitions, and jointness, and 
that gave us air dominance which was a huge turnaround. We can 
do it now.
    But the reason that I emphasized the strategic thing--
everybody talks about strategy. It is something we all agree we 
need to do it. But why it is so important is if you look at 
what we had just a few years ago, we had the 2012 defense 
guidelines. That is what we were resourcing things from. And if 
you remember, there was a push to take up the landmines along 
the DMZ. Can you imagine any of us sitting in this room today 
and saying, oh, my gosh, I wish those landmines had been taken 
up on DMZ. We would have thought that was ludicrous.
    The same thing when you did not have that strategy and we 
looked there. We were going to take our cruisers out. If we 
took our cruisers out, it was because the 2012 guidelines were 
based on the fact that they did not think China would do what 
it has done now. But, Senator, here is what would have 
happened. We do not just need those cruisers. We need twice as 
many because we will be in a 360 degree fight. This is what 
Americans do.
    If we will sit down and create those strategies, I still 
think we can begin to turn this around. And our allies are 
looking to us to develop that strategy and show that resolve so 
they can embrace us and come around too. But I think we can 
certainly do it.
    Senator Portman. Professor, you had a comment? I am over 
time.
    Ambassador Gallucci.  It sounds to me, on the face of it, 
wrong to think that there is nothing we can do in the face of 
the Chinese move and to simply accept it as a fait accompli. 
Again, I have to say I am not really competent to go into the 
detail of what exactly we need to do. But I think certainly at 
the political level there are things we can do to reassert our 
presence in the region. Mr. Forbes has put forth in his remarks 
the importance of freedom of navigation exercises, and that is 
absolutely critical and we need more, not less of that.
    Senator Portman. Thank you.
    The Chairman.  Thank you, and we will go ahead, if you do 
not mind, and continue this conversation and questioning.
    And to Senator Portman's point, thanks to CSIS and a great 
Colorado-headquartered company, DigitalGlobe, we have some 
incredible, incredible visuals of what is happening in the 
South China Sea. I mean, this picture here--I know you cannot 
see it here, but it shows construction of hangars at Firey 
Cross Reef, enough to accommodate 24 combat aircraft, three 
larger planes, such as ISR, transport, refueling or bomber 
aircraft. There is a series of radomes here and a large 
collection of installed radomes north of the airstrip 
representing a significant radar sensor array. That is 
happening now. It is not being built. It is built. It is up. So 
I think that is exactly what we face in the South China Sea.
    And I am concerned as well about the issue of freedom of 
navigation operations and would like to see and encourage the 
administration to continue to--as they continue their 
development of an Asia policy, to work on the routinized 
freedom of navigation operations and other efforts within the 
South China Sea to continue to reiterate our point that China 
has violated international law and is in violation of 
international law with its activities on reclamation of the 
South China Sea islands--or excuse me--of the South China Sea 
reefs.
    I want to shift again back to the Asia Reassurance 
Initiative. With Secretary Mattis and Secretary Tillerson 
visiting Asia over the last several weeks, visiting Japan, 
Korea, China, and our conversations about making sure that the 
new administration is developing a robust Asia policy, talk a 
little bit about, if you would, the--you mentioned it in your 
opening statement, Congressman, that the rebalance policy--we 
supported it. We were excited about the rebalance or pivot, 
however you want to call it, whatever it changed to, that we 
believed it was the right thing for a very consequential 
region. And talk about where that fell short--we have talked 
about resource issues. We have talked about the budgetary 
concerns--and how the Trump administration can do better. And 
also talk about assessments of the first months of what we have 
seen with the administration, where we need to go from here.
    Mr. Forbes. Well, Mr. Chairman, I think one of the things 
that was important is the Obama administration needs to be 
applauded for at least recognizing the importance of this 
region. They did when they first came out and called this a 
pivot. But then they became confused with themselves and were 
kind of pushed back to change it to rebalance.
    I had more leaders from around the world who are allies 
that came in to me and said, what in the world does this mean? 
What is your strategy? And oftentimes what you have is world 
actors, whether they are our competitors or our allies, will 
look to how we resource something to kind of draw out a road 
map of what that actually means. Well, if they looked at how we 
resourced it, we did not do a very good job. And much of what 
we do is not just the rhetoric of a policy, but then how we 
implement that policy with the resourcing.
    And let me just give you kind of the picture of what our 
allies saw and what China saw. They saw us saying, okay, we are 
going to turn and move into the Asia-Pacific area, but then 
they saw this, having a budget that was proposing to take and 
delay a carrier, actually cut out our cruisers, reduced our 
naval capacity significantly, reduced our Army, reduced our Air 
Force. And so all of a sudden, you have them beginning to say 
we do not really know whether you are committed to this region 
or not.
    And I had an interesting thing from one of our allies who 
came to me, the head of that country, and he said this. You 
know, we used to think you guys knew how to make the trains run 
on time. We are not sure you do anymore. And therefore, what is 
happening to a lot of the countries around me is they are 
looking to make deals with China and other places.
    So I think the thing that I would emphasize to this new 
administration is this. You need to come out with a strategy 
that you can articulate. Mr. Chairman, this concept that 
somehow we cannot talk about strategy because it is like a 
secret football play that we are going to pull out--that is 
just bogus. That is an excuse for not having one. Strategies 
are important. They need to articulate it to you so you know 
how to fund it. But we need to be able to tell it to our allies 
so they know how to come around us and embrace it. And then the 
third thing, our competitors need to know where are the lines 
and whether we step across those lines.
    So I would say to them, develop that strategy. And one of 
the big parts of that strategy that you are going to 
communicate is your presence and how you resource it. And I 
would say one of the top things that they can do is begin to 
say to the military, we are going to rebuild the presence that 
we have in the Asia-Pacific area.
    The Chairman.  Ambassador, do you care to comment?
    Ambassador Gallucci.  The only thing I would say--and it 
goes to some of the general propositions that Congressman 
Forbes has in his written statement about our need to improve 
analytically our military naval capabilities and air 
capabilities. I would also like that to be sensitive to if not 
driven by scenarios.
    There is a reason why I picked out the Taiwan case because 
I think that is particularly worrying going to a core issue for 
the Chinese and one in which I do not think--I certainly hope 
we would not walk away from. So that involves, if you look at 
that scenario, some very special needs in terms of 
capabilities. The Chinese have played to that game, and I know 
we are aware of that in our military thinking and naval 
thinking, but I would like expansion and modernization to be 
sensitive particularly to that scenario.
    The Chairman.  Thank you.
    And so with the upcoming summit that President Xi and 
President Trump are going to be hosting, meeting, I guess, next 
week, what will this summit cover? What should the agenda be? 
What do you believe will be discussed? And you are at the 
United States Senate Foreign Relations Committee. What would 
you ask us to tell the administration as it relates to this 
summit?
    Mr. Forbes. Well, one of the things that I would point out 
that we have not really talked about here--I would never take 
off the table intellectual property rights. It is still an 
important thing. We need to keep it on the table.
    I think you need to continue to talk about human rights 
issues, even though they may not be at the top of the agenda, 
that you cannot stop talking about those issues. And I think 
they are very important to say.
    And I think the overall thing is not just the words that 
are spoken, but I think you need to communicate two things with 
the Chinese. First of all, respect. You do not want to be 
obnoxious to them. But I think they do appreciate strength. And 
so I think we need to communicate our resolve, and I think 
nothing says resolve like saying that we are going to increase 
our presence in the Asia-Pacific area. And I think that should 
be communicated to them. And I think we should talk about this 
reclamation of property and, most importantly, the 
militarization of what they have reclaimed and say it is wrong 
and you need to stop those actions.
    The Chairman.  Ambassador?
    Ambassador Gallucci.  I think the chapeau is really the 
respect for China as a great power, the chapeau of the cliches 
that have driven the remarks of Americans about China for quite 
a long time now to be repeated with feeling about China's 
presence, about China's interests, and the legitimacy of that 
about China's role in the world, even beyond the region, but to 
have no ambiguity about America's position. We are not in 
retreat. We have important alliances. Those alliances are for 
us guaranteeing the security not only of the ally with whom we 
extend our deterrent and commit ourselves, but they are 
important to our own security. And we are not retreating from 
any of those, and we are going to maintain the capabilities to 
make good on the commitments contained in those alliances. That 
is more important than anything.
    Second, I would look for an opportunity--it has to be done 
carefully--to restate the American commitment to the idea that 
Taiwan's status, independent status, not be changed by the use 
of force or the threat of the use of force, that we are not 
moving away from a One China policy, but we are not moving away 
from our commitment to Taiwan either.
    Third, I think the North Korea case should be on the 
agenda. I do not think we lead with that, but I think it should 
be on the agenda and that we really do expect more from the 
Chinese. It is easy to say that we would like them to abide by 
the sanctions resolutions that emerge from the U.N. Security 
Council, but more than that, everybody knows that North Korea 
has one patron and it is Beijing. And Beijing needs to take 
care of its client.
    I do not know whether this needs to be brought up by us, 
but if it is brought up by the Chinese, we should make no 
apologies about THAAD deployment in South Korea. I mean, the 
outrageous--and it is outrageous--proposition that we would 
provide defense for an ally, a treaty ally, who suffers 
ballistic missiles being shot in its direction by a client of 
China and then China complains to us about providing that 
defense is almost too much to bear.
    I would not spend a whole lot of time, as some have 
advocated--I do not see the wisdom of this--trying to persuade 
the Chinese about the limited intentions we have for the 
radars. That was like trying to persuade the Russians not to 
worry about our deployments in the Atlantic. It falls on deaf 
ears and it does not sound very good going down. So I would not 
worry too much about that, but I would certainly be assertive 
about what we will do and put it in the context of supporting 
our alliance.
    The Chairman.  Senator Markey?
    Senator Markey. Thank you, Mr. Chairman.
    So let me follow up on that. The Defense Authorization Act 
that Congress passed last year contains a provision that 
expands the scope of the U.S. national missile defense. 
Previously missile defenses were meant to remain limited such 
that they would not threaten or undermine Russia's or China's 
strategic deterrence. But the new law sends a signal that the 
United States could seek to build a national missile defense 
system that could blunt China's retaliatory capacity.
    What consequences, Mr. Gallucci, could a policy aimed at 
undermining China's strategic nuclear deterrent have on U.S.-
China relations and on strategic stability in the Asia-Pacific?
    Ambassador Gallucci.  Congressman Markey, this is----
    Senator Markey. For the last 3 years, I know keep calling 
myself ``Congressman Markey'' as well. [Laughter.]
    Ambassador Gallucci.  This is really well-trod ground, 
again the idea of presenting China with a threat that they will 
lose a deterrent that they have worked very hard to build to 
persuade the United States that we cannot threaten to go up an 
escalatory ladder in a way they cannot because we have what is 
in the trade called a first strike capability able to disarm 
them to the degree that they could not respond and cause us 
sufficient damage to hurt us and discourage the act in the 
first place, have real deterrence.
    And the idea that one would want to do this, however--and 
we have wanted to since the 1960s, as I am sure you know--is 
natural because we know that deterrence is a psychological 
phenomenon and we would prefer mettle to psychological 
phenomenon. And so defense has mettle, and it means denial and 
it means we can actually shoot down, if you have an effective 
defense that does not leak nuclear weapons, then that would be 
desirable. I understand that.
    But the reason arms controllers have for a long time not 
come out in favor of defenses is because it obviously leads to 
an arms race, as the Chinese will continue to try and maintain 
if they, indeed, have it now or gain it if they do not, the 
ability to threaten the United States even after they have been 
attacked. And we do not make them feel better by telling them, 
oh, this is only a defense aimed at new powers like North Korea 
because once they have been struck by the United States, the 
scenario that they have would make them a really weak power at 
the strategic nuclear level. And it would look as though our 
defense was geared precisely to what they are worried about. 
They would try to overcome this, and that is then again in the 
trade called an offense/defense arms race.
    And the question to ask before one goes into that is how 
much does an increment of offense cost to overcome an increment 
of defense, and is that a race you want to get into. Or would 
you like to agree that we are not going to do that?
    Senator Markey. Meaning it costs a lot less for offense 
than it does for defense.
    Ambassador Gallucci.  Indeed.
    Senator Markey. Okay. So that I think has to be out on the 
table.
    And in your testimony, you discuss the significant security 
threat emanating from plans in Japan and China to conduct 
large-scale reprocessing of spent nuclear fuel. And you say it 
is the same French company, Areva, which is providing that 
technology in both countries. And you note that these plans 
could result in the stockpiling and transportation of enough 
plutonium to produce hundreds or evaluation thousands of 
nuclear weapons. If these plans proceed, they could increase 
incentives for South Korea to follow as well.
    And that plutonium arms race in East Asia could increase 
the risk not only of nuclear terrorism but also of additional 
nuclear proliferation, as all three countries eye each other 
with suspicion.
    The United States has a civil nuclear cooperation agreement 
with all three of these countries. This may give us a measure 
of influence over their reprocessing plants. How would you 
suggest that we use our influence to contain the risk of 
nuclear terrorism and proliferation in East Asia?
    Ambassador Gallucci.  It seems to me at least plausible 
that we could engage the Japanese first since they have the 
overhang of civil plutonium right now.
    Senator Markey. What is their thinking? Why do they want--I 
think you said 44 tons?
    Ambassador Gallucci.  44 tons. 20 percent of it is now in 
Japan. The other 80 percent is divided between France and the 
UK.
    Senator Markey. And I think as you said, post-Fukashima, 
the nuclear future as an electrical generating source is going 
to be quite limited.
    Ambassador Gallucci.  It is hard to know even for Japanese. 
I was just in Tokyo talking to them about this. They do not 
know either. But it is certainly clear that the breeder reactor 
program, which might have absorbed a bit of this plutonium, has 
been shut down.
    Senator Markey. Exactly. So what are they thinking? Why do 
they need it?
    Ambassador Gallucci.  Well, as you know, the concern in 
Beijing and in Seoul was that it was precisely for what we 
would rather not have it be for, namely a hedge against a 
decision that they might have to take, they would think, to 
acquire nuclear weapons. And they would have the fissile 
material with which to do it. That is one reason. For some, it 
may be a reason. For others, it was part of a nuclear 
engineering solution to the nuclear fuel cycle either for fast 
breeder reactors or what is called thermal recycle in the 
current generation of reactors and also for radioactive waste 
management.
    Our own blue ribbon commission in 2012 concluded that there 
really was no good reason for reprocessing spent fuel. Spent 
fuel is quite adequately dealt with for hundreds of years by 
dry cask storage. So there is not a good answer to the question 
except political type answers, not technical answers.
    Senator Markey. So you are saying--I am just trying to----
    Ambassador Gallucci.  Please.
    Senator Markey. Are you saying that the conclusion has to 
be at this point that it is really just to have a stockpile in 
the event that they move to a nuclear weapons production 
strategy in the years ahead and that under this new Prime 
Minister, the likelihood of them giving up those 44 tons of 
plutonium are very low, but that that induces a certain 
paranoiac reaction in the Chinese who hire the same company to 
do the same thing, which makes it very difficult to then 
complain that another country is doing the same thing with the 
same company that you are doing? And the South Koreans just sit 
there and they say, well, maybe we should hire the same company 
in order to do that same thing.
    So how do we talk to the Japanese about this because they 
are clearly the first domino in this ever-escalating nuclear 
production capacity?
    Ambassador Gallucci.  I would not dissent from that 
characterization of the situation. I do believe the place to 
start is Japan. We have an agreement of cooperation that does 
expire in 2018. It does not expire if neither side poses an 
objection to its continuation. What we could do is start with 
the Japanese and be clear here that not everybody in Japan is 
looking to hold onto that plutonium as a hedge against the need 
for nuclear weapons eventually. I think that view certainly 
exists in some quarters in Japan, but I think engaging the 
Japanese is not a bad idea, not one that is bound to fail. They 
have a plutonium problem. As you know, we have a plutonium 
problem too. We have to dispose of plutonium that we are not 
going to dispose of as we had originally told the Russians we 
would, and we need to find another way. So we could have a 
technical consultation with the Japanese about this, and it 
could be very fruitful.
    If there was any success in that, engaging the Chinese and 
pointing out--I mean, some are concerned about the Chinese 
having plutonium from the civil area leak into the military 
area. That is to me not as consequential as the concern about 
terrorism, and I worry about that substantially more. But for 
the Chinese to understand that they are an attractive nuisance 
in a sense with their own recycle program and that their 
security would be enhanced by joining with the Japanese and the 
Koreans who right now would be giving up nothing because they 
do not have a reprocessing capability. It is possible to 
imagine here, without an enormous diplomatic heavy lift, a 
moratorium at least on reprocessing and creating more separated 
plutonium. And that is what I would recommend.
    Senator Markey. Thank you.
    Thank you, Mr. Chairman.
    The Chairman.  Senator Kaine?
    Senator Kaine. Thank you, Mr. Chair.
    And thank you to the witnesses. I am especially glad to see 
my old friend, Congressman Forbes, here. I was really happy to 
see you would be testifying today. And let me actually start 
with you, and I will bring you back to your Seapower days in 
the House. He was ranking on Seapower and one of the main 
leaders on the Armed Services Committee.
    I just came from being the lead Democrat on a Readiness 
Subcommittee on our side on SASC, and we were talking about 
naval readiness. I understand earlier you testified that the 
greatest threat in the South China Sea was our readiness 
issues. And I think there was a quote around something you said 
from one of my staffers that readiness was not just the number 
of ships, but their condition. Could you elaborate on that a 
little bit so that we can take that advice as we are starting 
to work on the NDAA here in the SASC committee in the Senate?
    Mr. Forbes. Yes, sir. Well, first of all, it is always 
great to see you. And thanks for allowing me to be here today.
    I think that one of the things that we need very 
desperately is to make sure we even get a new metrics on how we 
measure fleet strength. Numbers matter. But what I am very 
concerned about right now, as we sit here and we look at all of 
the threats in the Asia-Pacific area, it is very concerning 
when top leaders in China say they think that we could very 
easily have a military conflict with the United States within 2 
years. And top leaders in the United States are saying we think 
we may have a conflict with China within 2 years. When you have 
that rhetoric out there and you see the nature of what is out 
there, we cannot build the ships we need, as you know, in 2 
years, 3 years, or whatever.
    And one of the concerns that I have is right now we have a 
huge shortfall in munitions. We need to fix that and fix that 
rapidly. We have shortfalls in training that we need to fix, 
and we need to fix that rapidly. And I think we are going to 
have to change some of our operational concepts. For example, 
we may need to move to something like distributed lethality as 
opposed to the current situation we have with our carrier 
groups. And I think we need to be sending a message out there.
    And, Senator, I had a lot of people talk to me about this 
350-ship Navy or 355-ship Navy. That is not particularly a 
goal. But it is a neon sign saying to the world that the United 
States is going to be prepared to play.
    And I can take anybody and I ask them, tell me what you 
remember about the military in the 1960s, 1970s, 1980s, 1990s, 
or the first 10 years of this century. They will say in the 
1960s, Vietnam. That is about all they remember. In the 1970s, 
maybe we hollowed out the force. The 1990s, they cannot really 
say much of anything. And 10th, they cannot say what we did to 
the military. It is just where we put it. But in the 1980s, 
they know we built a 600-ship Navy.
    So that is why I think, in addition to creating the 
readiness, we need to at least send a signal out there that we 
are on a direction to rebuild this Navy. I know when you look 
under my name, you see Naval War College, so I am going to be 
prejudiced. But I am not reaching these conclusions because of 
my prejudice. I am reaching my prejudice because of my 
conclusions. It is just the fact that that is where we are 
going to be for the next decade or two decades.
    Senator Kaine. Let me ask you both a question that dealt 
with another hearing that we had earlier today in the Foreign 
Relations Committee. The Western Hemisphere Subcommittee met 
earlier today, and one of the items that we heard about from 
witnesses is increasing Chinese presence and investment in the 
Americas, including Venezuela. We see this all throughout 
Africa as well. So the title of this hearing is our leadership 
in the Asia-Pacific, but the biggest nation we are concerned 
about in the Asia-Pacific is really spreading their influence.
    We are about to maybe dramatically cut aid to Africa, our 
global aid programs in the Americas. It does not seem like that 
is what China is doing. Talk a little bit about how we could 
address this broadening Chinese influence into the Western 
Hemisphere especially. What are the kinds of things that we 
should be looking to do if we want to counter that?
    Ambassador Gallucci.  I honestly do not know how we counter 
what is now substantial but also growing Chinese investment and 
presence below the equator in Africa and Latin America.
    For a time, I was the President of the MacArthur 
Foundation, and we did work in both Latin America and in 
Africa. And we would see the footprints of the Chinese in areas 
in which we were working. We worked in species preservation, 
biodiversity particularly. So we were very concerned about how 
the Chinese used the investments, what they did with their 
fishing, and how they behaved generally, and were they--this is 
a phrase that is used in a different context, but were they a 
responsible stakeholder in the development of those countries. 
And the answer was not sufficiently and not to the level that 
the United States or our colleagues in Europe were moving to. 
And they were not meeting standards in those areas. And we 
worked together--foundations did--to try to figure out ways of 
persuading the Chinese that this was not a good footprint. So 
all that is by way of saying that I think you are exactly right 
to be concerned about this.
    The problem you raise, though, is that if we are not going 
to pay the money to have access to the table, it is hard for me 
to see how at the governmental level, which would be the more 
important level, we will have much to say. Just to put it 
simply, we will lose influence.
    Mr. Forbes. Senator, one thing I would say is we sometimes 
have to crawl before we can walk. And one of the things that I 
have advocated--I did it in my testimony here. I have actually 
tried to get this accomplished with legislation last year. But 
we need to have a cross-agency review of what our actual 
policies are so that we do not have one agency working against 
another agency, which with China that happens in a lot of 
situations. I think that is important.
    And the second thing that I think this subcommittee and 
other committees in Congress can do is we still do not have a 
good picture of exactly what all of that soft power is doing 
around the world with China. And I think the more we can just 
shed light on here is where they are investing, here is what 
they are doing, but here is the impact of what they are doing, 
I think that in itself leads then to policies that can help at 
least begin to get responses to their actions.
    Senator Kaine. I will just say this, Mr. Chairman. I am 
done. The great thing about being o this committee is we often 
have foreign leaders come and sit down in our business room 
over in the Capitol and we just trade ideas. And when we have 
leaders from Latin countries--about a year and a half ago, we 
had a South American president who came and basically said 
this. We would rather do a lot of work with you all because, I 
mean, there is just such a cultural connection. Whether it is 
families in the United States or people who have done Fulbright 
scholarships, the connections are so intense. We all call 
ourselves Americans, North, South, or Central, and we feel 
that.
    But we are doing a lot more with China now even though we 
are a little suspicious of their motives. They do not 
necessarily do business in the way that is going to elevate 
standards or speak to much concern about our country, but they 
are just present and you are not. So we have a preference, but 
we cannot push on a string. If you are not going to be here, 
then we are going to be doing a lot more with China. And that 
was a pretty sobering lesson to hear. And, Ambassador Gallucci, 
I kind of understand you cannot change that with words. You 
have to change it with dollars and with actions.
    But thanks to both of you for your ongoing work in this 
area.
    And, Mr. Chair, thanks for having this hearing.
    The Chairman.  Thank you, Senator Kaine. And I think it is 
a good point that you bring up because in conversations with 
different think tanks, research that has been done, public 
polling that has taken place in Asia, even Asian nations across 
Asia, they talk about the U.S. norms and that they would rather 
do business in an environment that is based on U.S. norms than 
one that is ruled by China and where they are heading. But you 
are right. Presence matters and our ability to continue to 
pursue American values and interest through, whether it is 
resource allocation or strategic implementation of initiatives 
this committee puts forward, it is important that we do that so 
that we can actually give them that leg to stand on, so to 
speak.
    So thank you to both of you for being here. I have 
additional questions. This is a hearing that could go all day, 
but much to your relief, it cannot. So I did want to let you 
know that I will be submitting a question to both of you on 
Southeast Asia and terrorism. As part of this Asia strategy, I 
think we have to address concerns in Southeast Asia over 
terrorism, what we can do to counter growth of ISIS, the threat 
of ISIS, radical Islam, and make sure that we are providing 
whether it is FMF type assistance throughout the region, 
whether it is counterterrorism training, continue the 
conversations that we have had, also conversations about what 
we can do to increase and strengthen our alliance with New 
Zealand, Australia, India throughout the region. So I look 
forward to that.
    And with that, I guess I have a closing script that I have 
to read here. But as we move forward on this strategy and this 
new legislation, the Asia Reassurance Initiative, I would love 
to continue to receive your feedback and comments. But thank 
you, first and foremost, for attending the hearing, for your 
time and work that went into the testimony. Thanks to the 
members who participated today.
    And for the information of members, the record will remain 
open until the close of business on Friday, including for 
members to submit questions for the record. And I just would 
kindly ask the witnesses to get your homework done as promptly 
as possible, if you would, and we will make that a part of the 
record. But it is truly appreciated--your service to our 
country and the work that you are doing today.
    And with that and the thanks of the committee, this hearing 
is adjourned. Thanks.


    [Whereupon, at 3:50 p.m., the hearing was adjourned.]



                         AMERICAN LEADERSHIP IN
                            THE ASIA-PACIFIC--


                        PART 2: ECONOMIC ISSUES

                              ----------                              


                        WEDNESDAY, MAY 24, 2017

                               U.S. Senate,
       Subcommittee on East Asia, The Pacific, and 
                International Cybersecurity Policy,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:18 p.m., in 
Room SD-419, Dirksen Senate Office Building, Hon. Cory Gardner, 
chairman of the subcommittee, presiding.
    Present: Senators Gardner [presiding], Risch, Markey, and 
Kaine.
    Also Present: Senator Portman.

            OPENING STATEMENT OF HON. CORY GARDNER, 
                   U.S. SENATOR FROM COLORADO

    The Chairman.  This hearing will come to order. Thank you. 
Let me be the first to welcome you all to the second hearing of 
the Senate Foreign Relations Subcommittee on East Asia, the 
Pacific, and International Cybersecurity Policy in the 115th 
Congress. I welcome you all to today's hearing on U.S. 
leadership in the Asia-Pacific.
    These hearings that we have held, the first hearing that we 
held and this hearing, will focus on informing new legislation 
that we are leading, the Asia Reassurance Initiative Act, or 
ARIA, that will seek to build out a long-term vision for United 
States policy toward the Asia-Pacific region.
    At our first hearing on March 29th, we focused on the 
growing security challenges in the Asia-Pacific, including 
North Korea, the South China Sea, and terrorism in Southeast 
Asia. At that hearing, Randy Forbes, a former Congressman from 
Virginia and chair of the House Armed Services Subcommittee on 
Seapower and Projection Forces, observed the following: ``In 
the coming decades, this is the region where the largest armies 
in the world will camp. This is the region where the most 
powerful navies in the world will gather. This is the region 
where over one-half of the world's commerce will take place and 
two-thirds will travel. This is the region where a maritime 
superhighway linking the Indian subcontinent, Southeast Asia, 
Australia, Northeast Asia, and the United States begins. This 
is the region where two superpowers will compete to determine 
which world order will prevail. This is the region where the 
seeds of conflict that could most engulf the world could be 
planted.''
    That is a very important statement that we hold in mind as 
we focus on this hearing.
    So today, we will talk about the importance of U.S. 
economic leadership in the Asia-Pacific. By 2050, as 
Congressman Forbes mentioned, experts estimate that Asia will 
account for over half of the global population and over half of 
the world's gross domestic product. We cannot ignore the 
fundamental fact that this region will be critical for the U.S. 
economy to grow and create jobs through export opportunities.
    We have two distinguished witnesses joining us today to 
shed light on this very important topic. Ms. Tami Overby, who 
serves as the senior vice president for Asia at the U.S. 
Chamber of Commerce, and Dr. Robert Orr--there are a lot of 
Orrs in Colorado, so I do not know if you have some Orrs in 
Colorado that you are related to or not, but certainly, there 
are a lot of Orrs there, too--a professor and dean at the 
School of Public Policy at the University of Maryland.
    Thanks to our witnesses for being with us today. I 
certainly look forward to your testimony.
    But I will first turn to Senator Markey, our ranking member 
of the Asia Subcommittee, for his opening comments.

              STATEMENT OF HON. EDWARD J. MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. Thank you, Mr. Chairman, very much. We 
thank you so much for holding this very important hearing.
    In essence, I think what you are saying here, Mr. Chairman, 
is that you are abiding by the philosophy of Wayne Gretzky when 
he was asked--by the way, the second greatest hockey player of 
all time--[Laughter.]
    Senator Markey.--when he was asked, how do you score goals? 
He said, ``I do not go to where the puck is. I go to where the 
puck will be.''
    So that is really what we are talking about here. How do 
we, from an economic perspective, get to where the puck will 
be?
    One of the witnesses here at the table knows that the 
correct answer of the greatest hockey player is Robert Orr, 
Bobby Orr from the Boston Bruins. That is one person in the 
room who knows that answer, the greatest hockey player of all 
time.
    So from my perspective, this hearing kind of goes right to 
how important it is going to be for us to work with like-minded 
countries toward a high standard, inclusive, and rules-based, 
regional economic order.
    The areas of economic leadership in the Asia-Pacific is 
especially critical to our future prosperity. One good area is 
the race to create clean energy jobs. More than half of all new 
electric-generating capacity installed worldwide last year was 
renewable. This will only grow further in the future.
    I am concerned that China is rapidly overtaking the United 
States in this critical sector. Last year, China increased its 
foreign investment in renewables by 60 percent to reach a 
record of $32 billion in one year. This includes 11 new 
overseas investment deals worth more than $1 billion apiece.
    In 2015, China invested over $100 billion in clean energy, 
twice that which we invested here in the United States. That 
same year, China overtook the United States as the largest 
market for electric vehicles, with over 200,000 registrations.
    Two Chinese companies, BYD and CATL, are a growing 
challenge to Tesla's leadership in the global electric car 
sector. Tianqi lithium, a Chinese company, is now the world's 
largest manufacturer of lithium ion, a key element for electric 
car batteries. Five of the world's six largest solar module 
manufacturers are Chinese.
    The list goes on and on. We could go to other areas of the 
economy as well.
    What it says to me is that they have a plan. We need a 
plan. We need a plan that we can articulate. And that is the 
job that the chairman has given us, to kind of think through 
what the economic vision for the future of the United States in 
this region is going to be.
    I am very much looking forward to this hearing, and I yield 
back to you, Mr. Chairman.
    The Chairman.  Thank you.
    We are also joined by Senator Portman from Ohio. Thank you, 
Senator Portman, for being here today. If you care to add 
anything at the beginning of the comments, if not, we can wait 
until questions.

                 STATEMENT OF HON. ROB PORTMAN,
                     U.S. SENATOR FROM OHIO

    Senator Portman. No, I am just honored to have Bobby Orr 
among us. And he is from Colorado, too, which is amazing.
    Seriously, thank you both for holding this hearing. I am 
here not as a member of the subcommittee, but as someone very 
interested.
    I am not going to stay for the entire hearing, but I really 
want to talk more about some of the issues that were raised 
already by the chair and ranking member, particularly what is 
the ``One Belt, One Road'' initiative going to mean for us? 
Should we be more engaged in it? What are the implications of 
the United States not being as involved in the Asian 
Infrastructure Investment Bank, as an example, and some of the 
trade negotiations ongoing in the region?
    I just would like to hear you all talk about that. I think 
it is important to raise awareness of what is actually 
happening in terms of China's interests and expanding its 
influence, its economic influence, and what you recommend we do 
in response to that.
    So thank you, Mr. Chairman. I appreciate you having this 
hearing.
    The Chairman.  Thank you, Senator Portman.
    Our first witness is Ms. Tami Overby, who serves as senior 
vice president for Asia at the U.S. Chamber of Commerce. As I 
mentioned, in this role, Ms. Overby is responsible for 
developing, promoting, and executing all Chamber programs and 
policies relating to U.S. trade and investment in Asia.
    Ms. Overby lived and worked in South Korea for 21 years, 
and led the U.S.-Korea Business Coalition and the successful 
congressional ratification of the U.S.-South Korea Free Trade 
Agreement.
    Welcome, Ms. Overby. Thanks for being with us today.
    We are also joined by Senator Kaine. I allowed Senator 
Portman to say a few words. If you would like to say a few 
words? Thank you.
    Ms. Overby, if you would like to proceed, and then I will 
introduce Dr. Orr.

STATEMENT OF TAMI OVERBY, SENIOR VICE PRESIDENT FOR ASIA, U.S. 
             CHAMBER OF COMMERCE, WASHINGTON, D.C.

    Ms. Overby. Thank you very much for this kind invitation.
    The Asia-Pacific region is critical to current and future 
U.S. economic growth, competitiveness, and job creation. Asian 
countries want an active, robust U.S. presence in the region. 
They want to be our trading partner.
    But Asian economies are not waiting or standing still after 
the U.S. withdrawal from TPP. I was just in Hanoi for the 
meetings of the APEC ministers responsible for trade. APEC 
economies, including the TPP countries, are moving forward 
without us.
    We also heard in Hanoi several cases in which countries 
explicitly said they are backtracking on their commitments they 
were prepared to make under the TPP, which would have helped 
U.S. companies.
    The U.S. and China share a highly interdependent, complex 
relationship that is critically important to each other and the 
world. Congress and the executive branch should recognize that 
without a coherent policy vision and our own concrete measures, 
it will be exceedingly different for the United States to 
compete regionally, given China's overwhelming presence and 
influence.
    China has captured much of the share of the Asian import 
market over the past 15 years while the U.S. share has declined 
from 12.2 percent to 6.6 percent even as Asian imports have 
increased more than threefold. U.S. companies continue to see 
significant economic opportunity in China but are increasingly 
concerned about their future there due to China's policies in 
critical areas ranging from IP to cloud computing.
    Concerns confronting our members are real and critically 
important. Business and government must work together to 
resolve these challenges.
    We are hopeful the new comprehensive economic dialogue will 
not only drive time-fixed, tangible outcomes, but also 
persistent and systemic issues, including asymmetries in market 
access, a range of industrial policies tied to Made in China 
2025, overcapacity, IPR, cybersecurity, data, and antitrust.
    U.S. companies are operating in a fiercely competitive 
environment in Asia. China is not only expanding its trade, it 
is aggressively spreading its economic influence through ``One 
Belt, One Road,'' the Asian Infrastructure Investment Bank, and 
Silk Road initiatives.
    Other countries as well as the EU are aggressively pursuing 
trade agreements, infrastructure, and other deals.
    Here are five major ways we can engage in the region to 
increase U.S. competitiveness.
    First, we need to move quickly, as quickly as possible, on 
a regional trade strategy. With the U.S. withdrawal from TPP, 
our Asian partners are openly questioning the U.S. commitment 
to the region. With only three FTAs in Asia, U.S. exporters are 
at a significant disadvantage as other countries aggressively 
pursue bilateral and regional FTAs, most notably the Regional 
Comprehensive Economic Partnership. There is a critical need 
for the U.S. to find pathways and platforms to pursue improved 
market access for U.S. goods and services that reflect the high 
standards of TPP and conform fully to trade promotion 
authority.
    Further, we need to recognize that our existing FTAs in the 
region are keeping us competitive. Without them, the U.S. would 
be lagging even further behind. I want to underscore the 
Chamber's strong support for the U.S.-Korea Free Trade 
Agreement. KORUS is a good agreement as negotiated and 
concluded, the most advanced U.S. FTA yet, and we should push 
for better implementation, not renegotiation.
    Second, we need a fully armed and empowered U.S. export-
import bank to help maintain U.S. export competitiveness in the 
region. China, Japan, Korea, the EU, and others provide export 
and project finance that support their companies in Asian 
markets. We need to reauthorize and fully empower the EXIM 
Bank.
    Third, we need to ensure adequate funding and support for 
the Foreign Commercial Service. FCS officers are valuable 
assets for American businesses, particularly small- and medium-
sized companies seeking to expand their export sales.
    Fourth, we need to maintain and reprioritize U.S. foreign 
assistance. U.S. foreign assistance could be a much more 
important and effective means of concrete support in the 
region.
    Fifth, we need to use regional organizations to pursue U.S. 
economic interests. In Asia, showing up is very important. It 
will be especially important post-TPP to have the U.S. 
Government leaders travel to the region regularly to register 
high-level U.S. interest and engagement in addition to hosting 
leaders here.
    Ambassador Lighthizer's participation in APEC was 
positively noted by our partners. And it is commendable that 
President Trump has already committed to attending APEC, the 
East Asia Summit, and ASEAN meeting. We need to show 
constructive and full engagement by U.S. and Cabinet and sub-
Cabinet officers to ensure U.S. business and economic interests 
are well-represented. Getting such people appointed and 
confirmed is critical in this regard.
    Lastly, given the tense security situation in Northeast 
Asia, the need for close cooperation with our strong allies in 
Japan and South Korea on all fronts is greater than ever, 
including economic engagement.
    Thank you.
    [Ms. Overby's prepared statement follows:]


                   Prepared Statement of Tami Overby

    Thank you for this opportunity to testify on American leadership in 
the Asia-Pacific. I am Tami Overby, Senior Vice President for Asia at 
the U.S. Chamber of Commerce (the ''Chamber''). I am pleased to be here 
on behalf of the Chamber to address U.S. economic relations with the 
critical Asia-Pacific region. The U.S. Chamber of Commerce is well 
aware of the linkages between strong economic ties and our political 
and geostrategic interests in the region. They cannot be easily 
separated.
U.S. Economic Engagement in the Asia-Pacific
    I was just in Hanoi for the meeting of the APEC Ministers 
Responsible for Trade. The Chamber and American business community are 
very pleased Ambassador Robert Lighthizer, the new U.S. Trade 
Representative, made such an effort to get there the week of his 
confirmation.
    In Asia, ``showing up'' is very important. So this was noted 
positively by our APEC partners. But as much as Ambassador Lighthizer's 
message of commitment to the region is welcome, our APEC partners have 
questions about the direction and substance of U.S. international trade 
policy, particularly in light of the U.S. withdrawal from the Trans-
Pacific Partnership (TPP).
    Asian countries want an active U.S. presence in the region. They 
want to be robust trading partners with the United States, but Asian 
economies are not waiting or standing still after the U.S. withdrawal 
from the TPP. They are moving forward across a number of fronts, from 
trade and aid to investment and infrastructure.
    The Asia-Pacific region is critical to current and future U.S. 
economic growth, competitiveness and job creation. U.S. exporters-
whether large or small companies producing goods and services or 
farmers and ranchers exporting commodities-need access to these fast 
growing economies and the rising pool of consumers. According to the 
Organization for Economic Cooperation and Development, the global 
middle class will expand from 1.8 billion in 2009 to 3.2 billion by 
2020 and 4.9 billion by 2030. Most of this growth is in Asia: In fact, 
Asia's middle-class consumers will represent 66% of the global middle-
class population and 59% of middle-class consumption by 2030, doubling 
these shares since 2009.
    Unfortunately, the United States is falling behind, as the charts 
below indicate. Trade between Asian countries is surging, but even as 
total Asian imports have risen more than threefold, the U.S. share of 
the pie has dropped dramatically in the past 15 years. 

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]




    There are four primary reasons for this:


   First is China's dramatic rise. China, not the United States, is 
        the dominant regional economic power. China is the top trade 
        partner for most Asian economies-from Japan and Korea in the 
        northeast to Indonesia and Malaysia in the southeast.


        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




   Second, the United States has only three free-trade agreements 
        (FTAs) in the region, with Australia, Singapore, and South 
        Korea. At the same time, according to the Asia Regional 
        Integration Center of the Asian Development Bank, Asian 
        countries have signed 140 bilateral or regional trade 
        agreements, and 75 more are under negotiation or concluded and 
        awaiting entry into force. One notable pact now under 
        negotiation is the Regional Comprehensive Economic Partnership 
        (RCEP), involving the 10 ASEAN economies, Japan, Korea, 
        Australia, New Zealand and India.
          While RCEP is an ASEAN initiative, China is making efforts to 
        drive negotiations to a conclusion this year. RCEP is a lower-
        standard agreement than the TPP, but is one of two pathways 
        toward the APEC goal of an eventual Free Trade Agreement of the 
        AsiaPacific (FTAAP), the TPP being the other.

   Third, our regional and global competitors aggressively support 
        their exporters in Asian markets. Leaders of these countries 
        take trade delegations to the most promising markets in search 
        of commercial deals. They provide export credits and low 
        interest loans for their companies through aggressively funded 
        export credit agencies. Furthermore, they tie foreign 
        assistance to commercial opportunities.
          China's support via One Belt One Road and the Asian 
        Infrastructure Investment Bank (AIIB) is accelerating and will 
        take this activity to a new level. Meanwhile, we have not yet 
        restored the Ex-Im Bank to full capacity, and are arguing over 
        whether we should reduce our foreign assistance budget, which 
        is less than 1% of GDP, and of which only 2% of that goes to 
        Southeast Asia.

   With regard to the U.S. withdrawal from the TPP, the clear takeaway 
        from Hanoi is disappointment that the United States has 
        withdrawn from the agreement. Ambassador Lighthizer conveyed 
        the administration's intention to negotiate bilateral FTAs in 
        the region at some point.
          Japan and New Zealand, which have ratified the TPP, are 
        pushing forward with a possible ``TPP-11'' arrangement. TPP is 
        in many respects the most advanced trade agreement yet 
        negotiated. In addition to opening markets for goods and 
        services, the TPP sets high standards for digital commerce, 
        competition with state-owned enterprises, regulatory coherence, 
        and in a number of areas relating to intellectual property 
        protection-all of which matter enormously for U.S. exporters of 
        all sizes, but particularly small and mid-sized companies. It 
        is clear their objective is to advance the TPP in some form, so 
        that the strong rules and high standards contained in TPP 
        survive. These rules, not those in RCEP, would then set the 
        benchmark for regional trade and a possible FTAAP.


    The Chamber has not yet taken a view on any prospective bilateral 
FTAs. Our position is that for any new bilateral FTA sought by the 
United States, Trade Promotion Authority (TPA) sets the right 
negotiating priorities and the proper process, and it should be 
followed scrupulously.
    Whether bilateral FTAs can deliver much for American exporters is 
open to question. In an era of global value chains, the TPP had the 
advantage of cutting through the ``Asian noodle bowl'' of divergent 
trade rules under multiple agreements.
    In any event, the United States is running out of time. Bilateral 
FTAs, even with small economies, will take years to negotiate and enter 
into force. Our exporters will continue to be at a competitive 
disadvantage.
    To illustrate, Australian beef exporters have a 10 percentage point 
advantage over American beef exporters in Japan due to the Australia-
Japan FTA. The TPP would have eliminated the relative disadvantage of 
U.S. cattlemen. The difference means $400,000 a day in lost sales for 
U.S. exporters. A bilateral FTA with Japan could potentially close this 
gap, but according to Japanese officials in public comments, the United 
States should not expect to get more than we would have with the TPP. 
Further, negotiating a bilateral FTA with Japan would still take 
several years.
    We also heard in Hanoi several cases in which countries explicitly 
said they are backtracking on commitments they were prepared to make 
under the TPP that would help U.S. companies. This problem is 
especially acute with regard to business priorities that are 
inaccurately but commonly viewed as primarily beneficial to the United 
States, such as stronger intellectual property protections and 
enforcement.
    In sum, the United States has withdrawn from the TPP, but the 
challenges it was designed to address remain. These challenges include:


 1. The Asia-Pacific region is growing, and it will soon be home to 
        two-thirds of the world's middle class consumers;

 2. Made-in-America products are too often shut out of those promising 
        markets by steep tariffs and other barriers; and

 3. U.S. exporters' disadvantages in the region are likely to mount as 
        Asian economies clinch new trade pacts that benefit Asians but 
        shut us out.


    The Trump administration will need to devise a strategy to address 
these challenges. The U.S. Chamber of Commerce is committed to working 
with the administration to devise one.
U.S.-ASEAN Relations
    U.S. engagement in Southeast Asia, and with ASEAN as an 
institution, will be essential to achieving U.S. objectives in the 
broader Asia region. American economic interests in Southeast Asia are 
vast; ASEAN is the fourth largest U.S. export market globally.
    It was therefore encouraging that Vice President Pence visited 
Indonesia-the largest ASEAN country-so early in his tenure, and that he 
confirmed that President Trump will meet with his ASEAN counterparts as 
a group later this year. This is a reassuring message both to American 
business and to a region that seeks U.S. engagement.
    Notwithstanding this engagement, a key challenge will be to 
continue to promote economic openness in the region. Four ASEAN 
countries were members of the TPP, and made substantial, and often 
politically difficult, reform commitments in order to be part of it. 
Others, including the Philippines and Thailand, were very interested in 
the TPP, and studied the agreement in detail to determine the types of 
reforms they would need to undertake if they were to join it in the 
future.
    In the TPP's absence, Singapore remains the only ASEAN country with 
which the United States has a free trade agreement. The dilemma for the 
U.S. now is to determine the means by which to recapture the important 
gains that TPP would have provided in those countries, particularly in 
Malaysia and Vietnam.
    Vietnam has sent encouraging signals about its willingness to 
negotiate bilaterally with the United States. Others have not. It is 
worth noting that in the 2000s, the United States attempted to 
negotiate bilateral FTAs with Malaysia and Thailand, both of which 
faltered in part because of the political difficulty for each in 
accepting U.S. demands for comprehensive market access in the context 
of a bilateral agreement. The lessons of these previous failures should 
be borne in mind should the United States decide to pursue bilateral 
FTAs with either.
    In the meantime, ASEAN is moving forward. The RCEP is an ASEAN, not 
Chinese, initiative. In addition, individual ASEAN members have 
negotiations going on simultaneously with other key trading partners. 
For example, Indonesia, Malaysia, the Philippines, and Thailand are all 
negotiating with the European Union, and Singapore and Vietnam have 
both completed (but not yet implemented) deals with the EU. All of 
those countries individually have FTAs with numerous other markets 
around the world.
U.S.-China Relations
    In addition to China's growing regional role, the United States and 
China share a highly interdependent yet complex relationship that is 
critically important to each other and the world. U.S. industry 
continues to see significant economic opportunity in the China market, 
which is worth half a trillion dollars annually to U.S. companies-and 
could be worth considerably more.
    Together, the U.S. and China represent around 40 percent of the 
global economy. China is the third largest goods exports market for the 
United States. And the American Chamber of Commerce in China 2017 China 
Business Climate Survey reports that the majority of U.S. companies 
experienced revenue growth in 2016.
            Challenges to American Companies 
    At the same time, U.S. and other foreign companies active in the 
China market have become more concerned about their future there. 
Nearly four years after the Third Plenum Decision, positive rhetoric on 
market reforms has yet to materialize into policy that significantly 
impacts the investment or business environment.
    Rather, the legacies of China's command economy are continuing to 
impact its economic policy and hamper its complete integration into the 
global economy. These policies are increasing the role of the state in 
the economy and creating an uneven playing field for U.S. companies.
    The American Chamber of Commerce in China and the European Chamber 
of Commerce in China report in the their latest annual surveys that an 
overwhelming majority of member companies-80 percent in the case of 
AmCham China-feel less welcome in the Chinese market than previously. 
These headwinds are curbing enthusiasm for U.S. investors. The AmCham 
2017 Business Climate Survey finds signs that companies' are now 
deprioritizing China in investment plans.
    A number of policy issues contribute to American company concerns, 
among them:


   An investment regime that is the most restrictive among G20 
        countries and limits market access in service sectors such as 
        banking, insurance, securities, telecommunications, and cloud 
        computing;

   Cybersecurity, information communication technology (ICT), and data 
        policies that pose challenges for global connectivity;

   An Anti-Monopoly Law that is enforced in a discriminatory manner 
        and used to advance industrial policies;

   IP enforcement that, while improved in recent years, is 
        insufficient to protect against high levels of counterfeiting, 
        piracy, and trade secret theft; and

   Industrial policies like Made in China 2025 that aim to use state 
        resources to create and alter comparative advantage in global 
        markets.


    The U.S. Chamber of Commerce has issued a series of reports over 
the past years assessing Chinese barriers to U.S. exports and 
investments as well as industrial policies that are relevant as the 
administration examines foreign trade barriers. They are listed in an 
annex to this statement.
    An uncompetitive China market raises serious concerns not only for 
its domestic economy but its economic partners. Chinese industrial 
policies precipitate market inefficiencies and spark overcapacity, 
resulting in lower prices for global commodities and the potential for 
predatory pricing-which has forced non-Chinese companies out of 
business in steel, solar, aluminum, and other industries.
    Having a competitive market in China is critical to minimizing 
these market distortions globally from China. In addition, American 
companies need to be able to succeed in China to ensure sufficient 
economies of scale to compete in the global economy against Chinese and 
other firms. Our two countries need to work together to address these 
issues and create a level playing field.
            Bilateral Engagement
    The Chamber welcomed the announcement of a new bilateral 
Comprehensive Economic Dialogue and the commitment by both governments 
to a 100-day plan to make progress on our trade relationship, as well 
as the recently announced interim outcomes. President Trump, Secretary 
Ross, and Secretary Mnuchin deserve credit for their efforts to address 
the business community's concerns.
    The outcomes on agricultural products and credit ratings agencies 
are a positive first step. But these initial outcomes should be 
regarded as a modest down payment for more far-reaching outcomes on 
market access, subsidies, procurement, and cyber/ICT. It is 
particularly important to secure outcomes on cybersecurity, ICT, and 
data, as China is currently issuing sweeping policies that are acting 
as new barriers for American companies.
            Next Steps
    The concerns confronting our member companies are real, and 
significantly important. The Chamber believes a high-standard Bilateral 
Investment Treaty (BIT) could address many, although not all the 
business community's concerns with China. As a result, we have long 
supported supplementing the U.S. Model BIT with robust provisions on 
state-owned enterprises, cross-border data flows, standards, as well as 
limitations on the use of excessively broad national security 
provisions as a pretext for discrimination against our companies.
    The U.S. Chamber is doing what we can to track and analyze Chinese 
polices, but larger, more systematic, efforts are needed. As China 
advances industrial policies that are distorting global markets, we 
urge the U.S. government to set up a robust monitoring and forecasting 
initiative to assess how Chinese industrial policies like Made in China 
2025 as well as other policy decisions are impacting critical sectors 
of the U.S. economy.
    The Chinese government is making policy decisions with long-term 
goals, and the U.S. government has an obligation to approach it in 
similar terms. Moreover, it is vital for the U.S. government to set 
clear expectations with China on our trade and investment relationship, 
and to publicly and dispassionately defend our commercial interests. 
The new Comprehensive Economic Dialogue can be used to secure and drive 
time-fixed, tangible outcomes, like those on beef.
    It is also critical that the U.S. government develop metrics to 
assess China's progress on its commitments to ensure full and even 
implementation. When commitments and dialogue are unable to adequately 
address unfair trading practices, the U.S. government should enforce 
our trade laws, consistent with WTO obligations, and consider new tools 
that would be consistent with WTO rules that begin to address 
asymmetries in market access and other policies that prohibit or 
restrict the ability of U.S. companies to compete in China.
U.S.-Japan-Korea Cooperation
    Clearly North Korea's escalation of missile testing is something we 
all need to be focused on. Nowhere else are our economic and strategic 
interests connected as with Japan and Korea, our two main allies in 
Northeast Asia. Trilateral cooperation on North Korea is essential, and 
obviously China's role here is critical.
    But the three countries need to find areas of economic cooperation 
as well. In particular, the United States, Japan and Korea can use fora 
like APEC to continue to push for good rules and best practices with 
regard to regulatory transparency, intellectual property, competition 
policy, and digital trade.
    We are having encouraging discussions in the business communities 
around issues like the digital economy and cybersecurity. To this end, 
we urge the governments to prioritize policies and concrete measures 
that support high-standard, internationally harmonized rules in concert 
with the private sector.
U.S.-Korea Relations
    The U.S.-Korea bilateral relationship should not be taken for 
granted. With the election of their new President, Moon Jae-In, there 
is a good opportunity to further strengthen our partnership-both in the 
security and economic spheres-but we must be smart and careful.
    The U.S.-Korea Free Trade Agreement, or KORUS, remains the 
cornerstone of our bilateral trade and investment relationship, and 
importantly, it underpins our vital security alliance. We cannot 
overstate how intertwined these relationships are, and need to be 
prudent and careful not to disrupt them.
    U.S. industry has expressed frustration with the unsatisfactory 
enforcement of KORUS in a number of areas in the five years since it 
was implemented. Some areas of concern include customs verification, 
non-tariff measures in the automotive sector, transparency in 
pharmaceuticals and medical devices, and the process surrounding 
numerous competition policy cases most notably.
    In this regard, the Trump Administration should redouble U.S. 
efforts to press the Korean government to fully respect the letter and 
the spirit of the agreement. KORUS established a comprehensive 
committee structure that allows governments to review progress and 
problems at regular intervals, and this structure should be employed 
vigorously. The Chamber regularly provided input to the Obama 
Administration on these matters and will do the same with the Trump 
Administration going forward.
    The Chamber urges the Trump Administration and the Congress to 
focus on ensuring full and faithful implementation of KORUS rather than 
negotiating an entirely new agreement with Korea or a renegotiation. 
The agreement as it stands set a high bar, and in a number of areas 
includes the strongest rules yet achieved in U.S. trade agreements.
    It is important to note that KORUS has led to sharp increases in 
U.S. service exports while exports of many U.S. agricultural and 
industrial goods have increased since KORUS went into effect five years 
ago. KORUS has helped maintain a steady if unspectacular level of U.S. 
goods exports at a time when Korea's overall imports have dropped 
dramatically due to domestic economic difficulties.
    These important gains for U.S. companies should not be overlooked, 
nor should KORUS be alternately be credited or blamed for changes in 
trade patterns in sectors where it had no impact (more than half of 
U.S.-Korea goods trade was already duty free before KORUS). The U.S. 
bilateral trade deficit in manufactured goods should not be viewed as 
the proper measure of the agreement's quality. KORUS has increased 
opportunities for U.S. exporters and will continue to do so as tariff 
cuts take full effect over the next few years.
    In short, overall implementation of the agreement can be better. 
That should be our collective focus and goal-to ensure this high-
standard agreement is implemented fully and faithfully so that it is 
truly a win-win. We are confident that if the Korean government does 
this, U.S. exports will continue to expand.
Conclusion
    The U.S. Chamber of Commerce appreciates the opportunity to testify 
today and the leadership of this committee on these critical commercial 
and strategic issues. U.S. economic engagement with Asia is not a 
luxury but a necessity for any efforts to spur economic growth and job 
creation here at home and secure a prosperous region for posterity. We 
look forward to our ongoing engagement with you.




              Annex: U.S. Chamber of Commerce Reports on 
                   U.S. Economic Relations with China

   Made in China 2025: Global Ambitions Built on Local Protections 
        (March 2017) \1\ examines China's plan to become an advanced 
        manufacturing leader in industries critical to economic growth 
        and competitiveness. The report catalogues China's policy 
        efforts to use a number of tools, including subsidies, 
        standards, procurement, financial policy, and government-backed 
        investment funds, to reach ambitious domestic and international 
        targets. By leveraging the power of the state to alter 
        competitive dynamics in global markets, MIC 2025 risks sparking 
        economic inefficiencies affecting China and overcapacity 
        affecting the global economy.
---------------------------------------------------------------------------
    \1\  U.S. Chamber of Commerce China Center, Made in China 2025: 
Global Ambitions Built on Local Protections, March 2017.

   Cultivating Opportunity: The Benefits of Increased U.S.-China 
        Agricultural Trade (November 2016) \2\ reveals that reducing or 
        eliminating relevant tariffs and other behindthe-border 
        barriers between the United States and China could result in 
        $28.1 billion in additional cumulative gains in two-way 
        agricultural sector trade over 2016-2025. The United States 
        would realize gains of $17.6 billion-a nearly 40% increase over 
        baseline projections.
---------------------------------------------------------------------------
    \2\ U.S. Chamber of Commerce China Center, Cultivating Opportunity: 
The Benefits of Increased U.S.-China Agricultural Trade, November 2016.

   Preventing Deglobalization: An Economic and Security Argument for 
        Free Trade and Investment in ICT (September 2016) \3\ examines 
        threats to the global economy from emerging policies 
        restricting open trade and investment in the information and 
        communications technology (ICT) sector and attempts to quantify 
        their impact. While the report is global in scope, Chinese 
        industrial policies feature prominently.
---------------------------------------------------------------------------
    \3\ U.S. Chamber of Commerce, Preventing Deglobalization: An 
Economic and Security Argument for Free Trade and Investment in ICT, 
September 2016.

   Competing Interests in China's Competition Law Enforcement: China's 
        Anti-Monopoly Law Application and the Role of Industrial Policy 
        (2014) \4\ examined China's use of its Anti-Monopoly Law to 
        advance industrial policy and boost national champions.
---------------------------------------------------------------------------
    \4\ U.S. Chamber of Commerce, Competing Interests in China's 
Competition Law Enforcement; China's AntiMonopoly Law Application and 
the Role of Industrial Policy, September 2014.

   China's Approval Process for Inbound Foreign Direct Investment: 
        Impact on Market Access, National Treatment and Transparency 
        (2012) \5\ detailed China's inbound investment approval process 
        and identified challenges for potential foreign investors.
---------------------------------------------------------------------------
    \5\ 5U.S. Chamber of Commerce, China's Approval Process for Foreign 
Inbound Direct Investment: Impact on Market Access, National Treatment 
and Transparency, October 2012.
---------------------------------------------------------------------------
   China's Drive for `Indigenous Innovation': A Web of Industrial 
        Policies (2010) \6\ highlighted China's efforts to use its 
        powerful regulatory regime to decrease reliance on foreign 
        technology and develop indigenous technologies.
---------------------------------------------------------------------------
    \6\ U.S. Chamber of Commerce, China's Drive for Indigenous 
Innovation: A Web of Industrial Policies, June 2010.


    The Chairman.  Thank you, Ms. Overby.
    Our second witness today is Dr. Robert Orr. He serves as 
professor and dean of the School of Public Policy at the 
University of Maryland. Prior to joining the University of 
Maryland, Dr. Orr served as the Assistant Secretary General for 
Strategic Planning in the Executive Office of the United 
Nations Secretary-General from 2004 to 2014. He has served in 
senior posts in the Government of the United States, including 
deputy to the United States Ambassador to the United Nations 
and director of global affairs at the National Security 
Council.
    I will have to read his hockey bio I guess at a different 
part of this, Senator Markey.
    Welcome, Dr. Orr. Thank you for being with us today.

 STATEMENT OF ROBERT ORR, PH.D., PROFESSOR AND DEAN, SCHOOL OF 
 PUBLIC POLICY, UNIVERSITY OF MARYLAND, COLLEGE PARK, MARYLAND

    Dr. Orr. Thank you very much, Mr. Chairman, Senator Markey, 
Senator Portman, Senator Kaine.
    This is an incredibly important subject that we are 
discussing here today. In 2017, we face a global economic 
landscape that is changing with lightning speed. Nowhere is 
this more evident than in the Asia-Pacific region. If the 
United States does not engage, compete, cooperate, and lead 
across the width and breadth of the Asia-Pacific region, we 
stand a very real possibility of squandering the unique leading 
economic and geostrategic role we have carefully crafted over 
many decades.
    The United States is well positioned to take a central role 
in shaping the global economy of tomorrow, continuing its long 
tradition of advancing innovation and competition as the 
pillars of progress. To do so will require full engagement by 
the United States across three distinct but related spheres of 
economic policy in the region: first, trade; second, 
development assistance; and third, investment in business 
development across the region.
    On the question of trade, there can be little doubt that 
the U.S. pullout from the Trans-Pacific Partnership has left 
America's friends and allies in the region frustrated--indeed, 
befuddled--and looking for partners.
    They continue to seek trade partnerships among themselves 
with the 11 remaining countries of the TPP agreeing to explore 
how to move forward absent the U.S. at the recent APEC meeting. 
If the U.S. does not find a way to fill the vacuum and demand 
for economic partners in the region, it is clear that China 
will attempt to.
    The Asia-Pacific, despite decades of growth, remains a 
developing region with the largest numbers of poor people in 
the world. While the U.S. has pulled back from the Asia-Pacific 
region, China has systematically increased its development 
assistance through both bilateral and multilateral mechanisms. 
The establishment of the Asian Infrastructure Investment Bank 
reflects the increased role China sees for itself in the 
region, successfully securing capital commitments totaling $100 
billion from leading nations worldwide, including many U.S. 
allies.
    In the face of China commanding a greater role for itself, 
cuts to our economic development tools in the region--USAID, 
OPIC, EXIM Bank--will only quicken our retreat.
    Numerous studies show disproportionate economic and 
political returns on U.S. development assistance dollars. The 
Trump administration's budget proposal eliminates USAID's 
development assistance account, winds down the activities of 
OPIC, seeks no new funding for EXIM Bank activities, and zeros 
out all climate-related funding across the Federal budget.
    Congress must exercise its authority to completely reverse 
these draconian and self-defeating cuts. Given global 
competition, especially in the Asia-Pacific region, we cannot 
afford to be penny wise and pound foolish.
    Perhaps the most important economic dynamic in the Asia-
Pacific region is the sheer scope and speed of sustained 
economic growth, creating massive and growing markets for both 
goods and productive investment.
    The geo-economic and geostrategic game of the 21st century 
will increasingly play out in the Asia-Pacific region, 
especially on issues of energy, infrastructure, natural 
resources, changing consumer demands, and various forms of 
economic transformation in the face of climate change. These 
sectors will shape global markets for decades to come, and how 
businesses and countries respond to these opportunities and 
challenges will directly affect their standing--indeed, their 
relevance.
    China is already moving to take advantage of the 
opportunities posed by these defining issues, seeing them not 
just as vehicles for economic development at home and abroad 
but also to command regional and global leadership. It is 
aggressively pursuing renewable energy development, as noted by 
Senator Markey, to address domestic energy needs, having been 
the world's largest investor in the technology since 2012, and 
is prepared to invest more than $360 billion over 4 years.
    China's State Grid Corporation has proposed and is now 
taking a leading role in envisioning a global energy 
interconnection, which would fundamentally transform the world 
energy system by creating a global grid to drive clean energy 
development.
    Innovation is occurring in the finance space with China 
clearly signaling its intent to be a leader in the field. It is 
moving toward the rollout of its national emission trading 
scheme following a several-year trial of seven regional trading 
schemes. From the outset, this national market will cover over 
7,000 firms accounting for nearly half of China's emissions, 
reducing inefficiencies in their economy and making themselves 
more competitive in the process.
    Recent global growth in green bonds is also being driven by 
China, which has gone from almost zero bond issuance in 2015 to 
accounting for 39 percent of the global total in 2016, in 1 
year.
    In this context, the U.S. can do a number of things to 
ensure its interests, as well as those of its allies and 
partners in the Asia-Pacific region.
    First, work with allies and partners to construct a global 
trading regime with the United States at its center. I would 
also concur with Ms. Overby's comment on the regional trading 
scheme.
    Secondly, fully and strategically fund the key instruments 
of economic development in the region, including appropriate 
USAID accounts, OPIC, EXIM Bank, the World Bank, Asian 
Development Bank, and the U.N. system.
    Third, stay in the Paris Agreement and make adjustments to 
climate policy within that flexible and universally agreed 
framework.
    Fourth, accelerate our own energy transition to cleaner and 
more cost-effective fuel sources, and build commercial 
partnerships around the Asia-Pacific region based on 
cooperation in this area.
    Fifth, focus on smart infrastructure and smart energy grids 
at home and around the Asia-Pacific region with friends and 
allies.
    Sixth, advance work at home and abroad on climate-smart 
agriculture, where the U.S. remains highly competitive.
    Seventh, put a price on carbon and, in so doing, squeeze 
inefficiencies out of our economy to make it as competitive as 
it can be. Nothing within the global climate agreement prevents 
a conservative climate policy involving carbon taxes, the likes 
of which former Secretaries of State James A. Baker III and 
George P. Shultz, as well as former Secretary of the Treasury 
Henry M. Paulson Jr., have put forward.
    Eighth, support U.S. Federal financing for science, 
technology, and innovation, and for bringing those innovations 
to market.
    And finally, pay close attention to human capital flows and 
how they are affected by exclusionary visa policies.
    The United States has long demonstrated economic leadership 
in the Asia-Pacific region, advancing a vision of innovation 
and competition to achieve progress. Countries are only 
prepared to hook their fate to a global leader who has shown 
that it understands their interests and their views. It would 
be the height of folly for the United States to give up that 
leadership role it has played on addressing the climate 
challenge, an issue seen by all countries in the region as 
central to their security and prosperity.
    I thank you, Mr. Chairman.
    [Dr. Orr's prepared statement follows:]


                  Prepared Statement of Robert C. Orr

    Chairman Gardner, Ranking Member Markey, and members of the 
subcommittee, thank you for this opportunity to testify before you on 
this very timely and important topic.
    My name is Robert Orr, and I am the Dean of the School of Public 
Policy at the University of Maryland. Born and raised in California, 
and having studied, lived and worked in Japan, Taiwan, and China, I 
have had decades of exposure to, and engagement with, the Asia-Pacific 
region. In addition, my work as a U.S. government official at the 
National Security Council and the State Department, combined with a 
decade at the United Nations, has given me long-term first-hand 
experience with how the United States is positioned and perceived in 
the region.
    In 2017 I see both huge opportunities and very real threats to U.S. 
interests. Both can be fundamentally shaped by what policy decisions we 
take today. We face a global economic landscape that is changing with 
lighting speed. Nowhere is this more evident than in the Asia-Pacific 
region. If the United States does not engage, compete, cooperate and 
lead across the width and breadth of the Asia-Pacific region, we stand 
a very real possibility of squandering the unique leading economic and 
geo-strategic role we have carefully crafted over many decades. If we 
do not take the long view and invest our resources accordingly, we face 
the real possibility of ceding our leadership role to others in the 
region who would welcome the windfall.
    The Asia-Pacific region is exceedingly diverse in the economic 
sphere, among others, with competing visions and economic models, 
distinct geo-economic spheres of influence, and dynamic on-the-ground 
competition that will define nations' economies, their prosperity, and 
their relations with each other. The United States is well positioned 
to take a central role in shaping the global economy of tomorrow, 
continuing its long tradition of advancing innovation and competition 
as the pillars of progress. To do so will require full engagement by 
the United States across three distinct but related spheres of economic 
policy in the region: trade; development assistance; and investment and 
business development across the region.
    On the question of trade, there can be little doubt that the U.S. 
pullout from the Trans-Pacific Partnership has left America's friends 
and allies in the region frustrated, indeed befuddled, and looking for 
partners. They continue to seek trade partnerships amongst themselves, 
with the eleven remaining countries of the TPP agreeing to explore how 
to move forward absent the U.S. on the sidelines of the most recent 
APEC meeting.\1\ If the U.S. doesn't find a way to fill this vacuum and 
demand for economic partners in the region, it is clear that China will 
attempt to.
---------------------------------------------------------------------------
    \1\ Ananthalakshmi, A. & Nguyen, M. U.S. and Pacific Rim Countries 
at odds in heated trade meeting. Reuters (2017).
---------------------------------------------------------------------------
    We are already seeing this in the discussions regarding the 
Regional Comprehensive Economic Partnership, which have been spurred on 
by the U.S. withdrawal from TPP. This agreement would cover nearly half 
the world's population, almost 30 percent of global GDP, include China 
and India, and would see no U.S. seat at the table. The U.S. needs a 
cogent trade policy to respond to the vacuum we ourselves have created; 
preferably by advancing multilateral trade agreements, but at a minimum 
through a well-designed set of bilateral trade arrangements with 
various partners in the region.
    The Asia-Pacific, despite decades of growth, remains a developing 
region with the largest numbers of poor people in the world. While the 
U.S. has systematically pulled back from the Asia-Pacific region, China 
has systematically increased its development assistance through both 
bilateral and multilateral mechanisms. The establishment of the Asian 
Infrastructure Investment Bank reflects the increased role China sees 
for itself in the region, successfully securing capital commitments 
totaling $100 billion from leading nations worldwide including many 
U.S. allies. This is only part of China's strategy, with various 
bilateral agreements used to build relationships and cement economic 
and political objectives in the region. In the face of China commanding 
a greater role for itself, cuts to our economic development tools in 
the region--USAID, the Overseas Private Investment Corporation (OPIC), 
and EXIM Bank--will only quicken our retreat. Numerous studies show 
disproportionate economic and political returns on U.S. development 
assistance dollars. The Trump Administration's budget proposal 
eliminates USAID's Development Assistance account, winds-down the 
activities of OPIC, seeks no new funding for EXIM Bank activities, and 
zeros out all climate-related funding across the federal budget. In 
this situation, Congress must exercise its authority to completely 
reverse these draconian and self defeating cuts. Given global 
competition, especially in the Asia-Pacific region, we cannot afford to 
be penny wise and pound foolish.
    Perhaps the most important economic dynamic in the Asia-Pacific 
region is the sheer scope and speed of sustained economic growth--
creating massive and growing markets for both goods and productive 
investment. The geo-economic and geo-strategic game of the 21st Century 
will increasingly play out in the Asia-Pacific region, especially on 
the issues of energy, infrastructure, natural resources, changing 
consumer demand, and various forms of economic transformation in the 
face of climate change. These sectors will shape global markets for 
decades to come, and how businesses and countries respond to these 
opportunities and challenges will directly affect their standing, and 
indeed their relevance.
    A few statistics give an idea of the most dynamic, and highest 
value opportunities:


   More than US$1.6 trillion has been invested in renewable energy 
        capacity since 2010,\2\ with some US$7.8 trillion forecast to 
        be invested through 2040.\3\
---------------------------------------------------------------------------
    \2\ Frankfurt School-UNEP Centre & Finance, B. N. E. Global Trends 
in Renewable Energy Investment 2017. (2017).
    \3\ Bloomberg New Energy Finance. New Energy Outlook 2016 Executive 
Summary. (2016).

   US$90 trillion is expected to be invested globally over the next 15 
        years to replace ageing infrastructure in developed economies 
        and to build out emerging economies.\4\
---------------------------------------------------------------------------
    \4\ The New Climate Economy. The Sustainable Infrastructure 
Imperative--Financing for Better Growth and Development. (2016).

   Investors with more than US$10 trillion under management are moving 
        to recognize the risk posed by holding carbon-associated assets 
        through performance reporting,\5\ and individuals and 
        institutions with more than US$5 trillion in managed assets 
        havecommitted to some form of divestment from fossil fuel 
        assets.\6\ These trends are accelerating.
---------------------------------------------------------------------------
    \5\ Marchais, M. & Blanc, D. Montreal Carbon Pledge--Accelerating 
Investor Climate Disclosure. (2016).
    \6\ Arabella Advisors. The Global Fossil Fuel Divestment and Clean 
Energy Investment Movement. (2016).

   Innovation in markets is occurring to finance plays in these areas, 
        with a total of US$694 billion in climate-aligned, outstanding 
        bonds in the markets in 2016.\7\
---------------------------------------------------------------------------
    \7\ Climate Bonds Initiative. Bonds and Climate Change--The State 
of the Market in 2016. (2016).


    These are the moves that economic actors are making globally on the 
issues that matter to them, and the opportunities of the new 21st 
Century economy run right through the Asia-Pacific region.
    China is already moving to take advantage of the opportunities 
posed by these defining issues, seeing them not just as vehicles for 
economic development at home and abroad, but also to command regional 
and global leadership.
    It is aggressively pursuing renewable energy development to address 
domestic energy needs, having been the world's largest investor in the 
technology since 20122 and is preparing to invest more than US$360 
billion over four years.\8\ This domestic activity has translated to 
global competitiveness in renewable energy, with Chinese companies, 
manufacturers and technology firms claiming the dominant share of large 
public companies worldwide that generate 10 percent or more from clean 
energy revenues.\9\
---------------------------------------------------------------------------
    \8\ Ferris, D. As U.S. wavers, China prepares to invest $360B in 4 
years. Energy Wire (2017).
    \9\ As You Sow & Corporate Knights. Carbon Clean 200: Investing in 
a clean energy future 2017 Q1 Performance Update. (2017).
---------------------------------------------------------------------------
    China's State Grid Corporation has proposed and is now taking a 
leading role in envisioning a Global Energy Interconnection, which 
would fundamentally transform the world energy system by creating a 
global grid to drive clean energy development.\10\ This is in addition 
to continued strong investments in domestic electricity infrastructure, 
including an expected expenditure of US$62 billion on smart grid 
technology through the period 2009 to 2020.\11\
---------------------------------------------------------------------------
    \10\ Minter, A. China Wants to Power the World. Bloomberg View 
(2016).
    \11\ Xiufeng, F. Smart Grids in China: Industry Regulation and 
Foreign Direct Investment.Energy Law J. 37, 135-176 (2016).
---------------------------------------------------------------------------
    Innovation is occurring in the finance space, with China clearly 
signally its intent to be a leader in the field. It is moving towards 
the rollout of its national emissions trading scheme, following a 
several year trial of seven regional trading schemes. From the outset 
this national market will cover over 7,000 firms accounting for nearly 
half of China's emissions,\12\ reducing inefficiencies in their economy 
and making themselves more competitive in the process. Recent global 
growth in green bonds is also being driven by China, which has gone 
from almost zero bond issuance in 2015 to accounting for 39 percent of 
the total global issuance in 2016.\13\
---------------------------------------------------------------------------
    \12\ Chun, Z. China prepares to open national carbon market. 
chinadialogue (2016).
    \13\ Climate Bonds Initiative. China Green Bond Market 2016. 
(2017).
---------------------------------------------------------------------------
    Not only furthering its economic rise, China is increasingly being 
seen as a credible leader on the the 21st Century transition to a 
cleaner, more efficient economy. Countries throughout the region 
understand that their future is directly linked to global climate 
outcomes, and they are investing and striking regional and global 
alliances accordingly. For the island states this is a matter of 
survival. For China and India, this is a matter of an economic model 
that can sustain their populations and reduce poverty without the 
crushing health effects of the exclusively fossil fuel-based model; for 
U.S. allies like Japan, Korea, and various members of ASEAN, it is as 
much an issue of economic competitiveness as it is one of enlightened 
leadership on the global stage. For all these countries, it is about 
markets for new technologies to mitigate climate change, but it is also 
about the need for physical and economic resilience in the face of 
rising seas and highly disruptive weather events. U.S. moves and 
pronouncements in recent months aligning itself with fuels and 
technologies of a bygone era instead of fuels and technologies of 
tomorrow, make the U.S.a much less attractive and reliable partner. 
Friends, competitors, and those in between have all begun to respond 
accordingly: by betting on China.
    In this context, the U.S. can do a number of things now to ensure 
its interests, as well as those of its allies and partners in the Asia-
Pacific region:


 1. Work with allies and partners to construct a global trade regime 
        with the United States at its center;

 2. Fully and strategically fund the key instruments of economic 
        development in the region, including USAID, OPIC, EXIM Bank, 
        the World Bank; the Asian Development Bank; and the UN system;

 3. Stay in the Paris Agreement and make adjustments to climate policy 
        within that flexible and universally agreed framework. Even 
        having the discussion about whether to pull the United States 
        out of the Paris Agreement is a self-inflicted injury. The 
        Administration should signal its clear intent to stay within 
        the Paris framework given the flexibility offered under the 
        agreement to pursue national policies of its own choosing, not 
        to mention the universal and strong support for the agreement 
        throughout the Asia-Pacific and the world.

 4. Accelerate our own energy transition to cleaner and more cost 
        effective fuel sources, and build commercial partnerships 
        around the Asia-Pacific region based on cooperation in this 
        area;

 5. Focus on smart infrastructure and smart energy grids at home and 
        around the Asia-Pacific region with friends and allies;

 6. Advance work at home and abroad on climate smart agriculture, where 
        the U.S. remains highly competitive;

 7. Put a price on carbon, and in so doing squeeze inefficiencies out 
        of our economy to make it as competitive as it can be. Nothing 
        within the global climate agreement prevents a "conservative 
        climate policy" involving carbon taxes the likes of which 
        former Secretary of States' James A. Baker III and George P. 
        Shultz, and former Secretary of Treasury Henry M. Paulson Jr. 
        have put forward;

 8. Support US Federal financing for science, technology, and 
        innovation, and for bringing those innovations to market; and

 9. Finally, pay close attention to human capital flows, and how they 
        are affected by exclusionary visa policies. In my university 
        and in those across the country, we are seeing shifts in 
        willingness by the best and brightest students from around the 
        world to come to, and ultimately stay in the United States. 
        Signals from Washington D.C., both the Administration and 
        Congress, can be very helpful or be very harmful in this 
        regard.


    The United States has long demonstrated economic leadership in the 
Asia-Pacific region, advancing a vision of innovation and competition 
to achieve progress. As the nations of the region turn their attention 
to the opportunities and impacts posed by climate change, China's 
leadership on the issue is offering an attractive alternative. 
Countries are only prepared to hook their fate to a global leader who 
has shown that it understands their interests and their views. It would 
be the height of folly for the U.S. to give up the leadership role it 
has played on addressing the climate challenge, an issue seen by all 
countries as central to the security and prosperity of all.


    The Chairman.  Thank you, Dr. Orr.
    Again, thank you, Ms. Overby.
    We will begin with questions now. You both laid out a 
series of themes or principles, goals, that perhaps we should 
focus on.
    Ms. Overby, you talked about the five things, a regional 
trade strategy, empowered EXIM Bank, adequate funding for FCS, 
reprioritizing U.S. foreign assistance, and using regional 
organizations to pursue regional economic opportunities.
    Dr. Orr, you laid out nine goals or ideas talking about 
trade, renewable energy, climate agreements, and a number of 
others.
    As we approach legislation to set a long-term strategy, not 
just a 4-year presidential term or an 8-year presidential term, 
but a long-term strategy when it comes to the economy and the 
region, should a strategy be focused on let's enter into a 
trade agreement, a bilateral trade agreement, with Japan, a 
bilateral trade agreement with another nation, Vietnam, you 
name it? Or should it be more encompassing than that, an 
overall regional strategy getting to the idea of a TPP type, a 
2.0? Or should it be focused on China, on balancing China? On 
what goal, overall, should we focus our strategy economically 
in the region for the next 10 to 20 years?
    Ms. Overby. From my perspective, I think focusing on 
writing the rules. Right now, you have the Regional 
Comprehensive Economic Partnership. It is a China-led, 16-
country negotiation going on, and the U.S. is not at the table. 
In Hanoi, we heard the TPP 11 trade ministers talk about a 
commitment to finding a way forward with that agreement. The 
U.S. is not at the table.
    So we are not participating in the two largest agreements 
in what we think is the most important part, which is getting 
the rules right.
    But, of course, the U.S. business community supports any 
agreement that will open markets and allow our firms to 
compete. So whether it is bilateral or multilateral, our answer 
would be yes, we need to get in the game and increase our 
activity there.
    The Chairman.  Dr. Orr, I do not know if you want to add 
anything to that. I do not want to cut you off. I am sorry.
    Dr. Orr. I would concur. It really is a question of getting 
in the game. There are key bilateral discussions on the table, 
and those can be very positive. But the dynamic is a 
multilateral dynamic.
    The fact that the 11 countries that were negotiating TPP 
are still talking with each other, still working together, 
provides an opportunity, if the United States is ready to seize 
that.
    The Chairman.  You both mentioned that the 11 other nations 
in TPP are having conversations with each other without the 
United States. You mentioned the RCEP and China getting 
together and setting rules. As far as you are aware, what is 
the status right now of conversations on bilateral trade 
agreements in Asia and other dialogues that we are having 
throughout the region?
    Ms. Overby. There is increased activity. The European Union 
has vastly accelerated their bilateral FTA negotiations with a 
myriad of countries in Asia. And the Chinese have been very 
clear about their indication to try to move RCEP to a 
conclusion this year. The 11 TPP countries also are looking to 
try to do something with the high standards and the strong 
rules in TPP.
    They reaffirmed in Hanoi that the reasons they entered TPP 
even without the U.S. participation are still valid. So from an 
American business perspective, we see the region moving on 
without us.
    The Chairman.  Could you talk about the political and 
economic consequences of a successful RCEP and the U.S. not 
entering into any substantive----
    Ms. Overby. The Regional Comprehensive Economic Partnership 
is viewed as a much lower standard agreement than TPP. 
Basically, it appears to be a group of tariff agreements that 
are going to be cobbled together. Although the Chinese have 
said that they are pushing for higher aspirations, some of our 
friends in the RCEP countries indicate that they do not expect 
it to be high-quality.
    So on the political side, we are deeply concerned with 
China's Asian Infrastructure Investment Bank, their ``One Belt, 
One Road,'' and their Silk Road Initiative. They are putting 
enormous financial resources and political capital behind 
making friendships, building connectivity in Asia. And the 
United States is on the outside.
    Trade agreements, by definition, are preferential. The 
countries in the agreement benefit from them. The countries on 
the outside are excluded from those benefits. So we are deeply 
concerned about the direction.
    The Chairman.  Thank you.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    Dr. Orr, if I could come back to you, this is a quite scary 
prognosis you are making for the gap that could be opened in 
clean energy job creation between the United States and China.
    You also mentioned that they are now in the process of 
beginning to plan for a global grid in order to accommodate a 
renewable energy revolution, which, of course, could be a part 
as well of their massive investment in electric vehicles as 
part of their economic plan for the future. Those are two huge 
sectors, the energy and the automotive sector, for the United 
States, but for the whole planet.
    Can you expand upon that a little more, so that we can 
understand what you are telling us is going on in that country?
    Dr. Orr. Thank you, Senator Markey.
    The Chinese have a very strategic intent with their 
investments in the clean energy sector. I have been traveling 
to China at least twice a year for the last decade. I have 
watched year-over-year the players in China broaden and thicken 
and deepen that are working on clean energy at home in China 
and around the world.
    They intend to dominate this space. They are doing a very 
good job of it right now. The investment numbers are 
staggering. They are creating markets at home and using that to 
be able to project those markets into other countries.
    Senator Markey. In Asia?
    Dr. Orr. In Asia primarily, not exclusively. They are also 
making investments in Latin America and other regions as well. 
But because they have such a deep market for renewables in 
their own country, they can produce them at very cost-effective 
rates.
    I mentioned the Asian Infrastructure Investment Bank, but 
we best not forget other instruments that they are using. The 
China Development Bank is being capitalized for big efforts in 
this area. There are other instruments.
    The ``One Belt, One Road'' initiative is not just an 
economic initiative. It is a geostrategic initiative. They are 
binding countries into their orbit. They have just held a 
summit that the President of Turkey declared that their plan 
was to link up with the ``One Belt, One Road'' initiative and 
provide the channel of all these products to Europe. This is a 
geostrategic order that is designed by China to do exactly what 
we do not want to see, which is a pivot away from a move into 
the Asia-Pacific, instead cementing their dominance on markets 
on the other side.
    Senator Markey. Could you just, conceptually, talk about 
what a cross-national smart grid, using renewables for the 
basis for it, in the Asian region, just those countries that 
are abutting China, could mean in terms of the deepening roots 
that they could create by binding those other countries to an 
energy, electricity, all-electric vehicle future for an entire 
region, not just that one country?
    Dr. Orr. Every country I visited in the region, every 
global conference I have been to in the last decade, either as 
a U.S. or U.N. official, I have seen the State Grid Corporation 
of China. They have a presence. They are projecting it. I was 
in Houston just a year ago. And at U.S. energy conferences, the 
State Grid Corporation of China is one of the leading players.
    So they are looking at this as a regional move, but they 
are not hiding their ambitions for a global grid that is driven 
by the Chinese State Grid Corporation. They are starting with 
conversations and, in fact, investments with countries abutting 
China to begin a smart grid that would be able to take onboard 
renewables of all kinds.
    This is something that is part of their kind of 
neighborhood strategy. But they are not going to stop there.
    Senator Markey. You mentioned in your testimony $60 billion 
in Chinese smart grid investment just through 2020, just 3 
years from now, $60 billion. So what do you project that could 
explode to become by 2030?
    Dr. Orr. In fact, you need to take even the announced 
numbers with a grain of salt. The Chinese have a way of 
understating the numbers when they are talking about their 
stated objectives. I think their stated objective of $60 
billion in smart grid by 2020 will probably be achieved well 
before that. I would expect the numbers by 2020 to be higher.
    I think how high it goes depends on how many takers they 
get. But if the indications are correct that all of their 
neighbors are talking with them, and they are starting to talk 
to a number of U.S. partners and allies as well, so it moves 
very quickly from the economic realm to the strategic realm in 
terms of building relationships and dependence on that grid.
    Senator Markey. Thank you, Mr. Chairman. That was always 
one of the visions of Buckminster Fuller, this cross-national 
grid that would bind people together, that would show the 
interconnectivity of all of us on the planet. But I do not 
think any of us ever envisioned that it would be the Chinese 
that would implement such a strategy.
    But it is something that actually makes a lot of economic 
sense, and it requires us to be thinking through what the 
implications are.
    Thank you.
    The Chairman.  Thank you.
    Senator Kaine?
    Senator Kaine. Thank you, Mr. Chairman.
    Thank you to the witnesses. Just a topical issue.
    Talk a little bit about the risk factors in the Chinese 
economy. I saw the news this morning about the Moody's bond 
credit rating downgrade in China. Just share with us a little 
bit your perspective on what that means and some of the risks 
that they are facing.
    Dr. Orr. Senator Kaine, I think, as you well know, there 
are many risks in the Chinese economy. While they are a 
juggernaut of growth over decades and have amassed huge amounts 
of capital that can be deployed strategically, there are still 
huge inefficiencies in their economy. There are still huge 
dangers for instability in the Chinese economy, and they are 
very conscious of that. Many of the decisions they make on the 
economic side are about that.
    Interestingly, one of the reasons, after years of trying to 
argue with Chinese officials that they need to invest more in 
clean technologies, they got religion not because of global 
environmental goals or the like. They got religion because of 
the political pressures arising out of the pollution in their 
biggest cities. But once they got religion, the investments 
started to flow dramatically.
    So I think these inefficiencies in various sectors of China 
remain there. There are some risk factors there, but I would 
say that the experiment on seven regional carbon markets is a 
very interesting exercise. Some of their carbon markets failed. 
Some of them succeeded wildly. And others came in between. They 
are now moving to a national carbon market.
    They will systematically squeeze inefficiencies out of 
their production processes with this national carbon market. We 
are not pursuing anything of the like here. Our inefficiencies 
in various sectors will not benefit from that treatment.
    So I think while the risks are there, they are aware of 
them, and they move money to try to address them. I do think we 
do need to be concerned not just about Chinese success but 
about Chinese failure, should some of these risk failures blow 
up in their face.
    Senator Kaine. Ms. Overby?
    Ms. Overby. Thank you, Senator Kaine.
    This year, China will have their 19th Party Congress, which 
is a very important milestone for President Xi Jinping. So I 
think, notwithstanding the instability and the potential risk 
factors, he will be driven to ensure as much stability as 
possible so that he can make it through that party congress 
successfully.
    As Dr. Orr mentioned, there are enormous inefficiencies in 
their system, excess capacity. But I think they are going to 
be, this year, as much as ever before, focused. To the outside 
world, it is going to look calm and secure.
    Senator Kaine. The second question, we have a funny way of 
doing jurisdictional divisions within the Foreign Relations 
Committee. I am the ranking member on the Near East, South, and 
Central Asia, which includes India. In talking about other 
nations in the region and ways to position bilaterally with 
other nations, I spend a lot of time thinking about the U.S.-
India relationship.
    Talk about the U.S.-India relationship in this sense of 
sort of the Indo-Asian economy and what are some opportunities 
that the U.S. may have there, either directly with India or 
even vis-a-vis or contra some of the Chinese activities.
    Ms. Overby. Sir, I will start. India is part of RCEP, the 
Regional Comprehensive Economic Partnership. That is made up of 
the 10 ASEAN countries, Japan, Korea, Australia, New Zealand, 
China, and India.
    From what we know about the RCEP negotiations, India and 
China have a challenge agreeing on much. So while the Chinese 
have been very clear that they want to drive these RCEP 
negotiations to a conclusion this year, there is a question in 
the region whether that will be minus India or whether they 
perhaps will lower their standards even further to accommodate 
India.
    I do think there is, between those two great powers, there 
is an opportunity for the United States. But we must engage.
    And I will stop there.
    Senator Kaine. Dr. Orr?
    Dr. Orr. India is moving quite quickly in a number of areas 
as well. Again, on renewable energy, which is kind of a golden 
thread running through this hearing, India is thinking big and 
moving big. They have big goals on solar and wind. They are 
meeting them. They are surpassing them. And they will keep 
attracting investment, both domestic and international.
    Their Smart Cities initiative of the Prime Minister has 
many components, but I think it is a strategic vision that is 
both at once developmental and economic.
    I had the privilege of traveling to India with Michael 
Bloomberg last year. We met with a number of the top business 
leaders in India, talking with them about what they were going 
to be doing in the climate and energy space. Virtually the head 
of every conglomerate in India, whether or not they are coal-
based, oil-based, or anything else-based, are making 
investments now in the sector.
    So while I described China as putting these huge dollars, 
$360 billion over the next 4 years, India is going to be 
mobilizing a lot of internal capital in this area as well.
    This race is on, and it is something that the United States 
has a technological lead, has a potential market that we could 
be extremely competitive globally. But right now, we are not 
making the decisions we need to compete with these giants.
    One final issue I would mention, Senator, with respect to 
India, the Indians are coming from a lower baseline in terms of 
their economic development. They know they have a lot of 
catching up to do. They are being quite strategic in certain 
sectors. They are heavily dependent on the IT sector.
    Just in my role as dean of a school of public policy, I 
have been engaging with a number of Indian officials. They are 
extremely interested in cybersecurity right now. This is 
important to them. They see this as important to their key 
industries, and they know they are lagging behind. So I think 
you see a strategic intent on the part of the Indian 
Government, like the Chinese Government.
    Senator Kaine. Thank you, Mr. Chair.
    Thanks to the witnesses.
    The Chairman.  Thank you, Senator Kaine, for that. I 
completely agree with you. In fact, I have had a number of 
discussions with various Asia experts and others in India about 
how we can, through some form of adverse possession, do a 
hostile takeover of the other committee's jurisdiction and just 
take India. [Laughter.]
    The Chairman.  Is this a proper forum for a business 
meeting? I am open to a motion to add India to our title, if we 
want to do that. I do not know if Senator Risch is listening.
    Senator Kaine. Noting the absence of a quorum----
    The Chairman.  That is right.
    On a serious point though, I do think that our Asia 
strategy, which includes opportunities to work with India, the 
Indo-Asia area, the alliances that we create, the ANZUS 
alliance, we have to make sure that we include India in these 
discussions. So, I think it is very important that we do this.
    So on a serious note, thank you. Maybe next Congress, we 
will accomplish that. Sorry, Jim Risch.
    Ms. Overby, I want to talk about two of the points you made 
in your list of five. You talked about reprioritizing U.S. 
foreign assistance and using regional organizations to pursue 
regional economic interests.
    Could you further elaborate on that? I think you said 
reprioritizing U.S. foreign assistance and using regional 
organizations. Just talk a little bit more about those two 
points.
    Ms. Overby. Sure, Mr. Chairman.
    What we mean by reprioritizing U.S. foreign assistance, 
U.S. aid is such a small percentage of the 150 account. Used 
effectively, we think it can help expand America's influence in 
Asia, by using regional agreements or regional organizations 
better. We are referring to APEC, the U.S.-ASEAN summit, the 
East Asia Summit. These are all opportunities where the U.S. is 
participating.
    As I mentioned in my testimony, Asians are very nervous. 
The withdrawal from TPP that, prior to this election, the U.S. 
was leading and we were pushing hard to ensure high standards, 
comprehensive rules, which are very important to American 
businesses, as we talk about China and India and what they are 
doing in clean energy, the U.S. has very strong innovation 
capabilities, but we need those high standard rules to ensure 
that our innovation is rewarded and, frankly, protected.
    The Chairman.  I want to get to that, too, because these 
rules, these high standards that we have, when we talk about 
the goals for economic opportunity in Asia, should any economic 
approach that we set out, any goal that we set out, what do we 
need to include in terms of rule of law, IPR, intellectual 
property rights kind of conversations? How do we address that?
    Ms. Overby. I think we start with a digital economy. Inside 
TPP, the e-commerce chapter for the first time clarified cross-
border data flow and data server location rules that made it 
easy for data to flow across borders and prevented countries 
from demanding that servers be located within their 
jurisdiction.
    Also, of course, strong IP protection, the U.S., the most 
innovative country on Earth, we need to be able to protect that 
innovation and be rewarded for it.
    The Chairman.  So like in the bill, this concept that we 
have that focuses on national security issues, economic 
security, human rights, democracy elements, if you have an 
economic component that talks about the importance of the 
alliances, that talks about the importance of trade and 
opportunity, do you need a standalone segment in there on these 
issues of standards, as it relates to intellectual property 
rights and those kinds of things?
    Ms. Overby. We think so.
    The Chairman.  Legislation that is short of a trade 
agreement in and of itself, you should still include that?
    Ms. Overby. I would support that, absolutely, because rule 
of law is still being developed in Asia. Those rules of the 
road for trade are being written as we speak. Right now, we 
have a hodgepodge of spaghetti bowl rules, different bilateral 
agreements, different regional agreements. TPP was seeking to 
raise the standards significantly.
    I should point out that the U.S. was the driver. When Japan 
joined the negotiation to be the 12th country, then it became 
the U.S. and Japan as the demandeurs of high standards for most 
of these comprehensive rules and standards. So it is our belief 
that we absolutely need to have clear rules, comprehensive and 
high standards.
    The Chairman.  Dr. Orr, anything you would like to add?
    Dr. Orr. Thank you, Mr. Chairman.
    Just on your initial question about foreign assistance, in 
my testimony, I name not only our bilateral vehicles that are 
proposed to be fully defunded, which I think would do us great 
damage, but I also named some of the multilateral vehicles that 
we need to use.
    As Ms. Overby just mentioned, the rules of the road are 
extremely important. We have codified rules of the road that 
make sense and that reflect American values and interests 
through various institutions. We need to use some of those 
institutions.
    Here I would point out that while questions have been asked 
about the Asia Infrastructure and Investment Bank, we do have 
vehicles that are quite active in the region. The Asian 
Development Bank and the World Bank do have a portfolio in the 
region that is quite important to ensuring the kind of 
development along the rules as we describe, and the IFC is 
quite important in that.
    Just the last thing that I would mention is that we have 
talked about China a lot, and India has come up. It is striking 
to me that we have not yet touched on major countries like 
Indonesia. Let's maybe think about Southeast Asia as a region.
    This is a region that very much wants to work with, trade 
with, get investment from, and invest in the United States. We 
do need to think about the other subregions of the Asia-Pacific 
region as important players in and of themselves, and to engage 
with them on the rules creation, because there is not a purist 
stance on that within the ASEAN countries.
    So working with them, I think a lot is possible. So as you 
give thought to your legislation, and I would agree that the 
rules-based system is important, we should base our work 
through institutions that help secure those rules, but then 
work with constituencies like ASEAN that are winnable.
    The Chairman.  Thank you, Dr. Orr. A vote has been called, 
so we will just kind of go back and forth, and then probably 
conclude the hearing, so nobody has to wait.
    Senator Markey?
    Senator Markey. Beautiful. Thank you.
    I would like both of you to kind of expand upon the 
question of the role that these key instruments of economic 
development in the region play, including USAID, OPIC, EXIM 
Bank, the World Bank, the Asian Development Bank, and the U.N. 
system itself in terms of its full funding to make sure that we 
are on the ground and competing in this region.
    Could both of you take that question, in terms of the 
importance of these American institutions and their funding 
levels?
    Dr. Orr. Thank you, Senator. All of these institutions play 
a different role, but the United States has always been the 
driver in every single one of those institutions you just 
mentioned. We get a tremendous bang for our buck.
    I have served the United States Government in various 
capacities, and I have served at the U.N. While at the U.N., I 
was extremely struck by how strong the United States is in the 
system. Conventional wisdom within the Beltway notwithstanding, 
when the United States wants something to happen through the 
United Nations, it happens. The rules reflect that. The various 
areas within the U.N.'s purview, everything from the 
international postal system, to trade issues, to investment 
rules, are codified with a disproportionate U.S. voting share, 
and that is to our benefit.
    The one other thing that I would mention in terms of 
institutions that we do need to think about, there are a number 
of informal institutions that engage on economic issues. Here, 
by working on climate change issues through formal mechanisms 
in the U.N., I became deeply associated with various energy 
networks around the world, various sectoral, agricultural 
sectoral organizations. These kinds of tools are ones that we 
also need to think about in our strategy.
    The one place where it has come together was in the Paris 
Agreement. The Paris Agreement is now being debated in 
Washington, about whether or not we should pull out. I cannot 
imagine a greater self-inflicted wound than walking away from 
an agreement that we shaped, that is in our interests, that 
every country in the world is supporting, and that provides the 
framework for those various sectors to coordinate around the 
rules of the road that we have set.
    Senator Markey. Thank you.
    Ms. Overby?
    Ms. Overby. Yes, I would refer to EXIM and OPIC. Those are 
the two that intersect our members the most. Having those 
institutions available are additional arrows in our quiver of 
helping American companies compete in a region that is so 
dynamic.
    I should note that other governments are doing more and 
more in that regard. And we saw--forgive me for using the only 
word I can think of--the debacle of not having a fully funded, 
fully operational EXIM Bank the last couple years. We need to 
get in the game and stay in the game.
    Our companies need support. We need to at least have the 
same level of support that other countries are providing to 
their companies. For many of our companies, it is the small- 
and medium-sized companies that are being hurt the worst.
    Senator Markey. Is there a reason why you did not mention 
the Asian Development Bank?
    Ms. Overby. The Asian Development Bank, I think it is 
important, but I think we see more activity among our companies 
with EXIM and OPIC.
    Senator Markey. Okay. Wonderful. Thank you.
    Thank you, Mr. Chairman.
    The Chairman.  Thank you. I think due to the vote, we will 
just go ahead and wrap up the hearing now. Thanks to both of 
you for attending today's hearing, for your time and testimony, 
thanks to all the participation today. Those of you who 
attended the hearing as well, thank you.
    For the information of members, the record will remain open 
until the close of business on Friday, including for members to 
submit questions for the record.
    I would kindly ask the witnesses to respond as quickly as 
possible to those questions. Your responses will be made a part 
of the record.
    With the thanks of this committee, this hearing is now 
adjourned.


    [Whereupon, at 3:09 p.m., the hearing was adjourned.]



                         AMERICAN LEADERSHIP IN
                           THE ASIA-PACIFIC--


                      PART 3: PROMOTING DEMOCRACY,

                   HUMAN RIGHTS, AND THE RULE OF LAW

                              ----------                              


                        WEDNESDAY, JULY 12, 2017

                               U.S. Senate,
       Subcommittee on East Asia, the Pacific, and 
                International Cybersecurity Policy,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:19 p.m., in 
Room SD-419, Dirksen Senate Office Building, Hon. Cory Gardner, 
chairman of the subcommittee, presiding.
    Present: Senators Gardner and Markey.

            OPENING STATEMENT OF HON. CORY GARDNER, 
                   U.S. SENATOR FROM COLORADO

    Senator Gardner. This hearing will come to order.
    Let me welcome you all to the fourth hearing of the Senate 
Foreign Relations Committee Subcommittee on East Asia, the 
Pacific, and International Cybersecurity Policy in the 115th 
Congress. I truly appreciate your willingness to participate in 
today's hearing.
    It is the third hearing in our four-part series, though, in 
the subcommittee to address various aspects of U.S.-Asia policy 
in the Pacific region, from security challenges to economic 
engagement to today's topic, which is, of course, projecting 
our values of democracy, human rights, and accountability 
throughout the region.
    These hearings will also inform new legislation called the 
Asia Reassurance Initiative Act, or ARIA, which will seek to 
build a long-term vision for United States policy toward the 
Asia-Pacific region.
    At our first hearing on March 29, we focused on the growing 
security challenges in the Asia-Pacific, including North Korea, 
the South China Sea, and terrorism in Southeast Asia.
    At that hearing, Randy Forbes, a former Congressman from 
Virginia and the chair of the House Armed Services Subcommittee 
on Seapower and Projection Forces observed the following: ``In 
the coming decades, this is the region where the largest armies 
in the world will camp. This is the region where the most 
powerful navies in the world will gather. This is the region 
where over one half of the world's commerce will take place and 
two-thirds will travel. This is the region where a maritime 
superhighway linking the Indian subcontinent, Southeast Asia, 
Australia, Northeast Asia, and the United States begins. This 
is the region where two superpowers will compete to determine 
which world order will prevail. This is the region where the 
seeds of conflict that could most engulf the world will 
probably be planted.''
    We agreed at that hearing that we must strengthen U.S. 
defense posture and increase engagement with our allies to 
counter these threats. At our second hearing on May 24, we 
focused on the importance of U.S. economic leadership in the 
Asia-Pacific.
    At that hearing, Tami Overby, senior vice president for 
Asia at the U.S. Chamber of Commerce, observed the following: 
``The Asia-Pacific region is critical to current and future 
U.S. economic growth, competitiveness, and job creation. U.S. 
exporters, whether large or small companies producing goods and 
services, or farmers and ranchers exporting commodities, need 
access to these fast-growing economies and the rising poll of 
consumers.''
    According to the Organization for Economic Cooperation and 
Development, the global middle class will expand from 1.8 
billion in 2009 to 3.2 billion by 2020 and 4.9 billion by 2030. 
Most of this growth is in Asia. In fact, Asia's middle-class 
consumers will represent 66 percent of the global middle-class 
population and 59 percent of middle-class consumption by 2030, 
doubling these shares since 2009.
    We agreed at that hearing that, while the administration 
and Congress might differ on global trade strategy, we cannot 
ignore the fundamental fact that it is the Asia-Pacific region 
that will be critical for the U.S. economy to grow and for the 
American people to prosper through trade opportunities.
    Today's hearing will examine perhaps the most 
underappreciated part of our presence in the Asia-Pacific and 
worldwide: promoting our values of human rights, the rule of 
law, and accountability.
    On December 10, 1986, President Ronald Reagan, in his 
speech declaring Human Rights Day, said the following, ``At 
birth, our country was christened with a declaration that spoke 
of self-evident truths, the foremost of which was that each and 
every individual is endowed by our Creator with certain 
unalienable rights. And our creed as Americans is that these 
rights, these human rights, are the property of every man, 
woman, and child on this planet and that a violation of human 
rights anywhere is the business of free people everywhere.''
    I believe that statement still holds true today as it did 
then, and it must form an integral part of our Nation's foreign 
policy. I look forward to our distinguished panel addressing 
how we can advance these American values in the Asia-Pacific.
    Now I will turn it over to our ranking member, Senator 
Markey, for why the Red Sox and Rockies World Series may or may 
not occur. [Laughter.]

              STATEMENT OF HON. EDWARD J. MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. I look forward to that prediction coming to 
pass, and I look forward to this hearing.
    I thank you, Mr. Chairman. I think this is a very important 
subject and a fantastic panel that you put together here today 
for us, because, for decades, the United States has promoted 
democracy, human rights, and the rule of law. This reflects our 
values and strengthens our security.
    So today, we take stock of this effort in Asia, the world's 
most dynamic region. Japan, South Korea, and Taiwan demonstrate 
that democratic values do not thrive only in the West, but 
wherever societies protect the rights and dignity of all 
people, East to West, North or South. But, while Japan, South 
Korea, and Taiwan prove that progress is possible, we see a 
mixed picture elsewhere in the region.
    Indonesia is both a Muslim-majority country and a democracy 
that values social tolerance. Yet, work remains before 
Indonesians move toward a full embrace of diversity and freedom 
of expression.
    Myanmar, with strong U.S. support, has made extraordinary 
progress in overcoming decades of dictatorship. It now faces a 
turning point. Will reforms continue or will a failure to 
address sectarian and ethnic tensions undermine this country's 
great potential?
    What will the Filipinos do about a President who tramples 
all norms of human rights and the rule of law with an 
extrajudicial killing spree masquerading as a counter-drug 
campaign?
    And, of course, North Korea is a unique case, a closed 
society where horrific violations of human rights occur 
countless times every single day of the year.
    Looming over the entire region is China, which questions 
whether democracy and the rule of law are relevant to economic 
development. In these circumstances, we must urgently ask, will 
China's rise undermine democracy, human rights, the rule of 
law, and regional prosperity? And what can America do to 
support Asia-Pacific countries seeking progress on these 
issues?
    I look forward to exploring these issues with our witnesses 
today. Once again, Mr. Chairman, I thank you for this great 
hearing.
    Senator Gardner. Thank you, Senator Markey.
    I will introduce all three of our witnesses, and then we 
will begin the testimony and the question time.
    Our first witness is Mr. Murray Hiebert, who serves as 
senior adviser and deputy director of the Southeast Asia 
Program at the Center for Strategic and International Studies. 
Prior to joining CSIS, he was senior director for Southeast 
Asia at the U.S. Chamber of Commerce and also worked as a 
journalist in the Wall Street Journal's China bureau.
    Thank you very much for being with us today.
    Our second witness is the Hon. Derek Mitchell, who serves 
as senior adviser to the Asia Program at the U.S. Institute of 
Peace. Prior to joining the U.S. Institute of Peace, he served 
as the U.S. Ambassador to Burma from 2012 to 2016, and also 
served as Principal Deputy Assistant Secretary of Defense for 
Asian and Pacific Security Affairs from 2009 to 2011.
    Welcome, Ambassador Mitchell.
    Our final witness today is the Hon. Robert King, who serves 
as senior adviser to the Korea Chair at the Center for 
Strategic and International Studies. Ambassador King previously 
served as the Special Envoy for North Korean Human Rights 
Issues at the U.S. State Department from November 2009 to 
January 2017.
    I encourage everybody to read the report that Ambassador 
King was author of. He was the longest serving envoy for human 
rights abuses in North Korea since the creation of the position 
under the North Korean Human Rights Act of 2004. I welcome 
Ambassador King.
    Thank you very much for being with us today.
    Mr. Hiebert, if you would like to begin the testimony, 
please do.

    STATEMENT OF MURRAY HIEBERT, SENIOR ADVISER AND DEPUTY 
  DIRECTOR, SOUTHEAST ASIA PROGRAM, CENTER FOR STRATEGIC AND 
             INTERNATIONAL STUDIES, WASHINGTON, DC

    Mr. Hiebert. Thank you, Chairman Gardner and Ranking Member 
Markey.
    Congratulations to the committee for holding this hearing 
on the important issue of promoting democracy, human rights, 
and rule of law in the Asia-Pacific. Promoting these values 
sends a clear signal to authoritarian governments that the 
United States is watching how they treat their citizens. The 
U.S. promotion of human rights and democracy has often made a 
difference when there is coordinated government and civil 
society effort to promote increased political space.
    Senator Markey already alluded to what happened in Myanmar/
Burma, where U.S. policy played a critical role in promoting 
reforms when the ruling military junta realized that this was 
the only way to end decades of sanctions and isolation.
    And, similarly, in Vietnam, which remains an authoritarian 
government, the U.S. has played a role in getting political 
prisoners and imprisoned religious leaders, bloggers, et 
cetera, out, as Vietnam has looked to deepen ties with 
Washington, as it faces increasing assertiveness from China.
    Generally, I would say over the last five or so years, 
human rights and democratic reforms in Southeast Asia appear to 
have slipped. There have already been several references to the 
Philippines where, since the election of President Duterte a 
year ago, police and vigilantes have killed more than 9,000 
suspected drug dealers and users, as the government has pursued 
a policy aimed at eradicating illegal drug use and sales. 
Duterte has very sharply rejected any criticism of these 
killings from foreign governments, including the United States.
    One of the most exciting developments, as also has been 
alluded to, is what happened in Myanmar, the elections in 2015, 
which were fairly credible, I think, in reflecting the wishes 
of the people. Yet, despite the improvement of human rights, we 
continue to face a couple of major problems. One is the abuse 
and restrictions on the Rohingya Muslim population, of whom 
about 150,000 or so are still in austere camps in Rakhine 
State. The second issue is human rights problems continue in 
ethnic minority areas wracked by conflict with the military.
    Then there is Thailand, where the military government 
installed after 2014 has sharply limited civil liberties. The 
government continues to restrict and censor online content. It 
monitors and blocks thousands of websites critical of the 
monarchy. And dozens of people have been charged and sentenced 
to long prison terms under Thailand's strict lese-majeste laws 
intended to protect senior members of the royal family.
    Since President Trump came into office, he has taken a 
couple steps, which indicate that there has been at least some 
change in attitudes toward human rights in the region. In a 
phone call to Duterte in late April, Trump congratulated him 
for the ``unbelievable job on the drug problem,'' and invited 
him to the White House. In another call to Prime Minister 
Prayuth of Thailand the next day, he congratulated him for the 
2014 coup doing a good job of stabilizing the situation after 
toppling a democratic government.
    In both cases, the President appears to have been trying to 
mend fences with countries that have been treaty allies of the 
United States had really faced a bit of a drift apart from the 
United States and had moved closer to China, as a result of 
tensions with the U.S.
    Secretary Tillerson, a couple months ago, also made it 
clear that, when it comes to foreign policy, national interests 
and economic interests are going to trump human rights. He 
added that promoting values are often an obstacle to advancing 
other interests.
    I am going to make a few comments about the question of 
what tools the U.S. has.
    One of the clearest tools that has been used recently, 
actually by my partner here to the right, Ambassador Derek 
Mitchell, who, as Ambassador, instituted a full Embassy, USAID, 
all parts of the Embassy coordination of efforts targeting rule 
of law, transparency, civil society, the media, et cetera, in 
preparation for the elections. The sad part is that, since the 
new administration took office in January, Myanmar has 
appeared, at least in Washington, to have fallen off the U.S. 
radar, opening the door to stepped up Chinese engagement.
    Because of the tensions between human rights and other 
aspects of foreign policy. One of my colleagues at CSIS, 
Shannon Green, has recommended that the U.S. Government create 
an interagency decision-making process that helps officials 
decide how to balance tensions that arise between short-term 
security interests and longer term human rights interests. She 
suggested maybe housing this coordinating function in the NSC.
    The other tool that you see making a pretty big difference 
in Asia is the Leahy amendment of 1997, which prohibits aid to 
military forces that violate human rights. This happened in the 
case of Indonesia after the violence in 1999 in East Timor. 
Under the Leahy amendment, the Kopassus special forces were 
sanctioned. As the government, as the military, wanted to get 
out from under sanctions, they instituted some reforms, at 
least in some units of Kopassus.
    The other development that is really interesting is the 
role of the Philippine military. Although President Duterte has 
suggested several times that they ought to get involved in the 
drug war, they have really stayed out. Officers, when you talk 
to them, say they recognize they need the United States 
particularly now in Mindanao for the fight against Islamic 
militants. They need intel-sharing and coordination with the 
U.S. They need U.S. military hardware. The Leahy amendment has 
had an indirect effect, at least in the Philippines, the Leahy 
amendment.
    Another useful tool is the Trafficking in Persons 
legislation. We saw this in Thailand. The government, despite 
all the criticisms of its human rights violations, took 
particular umbrage at its Tier 3 status in the Trafficking in 
Persons Report and made a yeoman's effort, I think, at stepping 
up investigations, prosecutions, and convictions of 
traffickers, to the point that they were elevated a few months 
ago to Tier 2.
    Trade agreements can also play a role. With the Vietnamese 
negotiating the Trans-Pacific Partnership, they agreed to some 
pretty sizable labor concessions by agreeing to let laborers 
have freedom of association in unions independent of the 
governments, to get more access to the United States and the 
U.S. market.
    I think that the Vietnam example demonstrates that there 
can be countries that have human rights problems, but yet they 
are improving economic and security cooperation with the United 
States. Therefore, it is possible to walk and chew gum, 
criticize human rights and yet improve in other areas.
    Finally, with the administration sort of missing in action 
on the human rights front, I think it does give Congress a much 
bigger role, and we look to all of you to help carry the flame 
for democracy and human rights overseas in the next few years.
    Thank you very much.
    [Mr. Hiebert's prepared statement follows:]


                  Prepared Statement of Murray Hiebert

    Congratulations to the committee for holding this hearing on the 
important issue of promoting democracy, human rights, and the rule of 
law in the Asia-Pacific.
1. Why is it important to promote American values of democracy, human 
        rights, and the rule of law as part of comprehensive U.S. 
        policy toward the Asia-Pacific?
    For starters, the promotion of U.S. values of democracy, human 
rights, and the rule of law has long been part of the U.S. national 
identity. Promoting these values sends a clear signal to authoritarian 
governments that the United States is watching how they treat their 
citizens, while defenders of human rights and democracy are assured 
that they will not be abandoned by Washington.
    U.S. support for these principles can help serve as a brake on the 
worst inclinations of authoritarian leaders. Because these values are 
at the core of U.S. foreign policy, many regimes are more cautious in 
committing abuses and flouting power.
    Second, democratic and human rights respecting governments often 
make the most reliable and stable partners for the United States 
overseas, while authoritarian governments often mistreat their citizens 
in their effort to cling to power. Democracies do not go to war with 
each other, create refugees, have more open and successful economies, 
and respect international law, Ted Piccone argued in a recent Brookings 
blog.
    Third, the United States has been a major beneficiary of the 
liberal world order and the institutions built on the principles of 
democracy, human rights, and the rule of law since World War II. The 
U.S. promotion of human rights and democracy has often made a 
difference when government officials, members of Congress, and human 
rights organizations have launched concerted efforts to promote 
increased political space, says CSIS colleague Shannon Green.
    U.S. policy toward Myanmar/Burma played a critical role in 
promoting reforms when the ruling military junta realized that this was 
the only way it could end decades of sanctions and isolation. U.S. 
promotion of human rights has played a role in getting political 
prisoners and imprisoned religious leaders, political activists, and 
bloggers released in Vietnam as the government has sought to deepen 
ties with Washington as a hedge against increased assertiveness from 
China.
2. What are the main challenges of adhering to these values and where 
        should U.S. efforts and resources be better focused to achieve 
        most effective outcome?
    Support for human rights and the democratic reform in Southeast 
Asia appears to have slipped in recent years even as the region's 
growing middle class, thanks to increased education, money, and 
technological innovation, is hankering for more freedom, more 
transparency, and a greater role in decision-making.
    Some examples:


   In the Philippines, since the election of Rodrigo Duterte a year 
        ago, police and vigilantes have killed more than 9,000 
        suspected drug dealers and users as his government has pursued 
        a policy aimed at eradicating illegal drug activity. This has 
        added to the problem of extra-judicial killings, which have 
        been a concern in the country for years. Duterte has sharply 
        rejected any criticism of these killings from foreign 
        governments, including the United States, and has said the 
        authorities would investigate any actions taken outside the 
        law. Other human rights and rule of law problems in the 
        Philippines include corruption, abuse of power, abuse of 
        prisoners by security forces, harassment of political 
        activists, and the killing and harassment of journalists.

   One of the most exciting developments in Southeast Asia in recent 
        years was the 2015 elections in Myanmar that were widely viewed 
        as a credible reflection of the wishes of the people. Aung San 
        Suu Kyi's National League for Democracy took office in March 
        2016 and soon began releasing hundreds of political prisoners 
        remaining from the previous military government. Although there 
        has been a general improvement in freedom of speech in the 
        country, Myanmar still faces three major human rights problems. 
        First, the abuses against and restrictions on the Rohingya 
        Muslim population of which over 120,000 remain in austere camps 
        in Rakhine State. Second, human rights problems continue in 
        ethnic minority areas still wracked by conflict with the 
        military. Third, many political prisoners continue to face 
        restrictions following their release and, at the end of 2016, 
        some 66 political detainees were facing trial on various 
        charges. The authorities also continue arresting and detaining 
        some citizens for expressing political views critical of the 
        government.

   Numerous decrees in Thailand by the military government installed 
        after a 2014 coup have limited civil liberties, including 
        restrictions on freedom of speech, assembly, and the press. The 
        military gave itself sweeping powers to limit ``acts deemed 
        harmful to national peace and stability.'' The government 
        continues to restrict and censor online content, and it 
        monitors and blocks thousands of websites critical of the 
        monarchy. Dozens of people have been charged and sentenced to 
        long prison terms under Thailand's strict lese-majeste laws 
        designed to protect senior members of Thai royal family from 
        insult or threat. Separately, abuses by government security 
        forces continue against the Malay-Muslim insurgency in the 
        south. In the most recent State Department Trafficking in 
        Persons report, Thailand was upgraded from tier 3, the lowest 
        ranking on the list, to tier 2, prompted by what the report 
        says were ``significant efforts'' made by the Thai government 
        to eliminate human trafficking. The report cited increased 
        investigations, prosecutions, and convictions as reasons for 
        Thailand's improved status.

   In Vietnam, the most serious human rights problems are severe 
        restrictions on citizens' political rights, including arbitrary 
        arrests of political activists and bloggers. The U.S. 
        government estimated at the end of 2016 that Vietnam was 
        holding 94 political prisoners. In 2016, the government 
        sentenced an estimated 12 activists for exercising their 
        internationally recognized human rights. The government 
        restricts speech criticizing the ruling Communist Party, limits 
        some internet access, and blocks some websites such as Radio 
        Free Asia and Voice of America. Facebook is generally not 
        blocked, except when activists are using it organize protests.

   Cambodia under Prime Minister Hun Sen has increased restrictions on 
        the freedom of speech and press freedom in recent years. 
        Violence and intimidation are used to silence civil society and 
        political opponents of the ruling Cambodia People's Party. From 
        time to time, political motivated killings are used to silence 
        critics as happened in July 2016 when commentator and activist 
        Kem Lay was gunned down at a convenience store.
3.What tools are available to U.S. to incentivize governments to adhere 
        to these values and principles? Has the Trump administration 
        used these tools effectively?
    In a phone call in April, Trump congratulated Duterte of the 
Philippines for his ``unbelievable job on the drug problem'' and 
invited him to visit the White House. In another call around the same 
time, Trump lauded Thai Prime Minister Prayuth Chan-ocha for restoring 
order following the 2014 coup that toppled a democratically elected 
government after months of disruptive protests. Trump's goal in both 
cases was to mend fences with two U.S. allies in Southeast Asia that 
had been alienated from Washington following human rights and democracy 
criticisms and had moved closer to China in the process. Deteriorating 
U.S. relations with Bangkok and Manila were undermining the U.S. 
position in Southeast Asia and opening the door to an increased Chinese 
role among traditional American friends.
    The Trump administration has made clear that it intends to downplay 
the promotion of human rights, democracy, and rule of law as tools of 
U.S. foreign policy. Secretary of State Rex Tillerson has said that 
when it comes to foreign policy, national interest and economic 
interests trump human rights, adding that promoting values are often 
``an obstacle'' to advancing other interests.. The Trump 
administration's views on human rights have disrupted a bipartisan 
consensus favoring the promotion of rights and democracy that has dated 
back at least to the end of the Cold War.
    The U.S. government has a vast array of tools to promote human 
rights and democracy:


   One U.S. tool was on display in Myanmar ahead of the 2015 
        elections. To be sure, the leaders and people in Myanmar 
        deserve the credit for pulling off reasonably free and 
        inclusive elections. But aid by foreign partners, including the 
        United States, was also critical. The U.S. Embassy and USAID 
        played key roles through projects targeting rule of law, 
        transparency, civil society, the media, and preparations for 
        elections. Even before the military launched reforms, the 
        United States helped keep the flame alive by training Myanmar 
        civil society organizations outside the country. (Since the new 
        U.S. administration took office in January, Myanmar has largely 
        fallen off the U.S. radar, opening the door to stepped up 
        Chinese engagement, although there are efforts underway to 
        bring Aung San Suu Kyi to Washington in September).

   My CSIS colleague Shannon Green has recommended that the U.S. 
        government create an interagency decision-making process, 
        perhaps housed in the National Security Council, to overcome 
        tensions that arise between U.S. short-term security interests 
        and longer-term human rights goals. This process could help 
        ensure that security cooperation resources and training bolster 
        democratic institutions, civilian protection, and the 
        professionalism of security forces.

   The so-called Leahy amendment of 1997 that prohibits U.S. aid to 
        military forces that violate human rights is another useful 
        vehicle. Under this legislation, the Indonesian army special 
        forces (Kopassus) were barred from receiving U.S. training and 
        equipment due to their abuses in East Timor in 1999. Over the 
        years, these forces were somewhat reformed leading to a lifting 
        of the ban on one counter-terrorism unit in 2011. 
        Interestingly, the Philippine Armed Forces have stayed out of 
        Duterte's war on drugs despite his frequent calls for the 
        military to aid the police. It's not clear if the Leahy 
        amendment has played a role in the generals' thinking, but 
        clearly many Philippine officers, many of whom have trained in 
        the United States, recognized that they need U.S. intelligence 
        sharing, equipment, and advice in dealing with threats like the 
        Islamic militant uprising that erupted in May.

   Another tool is the annual Trafficking in Persons report. 
        Frustration with being relegated to the last tier prompted the 
        Thai military government to step up its investigations, 
        prosecutions, and convictions of traffickers to the point where 
        it was elevated to tier 2 in this year's report.

   Trade negotiations can also provide an opportunity to promote human 
        rights reforms. Under the Trans-Pacific Partnership (TPP), 
        which was jettisoned by the Trump administration, U.S. 
        negotiators were able to press Vietnam's Communist Party, which 
        has long viewed itself as the patron of laborers, to grant 
        workers freedom of association through independent labor unions 
        in exchange for increased access to the attractive U.S. market.

   One of the oldest human rights debates in Washington swirls around 
        private diplomacy versus public criticism for violations of 
        human rights. In the case of both Thailand and the Philippines, 
        U.S. public criticism raised hackles among leaders creating 
        anger and rejection of the message and the messenger, and 
        prompted moves to deepen ties with China. More recently, U.S. 
        officials have switched to private diplomacy in the 
        Philippines. Although so far we have not seen much change in 
        the levels of violence in the drug war, Duterte has drastically 
        toned down his anti-American rhetoric and is looking for U.S. 
        support in the battle against Islamic militants in the southern 
        province of Mindanao. At the same time, Washington even when it 
        uses private diplomacy needs to ensure that Filipinos are aware 
        that the U.S. government is not embracing Duterte's policies 
        uncritically.

   In Vietnam, U.S. aid to help develop a legal system and train 
        judges as Vietnam joined the World Trade Organization a decade 
        ago laid the cornerstones to open the door for Washington to 
        provide advisers to the National Assembly on revising the 
        country's criminal code. U.S. relations with Vietnam are an 
        example that it is possible for Washington to deepen trade 
        relations and security cooperation while at the same time 
        keeping a focus on human rights problems.

   Because the administration seems to have largely abandoned its 
        important role in human rights promotion, it might mean that 
        the United States will have to look to Congress to promote 
        democracy and human rights overseas in the next few years.


    Senator Gardner. Thank you, Mr. Hiebert.
    Ambassador Mitchell?

 STATEMENT OF HON. DEREK MITCHELL, SENIOR ADVISOR TO THE ASIA 
        CENTER, U.S. INSTITUTE OF PEACE, WASHINGTON, DC

    Ambassador Mitchell. Thank you very much, Mr. Chairman, 
Ranking Member Markey.
    First of all, thank you for inviting me to speak at this 
hearing. I am very honored to be joined by my good friends, 
Murray Hiebert and Bob King, to my left and right.
    As a citizen, let me also extend my gratitude for the 
series of hearings the subcommittee has organized in recent 
months to examine U.S. interests in East Asia, beginning with 
examinations of security, economic affairs, and now human 
rights governance and rule of law. Too often, these interests 
are looked at independently, as distinct from one another, when 
they are, in fact, closely linked.
    It has been my observation and experience that commitment 
to values of human rights and democracy is not merely an 
idealistic goal or an ideology, but quite proven in practice. 
When countries promote individual human dignity and protect 
civil liberties, they tend to be more highly functioning and 
stable societies. They create conditions for peaceful 
interaction within and among states. They provide platforms for 
individual achievement. They also become more appealing 
destinations for business investment, and are able to prevent 
their territory from being a source of international 
instability or transnational challenge, like those that Murray 
just listed.
    The perception persists, nonetheless, that somehow 
promoting human rights and democratic governance is, at best, a 
luxury and, at worst, an obstruction to protecting U.S. 
economic and national security interests around the world. 
Asian and some non-Asian commentators over the years have 
advanced a theory of Asian exceptionalism that ``Western'' 
values of democracy and human rights are somehow alien to Asian 
culture, lack foundation in Asian history, and, thus, are 
unnatural to Asian society.
    But over the past 30 years, the region has enjoyed a rush 
of democratic change and advancement of human rights 
accompanied by relative stability and dynamic economic growth. 
When presented the opportunity, the people of East Asia, like 
others around the world, have demanded that their voices be 
heard and respected, and that they have the right to hold their 
governments accountable. The United States has benefited 
materially as a result in economic, political, and national 
security terms.
    Progress has been hardly linear, without setbacks, or 
shared among all nations in the region. But those who claim 
Asia as a whole is uniquely immune to the yearning for 
individual rights, personal freedoms, and accountable 
governance have had to reassess.
    I saw that personally in Burma. I witnessed firsthand the 
deep respect the Burmese people had for the United States due 
to our strong and sustained commitment to stand with them 
instead of exploiting the country for economic or geopolitical 
gain. I should note that that commitment was bipartisan, 
reflected in congressional legislation and the policies of 
successive presidential administrations.
    U.S. policies then and since then were geared to supporting 
Burma's success. The promotion of human rights and democratic 
processes is a central and fully integrated component. We 
understood, without that component, peace, stability, security, 
and overall development in Burma could not be achieved to the 
detriment of our interests.
    Of course, the transition in Burma is not complete, as you 
say. Enormous challenges remain in northern Rakhine State, 
Kachin, northern Shan State, and all around the country. Future 
success is not certain.
    But even as we must recognize the most important factor in 
Burma's success no doubt will come from within, Burmese people 
told me often that principled support of external partners, 
most importantly the United States, would remain essential for 
their morale and continued progress.
    In terms of recommendations for U.S. policy, the first must 
critically be, as Murray suggested, for the current U.S. 
administration to recognize the importance of human rights and 
democracy promotion to U.S. interests and return it to U.S. 
foreign policy. The U.S. Congress should do what is necessary 
to reassert its traditional prerogative as conscience of the 
country in this regard.
    Secondly, from my experience, an effective values-based 
policy requires thoughtful implementation by U.S. missions 
overseas. U.S. Embassies should tightly knit all their 
components--State Department, USAID, DOD, et cetera--into a 
coherent strategic whole to ensure consistency. That is the 
cliche known as the one-mission approach.
    Third, given that human rights and democratic gains take 
hold gradually, and that political transitions transcend single 
moments in time such as elections, the U.S. Government, 
including Congress, must remain patient, manage expectations, 
and provide resources on a consistent basis to support the 
institutions and processes that promote human rights, 
democracy, and rule of law around the world. Such support 
should not wane due to premature assumptions of success, 
disappointing setbacks, or periodic shifts in political whims 
in the United States.
    To be specific and blunt, Congress should fully fund both 
the State Department and USAID, and leading institutions that 
conduct related work in Asia, such as the National Endowment 
for Democracy and its sister organizations, NDI and IRI, Radio 
Free Asia, Voice of America, Peace Corps, The Asia Foundation, 
the East-West Center, and the U.S. Institute of Peace.
    Let me just say, in conclusion, that human rights, 
democracy, and rule of law are fundamental components of who we 
are as a Nation, essential to America's founding idea and 
meaning as a country. The United States may not always be 
perfectly consistent in application. All foreign policy, after 
all, is a matter of balancing competing priorities and making 
choices based on context. But without a principled element to 
our foreign policy, we unilaterally throw away our unique 
advantage among peoples of the world as a generous and 
attractive great power, one that is committed to the overall 
well-being of others as equally worthy to the inalienable 
rights to life, liberty, and the pursuit of happiness.
    More fundamentally, the defining challenge of the 21st 
century will be preserving and adapting, as needed, the norms, 
rules, and values of the post-World War II international system 
in the face of rising powers who may be uncomfortable with that 
status quo. If the United States does not lead in shaping those 
norms, rules, and values, including on human rights, democracy, 
and rule of law, no one else can or will quite take our place, 
and others will just as assuredly fill that void with their own 
version of values promotion to our lasting detriment.
    Thank you, Mr. Chairman.
    [Ambassador Mitchell's prepared statement follows:]


          Prepared Statement of Ambassador Derek Mitchell \1\
---------------------------------------------------------------------------

    \1\ The views expressed in this testimony are those of the author 
and not the U.S. Institute of Peace.
---------------------------------------------------------------------------
    Chairman Gardner, Ranking Member Markey, and members of the 
subcommittee, thank you for inviting me to testify this afternoon. I am 
grateful for the opportunity to provide my own perspective on this 
important topic.
    As a citizen, I am also grateful for the series of hearings this 
Subcommittee has organized in recent months to examine U.S. interests 
in East Asia, beginning with examinations of security, economic 
affairs, and now human rights, governance and rule of law. Too often, 
these interests are looked at independently, as distinct from one 
another, when they are in fact closely linked.
    I am reminded that when I moved from the National Democratic 
Institute to the Pentagon's Asia division 20 years ago this month, 
friends in both communities would commonly question how I could 
transition from democratic development to international security 
affairs. I never understood the inconsistency. While the communities 
may be rather segregated, the connection between them to me was clear: 
that safeguarding international security creates necessary space for 
political and economic reform, and the stability created by economic 
growth and democratic governance contributes to international peace and 
security in return.
    Indeed, it has been my observation and experience that commitment 
to values of human rights and democracy is not merely an idealistic 
goal or an ideology but quite proven in practice. When countries 
promote individual human dignity and protect civil liberties, they tend 
to be more highly functioning and stable societies. They create 
conditions for peaceful interaction within and among states. They 
provide platforms for individual achievement. They also become more 
appealing destinations for business investment, and are able to prevent 
their territory from becoming a source of international instability or 
transnational challenge. Stable democratic nations rarely become the 
source of refugee flows, or the epicenter of pandemic disease, human 
trafficking, and the like.
    Nonetheless, the perception persists that somehow promoting human 
rights and democratic governance is at best a luxury and at worst an 
obstruction to protecting U.S. economic and national security interests 
around the world. American ``moralism'' is hypocritical, arrogant or 
just unwelcome, according to this view. This view contends the United 
States would do better to tone down if not eliminate promotion of human 
rights and democracy as a central component of its international 
relations, the better to promote other more salient national interests.
East Asia
    East Asia in fact is particularly open to such a perspective. The 
region has been traditionally dominated by ``realist'' attitudes that 
prioritize the importance of power balances and economic growth over 
liberal political values. To a degree that makes sense given the 
region's diverse mix of large and small powers, where historical 
legacies weigh heavily on relations among states, and where national 
power and political legitimacy of leaders has rested increasingly on 
the ability to deliver public economic goods.
    Given this context, America has maintained its power and 
credibility in East Asia largely due to its contributions to regional 
security and economic affairs. Regional governments and elites have 
often denigrated U.S. efforts to prioritize democracy and human rights 
in the region. One factor is Asia's colonial past. Sensitivity over 
external involvement in their internal affairs runs deep in many 
countries, reflected in Southeast Asia's foundational ``Five Principles 
of Peaceful Coexistence.''
    Asian (and some non-Asian) commentators over the years have also 
advanced a theory of Asian exceptionalism: that ``Western'' values of 
democracy and human rights are somehow alien to Asian culture, lack 
foundation in Asian history, and thus are unnatural to Asian society. 
Those who asserted a distinction between inherent ``Asian'' and 
``Western'' values contended that while Western traditions put a 
premium on individual rights, personal liberties, and democratic 
governance, Asian culture and history led to prioritization of 
collective responsibilities, strong central governance, social harmony, 
and economic over political rights. According to this view, attention 
to individual rights and popular democracy in an Asian context is an 
invitation to instability and division if not chaos.
    East Asia's history since the late 1980s has challenged this notion 
of Asian exceptionalism, however. Over the past 30 years, the region 
has enjoyed a rush of democratic change and advancement of human rights 
accompanied by relative stability and dynamic economic growth. When 
presented the opportunity, the people of East Asia like others around 
the world have demanded that their voices be heard and respected, and 
that they have the right to hold their governments accountable. 
Progress has been hardly linear, without setbacks, or shared among all 
nations in the region. But those who claim Asia as a whole is uniquely 
immune to the yearning for individual rights, personal freedoms, and 
accountable (democratic) governance have had to reassess.
Soft Power
    It is of course not uncommon for autocrats anywhere to assert that 
democracy and civil liberty must be restricted in their country, that 
suppression of political and social rights is necessary for national 
security, stability, and economic development. But citizens have a 
different idea, and it is to them that the United States looks when 
promoting principles of human rights and democracy. America's 
reputation as a source of support for freedom fighters and democratic 
activists around the world is expected and widely respected, even among 
many of those who may decry American naivete and question U.S. 
intentions and consistency.
    That reputation and commitment to liberal values and principles has 
been a critical source of American power and influence around the 
world. ``Soft power'' is perhaps an unfortunate term given those who 
instinctively associate something called ``soft'' as akin to ``weak.'' 
But power is power whatever form it takes. We forego that advantage at 
our peril. Touting the nobility of U.S. budgets that reflect interest 
in ``hard power'' alone, therefore, is not strategic thinking but 
narrow, shortsighted and disconnected from the totality of ways to 
protect one's interest and exercise influence in today's world.
    The United States should also consider engaging business in the 
effort. While some U.S. businesses chafe at the U.S. Foreign Corrupt 
Practices Act and other regulations on its global activity, their 
existence and U.S. business's overall leadership in exemplifying 
corporate social responsibility around the world are further examples 
of U.S. soft power, and can offer U.S. business advantages when 
branding themselves to customers and communities overseas in turn.
    In East Asia, trade may also serve as a lever for promoting our 
values given its role in underwriting the region's growth. The Trans-
Pacific Partnership (TPP) agreement was a landmark achievement to 
promote labor rights and good governance in countries where such rights 
and practices have historically been weak. While recognizing the need 
to take account of effects of trade agreements here at home, foregoing 
the TPP frankly damaged both our credibility and our values in Asia.
    The U.S. military can also help demonstrate to regional militaries 
that (hard) power and principle are not mutually exclusive, and that 
the values of transparency, accountability, and civilian control have 
strategic benefit. Providing opportunities for U.S. servicemen and 
women to engage with counterparts (and others) in East Asia to this end 
can create lasting partnerships, and help promote responsible, 
professional militaries that will underwrite regional stability over 
the long term.
    In the end, human rights and democracy must result in practical 
outcomes for peoples' lives: ``democracy must deliver,'' as former 
Secretary of State Madeleine Albright likes to say. Demonstrating the 
benefits of connecting countries to the United States, and to its norms 
and values, has long-lasting strategic value if only to prevent nations 
from aligning with the values and norms of others with less interest in 
contributing to the general welfare.
Expectations Management
    Time and patience are required in the realm of human rights and 
democracy promotion. In very few instances is measurable progress 
achieved quickly or completely. Steps back are inevitable, with 
realization of our fondest hopes a work in progress in virtually all 
cases (including here at home). Imperfect outcomes are the natural 
outcome of imperfect systems and the imperfection of human beings.
    Likewise, many countries may seek democratic change in the belief 
that doing so will inevitably and quickly lead to economic development 
and national power like the United States. Expectations there too must 
be managed. Transitions are difficult and protracted, with setbacks 
normal. Disappointment and disillusion are the common result when 
outcomes do not match expectations, leading often to reaction and 
regression.
    The United States thus must not only be patient with the course of 
change, but also should counsel other countries on the difficulties 
that come with reform. We ourselves must not succumb to the notion, for 
instance, that successful elections mark the end of the process, but 
remember that developing new institutions, processes and mindsets are 
the most essential components to fortify and sustain a free society 
over time.
State of Play in East Asia
    Asia's tremendous diversity prevents a one-size-fits-all approach. 
Spanning the world's largest country (China), largest Muslim-majority 
nation (Indonesia), last remaining totalitarian state (North Korea), 
and medium-sized nations that run the full gamut of democratic 
progress, human rights protection and authoritarian rule, the region 
has resisted categorization. Nonetheless, as noted above, democratic 
transitions in East Asia over the past generation have affirmed that 
people throughout the region, regardless of culture, ethnicity, 
religion, etc., seek and desire basic human dignity, rights, and 
freedom.
    It is no coincidence that the U.S.'s two allies in Northeast Asia--
Japan and Korea--are both democratic success stories. They demonstrate 
the positive impact of U.S. engagement historically in the advancement 
of democratic principles and human rights in East Asia. They remain 
essential partners of the United States and core contributors to global 
development and stability.
    The U.S.'s two Southeast Asian treaty allies pose more of a 
conundrum. Thailand's regression following the 2014 military coup and 
the Philippine President Rodrigo Duterte's violent drug war (and 
apparent personal aversion to the United States) have led to a chill in 
both bilateral relationships in recent years. In each case, the United 
States has profound regional security interests in maintaining stable 
bilateral relations. We must not sacrifice all that we have built with 
such historic friends. Nonetheless, as a matter of principle and 
interest, it is appropriate that the United States not conduct business 
as usual even with such long-time allies to demonstrate our support for 
upholding the most basic tenets of human rights, due process and 
accountable governance and as a warning to others considering a similar 
path. Thailand's long-delayed plan to hold national elections in 2018, 
for instance, must occur to help put that relationship back on sound 
footing.
    While not involving an ally, the United States should also not 
ignore national elections in Cambodia in 2018. Cambodia's political 
opposition, despite severe harassment, achieved better-than-expected 
results in recent local elections, suggesting growing political 
strength. Meanwhile, Prime Minister Hun Sen has suggested he intends to 
hold onto power past 2018 through any means necessary. The situation 
requires close watching--and international engagement--to ensure 
democratic processes are safeguarded, human rights protected, and the 
popular will respected so Cambodia does not fall further back.
    In Southeast Asia more broadly, despite traditional sensitivity 
toward issues of national sovereignty, nations are beginning to pay 
more attention to the effect of internal affairs of neighbors on their 
interests. ASEAN has established a Human Rights Council, while the 
ASEAN Charter affirms principles of democracy, human rights, good 
governance, and rule of law as essential to building an ``ASEAN 
Community,'' the region's vision for promoting future economic 
development.
    Burma's abuse of the Muslim Rohingya population on its soil, for 
instance, has led to furious responses from (Muslim) populations in 
Indonesia and Malaysia. (Abuses against the Rohingya elsewhere in the 
region, including within Muslim-majority nations, get rather less 
attention from local populations.) Burma's neighbors also resent the 
refugee flows and human trafficking networks that contribute to 
regional instability.
    Outside of Burma, other ethnically and religiously diverse nations 
of Southeast Asia increasingly struggle to balance majoritarian 
nationalist attitudes and minority rights. Hate speech disseminated 
through social media afflicts the region as elsewhere in the world, and 
in many cases has inflamed sectarian tension. In majority-Muslim 
Indonesia, the ethnic Chinese Christian former governor of Jakarta not 
only lost his re-election bid but also faces extended jail time over a 
political comment considered blasphemous towards Islam. The majority-
Catholic Republic of the Philippines has struggled for decades (as did 
Americans before them) with unrest in its Muslim-dominated southern 
islands. The implications of rising chauvinism in Southeast Asia is 
affecting relationships among neighbors, where one nation's majority is 
another nation's oppressed minority, threatening regional cohesion and 
integration.
    The hardest East Asian cases of course concern China and North 
Korea. While China's human rights record is no longer akin to North 
Korea's, its antipathy to rule of law, civil and political rights, and 
accountable democratic governance hardly stands up to minimal levels of 
scrutiny. Nonetheless, given overriding interests of American national 
security, attention to human rights in both countries has receded in 
both cases. That is unfortunate and need not continue, even if it 
cannot override the urgent priorities of national security.
         case studies: the republic of korea, taiwan, and burma
    Three specific cases exemplify the value of U.S. promotion of human 
rights and democracy in East Asia.


    Korea: Imagine if the Republic of Korea were not a democracy. Seoul 
recently underwent a political crisis punctuated by mass street 
demonstrations and a legal challenge that resulted in the removal of a 
sitting president, a new election, and a peaceful transition of power 
to a new president. The process was a model of democratic efficiency 
and rule of law.
    It was not always thus. Prior to its democratic transition 30 years 
ago, the ROK had a history of assassinations, civil unrest, and violent 
repression. We might consider how different our security situation 
would be today, in the face of an escalating threat from a nuclearizing 
North Korea, were the ROK experiencing political unrest in a non-
democratic rather than democratic context. What if the Korean people's 
support for the U.S.-ROK alliance were not at all-time highs but akin 
to years ago when the United States was viewed as a friend of the 
nation's autocrats? What if ROK society were not united and stable, and 
confident in U.S. good faith interest in their rights and success? How 
do we calculate the value of today's democratic ROK to our national 
security?
    In Korea, we have a case of ``the dog that did not bark,'' where 
one takes for granted the absence of a crisis due to the stability of a 
democratic society. We should in fact never take such for granted.


    Taiwan: We should also consider the example of Taiwan. Due to 
geopolitical factors, Taiwan is often considered a potential negative 
factor in regional security rather than what it is: an East Asian 
success story. That China demands the world ignore the island due to 
its own nationalist attitudes should not obscure the fact that Taiwan's 
political, economic, social, and cultural achievements are substantial, 
and deserve to be recognized and cherished, not isolated and ignored, 
for their contributions to the region and beyond. What Taiwan has 
constructed for itself--a peaceful, stable, developed democratic 
society--also challenges the notion that ``Chinese culture'' is 
inconsistent with democracy.
    The United States thus has an interest to preserve and protect 
Taiwan's accomplishments, and promote the island's participation in 
world affairs given its potential contributions. Taiwan's stable 
development is a reflection of what we want to see throughout Asia. To 
give up on them, or to take what they have achieved for granted, 
undermines in turn America's interest and credibility in seeking a 
stable, secure, and prosperous East Asia.


    Burma: U.S. policy toward Burma during my tenure as special envoy 
and then U.S. ambassador to Burma between 2012 and 2016 essentially 
continued long-term U.S. policy of promoting human rights and democracy 
in the country, if increasingly through engagement rather than 
isolation. I witnessed first-hand the deep respect the Burmese people 
had for the United States due to our strong and sustained commitment 
over many years, reflected in Congressional legislation and the 
policies of successive presidential administrations of both parties, to 
stand with the nation's democratic and human rights activists instead 
of exploiting the country for economic or geopolitical gain. The 
transition in Burma is not complete, future success is not certain, and 
debates continue in some quarters over the appropriate U.S. policy to 
maintain leverage for change going forward. But there is no question in 
my mind that the application of a combination of U.S. pressure and 
engagement in support of Burma's reform in recent years had tangible 
impact on the political evolution there, and contributed to the current 
moment of hope and opportunity, the first the Burmese people have had 
in decades.
    On the walls of the U.S. embassy in Yangon, we listed five goals of 
our work to remind everyone of how we might measure strategic success 
for the country and of our work: an end to the civil war through a just 
peace; human rights and democracy; economic development; ``resilient 
communities'' (defined essentially as health, education and protection 
against natural and man-made disasters); and transnational security 
(nonproliferation, human and drug trafficking, pandemic disease, etc.).
    The logic of this list was simple: a sustainable end to the world's 
longest-running civil war, and maintenance of unity in a country of 
such immense diversity and extended trauma, could not occur without 
respect for the rights and dignity of all, and in turn human rights and 
democracy could not take hold absent internal peace and reconciliation. 
Economic development is essential to demonstrate that reform can 
deliver tangible dividends to the people. Local resilience is critical 
for internal stability during what will necessarily be a long and 
difficult transition. And Burma's conformity with international norms 
is essential for broader U.S. interests in regional security.
    In every case, U.S. policies were geared to supporting Burma's 
success, with promotion of human rights and democratic processes a 
central and fully integrated component. We understood without that 
element, peace, stability, security and overall development of the 
country, and the region, could not be achieved, to the detriment of 
U.S. interests.
    We also understood the stakes, that the region was watching, that 
during a period of overall political regression in Southeast Asia, 
success of Burma's reform efforts could serve as an important model for 
others. While we well recognized that the most important factor in 
success would come from the remarkable courage, resilience and 
sacrifice of Burma's people, we also knew--and heard often -- that the 
continued support of friends on the outside, most importantly the 
United States, was welcomed by the Burmese people and would remain 
essential for their continued progress.
Clarifying and Communicating Intent
    Since World War II, U.S. foreign policy has been based on a belief 
in the value of a common series of norms, rules, standards, and values 
for international conduct that will be applied equally and serve the 
common good. The United States has believed its success and security 
are linked to the success and security of others, on the assumption 
that we are all acting consistent with these rules and norms. That 
strategy served the United States well during the Cold War and has 
continued to animate our approach to international affairs into the 
21st century.
    Those who favor promoting human rights and accountable democratic 
governance around the world will have to continually make the case for 
why those norms are an essential component of international peace and 
security. They will also need to reassure cynics and skeptics both at 
home and abroad who may misunderstand the such a policy.
    That in supporting values of human rights and democracy, the United 
States does not seek perfection, does not take an attitude of moral 
superiority, recognizes the complexities of individual national 
contexts, and maintains a healthy dose of humility about itself and the 
work yet to be done here at home.
    That the United States does not seek to remake the world in its own 
image. That there are many forms of democracy, for instance, that do 
not precisely conform to that of the United States (although certain 
basic principles are essential, such as civilian control of the 
military, free media and civil society, an independent judiciary, 
etc.).
    That U.S. interests when promoting democracy are focused on a fair 
and free process rather than seeking any specific political outcome.
    That the United States does not seek to go it alone. That we 
continue to pursue partnerships with allies and other like-minded 
nations in Asia and elsewhere who also see the benefits of human rights 
and accountable governance to international peace and security.
    That contrary to the assertions of autocrats--who clearly have a 
conflict of interest in such matters--U.S. intentions are not to 
undermine a nation's strength or unity but to enhance the country's 
long-term stable development, and enhance regional stability by 
extension.
    And that we recognize the fundamental human truth that there is 
more to life than politics or economics. That human beings 
fundamentally crave the dignity of controlling their own futures and 
expressing themselves in their own voice in whatever form they find 
most comfortable. To contend otherwise is to deny human nature, and 
create social, civic and political tension internally that will 
inevitably cross borders and affect the interests of other states.
                   recommendations/final observations
Several recommendations follow:

    Consistent Commitment and Messaging within the U.S. Government: The 
most urgent requirement is for the current U.S. administration to 
recognize the importance of human rights and accountable governance to 
U.S. interests around the world, and to return it to U.S. foreign 
policy. Concurrently, the U.S. Congress should assert its traditional 
prerogative as conscience of the country. Ideally, State Department 
diplomats, Defense, Treasury and Commerce Department bureaucrats, and 
members of Congress should all get on the same page to ensure 
discipline, consistency and integrity in word and action over time, 
even if perfect consistency is impossible. Policies should be 
coordinated to the greatest extent possible to prevent dilution of the 
impact and credibility of a values-based approach.

    Attention to National Context: Demonstrating due respect for local 
contexts is essential for U.S. credibility and integrity of effort. 
That means ensuring one understands history, culture, the unique 
touchstones, interests, sensitivities, and qualities of both a nation's 
government and people to ensure one is speaking in a language 
consistent with the nation's own conception of national interest. This 
is not a matter of compromising on principle but of constructing an 
attitude of respectful partnership to avoid damage to international 
relationships. Country specialists and qualified diplomats who can 
navigate this terrain are critical.

    U.S. Embassy Leadership: More specifically, a successful values-
based policy requires creative and proactive leadership of U.S. 
embassies overseas, starting with the ambassador. As the ambassador 
goes, so goes the embassy. Ambassadors should cultivate and enforce a 
``one mission'' attitude that integrates and shapes the work of not 
only State Department components but also USAID, the Defense Attache 
Office and others into a coherent strategic whole to advance human 
rights, democracy and other goals on the ground.

    Demonstrating Openness and Humility: As noted, it is essential that 
the United States assume a tone of humility about its own challenges 
when promoting human rights and democracy overseas. When I was 
ambassador, I discovered I was most successful when I was as open and 
candid as I could be about the difficulties of democracy in general, 
and the challenges the United States itself has faced on racial, 
ethnic, religious, and other lines throughout our history--and that we 
continue to struggle with today. By providing lessons, good and bad, 
from our experience, and being open ourselves to constructive criticism 
and lessons from outside, we can be a positive example for others, as 
well as disarm those who have self-interested reasons to dismiss U.S. 
human rights and democracy promotion as cynical or hypocritical.

    Patience, Constancy, Resources: Given that human rights and 
democratic gains take hold gradually and that political transitions 
transcend single moments in time such as elections, the U.S. 
government, including Congress, must maintain attention and provide 
resources on a consistent basis over time to support the institutions 
and processes that promote human rights and accountable governance 
around the world. Such support should not wane due to premature 
assumptions of success, disappointing setbacks, or periodic shifts in 
political winds in the United States. Congress should sufficiently fund 
both the State Department and USAID to this end, as well as other 
leading institutions that conduct related work in Asia, including the 
National Endowment for Democracy (and the National Democratic Institute 
and International Republican Institute by extension), Radio Free Asia, 
Voice of America, The Asia Foundation, the East-West Center, and the 
U.S. Institute of Peace.

    Partnerships: Promotion of human rights and democracy is no longer 
the unique province of the United States or even governments. As more 
nations go democratic, interest in integrating human rights and 
democracy into their foreign policies has grown, including in Asia. The 
United States should build partnerships with governments and civil 
society organizations alike with Asian democracies such as Japan, 
Korea, Taiwan and Australia, which will have the added benefit of 
potentially defraying costs as well as putting a helpful regional face 
on the work of human rights and democracy promotion in Asia. The U.S. 
government should also consider how to integrate U.S. business into 
such activities given their global leadership in corporate social 
responsibility.

Conclusion
    Finally, this testimony has omitted perhaps the most common 
rationale offered for why the United States has an interest in human 
rights and democracy, whether in Asia or elsewhere: because it is a 
fundamental component of who we are as a nation, that it is essential 
to America's founding idea and meaning as a country.
    The United States may not always be perfectly consistent in 
application, and will compromise on these principles at times when an 
overriding national interest is at stake. All foreign policy after all 
is a matter of setting priorities and making choices based on context. 
But the United States boasts a tradition extending at least to Woodrow 
Wilson's 14 Points, FDR's Four Freedoms, Ronald Reagan's Westminster 
speech, if not to Lincoln's Gettysburg Address and the Declaration of 
Independence, that impels us forward.
    Without a principled element to our foreign policy, the United 
States becomes just another self-interested major power, of which there 
have been many that have risen and fallen throughout history with few 
mourning their departure. We also unilaterally throw away our unique 
strategic advantage among peoples of the world as a generous great 
power, one that generally inspires admiration and respect not fear and 
anger, and one that is committed to the overall well-being of others as 
equally worthy to the inalienable rights to life, liberty and the 
pursuit of happiness.
    The defining challenge of the 21st century will be preserving, and 
at times adapting, the norms, rules, and values of the post-World War 
II international system given the rise of new major powers who may be 
uncomfortable with the status quo. If the United States does not lead 
in helping shape these norms and values, including on human rights, 
democracy and the rule of law, no one else can or will quite take our 
place. And others will just as surely fill that void with their own 
version of values promotion, to our lasting detriment.


    Senator Gardner. Thanks, Ambassador Mitchell.
    Ambassador King, I gave you credit for Judge Kirby's 
report. You were special envoy. I still want people to read 
that report while you were special envoy, so thank you.
    Ambassador King?

 STATEMENT OF HON. ROBERT R. KING, SENIOR ADVISER TO THE KOREA 
    CHAIR, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES, 
                         WASHINGTON, DC

    Ambassador King. Thanks very much. Thank you, Mr. Chairman, 
Senator Markey. Thank you for the invitation to appear before 
the subcommittee today, but thank you also for holding this 
hearing.
    As you know, my special interest and focus for the last 7 
years has been promoting human rights, rule of law, and 
democracy in North Korea, and my comments today are going to 
focus primarily on North Korea.
    Today's hearing is particularly appropriate and timely. In 
the last few months, the United States has given particular 
attention to security issues involving the North. This 
attention is fully warranted. I am concerned, however, that, in 
giving proper attention to security issues, we not lose sight 
of the critical importance of human rights in our policy toward 
North Korea.
    It is important to keep in mind that a country which 
brazenly and openly violates the human rights of its own 
citizens is a country that will not hesitate to use weapons of 
mass destruction against neighboring countries. A country that 
sends agents to murder the half-brother of its leader will have 
no reluctance to use similar tactics against the citizens of 
countries it fears.
    Mr. Chairman, I want to mention, in particular, the 
critical role that Congress has played in pressing 
administrations, both Republican and Democratic, to give 
attention to human rights in our policy toward North Korea. The 
overwhelming support for adoption and reauthorization of the 
North Korea Human Rights Act of 2004 reflects the bipartisan 
consensus and the importance of this issue.
    Congressional interest in North Korean human rights is the 
principal reason that progress has been over the last decade in 
pressing North Korea on its abysmal human rights record, and I 
am delighted to see that this committee is continuing that 
role.
    One of the most important recent steps was the creation of 
the U.N. Commission of Inquiry on DPRK human rights, which you 
mentioned. That ground-breaking report was, indeed, a major 
step forward. The commission of inquiry concluded that the 
North's human rights crimes involved: extermination, murder; 
enslavement, torture, imprisonment; rape, forced abortions and 
other sexual violence; persecution on political, religious, 
racial and gender grounds; the forcible transfer of 
populations; enforced disappearance of persons; the inhumane 
act of knowingly causing prolonged starvation.
    Mr. Chairman, it is important that we continue to press the 
North on these human rights violations, and there are several 
steps that I would urge the administration and Congress to 
pursue with regard to North Korea.
    First, we need continue our active leadership efforts at 
the United Nations. The Human Rights Council in Geneva has 
played a critical role on human rights, creating the commission 
that we have talked about. We need to continue our active 
leadership and participation in that forum.
    We have found broad support in the U.N. General Assembly in 
New York. By substantial majorities, the General Assembly has 
approved resolutions critical of the violations of human rights 
by the North. We need to continue our effort there as well.
    The U.N. Security Council has discussed North Korea's human 
rights abuses for the last 3 years. That would not have 
happened if it had not been for the United States playing an 
active leadership role. It is important that we continue our 
engagement and involvement with the U.N.
    Second, we need to continue to encourage the free flow of 
information into North Korea. The availability of accurate 
information about events beyond the borders of the North limits 
the ability of the dictatorship to manipulate its own people. 
We need to continue robust American support for the Voice of 
America, Radio Free Asia, and other programs to increase access 
to digital information, including increased appropriations to 
support these programs. The impact is long-term, but it is 
vital to press the North Koreans in directions that are 
positive.
    Third, we need to continue to support refugees who flee 
North Korea at great personal risk to their own and their 
families' lives. Only a few of these refugees have chosen to 
come to the United States, but we should aid those who have 
chosen to settle here.
    We must also support the South Korean Government in its 
humane and generous refugee program for those from the North. 
And we need to continue to press China to permit refugees from 
the North who seek to escape through their country to move on. 
Refugees repatriated by China are among the most vulnerable to 
imprisonment, torture, and execution by the North Korean 
regime.
    Fourth, we must not ignore the humanitarian needs of the 
North Korean people. Admittedly, the brutal conditions in the 
North are the result of a government policy that places the 
needs of the bulk of the people well below the priority for 
luxuries for the leadership and the development of nuclear 
weapons and missiles.
    If we can determine the legitimate humanitarian needs of 
the people, we should assist in providing aid, if we can ensure 
it goes to those most in need. We should also assist private 
American humanitarian organizations that provide such aid.
    Finally, Mr. Chairman, we need to think carefully about 
travel by American citizens to North Korea. Over the past 
decade, more than a score of American citizens have been 
detained. They have been held in isolation and have suffered 
from their imprisonment. The most tragic and heartrending case 
was the American student who died recently, shortly after his 
return to the United States.
    Many hundreds of Americans visit North Korea each year; 
most return without a problem. Some of these are engaged in 
important medical and other humanitarian efforts, but many go 
to get bragging rights for participating in the Pyongyang 
Marathon or for other adventures.
    If the Congress or the administration should consider a ban 
on U.S. citizen travel to the North, an exception should be 
permitted for travel by Americans involved in humanitarian and 
other worthy efforts in North Korea.
    Thank you very much for this hearing, and thank you for the 
opportunity to participate.
    Senator Gardner. Thank you, Ambassador.
    Again, thank you to all of you. We will begin with the 
questions.
    Just to start with a question following up on what you just 
said, that you would support a travel ban, with the exemption 
that you talked about. Is that correct?
    Ambassador King. As long as there is an opportunity to 
provide a license or permission for people who meet certain 
criteria doing humanitarian and other kinds of work, yes.
    Senator Gardner. Thanks, Ambassador.
    Ambassador Mitchell or Mr. Hiebert, would you like to 
comment on that travel ban, a North Korea travel ban, at all? 
No? Thank you.
    Mr. Hiebert, one of the topics you brought up in your 
opening statement, I think Shannon Green you mentioned was 
behind an idea that would develop an interagency decision-
making body to help resolve the tension, I think is the word 
you used, between a security decision and a human rights 
decision.
    Earlier this year, Secretary Tillerson said, and I quote, 
``In some circumstances, if you condition our national security 
efforts on someone adopting our values, we probably cannot 
achieve our national security goals or our national security 
interests.''
    I think it is very clear on the panel that the national 
security interests and human rights, they do go hand-in-hand, 
and economic development interests in those nations that are 
spurring economic growth respect human rights.
    Could you describe maybe in a little bit more detail such a 
panel? Would it be something that could actually help us 
resolve that tension? Would it result in, perhaps, overreliance 
on a panel that could lead more favorably on security concerns 
and neglecting human rights concerns?
    Mr. Hiebert. That is always the problem, right? It would 
need a good moderator to referee between the different 
priorities of the Pentagon, of the State Department, of the 
economic agencies, and of the human rights officials in the 
State Department.
    The idea is not necessarily to override security concerns, 
but in such cases as we have now in the Philippines, where you 
have the militant Maute group operating and occupying a city 
for almost 2 months, not to ignore human rights concerns. 
Obviously, there are times when security has to take a tough 
position. But the goal here is really just to keep the 
importance of human rights concerns within that debate alive 
rather than just letting them be totally missing.
    Senator Gardner. Thank you.
    One of the comments made during the testimony was concern 
that Burma may have fallen off the radar in terms of the 
attention it is receiving from the administration and 
Washington right now. One of the elements of the bill that we 
are developing in the ARIA legislation, one of the components 
of that bill, addresses Burma by learning from what we did in 
Africa with the Electrify Africa Act, the Power Africa Act, the 
last administration successfully pursued and would sort of take 
that idea of Power Africa and put it into Burma to have like a 
Power Burma initiative where the U.S. private sector and 
government can work together to try to develop a more stable 
energy supply in Burma.
    The reason that idea came forward is because, in a 
conversation with one of the close advisers to Aung San Suu 
Kyi, was a concern that three things needed to be accomplished 
during the new government. That was progress made on the 
strife, the civil war, and progress made on electricity.
    So if we can take that kind of policy initiative and put it 
in place in Burma, Ambassador Mitchell, I would like your 
opinion on whether something like that could work and help 
achieve the goals that they need to, to help make this new 
civilian government more successful.
    Ambassador Mitchell. There is no doubt that they need to 
demonstrate that democracy delivers, and electricity generation 
powers everything. It affects education. It affects 
agriculture. It affects all the development they will look for 
in that country. I do not know specifically what was done in 
Africa to know how you can transfer that context to a Burmese 
context.
    The problem with Burma is that they have a problem with 
peace. They are fractured. It is very difficult to get access 
to lots of locations. You can go and get access to the center, 
but getting access to some of the periphery is more difficult.
    Their systems and their power generation is 30 to 40 years 
old, so the whole infrastructure needs to be regenerated. The 
World Bank is working this. They also need a plan, first of 
all, of how they want to do this. So do you work at a national 
level? Do you do it locally and then build a network among 
these localized initiatives?
    If we can put extra funds and extra thinking in to assist 
them with this, then absolutely, it is the long pole in the 
tent for Burmese development. But we have to be very careful to 
act according to their context and not try to transfer entirely 
what worked in one place and assume it will work in Burma.
    Senator Gardner. And, of course, this is a human rights-
focused hearing. That is an economic focus. But explain to me 
the connection between that again. I think it is important to 
note.
    Ambassador Mitchell. Well, I mean, for one thing, 
democracy, we used to have a list of things that we were 
seeking to achieve in Burma. We put it on the wall in the 
Embassy. It was peace and then human rights and democracy, 
because you cannot have peace without human rights and 
democracy. Frankly, you cannot have human rights and democracy 
without peace.
    But then democracy needs to deliver. She has been voted--I 
mean, what people have been seeking is a credible election. 
There was a credible election in which Aung San Suu Kyi has now 
gained most of the power, and all of the power, in the country. 
The military still has control of some pretty important levers.
    But she needs to deliver, and electricity is one of those 
things that is very tangible to people in that country that 
they are looking for. It is not going to happen nationally 
immediately, but as long as there continue to be brownouts and 
blackouts, then people will say, democracy, why is this 
different or any better than what we had before? And we have 
seen that movie before in Eastern Europe. The expectations are 
very high.
    So in terms of democracy, it is very, very important.
    In terms of human rights, in terms of equitable 
development, enabling people all over the country to have 
access to education and information, it is very important.
    So in a number of ways, you can make the connection there 
between seeing the development occur under this new system and 
seeing this new system, frankly, succeed and persist in a very, 
very difficult environment.
    Senator Gardner. Thank you.
    Ambassador King, President Moon and various members of the 
administration have made comments in recent weeks appearing to 
invite North Korea to cohost the Olympics and other statements. 
Could you talk a little bit about perhaps what you see and hear 
out of South Korea, and whether or not that is helpful in terms 
of holding North Korea accountable for human rights?
    Ambassador King. The expectation was that there might be 
problems with South Korea with the election. My sense is that 
the President, President Moon Jae-in, has been very careful in 
terms of what he said about human rights. He is a human rights 
lawyer. He has appointed as his foreign affairs minister the 
former deputy High Commissioner for Human Rights at the United 
Nations. They both made statements expressing concern and 
support for human rights.
    I think there is a commitment in South Korea to human 
rights, rule of law, and democracy. And while there is a desire 
at the same time to move towards reconciliation with the North, 
I do not think that it is going to be at the cost of pressing 
on human rights.
    Senator Gardner. Thank you, Ambassador King.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    Mr. King, when there is a criticism of human rights policy 
in North Korea, they consider it an attempt externally to begin 
a process of regime change, to get rid of this whole Kim 
dynasty and start all over again. So we kind of get into a 
situation where you have to try to find a pathway forward.
    So I am of the opinion that we have to begin a process of 
direct negotiations with the North Koreans around their nuclear 
program. But as part of that discussion, of course, human 
rights would ultimately be implicated.
    Can you talk about this rise in the threat of an 
intercontinental ballistic missile with a nuclear warhead on 
top of it, and how we deal with that issue, and how we deal 
with it in the context of human rights? We had to basically 
deal with that same squared circle back in the 1980s where 
there was an out-of-control nuclear arms race going on with the 
Soviet Union, and, simultaneously, there was a Jewish 
population inside of Russia that was being oppressed. 
Ultimately, it turns out that the arms negotiation is what led 
to the total freedom that was then created.
    So how do you view it, given your long experience in this 
area?
    Ambassador King. Russia was a lot easier than North Korea.
    Senator Markey. Yes, but not viewed that way at the time.
    Ambassador King. No, certainly not.
    The first thing that I think we need to emphasize is that a 
policy of encouraging respect for human rights is not a policy 
that is aimed at regime change.
    I would say that what we want to do is encourage leaders to 
be responsive to their own people. Increasing information in 
North Korea about what is going on elsewhere will put pressure 
on the regime to take into account what its people are 
concerned about.
    I think we need to continue to press on human rights. We 
need to continue to press the North Koreans in the United 
Nations because this raises questions about the legitimacy of 
the regime, which has had some effect in terms of changes, 
mostly around the edge rather than fundamental changes, but we 
need to continue to press them.
    I think when we are dealing with the questions of human 
rights and security, this is not an either/or. I think both are 
related.
    In the case of the Soviet Union, I think our nuclear policy 
and our human rights policy worked together in a positive 
direction. I think the Soviets were far more willing to discuss 
the question of nuclear weapons with us than the North Koreans 
have been. The difficulty we face is a reluctance, at this 
point, on the part of the North Koreans to talk at all.
    Senator Markey. If you remember back then, though, Reagan 
was not willing to sit down with the Soviets. He pulled out of 
all talks. And so it was just the opposite. We had walked away 
from all talks, having been at the table since the Eisenhower 
administration.
    So then, ultimately, it was the United States engaging with 
Gorbachev that began the discussion of reaching an agreement, 
which then created an atmosphere where human rights could be 
more respected. But before that, not so.
    So how do we deal with this issue of managing expectations 
about human rights in North Korea with the world community in a 
context of trying to engage in direct negotiations with the 
North Koreans regarding their nuclear program which, to certain 
extent, it seems to me, is a sine qua non with regard to 
ultimately being able to affect human rights?
    Ambassador King. Yes, it is not an easy one. On the one 
hand, I think we need to continue to press on human rights. We 
should not back off on pressing them on that.
    On the other hand, I think we need to continue to make the 
cost of acquiring nuclear weapons and improving those nuclear 
weapons greater by the sanctions we impose, by working with 
other countries.
    The one thing that I think is critical in this whole 
process is that this is not something the United States can do 
by itself. This is something that requires us to be involved 
and engaged with other countries. We need to work through the 
United Nations both on security and human rights issues. We 
need to work with other countries in terms of the sanctions 
that are imposed.
    U.S. sanctions against North Korea are very limited. 
Sanctions that are imposed by the United Nations in cooperation 
with the Chinese can and do make a difference, and we need to 
continue to press the Chinese in terms of that effort.
    It is not an easy way to go forward, and there is no silver 
bullet that is going to solve the problem.
    Senator Markey. The problem as it exists is that, from the 
first quarter of 2016 to the first quarter of 2017, there was a 
37 percent increase in trade between China and North Korea. And 
simultaneously, there was a $10 billion hit on the South Korean 
economy, as the Chinese imposed tougher controls on tourism 
going to South Korea.
    So that is the law of unintended consequences, where the 
country we are trying to help gets a $10 billion hit on their 
economy, and there is an increase in trade in North Korea, all 
as a result of U.S. policy on THAAD and other areas.
    So that, to me, is something we have to re-examine, so that 
you do not engage in a repetition syndrome, trying to get a 
different result from a policy that ultimately has to require 
the Chinese to be participating, but, under the existing 
circumstances, it is highly unlikely that will be the case, no 
matter what we do.
    Ambassador King. It is a mixed picture because, recently, 
the price of rice in North Korea has gone up significantly. 
There are indications that there may have been some cut-off of 
some petroleum products. We do not have perfect information 
about North Korea, but the information we have suggests it is a 
mixed picture.
    I think part of what we have to do is continue the effort 
of working with others to try to move this forward.
    Senator Markey. I agree with you that it may be a mixed 
picture, but if that number was accurate, the 37 percent 
increase in trade, that is the overarching, larger environment 
within which North Korea is now existing, and there may be some 
sub-stories within that, maybe in rice or other areas.
    But the totality of it is just something that does not 
appear to be a stranglehold at all in any direction of the 
North Korean economy.
    So to me, it just raises difficult questions in terms of 
how we progress from here to get the result we want, which is a 
denuclearized North Korea and an increase in human rights in 
that country.
    Ambassador King. Like I said, the Soviet Union was easy by 
comparison.
    Senator Markey. No, I appreciate that. But at that point, 
we were 40 years into that and had not been able to square that 
circle. So it only began, really, when we had the direct 
negotiations, only when they began to sit down in Reykjavik.
    Ambassador King. It also began because there were changes 
taking place in the Soviet Union. It was the advent of 
Gorbachev, and the changes that he made in terms of moving the 
economy toward a market economy, allowing greater freedom in 
terms of----
    Senator Markey. And I agree with that 100 percent, but that 
was the actuarial table at work. That was Gorbachev dying, and 
Chernenko, another septuagenarian getting named and him dying, 
and Andropov being named and him being a septuagenarian and him 
dying. So the actuarial table did work in our favor in 1983 in 
1984. In 1985, Gorbachev got the job.
    But the Kim dynasty, even if the actuarial table affects 
him, it is unlikely to result in this opportunity, which Reagan 
ultimately got. But it was not through a plan. It was through 
something that happened internally in that country.
    So he was not going to change unless that happened. I just 
think relying upon that to happen inside of North Korea is 
exceedingly optimistic. I just think that we have to have an 
external strategy.
    Thank you, Mr. Chairman.
    Senator Gardner. Thank you. We will just continue back and 
forth, if you do not mind.
    One of the focuses of the bill, of course, is human rights 
and rule of law.
    We see in North Korea continued violation by many nations 
accepting labor out of North Korea, both a rule of law 
challenge to both nations involved, as well as a human rights 
concern.
    So how would you address, in legislation, the labor abuses 
taking place in China of North Korean workers, the continued 
acceptance of labor from North Korea around the globe?
    Ambassador King. There has been some success in dealing 
with North Korean employed working abroad. Diplomatically, we 
have pressed countries in Europe, in the Middle East, and 
elsewhere, to urge them to move beyond using North Korean 
workers, and we had some progress in several areas.
    The problem is, the largest number of workers are in China 
and in Russia. This is the most difficult of areas to deal 
with, but we need to continue to press. We need to continue to 
work on it. But there is not an easy solution.
    Senator Gardner. Could you apply something like the Global 
Magnitsky Human Rights Accountability Act to a Chinese official 
if you knew that they were part of allowing labor into China? 
Is there a path there that you could use?
    Ambassador King. It might be something that could be done. 
Identifying individuals and applying sanctions to individuals 
in cases like this could be helpful. It is difficult to get 
information, particularly at the levels where these decisions 
are being made about workers. It might be worth looking at, but 
I do not see it as the silver bullet.
    Senator Gardner. When we see news reports about something 
like soccer stadiums being built with North Korean labor, how 
should we address that?
    Ambassador King. The way we have. We have raised it with 
the Middle Eastern country involved. We have raised our 
concerns with them. They understand those concerns, and they 
have moved in different directions.
    Senator Gardner. Thank you.
    Ambassador Mitchell, you mentioned in your statement that 
changes in human rights gradually take place, that the U.S. has 
to be patient and that we need to support programs that support 
that nation but also, I think, made it clear with patience.
    Can you talk about your experience in Burma? I know there 
were some sanctions that were lifted in Burma, and, as a result 
of those sanctions, I think there was an anticipation that 
there might be greater changes. There was anticipation under 
the new government that we might see greater progress on the 
Rohingya. Talk a little bit about that experience and whether 
or not we have been too patient, whether we should have more 
patience, and how to balance that patience with additional 
actions to try to have better results.
    Ambassador Mitchell. Are you referring specifically to the 
Rohingya or generally?
    Senator Gardner. In general.
    Ambassador Mitchell. In general. Well, in general, the one 
thing as I mentioned there as well is that democracy does not 
start and end with elections, really end with elections, that 
it is a process.
    And we knew, I knew, that even though we had this 
remarkable moment in 2015 where Aung San Suu Kyi's party wins, 
she becomes, effectively, the leader, that she just inherited 
the same structural problems in this country that existed 
before the election, 50 years of systematic degradation of 
every institution in this country except for one, except for 
the military.
    I mean, civil society worked underground. The best and the 
brightest either left or were killed or were imprisoned. So 
human capacity, the legal infrastructure, the physical 
infrastructure all needs to be built, and trust needs to be 
constructed as well among this remarkably diverse population 
that is the longest running civil war in the world, 70 years 
since independence they have been fighting themselves. So we 
always had to have very managed expectations of how quickly 
things would move on the ground and how we would see progress 
proceed.
    Having said that, yes, of course, we should expect things 
to go and to see progress, to see more measurable progress, and 
including things like electricity, as you mentioned. It has 
probably gone slower than we would have expected, than they 
should have moved.
    Aung San Suu Kyi, I think many people when I was there just 
a few months ago were criticizing her for not paying enough 
attention to the economy. I think people have tried to suggest 
to her, you do need to deliver on these things for people so 
that they feel there is a result from democracy.
    So we do have to be patient. On things like just the human 
rights side of things, there are legacy laws. There are laws in 
place from the British colonial days that deal with unlawful 
associations, people getting together unlawfully, which are 
just 100 years old, more than 100 years old, and need to be 
gotten rid of and brought up-to-date. There are new laws in 
telecommunications that regard people who criticize the 
military or even Aung San Suu Kyi on Facebook as a criminal. So 
you are having new political prisoners or new people brought up 
on charges for free speech.
    This should not be happening. Again, it is a legacy of old 
mindsets, a legacy of the past, a legacy of lack of capacity. 
That needs to be done quicker, and I think we should be holding 
them to account for those things.
    Finally, what I will say on the Rohingya, which we can talk 
extensively about, I always say it was sort of a black spot on 
my time there.
    As you said, it was a remarkable, extraordinary period. I 
was fortunate to be there and present and part of the change, 
but that situation only got worse when I was there. These 
people were kept in pens, their humanity and dignity taken away 
from them.
    And I think what I tried to suggest to everyone there is 
that it is not working for the country. The status quo in 
sustaining that situation is not only terrible for the Rohingya 
and affecting their reputation writ large in the international 
community but, more importantly, frankly, for them, is that it 
is not helping them.
    It is setting the Rakhine people back, the Rakhine State 
back where this is happening. And the whole country is 
attracting the attention of the worst actors in the world. And 
now there is concern about an extremist group that may be 
acting there.
    So even in their own interests, they need to be thinking 
differently and acting differently to give these people a 
certain degree of justice, of due process, their humanity and 
dignity, so that they can stabilize the situation and then move 
forward as a country.
    Senator Gardner. Thank you.
    Mr. Hiebert, if you wanted to talk about Burma, please feel 
free to, but a question to you about Thailand. The U.S., do we 
have an opportunity to persuade the military there to lessen 
the restrictions it has placed on freedom of expression on 
Thailand? And what leverage do we have in terms of rights in 
Thailand?
    Mr. Hiebert. They have not accepted criticism very well. We 
have seen various people in the previous administration try to 
go and talk a little bit about that.
    It was hoped that the Prime Minister would be coming here 
in mid-July. That had been planned. However, the Thais have now 
asked for that trip to be delayed. They think they could not 
get ready for all the stuff that you have to do for having a 
head of state visit here.
    There is also a lot of sensitivity as we are in the midst 
of this change in the monarchy. The former King will be 
cremated in October, and a new King will be coronated probably 
in December. In this transition, everybody is being very 
cautious and no one wants to change the status quo. So, they 
really have been pretty tough on stuff happening on Facebook 
and social media generally, very critical of anybody posting 
stuff that is even hinting at making fun of the monarchy.
    So it is in a very sensitive period. I guess the hope was 
that, if we could get the Prime Minister here, that, gradually, 
relations could improve at all kinds of levels--we could get 
some trade deals to start happening. We could have some mil-to-
mil cooperation resume at a higher level. And then they would 
move toward elections.
    I wish when President Trump called the Thai Prime Minister 
that, he could have said, ``It is great that the country is 
more stable but,'' without offending him in the least, he could 
have said, ``But it would be really helpful if you would start 
moving toward elections, which you have said you want to hold 
next year. We are watching. I hope we can do it,'' kind of 
thing, which would have been fine.
    But just generally, Thailand is a little stuck. It needs 
some way to break the logjam. I guess that is why many of us 
were hoping the Prime Minister's trip to Washington would 
happen soon.
    Senator Gardner. Any outlook for the elections?
    Mr. Hiebert. We have had elections on the horizon a few 
times. I guess, we do not know when they will happen.
    When you talk to Thais, some will tell you, yes, it will 
happen this time. Others say, well, they have postponed it two 
or three times already, they may do it again.
    That would be another advantage of having the Prime 
Minister come here. I think it would be a way to start talking 
about some of these things and nudge them a little bit about 
why this matters.
    Senator Gardner. Thank you.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    Mr. Hiebert, what is your assessment of the threats to 
Indonesia's democracy coming from rising religious and ethnic 
intolerance inside of that country? Is this something that is 
becoming more serious as a concern that we should have in our 
country?
    Mr. Hiebert. You will have seen what happened with the 
treatment of the governor, the mayor of Jakarta, during the 
election campaigning he made an offhanded sort of joke about 
whether Muslims could live under non-Muslims.
    Senator Markey. And he was an ethnic Chinese Christian.
    Mr. Hiebert. Yes.
    Senator Markey. So an ethnic Chinese Christian is making 
this joke. Right.
    Mr. Hiebert. So it was not received very well. His comments 
were recorded, and then conservative Muslims really played this 
up and eventually he was charged with blasphemy. And they had 
two giant protests late last year that really highlighted that 
was on the ascendancy and would play a greater political role.
    In the election process, we saw Ahok not only lose the 
election. He had been charged with and was on trial for 
blasphemy. When the prosecutors urged that the courts sentence 
him only to probation and not jail, the panel of judges 
actually called for him to be put in jail, and he is now 
serving a 2-year sentence in prison.
    Senator Markey. So again, the crime that he committed as an 
ethnic Chinese Christian, again, was?
    Mr. Hiebert. Blasphemy.
    Senator Markey. And the blasphemy was?
    Mr. Hiebert. That he raised questions in a joking way about 
whether a Muslim could live under a non-Muslim, could be ruled 
by a non-Muslim.
    Senator Markey. So he has 2 years in prison right now for 
saying that.
    Mr. Hiebert. Yes. I was going to add, just today, President 
Jokowi, initiated some legal measures, which will allow the 
government to be able to ban certain radical Muslim groups. We 
could start to see that.
    But during the election campaign for Jakarta governor, a 
lot of Ahok's political opponents were using these conservative 
religious groups to build opposition to Ahok among voters. Even 
though these politicians were not part of these movements, they 
used those protests, actually, to discredit Ahok.
    Senator Markey. So you are saying, after the fact, after 
the election, after the conviction, now the President of the 
country is getting concerned?
    Mr. Hiebert. Getting concerned because he has his own 
elections in 2019, and he wants to make sure that these groups 
are somewhat reined in. And some of the more moderate Muslim 
groups have endorsed efforts to rein in the more conservative 
groups thinking that this is probably a good idea.
    Senator Markey. So what could the United States do? What 
could this subcommittee do in order to send a message that that 
kind of behavior is unacceptable? What would you recommend?
    Mr. Hiebert. That is a tough one. Obviously, you can keep 
talking about the concerns about what happened. I think Members 
of Congress can visit and raise concerns about this.
    It is really tough in a country that is running a fairly 
good democracy. You cannot sanction them. Former President 
Obama on a just completed visit to Indonesia did a very good 
job of this, as somebody who had lived in Indonesia, by talking 
about diversity and how you live with people of different 
opinions.
    I think Members of Congress and the administration need to 
find ways to just keep talking to President Jokowi and his 
Cabinet about why some of the activities by radical Islamic 
groups are dangerous for Indonesia's democracy.
    Senator Markey. He was a Christian going to a Catholic 
school in a Muslim nation, President Obama, so that is 
something that I think is lost on people.
    Let me move on. I think we would like to pursue with you 
this issue, because I think it is something that is important 
for the United States to have a view on this.
    Mr. Hiebert. We can think about it some more and come up 
with some ideas for you.
    Senator Markey. I think it would be helpful to us, if you 
can have a recommendation for us.
    Mr. Hiebert. Okay.
    Senator Markey. The question of Internet freedom, I will 
just give you the grades here. In 2016, Freedom on the Net 
survey, the Freedom House ranked China, Vietnam, Myanmar, and 
Thailand as ``not free.'' Cambodia, Malaysia, Indonesia, 
Singapore, and South Korea come out as ``partly free.''
    And our challenge promoting free expression of the Internet 
in Asia is complicated by the fact that China vigorously 
promotes strict state control of cyberspace across the region.
    What are your perspectives, any of you, on how the United 
States can meet this challenge to be driving the Internet in 
terms of a more open model, rather than what is increasingly 
happening in country after country?
    Ambassador Mitchell. Well, I think you have to make the 
case, as we do everywhere, that what we are trying to achieve, 
and it goes to what you were discussing with Murray, is taking 
a positive tack on this, that we are seeking your success. And 
from our experience, the lessons that we have learned on this 
in a diverse place like Indonesia, a diverse place like 
Myanmar, you are going down a very, very risky path of division 
that ends badly, and why we believe this. I think that is the 
first level of discussion.
    On the Internet, you have different levels of control of 
the Internet, or access to the Internet. In Vietnam, they are 
going after bloggers, but there is actually pretty good access 
to the information otherwise, and people are free to speak on 
Facebook.
    Myanmar, I think, similarly, it is a Facebook country. My 
Embassy had over 1 million followers, so whatever we put up 
there, we had 1 million people reading it. But if you say the 
wrong thing, if you criticize somebody the wrong way, then you 
get thrown in prison because you have denigrated somebody, with 
the libel laws and that kind of thing.
    So I think we have to, first off, convey the positives of 
free information, that the absence of this will create more 
instability, more problems for your democracy, more division in 
your society, more problems for you. And, certainly, 
condemnation, a bad reputation in the U.S. Congress. And those 
who really want to work in partnership, that it will have an 
effect on the partnership we want to have with these countries.
    Senator Markey. In the early hearings that the chairman 
had, the witnesses all agreed that continued American 
engagement is absolutely essential, economically, 
diplomatically, militarily in this region. But we have this 
China model, which is also competing with us now.
    So I would like if I could, if you do not mind Mr. 
Chairman, just your views on this dynamic tension and very 
aggressive strategy that the Chinese have put together, which 
ultimately helps to create a different ideation with regard to 
what a successful governance model could look like in countries 
in Asia.
    So could you talk about that, what you believe the United 
States has to do if we are going to be effective in countering 
that message?
    Ambassador Mitchell. If I can say, if you are an autocratic 
government or single-party government, you are going to favor 
doing this. You want to control information. That is your idea 
of what security or stability looks like.
    What we need to do is support those actors to open up the 
country and allow more voices through civil society, through 
free media, through our engagement, through NGOs and our own 
work, Radio Free Asia, Voice of America, et cetera, to try to 
demonstrate that open flow of information is what a free 
society looks like, and that free societies succeed.
    China has enormous challenges internally. And when I talk 
to people in Burma about the China model, they say we do not 
want to be like China, which is good that they do not want to 
be that model of governance. They want to be their own model of 
governance. They talk about democracy, and they are willing to 
try this.
    Now, Vietnam, you hear that, over time, we want to open up 
gradually. I think we make it clear to them this matters to us, 
and that we will hold them to account whether this continues in 
a gradually progressive way or not.
    The challenge I always found in Burma was trying to measure 
what progress looked like. How do we know if we are still on 
track but going slower or slowly, or if things have gotten off 
track? That is something that is an art, not a science. There 
is no easy way. The people of the country will make their own 
judgments, according to their own interests.
    But I think what we should do as much as possible to 
empower the people of the country, empower a diverse array of 
voices in the country, get information in. They will make their 
own decisions, but that will be the best way to empower those 
that we think will help.
    Senator Markey. Thank you.
    If the United States retreats--which the budget proposals 
of this administration would indicate is one alternative path 
that we could go down--if we do retreat, what does that mean in 
terms of the Chinese ability to propound an alternative of an 
authoritarian model, which could also be successful because of 
the additional benefits that will flow to those countries that 
would embrace it?
    Mr. Hiebert. Certainly, if the U.S. is missing in Southeast 
Asia, it is pretty obvious, right now, as the U.S. sort of 
seems to be withdrawing, and China has been putting a lot of 
pressure on its neighbors to drift back toward China, you do 
have the situation where their more authoritarianmodel, in many 
cases, is now being looked at.
    But I was going also to make the point, economically, that 
Vietnam, which has Intel in there, it has Samsung, which is by 
far their largest exporter, that Vietnam realizes they need to 
keep the Internet open for economic development. So therefore, 
it does not need to be the State Department human rights guys 
who come and thump on the table. It can be USTR people doing it 
in Trade and Investment Agreement talks. That starts changing 
the dynamic.
    So countries like Vietnam, I would not put in the same 
category of China. If I go to China, I cannot access the New 
York Times or the Wall Street Journal. I cannot access my Gmail 
account. In Vietnam, I can access everything.
    In Thailand, we saw the recent case where they were 
pressing Facebook and other social media companies to monitor 
what people were putting up on these platforms. By U.S. 
officials talking economically ahead of the Prime Minister 
visit that was supposed to happen next week, and is now not 
going to, it prompted the Thais to postpone some of the 
decisions about how to implement some of these social media 
regulations.
    So economically, we do have some leverage at times also in 
countries that want to be part of the global supply chain.
    Senator Markey. Mr. King, before I go to you, I just want 
to say that Vietnam has just announced a $1 billion deal with a 
company in Massachusetts to purchase scanning equipment, 
detection equipment that can detect nuclear contraband coming 
into their country, or fentanyl, or drugs coming into their 
country.
    So that is a pure capitalist deal that advantages that 
company and also reflects openings that could be a precedent 
for other United States cooperation with that country.
    Mr. King?
    Ambassador King. One of the things that is interesting is 
that Chinese information is not permitted in North Korea, 
because it is far too open.
    Senator Markey. Say that again.
    Ambassador King. It is illegal to listen to Chinese radio 
in North Korea. Compared to what you get in North Korea, 
Chinese radio is far more open than what they are getting 
domestically. One of the things that is interesting is that 
sources of external information include listening to Chinese 
radio as well as South Korean- and American-funded broadcasts.
    One of the things that I think we need to do, and where we 
can make a difference, particularly in a place like North Korea 
where access to the Internet is basically not available, is do 
what we can to get information into North Korea on thumb drives 
and particularly through radio, which is somewhat old-fashioned 
but still effective, so that there are alternative information 
sources that are available to the people in North Korea.
    Senator Markey. That is very interesting.
    I went with President Clinton for 9 days to China on his 
trip in 1998, and we did one public event, the President and I, 
in an Internet cafe. The President said, well, in addition to 
the Chinese-controlled government press, I want to get 
additional information about the trip that I am making to the 
country, where would you go? And then these three very, very, 
very, very, very smart Beijing University students, they had a 
conversation, and then you could hear one of them go, ``But 
President Clinton, President Clinton.''
    So, all the sudden, they are going to the keyboard and up 
comes ABC News, ``Clinton Visits Beijing,'' not possible in 
North Korea.
    Thank you all very much for your great testimony.
    Senator Gardner. Thanks, Senator Markey.
    A couple questions.
    Mr. Hiebert, you mentioned in your comments as well that 
perhaps the new administration is trying to mend fences with 
some of our treaty allies in Southeast Asia, but yet we know 
that the extrajudicial killings that have taken place in the 
Philippines create a very significant obstacle for the United 
States and for a Nation that wishes to respect human rights, as 
we do, and the challenge that presents us in how to deal with 
the Philippines.
    How do we address extrajudicial killings in the 
Philippines, violations of human rights, and what is occurring 
in the Philippines?
    Mr. Hiebert. This was tried by Ambassador Goldberg late 
last year and also by President Obama on a few occasions, and 
they got dinged really badly by Duterte.
    It is a tough situation. He does not take criticism. 
Although I talked recently to the current Ambassador Sung Kim, 
and he says you can talk to him privately, but Duterte does not 
want to hear about this stuff publicly.
    And so maybe you have to keep talking privately at a time 
when, obviously, Duterte, was democratically elected and 
remains very popular. He hears the criticism from the United 
States. He calls the President all kinds of nasty names, and 
then goes to Beijing and says I am going to separate from the 
United States, which, for a treaty ally to say that to the 
United States in Beijing, is pretty tough news. Then on top of 
that, in mid-May, he gets a new war in Mindanao, where Islamic 
radicals took over Marawi, a medium-sized city.
    So the U.S. has challenges. What we had in working with the 
previous Aquino government, on the Enhanced Cooperation 
Agreement to give the U.S. access to five bases on a rotating 
basis that would help them to be able to gather some maritime 
domain awareness of what China is up to in the South China Sea. 
Now they have this crisis with Islamic militants in Mindanao 
where Aquino had a peace agreement a couple years ago. It did 
not work. Now they suddenly have a war breaking out again. And 
a lot of the young soldiers who were in the MLF, the key group 
in the peace process are suddenly saying, there is no peace 
dividend for us, so what the heck?
    We are now starting to get external fighters from 
Indonesia, Malaysia, people coming from Iraq and Syria. So you 
have a situation that is quite dangerous.
    So this is the tension that you were asking about. How do 
you balance human rights versus security concerns?
    I think we need to keep trying to talk to President 
Duterte. We have to recognize he has only five more years in 
office. There will be a transition. We cannot just isolate the 
whole country, I think, because of him.
    The military, as I was alluding to in my references to the 
Leahy amendment, the military is still, roughly, minding its 
P's and Q's, following general rules of engagement that we can 
accept, in that it is not doing the human rights violations and 
not participating in the drug war.
    This is a walk-and-chew-gum kind of situation where we need 
to try to keep pressure on, but we can only do so much in the 
larger context of a president who is very mercurial, and with 
whom we have other issues to deal with.
    This is one that the U.S. has been struggling with a lot. I 
do not know how you go deeper with him when he cannot take 
criticism at all.
    Ambassador Mitchell. If I could just add one thing, he is 
not just mercurial. He is also very popular at home, which even 
complicates it even further, if you are thinking about popular 
opinion and democracy and the rest.
    Human rights are human rights, and they are inviolable, 
regardless if it is supported by the majority of people. But it 
is much more difficult when someone feels politically he is 
getting advantaged, or at least no disadvantage, from doing 
this. And people even support him for his strong hand.
    Senator Gardner. Ambassador King, would you like to address 
anything in the Philippines?
    Ambassador King. Not really.
    Senator Gardner. Thank you.
    I do want to follow up to talk about communication within 
North Korea. The North Korea sanctions act that this Congress 
passed last Congress authorized additional dollars to go toward 
finding new ways to communicate to try to reach out to the 
people of North Korea. Those grants have been put forward. They 
have been authorized, appropriated.
    Is that effective? We have talked about some of the 
programs that have taken place, making sort of reality TV shows 
about North Korean defectors living in South Korea, living in 
the United States, what that is like, what that means. Is there 
a more effective way? What are hearing from defectors? Is there 
new technology that we ought to be thinking about that we can 
utilize? Or is it radios and thumb drives still? Is there an 
additional avenue? Are there additional avenues for 
communication?
    Ambassador King. Radios and thumb drives are still one of 
the key elements, in terms of that.
    There is a real effort to try to use programs that will 
reach out and will provide opportunities for getting 
information in. It is not easy. The North Koreans are very 
savvy on cyber issues.
    The cell phones in North Korea are incredibly difficult to 
use illegally. You cannot make calls outside of the country on 
the phones. There is no access to the Internet inside North 
Korea. There is intranet, which is basically state propaganda. 
So it is a very difficult kind of process.
    In spite of that fact, people are interested in knowing 
what is going on elsewhere. People do watch South Korean films. 
South Korean films are very popular in North Korea. South 
Korean soap operas are popular all over Asia, and they are very 
popular in North Korea.
    So some information is getting in. We just need to continue 
to work at it. We need to continue to probe. It is not a cheap 
process, and we need to continue to support those efforts to 
see that that happens.
    You mentioned questions about life of defectors and how 
that affects what is going on. Based on polling of defectors 
from North Korea, and also people who are temporarily in China 
who are willing to talk to people they do not know who are 
tallying results, it indicates that there is great interest in 
life of defectors in South Korea and in the United States.
    So the programs are geared to the kinds of things that 
North Koreans are interested in, and I think they have had some 
success, in terms of dealing with that.
    Senator Gardner. Thank you.
    Senator Markey, I do not know if you have any questions or 
if you wanted to continue the conversation?
    Senator Markey. No, I am fine. Thank you.
    Senator Gardner. I think it is important, as we talked 
about Senator Markey's last question, we talked about U.S. 
engagement and concerns over U.S. withdrawal. All of us, I 
believe, supported the previous administration's stated 
objectives of a rebalance or pivot, or whatever word they 
wanted to use. But what we have lacked in this country, I 
believe, is a long-term strategy when it comes to Asia. It is 
something that exceeds a 4-year or 8-year term of a President.
    So what we are trying to develop, and with your help, we 
will develop, that policy through ARIA, the Asia Reassurance 
Initiative, that really does place U.S. interests back into 
play in the region, because of nations, as you have described, 
that are desperately looking for that partnership with the 
United States, desperately looking for somebody other than 
China, whose rules and norms are not in the interests that they 
want to pursue for trade, for security, for democracy.
    So as we look at ways to strengthen the rule of law and 
democracy, this information has been invaluable, and I 
appreciate it. But know that that is the entire purpose of 
these hearings, to pass legislation, put it in a law that 
develops 10, 20 more years of strategy, presence, leadership in 
Asia. Now is our chance in an area of the world that has 
growing populations, growing economic power. It is something 
that we cannot turn our backs on.
    So, Senator Markey, thank you.
    Senator Markey. If you do not mind?
    Senator Gardner. Yes, please.
    Senator Markey. Just one more question. It is only on this 
question of extrajudicial killings in the Philippines and who 
they are, and what their funding sources are, and whether or 
not an American cut-off of security assistance targeted at the 
groups that are engaged in the extrajudicial killings and those 
that are responsible for capturing vigilantes but are not doing 
so, is there a role that the U.S. can play in trying to at 
least specifically target those funds that we provide to the 
Philippine Government as a carefully calibrated attempt to 
impact that kind of conduct that we are unhappy with?
    Does anyone have a recommendation?
    Mr. Hiebert. Probably about a third or so, or 40 percent, 
of the killings are by the police. Then about 60 percent are 
being done by these vigilante groups. They are just 
freelancing.
    On the police, the U.S. has at least once in recent months 
stopped the sale of weaponry, of guns. Obviously, providing 
weaponry would be something that we could look at.
    Senator Markey. What part of the Philippine security 
apparatus is actually implicated in vigilantism?
    Mr. Hiebert. The National Police. The vigilantes, boy----
    Senator Markey. Failing to pursue--inside of the 
government, there is obviously a failure to pursue these 
vigilantes. So what part of the security apparatus inside of 
the Philippines is actually turning a blind eye to the 
vigilantes, are basically part and parcel of the problem?
    Mr. Hiebert. It is the police who are turning a blind eye 
and just letting these guys operate, because they are sort of 
doing their work for them, without getting their hands dirty.
    But I think, obviously, cutting off the provision of 
equipment to the police might be one thing.
    But looking for ways to cut the flow of drugs might be 
something the U.S. could help with. I am not sure to what 
extent the government is open to this, they took some aid from 
the Chinese to set up detox camps for 10,000 people at a time, 
but it is kind of ironic that most of the drugs that are coming 
to the Philippines are from China. If China just cut off the 
supply, it might help.
    But maybe there would be ways, I know this is happening 
already, but to do more showing what other alternatives there 
are for dealing with drug addicts, rather than just gunning 
them down on the side of the road and claiming they were drug 
dealers. There might be some openness to that. Senator de Lima, 
a former Justice Secretary, has taken on Duterte on the 
violence of the drug war. She does not sit quite as comfortably 
as you guys do, with all due respect. She is sitting in prison 
because she criticized him too much, and he just found ways to 
get rid of her.
    So it is tough, but I think we could probably find ways to 
offer some alternatives for dealing with drug addicts.
    Senator Markey. You raise the China question. They are the 
source of fentanyl in the United States. In Massachusetts, it 
is now killing 75 percent of our opioid overdose victims. That 
comes right out of China. It will be two-thirds to three-
quarters of all Americans in another very brief period of time 
who will be dying from that. That is a Chinese issue as well.
    So you are right. The Chinese have an ability to kind of 
control that spigot, to a very large extent, in an 
authoritarian country, and they are not doing so. So I thank 
you for pointing out that issue in the Philippines as well.
    Thank you, Mr. Chairman.
    Senator Gardner. Thank you.
    Thanks to everyone for attending today's hearing, and to 
the witnesses for providing your testimony.
    This is the homework assignment. For the information of 
members, the record will remain open until the close of 
business Friday, including for members to submit questions for 
the record.
    I just ask you kindly to respond to those questions as 
quickly as possible, so that they can be made a part of the 
record.
    Senator Gardner. Again, thanks to all of you for being 
here, and this committee is now adjourned.


    [Whereupon, at 3:43 p.m., the hearing was adjourned.]



                         AMERICAN LEADERSHIP IN
                           THE ASIA-PACIFIC--


                       PART 4: VIEW FROM BEIJING

                              ----------                              


                       TUESDAY, NOVEMBER 14, 2017

                               U.S. Senate,
       Subcommittee on East Asia, The Pacific, and 
                International Cybersecurity Policy,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:40 p.m. in 
Room SD-419, Dirksen Senate Office Building, Hon. Cory Gardner, 
chairman of the subcommittee, presiding.
    Present: Senators Gardner [presiding], Barrasso, Markey, 
Murphy, and Kaine.

            OPENING STATEMENT OF HON. CORY GARDNER, 
                   U.S. SENATOR FROM COLORADO

    Senator Gardner. This hearing will come to order. Let me 
welcome you to the fifth hearing for the Senate Foreign 
Relations Subcommittee on East Asia, the Pacific, and 
International Cybersecurity Policy in the 115th Congress.
    Thanks to my colleague, Senator Markey, for working with us 
on what I think has been a very good series of hearings this 
Congress. It is the fourth hearing this year in the 
subcommittee that is specifically dedicated to building out 
various aspects of U.S. policy challenges and opportunities in 
Asia from security threats to economic engagement to human 
rights.
    President Trump has just concluded a landmark visit to the 
region, the longest by a U.S. President in over 25 years. His 
attendance of the APEC summit in Vietnam and the ASEAN summit 
in the Philippines I believe sends an important reassurance 
signal to nations in the region that the United States remains 
engaged and willing to lead.
    These hearings are also informing new legislation that we 
are working on that I am leading called the Asia Reassurance 
Initiative Act, or ARIA, which will seek to build out a long-
term vision for United States policy to ensure a free and open 
Indo-Pacific region. I look forward to working with Senator 
Markey and other colleagues to introduce this legislation very 
soon.
    At our first hearing on March 29th, we focused on the 
growing security challenges in the region, including North 
Korea, South China Sea, and terrorism in Southeast Asia. We 
agreed at that hearing that we must strengthen U.S. defense 
posture and increase security engagement with our allies in the 
region.
    At our second hearing on May 24th, we focused on the 
importance of U.S. economic leadership in Asia. We agreed at 
that hearing that while the administration and Congress might 
differ on global trade strategy, we cannot ignore the 
fundamental fact that it is Asia and Asia will be critical for 
the U.S. economy to grow and for the American people to prosper 
through trade opportunities.
    At our third hearing on July 12th, we focused on projecting 
U.S. values in the region, including the promotion of 
democracy, human rights, and the rule of law. We agreed that 
the active promotion of these fundamental values only 
reinforces American leadership in Asia and reflects our core 
beliefs as a nation that human rights are universal rights, 
without exception.
    Today's hearing will consider the U.S. relationship with 
the Peoples Republic of China, the region's rising power and 
our closest near-peer strategic competitor. We will examine 
Beijing's views of U.S. actions and intentions in the Indo-
Pacific and how these perceptions will shape the strategic 
landscape for the next generation of policymakers in both 
capitals.
    We already know that, as once hoped, China's rise--our 
concern may be less than peaceful. Economic growth and the 
emergence of a middle class has not tempered the Communist 
Party's hegemonic and nationalist impulses, including the 
recent destabilizing actions in the East and South China Seas, 
continued belligerence toward Taiwan and the bullying of 
China's neighbor, South Korea.
    As President Xi Jinping consolidates power domestically, it 
is clear that China also increasingly views its increasing 
economic and military power in the region as a zero sum game 
with the United States.
    I hope our distinguished witnesses today can shed light on 
a U.S. policy toward China that avoids conflicts but also meets 
key U.S. national and security goals of a free and open Indo-
Pacific region.
    I will turn it over to Senator Markey for his opening 
comments and again thank him for working in this committee to 
make these hearings a success. Thank you.

              STATEMENT OF HON. EDWARD J. MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. Thank you, Mr. Chairman, and thank you for 
this very important hearing and thank you for the tremendous 
lineup of witnesses which you have gathered here today.
    The alliance framework in the Asia-Pacific has allowed the 
United States to benefit from the economic dynamism in the 
region and safely address the pressing security challenges in 
the region. For this reason, continued American leadership in 
the region is essential for global peace and security.
    But to lead in the Asia-Pacific, we must understand China's 
strategic intentions and their impact on the United States. To 
do this, we must look back at history.
    Out of the ashes of World War II, the United States led a 
broad effort to create a new global system, one that would not 
only promote U.S. interests, but also benefit the entire world, 
one that would reduce the likelihood of devastating global 
conflict, while helping those around the world prosper, and one 
that would uphold respect for national sovereignty and freedom 
from coercion.
    The system's ability to overcome the unique characteristics 
of the Asia-Pacific has proved its staying power. Longstanding 
American security alliances have deterred threats and helped 
establish a balance of power. Through American development 
programs and institutions like the World Bank and the 
International Monetary Fund, the United States helped unleash 
unprecedented economic growth and stabilize a fragile Asia-
Pacific, all the while promoting democracy, human rights, and 
the rule of law in the region, core values for all people.
    China particularly benefited tremendously from this system. 
With a stable security environment and access to global 
markets, China's economy has grown to $9.5 trillion, a 15-fold 
increase over the past 30 years, lifting 800 million of its 
citizens out of poverty.
    China's rapid development has helped spur closer people-to-
people relations with the United States. In 2016, there were 
over 300,000 Chinese students studying in U.S. universities. 
And we have cooperated for the global good in a number of key 
areas, including on the successful conclusion of the 
multilateral deal to restrict Iran's ability to develop nuclear 
weapons.
    And as China seeks to play a larger international role, 
President Xi wants it to construct a fairer global governance 
system. But while all countries helped shaped the international 
system, they and especially China should work through existing 
institutions and in support of the system's key tenets that 
have benefited countries across the globe.
    Unfortunately, China is challenging the very underpinnings 
of the global order that has brought peace and prosperity.
    First, China has not lived up to its international 
obligations to help denuclearize the Korean Peninsula. No 
country has greater leverage than China, which is responsible 
for approximately 90 percent of North Korean trade. Oil still 
flows over the border, which I saw firsthand during my trip to 
Dandong on the Yalu River in August. China must cut off these 
shipments to get Pyongyang to return to the negotiating table. 
It has done so before, including in 2006, and it must do so 
again.
    But China is challenging the international system elsewhere 
as well. It has constructed, in violation of international law, 
military bases on artificial islands in disputed areas of the 
South China Sea.
    Through economic coercion, Beijing undermined the 
sovereignty of its smaller neighbors. Countries including South 
Korea and the Philippines face Chinese retaliation for taking 
legal and sovereign actions in their own defense.
    And China's signature Belt and Road initiative, which aims 
to position China as the uncontested leading power in Asia, may 
further coerce its neighbors through loans they cannot repay.
    U.S. companies face the threat of intellectual property 
theft, with the media reporting that China has been stealing 
cutting-edge research, as well as sensitive trade secrets from 
the United States. And that includes companies working in the 
clean energy sector who cannot compete with state-backed firms.
    So this is a very important hearing. We must ensure that we 
protect both U.S. economic and security interests, as well as 
the broader international system that has helped provide peace 
and stability in the Asia-Pacific and beyond.
    And I look forward to exploring those issues with our 
witnesses today. Again, an incredible panel you have put 
together.
    Senator Gardner. Thank you, Senator Markey. I agree with 
you on the incredible and outstanding quality of our witnesses. 
So, I thank the witnesses for your public service, all of you, 
and thank you for being here today.
    We are joined as well by Senator Barrasso and Senator 
Murphy. Thank you very much for being a part of this committee 
hearing today.
    We will now turn to witness testimony. I will introduce all 
three witnesses and then you can proceed with your testimony. 
We will begin with Ambassador Baucus and then Dr. Pillsbury, 
and Dr. Allison will be third. Thank you very much.
    Our first witness is the Honorable Max Baucus who most 
recently served as United States Ambassador to the People's 
Republic of China from 2014 to 2017. Obviously, no stranger to 
the United States Senate. He served as a Senator from Montana 
for 36 years from 1978 to 2014, including as chairman of the 
Senate Finance Committee from 2007 until his departure to 
become Ambassador. Welcome, Ambassador Baucus. Thank you very 
much for your service.
    We will also introduce the next two witnesses. Dr. Michael 
Pillsbury serves as the Senior Fellow and Director for the 
Center for Chinese Strategy at the Hudson Institute. Dr. 
Pillsbury is a distinguished defense policy advisor, former 
high-ranking government official, and author of numerous books 
and reports on China. He served as an Assistant Under Secretary 
of Defense for Policy Planning in the Reagan administration and 
has also served on the staff of four U.S. Senate committees 
from 1978 to 1984 and from 1986 to 1981. Welcome, Dr. 
Pillsbury. Thank you as well.
    Our final witness today is Dr. Graham Allison who serves as 
the Douglas Dillon Professor of Government at the Harvard 
Kennedy School. Dr. Allison is a leading analyst of U.S. 
national security and defense policy. He is probably the one 
that rejected my application to Harvard. As Assistant Secretary 
of Defense in the first Clinton administration, Dr. Allison 
received the Defense Department's highest civilian award, the 
Defense Medal for Distinguished Public Service. Dr. Allison has 
also served as special advisor to the Secretary of Defense 
under President Reagan. Welcome, Dr. Allison.
    To all three of you, thank you.
    Ambassador Baucus, if you would proceed with your 
testimony.

 STATEMENT OF HON. MAX BAUCUS, FORMER UNITED STATES AMBASSADOR 
      TO THE PEOPLE'S REPUBLIC OF CHINA, BOZEMAN, MONTANA

    Ambassador Baucus. Thank you very much, Mr. Chairman. It is 
sort of serendipitous to be back here in this position. Thank 
you very much for calling this hearing. Senator Markey, Senator 
Murphy, Senator Barrasso, I served with two of you, did not 
serve with the other two of you, which is some indication of 
how quickly times change around here. But it is an honor to be 
here.
    I have just got a couple things to say and I will summarize 
my statement.
    First, I loved this job representing the United States in 
China. It is the best job I ever had. I loved serving Montana 
in the United States Senate, Chairman of the Finance Committee, 
but I got to tell you representing the United States in China 
was terrific for two reasons.
    One is the people. Chinese people are so energetic. They 
are so practical, pragmatic. They are positive. They are 
competitive. They are almost survivalists. There is such energy 
there, frankly more than we find in the United States. Chinese 
people believe more in their future than we Americans generally 
do in ours.
    Second is just the reward of working on this relationship, 
U.S.-China. I very much believe--it has been said many times 
before and said many times in the future--that this is the most 
important relationship in the world, U.S.-China. It is going to 
determine so much. Whether we work well together or do not, it 
is going to affect the qualify of lives of our people, our kids 
and our grandkids, as well as the quality of lives of Chinese 
people, their kids and their grandkids. In many respects we are 
very similar. Chinese leadership is worried about its people; 
American leadership is concerned about our people. We are 
similar in that respect.
    But there are major, major differences. One is this. I 
think we Americans get indulged in this concept of 
exceptionalism. We Americans assume that if we just keep 
working with other people, other countries, the Chinese, they 
are going to be just like us. They would be more like us. Just 
keep working. That is the assumption. And I can tell you that 
is an incorrect assumption. China is China. The United States 
is the United States. We are very different countries, very 
different forms of government, and we have to recognize that. 
We think ours is superior; they think theirs is superior.
    I remember talking to a good number of Chinese leaders who 
I could quote to great length saying that their socialism with 
Chinese characteristics is vastly superior to ours. Why? Well, 
look, in one of your statements, how far China has come in the 
last 30-40 years, saying to me that they believe that they 
could never have progressed as quickly, as far under 
capitalism, under democracy. It never would have happened. And 
there is probably some truth to that.
    They do believe they are superior. They think they are the 
model for other developing countries, Africa, wherever in the 
world because they are so much more efficient. They can get so 
much more done so much more quickly. We have to recognize that 
and deal with that.
    We pride ourselves as Americans in our Judeo-Christian 
ethic, in our Constitution, our Bill of Rights, separation of 
powers, independent judiciary. It is our way. We think it is 
the right way. We assume too much it is the right way. We think 
it is right for us. We do think it is right for others, but we 
cannot assume that others are going to adopt it if they have a 
different point of view. In this case, China has a very 
different point of view.
    You have to remember, as has been said many times--and I 
think there is a lot to it--China is so proud of its history, 
thousands of years of history. We are such a young country, 
really 240-250 years. That is all we are. They are thousands of 
years. And the Middle Kingdom was the center of the universe 
for thousands of years. They would ask people to come and pay 
tribute, not to trade with them, just pay tribute, to kowtow to 
the emperors of the Middle Kingdom, but not do deals, just 
other countries would be subservient to them.
    Do not forget, about 1830, 32 percent of the world GDP was 
Chinese. America at that year was about 2 percent. They were 32 
percent. Look at what has changed during the Industrial 
Revolution and then China subsequently went inward. They now 
think after 200 years of humiliation controlled by the 
Japanese, French, Americans, Brits, and so forth that now their 
time has come. Their time has come to regain their rightful 
position as, if not the world leader, at least a major leader 
in the world. And it is very difficult to know how far that is 
going to go.
    I was in Beijing just a couple weeks ago. I was surprised 
to learn from a number of Chinese who believe that, gee, you 
Americans, you pursued the Monroe Doctrine in 1823. You 
Americans wanted to keep the Europeans out of your sphere. 
Well, we Chinese--you know, it is our turn now. You should not 
interfere with what we are doing. Basically they are trying to 
set up a duality where China controls this part of the world. 
They want the United States to control this part of the world. 
Of course, that is never going to work. Times have changed so 
much. But that is a lot of their thinking right now as they try 
to figure out what makes best sense for them.
    China, remember this, is authoritarian, one party rule. The 
party is everything. It is involved in all parts of Chinese 
society. The 19th party congress enhanced President Xi's power 
but also very much it enhanced the role of the party in Chinese 
society. Xi's thought is embedded in the constitution. So if 
you question President Xi, you are not questioning him. You are 
questioning the party because his thoughts are in the 
constitution. It was a very, very major change.
    They are doing this in part--the party is--to maintain 
control. Part of the Faustian bargain, the party believes, we 
take care you, we take care of the people, and you do not 
question our legitimacy. That is part of the deal.
    But in addition they believe with much greater party 
control, they then can control their destiny. They can decide 
what direction they want to go as a country free from internal 
discord. If the party has control, they are able to control 
what happens. That came through in spades to me just in the 
last couple weeks when I was over there talking to some Chinese 
officials.
    This became crystallized for me in November 2014. President 
Obama was visiting President Xi at a summit meeting there in 
Zhongnanhai. And President Xi, you could tell--he was worried 
about American involvement in Hong Kong thinking we Americans 
are fomenting unrest in Hong Kong. President Obama said, oh, 
no. We do not do that. But he did say, you have got to remember 
that human rights is very much in our DNA. It is in our 
Constitution, the Declaration of Independence, the Bill of 
Rights. So when Members of Congress stand up on behalf of human 
rights in Hong Kong, you got to remember that is in American 
DNA. He also said it is in my DNA too.
    President Xi then responded by saying talking about the 
role of emperors in China. And emperors in Chinese history take 
care of the people. And if people are happy, they could stay in 
power. He said the role of the party now is to take care of the 
people. It even trumps human rights, he said. All is taking 
care of the people irrespective of human rights or anything 
else. So he believes and the government believes they can 
people happy by more income--income is rising--address air 
pollution, water pollution, food safety, more health care. 
People will be happy and then they will stay in power and they 
can do what they think makes sense for them tapping into the 
strong nationalism that occurs in that country.
    So the question is what do we do. What do we do about all 
this?
    Number one, I believe--and this is kind of a fanciful 
recommendation--if we could load up a 747 full of Members of 
Congress, members of the executive branch, media, business 
people, fly over to China, go around China for a couple of 
weeks, go to different provinces, talk to the party 
secretaries, talk to the business people, Chinese business 
people, American business people doing business in China, 
seeing is believing. We know that. 80 percent of life is 
showing up. If more Members of Congress and more American 
officials spent a lot more time in China, tasting it, feeling 
it, smelling it, know what it is, this could make a huge, huge 
difference. There is just too much abstract thinking about 
China, not enough concrete because we are just not there 
enough.
    Second, we all know that China thinks long-term. China is 
strategic. They have kind of got a plan. It is opaque. It is 
behind closed doors, but it is a plan. We Americans are just so 
ad hoc in our decision-making it is embarrassing. During the 
last 3 years when I was there, I was part of many discussions, 
the administration, what do we do about this, what do we do 
about that. It was all reactive. It was all reactive. There was 
no paradigm. There was no structure. There was no plan that the 
various parts could potentially be part of.
    It is very hard in our form of government to develop a 
longer-term plan. Congress people come and go. Presidents do. 
It is very hard. But I think we have to try. We have to do 
whatever we can to develop a longer strategic plan. And I think 
the Senate Foreign Relations Committee can play a very good 
role here by having lots of hearings on various aspects of 
China and keep it up every year so there is a history built up 
and there is a record so this is institutionalized if we work 
on this question.
    Number three, you got to stand up to China. You got to 
stand up to them. Do not forget. We are process-oriented--we, 
Americans. We are kind of the arbiters. It is kind of neutral. 
The similar analogy is when you are treading water, you are 
sinking. You know, we do not have a real aggressive plan. We do 
not want to take advantage of other people. We do not want them 
to take advantage of us. But we do not have a plan that is more 
far-reaching that one could put one's finger on that is 
tangible and get a sense of. China does. They have got their 
plan, and it is more action-oriented. It is more proactive. We 
do not do that as Americans. But we have got to stand up to 
them because if we do not, they will just keep going. They will 
just keep going until finally somebody stands up to them.
    I want to mention very briefly two instances where we did 
stand up and it really worked.
    We are quite concerned, obviously, about the island buildup 
in the South China Sea. We watched with great frustration as 
China one step at a time--it is similar to the Chinese board 
game of wei qi. We play chess in the West. They play go and wei 
qi in the East. And they are just salami slicing a step at a 
time, and the proof is when the game is over because you have 
just surrounded your opponent. You just won. That is just the 
way it is. That is what they did in the South China Sea.
    President Xi came over one day. It was just before a 
summit. And President Obama proudly said to President Xi do not 
go there. He was talking about Scarborough Shoal just outside 
the Philippines. He said if you occupy Scarborough Shoal, there 
will be immense consequences. You will rue the day that you did 
this. I am not telling you what the consequences will be, but 
do not do it. They stopped. They did not do it.
    There were other examples. But you have to stand up in my 
judgment not with tweets, not publicly, not with name-calling, 
but privately and show, because you have thought through with 
your strategic plan, that you mean it. And you have to game it 
out. They will retaliate. We will have to figure out what our 
counter is, back and forth, but they have to see that we really 
mean it. Many times in my experience when we do stand up--but 
you got to stand up, you got to know you are standing up--they 
will say, okay, I guess we cannot quite go there.
    So that is just my basic prescription: spend a lot more 
time in China to understand it, develop a plan, and just be 
firm. Chinese people are wonderful. It is great potential here 
for our two countries.
    And I have got one more final point here. Part of the last 
point is speaking truth to power. I, after a while, in all the 
meetings I had, would ask questions. I would interrupt the 
interlocutor who was reading from his talking points. Just ask 
questions. Break in mid-sentence. Give me an example of that. 
Explain more fully. They liked it. You got to speak truth to 
power.
    And second, I did this very frequently. I think Professor 
Allison will appreciate this. At many, many meetings, I just 
asked the Thucydides Trap question. I would say, look, your GDP 
is doubling every 10 years. Your military spending is doubling 
in 5 or 6 years. We look at the trend line, and what are we to 
think, we Americans, we Westerners? It is not only what you 
say. It is what you do. What are your actions to show that you 
really want to work with us so we can avoid the trap? I would 
ask that question constantly. They would always listen. They 
would not respond, but they listened. And my judgment is we 
have to keep asking that question of the Chinese and of 
ourselves because they are rising, established, things are 
going to change. And it is another reason for those longer-term 
strategic hearings which I recommend this committee pursue at 
great length because I think it is really key.
    Thank you very much, and I apologize for speaking over my 
allotted time.


    [Ambassador Baucus's prepared statement is located at the 
end of this hearing transcript.]


    Senator Gardner. No. Thank you, Ambassador.
    I know several of you have family members here. So thank 
you for joining us as well.
    Dr. Pillsbury?

STATEMENT OF DR. MICHAEL PILLSBURY, SENIOR FELLOW AND DIRECTOR, 
CENTER FOR CHINESE STRATEGY, HUDSON INSTITUTE, WASHINGTON, D.C.

    Dr. Pillsbury. I want to agree with all three of Senator 
Baucus' recommendations, although I am not sure we should put 
all of the Congress on one 747 at the same time. [Laughter.]
    Dr. Pillsbury. More knowledge of China, a deeper role, a 
bigger role for the Senate Foreign Relations Committee and the 
Senate in general, and number three, standing up to China.
    Let me go back to Senator Markey's opening statement. The 
Senate Foreign Relations Committee by its visits and by its 
legislation--and here I want to specifically praise Senator 
John Barrasso for being one of the cosponsors of the 
legislation introduced last week to strengthen CFIUS. This is 
landmark legislation. It has nine cosponsors already: five 
Republicans, four Democrats, including Dianne Feinstein. Your 
House parallel legislation sponsors stood up last week and said 
this is about China, whereas the Senators so far have been more 
tactful. This is about any country whose investments in our 
country need to be monitored or restricted.
    This particular piece of legislation is an example of I 
think what Senator Baucus is talking about: Senate or 
congressional leadership on forming a long-term strategy toward 
China. The Founding Fathers wrote into the Constitution a 
really crucial role for the Senate, not just in the 
confirmation process, but in the treaty ratification process 
which, if you have read some of the early stories of George 
Washington and Henry Knox, for the first treaty they thought 
they would just show it to the Senate for a few minutes and 
then take it back. And the Senators said, no, we need to keep 
it overnight. And there was something close to a tug-of-war. 
Accounts vary on whether the President would let the Senators 
have the treaty overnight. The Senate won.
    And the role of the Senate Foreign Relations Committee, in 
particular in its oversight of the State Department, can serve 
not just as a kind of source of advice, but also legislation. 
And I provide in my paper 10 or 11 examples of some really 
specific things that I believe are already being worked on. I 
certainly support Senator Gardner's effort at the Asian 
Reassurance Initiative.
    There is a parallel effort, as you know, with Chairman 
McCain over in the Armed Services Committee. I was pleased in 
Singapore in June to hear Secretary of Defense Jim Mattis 
endorse the McCain initiative. It is not clear what the $300 
million or $400 million exactly would be spent for, but the 
intent is clear, that our Asian allies and partners do not have 
shared situational awareness of what is going on in Asia.
    The Indians fairly recently were joking about we want to 
make the Indian Ocean, the Indian Ocean, by which they meant 
the purchase of several billion dollars worth of American P-8 
aircraft which have weapons systems in the back that can sink 
ships frankly and other improvements, including maritime 
situational awareness and a big new center in Delhi where the 
Indians can keep track of both blue hulls and gray hulls going 
through the Indian Ocean. The Chinese are very angry about 
this. They have criticized the Obama administration for its 
effort to, as they say, boost India to a higher rank order in 
comprehensive power than the Chinese believe India deserves.
    So I think it is a very good thing that Chairman Gardner 
mentioned the Indo-Pac region and this new concept which we 
have now heard more than 50 times by members of the Trump 
administration, including the President himself on his trip, a 
free and open Indo-Pacific region.
    The Chinese have already attacked this. They do not like 
it. It is probably an example of what Senator Baucus mentioned, 
standing up to China, because frankly there is quite a long 
list of Chinese initiatives to which the United States has not 
responded. One of them is the Belt and Road initiative that 
Senator Markey mentioned. I completely agree with him that they 
are offering low-interest loans to countries that cannot afford 
it. We are already faced with the example of Sri Lanka, which 
fell behind in its payments, and then was the subject of 
coercion that if you transfer the main port here in Sri Lanka 
to Chinese control, we will forgive the debt. The Sri Lankans 
did it.
    A similar operation has occurred recently with assuming the 
control, financially at least, of the main port of Greece, 
Piraeus, and then asking the Greeks to interfere and block 
European Union human rights action.
    So we are beginning to see just through the media what the 
Belt and Road initiative may mean. However, the only statesman 
in the world who stood up to it yet is Prime Minister Modi. He 
and his team have been quite outspoken partly because the Belt 
and Road initiative includes violation of Indian sovereign 
claims. But the United States Government up till now--and this 
is a 5-year-old initiative if you count the early part of it--
has been silent. We sent our National Security Council staff, 
senior director for East Asia, to the Belt and Road summit who 
said something positive about American companies, but he 
neither opposed nor supported the Belt and Road initiative.
    There are several others. One is the new model of great 
power relations that in many ways anticipates Professor 
Allison's excellent book. The new model of great power 
relations has been proposed by President Xi. He has described 
it as a personal signature initiative. A gentleman named Wang 
Huning, who is now on the standing committee of the Politburo, 
is the scholar allegedly who thought it up. We have had no 
answer to it.
    Susan Rice, John Kerry, President Obama, all three have 
said we should explore it or try to see what it means but have 
not endorsed it. Neither did President Trump on this trip. 
Frankly, if you ask the Chinese--and I agree with Senator 
Baucus about how energetic they are. If you say what is the new 
model of great power relations, they say, well, it replaces the 
old model. And what is the old model? Well, it is the main 
theme of Graham Allison's ``Destined for War.'' In the old 
model, the rising power either starts a war with the hegemon or 
the hegemon starts a war with the rising power.
    So you would think who could be against the new model. But 
then it turns out the new model does not explain who a great 
power is, whether India, the European Union, or Japan qualify 
or it is just a G-2 bilateral arrangement. It does not explain 
whether the use of force would ever be justified by the United 
States. It sounds in some ways as if the new model of great 
power relations, if we would agree to it, is saying we will not 
come to the defense of any ally in the region against China.
    So the Senate has yet to speak on those two Chinese 
initiatives, and there are several others. One is the Asia for 
the Asians concept where our embassy asked to be at least an 
observer down in Shanghai to go to this confidence building 
conference, and we were told no. You can be an observer, but 
when we say Asia for the Asians, we do not include the United 
States.
    There is another vague concept, one I personally love, 
called the Community of Common Destiny. This was repeated 
several times in President Xi's 3-and-a-half hour speech. No 
one quite knows what the Community of Common Destiny is. But 
Senator Baucus mentioned the old tribute system, and there is 
some reason to believe that that is really what it is. It is 
reactivating a common destiny led by China.
    And that lets me mention my agreement with Professor 
Allison on Lee Kuan Yew. Your first set of four or five 
questions for the hearing asked about Chinese intentions. And 
there is really no better answer than what Lee Kuan Yew gave. I 
will see if I can get the exact quote here. ``It is China's 
intention to be the greatest power in the world.''
    Now, we used to take that with complacency because of what 
was called the China collapse theory, that they are going to 
fall apart. They have no chance to be the greatest power in the 
world. That book came out, ``The Coming Collapse of China,'' in 
2002. 15 years later, China's GDP has not only doubled. It has 
almost tripled. So the China collapse theory, which Graham 
Allison essentially attacks in his book and I attack in my 
book, essentially is no longer credible in my view. They have 
problems but they know what to do about those problems.
    So just a list, in closing, the 10 steps that I think are 
under consideration.
    You may think this is trivial, but we have sued China more 
than any other country in the World Trade Organization in 
Geneva. The experts tell me we could have sued China and should 
a great deal more times, but there is a limit on the number of 
lawyers on the Department of Justice payroll for designing and 
crafting often very complex lawsuits so that the suit succeeds 
in Geneva.
    Number two, the comprehensive CFIUS reform. I love the 
Cornyn-Feinstein bill, but it does not mention the allies. We 
have got to coordinate with the European Union and especially 
Germany and France about these Chinese investments undergoing 
scrutiny. A number of European Union leaders have already come 
out for this in the last couple of months. I think we should be 
joining them on joint scrutiny of sensitive Chinese investments 
that either challenge national security or are opaque because 
you cannot tell what a Chinese company is, whether it is part 
of the government or not. The fact that Senator Dianne 
Feinstein supports this legislation I think is very important. 
So does Richard Burr, the chairman on the Intelligence 
Committee.
    Number three, I mentioned that more coordination with 
allies. What I took out of President Trump's trip was that he 
spent a lot of time with three multilateral organizations. It 
was not just five countries being visited bilaterally. That is 
important. It seems to me nothing really of significance along 
the lines of what Senator Baucus is calling for can be achieved 
in Asia or the Indo-Pacific region without allies and partners. 
We cannot underline that enough.
    Number four is an old pitch. Professor Allison's book says 
China is going to deny us a Sputnik moment because China does 
not want us to give a boost to STEM, to federally funded R&D. 
We should do it on our own. There are a lot of good ideas from 
the Senate Competitiveness Caucus, from what is called the 
ITIF, and from another set of groups who work on competition 
showing that federally funded R&D is the source of our global 
superiority. Yet, we have dropped from 2 percent to about a 
half of 1 percent in our federal funds.
    I think publishing a list of Chinese companies who engage 
in intellectual property theft and unfair trade practices would 
not only inform possible litigants but also puts the Chinese on 
notice we are watching this kind of behavior that Senator 
Markey alluded to.
    Finally, measures to provide U.S. companies a better 
understanding of state-owned entities is important because when 
something like the purchase of the Waldorf Astoria takes place, 
on the surface it looks wonderful. It is a good deal for the 
Waldorf Astoria. But what is the nature of this Anbang 
insurance company? The CEO has now disappeared in China, and 
the more people examine it, the more it clearly has very close 
relationship perhaps under the control of the Chinese 
Government.
    I mentioned in passing the Foreign Sovereign Immunities Act 
and the Economic Espionage Act could use revisiting. As you 
know, when a state-owned company in China is active here and is 
sued, you would think a judge would say, well, we cannot attach 
those assets because you do not really have any presence. We 
can attach another state-owned company. The judges have been 
saying the Foreign Sovereign Immunities Act is unclear.
    The Economic Espionage Act, if you go to the DOJ website 
for last year, it makes you want to cry. Almost 100 cases of 
sensitive U.S. trade and national security information 
disappearing. And frankly, just to give you one of the most 
dramatic examples, a gentleman is now doing 7 years in prison 
because he fell in love with a Chinese woman. The judge at his 
sentencing--Senator Baucus, the judge at the sentencing said 
you fell in love with this woman, you lost control. I am only 
giving you 7 years because you did not really harm the United 
States. You did not intend to.
    Well, what had he done? The FBI and DOJ have put up the 
details. He had a highly classified document called the DOD 
Strategy for China. Despite Professor Allison criticizing the 
government that we have no strategy, apparently we did. It was 
published in 2012 and 2 years later apparently is in the hands 
of the Chinese. That is not all. There is quite a long list of 
documents that he either gave Ms. Lee or were around in his 
home while she was there. It is well worth reading, the DOJ 
website. You may think what could be more boring than that, but 
the cases are dramatic.
    Finally, another thing we have not responded to as a 
government is the new Made in China 2025 plan, which on its 
face is a violation of the WTO. You simply cannot say we will 
have government procurement in China to dominate 10 sectors in 
violation of the WTO, and they are close to saying that.
    Finally, something I sort of brought up as one of my 12 
recommendations in my own book, we have never done an inventory 
of all the U.S. Government-funded activities for the last 40 
years to help China. Some of it is quite stunning. The National 
Science Foundation, if you go to its website to apply for a 
grant--and by the way, Graham, they have them in political 
science too--you get a bonus if you have a Chinese partner. We 
have almost 100 agreements with various scientific agencies in 
China to provide scientific discoveries immediately to China. 
And they have been known in a rather cheeky way to complain to 
the embassy in Beijing, hey, we read about this, this new gene 
editing device. You have not transferred it to us yet and tweak 
the NSF or the embassy minister counselor of science and 
technology. That is really possibly a good thing in some areas. 
We ought to cooperate in cancer research. We ought to cooperate 
in improving weather forecasts with this joint of fleet of 
ships we have in the South Pacific.
    But I think the Senate should know the total inventory of 
these programs, none of which has been blessed with legislative 
approval. In many cases, you find weird programs where someone 
discovered prairie grass roots can be made deeper and save a 
massive area of the country. The relevant government department 
simply transferred it to China. There is no sense of 
competitiveness with the Chinese in very sharp contrast to 
Senator Baucus' invocation of their competitive attitudes.
    And finally, the intelligence efforts. The FBI asks every 
year for more money for Chinese industrial espionage in 
particular, cyber theft as well. The FBI deserves a real 
incentive for what they have done so far, but they say more 
needs to be done. And part of the reason is again what Senator 
Baucus opened up with, Chinese exceptionalism. They seem to 
have a very different concept of espionage than we do and than 
the Soviets did, not official cover agents in embassies going 
to cocktail parties and trying to recruit agents. On the 
contrary, something very different that operates not out of 
embassies but out of almost anywhere else. And that is very 
expensive to cover. But if this list I mentioned of the recent 
cases last year is any guide, we are under a real challenge 
from a Chinese collection system that takes your breath away.
    Thank you.


    [Dr. Pillsbury's prepared statement is located at the end 
of this hearing transcript.]


    Senator Gardner. Thank you, Dr. Pillsbury.
    We are joined by Senator Kaine.
    Professor Allison, please proceed.

 STATEMENT OF DR. GRAHAM ALLISON, DOUGLAS DILLON PROFESSOR OF 
  GOVERNMENT, HARVARD KENNEDY SCHOOL, CAMBRIDGE, MASSACHUSETTS

    Dr. Allison. Thank you very much. It is a great honor to 
appear with distinguished colleagues. I find much in what they 
have said to agree with.
    Let me commend you and the committee for trying to 
investigate this topic because I do not think there is a more 
important topic for the U.S. today.
    So I will try to summarize my points briefly. They 
basically come out of this book that I have recently published 
called ``Destined for War: Can America and China Escape 
Thucycides's Trap?'' and I think copies of the book were 
delivered to your offices previously.
    So I will try to make six or seven propositions.
    First, the U.S. now faces a rising China that today 
constitutes a full-spectrum rival. So the notion of we are not 
going to have peer competitors, that was then. This is now. 
Never before has a country risen so far so fast on so many 
different dimensions. Ambassador Baucus and I were talking. He 
said he has been gone for 6 months, and he goes back and he is 
shocked again. So I try in the first chapter of the book to 
give you a shock that just sort of says behold the rise of 
China. I quote Vaclav Havel, the former Czech President. Things 
have happened so fast we have not yet had time to be 
astonished. So I think you should look at the evidence and it 
is just overwhelming. And then I think you should go and look 
with your own eyes.
    Secondly, we should recognize the structural stress that 
occurs when a rising power threatens to displace a ruling 
power. This dangerous dynamic I call Thucydides Trap, and 
Thucydides had this idea about 2,500 years ago. It is a big 
idea. So when a rising power threatens to displace a ruling 
power, in general poop happens. So in the book, I look at the 
last 500 years. I find 16 cases in which this phenomenon 
occurred. 12 of them ended in war; 4 of them in not war. So the 
proposition that is acclaimed that says war between the U.S. 
and China is inevitable would be wrong on the evidence, but to 
say that the odds are not good would be correct.
    Third proposition. In this dangerous dynamic, the primary 
source of risk is not that the rising power decides I am big, I 
am strong, it is time for me to fight you. And it is not 
generally the case that the ruling power decides you are 
getting so big for your britches, I better fight you now 
because tomorrow you are going to be even stronger. Instead, 
what happens is in this dangerous dynamic a third party's 
action becomes a provocation to which one or the other primary 
competitors feels obliged to respond, to which then the other 
feels obliged to respond, and you get a cascade that drags 
people to a place where neither want to be.
    So ask yourself how in the world could the assassination of 
a relatively minor archduke in June of 1914 have created a 
conflagration that burned down the whole of Europe. I have a 
good chapter on this in my book. It is a subject I studied when 
I was in college. I still cannot tell you the answer. It still 
makes no sense. Nobody wanted war. When they thought about what 
a war would mean, they knew it would be catastrophic. At the 
end of the war, every one of the principal actors had lost what 
he cared about most. So if they had been given a chance for a 
do-over, nobody would have judged what he did, but the emperor 
in Vienna did, thinking I need to hold together my empire. End 
of the war, he is gone. His empire is gone.
    The Russian czar is backing the Serbs because they are 
Orthodox. He had been overthrown by the Bolsheviks. He is gone.
    Kaiser is backing his only ally in Vienna. He is gone.
    France, society never recovers as a great player.
    And Britain, which has been a creditor for 100 years, is 
turned into a debtor on a slow slide to decline.
    So you do not have to have people that want war. What can 
happen is an external event.
    And if I think about the Cuban missile crisis in 1962, 
which I have studied very carefully, here you see a competition 
between the U.S. and the Soviet Union and the risks that were 
created by Castro. And then today, the chief candidate or 
provocateur is, as President Trump would say, little rocket 
man.
    So next question. Is Xi and his colleagues, when they are 
talking to each other privately--are they serious about 
displacing the U.S. as the predominant power in Asia in the 
foreseeable future? And I put that question to Lee Kuan Yew who 
was the world's premier China watcher until his death in 2015. 
I quote in the testimony his answer. He says, ``Of course. Why 
not?'' Who could imagine otherwise? How could they not aspire 
to be number one in Asia and in time'' beyond?
    So Ambassador Baucus talked about China imagines through 
all of history, it was the center of the universe. It was the 
great power. There was then this interruption, which occurred a 
couple hundred years ago. It created centuries of humiliation. 
But that was then. We are back and we are going to be back to 
the way things were before.
    Next to final, what is going to happen in the current 
Korean missile crisis, which is just the most dangerous of the 
events that is occurring in the context of this Thucydidean 
dynamic? So jump ahead a year from today. We will see one of 
three things will have happened. One, Kim Jong-un will have 
acquired the ability to reliably strike San Francisco or Los 
Angeles with a nuclear weapon. Or two, Trump will have 
conducted air attacks on North Korea to prevent that happening. 
Or three, there will be a minor miracle. Now, I believe in 
miracles. So I am praying for the third, but I am not counting 
on it.
    I would say it is quite possible--I think the first is more 
likely than the second, that is, that Kim Jong-un succeeds, 
that he will have trumped Trump. And that is not a very good 
world either, as I suggest in the piece that I attached to the 
testimony.
    The second is that we attack North Korea, and if we do, the 
normal game that Michael and I have played many, many times at 
Defense ends up with North Korea attacks Seoul. We then 
suppress the attacks on Seoul. Pretty soon we have attacked a 
couple of thousand endpoints. Then there is a second Korean 
war. And as Secretary Mattis has testified, in the second 
Korean war, make no doubt, we will win. Korea will be unified. 
The Kim regime will be gone. But the one question that he has 
not been asked is, what about China? And if we cannot imagine 
North Korea dragging China and the U.S. into a war that 
everyone knows would be nuts and that nobody wants, we should 
remember what happened in 1950.
    In 1950, North Korea attacked South Korea. We came to the 
rescue. MacArthur was pushing the North Koreans right back up 
the peninsula. We went across the 38th parallel where the war 
started. We were approaching the Chinese border. He thought we 
were going to wrap it up, bring the troops home for Christmas. 
It was inconceivable to him that a China, which had only the 
year before consolidated control of its own country--Mao was 
just barely getting over the long, bloody civil war--would 
attack Superman. We had a nuclear monopoly. We had just 5 years 
before dropped bombs on Hiroshima and Nagasaki to end World War 
II. It just was impossible. China was one-fiftieth our size. It 
is going to attack us? Never.
    But MacArthur woke up one day and here are 300,000 Chinese 
and pretty soon a half million others. They beat us right back 
down to the 38th parallel and we had to sue for an armistice. 
Tens of thousands of Americans and hundreds of thousands of 
Chinese and millions of Koreans died in that war.
    But did Mao want a war with the U.S.? Never. Did the U.S. 
want a war with China? Never. We did not want the North Koreans 
to take over South Korea, and one thing led to the other.
    So I would say Chinese say to me--and I think it is 
uncertain what they would actually do, but they say we have 
established the proposition there is not going to be a unified 
Korea that is an American military ally. Mao made that point in 
1950, and we should not have to play that game again. I say to 
them if you were to get into war with the U.S., every part of 
the China dream goes right to hell. And they say, yes, but if 
you were to get into a war with us, what is that going to look 
like for you? So I would say this is extremely, extremely 
dangerous.
    Finally, what for the U.S. to do, Senator Baucus' point. In 
Washington, I know that you are supposed to describe the 
solution to the problem in the same sentence that you describe 
the problem. I think that is one of the problems. Okay? So this 
is not a fixable Washington problem. This is a condition, like 
a chronic condition, that we are going to have to cope with for 
as far as we can see: a rising China, a ruling U.S., the stress 
and strain that comes in that circumstance. And what I do say 
in the book in the conclusion is we need to get the diagnosis 
right first. So the medical idea that diagnosis precedes 
prescription is a very good insight.
    I tried to get the diagnosis right in the book. That is the 
purpose of it. In the conclusion I say, if the diagnosis is 
correct, what then is required? So if we are facing conditions 
of extreme danger, then we have to be smarter. We have to be 
more imaginative. We have to be more adaptive. And I would say 
in this current situation, business as usual, which is what I 
think we have seen for the last 20 years, Republicans and 
Democrats, more or less, will likely produce history as usual. 
So my hope is Santayana's line about only those who fail to 
study history are condemned to repeat it. And what I would hope 
we do now, what I think the Foreign Relations Committee can 
play a key role in doing is starting stimulating imagination 
beyond the orthodoxy of the current situation.
    In the conclusion of the book, I give you something way to 
the left of anything anybody ever heard of in Washington that 
might make sense--I am not advocating it--and something way to 
the right of anything that you have heard in the current debate 
and not because I am subscribing to either of these but simply 
to say we have not opened up the space for the discussion and 
debate.
    And my optimism about this is if we go back to the 
invention of the strategy for the Cold War, that is 
breathtaking. I think most of us have not really looked at it 
and appreciate it. I have a description of it in the book.
    1946. It is April, so a year after the war. Kennon writes 
back this famous long telegram, and he says the Soviet Union is 
going to be a greater existential threat to the USA than the 
Nazis were. Truman says who is this guy and what in the world 
is he saying. This makes no sense. We just got exhausted in the 
war against first the Germans and the Japanese. We are bringing 
the troops home. We are trying to worry about health care and 
about the American economy. Do not tell me we have another 
dragon out there.
    That stimulated a conversation which 4 years later had 
created one of the most imaginative strategies I think in the 
history of statecraft forever. So it had an economic strand. 
That was the IMF, the World Bank, the GATT, the open training 
system, and the Marshall Plan, which was again a breathtaking 
idea. It had a military component with both American military 
forces but also with NATO. It had entangling alliance. George 
Washington said do not do that, but it said Europe and Japan 
matter enough to us that unless we are able to rebuild it and 
have them as allies, we will not be able to deal with this 
competition. It had a political dimension. I mean, the whole 
thing is breathtaking.
    So the fact that we have done something like that before as 
a society would suggest that is not impossible. But I think 
that that is the challenge.

    [The Dr. Allison's prepared statement is located at the end 
of this hearing transcript.]


    Senator Gardner. Thank you, Professor Allison.
    You have all given us a great deal to think about.
    We will go ahead and begin the questions. You have given us 
a number of questions. We will probably have some questions for 
the record to follow up with, if that is all right. We will 
give you some homework.
    In your testimony, both verbally as well as in the written 
testimony, Professor Allison, you talk a little bit about this 
democratic peace hypothesis. And we have talked about how if we 
work with China to address human rights, if we work with China 
to address intellectual property, if we work with China to 
address reforms when it comes to different laws and respect of 
the rule of law, that they will eventually come around to our 
way. You have talked about how that is simply not going to be 
the case.
    If that is not the case, then how does the United States 
position itself in the region with other nations that obviously 
will not like that outcome either? What is the best result for 
us to position ourselves with allies in the region to counter 
that?
    Dr. Allison. Thank you. That is a great question, and it 
actually relates to the point that Senator Baucus made before.
    So it is a little bit of a caricature but only a little bit 
that in 1991 when the Cold War ended and the Soviet Union 
disappeared, most of the strategic community, most of the 
Washington community sort of took a victory lap and was in a 
stage of celebration. And there was a very famous book that was 
written by a brilliant scholar, Frank Fukuyama. It was called 
``The End of History,'' and it declared that now democratic 
capital had swept the field and there would no longer be 
ideological competitors. And the theory of the case was the 
Soviet Union had gone bad because they were trying to run a 
command and control economy. Only market capitalism can make 
you rich. So everybody is going to adopt that, and as they get 
richer, they are going to have a middle class. And if you have 
a middle class, it is going to have more political 
participation. So it is going to become democratic. And 
democratic societies, according to the democratic peace 
hypothesis, do not fight each other. And the kind of cartoon 
version of that was Tom Friedman's golden arch theory in which 
two countries that have McDonald's golden arches cannot fight 
each other.
    So we imagined China was going to become like us. But I 
have a chapter in the book on clash of civilizations. I think 
Senator Baucus captured the point. The Chinese think they were 
Chinese before we ever arrived. They think they have a 
civilization that has its own view of the way things work. They 
think that the emperor or a system--I call Xi Jinping, now that 
he has been reelected, but without a successor, the new emperor 
of China, that basically the emperor through the party, which 
is the reach of the Leninist Mandarins, the way the Mandarins 
used to give the reach of the emperor, are going to lead the 
society. And if you look at the work plan that Xi laid out last 
week, it has got the party leading the economy, the party 
leading the military, the party leading the society, the party 
leading the Internet, the party, the party, the party. So they 
believe that a small group of people who are going to be, 
quote, more virtuous--that is part of what the anti-corruption 
campaign is about--are going to lead their society, and they 
are going to demonstrate that they can deliver more of what 
people want than we do.
    Another one of the shockers for people who thought, oh, 
well, they are really going to come around to our way was in 
the 19th party congress in Beijing last week and the week 
before. Before they had never talked about a China model. They 
have always said we do not have a model. We just do for 
ourselves. We are a poor developing country. They said I think 
we do have a model. I think we have a model of how if you want 
to get rich fast, this is the way to go. And this way is an 
authoritarian way that is contrary to our view. This is a view 
that says the citizens have obligations more than our view that 
they have freedoms and rights. This is a view that says we are 
going to control the whole information system so we both know 
what you are saying and what you are thinking. We can keep 
track of you. And we are going to exploit our situation to the 
maximum extent that we can get away with.
    So I think we should recognize we have a serious peer 
competitor who has a different image of how they want to rule 
their world inside China and how they want to behave in the 
region. And I think that is what makes the competition there 
because we are not going to give up who we are being 
democratic. Our Constitution says all human beings are endowed 
by the creator with inalienable rights. So we are not about to 
change that set of views, and they are not, I think, about to 
change their views.
    Senator Gardner. If I could quickly get an answer from the 
three of you actually on the President's visit to Asia. How 
would you portray the success or the outcome of the President's 
Asia visit? Dr. Pillsbury?
    Dr. Pillsbury. I would call it a success in the sense that 
it lays the foundation for future trips. There is a number of 
themes he brought up bilaterally that you actually will find in 
these very detailed bilateral agreements issued at each stop. 
For example, the one on the Philippines actually has a section 
on human rights. In each one of these agreements, there is a 
discussion of security cooperation, arms sales, specific 
things. I noticed the press does not cover any of those 
agreements, but if you put them together, it is almost 50 pages 
of the beginnings of an Asia-Pacific or an Indo-Pacific 
strategy. I am talking about the bilateral agreements that the 
President issued at each stop.
    Secondly, he started some broad themes that we can 
integrate better than before possibly security and trade and 
economics. If you notice the team with him in the meeting with 
President Xi, you saw Bob Lighthizer sitting there from USTR. 
That is unusual. You saw four NSC staffers, some of whom cover 
strategy in economics, not just the East Asia couple who were 
there. So this to me is refreshing, the idea that the pivot 
perhaps was a good idea to start with, but it needs to be a 
combination of trade and economics with security issues and 
arms sales.
    And there is another angle to it that the President brought 
out. The bilateral meetings can be harmonized at the same time 
as the multilateral meetings. There is an old expression that 
Senator Markey I am sure knows that they use in the State 
Department called multi-bi. It does not mean what you think it 
means. It means multilateral and bilateral combined.
    So I think Professor Allison has done us all a great 
service in this book about the diagnosis of the problem, but he 
is a little bit late to the party. A lot of Senators, 
Congressmen, White House staff, people in the Defense 
Department are already working on very specific, tangible 
legislation and other steps that frankly accepts ``Destined for 
War'' as being correct in its diagnosis. But it is time to get 
down to specifics, and I think we are way beyond the McDonald's 
arches theory. We are now into really specific things. Does the 
Senate Foreign Relations Committee want to check up or not on 
what the entire executive branch is doing to help China be more 
competitive? That is like a yes or no.
    Senator Gardner. Thank you. I am well beyond my time. Do 
you mind if I hear from the other two, just the visit to Asia? 
I would appreciate your point of view.
    Dr. Allison. I think I agree with Michael mainly, but I 
would say it is very hard to tell. I would give it a successful 
for as far as I can see from the actions and the words. But the 
work that was done was done in private. So without having a 
sense for whether Xi and Trump sat down together, what I would 
wish and say, wait a minute, here is this jerk, Kim Jong-un. He 
could drag the two of us into a war. Let us be serious about 
how we are not going to let that happen. Either they made some 
real progress on that front or they did not. And I think we 
cannot tell at this point. You could see that is what President 
Trump was trying to do, and he was trying to work with Xi in 
that regard.
    But I think if I watch Xi's actions so far, well, you can 
see a little bit of hope. I mean, that is the minor miracle 
that I am looking for in this situation because I think there 
is no question that if Xi says to Kim Jong-un you are stopping, 
no more ICBM tests and no more nuclear tests, and if you 
violate that, I am squeezing this oil lifeline, it will get his 
attention.
    Senator Gardner. Thank you, Professor Allison.
    Ambassador Baucus, I am way over time. Do you mind? 
Ambassador Baucus, please.
    Ambassador Baucus. I take a slightly different view. 
Frankly, I do not think the President accomplished very much in 
China. There is no evidence of any movement on North Korea. The 
United States has been asking China, almost demanding of China 
do more, do more, do more. President Trump did too. No result.
    Second, there was this big agreement announced of deals 
between American companies and China. If you look down deep, 
you will find out there is not much there there. There are MOUs 
or there are deals that were agreed to earlier. There is 
nothing new.
    But more importantly, there is nothing that I could see to 
address the fundamentals, the fundamentals being market access, 
American companies denied sufficient market access in China, 
addressing all the subsidies that China made in China 2025 has 
been mentioned. There is nothing addressing those fundamentals. 
I think we lost. We looked weak in my judgment because there 
was nothing solved.
    Then you go further south, the big, glaring problem is that 
his presence there and his words withdrawing from the TPP send 
a signal to all the countries in the region that we are really 
not fully involved and we are starting to withdraw, ceding to 
China.
    Lee Kuan Yew has been mentioned many times here. Lee Kuan 
Yew met with President Obama in 2009. Lee Kuan Yew asked 
President Obama, what are going to do about the TPP? Obama 
said, well, I do not know. He said, you better go back and put 
that together because if you do not, you are going to cede 
trade to China.
    So as you know, the other countries decided, well, the 
United States pulled out of TPP. We will do it ourselves.
    Senator Gardner. I want to make sure I get to the others.
    Ambassador Baucus. I want to make one point here. The most 
important geopolitical matter that crossed my desk during the 3 
years I was there was TPP, and we blew it. We absolutely blew 
it. And other countries see that, and actions speak louder than 
words. There was a lot of talk about this Indo-Pacific. They 
are just words so far. Now, maybe we will find it will amount 
to more, but so far, I do not see anything that is very 
constructive.
    Senator Gardner. Thank you, Ambassador.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    This is my 41st year in Congress, and it is the first time 
a chairman ever allowed all three opening witnesses to speak 
for 15 minutes apiece. So we are making history.
    Ambassador Baucus. I apologize.
    Senator Markey. No. You should not apologize. It is kind of 
a course at Harvard. So we are up here and learning. So we 
thank you for that.
    So let me just go to Professor Allison's point that he just 
made about whether or not China will cut off the oil going into 
North Korea. 90 percent of all trade that North Korea engages 
in is with China, but clearly the most important part of it is 
oil because that is the lubricant for all parts of an economy.
    So thus far, the Chinese have been unwilling to do it. In 
2006, they were willing to do it, and the North Koreans 
actually went back to the table in 2006. So we know where the 
pressure point is.
    So if we could just go across and just ask would you 
recommend that the United States insist that the Chinese cut 
off the oil not towards the goal of collapsing the regime, not 
towards the goal of uniting North and South Korea, but towards 
the goal of driving the North Koreans to the table so we can 
accomplish the goal of not having them complete their ICBM 
hydrogen bomb program. Mr. Pillsbury?
    Dr. Pillsbury. Yes.
    Senator Markey. Beautiful.
    Dr. Allison. I would have them squeeze it maybe by 25 
percent to get their attention and then talk to them and say, 
what is not going to happen is you are not going to have any 
more ICBM tests and you are not going to have any nuclear 
tests. And if you do, you are not going to have any oil.
    Senator Markey. Well, the Chinese said that they have 
already squeezed the 25 percent.
    Dr. Allison. Well, I would say I have been trying to watch 
and I have not seen it. I have seen a little bit of talking 
about it, but I think that Kim Jong-un believes he can get away 
with murder. He usually does. So I think it is going to be very 
hard to move him.
    Senator Markey. Ambassador Baucus, would you cut off the 
oil?
    Ambassador Baucus. It is not going to happen. It is not 
going to happen. China will not do it.
    Senator Markey. So if China does not do it, then we have no 
real pressure point on the North Koreans. So are you accepting 
the inevitability of the ICBM program and----
    Ambassador Baucus. No. Professor Kissinger, Dr. Kissinger, 
whoever Kissinger, has suggested the beginnings that we explore 
kind of a grand bargain with China, Japan, South Korea, and 
maybe even including North Korea. I think there is no solution 
on the peninsula that does not include China.
    Senator Markey. No, I agree. But how can we do it if the 
oil is not cut off. That is their role to drive them to the 
table.
    Ambassador Baucus. Well, they do not do it and they will 
not do it. Why will they not do it? I think it is very simple. 
They will not because the Chinese have a neuralgic fixation on 
the status quo and stability within China and also in the 
region. Chinese in many ways have a very conservative 
government. So you go to the Korean Peninsula, they are afraid 
if they cut off the oil it causes instability in the peninsula.
    Senator Markey. No. It would not be towards the goal of 
like a long-term cutoff. It would just be, as Dr. Allison is 
saying, towards the goal of just saying, as anyone who has ever 
been put in a headlock, you know, say uncle.'' It is not 
towards killing someone. It is just towards give up. Stop this 
fight and let us just resolve it. So if we just did it on a 
temporary basis, would that be----
    Ambassador Baucus. I am just giving my own personal 
opinion. It will not work.
    Senator Markey. It will not work.
    So let me ask this then.
    Dr. Allison. It will not work because they will not do it, 
or if they did it, it would not work?
    Ambassador Baucus. It will not work because they will not 
do it.
    Senator Markey. Because they will not do it. So the option 
then becomes--unfortunately, we had a hearing in this room this 
morning on what General McMaster has been talking about, which 
is a preventive nuclear war that the United States might have 
to engage in, which would then have us using our military in 
order to strike the nuclear sites inside of North Korea. Then 
that gets back to Dr. Allison's point of going back to 1950 
when the Chinese then entered into the fight.
    So I am just going to read here something from the Global 
Times, which is a Chinese state-owned publication. On August 
10th of this year, here is what--they articulated the 
government position. It stated that if the United States and 
South Korea carry out strikes and try to overthrow the North 
Korean regime, China will prevent them from doing so, but that 
China would make clear that if North Korea launches missiles 
that threatens U.S. soil first and the U.S. retaliates, China 
will stay neutral.
    So that then goes to the question of us attacking the North 
Koreans and the Chinese saying if that is the case, we are 
getting in because we are not going to allow the U.S. to 
establish a hegemony.
    Ambassador Baucus. I know the editor of the Global Times. I 
have met many times with him. You got to understand. Sorry. I 
did not mean it that way.
    Senator Markey. No, no, please.
    Ambassador Baucus. He is provocative. He likes to put stuff 
out there, and he is somewhat speaking for the government and 
somewhat not.
    Senator Markey. So you do not think if we did strike in 
North Korea militarily that the Chinese would----
    Ambassador Baucus. They would find a way to get into the 
peninsula themselves so they can control the peninsula.
    Senator Markey. They would, yes. And do you agree with 
that?
    Ambassador Baucus. I do.
    Senator Markey. Dr. Allison?
    Dr. Allison. I do. And I think, therefore, to be clear, my 
prayer for the minor miracle would be that at the meetings, 
private meetings between President Trump and Xi recently, they 
sat down and said, wait a minute. This guy could drag us into a 
war. We do not want a war. That will be crazy.
    So we need to figure out what are the terms that we can 
live with that we can go to him and say simply that is it. And 
I think the ``that is it'' would be you getting them to stop 
for a year of any ICBM tests and any nuclear weapons tests. 
That is not forever, but it gives us a year just to work on the 
forever land, but for the year. And I think if the message from 
China and the U.S. was that is it, take it or leave it, and if 
there was a little squeezing of the oil to get started, I think 
it would get his attention and I think it actually might 
succeed.
    Senator Markey. But if we do strike, are we falling into 
the Thucydides Trap?
    Dr. Allison. Well, I think if we strike, we should remember 
that is a little bit like what happened in 1950, and the 
sequence of events could end, crazy as it seems, with Americans 
and Chinese fighting each other.
    Senator Markey. Do you agree with, Dr. Pillsbury?
    Dr. Pillsbury. No, I do not. I think your question has 
provoked a split among your three witnesses.
    I happen to agree with you, Senator Markey, that there was 
something in 2006 that the Chinese would not quite agree with 
you. They say it was an accident. Somehow there was a 1-day 
cutoff in the oil pipeline, and somehow the Six Party Talks, as 
you said, resumed.
    I think it would be a mistake to strike nuclear sites and 
missile sites in North Korea without consultation with the 
Chinese. A Chinese professor has already written an op-ed piece 
that China and the U.S. should initiate contingency planning 
about military strikes against North Korea. That is not the 
``Global Times'' editor, Mr. Hu. That is a distinguished 
professor in Beijing. Other Chinese have been writing about the 
need to unload North Korea as an ally. So there has been a 
debate over the last 2 or 3 years about what to do about North 
Korea.
    I think we still have influence with them on steps that can 
be taken, and frankly, a sort of a total out-of-the-blue 
pipeline cutoff is not the way to go. The discussion of 
military options with the Chinese is a first step.
    Senator Markey. So if I may----
    Dr. Pillsbury. And there are a couple other steps involving 
Chinese banks, Chinese parts, the various ways that in an 
underground manner China supports the weapons program in North 
Korea. These can be squeezed.
    There is another whole area I am sure you know about, which 
is what you might call the royal family financing in Pyongyang.
    Senator Markey. And again, Senator Gardner and I have 
introduced legislation----
    Dr. Pillsbury. Banco Delta Macao. Need I mention anything 
more?
    Senator Markey. No. We are dealing with the financing, 
dealing with the cryptocurrency, dealing with the drug money, 
dealing with the slave wages, dealing with all of it. But at 
the tippity top of it and 90 percent of it is the oil. So that 
is kind of the binary choice here that China has. In other 
words, you are saying that there is a distinguished professor 
who is saying that we should coordinate a potential military 
strike at some point and that there should be coordination.
    And I guess what my perspective would be is that it would 
be much wiser to try to coordinate an economic strike against 
the North Koreans that the Chinese understand is not meant to 
collapse the Kim regime but only to put the pressure on that 
brings them to the table before we move to the second 
coordinated strategy that might include a military strike that 
the Chinese agree with. So it is just getting the sequencing 
correct so that we have exhausted the economic pressure that I 
do not think we have touched to the extent that we should thus 
far.
    My time has expired, but I thank all of you so much.
    Senator Gardner. Thank you.
    Senator Kaine?
    Senator Kaine. Fascinating testimony.
    Dr. Allison, since you distributed your book, I have really 
been grappling with the Thucydides question and thinking about 
it in the context of the United States' history at the 
beginning of the last century. So the U.S. economy became the 
largest economy in the world in the 1890s, and then the 
military probably became the most powerful when Roosevelt 
expanded the Navy and certainly to the test in World War I.
    But another element of what became the American century was 
the United States grabbing onto a peacekeeping role. President 
Roosevelt brokered the end of the Russo-Japanese War and won 
the Nobel Peace Prize for that. And then President Wilson was 
an architect of the Treaty of Paris and the international 
institutions. So great nations are great peace builders. It was 
not just military power, and it was not just economic power. It 
was also a commitment to peace building.
    And China has an opportunity--you know, I have now been in 
two hearings today where we are talking about the prospect of 
war on the Korean Peninsula. I got a kid in the military. It is 
not a particularly pleasant day for me to have to go to two 
hearings about this.
    But I am a believer in miracles too. North Korea wants some 
things. It is not just a matter of what punishments can we put 
on them to cause them to give up nuclear ambitions. They want 
some things. They have wanted a peace deal to end the Korean 
War rather than just an armistice. And they have put that on 
the table before. Now, maybe that is just a fake request, but 
for a long time, they have wanted there to be a peace deal to 
end the Korean War so that they could have some guarantee that 
they would have an independent country and that the long-term 
goal was not a reunification and an absorption of their country 
into South Korea.
    China could be--in trying to broker some kind of a peace 
deal that would end North Korean nuclearization--would putting 
that issue on the table, a peace deal to end the Korean War 
that is now 70 years old--should that be on the table?
    I noticed China's reaction when the Nobels are given out to 
dissidents and artists that they do not like, they do not like 
that. But for a Chinese Government to win a Nobel Peace Prize 
for brokering a very difficult peace deal, just like President 
Roosevelt did in 1905, I mean, that would be a very different 
kind of a thing. So I am in the miracle territory here.
    But I just want to say that thinking about North Korea just 
as what is the right punishment to put on them so they will 
stop doing what they are doing, you know, look, they are trying 
to get nuclear weapons. There is--if a horrid rationality, 
there is some rationality. We want to protect the regime. 
Qaddafi gave up nuclear weapons and the regime went away. We 
want to protect the regime. But there are some things they want 
like a peace deal to end the war. Are those elements--if we 
think bigger and bigger picture about what the solution might 
be, might China--and you all know. You are experts in China and 
I am not. But might China want to, as part of assuming this 
global leadership role, assume the leadership including in 
being a peacekeeping nation just like the United States did 
back at the turn of the 20th century?
    Dr. Allison. So thank you. I like the drift of your 
comments and the suggestion.
    First, TR's role in brokering the Japanese-Russian 
agreement as the first Nobel Prize any American ever won. And I 
see in the Roosevelt room, that is one of the highlights to see 
this fact. So if Xi could become attracted to winning a Nobel 
Prize for dealing with the North Korean problem, I think that 
would be fantastic.
    Secondly, I think you are absolutely right that we have to 
think about what we can give North Korea, as well as what we 
can get. At this moment, the thing that we need most from North 
Korea is that it stop testing ICBMs and nuclear weapons because 
if it does not, it is going be into option one, which is a 
North Korea that can credibly threaten the American homeland. 
And President Trump has said that is absolutely not going to 
happen. So I think it is quite plausible that he attacks them 
to prevent that even though he knows that might even ultimately 
end in a war with China. I think partly he is also trying to 
help Xi Jinping understand that that he is prepared to do that 
if that is his last resort.
    So now if we imagine that the minor miracle that I was 
praying for, Xi and Trump would each say let us take one or two 
of our advisors, tell them to go off in a corner for a day or 
2, and come back with three ugly options. We are not going to 
like them. They only need to be better than what is currently 
now going to happen. And one of those options would undoubtedly 
be the U.S. give some things that we do not want to give.
    So is there some magic or something sacrosanct about how 
many participate in each of our military exercises? I am an old 
Defense Department type. We would say absolutely yes. We would 
never make an adaptation at all especially to prevent people 
from bad behavior they should not have been doing in the first 
place. The answer is, of course, we can make changes. There was 
32 and a half thousand; the previous time, there was 27,000. Is 
there something sacrosanct about how many troops the U.S. has 
in South Korea? Is there something sacrosanct about how 
frequently we drive by or fly by? Do we need to have three 
carriers nearby or two? So there are a lot of things that we 
could be adapting and adjusting.
    Senator Kaine. Like removing missiles from Turkey during 
the Cuban missile crisis.
    Dr. Allison. Absolutely, to take a for example. And that 
was ugly. It was ugly, very ugly. But compared to the 
alternative--so I would say we would end up in the ugly zone.
    On the particular item that you said, the peace treaty, I 
think there I slightly disagree. In Kim's cosmology, they 
believe they are the legitimate rulers of the whole of Korea. 
They think what they are doing is taking back over the whole of 
Korea, and the peace treaty is a step in that picture as they 
see it. So his idea and his hope is he gets to be a nuclear 
weapons state. We lose interest or we back off from Korea. 
Pretty soon the South Koreans then are intimidated by him. One 
thing leads to the other. So I would work on the short-run 
things now rather than the longer.
    Dr. Pillsbury. If I can jump in with about 60 seconds, I 
tend to agree far more with Professor Allison than Senator 
Baucus. Because of the book I wrote, which I failed today to 
bring and pass out free copies of, I wrote my book--[Laughter.]
    Dr. Allison. He only charges for them.
    Dr. Pillsbury. Well, and Professor Allison gave a generous 
blurb on the back cover, which I do not know if he regrets or 
not.
    I tried to go through declassified documents to show that 
what you are raising and what Professor Allison essentially is 
agreeing has happened before because of the extraordinary high 
level of strategic cooperation between the United States and 
China, which often is not declassified for as long as 30 years. 
Some of it is quite dramatic. Lee Kuan Yew himself--I tell the 
story in the book--came to a secret base in Thailand where the 
CIA and the Chinese CIA were cooperating with Singapore, 
Malaysia, and the Thais to provide weapons, maps, and money to 
guerillas to kick the Vietnamese out of occupying Cambodia. 
That was only disclosed more than 30 years later. That is 
pretty sensitive cooperation.
    I have several pages on our working with them on 
Afghanistan, a very, very close relationship on solving 
strategic problems.
    Dr. Kissinger did not allow to be declassified until the 
last couple of years one of his most sensitive areas of 
cooperation with the Chinese which began in 1973.
    So the precedent is there. I do not know if holding out a 
Nobel Peace Price to President Xi Jinping could work, but it is 
the kind of thing that I suspect would appeal to his sense of 
greatness that came through in this 3-and-a-half hour speech. I 
do not claim ownership of the idea. This may be a new 
initiative you have announced today for how the U.S., China--I 
assume you mean North Korea and South Korea, all four would 
share in the prize. But, of course, that involves Senator 
Baucus being wrong that China would put an oil cutoff on the 
table and start to do it. So we have to hope Senator Baucus is 
wrong in his forecast.
    Ambassador Baucus. On the basic point, I think it is a 
creative idea. I am struck with a meeting between President 
Obama and President Xi when President Xi was physically upset 
with Kim Jong-un, the one time I have heard him, Xi, with an 
edge in his voice, clearly frustrated that he does not have 
more influence over Kim. And I think that is the case. There is 
a real tension there between Kim Jong-un and President Xi.
    However, as has been noted, there is more pride now. There 
is more a feeling of potential greatness, if you will, on the 
part of President Xi. So I think that is an idea that he would 
find appealing.
    It is hard to know how that would play out because China is 
pretty conservative. That would be a major step. It would take 
a while for them to figure out how they would do all that. That 
would not be something they would just announce without giving 
a lot of thought to it, running it through all the various 
channels in China that would be necessary to get in touch with.
    I think it is analogous to the approach that must be taken, 
namely where we more seriously talk to China in an honest way. 
In my experience, our discussions with China on this issue have 
been very superficial. It is like two ships passing in the 
night. So for the ships to meet, not collide, but to meet, 
there has to be a very thoughtful approach here and it means a 
lot of shuttle diplomacy probably, a lot of back and forth with 
lots of officials to try to develop more trust, more confidence 
in finding an agreement. And I think it will include a lot of 
the points that have been mentioned here, and there are many, 
many more that we have not discussed that should be out on the 
table. And after a while, if they are all explored in good 
faith--and I think they would be in China too in good faith, 
although we have to deal with the opacity of that government. 
We are open; they are not. We have no choice but to try because 
the other alternatives so far are not working, namely military, 
I think, is out of the question. We do not want that.
    Second, sanctions are not achieving the desired result so 
far. I do not see any evidence that is going to really change 
very much. So we have to keep the pressure up, keep talking 
about the sanctions, all of that, but at the same time maybe 
back door, third party, start talking a little more and with 
China and with Japan explore this but in South Korea. Then I 
think that China might say, well, gee, maybe there is an 
opportunity here where they could play a more responsible role, 
if you will. It is like Bob Zoellick's point about--I forgot 
the phrase he used, but the main point being be responsible as 
you rise and have more influence.
    Senator Gardner. Thank you, Senator Kaine.
    And I know Senator Markey has a couple of questions he 
would like to ask.
    Let me just ask you this. If we are unsuccessful in 
denuclearization of North Korea, will South Korea and Japan 
ultimately be forced to develop their own nuclear weapon 
program? Make this, if you could, a quick answer. Mr. 
Pillsbury?
    Dr. Pillsbury. I do not think I want to acknowledge the 
idea of failure in advance. So I would just decline to answer 
the question. It is really not fair to acknowledge failure in 
advance. It is just a question of the political will on the 
part of allies and ourselves how far are we willing to go with 
North Korea. It is already quite obvious all over Asia that the 
credibility is going up of an American military strike on North 
Korea. That is a really big change from a year ago when I think 
probably all of us would go to conferences and everybody would 
say, well, everything is on the table, wink, wink, except the 
use of force.
    Senator Gardner. Let me shift the question then because I 
would ask this. And I had a discussion with this with a Chinese 
official earlier today.
    Would China work with the United States--perhaps the United 
Nations is the right body to do this--on a plan for what to do 
with the nuclear stockpile of Kim Jong-un should there be a 
denuclearization success? Should we get that planned ahead of 
time with China? And would that then build enough trust to 
actually begin working together in a way that we could achieve 
that, sort of back into our goal of peaceful denuclearization? 
Professor Allison?
    Dr. Allison. Well, it has now become more complicated. It 
is a great question.
    I cannot imagine the Kim Jong-un regime giving up its 
nuclear arsenal in any world. So I understand that is our 
stated objective. I even have written once CVID, complete, 
irreversible, verifiable, denuclearization, is a complete, 
irreversible, verifiable delusion. So it is not going to 
happen. I think it will come right after the U.S. and Israel 
because Kim Jong-un has a very good reason for wanting to have 
nuclear weapons. So that is number one.
    Number two, that does not mean that he has to have a 
capability to strike San Francisco or Los Angeles. He has 
already got 50 nuclear weapons. He has already got missiles 
that can deliver these weapons like in South Korea and Japan. 
So I could imagine him stopping at this point for a time, and 
then we would see.
    So then the longer-term solution to this would be if you 
could imagine that regime changing, which it could do over 
time, or if you could imagine the Chinese coming to play a more 
dominant role in the regime or in the region, but I think 
stopping the bleeding right now seems to me to be the 
overwhelming question. The longer-term problem I think will be 
very, very hard.
    Senator Gardner. Dr. Pillsbury, how concerned are you about 
President Moon and the new administration in South Korea and 
their approach toward North Korea and perhaps even their 
relationships with China that could result in a softening of an 
approach toward North Korea and a distancing of the United 
States?
    Dr. Pillsbury. I am going to Seoul tonight to see President 
Moon's team. He has got a campaign advisor who has published a 
lot about North Korea. President Moon seems to have come around 
quite a bit. Some of his campaign supporters are in tears. They 
are quite angry at him as well. Frankly, the North Korean 
military watches the South Korean President's attitude very 
closely. So we have made a lot of progress, it seems to me, in 
influencing the North Korean military to start thinking 
differently. As President Trump said in his speech to the South 
Korean assembly, start thinking of nuclear weapons as dangerous 
to them, as attracting attack as opposed to guarantors of the 
regime.
    The military does not seem to have taken the initiative in 
the original decision to develop nuclear weapons. It seems to 
have been more of a Kim family pledge to the military. You keep 
the Kim family in power and we will deliver nuclear weapons. We 
will get the resources, the money, all of the ingredients 
needed.
    So changing the North Korean military's attitude seems to 
me is part of the game right now. And President Moon's 
cautionary approach has started to include the use of force. He 
does not want it. It is his last resort, but he has changed 
from his campaign pledges. That to me is quite significant.
    And the Chinese have told us in academic settings that the 
North Korean military is the real power in that country other 
than the royal Kim family itself. So that is why thinking about 
the three aircraft carriers concentrating so much power in one 
place, this is the kind of thing military leaders pay attention 
to. It is their belief in a credibility of what President Trump 
is saying that it seems to me everything hangs on. And some of 
the sanctions, not the oil pipeline, not the banks, but some of 
the sanctions can also affect the North Korean military. And 
this is an area where it seems to me the Chinese and think tank 
channels have been supportive. They think the North Korean 
military is part of the solution, maybe even the solution.
    Senator Gardner. Thank you. I know we have not even gotten 
into the issues of the South China Sea and other issues that 
could go on for a long time.
    Senator Markey?
    Senator Markey. Thank you so much.
    So I want to come back to Senator Baucus because you raised 
a very interesting kind of dichotomy here where as the Chinese 
move from the era of the emperor to the era of the party, and 
what you said was that do not worry about human rights is what 
Xi says because we are going to take care of the people. And so 
I think it would be helpful for us to understand then are they 
just turning a deaf ear to anything that we say about human 
rights, that it has no impact on them whatsoever, that it is 
not really in our interest to kind of waste capital on an issue 
where there will be no progress because we are going to take 
care of the people, as you said, is just going to be the 
continued mantra that they utter to any U.S. ambassador or 
congressional delegation which is visiting them.
    Ambassador Baucus. No. I think it is important to talk 
about human rights. It is a universal value that all people 
understand. It is human dignity that is so essential basically 
to life. I think we should press protection of human rights, 
but we are only going to get so far but we still should 
continue to advocate the value of human rights even with China.
    Senator Markey. So do you agree with that, Dr. Pillsbury, 
that they are unlikely to give us an answer or respond to our 
pressure, our interests, but that we should raise them 
regardless?
    Dr. Pillsbury. I agree in principle, but they have been 
extraordinarily sensitive to human rights issues that are 
raised at the presidential level about specific individuals.
    And so I was very pleased at this tremendous bipartisan 
cooperation going way back. It was Claiborne Pell, Joe Biden, 
Jesse Helms, and Orrin Hatch, if you can imagine such a 
combination, who supported the legislation to create Radio Free 
Asia and have human rights dissidents actually read their 
stories and address the issue and then have phone-in telephone 
calls from China of people talking about specific human rights 
cases and violations.
    That legislation President H.W. Bush and his Assistant 
Secretary at the time, Richard Solomon, told us they would veto 
it. They did not want Radio Free Asia. They did not want 
broadcasts in Mandarin on human rights issues going into China. 
They were overcome. It passed. It is one of our best programs, 
and it is one of many ways that human rights issues can be 
brought up in addition to diplomatic dialogue.
    As I say in my testimony, the National Endowment for 
Democracy, the funds for democracy promotion both at USAID and 
at State have a focus already on Chinese democracy and human 
rights. More can be done, but that is an area for a Foreign 
Relations Committee hearing frankly.
    Senator Markey. Thank you.
    If I can come back to you again, Max. The point that Dr. 
Pillsbury raised earlier about these programs to transfer U.S. 
technologies, U.S. innovation to China and that it is a legal 
requirement that we do so, did you come across that while you 
were there in terms of their insistence to the U.S. Government 
that there be a facilitation of that type of transfer?
    Ambassador Baucus. In fact, the opposite was just the case. 
They kept complaining to us about our restrictions of 
technology transfer to China. I did not ever hear anybody in 
China advocate the Americans should stick with agreements that 
you have to transfer technology.
    As you also know, they are very clever. With the Snowden 
revelations, China passed a lot national security statutes to 
protect their country from espionage.
    But at the same time, they used that as an opportunity to 
set up discriminatory barriers against U.S. technology firms 
selling equipment in China in order to build up their own 
industry at foreign expense. And they are pretty successful 
with it.
    So from my perspective, all I heard is China complaining, 
frankly, that the U.S. is not allowing the technology transfer 
that they like under the U.S. Export and Control Act.
    Senator Markey. Back in 1998, I traveled with Senator 
Baucus, John Dingell, and Jay Rockefeller as the congressional 
delegation with President Clinton on Air Force One for 10 days. 
We were in Shanghai and Xian and Hong Kong and Beijing. And I 
just went back in the last week of August, first to go up to 
the Yalu River, the border between Dandong and North Korea.
    Ambassador Baucus. The bridge of no return?
    Senator Markey. Yes, the bridge.
    But then I went over to Shanghai, and you are right, Max. 
It was non-recognizable just from 1998, just completely built 
up in a way that it was non-recognizable from that city that I 
visited back then. So it was eye-opening then to see it on the 
rise, but now it is just absolutely incredible.
    And maybe I would just ask this one final question because 
we had a hearing--and maybe one of you knows the answer to 
this, but we had a hearing and we had the Dean of the 
University of Maryland Graduate School testify, Robert Orr. So 
he testified here about the global green grid which China is 
now proposing, first starting with it going into the adjoining 
countries to China but then expanding beyond that, which is 
just a high concept in terms of their insinuation of their 
government planning and to the kind of the fundamental part of 
each economy of the grid, but using renewable energy. So can 
any of you speak to that question if you are familiar with it 
at all?
    Ambassador Baucus. I am not familiar with it. It just 
amazes me. We live in a time. There are so many ideas and some 
of them are very grand and one or two are going to come to 
pass. It is just fascinating with all the technologies, et 
cetera.
    I know the head of SoftBank, Masayoshi Son, has a similar 
concept, not green but a conventional network grid for the 
region.
    But I also smile a little bit because I visited one 
province there, and there are lots of solar panels, lots of 
wind power. And the party secretary of the province was just so 
happy, but he was unhappy too. Why? Because the coal industry 
had such a near lock on the purchase of power that they in the 
coal industry were still able to preempt renewables. That is, 
renewables was so ineruptable that the province could not sell 
enough of their wind power to the grid as they really wanted 
to.
    So it is going to take time. I hear a lot about the green 
renewable. It would be great if it develops, but realistically 
it is slow.
    Dr. Pillsbury. Could I jump in for a second? It comes out 
of an initiative that I praise in my book ``The Hundred Year 
Marathon.'' It dates back to the Reagan administration where 
the United States decided, you know, we have an Environmental 
Protection Agency. Some people do not like it; some people do. 
We need to create one in China. And there was an outreach to 
find partners. They acknowledge us sometimes in speeches. But 
the shift of China away from coal, away from cars, a whole 
series of green initiatives date to this group of people who 
are identified. Later they became, in one case, minister. They 
give cabinet rank to their EPA now. And it is an example of an 
American success story, which George Shultz talks about in 
terms of empowering or building the capacity inside China 
sometimes is the problem. They will agree with us rhetorically 
on something, but they cannot actually do it.
    Something similar happened in the nonproliferation area. 
They would say, yes, we are against nuclear proliferation. We 
are against exporting advanced weapons. But we knew they could 
not keep track of what they were doing. So U.S. money, the U.S. 
embassy helped them create an export enforcement system. This 
is way back before Ambassador Baucus.
    But we have gone a little bit too far in so much 
cooperation that, frankly, I do not think is brought to the 
attention of the ambassador. It is so routine now. I saw a 
briefing last year of the National Science Foundation 
transferring advanced manufacturing techniques to the Chinese 
Ministry of Science and Technology. It is done in a routine way 
because of all of these agreements. So nobody would bother the 
ambassador, whereas he would definitely hear from the Chinese 
about you are not selling us high-tech equipment and what about 
this restriction. That is what I am calling for a hearing on, 
all this cooperation.
    Senator Markey. Great. What an all-star panel.
    Ambassador Baucus. If I might. You have got to take your 
hat off to China too in renewables in the sense that China will 
have more electric vehicles produced than any other country 
soon. They are electrifying. There are so many of their cities 
with EVs. When you are in Beijing, they are not combustible 
scooters. They are all electric. It is stunning. They have 
ideas they think they need to pursue, and they tend to be ideas 
of the future getting ahead of the game.
    Senator Gardner. Thank you to all of you for your time and 
testimony today. I truly appreciate the opportunity to have 
this important dialogue and conversation as we inform our 
legislative work tour, our legislative goal of creating long-
term policies in the United States toward Asia.
    For the information of members, the record will remain open 
until the close of business on Thursday, including for members 
to submit questions for the record. Again, your homework 
assignment. If you could return those as quickly as possible--
the answers to those questions--I would greatly appreciate it.
    With the thanks of the committee, this hearing is now 
adjourned.


    [Whereupon, at 4:30 p.m., the hearing was adjourned.]



                              ----------                              



              Additional Material Submitted for the Record

                 Prepared Statement of Hon. Max Baucus

    Mr. Chairman, I appreciate the opportunity to speak today on U.S. 
policy on China. I believe it's one of the more important questions 
facing our country today.
    I loved the serving as U.S. Ambassador to China. One of the most 
rewarding jobs I've been honored to have.
    I won't rehash all the relevant points in the relationship. China's 
amazing rise and the points of tension we are dealing with. Instead, 
I'll offer some suggestions.
    I think it's important for Americans to be aware of what I call the 
American exceptionalism trap where we assume that if we keep working 
with another country, in this case China, American exceptionalism will 
prevail. They'll be more like us and differences will be manageable. 
It's an assumption I think we need to examine.
    Although China and the U.S. both strive to enhance the well-being 
of their people in profound ways our two countries are very different.
    We Americans pride ourselves on our western Judeo-Christian values 
and democracy. On our democratic elections. Our constitution. Our bill 
of individual rights. Freedom of speech and press. Separation of powers 
where power is spread among three different branches. Our independent 
judiciary free from influence by the government.
    We're proud people. We're Americans. We have the world's best form 
of government. We've kept the peace since WWII. We lead. We help solve 
disputes between countries, upholding our values and our approach to 
government. We think, no, we assume that our way is best and with 
patience and perseverance others will see that, too. They'll agree with 
us.
    China has another view. China is just as proud if not more so than 
we Americans. After all it has had thousands of years of history. Its 
Middle Kingdom was the center of the universe up until the last two 
centuries when China was invaded and controlled by Japan, U.S., UK, 
France. Otherwise known as the two hundred years of humiliation. They 
now see their rightful place in world history returning.
    China is authoritarian. It has one party rule. There are no 
elections. Very weak independent judiciary. Little free speech or rule 
of law. Instead, the party is everything. The party sees its role as 
taking care of the people. So long as they can keep people happy with 
rising incomes, addressing air and water pollution, food safety and 
health care, they believe they will indefinitely stay in power. It's 
the Faustian bargain that both the people and the party have upheld 
since they came into power in 1949. We take care of you and you don't 
question our legitimacy.
    At the recent 19th party congress, the party strengthened its reach 
in virtually every area of society. China believes that a very strong 
party is necessary not only to maintain control but necessary to grow 
and develop their country. The party is everything.
    I'll never forget President Obama and President Xi explaining each 
country's role in November 2014. President Obama explained that human 
rights is absolutely fundamental to our democracy. It's in our DNA as 
well as our constitution. President Xi explained that the party is 
absolutely fundamental to their government. The party is everything and 
it is the duty of the party to care for the people trumping human 
rights.
    It's not too simplistic to note that whereas we Americans believe 
in fairness and dispute resolution procedures enshrined in our 
constitution and laws, China, without those protections, is more 
results oriented.
    While the United States tends to be ad hoc in its foreign policy 
decisions, China takes the long view. It has a vision. China is 
patient. China's One Belt One Road, it's Asian Infrastructure 
Investment Bank, it's Free Trade Agreements with countries it wants to 
do business with are all examples of China's vision to turn itself into 
a major, if not the major, economic power in the world.
    This long view enables them to take small steps at a time. South 
China island building is reminiscent of its board game, Weiqi, taking 
one small step at a time so no one notices until the game is over.
    China is opportunistic. They saw an opportunity when we pressed for 
an agreement on Climate Change, enabling them to pour immense resources 
into renewables such as solar and wind power at the expense of our 
solar and wind industries.
    They saw another when Eric Snowden revealed U.S. espionage efforts, 
enabling them to pass national security statues under the pretext of 
protecting their security interests but also allowing for 
discrimination against our foreign technology.
    China is very different from the United States. We each have 
interests and different philosophies of government. Neither, at least 
in the indeterminate future, will persuade the other that it's better. 
We're different. We must understand and respect that.
    So, what do we do? What should our U.S. policy be with regard to 
China.
    First, I urge each of you to go there. See China. Develop personal 
relationships. 80 percent of life is showing up. Load up a 747 with 
members of congress, the executive branch, some businessmen, NGO's and 
the media and fly to China. For at least two weeks. Visit as many 
provinces as you can. Talk to party secretaries and leaders as well as 
to the cab drivers. Then go back at least once a year. After a while 
you'll start to learn about China and develop personal relationships. 
You need to see it for yourselves to properly understand the scale and 
magnitude of China's rise in the last 40 plus years.
    I know that sounds fanciful, but if that plane were to take off I 
guarantee you'd see productive results.
    Second, the U.S. must develop a strategy. A strategic plan. One 
that defines our long-term interests. Provisions that show how we will 
execute it. China has a plan. We need one, too.
    The plan should include U.S. engagement not withdrawal in the 
region.
    The most important geopolitical matter to cross my desk while I was 
in Beijing was the Trans Pacific Partnership. It was so important that 
I took it upon myself to fly to DC two months before the election to 
explain its importance to members of congress, both sides of the aisle 
and both parties.
    Many SE Asian ambassadors pleaded with me to stay in the agreement 
so that they could play China off against the U.S.
    Singapore icon, Li Quan Yew, personally urged president Obama to 
join TPP when they met in 2009 saying that otherwise the U.S. would 
cede trade to China.
    It was a huge mistake for the United States to pull out. 
Economically and geo-politically.
    It's no wonder that the remaining TPP countries are going ahead 
without the United States.
    Third, after we develop a plan, a course of action for the region 
the U.S. must press its views and stand up to China when their actions 
are against our interests.
    The Chinese understand and respect strength better than any other 
people I know. They can sense weakness better, too.
    We did stand up and protect our interests at least several times 
while I served. Two involved our national security. One our economic 
interests.
    It was with great frustration that we watched China dump sand on 
submerged reefs in the South China Sea converting them into features 
which they called islands.
    During President Xi's visit to the U.S. in March of last year 
President Obama in a very small group privately told President Xi that 
it would be a mistake for China to invade a specific South China Sea 
island. It worked. China didn't occupy it. We stood up.
    Another time, when the U.S. threatened sanctions on China over 
Chinese hacking of the Office of Personnel files, China quickly sent 
over their top party national security official to negotiate a 
settlement with the U.S.
    There are other examples I could mention if we had more time.
    Standing up to China or having self-respect means being candid and 
speaking truth to power.
    When I first arrived in China I would listen to the official across 
the table read his or her prepared talking points verbatim. The 
interpreter and everyone on his or her side of the table would be 
reading the same points.
    After a few months of this formality I decided this was a waste of 
time. So, I Interrupted him or her mid- sentence. Broke right in. Could 
you give me an example, or explain that more fully? I would ask. They 
liked it. It was more honest, more real.
    I would also often ask the Thucydides Trap question. Your GDP will 
double in ten years, your military spending in six, I would say. The 
trend line shows that your economy will exceed that of the U.S. in ten 
years. What are we to think? I'd ask. What are your intentions? In 
fact, deeds are more important than words, I'd remind them. What 
actions or deeds can you point to that show you want to work with U.S.?
    I thought it was important to speak truth to power. Speak honestly, 
directly. Not with an edge or condescension but constructively. It was 
the basic question that had to be asked. They just listened. They never 
answered or addressed the question.
    I asked it so often that soon President Xi Jinping raised it at a 
meeting with a cabinet secretary saying there's no trap. Later 
President Obama raised it with President Xi at a summit in 2015, also 
saying the trap isn't real.
    My view is that we have to constantly keep asking that question 
both for China and for ourselves to better assure the trap doesn't 
spring shut.
    That's my prescription. First, go to China. Often. Second, develop 
a long range strategic plan. Third, be strong with China in the best 
sense of the term. Show there will be consequences if they take actions 
that are not in our best interest. It'll better assure that we'll find 
agreed upon solutions.
    It's the best way to avoid the Thucydides Trap for the well-being 
of the peoples in both our countries.



                               __________


              Prepared Statement of Dr. Michael Pillsbury

    Chairman Gardner and Ranking Member Markey, thank you for the 
opportunity to testify in your series of hearings on American 
leadership in the Asia-Pacific. I understand today's subject is Part 4, 
``The View from Beijing.'' Your letter of invitation raised seven 
specific questions. When I was a Senate staffer for the Budget 
Committee, the Labor and Human Resources Committee and the Foreign 
Relations Committee, I noticed Senators appreciated not only short 
answers but also information that would be relevant to legislation or 
possible initiatives. In that spirit, I address your seven questions 
first, then I want to provide you with some background reading that 
supports my answers, not for today but for your next long flight 
overseas--a new view of the declassified evidence of ``how we got 
here'' in terms of today's U.S.-China relationship. My thesis in The 
Hundred-Year Marathon is while Americans have the illusion we have been 
managing China's rise, the truth is the other way around--China has 
been doing a much better job of managing America's decline. I agree 
with both Henry Kissinger and Professor Graham Allison's effusive 
praise of the assessment of China by former Singapore Prime Minister 
Lee Kuan Yew. Allison wrote, ``The rise of China is the issue about 
which Lee undoubtedly knows more than any other outside observer or 
analyst.'' However, both Allison and Kissinger do not pay sufficient 
attention in my view to the implications for us of Lee Kuan Yew's most 
important finding. Lee wrote, ``It is China's intention to be the 
greatest power in the world.'' Of course, we should never overestimate 
China's power or ability to surpass us, but more and more of allies are 
saying quietly, ``that the way to bet.'' My book advocates 12 steps for 
a new strategy toward China, which I will not elaborate today. I have 
read the testimony of your three prior hearings and largely agree with 
your earlier witnesses on both the economic side and the security 
issues. As well, Chairman Corker held an insightful hearing on how to 
improve security cooperation with both General Charles Hooper, head of 
DSCA and a mandarin-speaker who served twice in Beijing, as well as 
State Department witnesses on the difficulty of coordinating State and 
Defense when so many senior positions are still vacant.
    Your first four questions concern China's intentions in the Asia-
Pacific, what is President Xi Jinping's vision, what are the main 
takeaways from the recent 19th Party Congress, and how does the Chinese 
leadership view the United States and its role in the region.
    The answer to all four questions is, in one word, ``continuity.'' 
China's leaders are continuing to implement a largely secret set of 
policy decisions made about 40 years ago. The Chinese leadership 
abandoned its earlier strategies of first allying with the Soviet Union 
in the 1950s and then going it alone in the 1960s. Some of their policy 
ideas were uniquely Chinese, especially about the slow pace they would 
follow, and others were derived from their deep relationship with the 
World Bank beginning in the 1970s. In the 1980s, the World Bank opened 
its largest office in the world in Beijing. China's leaders sought and 
followed advice from World Bank and IMF officials, and from many Nobel 
prize winners in economics, and even from Goldman Sachs, as told in 
detail in former Treasury Secretary Hank Paulson's book Dealing with 
China: An Insider Unmasks the New Economic Superpower. They set up a 
national policy which has been correctly labeled mercantilist and even 
predatory. Many have criticized them, and an innovative report from 
ITIF called the World Mercantilist Index has consistently scored China 
to be Number One. China's response has been ignoring this criticism and 
to imply that reforms are coming--someday. Some Chinese authors cite 
American history in the century from 1820 to 1920 as their model for 
government-assisted growth through these predatory practices.
    Your second set of three questions focuses on U.S. policy, asking 
specifically how U.S.-China policy should take into account China's 
intentions, whether the Obama administration's Asia pivot or rebalance 
policy succeeded in deterring Chinese destabilizing activities, what 
policy the Trump administration should pursue to improve U.S. policy 
toward the Asia-Pacific and China, and how to assess President Trump's 
recent visit to the region. I thought the President's Asia trip was a 
success, particularly in its focus on multi-lateral and alliance 
relationships with ASEAN, APEC and our military allies in Japan, South 
Korea and the Philippines. He laid an excellent foundation for his 
future visits to the region.
    I would also answer your three questions about U.S. policy with 
just one word, ``innovation.'' My own advice to the Trump 
administration as a transition adviser has been simple. We need a 
holistic approach led by the President himself who alone can coordinate 
the Defense Department, USTR, Commerce, Treasury, and important 
elements in the State Department in designing new strategies to deal 
with the issues of trade, security cooperation, and multilateral 
coordination.
    In my view, it is way too soon to judge whether the Trump 
administration will have the leverage to significantly change Chinese 
predatory practices, a concern that has been publicly raised by USTR 
Ambassador Bob Lighthizer. My view has been that we need to press the 
Chinese toward reforms by working with our allies, not alone. We also 
need to be aware of our allies inside China who have been frustrated or 
even punished for their advocacy of real reforms. Cato Institute has 
honored an economic reformer named Mao Yushi, but it was not widely 
reported. Too few know the specific reforms advocated by the late Liu 
Xiaobo whose writings were made available in a book by Professor Andy 
Nathan of Columbia.
    There are specific policy areas where a holistic strategy should be 
designed. I recommend that the State Department take the lead in 
advising the President on how to coordinate the timing and 
implementation of all the components that a new strategy for the Indo-
Pacific will need. Many do not include all these components, and many 
areas too often go uncoordinated such as the democracy promotion funds 
at USAID and State, and the Asia program of the National Endowment for 
Democracy. Pacific Command is not just a DoD combatant command, but 
often offers ideas in overall strategy, civil aspects of security 
cooperation, and the rule of law.
    In the long term, one of first challenges is Congress should 
require the State Department's Bureau of Intelligence and Research 
[together with the entire IC and DoD] to present to the Congress a 
genuine assessment of the U.S.-China military balance, [to include 
future technology issues]. An outline of how to assess this balance has 
been suggested in an alarming Rand report called The U.S.-China 
Military Scorecard, 1996-2017. The current annual DoD report to 
Congress that has been required since 2000 under the NDAA does not 
directly compare the military ``scorecard'' of the U.S. and China, yet 
many textbooks teach us that the underlying military balance has a 
decisive impact on our diplomacy and on deterrence.
    We do not want our allies to doubt that the Indo-Pacific military 
balance favors us in the long term. Andy Marshall at the DoD Office of 
Net Assessment studied this issue at the initial direction of Henry 
Kissinger in 1973. One of his findings was that perceptions of a 
declining military balance can be as important as a real decline. We 
took many initiatives based on Andy Marshall's insights largely about 
the Soviet Union. Congress needs to request similar studies of the 
future military and technological balance with China. The trend may be 
against us if the forecasts are correct Chinese economic growth in PPP 
has already surpassed us.
    The second set of State Department led policies must include 
specific steps in the fields of trade and technology protection that 
fall to many different departments and agencies:


 1. more lawsuits at the WTO,

 2. comprehensive CFIUS reform,

 3. a mechanism through which we can coordinate restrictions on Chinese 
        investment with our European allies,

 4. a large increase in federally funded R&D to return to the level of 
        three decades ago,

 5. publishing a list of Chinese companies engaged in IP theft and 
        unfair trade practices to inform potential litigants of 
        possible legal targets,

 6. measures to provide U.S. companies and U.S. government regulators a 
        better understanding of Chinese state-owned entities in the 
        U.S.,

 7. amendment of the Foreign Sovereign Immunities Act and the Economic 
        Espionage Act to protect ourselves,

 8. developing comprehensive responses [particularly with India] to 
        China's Belt and Road Initiative and [with the European Union] 
        to the new ``Made in China 2025'' plan,

 9. an inventory of the official programs and activities we undertake 
        to assist China's growth, and

 10. intelligence efforts to reduce industrial espionage and cyber 
        theft.


    All of these steps face a challenge. Americans tend to assume 
falsely that we have been in charge of relations with an essentially 
benign and economically inferior China. One of the great lessons of 
history Americans have been taught over the years is that President 
Richard Nixon and Henry Kissinger took a brilliant strategic initiative 
to ``open'' a backward, internally-focused China. But what if China has 
been more successful in taking initiatives against us--from the start?
     In a little-noticed sentence in his book On China published in 
2011, Dr. Kissinger has correctly changed the dramatic narrative of a 
unilateral American diplomatic initiative. Instead, he revealed new 
Chinese materials and admitted there was a ``parallel'' effort inside 
China to ``open'' America. Indeed, he lists five times when he and 
Nixon actually turned down the earliest Chinese initiatives. My book 
3The Hundred-Year Marathon presents even more evidence. I was permitted 
by the CIA, the FBI and the Defense Department to use both new American 
declassified documents and new Chinese materials to show that the 
foundation of U.S.-China relations is very different from what has been 
taught in earlier historical accounts. This new history has been well-
received--The Hundred-Year Marathon was a # 1 national best seller and 
translated into Japanese, Korean, and two different Chinese editions in 
both Taiwan and China. One reaction to this newly history is that the 
prospects for future U.S.-Chinese cooperation are much greater than 
most had assumed. Conversely, the prospects for a U.S.-China war are 
more remote. Strangely, there are at least six American or British 
books about the growing likelihood of an American war with China. There 
are none about the likelihood of a ``G-2'' style era of strategic 
cooperating with China. The books are all useful, with dramatic titles 
like The Coming Conflict With China, The Coming China Wars, The Next 
Great War, China's Coming War with Asia, and my personal favorite by 
Graham Allison, Destined For War: Can America and China Escape the 
Thucydides Trap?
    My own view is that President Trump is on the right track to pursue 
strategic cooperation with China. He has even acknowledged in his own 
books and speeches a deep admiration for how smart Chinese strategy has 
been.
    But the problem of complacency threatens us. Too many believe China 
will not be a challenge because it will collapse long before surpassing 
us. Others claim we have been in charge of China since 1969 and that 
China has no strategy, but is merely muddling through. Is this true?
How Did We Get Here? The Hundred-Year Marathon since 1969:
    Nixon and Kissinger have admitted that in their first months in 
office, their focus was on improving relations with the Soviet Union. 
They had no desire to provoke the Soviets' ire by dallying with China. 
Indeed, in many ways, it was not Nixon who went to China, but China 
that went to Nixon. In the case of each American president, Beijing's 
strategy seems to have been a product of brilliant improvisation--
constant tactical shifts combined with shrewd assessments of the 
internal differences among the main players in Washington debates. In 
their assessment of shi vis-a-vis the United States, China's leaders 
benefited from something considered to be of critical importance during 
the Warring States period: a well-placed spy in the enemy's ranks.
    A forty-year employee of the CIA, Larry Wu-Tai Chin, was accused in 
1985 of engaging in decades of espionage on behalf of China. Chin was 
accused of providing countless classified U.S. documents regarding 
China to the Chinese government, charges to which Chin pled guilty in 
1986. While confessing to a judge, Chin declared that he acted as he 
did to promote reconciliation between the United States and China. 
Shortly thereafter, he was found by a guard asphyxiated in his prison 
cell. Larry Chin seemed to admit to the judge he revealed our planning 
and weaknesses to the Chinese government so Beijing could have been 
highly effective in getting all it wanted.
    America, in contrast, has not had similarly placed informants to 
provide direct insight into Chinese strategic thinking. Because we also 
lack access to internal Chinese policy documents, this chapter attempts 
to unearth the motivations of China's leaders during the time of 
renewed relations with the United States through the end of the Reagan 
administration by examining U.S. accounts of what appeared to be 
driving China, as well as another open-source information that has 
emerged since.
    Unlike the United States, China has not released, nor is it likely 
to ever release, official internal records showing how Chinese leaders 
were able to obtain essentially all of the major economic, military, 
and diplomatic-political assistance it sought from the last eight U.S. 
presidents, from Richard Nixon through Barack Obama. However, there do 
appear to be consistent strategic approaches followed by Beijing that 
have been acknowledged in general terms in interviews of and articles 
by Chinese scholars. The nine elements of Chinese strategy (introduced 
in chapter 2) help us to better make sense of China's past and 
prospective actions. The use of deception, shi, patience, and avoiding 
encirclement by the Soviet Union are all apparent. In particular, the 
nine key elements of Chinese strategy have guided China throughout its 
decades-long campaign to obtain support from the United States to 
increase China's strength.
    There is wide agreement that in the late 1960s, with their outsize 
ambitions exposed to the Soviets, with whom they were on the brink of 
military confrontation, China sought out a new benefactor. For ideas 
about how to make America a friend--or, to be more precise, a temporary 
ally--Mao turned to the military rather than to his diplomats.
    Many Americans discounted the influence of China's hawks. They were 
surprised to learn that the military secretly designed China's opening 
to America. In the spring of 1969, Mao summoned four hawkish army 
marshals who wanted to end China's decade of passivity and instead to 
stand up to the threat of the Soviet Union--Chen Yi, Nie Rongzhen, Xu 
Xiangqian, and Ye Jianying. These marshals summed up the American 
strategy toward the Soviet Union and China in a Chinese proverb of 
``sitting on top of the mountain to watch a fight between two tigers.'' 
In other words, they believed America was waiting for one Communist 
country to devour the other, and they thought in terms of ancient 
lessons from the Warring States period.
    In May 1969, Mao asked them for further recommendations. According 
to Kissinger, the marshals' private secretary recorded that the group 
discussed ``whether, from a strategic perspective, China should play 
the American card in case of a large-scale Soviet attack on China.'' 
Marshal Chen Yi suggested that the group study the example of Stalin's 
nonaggression pact with Hitler in 1939.
    Another marshal, Ye Jianying, cited the ``Red Cliff strategy'' 
pursued by Zhuge Liang, the southern commandeer who outwitted Cao Cao: 
``We can consult the example of Zhuge Liang's strategic guiding 
principle, when the three states of Wei, Shu, and Wu confronted each 
other: `Ally with Wu in the east to oppose Wei in the north.''' In the 
marshals' view, America feared a Soviet conquest of China: ``The last 
thing the U.S. imperialists are willing to see is a victory by the 
Soviet revisionists in a Sino-Soviet war, as this would [allow the 
Soviets] to build up a big empire more powerful than the American 
empire in resources and manpower.''
    Chen Yi pointed out that the new president, Richard Nixon, seemed 
eager ``to win over China.'' He proposed what he called ``wild ideas'' 
to elevate the United States-China dialogue to the ministerial level, 
or even higher. Most revolutionary, according to Kissinger, was Chen 
Yi's proposal that the People's Republic drop its long-held 
precondition that Taiwan be returned to mainland China.
    Foreign Minister [and retired general] Chen Yi argued:

        First, when the meetings in Warsaw [the ambassadorial talks] 
        are resumed, we may take the initiative in proposing to hold 
        Sino-American talks at the ministerial or even higher levels, 
        so that basic and related problems in Sino-American relations 
        can be solved. . . .
          Second, a Sino-American meeting at higher levels holds 
        strategic significance. We should not raise any prerequisite.. 
        The Taiwan question can be gradually solved by talks at higher 
        levels. Furthermore, we may discuss with the Americans other 
        questions of strategic significance.

    China still called the United States its enemy, describing a 
possible visit by Nixon as an instance of China ``utilizing 
contradictions, dividing up enemies, and enhancing ourselves.'' In 
other words, the United States was merely a useful tool for China, not 
a long-term ally. Operating on this principle, Beijing sent a secret 
message to Nixon and Kissinger: since President Nixon had already 
visited Belgrade and Bucharest--capitals of other Communist countries--
he would also be welcome in Beijing. The message contained no hint of 
trust or future cooperation.
    China has not released internal documents to substantiate the 
reasons for the decision to reach out to America, but several Chinese 
generals have told me that Mao's subtle approach to the Nixon 
administration was a striking example of identifying and harnessing 
shi, with some telling me that there was one moment that caused Mao to 
redouble his efforts: a major battle at the border of Xinjiang in 
northwestern China on August 28, 1969. Beijing mobilized Chinese 
military units along China's borders. By then, Kissinger concludes, 
resuming contact with the United States had become a ``strategic 
necessity.'' At the United Nations in New York, I heard the Soviet 
version of their attack and quickly passed it to Peter and Agent Smith 
to inform the contentious NSC debate about the risks of reaching out to 
China.
    In 1969, Mao was able to assess correctly the shi that was driving 
China out of the Soviet orbit and toward a new alliance with the West. 
Mao had taken two actions to accelerate this shift. The first was his 
invitation of Nixon to Beijing. The second was to test two massive 
hydrogen bombs without warning within days of each other near the 
Soviet border. The act served both as a show of force and as a signal 
to America that China sought to move away from the Soviet orbit.
    Realizing the Americans still weren't quite getting the message, 
Mao did something on October 1, 1970, quite unusual for the committed 
and anti-Western Communist: he invited the well-known American 
journalist and author Edgar Snow to stand with him on the Tiananmen 
reviewing stage, and arranged for a photograph of both of them to be 
taken for all of China to see. Mao gave his guest a message: President 
Nixon was welcome to visit China. This was an astonishing invitation--
the latest of several overtures by the Chinese government. Kissinger 
admits that Washington still did not get the message, or at the very 
least did not appreciate its sincerity. The U.S. government was too 
preoccupied with its own interests and strategies to care about 
China's. Thus the history of normalized Sino-American relations started 
off with a myth. Nixon did not first reach out to China; instead, 
China, in the person of Mao, first reached out to Nixon. The Americans 
just didn't realize it. Nor did Washington yet know that Chinese 
documents called America the enemy and likened it to Hitler.
    As Nixon and Kissinger considered their grand strategic approach to 
China, I was playing a much smaller role in this drama. In the autumn 
of 1969, my interlocutors within the intelligence agencies, Peter and 
Agent Smith, requested that I brief Kissinger's staff about the 
information I had gathered while working as an intelligence asset at 
the United Nations. In my meetings with Kissinger's top advisers, I 
detected a sharp split on China. Two National Security Council 
staffers, John Holdridge and Helmut Sonnenfeldt, wrote memos that 
seemed to favor an overture, with neither fearing a Soviet 
overreaction. But two others, Roger Morris and Bill Hyland, were 
opposed. Morris and Hyland feared that any U.S.-China alliance would 
needlessly provoke Moscow and severely damage the administration's 
emerging policy of detente with the Soviet Union. Four senior American 
ambassadors had already met in person with Nixon to warn him that 
Moscow would respond to any U.S. opening to China by halting movement 
toward detente and arms control. These clashing memos help to explain 
why Nixon and Kissinger delayed the opening to China by two years. They 
had to be prodded by China, and by my own reports from the Soviets at 
the United Nations that Moscow would not call off detente and actually 
expected America to accept China's deceptive offers of an alignment. 
Shevchenko and Kutovoy had said exactly this to me.
    My evidence seemed to play a modest role in breaking this deadlock. 
I relayed what I had gathered so far: that the Sino-Soviet split was in 
fact genuine and that the Soviets expected us to open relations with 
the Chinese. I reported, and others verified, that senior diplomats 
such as Arkady Shevchenko already assumed that Nixon would improve 
relations with China to some degree. Their fear was only that he would 
go ``too far'' and establish military ties--something that was not then 
on the table. I was a strong--and, I hoped, persuasive advocate for a 
Sino-American alliance. Kissinger even sent me a thank-you note later.
    But there were additional factors at work that persuaded Kissinger 
and ultimately President Nixon to move toward Beijing. While Kissinger 
was still attempting to discern Chinese intentions, Senator Ted Kennedy 
was seeking to visit China. The Chinese even mentioned this possibility 
to Kissinger during his secret trip to Beijing in July 1971, consistent 
with Warring States concepts about manipulating hawks and doves. Nixon 
reacted as anticipated and instructed Kissinger to ask the Chinese to 
invite no other U.S. political figure to visit China before Nixon. 
Nixon believed, with good reason, that Kennedy was attempting to steal 
his thunder and become the first American politician to travel to 
Beijing. Raising the possibility in public speeches of renewed 
relations with Communist China, Kennedy was putting together what 
looked to be a foreign policy platform for the 1972 presidential 
election.
    Another factor was China's involvement in the Vietnam War. 
Beginning in the 1950s, China had been supplying North Vietnam with 
weapons, supplies, and military advice. China had recently reduced 
military aid to North Vietnam and had even drastically reduced Soviet 
shipments through China, which further persuaded the Nixon 
administration to side with the pro-China camp.
    The Americans would receive reassurance on this front during 
Nixon's visit to Beijing when Mao told the president that he was eager 
to remove any threat from China to the United States: ``At the present 
time, the question of aggression from the United States or aggression 
from China is relatively small; that is, it could be said that this is 
not a major issue, because the present situation is one in which a 
state of war does not exist between our two countries. You want to 
withdraw some of your troops back on your soil; ours do not go 
abroad.''
    Kissinger asserts that this sentence indicating that Chinese troops 
would not go abroad reduced the U.S. concern that China would intervene 
in Vietnam, as it had done in Korea in 1950. Mao correctly recognized 
that this fear featured prominently in American thinking and wanted to 
induce complacency.
    In July 1971, Kissinger made his historic secret visit to China, 
the first tangible realization of Mao's long-held plans. The Chinese 
were coy about the Soviet threat that had driven them to reach out to 
the Americans. Foreign Minister Zhou Enlai referred only obliquely to 
``our northern neighbor'' and ``the other superpower.'' Nor did the 
Chinese side initiate any further discussion on the issue of the Soviet 
threat. Were they really so terrified of an attack?
    During Kissinger's subsequent trip to Beijing, in October, Zhou 
placed the Soviet Union on a list of six key issues on the substantive 
agenda, although he listed it last. After the Chinese declared that 
they were not opposed to improvements in American-Soviet relations, 
Kissinger concluded that they were displaying bravado and concealing 
their fear of the Soviet threat. Kissinger warned Zhou of Moscow's 
``desire to free itself in Europe so it can concentrate on other 
areas.'' ``Other areas'' meant the People's Republic of China.
    But there were glimpses even then that the Chinese saw the United 
States not as an ally but as an obstacle. Referring to the United 
States, Zhou offered a hint of how the Chinese really felt about their 
new prospective friend.
    ``America is the ba,'' Zhou told Kissinger's interpreter, 
Ambassador Ji Zhaozhu of China's Foreign Ministry, repeating a term 
that would be frequently used by Chairman Mao and his successor, Deng 
Xiaoping.
    U.S. government officials who understand Mandarin--a small but 
growing group--have long known that many Chinese and English terms 
cannot be fully translated between the two languages. Choices must 
often be made by the interpreters about what each side really means. 
Kissinger's translator told Kissinger that Zhou's statement meant, 
``America is the leader.'' This seemed to be an innocuous remark, and 
when taken in the context of the Cold War even a compliment. But that 
is not what the word ba means in Mandarin--at least that is not its 
full context.
    Ba has a specific historical meaning from China's Warring States 
period, where the ba provided military order to the known world and 
used force to wipe out its rivals, until the ba itself was brought down 
by force. The ba is more accurately translated as ``tyrant.'' In the 
Warring States period, there were at least five different ba. They rose 
and fell, as each new national challenger outfoxed the old ba in a 
contest of wits lasting decades or even a hundred years. One wonders 
how U.S. policy toward China might have shifted had Kissinger been told 
that day that the Chinese saw Americans not as leaders, but as 
wrongdoers and tyrants. To this day we still have to sort out and live 
with the consequences of that key mistranslation.
    Some years later, I had the privilege of talking to Ambassador Ji 
Chaozhu. He omitted any discussion of how he translated the concept of 
ba to Kissinger in his otherwise chatty memoir The Man on Mao's Right, 
which provides a rare insider's account of how China's Foreign Ministry 
viewed the opening to the United States. I asked if the word ``leader'' 
he used in English had originally been the Chinese word ba.

          ``Did you tell Dr. Kissinger what a ba was?'' I asked.
          ``No,'' he replied.
          ``Why?''
          ``It would have upset him.''

    If Kissinger had realized what Zhou meant by ba--if he had realized 
how China really viewed the United States--the Nixon administration 
might not have been so generous with China. Instead, the administration 
soon made numerous offers of covert military assistance to China--all 
based on the false assumption that it was building a permanent, 
cooperative relationship with China, rather than being united for only 
a few years by the flux of shi. Perhaps if U.S. analysts had gained 
access to views of the anti-American hawks, China's perception of 
America as a tyrannical ba would have alerted Washington. A RAND study 
in 1977 warned of evidence since 1968 that there was a strong anti-
American group within the Chinese leadership that used proverbs such as 
America can ``never put down a butcher's knife and turn into a 
Buddha.''
    Two months after Zhou's conversation with Kissinger, with Nixon's 
visit just around the corner, Kissinger made the first of many covert 
offers to the Chinese. Unbeknownst to a public that would have been 
shocked to see the United States aiding and abetting the People's 
Liberation Army, Kissinger gave China detailed classified information 
about Indian troop movements against Pakistan, as well as America's 
``approval of Chinese support for Pakistan, including diversionary 
troop movements.'' In return, Kissinger asked for Chinese troop 
movements on the Indian border to distract India from its efforts to 
invade and then dismember eastern Pakistan. China's troops did not 
move, but that did not dampen American expectations.
    In January 1972, Nixon authorized Kissinger's deputy Alexander Haig 
to make another covert offer to China. Heading an advance team to China 
just a month before Nixon's historic visit, Haig promised substantial 
cooperation with China against the Soviet Union. Haig told Zhou that 
during the crisis between India and Pakistan, the United States would 
attempt to ``neutralize'' Soviet threats along China's borders and 
``deter threats against [China].'' As far as covert deals go, these 
first two offers by Kissinger and Haig were tactical. But they 
represented a sharp turn after two decades of a complete American 
embargo on China. And, most significantly, they were a sign of larger 
offers to come.
    China played its role to perfection once Mao sat face-to-face with 
Nixon in February 1972. Mao assumed the same role with the Americans 
that he had early on with the Soviets--portraying China as a harmless, 
vulnerable supplicant desperate for aid and protection. ``They are 
concerned about me?'' Mao once asked, referring to the Americans. 
``That is like the cat weeping over the dead mouse!'' Mao even put the 
Americans on the defensive by claiming that they were standing on 
China's shoulders to get at Moscow.
    Years later, Kissinger reflected on the palpable uncertainty he 
perceived when coordinating with Chinese officials: Was America's 
commitment to ``anti-hegemony'' a ruse, and once China let its guard 
down, would Washington and Moscow collude in Beijing's destruction? Was 
the West deceiving China, or was the West deceiving itself? In either 
case, the practical consequence could be to push the ``ill waters of 
the Soviet Union'' eastward toward China. To counter these possible 
perceptions, Nixon promised Mao that the United States would oppose any 
Soviet ``aggressive action'' against China. He stated that if China 
``took measures to protect its security,'' his administration would 
``oppose any effort of others to interfere with the PRC.''
     On the same day Nixon met other leaders in Beijing, Kissinger 
briefed Marshal Ye Jianying, the vice chairman of the military 
commission, and Qiao Guanhua, the vice minister of foreign affairs, 
about the deployment of Soviet forces along the Sino-Soviet border. As 
Yale Professor Paul Bracken first pointed out in a 2012 book, The 
Second Nuclear Age, China was given nuclear targeting information in 
the briefing, which Marshal Ye considered ``an indication of your wish 
to improve our relationship.'' Discussion during the briefing included 
details about Soviet ground forces, aircraft, missiles, and nuclear 
forces. Winston Lord, Kissinger's key aide on China, knew that the 
White House assumed that the Soviets might well ``get to hear of'' this 
exchange of information. Indeed, Moscow soon did.
    Mao asserted that the United States and China should cooperate in 
dealing with the Soviet ``bastard'' and urged that Washington should 
work more closely with its allies, particularly to maintain NATO unity. 
Mao also urged the United States to create an anti-Soviet axis that 
would include Europe, Turkey, Iran, Pakistan, and Japan. A counter-
encirclement of the Soviet hegemon was a classic Warring States 
approach. What the Americans missed was that it was not a permanent 
Chinese policy preference, but only expedient cooperation among two 
Warring States. Mao's calculations in 1972 were not clarified until the 
Chinese released a memoir two decades later.
    This played well with Kissinger, who told Nixon ``with the 
exception of the UK, the PRC might well be the closest to us in its 
global perceptions.'' There seemed to be little suspicion of China's 
strategy.
    Yet the Chinese remained suspicious of the United States. They did 
not share Kissinger's view that the Shanghai Communique, the document 
of understanding that was signed at the end of the summit, suggested 
that ``a tacit alliance to block Soviet expansionism in Asia was coming 
into being.'' The communique stated: ``Neither [the United States nor 
China] should seek hegemony in the Asia-Pacific region, and each is 
opposed to efforts by any other country or group of countries to 
establish such hegemony; and neither is prepared to negotiate on behalf 
of any third party or to enter into agreements or understandings with 
the other directed at other states.
    If the Nixon administration wanted a quasi alliance with China, 
China's message seemed to be that the Americans needed to offer more. 
Thus the Nixon administration's next covert offer of support came in a 
February 1973 meeting in Beijing. It also included an explicit security 
promise, based on finding a way that the United States and China could 
cooperate that would at best deter Moscow and at least get the Soviets' 
attention. Kissinger told the Chinese that Nixon wanted ``enough of a 
relationship with [China] so that it is plausible that an attack on 
[China] involves a substantial American interest.'' This is the concept 
of a symbolic trip wire, as used in U.S. troop deployments in South 
Korea and previously in West Germany to demonstrate that the United 
States has a ``substantial national interest'' in a given contingency. 
Kissinger was not promising a permanent deployment of U.S. troops to 
China's northern border, but he wanted something that would make a 
splash. This is what Mao's generals had proposed he seek from Nixon in 
1969: a conspicuous gesture to Moscow.
    Kissinger even provided a timeline for this strategy. ``The period 
of greatest danger'' for China, he told Huang Hua, China's ambassador 
to the United Nations, would be in the period from 1974 to 1976, when 
the Soviet Union would have completed the ``pacification'' of the West 
through detente and disarmament, the shifting of its military forces, 
and the development of its offensive nuclear capabilities. Kissinger 
wanted the trip wire in place by then.
    The next covert offer--the fourth since Nixon's first meeting with 
Mao and the sixth since Kissinger's first trip to China--promised to 
offer China any deal America offered to the Soviet Union. In the run-up 
to the summit meeting between Nixon and Soviet leader Leonid Brezhnev 
in June 1973, Kissinger reaffirmed that ``anything we are prepared to 
do with the Soviet Union, we are prepared to do with the People's 
Republic.'' In fact, the United States was willing to offer China deals 
even better than those made with the Soviets: ``We may be prepared,'' 
said Kissinger, ``to do things with the People's Republic that we are 
not prepared to do with the Soviet Union.''
    At about this time, Nixon sent a note stating ``in no case will the 
United States participate in a joint move together with the Soviet 
Union under [the Prevention of Nuclear War] agreement with respect to 
conflicts . where the PRC is a party.'' At the same time, he decided to 
circumvent U.S. law and regulations by providing technology to China 
through the British.
    The seventh covert offer was the most sensitive one, and would not 
be revealed for three decades, even to the CIA. It grew out of an 
internal debate I witnessed in October 1973 about whether to back up 
America's vague promises to Beijing and do something tangible to 
strengthen China, or to stay at the level of mere words and gestures. 
The United States could establish a ``more concrete security 
understanding'' with the Chinese, or instead merely promise significant 
progress in the diplomatic normalization of bilateral relations. There 
was a strong case for each option.
    That year, I was working at the RAND Corporation, where as a China 
expert I had been given top-secret access to Kissinger's conversations 
with Chinese leaders by Richard Moorsteen, a RAND colleague close to 
Kissinger. Andy Marshall and Fred Ikle had hired me at RAND, the latter 
of whom soon left RAND after Nixon appointed him director of the Arms 
Control and Disarmament Agency. Ikle invited me to see him at his 
agency's offices several times in 1973 to discuss my analysis of China, 
and to draft a proposal to Kissinger of secret cooperation of 
intelligence and warning technology.
    I shared Ikle's support for tangible U.S. covert cooperation with 
China. Though Ikle told Kissinger that a ``formal relationship'' (that 
is, a formal alliance) was not desirable, Washington could unilaterally 
provide help of a ``technical nature.'' The United States could set up 
a ``hotline'' arrangement that would provide a cover for Washington to 
give Beijing secret early-warning information about Soviet military 
actions directed against China. ``Given that a large portion of the 
Chinese strategic forces will continue to consist of bombers, hours of 
advance warning could be used by them to reduce the vulnerability of 
their forces significantly,'' Ikle and I wrote in one memo. ``The fact 
that the hotline might enable us to transmit warning of a possible 
Soviet attack could be a powerful argument.'' We also advocated 
Washington's selling to Beijing hardware and technology to alert the 
Chinese if the Soviets were about to attack, and we supported providing 
America's superior high-resolution satellite images to heighten the 
accuracy of Chinese targeting of Soviet sites. Kissinger agreed with 
our proposal. Only a few knew that he proposed tangible U.S. covert 
cooperation with China. On a trip to Beijing in November 1973, 
Kissinger told the Chinese that in the event of a Soviet attack the 
United States could supply ``equipment and other services.'' America, 
Kissinger said, could help improve communications between Beijing and 
the various Chinese bomber bases ``under some guise.'' He also offered 
to provide the technology for ``certain kinds of radars'' that the 
Chinese could build. In other words, Kissinger secretly offered aid to 
the People's Liberation Army. He was proposing the beginnings of a 
military supply relationship, both in peacetime and in the event of a 
Soviet attack.
    To my surprise, the Chinese initially balked at the seventh offer, 
asking for time to study the proposals before responding further. They 
said that American cooperation with early warning would be 
``intelligence of great assistance,'' but this had to be done in a 
manner ``so that no one feels we are allies.'' With a mentality 
straight out of the Warring States era of ruthlessness and shifting 
alliances, China's leaders were suspicious that Kissinger's offer was 
an attempt to embroil China in a war with Moscow.
    The Chinese perhaps did not recognize the risk Nixon and Kissinger 
had taken to make this offer. Kissinger's closet adviser on China, 
Winston Lord, had argued strongly against this step in a memo to 
Kissinger, saying that it would potentially be unconstitutional (not to 
mention widely opposed) and would inflame the Russians. Kissinger had 
overruled Lord's objections, though Lord himself was a strong supporter 
of improving relations with China.
    Sino-American relations went through their biggest improvement in 
the late 1970s, as Deng Xiaoping took on increasing power and became 
the public face for China's PR offensive with the United States. To 
Westerners, Deng was the ideal Chinese leader: a moderate, reform-
minded man with a tranquil, grandfatherly demeanor. He was, in short, 
the kind of figure Westerners wanted to see.
    But Deng was no docile grandfather. In private meetings within the 
Politburo, he raged at aides and advisers over China's lack of progress 
against the West. He believed that under Mao and his questionable 
``reform'' practices, China had lost thirty years in its campaign to 
surpass the American ba.
    Deng was enthusiastic about a partnership with the Americans, but 
for a key reason not meant for public consumption. He had rightly 
deduced that by following the Soviet economic model, China had backed 
the wrong horse and was now paying the price. Internal Chinese 
documents, which came into the hands of U.S. intelligence officials 
long after the fact, showed that Chinese leaders concluded that they 
had failed to extract all they could from their now-faltering Soviet 
alliance. Deng would not make the same mistake with the Americans. He 
saw that the real way for China to make progress in the Marathon was to 
obtain knowledge and skills from the United States. In other words, 
China would come from behind and win the Marathon by stealthily drawing 
most of its energy from the complacent American front-runner.
    Within the Politburo, Deng was known for referencing a favorite 
admonition from the Warring States, tao guang yang hui (hide your 
ambitions and build your capability). Deng, too, sent opponents 
messages through seemingly oblique and harmless stories. During his 
first meeting with President Gerald Ford in December 1975, he referred 
to a story from the classic Chinese book The Romance of the Three 
Kingdoms to make what in retrospect was an important point, one 
completely lost on Ford. The story again involves Cao Cao, discussed in 
the previous chapter, considered in Chinese literature to be one of 
history's greatest tyrants. Cao Cao, in fact, probably best exemplifies 
the concept of a ba in ancient Chinese literature.
    In the particular vignette Deng told Ford, Cao Cao defeats Liu Bei, 
a rival challenger, and remains the ba. After their war, the challenger 
offers to work for Cao Cao, but Cao Cao remains suspicious of Liu Bei's 
loyalty. Deng cited to President Ford Cao Cao's famous quote ``Liu Bei 
is like an eagle, which when it is hungry will work for you, but when 
it is well fed, will fly away.'' Ostensibly, the ``eagle'' in Deng's 
story was the Soviet Union. American attempts to accommodate the 
Soviets, Deng warned, would fail. Once they had what they wanted, the 
Soviets, like Liu Bei, would pursue their own interests. What the 
Americans missed from that anecdote was that the same strategic 
sentiment held true for China. Once America built China into an equal, 
China would not remain an ally but would ``fly away.''
    However, Deng tactfully decided not to tell the most famous story 
about Cao Cao and Liu Bei--for if he had done so, he would have 
divulged China's true aims in dealing with the Americans. Chinese hawks 
had not yet begun to write openly about the allegory contained in these 
ancient stories. We would need this key to decode Chinese strategic 
allusions. There was no sign that either Ford or Kissinger had any idea 
what Deng was talking about.
    Entranced as they were by their new relationship with the Chinese, 
the Nixon and Ford administrations willingly satisfied many of China's 
immediate political objectives.
    All these gifts--and more to come--were kept secret from the 
American public for at least thirty years. The United States not only 
cut off the CIA's clandestine assistance program to the Dalai Lama--
Public Enemy Number One to Communist China--but also canceled the U.S. 
Navy's routine patrols through the Taiwan Strait, which had symbolized 
America's commitment to Taiwan. American policy became a series of 
initiatives to strengthen China against its adversaries.
    In 1975, while still at RAND, I wrote an article for Foreign Policy 
magazine advocating military ties between the United States and China, 
to create a wedge against the Soviets. Richard Holbrooke, the once and 
future diplomat, was then serving as the magazine's editor. He was a 
strong proponent of the article, labeling my idea a ``blockbuster.'' He 
shared my thoughts with other editors, leading to a long story in 
Newsweek, ``Guns for Peking?'' Other media outlets picked up the 
proposal, while the Soviet press attacked both the arguments I made in 
the proposal and me personally. Chinese military officers at the United 
Nations had suggested the idea to me. So in 1973 I began four decades 
of conversations with China's military hawks, hearing about lessons 
from Warring States to deal with the hegemon, which I then assumed 
would always mean the Soviet Union.
    In early 1976, Ronald Reagan, running against President Ford for 
the Republican presidential nomination, read the article. (I had sent 
it to Reagan at Holbrooke's behest.) In a handwritten note, the former 
California governor said he agreed with the idea of closer ties with 
the Chinese as a wedge against the Soviets. But he also cautioned me 
about the Chinese, and worried in particular about abandoning America's 
democratic allies in Taiwan. After I met with Governor Reagan at his 
Pacific Palisades home--where he joked about being ``sixty-four years 
old and unemployed''--he encouraged me to keep sending him material 
about China that he might use in speeches.
    In 1978, relations with the United States moved toward 
normalization--that is, official American recognition of Communist 
China as the legitimate government of the Chinese people. That year, 
Deng focused immediately on what was at the top of his American wish 
list: science and technology. This was an example of the Warring States 
concept known as wu wei--or, having others do your work. As he 
formulated a strategy in 1978, Deng understood, as he put it, that 
``technology is the number one productive force'' for economic growth. 
The only way China could pass the United States as an economic power, 
Deng believed, was through massive scientific and technological 
development. An essential shortcut would be to take what the Americans 
already had. Deng found a willing partner in that effort in a new 
American president, Jimmy Carter, who was eager to achieve the 
diplomatic coup of a formal Sino-American partnership.
    In July 1978, President Carter sent to China the highest-level 
delegation of U.S. scientists ever to visit another country. Frank 
Press, Carter's science adviser and a former MIT professor specializing 
in earthquake science, led the delegation. Press had been chairman of 
the U.S. Committee on Scholarly Communication with the People's 
Republic of China from 1975 to 1977, and therefore took particular 
interest in scholarly exchanges with China. The Press delegation 
received great attention from the Chinese. The People's Daily rarely 
published speeches by foreigners, but in this case it printed Press's 
banquet speech, which stressed the advantages of globalization. And 
Michel Oksenberg, a National Security Council official for China policy 
who would sit in on some fourteen meetings with Deng, said he never saw 
Deng more intellectually curious and more involved in articulating his 
vision about China's future than on this trip. Again playing the role 
of vulnerable supplicant, Deng spoke to Press's delegation about 
China's all but hopeless backwardness in science and technology and 
expressed his concerns about American constraints on high-tech exports 
to his country. In the past, Beijing kept tight control over the 
country's scientists going to the United States, limiting their numbers 
in fear that the scientists might defect. Press expected that they 
would likewise be cautious about expanding scientific exchanges with 
the West. So he was surprised when Deng proposed that the United States 
immediately accept seven hundred Chinese science students, with the 
larger goal of accepting tens of thousands more over the next few 
years. Deng was so intent on receiving a prompt answer that Press, 
considering this one of the most important breakthroughs in his career, 
telephoned President Carter, waking him at 3:00 a.m.
    Like his adviser, Carter gave little thought to the implications of 
China's sudden intense interest in scientific exchanges, viewing it as 
merely a welcome sign of improved relations. In January 1979, Deng made 
his first and only visit to the United States, and he was a hit. 
President Carter feted him at a state dinner and, in a sign of the 
bipartisan flavor of U.S.-China policy, even invited the disgraced 
Richard Nixon to attend, the first time the former president had 
visited the White House since his resignation in August 1974. Deng 
spent thirteen days in the United States, touring Coca-Cola's 
headquarters, the Johnson Space Center in Houston, and even Disney 
World. In a sign of acceptance by the American popular media, Time 
magazine put Deng on its cover, twice. At the National Museum in 
Beijing, one can see displayed a photograph of Deng smiling beneath a 
ten-gallon hat he received in Texas, which became the symbol of his 
1979 visit. It signaled to the U.S. public that he was good-humored, 
less like one of ``those Communists'' and more like ``us.'' But it also 
proved a turning point for the Chinese and the Marathon. Deng obtained 
far more than had Mao. On January 31, 1979, during his visit to the 
United States, Deng and Fang Yi, director of the State Science and 
Technology Commission, signed agreements with the U.S. government to 
speed up scientific exchanges. That year, the first fifty Chinese 
students flew to America. In the first five years of exchanges, some 
nineteen thousand Chinese students would study at American 
universities, mainly in the physical sciences, health sciences, and 
engineering, and their numbers would continue to increase. Carter and 
Deng also signed agreements on consular offices, trade, science, and 
technology--with the United States providing all sorts of scientific 
and technical knowledge to Chinese scientists in what would amount to 
the greatest outpouring of American scientific and technological 
expertise in history. The Chinese reached out to the U.S. National 
Academy of Sciences to send a series of delegations to China to 
initiate U.S.-China scientific exchanges in several fields China had 
selected. The Chinese strategy was to get the Americans to ensure their 
admission to all international organizations dealing with physics, 
atomic energy, astronautics, and other fields.
    The Americans agreed, thus making an eighth offer to China. The 
Americans also agreed to engage in more covert military cooperation. 
President Carter provided China with intelligence support to aid 
China's war in Vietnam, to a degree that shocked even Henry Kissinger, 
as he described in his 2011 book On China. In tones suggesting that 
perhaps he'd created a monster by opening the door to ties with 
Beijing, Kissinger denounced Carter's ``informal collusion'' with what 
was ``tantamount to overt military aggression'' by Beijing--aid that 
``had the practical effect of indirectly assisting the remnants of the 
Khmer Rouge.'' A visit to China by Secretary of Defense Harold Brown, 
Kissinger fumed, ``marked a further step toward Sino-American 
cooperation unimaginable only a few years earlier.''
    The ninth offer, Presidential Directive 43, signed in 1978, 
established numerous programs to transfer American scientific and 
technological developments to China in the fields of education, energy, 
agriculture, space, geosciences, commerce, and public health. The 
following year, the Carter administration granted China most-favored-
nation status as a U.S. trading partner.
     President Carter also authorized the establishment of signals 
intelligence collection sites in northwestern China in about 1979, as 
the CIA operative and future U.S. ambassador to China James Lilley 
described in his memoir, China Hands. ``Part of the reason I was 
awarded a medal from the CIA was my work setting up the first CIA unit 
in Beijing,'' Lilley wrote. ``Another contributing fact was my role in 
developing intelligence sharing with China.. It sounded like a far-
fetched idea--the United States and China, who had been fighting each 
other through surrogates just a few years earlier in Vietnam, working 
together to collect strategic technical intelligence on the Soviet 
Union.''

          * * * * * * *

    In 1978, I was serving as a professional staff member on the U.S. 
Senate Budget Committee, and I also worked as a consultant to the 
Defense Department, where I continued to read classified analyses on 
China and produced reports and analyses of my own. As Ronald Reagan 
mounted a second bid for the White House in 1980, I was appointed as 
one of his advisers, and I helped draft his first campaign speech on 
foreign policy. I expressed a view, common among his advisers, that the 
United States ought to help China to stave off the far greater Soviet 
threat. After Reagan won the election, I was named to the presidential 
transition team. I then advocated still more cooperation. An early ally 
in my efforts was Alexander Haig, who knew all about the earlier 
efforts with China under the Carter administration, and now as 
secretary of state visited Beijing and publicly offered to sell weapons 
to China, the next logical step.
    National Security Decision Directive (NSDD) 11, signed by President 
Reagan in 1981, permitted the Pentagon to sell advanced air, ground, 
naval, and missile technology to the Chinese to transform the People's 
Liberation Army into a world-class fighting force. The following year, 
Reagan's NSDD 12 inaugurated nuclear cooperation and development 
between the United States and China, to expand China's military and 
civilian nuclear programs.
    Reagan was deeply skeptical of his predecessor's policies toward 
China--a stance that led to a serious policy disagreement within the 
administration. Reagan saw China's underlying nature better than I did 
and better than most of the China experts who would populate his 
administration. On the surface, Reagan followed the Nixon-Ford-Carter 
line of building up China--``to help China modernize, on the grounds 
that a strong, secure, and stable China can be an increasing force for 
peace, both in Asia and in the world,'' in the words of Reagan's NSDD 
140, issued in 1984. (Significantly, the NSC staff severely limited 
access to NSDD 140--only fifteen copies were produced--probably at 
least in part because it outlined the Reagan administration's 
controversial goal of strengthening China.)
    Reagan signed these secret directives to help build a strong China 
and even offered to sell arms to the Chinese and to reduce arms sales 
to Taiwan. But unlike his predecessors, Reagan added a caveat that 
should have been crucial. His directives stated that U.S. assistance to 
China was conditioned on China staying independent of the Soviet Union 
and liberalizing its authoritarian system. Unfortunately, his advisers 
largely ignored these preconditions, and for whatever reason so did he.
    Additionally, the Reagan administration provided funding and 
training to newly established Chinese government-run institutes 
specializing in genetic engineering, automation, biotechnology, lasers, 
space technology, manned spaceflight, intelligent robotics, and more. 
Reagan even approved a Chinese military delegation visit to one of the 
crown jewels of national security, the Defense Advanced Research 
Projects Agency, the research agency that invented the Internet, cyber 
operations, and dozens of other high-tech programs.
    During the Reagan presidency, America's covert military cooperation 
with China expanded to previously inconceivable levels. The United 
States secretly worked with China to provide military supplies to the 
anti-Soviet Afghan rebels, the Khmer Rouge, and the anti-Cuban forces 
in Angola. Our cooperation against the Vietnamese occupation of 
Cambodia--including the arming of fifty thousand anti-Vietnam 
guerrillas--was discussed in interviews by four of the CIA officers who 
revealed the details of this program in the book The Cambodian Wars. 
There was a much larger secret that other CIA officers revealed in 
George Crile's book Charlie Wilson's War, the story of America's 
purchase of $2 billion in weapons from China for the anti-Soviet Afghan 
rebels. Kissinger's memoirs reveal that there was covert cooperation in 
Angola as well.
    Why did China seek to cooperate with the United States on these 
large-scale covert actions? We will definitively find out only when 
Beijing opens its archives or a very high-level defector arrives. One 
thing we know now is that Beijing wanted to use American power and 
technology to strengthen China for the long term. The key point seems 
to have been the perceived need to play strategic wei qi, to head off 
encirclement by the Soviet Union. No one saw this as an effort to make 
broader progress in the Marathon. China made itself seem weak and 
defensive to us, in need of protection.
    In the tenth offer, U.S.-Chinese intelligence gathering along 
China's border with the Soviet Union-code-named the Chestnut program--
was approved, according to the New York Times reporter Patrick Tyler. 
Later, during an August 1979 trip to China by Carter's vice president, 
Walter Mondale, the Pentagon and the CIA airlifted to China the 
Chestnut monitoring stations via military transport. Tellingly, Tyler 
reported, the Chinese asked the U.S. Air Force C-141 Starlifter at the 
Beijing airport to park beside a Soviet passenger jet so the Soviets 
would see the cooperation.
    According to Tyler, these monitoring stations could collect 
information about air traffic, radar signals from Soviet air defenses, 
and KGB communications, and they could also detect any change in the 
alert status of Soviet nuclear forces. Thus China would have an 
increase in its warning time in the event of a Soviet attack. This was 
a huge advance in Chinese security in the months before the attempted 
encirclement that would begin with the Soviet-backed Vietnamese 
invasion of Cambodia and the Soviet invasion of Afghanistan in December 
1979. Through their patience, the Chinese were getting more than what 
Kissinger, Ikle, and I had proposed six years earlier.
    According to the requirements of shi, Beijing must have thought it 
needed America's help to break up the two ``pincers'' of the Soviet 
encirclement of China--in Afghanistan and Vietnam. The circumstances 
justified going farther than Mao had; Deng would accept significant aid 
from the hegemon.
    From 1982 through 1989, the Sino-American Cambodian program was run 
out of Bangkok, with the support of the Chinese, the Royal Thai Army, 
Singapore, and Malaysia. This constituted the eleventh offer of U.S. 
assistance to China. The covert cooperation was effectively masked for 
two decades because it was partly overt. USAID provided funds named for 
the program advocates, Representative Bill McCollum, a Republican from 
Florida, and Representative Stephen Solarz, a Democrat from New York, 
for nonlethal humanitarian assistance in Cambodia. Behind these two 
overt programs, Reagan ordered the CIA to provide covert assistance 
initially in 1982 for $2 million a year, and that was raised as of 1986 
to $12 million, as Kenneth Conboy notes. The program was commingled 
under a project the Thais called Project 328. China, Malaysia, 
Singapore, and Thailand also contributed weapons and funds. Singapore's 
Prime Minister Lee Kuan Yew even visited Bangkok to travel to the 
secret camp. I visited in 1985 and 1986, to be briefed by the CIA 
station chief, who had transferred to Bangkok after serving as head of 
the Far East Division at CIA headquarters. He considered the project 
``the only game in town,'' referring to the Cold War, with China 
joining up against the Soviets.
    Starting in the summer of 1984, two years after the program in 
Cambodia began, Chinese covert cooperation to drive the Soviets out of 
Afghanistan would become fifty times larger than its effort in 
Cambodia.
    We did not understand shi and counter-encirclement at that time, 
and therefore no one thought the Chinese government would risk Soviet 
wrath by becoming a major arms supplier to America's efforts to aid the 
Afghan rebels. The discovery was made by a brilliant, Mandarin-speaking 
CIA friend, Joe DeTrani. This Chinese connection was a tightly held 
secret, and no more than ten people in the entire CIA were aware of the 
program, according to Tyler. The Chinese still do not acknowledge that 
they provided such arms. In his book Charlie Wilson's War, George Crile 
reports that the first order was for AK-47 assault rifles, machine 
guns, rocket-propelled antitank grenades, and land mines.
    In 1984, Representative Charlie Wilson had drummed up $50 million 
to increase support for the rebels in Afghanistan. Crile reports that 
the CIA decided to spend $38 million of it to buy weapons from the 
Chinese government. The Washington Post in 1990 quoted anonymous 
sources that said that the total value of weapons provided by China 
exceeded $2 billion during the six years of Sino-American covert 
cooperation.
    U.S.-Chinese clandestine cooperation reached its peak during the 
Reagan administration. Presidents Nixon and Ford had offered China 
intelligence about the Soviets. President Carter established the 
Chestnut eavesdropping project. But it was Reagan who treated China as 
a full strategic partner--albeit in secret.
    The three main projects were clandestine aid to the anti-Soviet 
rebels in Afghanistan, Cambodia, and Angola. By now, I had been 
promoted to the civilian equivalent of a three-star general and made 
head of policy planning and covert action in the Pentagon, reporting to 
the official in charge of policy, Fred Ikle. Ikle and I were among the 
few who knew about Kissinger's 1973 offer to aid China and President 
Carter's Chestnut program. He and I were ready to test whether China 
was really willing to become a U.S. ally. The affirmative results would 
prejudice many senior U.S. officials to favor China for years to come.
    My duty was to visit the leaders of the Afghan, Cambodian, and 
Angolan rebel groups in Islamabad, Bangkok, and southern Angola, 
respectively, to ascertain their plans and needs. I was also sent to 
obtain China's advice, approval, and support. We recommended that 
President Reagan sign National Security Decision Directive (NSDD) 166, 
which reflected that there was a chance that escalation in Afghanistan 
could provoke retaliation by the Soviets. We needed China's assessment 
of the situation and, ideally, its support.
    Two decades later, the journalist Steve Coll alleged that ``the 
Chinese communists cleared huge profit margins on weapons they sold in 
deals negotiated by the CIA.'' If the assertion is accurate that $2 
billion was spent on Chinese weapons for the anti-Soviet rebel groups, 
then China's purchase of more than $500 million in American military 
equipment for itself seems relatively small.
    The Chinese not only sold the weapons to us to give to the rebels, 
but also advised us how to conduct these covert operations. From their 
advice emerged a few lessons about Chinese strategy toward a declining 
hegemon, in this case the Soviet Union. First, the Chinese emphasized 
that we had to identify key Soviet vulnerabilities to exploit. One 
tactic, they explained, was to raise the cost of empire. When I first 
proposed the option of supplying Stinger antiaircraft missiles to the 
Afghan and Angolan rebels, the Chinese were delighted at the high costs 
that these weapons would impose, in the form of destroyed Soviet 
helicopters and jet fighters.
    The second idea was to persuade others to do the fighting. This was 
of course a manifestation of the Warring States-era notion of wu wei.
    The third concept was to attack the allies of the declining 
hegemon. The Cambodian rebels worked against the Soviets' Vietnamese 
puppets. The Angolan rebels expelled the Cubans, who had been flown to 
Angola in Soviet aircraft that might also have been shot down with 
Stingers, if they had been made available then. The United States, in 
cooperation with China, did all this, and more.
    I asked the Chinese whether they thought it would be excessively 
provocative to take two additional steps: Should we supply and 
encourage Afghan rebels to conduct commando sabotage raids inside the 
Soviet Union (which had never been done during the Cold War)? And 
should we agree to the request to provide the Afghans with long-range 
sniper rifles, night-vision goggles, and maps with the locations of 
high-ranking Soviet officials serving in Afghanistan in support of what 
amounted to a targeted assassination program? My colleagues had been 
certain that the Chinese would draw the line at such actions. I had 
read enough Chinese history to guess that they would agree, but even I 
was taken aback at the ruthlessness of Beijing's ambition to bring down 
the Soviets when they answered affirmatively to the two questions.
    Steve Coll wrote in his Pulitzer Prize-winning book Ghost Wars that 
it was the American side that declined these requests. He writes of 
``alarms'' among the CIA's lawyers that it was almost ``outright 
assassination'' and so the local CIA station chief ``might end up in 
handcuffs.'' So the sniper rifles could be approved but not the maps 
and night-vision goggles. The commando raids inside Soviet territory, 
favored by the Chinese as a way to bring down the Russian hegemon, were 
soon curtailed as well, in spite of the Chinese recommendation to us 
that this would have a useful psychological shock effect on the 
declining hegemon.
    In 1985, the aid to the Chinese Marathon expanded to include 
American weapons, as the Reagan administration arranged for the sale of 
six major weapons systems to China for more than $1 billion. This 
program aimed to strengthen China's army, navy, and air force and even 
to help China expand its marine corps. And in March 1986 the Reagan 
administration assisted China's development of eight national research 
centers focused on genetic engineering, intelligent robotics, 
artificial intelligence, automation, biotechnology, lasers, 
supercomputers, space technology, and manned spaceflight. Before long, 
the Chinese had made significant progress on more than ten thousand 
projects, all heavily dependent on Western assistance and all crucial 
to China's Marathon strategy. The Reagan administration hoped it was 
countering Soviet power by giving a boost to the Chinese, and 
everyone--from Reagan on down--wanted to believe Beijing's claims that 
China was moving toward greater liberalization.
    China's strategy to break the Soviet encirclement with help from 
its fellow Warring State was succeeding. In 1989, the Soviets announced 
they would leave Afghanistan, and Vietnam soon withdrew from Cambodia. 
Now, would Washington and Beijing build on this foundation of trust and 
therefore become true allies forever? I thought so. But according to 
the Warring States' axioms, now would be the time for China to get back 
to dealing with the real hegemon, the United States.



                               __________


              Prepared Statement of Dr. Graham T. Allison

    Mr. Chairman, Ranking Member Markey, and members: I thank you for 
the opportunity to testify today on critical questions about ``American 
leadership in the Asia-Pacific: the view from Beijing.'' My grandfather 
was fond of quoting a line from the Old Testament book of Proverbs that 
says: ``oh, that my enemy had written a book.'' On the array of 
questions that you have posed for the members of this panel, I have 
written a book entitled Destined for War: Can America and China Escape 
Thucydides's Trap? The book was published on Memorial Day and I have 
been gratified by the responses from reviews in all the major 
newspapers and journals, including the front page of the Sunday New 
York Times Book Review, as well as the speed with which the major 
arguments of the book have entered the policy mainstream, both in 
Washington and Beijing. Indeed, at the 19th Party Congress that just 
concluded in Beijing, Xi Jinping was talking, among other things, about 
Thucydides's Trap.
    If required to summarize the core argument of the book in a few 
bullet points, it is that:

   When a rising power threatens to displace a ruling power, alarm 
        bells should sound: danger ahead. Thucydides's Trap is the 
        dangerous dynamic that occurs in this interaction. In the case 
        of the rise of Athens and its impact upon Sparta (which had 
        ruled Greece for 100 years), or Germany in its rivalry with 
        Britain a century ago in the run up to World War I, or China 
        over the past generation as it has come to rival, and in many 
        areas, surpass the U.S., this dangerous dynamic creates 
        conditions in which both competitors are acutely vulnerable to 
        provocations by third party actions. One of the primary 
        competitors feels obliged to respond and there follows a 
        cascade of actions and reactions at the end of which the two 
        find themselves in a war neither wanted. Ask yourself again: 
        how did the assassination of a minor archduke start a fire that 
        burned down the whole of Europe at the beginning of the past 
        century? How did North Korea drag China and the U.S. into war 
        67 years ago last month?
   Destined for War examines the past 500 years and finds 16 cases in 
        which a rising power threatens to displace a ruling power. 
        Twelve of these cases ended in war; four without war. Thus to 
        say that war between a rising China and a ruling U.S. is 
        inevitable would be mistaken. But to say the odds are against 
        us would not be.
   This book is neither fatalistic nor pessimistic. Instead, its 
        purpose is to help us recognize that these structural factors 
        create extreme dangers that require extreme measures on the 
        part of both the U.S. and China--if we are to escape 
        Thucydides's Trap. As I argue in the book, business as usual 
        (which is what we have seen for the last two decades under both 
        Democratic and Republican leadership) is likely to lead to 
        history as usual. And in this case, that would be a 
        catastrophic war that no one in Beijing or Washington wants. 
        Indeed, every serious leader in both capitals knows that would 
        be crazy. But none of the leaders of the major powers in 1914 
        wanted World War I. Neither China nor the U.S. wanted war in 
        1950. The good news is that, as Santayana taught us, only those 
        who refuse to study history are condemned to repeat it. We are 
        under no obligations to repeat the mistakes made by Kaiser 
        Wilhelm in 1914 or Pericles in classical Greece that led to 
        war.
   In sum, the purpose of the book is to help us diagnose the 
        condition which we now find ourselves in. My thesis is certain 
        to frustrate Washingtonians--since the Washington template 
        demands a solution to a problem in the same sentence in which 
        the challenge is identified. In my view, that is one of the 
        major problems with ``Washington solutions.'' We must recognize 
        that a rising China is not a ``fixable'' problem but rather a 
        condition that we will have to cope with for a generation. 
        Success in meeting this grand challenge will require a surge of 
        imagination and adaptability as remarkable as that demonstrated 
        by individuals we now celebrate as the ``wise men'' who created 
        the Cold War strategy that we sustained for four decades until 
        success was at last achieved.

    Your invitation for me to testify identified ten questions. Perhaps 
I can be most helpful by summarizing brief answers to each.

1.  What is your assessment of Chinese strategic intentions in the 
        Asia-Pacific region, and globally, over the short, medium, and 
        long term? How will China advance those intentions?

    I posed this question two years ago to the individual who was 
unquestionably the world's premier China watcher until his death in 
2015. Specifically I asked him: ``are China's current leaders, 
including Xi, serious about displacing the U.S. as the predominant 
power in Asia in the foreseeable future?''
    I cannot improve on his answer. Lee Kuan Yew responded: ``Of 
course. Why not? How could they not aspire to be number one in Asia and 
in time the world?''
    Lee foresaw the twenty-first century as a ``contest for supremacy 
in Asia.'' China's leaders see this as what they call a ``prolonged 
struggle'' over international order--especially in their neighborhood. 
This does not mean that Xi and his colleagues want war. Precisely the 
opposite. Instead, they are attempting to follow Sun Tzu's maxim: 
``Ultimate excellence lies not in winning every battle, but in 
defeating the enemy without ever fighting.'' As Henry Kissinger's 
explains, for the Chinese this means that ``far better than challenging 
the enemy on the field of battle is maneuvering him into an unfavorable 
position from which escape is impossible.'' In economic relations 
today, China is doing just that to its Asian neighbors and indeed to 
the U.S.
    China primarily conducts foreign policy through economics because, 
to put it bluntly, it can. It is currently the largest trading partner 
for over 130 countries--including all the major Asian economies. As 
China's dominant economic market and its ``One Belt, One Road'' plan to 
network Asia with physical infrastructure (at a scale 12 times that of 
the Marshall Plan) draws its neighbors into Beijing's ``economic 
gravity,'' the United States' post-World War II position in Asia 
erodes.

2.  How does the Chinese leadership view the United States and its role 
        in the region and the world?

    In 2014, former Australian Prime Minister Kevin Rudd and U.S. 
National Security Advisor Brent Scowcroft each came back from separate, 
extensive conversations with Chinese leaders with identical views of 
what they call the striking ``consensus'' in the Chinese leadership. 
According to both statesmen, China's leaders believe that America's 
grand strategy for dealing with China involves five ``to's'': to 
isolate China, to contain China, to diminish China, to internally 
divide China, and to sabotage China's leadership. As Rudd explained, 
these convictions ``derive from a Chinese conclusion that the U.S. has 
not, and never will, accept the fundamental political legitimacy of the 
Chinese administration because it is not a liberal democracy.'' 
Moreover, according to Rudd, this is based on ``a deeply held, deeply 
`realist' Chinese conclusion that the U.S. will never willingly concede 
its status as the preeminent regional and global power, and will do 
everything within its power to retain that position.'' Or, as Henry 
Kissinger says plainly, every Chinese leader he has met believes that 
America's strategy is to ``contain'' China.
    When I asked a Chinese colleague in their security community what 
he thought the U.S. role in the region should be, he answered: ``back 
off.'' His own colleague proposed a more candid two-word summary: 
``butt out.'' As realistic students of history, Chinese leaders 
recognize that the role the U.S. has played since World War II as the 
architect and underwriter of regional stability and security has been 
essential to the rise of Asia, including China itself. But they believe 
that as the tide that brought the U.S. to Asia recedes, America must 
leave with it. Much as Britain's role in the Western Hemisphere faded 
at the beginning of the twentieth century, so must America's role in 
Asia as the region's historic superpower resumes its place. As Xi told 
a gathering of Eurasian leaders in 2014, ``In the final analysis, it is 
for the people of Asia to run the affairs of Asia, solve the problems 
of Asia and uphold the security of Asia.''
    Prior to last week's APEC meeting in Da Nang, China persuaded 
Vietnam to negotiate their South China Sea dispute through direct talks 
without the U.S., and the Philippines to end construction of facilities 
on Thitu Island, which China claims. As China's Ambassador to the U.S. 
put it: ``I think it would certainly be better if others including the 
United States would not try to interfere in this constructive 
process.'' At the conclusion of last week's meeting with President 
Trump, Xi noted that ``the Pacific Ocean is vast enough to accommodate 
both countries'' But as China's aggressive deployment of modern anti-
ship missiles with longer and longer ranges keeps nudging U.S. aircraft 
carriers further and further from its shores, one suspects that Xi 
hopes to persuade Trump to a division of spheres of influence on either 
side of Hawaii.

3.  How is China's regional and global posture taking shape under 
        President Xi Jinping? What is your perspective on the outcomes 
        of the recent 19th Party Congress?

    In his speech at the 19th Party Congress, President Xi was very 
clear about China's posture today. He said: ``the Chinese nation now 
stands tall and strong in the East; no one should expect China to 
swallow anything that undermines its interests.'' Moreover, he was bold 
enough to put a target objective and a date together, declaring China's 
intention to become ``global leader in terms of composite national 
strength and international influence'' by 2050. If, by mid-century, 
China achieves a per capita GDP equivalent to that of the U.S., its 
economy will be four times larger than ours--since it has four times as 
many people.
    Anyone who doubts Xi's ambitions for China should listen to the 
declaration of his own sense of the march of history captured in a line 
that has not been reported by English-language media. He declared: 
``History looks kindly on those with resolve, with drive and ambition, 
and with plenty of guts; it won't wait for the hesitant, the apathetic, 
or those shy of a challenge.'' That should give you an idea about his 
posture.

4.  How has the United States' view of China evolved over the past 
        century, and how do you see it evolving in the decade ahead?

    To put it in one line, the U.S. has assumed that, as it matured, 
China would become ``more like us.'' Particularly after the Cold War 
ended abruptly in 1991 with the collapse of the Soviet Union, most of 
the American foreign policy establishment took a victory lap in which 
we engaged in more than a little triumphalism. Celebrating the U.S. 
position as the Unipolar Power, Frank Fukuyama famously declared the 
End of History. Democratic capitalism had swept the field and hereafter 
nations would follow our lead first in adopting market capitalism in 
order to grow rich. As they developed a middle class, they would become 
democracies. And according to the ``democratic peace'' hypothesis, war 
would become obsolete since democracies do not fight each other. Thomas 
Friedman popularized this argument with his ``Golden Arches'' theory, 
declaring that two nations that had McDonald's Golden Arches could not 
fight each other.
    Obviously, this victory lap was premature. Americans are now waking 
up to the fact that, as Lee put it, a powerful China will insist on 
``being accepted as China, not as an honorary member of the West.''

5.  What is your perspective on the Obama administration's ``Asia 
        Pivot'' or ``rebalance'' policy, and what policy should the 
        Trump administration pursue with respect to the Asia-Pacific, 
        and China in particular?

        [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    This illustration comes from my testimony to the Senate Armed 
Services Committee in 2014. It compares the relative weight of the U.S. 
and Chinese economies as if they were two competitors on opposite ends 
of a seesaw. While we have been debating whether we should put less 
weight on our left foot (the Middle East) in order to put more weight 
on our right (Asia), China has just kept growing--at three times the 
U.S. rate. As a result, America's side of the seesaw has tilted to the 
point that both feet will soon be dangling entirely off the ground.
    What strategy should the Trump administration adopt to deal with 
this challenge? I wish I knew. I wish anybody knew. But truth be told, 
I am still struggling to diagnose our challenge. As I argue in DFW, 
diagnosis must precede prescription. If when one walks into a doctor's 
office, he immediately proposes to put you on the trolley and roll you 
into the operating room for surgery, beware. Washingtonians live by the 
creed: ``don't just stand there, do something.'' But I believe that we 
need first to understand the shape of the challenge we face. There is 
no ``solution'' for the dramatic resurgence of a 5,000-year old 
civilization with 1.4 billion people.
    What America needs most at this moment is not a new ``China 
strategy,'' but instead a serious pause for reflection, followed by a 
surge of strategic imagination as penetrating as that displayed by 
those ``wise men.'' In short, it will demand something far beyond 
anything we have seen since the opening to China.
    What I will say is that the strategy toward China that America has 
followed since the end of the Cold War, known as ``engage but hedge,'' 
is fundamentally flawed: it is a banner that permits everything and 
prohibits nothing. It relies on balancing China while hoping that China 
will become a liberal democracy, or at least accept a subordinate place 
in the American-led international order. It should now be obvious that 
this is not going to happen. If the U.S. just keeps doing what it has 
been doing, future historians will compare American ``strategy'' to 
illusions that British, German, and Russian leaders held as they 
sleepwalked into WWI.

6.  What is the current state of China-North Korea relations? How have 
        they evolved in recent years? Given China's desire to avoid a 
        collapsed state and/or having the U.S. military close to its 
        borders, how much pressure can China be expected to apply to 
        North Korea?

    China-North Korea relations are worse than ever before. Outraged by 
Beijing's support for sanctions, some North Korean statements have even 
begun implicitly threatening China, noting that North Korea's missiles 
can fly in any direction. Chinese internet users commonly refer to Kim 
Jong Un as ``Little Fatty'' and reportedly Xi Jinping personally cannot 
stand him. When Kim tested a missile during Xi's important BRICS 
Summit, Xi took it as a serious personal insult.
    However, the strategic situation has not fundamentally changed for 
China. They see stability on the Korean Peninsula, even with an 
antagonistic neighbor, as preferable to any feasible alternative. They 
remain unwilling to support any action that would lead to the collapse 
of the regime. And they continue to see the biggest anomaly on the 
peninsula as the presence of the U.S.

7.  How likely is it that a U.S.-North Korea military conflict would 
        trigger a wider Sino-American war? Under what circumstances 
        might we expect China to intervene (or not intervene) in an 
        American conflict with North Korea?

    Anyone who finds it hard to believe that a military conflict with 
North Korea could drag the U.S. into war with China should remember 
1950. In June of 1950, a Communist North Korea lad by KJU's grandfather 
attacked South Korea and almost succeeded in reunifying the country 
under his control. The U.S. came to the rescue at the last minute and 
U.S. troops pushed the North Koreans back up the peninsula, across the 
38th parallel, and rapidly approached the Chinese border. McArthur 
expected to wrap things up before Christmas so that U.S. troops could 
come home. The possibility that China, which just the year before had 
consolidated control of its own country after a long, bloody civil war, 
would attack the world's sole superpower, who just five years earlier 
had dropped atomic bombs on Hiroshima and Nagasaki, was for McArthur 
inconceivable. But he awoke one morning in October to find his forces 
attacked by a ``peasant army'' of 300,000 Chinese who beat the U.S. 
back down the roads they had come up, to the 38th parallel, where the 
U.S. was forced to settle for an armistice. Tens of thousands of 
Americans, hundreds of thousands of Chinese, and millions of Koreans 
died in that war.
    Chinese believe that Mao established the proposition that Korea 
would never become a unified state under the control of an American 
military ally. As they put it pointedly, if we were prepared to fight 
to make that point in 1950 when we were 1/50th your size, it should not 
be necessary to test that proposition again with a China that now has a 
GDP larger than that of the U.S.China has considered Korea to be its 
vassal state since 670AD. And for China the prospect of South Korea 
conquering the North and bringing U.S. troops to China's borders is as 
unacceptable today as it was in 1950. Expect China to intervene in some 
fashion on the peninsula in almost any military scenario?even if only 
to seize and hold a buffer zone in the north, as Chinese troops have 
recently been drilling to do.
    Even if Chinese forces entered North Korea with no intention of 
fighting the U.S., there are many scenarios in which war could still 
occur through miscalculation, including a ``vertical track meet'' 
between Chinese and U.S. special forces rushing to secure the North's 
nuclear weapons in the event of a regime collapse. These weapons are 
held near China's borders, so it is very likely that if and when U.S. 
troops arrive, they will find Chinese special forces already there.

8.  What diplomatic role can China play to defuse tensions between the 
        U.S. and North Korea, and advance diplomacy to denuclearize the 
        Korean peninsula?

    The immediate cause of tension between the U.S. and North Korea is 
North Korea's drive to develop a credible threat to strike the American 
homeland with nuclear weapons, on the one hand, and President Trump's 
determination to do whatever is required to prevent that from 
happening, on the other. This is the dynamic that will in the next 12 
months take us to one of three destinations: (1) North Korea will have 
completed the next series of ICBM tests and be able to hold American 
cities hostage; (2) Trump will have ordered airstrikes on North Korea 
in an attempt to prevent that from happening; or (3) a minor miracle in 
which Xi and Trump, working together, convince Kim to halt his nuclear 
advance.
    China controls North Korea's oil lifeline. If it squeezes that 
pipeline, North Korean aircraft, tanks, missile launchers, trucks, cars 
and factories will feel the pain. China has been reluctant to exercise 
this influence for fear of how Kim might react. But after recent 
provocations, Chinese officials have begun signaling that Xi might be 
willing to take that risk.
    Careful watchers of last month's 19th Party Congress in Beijing 
have noted the dog that did not bark. During the coronation of China's 
new emperor, the only peep from Pyongyang was a letter of 
congratulations from Kim. This caution carried over to the meetings 
between Trump and Xi last week, which Kim did not greet with another 
nuclear or missile test as some feared he would.
    If Trump and Xi seek to hammer out a joint plan for stopping Kim 
from further ICBM and nuclear tests, what could that look like? The 
Chinese government has offered a formula it calls ``freeze for 
freeze.'' North Korea would stop testing for the year ahead and the 
U.S. would stop or significantly modify joint U.S.-South Korean 
military exercises that Kim despises. The U.S. has rejected that idea 
outright. But if Trump recognizes that the only alternatives are the 
two previously mentioned, it should be possible to find adjustments the 
U.S. could make in exercises, bomber flights and troop levels in South 
Korea that, while uncomfortable and ugly, do not compromise anything 
vital. Whether that would be sufficient to persuade Xi to threaten 
Kim's oil lifeline, and whether Kim would accept a freeze for freeze, 
is uncertain. And even if such a deal were possible, this would only 
kick the can down the road for another year.
    Nonetheless, given where events stand today, if Trump and Xi can 
find their way to cooperate to produce this minor miracle, we should 
all give thanks.

9.  Other than North Korea, what flashpoints do you see that could 
        trigger military conflict between the U.S. and China?

    The dangerous dynamic of Thucydides's Trap leaves both parties 
vulnerable to actions by third parties, or events that would otherwise 
be inconsequential or readily managed, but that trigger reactions by 
the primary competitors that lead to war. Chapter 8 of my book is 
titled ``From Here to War.'' It sketches five all--too--plausible 
scenarios that could escalate mundane crises into a war that neither 
the U.S. nor China wants: North Korea; an accidental collision in the 
South China Sea; a move by Taiwan toward independence; a clash between 
China and Japan in the East China Sea; and an economic conflict that 
escalates into a shooting war.
    I am ready to describe each in detail if members are interested.

10.  How do you assess President Trump's visit to the region?

    One is reminded of Zhou Enlai's response to Henry Kissinger when 
Kissinger asked him how he assessed the French Revolution. Zhou said: 
``it's too soon to tell.''
    Overall, the trip seems to have been more successful than most 
observers had expected. Through a twelve day marathon, an individual 
known not to like to travel or to participate in big meetings with 
foreign leaders played his role and stayed on script. Since his primary 
objective was to develop support for stopping KJU's nuclear advance, 
the fine words we heard both from Trump and from all his counterparts 
are good enough. But the proof of what was accomplished on this front--
or not--will be in actions we see in the weeks ahead.
    The Trump administration's choice to focus on Xi and to do whatever 
it can to persuade him to rein in KJU was, in my view, the best of the 
feasible approaches available--given the realities they inherited in 
January. Whether Xi believes that if he fails to stop KJU from 
conducting another series of ICBM tests, Trump will order U.S. strikes, 
time will tell. As noted above, I am hoping and indeed praying for a 
miracle. But as an old Pentagon hand, I know that hope and prayer alone 
are not a sufficient plan.
    For more on my thoughts about the North Korean challenge, I have 
attached two op-eds from the past two weeks that summarize my views.
    I trust that I have said enough to be responsive to your assignment 
and I look forward to the discussion.




                Will Trump and Xi ``Solve'' North Korea?

                 Dr. Graham Allison, Politico, 11/8/2017

    The centerpiece of President Donald Trump's conversation with 
Chinese President Xi Jinping on Thursday will doubtless be North Korea. 
Before their first meeting in April, Trump's message to Xi was 
unmistakable: You solve this problem, or I will, and you won't like the 
way I do it. Then, just after he served Xi and his wife chocolate cake 
at Mar-a-Lago, Trump excused himself and went to an adjacent room to 
announce that the U.S. was launching 59 cruise missiles against Syria. 
Message: I'm serious.
    Trump has repeatedly complained that his predecessors left him a 
mess in North Korea, with an emboldened regime in Pyongyang that 
threatens to soon have a credible capability to hit the United States 
with a nuclear weapon. ``It should have never been given to me,'' he 
told an interviewer in October. ``This should have been solved long 
before I came to office, when it would have been easier to solve. But 
it was given to me and I get it solved. I solve problems.''
    But will Trump really ``solve'' North Korea? The answer is most 
certainly no. Indeed, I am so confident in answering no that I am 
prepared to bet $100 of my money--against $1 of anyone who wants to 
wager--that when Trump leaves office, a nuclear-armed North Korea will 
remain a major challenge for his successor.
    Why is the North Korea challenge essentially unsolvable? Because of 
brute realities that defined the problem before Trump arrived. 
Specifically, when he entered office nine months ago, North Korea 
already had dozens of nuclear weapons, as well as short- and medium-
range missiles that could deliver them against South Korean and 
Japanese cities. Moreover, it stood on the cusp of an intercontinental 
ballistic missile capability to credibly threaten attacks on San 
Francisco and Los Angeles.
    Well before Trump mounted his campaign for the presidency, Kim Jong 
Un had concluded that the surest way to protect his regime from an 
attack by the U.S. was a sturdy nuclear security blanket. North Korean 
leaders listened carefully to President George W. Bush's 2002 State of 
the Union address when he famously named an ``axis of evil'': Iraq, 
Iran and North Korea. Bush then proceeded to launch a massive attack 
against Iraq, the only one of the three that had no nuclear weapons or 
serious nuclear weapons program. A decade later, Bush's successor 
joined the British and French in an extensive air campaign against 
Libya that overthrew Muammar Qadhafi, who just eight years earlier made 
a deal with the U.S. to give up his nuclear weapons program. As Bush's 
Undersecretary of Defense Eric Edelman later quipped, we taught bad 
guys around the world that ``if you have no nuclear weapons, we will 
invade you; but if you give up your nuclear weapons program, we will 
only bomb you.''
    If these realities make it impossible for Trump to ``solve'' North 
Korea, what can he hope to achieve on this Asia odyssey?
    Jump ahead a year to November 2018. At that point, we will know 
what happened in the current stare-down between Kim and Trump. There 
are three possibilities: (1) North Korea will have completed the next 
series of ICBM tests and be able to hold American cities hostage; (2) 
Trump will have ordered airstrikes on North Korea to prevent that 
happening; or (3) a minor miracle will have avoided the first two 
possibilities.
    The safest posture is to hedge one's bets, or even better, to craft 
a Delphic pronouncement that sounds profound but leaves sufficient 
wiggle room to allow one to claim to have been right whatever happens. 
But if forced to place my bet, I'd wager that Kim wins. He will conduct 
the tests, and U.S. intelligence will report that he now has a credible 
threat to hit the continental United States. Of course, he would never 
do that--or at least almost never. He knows that doing so would mean 
committing suicide for himself and his regime. Nonetheless, Americans 
will be living in a significantly more dangerous world.
    If required to quantify my odds, I put the first option (No. 1 
listed above) at 50 percent. For the rest, saving 10 percent for 
possibilities beyond the three I am currently able to identify, I would 
split the remainder: betting that there is a 25 percent chance of a 
U.S. attack and a 15 percent chance of a miracle.
    Currently, most of Washington's national security experts are not 
only expecting, but even hoping for the first option, since they find 
the second unacceptable and the third too remote a possibility to 
believe. Unfortunately, most have not yet recognized how dangerous that 
world will be.
    Why will it be more dangerous than the challenge we face today? 
Because Kim will be emboldened by his success. He will have gone 
eyeball to eyeball with the leader of the most powerful country in the 
world and forced him to blink. He will have trumped Trump.
    What can we look for in Kim's next act? If he follows his father's 
and grandfather's script, watch for coercive extortion. In response to 
Kim's tests, the U.S. will further tighten sanctions to threaten the 
regime's economic survival. His response will remind us of former 
Secretary of Defense Robert Gates's observation: North Korea will 
``sell anything they have to anybody who has the cash to buy it.'' A 
nation known in U.S. intelligence circles as ``Missiles-R-Us'' will 
threaten to become ``Nukes-R-Us.''
    Could North Korea sell nuclear weapons to another rogue state? The 
U.S. would warn the regime that this would cross an inviolable red 
line. But what could we threaten that Kim would believe we would 
actually do? He will reflect on the fact that the U.S. was not prepared 
to attack North Korea to prevent it from acquiring an ability to strike 
the American homeland. For what else would it risk war--other than a 
full-scale attack on the U.S. or an American ally?
    The second option, particularly if it involves a limited cruise-
missile attack like the one Trump launched in Syria, is operationally 
feasible and can interrupt Kim's ICBM tests. The question is: How will 
Kim respond? Most U.S. intelligence analysts believe he will shell 
Seoul with conventional artillery. Just last week, a high-level North 
Korean defector told Congress that this is the plan. North Korea has 
long deployed and regularly practiced the use of this threat to Seoul. 
Killing tens of thousands of people overnight would not be that 
difficult.
    In order to stop the firing that could kill hundreds of thousands 
more, South Korea and the U.S. would conduct strikes to destroy these 
long-range artillery guns and other missiles and rockets poised to hit 
the South.
    This would mean attacks on several thousand aim points. Even if the 
effort was successful in significantly limiting the number of 
additional bombs exploding in South Korea, the consequence of the 
attack would almost certainly be the initiation of a Second Korean War. 
And the further wild card that cannot be wished away is North Korea's 
substantial nuclear arsenal and missiles.
    When asked about this scenario by Congress, Secretary of Defense 
James Mattis has repeatedly insisted that such a war would be 
``catastrophic.'' He has reminded members of Congress that in the first 
Korean War, tens of thousands of Americans, hundreds of thousands of 
Chinese and millions of Koreans died.
    Mattis has also assured Congress that at the end of such a war, the 
U.S. would win and the Kim regime would be gone. The question he has 
not addressed, however, is what China would do. The Chinese security 
community has been as loud and clear as it could be that Beijing would 
never allow a unified Korea that is an American military ally. That, 
they say, was the big lesson from the first Korean War.
    Which brings us to pray for a minor miracle in which Xi and Trump, 
acting together, persuade Kim to halt his nuclear advance. This is not 
quite as far-fetched as it may seem at first glance. Xi has found Kim 
almost as frustrating as Americans have. Repeatedly, Kim has 
demonstrably dissed Xi by launching missiles or testing nuclear weapons 
to ``celebrate'' major events in Beijing: the BRICS [Brazil, Russia, 
India, China, South Africa] Summit, the grand announcement of Xi's 
multitrillion dollar One Belt One Road Initiative, the visit of 
Secretary of State Rex Tillerson to plan for the summit in Beijing with 
Trump.
    China controls North Korea's oil lifeline. If it squeezes that 
pipeline, North Korean aircraft, tanks, missile launchers, trucks, cars 
and factories will feel the pain. China has been reluctant to exercise 
this influence for fear of how Kim might react. But after recent 
provocations, Chinese officials have begun signaling that Xi might be 
willing to take that risk.
    Careful watchers of last month's 19th Party Congress in Beijing 
have noted the dog that did not bark. During the coronation of China's 
new emperor, the only peep from Pyongyang was a letter of 
congratulations from Kim. Whether this caution will carry over to the 
meetings between Trump and Xi on Thursday we will soon see.
    If Trump and Xi seek to hammer out a joint plan for stopping Kim 
from further ICBM and nuclear tests, what could that look like? The 
Chinese government has offered a formula it calls ``freeze for 
freeze.'' North Korea would stop testing for the year ahead and the 
U.S. would stop or significantly modify joint U.S.-South Korean 
military exercises that Kim despises. The U.S. has rejected that idea 
outright. But if Trump recognizes that the only alternatives are the 
two we have discussed, it should be possible to find adjustments the 
U.S. could make in exercises, bomber flights and troop levels in South 
Korea that, while uncomfortable and ugly, do not compromise anything 
vital. Whether that would be sufficient to persuade Xi to threaten 
Kim's oil lifeline, and whether Kim would accept a freeze for freeze, 
is uncertain. And even if such a deal were possible, this would only 
kick the can down the road for another year.
    Nonetheless, given where events stand today, if Trump and Xi can 
find their way to cooperate to produce this minor miracle, we should 
all give thanks. Indeed, having found out what they can achieve when 
the U.S. and China are prepared to be more imaginative and adaptive in 
cooperating, they might find ways to go further, and begin rolling back 
Kim's nuclear program. And even this partial success would lay a 
foundation for managing other arenas where the Thucydidean dynamic of a 
rising power's threat to displace a ruling power creates serious risks 
of catastrophic war.
    Would I bet on this happening? Nope. But I hope it does.




          * * * * * * *




              North Korea Crisis Presents Risk, But Also 
                    Opportunity for U.S. and China,

       Graham Allison and Michael Morell, Cipher Brief, 10/22/17

    Most discussions about the North Korea nuclear threat focus on the 
risk of conflict between the U.S. and North Korea. Serious as that is, 
an even more important issue is what the crisis will mean for the U.S. 
and China--the world's most consequential relationship. Great risk and 
great opportunity abound.
    Will the 21st century be defined by great power war or peace? By 
prosperity or poverty? The answers depend largely on the course set by 
Washington and Beijing. But as powerful as both are, each is subject to 
structural forces not of their own making. Today, as a rising China 
threatens U.S. predominance in Asia and the international order the 
U.S. has underwritten for the past seven decades, both sides are locked 
in the Thucydides Trap. (Thucydides, the ancient Greek historian, was 
the first to identify the natural tensions between a rising power and 
the ruling power it seeks to displace--in his case, Athens and Sparta--
that can lead to conflict.)
    This dynamic leaves the U.S. and China vulnerable to the decisions 
of third parties: actions that would otherwise be inconsequential or 
easily managed can trigger reactions by the great powers that lead to 
disastrous outcomes neither wanted. How else could the assassination of 
a minor archduke in Sarajevo in 1914 have produced a conflagration so 
devastating that it required historians to invent an entirely new 
category--``world war''? In the antics of the erratic (but rational) 
young leader of North Korea, whom the Chinese security establishment 
calls ``little fatty,'' it is not hard to hear echoes of 1914. The 
challenge for leaders in Washington is to deal with the acute crisis 
while also developing ways to cope with the underlying challenge in the 
relationship.
    What is the risk? In the next six to 12 months, either Kim Jong-un 
is going to demonstrate that he can reliably put a U.S. city at risk of 
nuclear attack and we are going to (reluctantly) accept that, or 
President Trump is going to try to prevent that from happening by 
ordering U.S. airstrikes on North Korea. Remember: upon becoming 
president-elect, Trump vowed that he would not allow North Korea to 
develop the capability to hit the U.S. with a nuclear weapon. A cruise 
missile attack like the one Trump ordered on Syria after the opening 
dinner for Chinese President Xi Jinping at Mar-a-Lago is not difficult 
to execute. The question is what would come next.
    No one knows for sure. But the best judgment of North Korea experts 
is that the North will respond by raining artillery shells down on 
Seoul--the center of which is just 35 miles from the border between 
South and North Korea--killing tens of thousands or even hundreds of 
thousands of its more than 25 million citizens in just the first 24 
hours of fighting. It is simply not possible for a U.S. preemptive 
strike to remove all the North Korean artillery along the border before 
it can fire on Seoul.
    As that is occurring, what will South Korea and the U.S. do? Again, 
while nothing is automatic, plans call for the obvious: attacks on the 
weapons that are firing against Seoul. In addition to the artillery on 
the border, the U.S. and South Korean counterattack would almost 
certainly target the several thousand other North Korean rockets and 
missiles that could attack South Korea (including missiles that could 
carry nuclear warheads). Whether that attack would also attempt to kill 
Kim Jong-un and the leadership in Pyongyang involves another decision 
by the President. But the critical point is that after a U.S.-South 
Korean response against several thousand targets in the North, the 
second Korean War would have begun.
    Secretary of Defense Mattis has offered his considered assessment 
of such a war in recent testimony before Congress. He has warned 
candidly that a second Korean conflict would be catastrophic, causing 
loss of life, including both U.S. combatants and U.S. civilians living 
in South Korea, unlike any we have seen since the first Korean War. But 
he has also assured members of Congress that at the end of that war the 
U.S. would ``win,'' Korea would be unified, and the Kim regime would be 
gone.
    The question he has not addressed, and which no member of the 
committees before which he has testified has asked him, is: ``what 
about China?'' That was the question General Douglas MacArthur 
infamously failed to consider in October 1950, when U.S. troops who had 
come to the rescue of South Korea pushed the North Korean aggressors 
back up the peninsula. MacArthur imagined that he would unify the 
country and start bringing American troops home before Christmas. Since 
this was just five years after the U.S. had ended World War II by 
dropping atomic bombs on Hiroshima and Nagasaki, and less than a year 
after Mao had won a long, bloody civil war, the thought that a nation 
with a GDP one fiftieth the size of America's would attack the world's 
uncontested superpower was inconceivable. But Mao did. And his force of 
300,000 fighters, followed by a second wave of half a million, beat 
American forces back down the peninsula to the 38th parallel where the 
U.S. had to settle for an armistice.
    As a member of the Chinese security establishment explained to one 
of us in a recent conversation, Beijing will not permit a united Korea 
allied with the U.S. on its border. From a Chinese perspective, that 
point was written in blood when Mao's China entered the first Korean 
War. And they will do so again if Beijing believes that is the U.S. 
intention or the likely result of a U.S. and North Korean conflict. 
Indeed, just last month, the Chinese warned publicly that if the U.S. 
preemptively attacked North Korea, China would fight on behalf of Kim 
Jong-un.
    This is a not a war we would want the U.S. to fight. No one should 
forget that the first Korean War claimed the lives of tens of thousands 
of Americans, hundreds of thousands of Chinese, and millions of 
Koreans. With China's extensive military modernization over the last 
two decades, particularly the deployment of weapon systems designed to 
deny U.S. access to the battlefield, the Chinese might even win the 
war--or force the U.S. to settle again for an equivalent of the 
armistice accepted in 1953. Such outcomes would mark a turning point in 
the balance of power in East Asia, if not the world. After World War 
II, the U.S. emerged as the leading global power. After a second Korean 
War, China might wear that mantle.
    A similar risk of conflict between the U.S. and China exists in the 
other, and perhaps more likely, path that the U.S. could take in the 
near-term regarding the North Korean nuclear crisis--acceptance of the 
North's nuclear weapons capability along with containment and 
deterrence to deal with the threat. The problem with this option is not 
only that it leaves Kim with an ability to strike the U.S. homeland 
with nuclear weapons but also that Kim could see that capability as a 
tool to coerce the U.S. and South Korea to get what he wants--first, 
the withdrawal of U.S. forces from the Peninsula and second, 
reunification on his terms. Kim could calculate that since the U.S. was 
not prepared to risk war to prevent it acquiring the capability to 
attack American cities, the U.S. would not be willing to trade Chicago 
for Seoul. And, in taking provocative actions based on this assumption, 
Kim could bring the U.S. and North Korea to war--again with the risk of 
China joining the fight.
    What then is the opportunity? Our vital national interest in North 
Korea is to ensure that Kim Jong-un cannot threaten the U.S. and our 
allies and partners with nuclear weapons. China shares this interest 
because Beijing understands that as the North Korean threat grows, the 
U.S. and its allies will move to protect themselves with missile 
defense, a development that would also put Chinese missiles and 
therefore China's deterrence at risk. Beijing also knows that South 
Korea and Japan may well respond to a North Korea armed with nuclear-
tipped missiles by developing their own nuclear weapons, a serious and 
threatening development from China's perspective.
    Given these converging interests, can we imagine American and 
Chinese diplomats finding common ground on a vision for the future of 
the Korean Peninsula--one without nuclear weapons--and developing a 
cooperative approach to achieve it that might start with significant 
limits on what North Korea has at present? If such cooperation were to 
result in eventual denuclearization of the North and enhanced stability 
in Northeast Asia, it would act as a bright shining beacon of what the 
U.S. and China could achieve working together. It would build trust in 
both capitals. It would be a major step forward in managing the 
Thucydidean tension in the relationship and pushing the two countries 
away from conflict and toward cooperation.
    How do we get to a place with the Chinese where we can have such a 
conversation about North Korea? It cannot be through threats. We cannot 
achieve this by publicly scolding China over not doing more to pressure 
Kim Jong-un, by publicly raising the prospect of war between the U.S. 
and North Korea in an effort to frighten Beijing into action, or by 
publicly offering China a deal whereby they pressure North Korea in 
exchange for the U.S. backing away from action on Chinese trading 
practices. None of these will move China to act. They are too proud a 
nation and a culture to be bullied, bribed, or threatened into action.
    Rather, the potentially productive path forward is to sit and talk 
turkey with the Chinese--in private, even secretly--about their real 
national interests and ours. President Trump and President Xi should 
ask one or more of their most trusted senior officials to sit down for 
several days of hard conversation and come back with feasible, if ugly, 
options for a joint way forward.
    For inspiration, they could read the transcripts--now 
declassified--of the initial conversations between Henry Kissinger (as 
Nixon's national security adviser) and Zhou Enlai (Mao's most trusted 
lieutenant). They could reexamine what John F. Kennedy did when he came 
to the final fork in the road confronting the Soviet Union over its 
attempt to place nuclear-tipped missiles in Cuba. They could consider 
what Obama did in sending Bill Burns and Jake Sullivan to secret talks 
that developed a path to prevent (or at least postpone for a decade) 
Iran's quest for nuclear weapons.
    Critics will shout: ``but in every one of these cases the U.S. 
compromised!'' Yes, to achieve what these presidents judged vital for 
our country, they sacrificed other interests. To open relations with 
China in order to encourage its split from the Soviet Union, Nixon and 
Kissinger agreed to de-recognize Taiwan as the government of China and 
recognize Beijing (a decision that was officially implemented under 
President Carter). To escape the choice between accepting an 
operational Soviet nuclear base in Cuba and an attack on the missiles, 
Kennedy promised--secretly--that if the Soviet missiles were withdrawn, 
six months later, equivalent U.S. missiles in Turkey would be removed. 
And as Iran's nuclear program had advanced to a point that it stood 
just 2 months away from its first nuclear bomb, Obama signed an 
agreement that allowed Iran to keep a limited uranium enrichment 
program in exchange for pushing its nuclear program back to at least a 
year away from a bomb.
    Ronald Reagan was determined to bury Communism. But to advance that 
cause, he repeatedly engaged in negotiations with the Soviet Union and 
reached arms control agreements that constrained or even eliminated 
American nuclear and missile programs as the price of stopping Soviet 
advances that threatened us. For this, many conservative supporters 
attacked Reagan. For example, George Will accused Reagan of 
``accelerating moral disarmament'' and predicted that ``actual 
disarmament will follow.'' But as Reagan's Secretary of State George 
Shultz noted: ``Reagan believed in being strong enough to defend one's 
interests, but he viewed that strength as a means, not an end in 
itself. He was ready to negotiate with adversaries and use that 
strength as a basis of the inevitable give-and-take of the negotiating 
process.''
    To persuade China to join us in taking responsibility for North 
Korea, and use its leverage to stop Kim's nuclear advance and begin 
rolling back his program, what incentives could Trump's secret 
negotiators offer as a reward for success? The Trump Administration and 
its predecessors have insisted that we will not make changes in our own 
military forces to reward North Korea or China for stopping bad 
behavior. But there is nothing sacrosanct about the number of U.S. 
troops who participate in the regular fall and spring joint military 
exercises with South Korea. In fact, the recent exercise included only 
17,500 American soldiers, a 30 percent reduction from the 25,000 who 
participated in the 2016 equivalent. Though Trump has steadfastly 
resisted Xi's call for a ``freeze for freeze''--a freeze in North 
Korean nuclear and missile tests in exchange for a freeze in U.S./South 
Korean military exercises--some variant of that should be considered as 
part of the solution, given the alternatives. Even more enticing to 
China, the U.S. could offer to delay or even cancel and roll back 
deployment of missile defenses, including the THAAD batteries in South 
Korea, if China took actions that mitigated or eliminated the threat.
    We recognize serious objections to each of these possible 
concessions and others. Indeed, we have often voiced them. But the 
brute fact is that, at this point, U.S. choices have shrunk to the zone 
between the horrific and the catastrophic. Accepting a nuclear-armed 
North Korea that can hold American cities hostage to a nuclear attack 
and attempting to live with that threat by a combination of deterrence 
and defenses would constitute one of the highest risks that the U.S. 
has faced in the seven decades of the nuclear age. Attacking North 
Korea to prevent that outcome will likely lead to a catastrophic second 
Korean War that could find thousands of Americans and Chinese killing 
each other.
    Before choosing between these terrible options, we urge President 
Trump to explore a third way through candid discussions with the 
Chinese of options that heretofore have been ``unacceptable'' but that 
are in fact preferable to the alternatives. Kennedy and Khrushchev did. 
So, too, did Reagan and Gorbachev. There is no guarantee that such 
talks with China or the subsequent joint approach to North Korea would 
work--Chinese influence with North Korea may be more limited than most 
think--but we owe it to our security and to history to try.
    If there is a better way out of the North Korea crisis, it will be 
through Washington and Beijing working together. For leaders determined 
to construct a productive U.S.-China relationship, North Korea offers a 
great opportunity. It also offers perhaps the greatest challenge and 
risk to that relationship, and therefore to U.S. leadership in the 
world, since the end of the Cold War.



                         AMERICAN LEADERSHIP IN
                           THE ASIA-PACIFIC--


                     PART 5: THE ASIA REASSURANCE 
                             INITIATIVE ACT

                              ----------                              


                         TUESDAY, MAY 15, 2018

                               U.S. Senate,
       Subcommittee on East Asia, The Pacific, and 
                 International Cybersecurity Policy
                             Committee on Foreign Relations
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:03 a.m. in 
Room SD-419, Dirksen Senate Office Building, Hon. Cory Gardner, 
chairman of the subcommittee, presiding.
    Present: Senators Gardner [presiding], Rubio, Markey, and 
Kaine.

            OPENING STATEMENT OF HON. CORY GARDNER, 
                   U.S. SENATOR FROM COLORADO

    Senator Gardner. This hearing will come to order.
    And let me welcome all of you to this hearing for the 
Senate Foreign Relations Subcommittee on East Asia, the 
Pacific, and International Cybersecurity Policy in the 115th 
Congress.
    This hearing is the fifth hearing in a series of hearings 
specifically dedicated to building out various aspects of U.S. 
policy challenges and opportunities in Asia, from security 
threats to economic engagement to democracy and human rights to 
U.S.-China relations.
    Today we will hear the administration's view on what 
constitutes a free and open Indo-Pacific and what we must do to 
achieve this goal.
    This hearing is the culmination of the intense work between 
this subcommittee, policy experts, U.S. businesses, civil 
society advocates, and the administration to define U.S. 
national interests toward this critically important region of 
the world.
    The results of these hearings and conversations is the Asia 
Reassurance Initiative Act, or ARIA legislation, which we 
introduced with Ranking Member Markey and Senators Rubio and 
Cardin 2 weeks ago. This legislation is intended to serve as a 
policy framework to enhance U.S. leadership in the Indo-Pacific 
region and to demonstrate our shared commitment to a rules-
based international order.
    We began this series of hearings nearly 15 months ago. At 
our first hearing on March 29th in 2017, we focused on the 
growing security challenges in the region, including North 
Korea, the South China Sea, and terrorism in Southeast Asia. We 
agreed at that hearing that we must strengthen U.S. defense 
posture and increase security engagement with our allies in the 
region.
    Later that year in May, we focused on the importance of 
U.S. economic leadership in Asia. We agreed at that hearing 
that while the administration and Congress might differ on 
global trade strategy, we cannot ignore the fundamental fact 
that it is Asia that will be critical for the U.S. economy to 
grow and for the American people to prosper through trade 
opportunities.
    At our third hearing, we focused on projecting U.S. values 
in the region, including the promotion of democracy, human 
rights, and the rule of law. We agreed that the active 
promotion of these fundamental values only reinforces American 
leadership in Asia and reflects our core beliefs as a nation 
that human rights are universal rights without exception.
    In November of last year, our fourth hearing considered the 
relationship with the People's Republic of China, the region's 
rising power and our near-peer strategic competitor. We agreed 
that, as once hoped, China's rise will be less than peaceful. 
As President Xi Jinping consolidates power domestically, it is 
clear that China also increasingly views its increasing 
economic and military power in the region as a zero sum game 
with the United States.
    So now that this legislation has finally been introduced, I 
hope today our distinguished administration guests can shed 
light on how we can shape a multi-generational comprehensive 
U.S. policy toward the Indo-Pacific region which preserves and 
strengthens the rules-based international order but also avoids 
armed conflict with Beijing; economically benefits the United 
States and sets high standards, but also protects Americans 
from unfair trade practices; reflects our nation's longstanding 
dedication to fundamental human freedoms, but also provides 
long-term tools and mechanisms to advance these goals as part 
of the multifaceted policy that includes engagement with 
regimes that may not necessarily share these same values.
    It is a tough challenge, a tough challenge, indeed, but I 
believe it can be achieved when the administration and Congress 
speak with one voice. And that is what I hope can happen at 
today's hearing.
    Now I will turn it over to our ranking member, who I have 
enjoyed working with over the past Congresses, his position on 
this committee and obviously on the legislation and look 
forward to this hearing with him and more work together.

              STATEMENT OF HON. EDWARD J. MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. Thank you, Mr. Chairman, very much. And 
thank you for convening this incredibly timely and important 
hearing.
    And I want to thank our administration witnesses for being 
here as well and for their dedication to promoting U.S. 
interests throughout Asia.
    Out of the ashes of World War II, the United States and its 
allies set out to create a set of rules, norms, and structures 
around the world that would not only promote U.S. interests but 
also benefit others as well. These systems, built out of the 
devastation of a world war, have been bastions of American 
values and influence throughout the world. They have helped 
countries flourish and prosper, and in no place that has been 
more evident and important to U.S. national security interests 
than in Asia.
    Whether we call it Asia or the Indo-Pacific, it is clear 
that a growing network of countries from the Indian Ocean 
through the Pacific yearn to participate in a regional system, 
an American system that keeps them secure and allows them to 
prosper, a system that reduces the likelihood of devastating 
major power conflict while helping others develop and thrive, 
one that upholds respect for national sovereignty and freedom 
from coercion. This system's ability to overcome the unique 
characteristics of the Indo-Pacific have proved its staying 
power.
    Through American development programs and institutions like 
the World Bank and the International Monetary Fund, the United 
States helped unleash unprecedented growth and stabilize a 
fragile region. We have promoted democracy, human rights, and 
the rule of law, core values for all people, all the while 
American security alliances have deterred threats and helped 
establish a stable balance of power.
    This arrangement continues to facilitate our ability to 
safely address the pressing security challenges in the region. 
But make no mistake. Challenges abound, prominent immediate 
ones like North Korea's nuclear weapons and ballistic missiles, 
longer-term or nuanced ones like the Chinese Government's 
strategic campaign to weaken the rule-based order. And with 
challenge comes opportunity, the opportunity to strengthen 
alliances from Japan to South Korea to Australia, Thailand, and 
the Philippines, to tackle issues from terrorism to climate 
change with longtime friends in Southeast Asia, to empower 
American diplomats to help solve vexing and longstanding 
foreign policy and security problems, to promote the health and 
wellbeing of countless individuals across the most heavily 
populated region of the planet, to empower people to seek 
freedom and economic opportunity, and the opportunity to show 
the region that the United States is no fair weather friend, 
that we are devoted to the Indo-Pacific because we, Democrats 
and Republicans alike, recognize that the region is more 
peaceful when we truly make it a priority.
    We are at a unique moment in history, one where we need to 
communicate to the region, to allies and adversaries alike, 
that the United States is invested literally and figuratively 
in Asia.
    That is why Senator Gardner and I introduced the Asia 
Reassurance Initiative Act, or ARIA. This legislation makes 
clear that it is an important issue, that there are key tenets 
that the U.S. regional policy must include: promoting the 
rules-based order whether through trade practices or the 
freedom of navigation, peacefully denuclearizing North Korea 
through diplomacy and economic pressure, prioritizing 
reasonable and effective nuclear nonproliferation policies, and 
defending human rights and the respect for democratic values.
    Our hope and our intent was and remains to ensure that the 
region stays at the forefront of people's minds, and in a time 
when allies and partners in the region may be unsure where the 
United States stands, it is imperative that we provide 
reassurance. The region should hear Congress and the executive 
branch expressing a shared recognition over the challenges and 
opportunities and over the principles by which we intend to 
pursue our interests and promote our values. There is no place 
in the modern world for powerful countries coercing smaller 
neighbors through threat of force, no room for dictators to 
discriminate against, falsely imprison, torture, or kill their 
own citizens, no room for proliferation of the most dangerous 
weapons on earth, and no room for the old ways of might makes 
right. But there should be every chance for creative, forward-
looking solutions while preserving the independence and freedom 
of action for those living under oppression and for forging 
stronger partnerships with likeminded countries towards common 
goals.
    But the system is increasingly under challenge. So we must 
speak clearly about U.S. objectives in the region, and we must 
lay out the pathways that will help us reach those goals. And 
we must fully fund those activities because a strategy with 
insufficient resources is no strategy at all.
    That is why our bill would authorize $1.5 billion annually 
to address wide-ranging challenges we face in Asia because we 
must ensure that we protect both U.S. economic and security 
interests, as well as the broader international system that has 
helped provide peace and stability throughout the Indo-Pacific 
and beyond. The United States cannot afford to cede leadership 
in such a critical region. Doing so will only lead to a 
resurgence of the behaviors we have for so long fought against.
    I look forward, Mr. Chairman, to exploring these issues 
with this fantastic panel that you have brought to the 
committee today, and I yield back to you.
    Senator Gardner. Thank you, Senator Markey.
    Our first witness will be the State Department witness 
before the Senate Foreign Relations Committee: Mr. Alex Wong, 
who returns to the State Department, now serving as Deputy 
Assistant Secretary of State at the Bureau of East Asian and 
Pacific Affairs. Prior to his appointment, he was the foreign 
policy advisor to our colleague and general counsel as well to 
Senator Tom Cotton. He was the Senator's chief advisor on all 
issues related to national security, international relations, 
and law enforcement. Welcome, Mr. Wong, and thank you very much 
for your service. We will begin with your testimony.

 STATEMENT OF ALEX N. WONG, DEPUTY ASSISTANT SECRETARY, BUREAU 
OF EAST ASIAN AND PACIFIC AFFAIRS, UNITED STATES DEPARTMENT OF 
                    STATE, WASHINGTON, D.C.

    Mr. Wong. Thank you, Senator. Chairman Gardner, Ranking 
Member Markey, members of the subcommittee, thank you for this 
opportunity to appear today before the subcommittee. It is an 
honor to testify on the Asia Reassurance Initiative Act, on the 
U.S. Indo-Pacific strategy, and our nation's continued 
leadership in the region. And it is also an honor to be doing 
so alongside my friend and colleague, Randy Schriver.
    The Indo-Pacific region is of chief importance to the 
United States. The Indo-Pacific includes half of the world's 
population and, by the middle of the century, will likely 
constitute half of the world's GDP. 50 percent of global trade 
passes through the Indo-Pacific sea routes. Annually the United 
States conducts $1.4 trillion in two-way trade with the region 
and is the source of over $850 billion in foreign direct 
investment annually, making the United States the region's 
largest trading partner and largest investor. The region is 
home to the world's three largest democracies and some of its 
most inspirational democratic miracles and many of its fastest 
growing economies.
    In all of these ways, the region implicates vital U.S. 
interests. And to defend those interests, we have long 
exercised leadership in the Indo-Pacific. But as the region 
grows in population and economic weight, U.S. strategy must 
adapt to ensure that the Indo-Pacific is increasingly a place 
of peace, stability, and growing prosperity and not a region of 
disorder, conflict, and predatory economics.
    The ARIA legislation states, ``Without strong leadership 
from the United States, the international system, fundamentally 
rooted in the rule of law, may wither, to the detriment of 
United States, regional, and global interests.'' While the 
administration is still reviewing the entirety of the 
legislation, we agree with that assessment.
    That is why the administration is pursuing a strategy, 
grounded in U.S. leadership that advances a free and open Indo-
Pacific. President Trump introduced the strategic concept of a 
free and open Indo-Pacific during his historic trip to the 
region in November, which was the longest trip by a President 
to the region in a generation. We are now formulating the 
implementation of this strategy, and the formulation process is 
a government-wide endeavor that includes the Department of 
State, Department of Defense, and every other agency that has a 
role in the Indo-Pacific.
    Our objective is to align U.S. policies and programs toward 
strengthening the free and open order that the United States 
has fostered in the region for over 70 years.
    Now, the modifiers we have chosen to describe the strategy, 
``free'' and ``open,'' were chosen with care because they 
embody the principles that we seek to embed in the region.
    The term ``free'' means first, on the international plane, 
that we want the nations of the Indo-Pacific to be free from 
coercion from outside powers. Nations should be able to pursue 
their own paths in a sovereign manner free from the weight of 
spheres of influence. Second, ``free'' means at the national 
level, we want the societies of the Indo-Pacific nations to 
become progressively more free, free in terms of good 
governance, in terms of fundamental freedoms, and in terms of 
transparency and anti-corruption.
    The term ``open,'' first and foremost, means open sea lines 
of communication and open airways. These open sea lines of 
communication, particularly those in the South China Sea, are 
the lifeblood of the region. Secondly, we mean more open 
connectivity in the form of quality, best value energy, 
transport, and digital infrastructure that is driven by private 
capital investment. Third, we mean more open investment 
environments and free, fair, and reciprocal trade. A better 
investment environment and an equal and open playing field for 
trade benefit U.S. workers, benefit U.S. businesses. But they 
also benefit indigenous innovators and indigenous entrepreneurs 
who will be empowered to drive economic growth in their home 
countries.
    Embedding these free and open principles will require 
efforts across the spectrum of our capabilities: our diplomatic 
initiatives, governance capacity building, economic cooperation 
and commercial advocacy, and military cooperation. But we are 
not starting from a standing start. The United States has 
longstanding programs that support the free and open order. And 
we have initiated new efforts in the first year of the Trump 
administration toward that end: new energy and infrastructure 
partnerships with Japan and India; the delivery of a Coast 
Guard cutter to Vietnam; strengthened cyber cooperation with 
partners such as Australian, Japan, Indonesia, New Zealand, 
Singapore, South Korea, and Vietnam; the first U.S.-India 
counterterrorism designations dialogue; an effort to speed 
foreign military sales to our partners in the region; and we 
were very gratified to work with Congress on the Palau Compact.
    As the United States pursues our Indo-Pacific strategy, it 
is important to note that a number of our partners across the 
region are pursuing similar strategies. If you look at India's 
Act East policy, if you look at South Korea's New Southern 
Policy, if you look at Japan's Free and Open Indo-Pacific 
Strategy, if you look at Taiwan's New Southbound policy, and if 
you look at Australia's Foreign Policy Whitepaper, they are all 
seeking to expand ties across the region, across the Indo-
Pacific and in particular with the nations of Southeast Asia 
and ASEAN. As these strategies overlap with our own, they will 
form a strong, free, and open fabric that will knit the region 
together, preserve sovereignty, and promote prosperity. This is 
a vision that the United States has long advanced in the Indo-
Pacific and one we believe will continue to reap benefits in 
terms of stability and prosperity.
    Mr. Chairman, members of the subcommittee, the Department 
of State, together with the rest of the administration, is 
making significant progress toward a lasting strategy that will 
ensure the Indo-Pacific continues to be a peaceful, prosperous, 
and economically dynamic region.
    I commend Congress and this subcommittee in particular for 
your thoughtful and thorough approach to supporting U.S. 
engagement in the region. I look forward to your questions, and 
I look forward to working with you and your staff members on 
our Indo-Pacific strategy.
    [Mr. Wong's prepared statement follows:]


                    Prepared Statement of Alex Wong

    Chairman Gardner, Ranking Member Markey, and members of the 
subcommittee: Thank you for the opportunity to appear before you today. 
It's an honor to testify on the Asia Reassurance Initiative Act (ARIA), 
the U.S. Indo-Pacific Strategy, and our nation's continued leadership 
in that region. And it's also an honor to be doing so alongside my 
friend and colleague, Randy Schriver.
    The Indo-Pacific region is of chief importance to the United 
States. The IndoPacific includes half of the world's population and, by 
the middle of the century, will likely constitute half of the world's 
gross domestic product. Fifty percent of global trade passes through 
Indo-Pacific sea routes. Annually, the United States conducts $1.4 
trillion in two-way trade with the region and is the source of over 
$850 billion in foreign direct investment, making the United States the 
region's largest trading partner and investor. The region is home to 
the world's three largest democracies, some of its most inspirational 
democratic miracles, and many of its fastest growing economies.
    In all of these ways, the region implicates vital U.S. interests. 
And to defend those interests, we've long exercised leadership in the 
Indo-Pacific. But as the region grows in population and economic 
weight, U.S. strategy must adapt to ensure that the Indo-Pacific is 
increasingly a place of peace, stability, and growing prosperity-and 
not one of disorder, conflict, and predatory economics.
    The ARIA legislation states, ``Without strong leadership from the 
United States, the international system, fundamentally rooted in the 
rule of law, may wither, to the detriment of United States, regional, 
and global interests.''
    Although the administration is still reviewing the legislation 
itself, we agree with that specific assessment.
    That is why the administration is pursuing a strategy-grounded in 
U.S. leadership-that advances a free and open Indo-Pacific. President 
Trump introduced this strategic concept during his historic trip to the 
region in November, the longest trip by a President to the Indo-Pacific 
in a generation. We are now formulating the implementation of that 
strategy, and the formulation process is a government-wide endeavor 
that includes the Department of State, the Department of Defense, and 
every other agency with a role in the Indo-Pacific.
    Our objective is to align U.S. policies and programs toward 
strengthening the free and open order that the United States has 
fostered in the Indo-Pacific for over 70 years.
    The modifiers we use to describe the Indo-Pacific order--``free'' 
and ``open''- were chosen with care, because they embody the principles 
we seek to embed in the region.
    The term ``free'' means first, on the international plane, that we 
want the nations of the Indo-Pacific to be free from the coercion of 
outside powers. Nations should be able to pursue their own paths in a 
sovereign manner free from the weight of spheres of influence. Second, 
``free'' means, at the national level, we want the societies of Indo-
Pacific nations to become progressively more free-free in terms of good 
governance, in terms of fundamental freedoms, and in terms of 
transparency and anti-corruption.
    ``Open,'' first and foremost, means open sea lines of communication 
and open airways. These open sea lines of communication, particularly 
those in the South China Sea, are the lifeblood of the region. 
Secondly, we mean more open connectivity in the form of quality, best-
value energy, transport, and digital infrastructure that's driven by 
private capital investment. Third, we mean more open investment 
environments and free, fair, and reciprocal trade. A better investment 
environment and an equal and open playing field for trade benefit U.S. 
businesses and workers. But they also benefit indigenous innovators and 
indigenous entrepreneurs who will be more empowered to drive economic 
growth in their home countries.
    Embedding these free and open principles will require efforts 
across the spectrum of our capabilities: diplomatic initiatives, 
governance capacity building, economic cooperation and commercial 
advocacy, and military cooperation. But we are not beginning from a 
standing start. The United States has longstanding programs that 
support the free and open order. And we've initiated new efforts in the 
first year of the Trump administration including: new energy and 
infrastructure partnerships with Japan and India; the delivery of a 
Coast Guard cutter to Vietnam; strengthened cyber cooperation with 
Australia, Japan, Indonesia, New Zealand, Singapore, South Korea, and 
Vietnam; the first U.S.-India Counterterrorism Designations Dialogue; 
an effort to speed foreign military sales to our partners; and we were 
gratified to work with Congress on the Palau Compact.
    As the United States pursues our Indo-Pacific strategy, it's 
important to note that a number of our partners are pursuing similar 
strategies. If you look at India's Act East policy, at South Korea's 
New Southern policy, at Japan's Free & Open Indo-Pacific Strategy, at 
Taiwan's New Southbound policy, and at Australia's Foreign Policy 
Whitepaper, they are all seeking to expand ties throughout the Indo-
Pacific and in particular with the nations of Southeast Asia and ASEAN. 
As these strategies overlap with ours, they'll form a strong free and 
open fabric that knits the region together, preserves sovereignty, and 
promotes prosperity. This is a vision the United States has long 
advanced in the Indo-Pacific, and one we believe will continue to reap 
benefits in terms of stability and prosperity. Conclusion
    Mr. Chairman and members of the subcommittee, the Department of 
State together with the rest of the administration is making 
significant progress toward a lasting strategy that will ensure the 
Indo-Pacific continues to be a peaceful, prosperous, and economically 
dynamic region.
    I commend Congress, and this subcommittee in particular, for your 
thoughtful and thorough approach to supporting U.S. engagement in the 
region. I look forward to your questions, and I look forward to working 
with you and your staff members on our Indo-Pacific strategy.


    Senator Gardner. Thank you, Mr. Wong.
    Our second witness today is the Honorable Randall Schriver 
who serves as Assistant Secretary of Defense for Asian and 
Pacific Security Affairs at the Department of Defense. Prior to 
his confirmation, he was the CEO and President of the Project 
2049 Institute, a nonprofit research organization dedicated to 
the study of security trend lines in Asia. Mr. Schriver has 
also previously served as the Deputy Assistant Secretary of 
State for East Asian and Pacific Affairs. Prior to his civilian 
service, he served as an active duty Navy intelligence officer, 
including a deployment in support of Operation Desert Shield 
and Desert Storm. Welcome, Mr. Schriver, and thank you for your 
service. I look forward to your testimony.

  STATEMENT OF HON. RANDALL G. SCHRIVER, ASSISTANT SECRETARY, 
ASIAN AND PACIFIC SECURITY AFFAIRS, UNITED STATES DEPARTMENT OF 
                   DEFENSE, WASHINGTON, D.C.

    Mr. Schriver. Thank you, Mr. Chairman and Ranking Member 
Markey. I very much appreciate the opportunity to appear before 
you today and talk about our Indo-Pacific strategy. I also 
appreciate being able to testify alongside my great colleague, 
Alex Wong, and appreciate his leadership in developing and 
implementing our Indo-Pacific strategy.
    Let me say at the outset we are really grateful for your 
support for U.S. engagement and leadership in the Indo-Pacific, 
and the fact that, as you noted both in your opening 
statements, it is bipartisan support in the Congress. That is 
very important and empowering for us. So we really commend your 
leadership there.
    I am also pleased to note at the outset the ARIA 
legislation. There seems to be great alignment with our 
policies, and as you develop the legislation, we look forward 
to supporting it in final form if it comports, as we expect it 
will, with our goals.
    If I could just provide a few updates to DOD's contribution 
to the Indo-Pacific strategy. Secretary Mattis often notes that 
the Indo-Pacific is a priority theater. That is certainly 
reflected in our National Defense Strategy and in our 
engagement with the region. In our National Defense Strategy, 
we clearly point out that of significant interest to us is the 
reemergence of great power competition and that is being 
promoted by the emergence and rise of China, as you both talked 
about in your opening remarks. So that demands a 
prioritization, and it also involves strategic choices. So we 
must maintain a focus on that long-term challenge but also, of 
course, deal with the immediate threats and challenges posed by 
rogue regimes such as North Korea, as well as violent extremist 
organizations, and would very much note the incidents in 
Indonesia this week.
    So we have crafted a defense strategy that builds a more 
lethal, resilient, ready, and rapidly innovating military, and 
when combined with our partners and allies, we believe we can 
sustain the ability to ensure free, open rules-based order in 
the Indo-Pacific.
    Strong deterrence is the foundation of our regional and, 
indeed, our global approach. And at DOD, our duty is to support 
our colleagues at the Department of State and our diplomats, 
such as Mr. Wong, as they engage and do their work to ensure 
they are doing so from a position of strength.
    DOD, therefore, is focusing investment on our combat 
capacity, our readiness posture and presence, and other areas 
that are unique to the region's warfighting needs. These 
include investments in key capabilities to support joint 
integrated fires designed to defend U.S. interests and reach 
inside potential adversaries A2AD envelope.
    A central theme to our National Defense Strategy is also 
DOD's approach to strengthening our alliances and partnerships, 
and in this, we are very closely aligned with your work on 
ARIA. We are committed to working with, by, and through allies 
and partners to find ways to address these common challenges in 
the Indo-Pacific. We seek to build networks of capable and 
likeminded partners, and we are strengthening our abilities to 
deter potential adversaries while also using programs like the 
Maritime Security Initiative to improve partners' maritime 
domain awareness and maritime capabilities. We seek to enable 
them to better resist coercion and maintain their autonomy and 
independence so that they can contribute to a rules-based order 
and to deter and defend against threats.
    Our alliances and partnerships are force multipliers for 
good. All countries in the region benefit from this order, and 
we expect allies and partners to contribute to its maintenance.
    Finally, our approach to the region and our strategy to 
maintain a free and open Indo-Pacific accounts for our 
relationship with China. We are certainly concerned by China's 
strategic intentions and their trajectory and certainly 
concerned about some of the destabilizing behavior we are 
witnessing, for example, in the South China Sea. We will pursue 
a constructive results-oriented relationship with China, though 
we will not accept policies or actions that undermine the 
rules-based order. We will stand up for and defend that order, 
and we will encourage others to do the same. We will cooperate 
with China where our interests do align, but we will compete 
vigorously where our interests diverge. Our aim is for all 
nations to live in prosperity, security, and liberty, free from 
coercion and able to choose their own path.
    The United States is a Pacific nation and has been one for 
centuries. We remain committed to maintaining the security and 
stability in this all-important region.
    Thank you again, Mr. Chairman and Ranking Member Markey, 
and look forward to your questions.
    [Mr. Schriver's prepared statement follows:]


                Prepared Statememnt of Randall Schriver

    Good morning Chairman Gardner, Ranking Member Markey, and members 
of the committee.
    Thank you for this opportunity to update you on the Department of 
Defense's approach to the Indo-Pacific region. I would also like to 
take this opportunity to thank Deputy Assistant Secretary Alex Wong for 
his remarks. We have been engaged in a robust and fruitful interagency 
process to develop the U.S. strategy and approach to the Indo-Pacific 
region, and it has truly been a sterling example of interagency focus 
and cooperation. Furthermore, as we work to develop and implement a 
strategy that demonstrates the U.S. commitment to a free and open Indo-
Pacific region, and advances a rules-based international order, we have 
been aided in our efforts by bipartisan support from Congress. While we 
are continuing our review, I was pleased to note that the Asia 
Reassurance Initiative Act (ARIA), currently being discussed by this 
committee, appears to align substantially with our approach to the 
region.
    The United States seeks to maintain a free and open Indo-Pacific 
region. A region in which nations with diverse cultures and different 
aspirations can prosper side-by-side in freedom, peace, and stability. 
By ``free,'' we mean that nations will be free from coercion and able 
to protect their sovereignty. At the national level, we mean that 
societies are increasingly freer in terms of good governance, and 
fundamental human rights and liberties. By ``open,'' we mean that all 
nations can enjoy freedom of the seas, and that all share a commitment 
to the peaceful resolution of disputes. We also mean more open 
investment environments and improved connectivity to drive regional 
integration and prosperity.
    As the region's population and economic weight grow, and as it 
faces rising security and political challenges, the U.S. commitment to 
the region must keep pace. Our vision for the IndoPacific region 
excludes no nation; we seek to partner with all who respect national 
sovereignty, fair and reciprocal trade, and the rule of law. Our aim is 
for all nations to live in prosperity, security, and liberty in the 
same rules-based order. For the Indo-Pacific region to flourish, each 
and every State must be free to determine its own course within a 
system of values that ensures opportunity for even the smallest 
countries to thrive.
    Toward these goals, and in alignment with the measures being 
discussed by this Committee, the United States is reaffirming our 
longstanding security commitments to our allies while broadening and 
strengthening our security partnerships. We are encouraging a more 
networked approach to security cooperation to counter common threats 
and ensure regional stability. We will work with allies and partners to 
promote regional institutions and infrastructure, such as the 
Association of Southeast Asian Nations (ASEAN), the Asia-Pacific 
Economic Cooperation (APEC) forum, and trilateral and multilateral 
mechanisms of like-minded partners, to protect and advance the region's 
rules-based order. Finally, we will support transparent and high-
standard infrastructure financing; pursue free, fair, and reciprocal 
trade; and foster sustainable development throughout the region. We 
seek to ensure that the Indo-Pacific's commitment to market-driven 
growth continues and that new infrastructure knits the region together, 
generates local wealth, and leads to sustainable growth.
    The Department of Defense is intently focused on supporting the 
broader, whole-of-government approach to this crucial region. Indeed, 
as Secretary Mattis often emphasizes, the Indo-Pacific is the priority 
theater, a point of view that is reflected in our National Defense 
Strategy (NDS) and in our robust engagement with the region.
    We recognize that we face a diverse array of security challenges in 
the Indo-Pacific region. As the NDS acknowledges, the reemergence of 
great power competition is the central challenge to U.S. security and 
prosperity, and demands prioritization and hard strategic choices. The 
NDS also highlights a number of immediate challenges, such as those 
posed by rogue regimes and violent extremist organizations.
    In light of these challenges, we have crafted a defense strategy 
that builds a more lethal, resilient, ready, and rapidly innovating 
U.S. military which, combined with a robust constellation of allies and 
partners, will ensure we remain capable of safeguarding security, 
prosperity, and a free, open, and rules-based order. All States in the 
Indo-Pacific region benefit from these collective goods, and we expect 
our allies and partners to contribute to the maintenance of this rules-
based order. We each have a role to play and a shared responsibility 
for our shared future.
    A central theme of the NDS, and one that is predominantly reflected 
in both the ARIA and DoD's approach to the Indo-Pacific region, is our 
focus on our alliances and partnerships. We are committed to working 
by, with, and through allies and partners to find ways to address 
common challenges, enhance shared capabilities, increase defense 
investment and improve interoperability, streamline information 
sharing, and build networks of capable and like-minded partners. We are 
strengthening our abilities to deter potential adversaries while also 
using programs like the Maritime Security Initiative to improve 
partners' maritime domain awareness and maritime capabilities, enabling 
them to better resist coercion and maintain their independence, 
contribute to the rules-based order, and deter and defend against 
threats. Our alliances and partnerships serve as a force multiplier for 
good, and further cooperation among us will aid in our collective 
efforts to maintain peace and stability throughout the region.
    In Northeast Asia, the dynamic security environment continues to 
underscore the importance of our robust alliance and partner 
relationships, in particular given the immediate challenge posed by 
North Korea's nuclear weapons and ballistic missile programs. Although 
recent diplomatic developments are encouraging, the Department of 
Defense continues to work closely with our allies and partners to 
maintain and improve our readiness to defend against potential threats, 
while ensuring that our diplomats engage from a position of strength to 
achieve the complete, verifiable, and irreversible denuclearization and 
the dismantlement of North Korea's nuclear, chemical, biological, and 
missile programs. Beyond North Korea, we are focused on modernizing our 
alliances with both the Republic of Korea and Japan, with each of ally 
taking steps to contribute to regional security and stability more 
broadly. We are also focused on promoting our defense relationship with 
Taiwan, and faithfully upholding our commitments under the Taiwan 
Relations Act.
    In Southeast Asia, we are working with allies and partners to build 
counterterrorism and maritime security capabilities to address region-
wide challenges central to upholding the rulesbased order. We are 
reinvigorating our longstanding alliances with Thailand and the 
Philippines, while bolstering our enduring partnership with Singapore. 
We are expanding strategic defense relationships with important 
regional players such as Indonesia, Vietnam, and Malaysia. We are also 
working to promote ASEAN's centrality in the regional security 
architecture and empower it to contribute more effectively to regional 
stability. It is important that ASEAN speak clearly and with one voice 
on regional issues such as the South China Sea, counterterrorism, and 
North Korea. We look forward to working with ASEAN members to 
strengthen multilateral defense cooperation, enhance maritime domain 
awareness, counter the threat posed by terrorism, and advance 
cooperation on humanitarian assistance/disaster relief, among other 
initiatives.
    In Oceania, our alliances and partnerships are based not only on 
shared security interests, but also on deeply shared values and a long 
history of shared sacrifice. Australia remains one of the United 
States' strongest allies, and we are deepening our defense partnership 
with New Zealand. We are modernizing these key alliances and 
partnerships to ensure they are as relevant to the security challenges 
of this century as they were to the challenges of the last century and 
continue to underwrite a free and open Indo-Pacific region and beyond.
    In South Asia, we are strengthening our partnerships, particularly 
with India. In 2016, the United States declared India a Major Defense 
Partner, which opens the door for increased cooperation on a range of 
defense issues, most notably defense trade and technology. We are 
natural partners across a range of political, economic, and security 
issues. With a mutual desire for global stability and support for a 
rules-based international order, our two countries have an increasing 
convergence of interests, including maritime security and domain 
awareness, counter-piracy, countering terrorism, humanitarian 
assistance, and coordinated responses to natural disasters and 
transnational threats. Our partnership extends beyond the Indo-Pacific 
region as well, and as we implement our South Asia Strategy, we welcome 
India's continued civilian contributions to stability and 
reconstruction in Afghanistan.
    We are also stepping up our engagement with European and NATO 
Allies, such as the United Kingdom, France, and Canada, with whom we 
share enduring interests in the Indo-Pacific region.
    As we strengthen our alliances and partnerships we are also taking 
the steps necessary to improve our military readiness and capabilities 
to reassure our allies and deter potential adversaries. Strong 
deterrence is at the foundation of our regional, and indeed, our global 
approach, and Secretary Mattis is clear in his emphasis on the 
Department's role in supporting our diplomats so they can engage and 
negotiate from a position of strength.
    Given the long-term, consequential nature of the Indo-Pacific 
region to U.S. national security and emerging threats to the region's 
stability, the Department is sustaining its focus on the region in 
Fiscal Year (FY) 2019. The FY 2019 budget seeks to close gaps within 
the Future Years Defense Program (FYDP) in U.S. combat capacity, 
readiness, posture and presence, and other areas unique to the region's 
warfighting needs.
    For example, the FY 2019 budget invests in key capabilities 
identified as critical to support joint, integrated fires in the Indo-
Pacific region, both in defense of U.S. interests and to reach inside 
an adversary's anti-access and area-denial envelope with advanced, 
long-range munitions. The budget also invests in posture initiatives to 
close gaps in resiliency of joint operations--that is, our ability to 
absorb an adversary attack and sustain operations to deny their 
objectives--in the Indo-Pacific region, particularly through improved 
logistics support. The budget also continues to address shortfalls both 
in preferred munitions for ongoing operations, and in more advanced, 
long-range munitions needed within the FYDP for high-end warfight 
demands in the region.
    These investments are one part of the Department's broader efforts 
in rebuilding our military to be more ready, capable, and lethal, 
particularly for forward deterrent forces.
    Finally, our approach to the region and our strategy to maintain a 
free and open Indo-Pacific region accounts for our relationship with 
China. China should and does have a voice in shaping the international 
system, as do all countries. However, in recent years, we have grown 
concerned by China's strategic intentions and trajectory, including 
some activities in the region that we view as destabilizing and 
counterproductive-in the South China Sea, for example. Although the 
United States will continue to pursue a constructive, results-oriented 
relationship with China, we will not accept policies or actions that 
threaten to undermine the international rules-based order, a system 
that has benefited everyone in the region, including China. We will 
stand up for and defend that order, and we will encourage others to do 
the same; and although we are committed to cooperating with China where 
our interests align, we will compete, vigorously, where our interests 
diverge.
    Our vision for the Indo-Pacific region excludes no nation. We seek 
to partner with all nations that respect national sovereignty, fair and 
reciprocal trade, and the rule of law. Although we accept that States 
will make some decisions that are not in our interests, we recognize 
that for the Indo-Pacific region to flourish, each nation in the region 
must be free to determine its own course within a system of values that 
ensures opportunity for even the smallest countries to thrive, free 
from the dictates of the strong. Our aim is for all nations to live in 
prosperity, security, and liberty, free from coercion and able to 
choose their own path.
    The United States is a Pacific nation and has been one for 
centuries. We will remain committed to maintaining the security and 
stability in this all-important region. This is a view that has 
transcended political transitions and has maintained strong bipartisan 
support. During my tenure as Assistant Secretary, I have been 
encouraged by the leadership demonstrated by Congress, and I look 
forward to working with you on the specific measures you propose to 
enhance U.S. leadership in the Indo-Pacific region.
    Chairman Gardner, Ranking Member Markey, members of the committee, 
thank you for the opportunity to testify this morning. I look forward 
to your questions.


    Senator Gardner. Thank you, Mr. Schriver. Thanks, Mr. Wong, 
again for your testimony.
    And we will begin with the question portion of this 
hearing. I think the hearing title, of course, to receive 
testimony on American leadership in the Asia-Pacific--what is 
exciting I think right now in the United States Senate, the 
number of people who are now engaged Asia policies that are 
relatively new to the Senate: Senator Markey's participation in 
his first term in Asia as ranking member of the Foreign 
Relations Committee; Senator Sullivan, Senator Daines, Senator 
Perdue, Senator Schatz, all relatively new members of the 
Senate to provide leadership in Asia.
    One of the striking conversations that I have with policy 
leaders around the region is their fond recollection of 
interactions with Congress led by Senator Dole, Senator Inouye, 
Senator Stevens. That is a generation that, obviously, is no 
longer with us in the Senate. And so this new generation of 
leaders needs to step up to the plate to provide that new 
generation of leadership for Asia. And I think that is what 
ARIA tries to get at the very heart of, is an attempt to 
provide new leadership in a region that desires a continuation 
of a rules-based system that has benefited every nation who has 
wished to participate and even those nations who wish now to 
change the rules.
    So a question for both of you. In the bill, ARIA, it sets 
the following policy goals. It is the policy of the United 
States to develop and to commit to a long-term strategic vision 
and a comprehensive, multifaceted, and principled United States 
policy for the Indo-Pacific region that, one, preserves peace 
through strength by securing the vital national security 
interests of the United States; two, promotes American 
prosperity by advancing the economic interests of the United 
States; three, advances American influence by reflecting the 
values of the American people and universal human rights; and 
four, accords with and supports the rule of law and 
international norms.
    Could you talk a little bit about whether you agree with 
these policy goals, and will the administration's Indo-Pacific 
strategy reflect these same goals and perhaps a strategy to 
embrace those four goals?
    Mr. Wong. Thank you for your question, Senator.
    I will say the administration does agree with those goals 
because they reflect not just the right goals and the right 
objectives in our strategy, but the longstanding interests and 
enduring interests the United States has in the Indo-Pacific. 
Along all of those lines in our formulation of our 
implementation plan for the strategy, we are discussing all of 
our efforts on security, on governance, on fundamental rights, 
as well as on diplomatic initiatives and economic initiatives. 
So I would agree with the policy laid out there in the ARIA 
legislation.
    Mr. Schriver. Thank you, Senator.
    I also would endorse those goals. At the Department of 
Defense, we are in the process of implementing our National 
Defense Strategy, which is a very forward-looking strategy and 
has long-term challenges very much in mind, which is why we 
talked about the emergence of great power competition and the 
challenges posed by China. And with the help of Congress and 
the funding provided, we are trying to build a force that is 
appropriate for that, the longer-term challenges dealing with 
China and their military modernization program and trying to 
work with partners and allies also to be adequately equipped 
and prepared for those long-term challenges. So we very much 
endorse your long-term view in this legislation.
    Senator Gardner. Thank you.
    Dr. Graham Allison, the Douglas Dillon Professor at 
Harvard, Kennedy School of Government, testified at one of our 
hearings last November, and I quote. As realistic students of 
history, Chinese leaders recognize that the role the U.S. has 
played since World War II as the architect and underwriter of 
regional stability and security has been essential to the rise 
of Asia, including China itself. But they believe that as the 
tide that brought the U.S. to Asia recedes, America must leave 
with it. Much as Britain's role in the western hemisphere faded 
at the beginning of the 20th century, so must America's role in 
Asia as the region's historic superpower resumes its place. 
This is Graham Allison's testimony.
    Could you talk a little bit about this statement, whether 
you agree with it, disagree with it, how we address this 
challenge of China, whether it is the strategies we have talked 
about here or others that we need to include in the legislation 
and what specific tools the United States could utilize to 
offset military and economic coercion as you stated in your 
testimony? Either one of you.
    Mr. Wong. I did not see the full testimony of Dr. Allison. 
I assume he is describing the viewpoint perhaps of some Chinese 
scholars or strategists that he is aware of.
    I would disagree with that description in the sense that 
the United States is not ebbing and flowing from the region. We 
are not a nation that comes and goes from the Indo-Pacific. We 
have long been an Indo-Pacific nation. We are an Indo-Pacific 
nation and we will continue to be an Indo-Pacific. And this 
policy survives from administration to administration. It does 
not come and go.
    I think that is borne out by the President's pronouncement 
of the free and open Indo-Pacific strategy and the commitment 
he exhibited in his historic trip last year, capping his first 
year with such a trip. I think it is exhibited in the 
discussions Congress is having on the ARIA legislation. That 
the legislative branch and the executive branch are focused on 
the Indo-Pacific talking about a long-term strategy and our 
long-term commitment to the region is a very strong message to 
our partners in the region about our staying power and the fact 
that we have never left and we will not leave.
    Senator Gardner. Mr. Schriver?
    Mr. Schriver. I agree with that, meaning I disagree with 
Dr. Allison's assessment, my former professor. But I think we 
are committed to developing and implementing a defense strategy 
that will be suited for the long-term challenges that China 
poses so we can ensure a free and open Indo-Pacific remains.
    Beyond that, I think working with partners and allies who 
share not just affinity with the United States but share values 
and interests--and so countries are not necessarily choosing 
between the United States and China. They are choosing to 
embrace a rules-based order, embrace freedom of navigation, 
free flow of commerce, protection of sovereignty, et cetera. So 
when you ally and partner with countries who share those 
values, I think we are in very good standing when you talk 
about Japan, South Korea, India, Australia, New Zealand, and 
many other countries that will sign up for those values. That 
puts us in very good standing.
    Senator Gardner. Very good.
    Senator Markey?
    Senator Markey. Thank you, and thank both of you for your 
service.
    Over the weekend, President Trump said in a tweet that the 
Commerce Department should find a way to give Chinese telecom 
company ZTE, quote, a way to get back into business fast. And 
that is despite the serious security concerns voiced publicly 
by U.S. officials about ZTE, as well as its violation of 
American sanctions and widespread bribery committed by the 
company to expand its footprint.
    Mr. Wong, do you believe that China as the largest 
shareholder of ZTE has responsibility to operate in good faith 
within the laws and norms of the international system, 
including by stringently enforcing sanctions?
    Mr. Wong. Thank you, Senator.
    A major component of our Indo-Pacific strategy is to 
bolster the rule of law both in the nations of the Indo-
Pacific, as well as internationally. So we support all nations 
of the Indo-Pacific, China included, abiding by controlling 
international law and international norms and obligations to 
which they have signed up for on trade and on security and on 
particularly maritime law.
    Now, with regard to the tweet you mentioned on ZTE. I 
understand the President issued guidance over the weekend on 
the sanctions related to ZTE. I understand that the Commerce 
Department is now reviewing that guidance and implementing the 
President's guidance in accordance with applicable laws and 
regulations and the particular facts of the ZTE case. I 
respectfully defer to the Commerce Department on the particular 
implementation of that guidance.
    Senator Markey. So from your perspective, you are not in a 
position to be able to give testimony with regard to the 
concessions from your perspective, your agency's perspective 
that the United States abandon its insistence on adherence to 
the rules-based international system.
    Mr. Schriver. Senator, the main component, a foundational 
component of the Indo-Pacific strategy is to bolster the free 
and open order and the rules-based system. But with regard to 
the ZTE case, I do defer to the Commerce Department on the 
implementation of the President's guidance and on the sanctions 
on ZTE.
    Senator Markey. Inside of the legislation we address a 
broad range of U.S. foreign policy toolkit items from diplomacy 
to economic pressure to trade and development. General Dunford, 
Chairman of the Joint Chiefs of Staff, said, quote, there is no 
challenge that I am currently dealing with that the primary 
factors in our success will not be diplomatic or economic.
    Do you agree with that, Mr. Schriver?
    Mr. Schriver. I do. And as I said, we very much view our 
role as supporting our diplomats and giving them the ability to 
operate from a position of strength. And that is true whether 
it is North Korea contributing to the maximum pressure campaign 
so our diplomats can work a solution there, but also challenges 
associated with China and other challenges in the region.
    Senator Markey. Great.
    The administration's fiscal year 2019 budget request 
proposed cutting the State Department by approximately 30 
percent with Asia-related cuts of about 50 percent.
    Mr. Wong, what kind of signal does it send to our allies 
and partners if we say that the Indo-Pacific is important but 
the President recommends significant funding cuts?
    Mr. Wong. Senator, we believe the fiscal year 2019 budget 
allows us to implement and achieve the objectives that we are 
seeking to achieve under the free and open Indo-Pacific 
strategy. And I think the core of your question is whether we 
are able to implement the strategy, implement our policies and 
reassure our allies with the resources that we have. And if you 
look at the first year of the Trump administration, we have had 
a number of achievements, a number of, first of all, trips to 
the region by cabinet members, by the Vice President, and 
capping the year with a historic trip by the President himself. 
We have greatly improved relations with Vietnam, and we have 
greatly made progress on the maximum pressure campaign with 
North Korea.
    Now, I would note that the fiscal year 2019 budget requests 
I believe on the order of nearly three-quarters of a billion 
dollars for our East Asia diplomatic operations, as well as our 
foreign assistance. That is a 10 percent increase over our 
fiscal year 2018 request, and we had targeted increases in our 
request on certain areas to provide us seed money to implement 
the free and open Indo-Pacific strategy, namely monies to 
bolster international institutions such as ASEAN, APEC, and our 
Lower Mekong Initiative, which is key to strengthening the 
rules-based order. We have asked for increases in our foreign 
military financing to bolster the military capabilities and 
partnerships we have with our partners in the region.
    We have also requested increases in our regional governance 
fund. This will allow us to implement the types of governance 
capacity building we would like to seek across the region to 
improve the abilities of the nations of the region, as well as 
the provincial governments of the region, to adopt the types of 
procurement systems, bid systems, life cycle cost evaluation 
systems, and civil society programs that will improve the free 
and open order.
    Senator Markey. My hope is that the recommendation for next 
year's budget kind of reflects that in terms of the goals which 
the administration has.
    And just to move on to North Korea for a second, Mr. Wong, 
how are you working to ensure that the United States does not 
fall for false concessions, those actions that do not 
substantively reduce the nuclear threat to the United States in 
its bid to eliminate North Korea's nuclear and other 
destabilizing weapons?
    Mr. Wong. Thank you, Senator.
    As you know, we have gotten to this point where we have the 
conditions for these talks by applying over the past year a 
strong maximum pressure campaign on the DPRK together with our 
allies and together through UN Security Council resolutions. 
And the President and the Secretary have stated that we are 
walking into these negotiations with clear eyes, fully 
understanding the track record of past efforts to discuss the 
nuclear program with North Korea, fully understanding the track 
record of the North Koreans themselves. And they are very 
focused. Our negotiating team is very focused on our ultimate 
goal, which is complete, verifiable, and irreversible 
denuclearization of the Korean Peninsula.
    Senator Markey. Thank you, Mr. Chairman.
    Senator Gardner. Senator Rubio?
    Senator Rubio. Thank you both for being here.
    I have a document in my hand. This is an unclassified 
document from the National Intelligence Council, basically 
office of the Director of National Intelligence. Let me read 
you the first paragraph of the unclassified. It says, China's 
government-run talent recruitment program facilitate the legal 
and the illicit transfer of U.S. technology, intellectual 
property and know-how to further China's science and technology 
development, military modernization, and goal of becoming a 
science and technology superpower by 2049. It is overseen by 
the Communist Party's Central Committee and it recruits 
scientists, engineers, entrepreneurs, and managers of all 
nationalities working or educated in the United States to 
commercialize and weaponize technologies.
    You both will agree that China is undertaking an effort to 
dominate the most important industries and technologies of the 
21st century and that they do so not simply by out-innovating 
us or out-investing us, but primarily by the either compelled 
or stolen transfer of intellectual property, the recruitment of 
both U.S. and other individuals in academia studying in the 
United States to transfer technology. They are basically 
conducting an all-out assault to steal what we have already 
developed and use it as the baseline for their development so 
they can supplant us as the leader in the most important 
technologies of the 21st century. Is that not an accurate 
statement?
    Mr. Wong. Senator, I believe what you have laid out--it is 
accurate. And a number of those activities and policies perhaps 
fall under the Made in China 2025 plan that I believe members 
of the committee or subcommittee are aware of. And while the 
full elements of that public policy, as well as, I am assuming, 
the private policies of China are still under review and we are 
still looking at it, I think we can look at the track record of 
what China has done when they have done mass subsidization of 
certain commodity industries like steel and like aluminum and 
the ill effects that that has had on world markets, number one, 
but also on the national security of other nations, the United 
States included. And the Trump administration has taken strong 
action on those fronts.
    Now that we are looking at industries or high tech 
industries of China itself deems strategic, for instance, 
semiconductors, artificial intelligence, this raises similar 
and perhaps more concerning issues with regard to the ill 
effects it will have on world markets, on world economies, but 
also the national security implications that you lay out.
    And this really goes to the broader competition that we 
have laid out in our National Security Strategy between the 
closed economic and political system, international system, 
that China is advocating and the more free and open Indo-
Pacific and world order that we have supported for over 70 
years.
    Senator Rubio. I do not want to run out of time.
    I support the open system. I think that is very important. 
But at the core, the most immediate and urgent threat here is 
the historic, unprecedented theft and transfer of intellectual 
property in the hundreds of billions a year unforeseen in the 
past. And that has direct national security implications.
    It is accurate, Mr. Schriver, that technological high 
ground almost always translates to national security and the 
ability of a nation to defend itself and its interests. 
Correct?
    Mr. Schriver. Yes, sir. And I think this is an area where 
we are paying attention, but we have got to improve because of 
the aggressive nature of the Chinese efforts that you mention. 
And it has to be whole-of-government. We have to look at visas 
for university students. We have to look at the defense supply 
chain. We have to look at all these things because of the 
aggressive nature of the Chinese.
    Senator Rubio. And I guess the point I am trying to drive 
is when we talk about issues like ZTE, that is just the tip of 
the iceberg. And apart from having helped to violate sanctions, 
the issue with them is not really so much a trade issue per se 
as it is a mechanism by which they--it is a technology, an 
infrastructure that they can use not simply to establish high 
ground there and market share in the U.S. at the expense of our 
domestic providers, but also is a way to steal intellectual 
property and secrets of other commercial endeavors that they 
also view to be critical. And that is why that issue is so 
important and I hope the administration does not move forward 
on this supposed deal I keep reading out.
    Two topics I want to touch on rapidly because it also has 
to do with part of this effort. Apart from the technology side, 
let me give you some things that have happened very recently.
    United and American Airlines are being threatened by China 
that if their website does not say Taiwan, China, they are 
going to lose their routes and have fines and penalties.
    Marriott fired an American worker based in the United 
States of America because he accidentally liked a tweet on 
Tibet.
    Yesterday, The Gap--we have all been to the Gap. They 
printed a T-shirt with a map of China, but it did not include 
Taiwan. And of course, The Gap quickly scrambled out, 
apologized. They issued a statement respecting China's 
sovereignty and territorial integrity.
    American companies are being bullied to the point where an 
American was fired in the United States because he liked a 
tweet.
    What is the State Department doing when companies come to 
them and say we are being harassed in this way? Because these 
companies have all caved.
    Mr. Schriver. Thank you for the question, Senator.
    The State Department believes these actions are outrageous 
and disturbing. I think we are all familiar with the sharp 
power that Beijing wields its market access as a cudgel to reap 
certain economic concessions from private sector entities like 
intellectual property transfer or certain joint ventures with 
Chinese companies. What they are doing now is extending this 
market access tactic to free speech, to extend, as the White 
House called it, the Chinese view of political correctness to 
private sector actors and in particular U.S. companies. And we 
find that outrageous.
    As you have seen, the White House and the State Department 
have raised this publicly, condemned it publicly. We have 
raised it privately with our Chinese counterparts, and we have 
discussed this with the companies at issue.
    China is very much well aware that it is wading into 
treacherous waters here, and they understand that if they 
continue along this path, continue to employ these tactics, 
that it will negatively affect the U.S.-China relationship and 
that there will be consequences.
    Senator Rubio. I am not so sure they think they are in 
treacherous waters because they keep winning. All these 
companies keep doing what they want because in the end, having 
market share is more important to these companies apparently 
than the trends that these are setting.
    I have one more quick question because one of the things 
China is trying to do as well is influence votes in 
international forums and have leverage even in our own 
hemisphere. So just in the last year, we have had not one but 
two countries in this hemisphere, first, Panama, after a lot of 
investment in Panama, and now the Dominican Republic 2 weeks 
ago, after who knows what happened, both switch away from 
Taiwan's recognition and towards recognition of China. And now 
I am hearing that perhaps Paraguay might be next, and they are 
going to continue to work on this. And of course, when they 
invest all this money in these countries and, frankly, 
oftentimes bribe individuals and governments, things that our 
companies cannot do but their companies can--when they do these 
things, it is often as leverage to align those countries' 
foreign policy to what China's foreign policy may be. And the 
first step is to get them to break away from Taiwan, no longer 
recognize Taiwan, and align themselves and recognize China.
    What is the State Department doing? I know that is in a 
different bureau, but it is part of China's global ambition and 
work. What are we doing? Are we telling countries around the 
region that we do not want to see them continue to do this? 
Have we talked to Honduras and Guatemala and Paraguay and other 
countries in the region, many of whom receive significant aid 
from the United States? Do they hear from us that we care about 
this issue?
    Mr. Wong. Senator, thank you for your question.
    Attempts to close off the international space of Taiwan and 
to alter the status quo across the strait are disturbing to the 
United States. And in our U.S. One China policy, we seek to 
strengthen ties with Taiwan. We seek to provide them proper 
defensive capabilities to defend their democracy. But we also 
want to maintain the status quo because it is the key to 
stability across the strait. So any moves to strip Taiwan of 
its diplomatic partners disturbs that status quo, and it is 
something that we made clear to our partners and we made clear 
to Beijing as well.
    Senator Rubio. So we made it clear to the Dominican 
Republic that they should not do what they did?
    Mr. Wong. That is my understanding.
    Senator Rubio. And they did it anyway.
    Thank you.
    Senator Gardner. Thank you, Senator Rubio.
    I want to follow along the same lines here as well. When we 
let people know our support for Taiwan, when we let people know 
that we are disturbed that they may have followed China's 
desires, that we state on our websites for American Airlines or 
that we do not recognize Hong Kong on a Marriott website as 
Hong Kong, but it is Hong Kong, China, when we let them know 
this, are we working with other nations around the globe to put 
pressure on China to stop? Can you talk a little about how we 
are pushing back? Is it just calling them up on the phone or in 
a meeting and saying, hey, we do not like this? I mean, what 
are we actually doing to put some force behind our disapproval?
    Mr. Wong. Senator, as in my exchange with Senator Rubio, we 
have made this clear. We have raised this privately with our 
Chinese counterparts. We have condemned it publicly. The White 
House has condemned it very strongly publicly. And we have 
talked with the companies who have been involved in these 
incidents.
    China understands where we stand on these activities and 
that if they continue along this path, they continue to employ 
these tactics to spread their vision of political correctness 
to U.S. companies, as well as other companies around the world, 
that there will be consequences.
    Senator Gardner. What will those consequences be?
    Mr. Wong. Those consequences are still under review, sir, 
and a lot of it will depend on China's actions going forward 
and if they continue along with these tactics.
    Senator Gardner. Could those consequences be reciprocal in 
terms of not allowing flights from China to the United States 
or other destinations?
    Mr. Wong. Again, Senator, the consequences are under 
review. I do not want to get into hypotheticals based on what 
China may or may not do going forward. The key for us, though, 
is for China to understand that this conduct is something we 
find outrageous and it is something that they should cease. For 
further details, however, I do defer to our China-specific team 
and I would be happy to work with you and talk with you and 
your staff about it.
    Senator Gardner. I understand, Mr. Wong. I think we have a 
World Health association meeting coming up toward the end of 
May. Last year, of course, China was able to sideline Taiwan 
from participation in this. I believe it is important that 
Taiwan participate in as many international organizations as we 
can, and we should continue to push and pursue the opening of 
the organizations to Taiwan. Again, this may not be the right 
question for you, but could you talk a little bit about efforts 
that we should be undertaking to make sure that Taiwan is 
participating in these international organizations?
    Mr. Wong. Thank you, Senator.
    The United States supports Taiwan's appropriate 
participation in international fora. And they have a lot to 
offer particularly in areas of humanitarian assistance and in 
areas of health and in areas of economic cooperation. With 
respect to the WHA, the World Health Assembly----
    Senator Gardner. Assembly. Excuse me. I said association. 
Thank you.
    Mr. Wong. Excuse me. We have been working to ensure or help 
to ensure as much as possible that Taiwan's participation and 
that Taiwan is invited and participates on an appropriate 
level. We were disappointed to see that they were not invited 
this year, but we will continue to work to ensure that our 
partners and the WHA and the WHO understand where we stand as 
far as Taiwan being closed off from international fora, which 
again is not just to the detriment of Taiwan, to the detriment 
of the United States, it is to the detriment of all partners 
around the world and all peoples that can benefit from the 
contributions of Taiwan.
    Senator Gardner. I think as you have described, both of you 
have described the Indo-Pacific region, what we mean by free 
and open as you have described the Indo-Pacific region. Free 
and open means sort an Asia of independent states, that they 
are not tributary to other parts of Asia, but that it is an 
Asia of independent states. Is that an accurate assessment? I 
assume that is an accurate assessment.
    Mr. Schriver. It is.
    Senator Gardner. There is also some thought out there that 
people believe the United States has been too defensive in 
Asia, that we continue to be on the defensive instead of the 
offensive when it comes to our Asia policy or our values and 
rules that we support in Asia. There are some who believe that 
we need a stronger public diplomacy information campaign 
directed at China to point out problems that we have and 
perceive with their policies like their approach to Taiwan or 
Hong Kong.
    Are we doing enough to highlight not only to the region but 
to our allies around the globe our disagreements with China's 
attempts to perhaps weaken that idea of an Asia of independent 
states?
    Mr. Wong. Senator, you point out the fact and the truth 
that public diplomacy is key to our overall diplomacy and our 
overall strategy in the Indo-Pacific. And we do a lot on that 
front to promote the free and open order, to promote the free 
and open vision that has brought stability and prosperity to 
the region over the past 70 years. And specifically when you 
talk about exchange programs, a huge part of our public 
diplomacy efforts, what we are doing there is developing the 
natural allies among the people of the Indo-Pacific to expose 
them to American ideas, to expose them to free and open ideas 
that are truly universal and beneficial. And for the long term, 
as they work in their societies and perhaps rise up to 
leadership positions, it will strengthen that fabric, 
strengthen those shared values and visions and principles that 
we talk about when we talk about the free and open order.
    Senator Gardner. Mr. Schriver?
    Mr. Schriver. I certainly agree with Mr. Wong that public 
diplomacy is key here.
    On the defense side, I think we are doing a lot to counter 
that narrative you described, Senator. We have increased the 
freedom of navigation operations just in terms of the numbers 
and the frequency of challenges. We are involved in capacity 
building efforts so that countries can protect their sovereign 
territory out to 12 nautical miles and so they can see out 
through their EEZ to 200 nautical miles. We are working not 
only with our traditional bilateral alliances, but we are 
building out trilateral and mini-lateral efforts and 
quadrilateral efforts so that if the Chinese are observing, 
they will note that it is not just the United States-China 
competition, it is also a competition of ideas and values and 
interests. And so there are--I think many more countries, 
including the most significant and influential countries in 
Asia outside of China, support these concepts, and that will be 
demonstrated and sustained over time.
    Senator Gardner. Thank you.
    Mr. Wong, to Senator Markey's question, you talked about 
some of the programs that are being supported by the State 
Department as we look at our Indo-Pacific strategy. Talk a 
little bit about your belief on foreign military financing, 
international military education and training and how that fits 
into this strategy.
    Mr. Wong. When we talk about the Indo-Pacific strategy, you 
can look at it as having three main buckets. The first is an 
economic agenda, an affirmative economic agenda. Second is a 
governance and capacity building effort to support good 
governance. The third is the security relationships. And the 
good thing about our security partnerships and our allied 
partnerships is that we have perhaps a unique in history set of 
relationships in the region: five treaty allies, numerous other 
partnerships where we expand the capacity militarily of our 
partners, have mil-to-mil relations, and improve 
interoperability and a common vision for what security and 
stability is in the Indo-Pacific.
    Now, I mentioned to Senator Markey that we requested 
increased money for FMF financing in fiscal year 2019. And 
again, this goes toward the element of the strategy where we 
are trying to build the capacity of our partners, improve 
cooperation, and improve that strong partnership we have not 
just with our allies but other security partners in the region.
    Senator Gardner. Thank you.
    Senator Markey?
    Senator Markey. Thank you, Mr. Chairman, very much.
    Mr. Schriver, how do you view the importance of U.S. forces 
in Northeast Asia, specifically in the Korean Peninsula? Would 
you say that they are instrumental in keeping peace in the 
region?
    Mr. Schriver. I think as Secretary Mattis said last week, 
they are a stabilizing force. They are certainly necessary at 
this juncture given the threat posed by North Korea. We will 
see what happens in the diplomatic track, but certainly now 
they are absolutely necessary. And I think beyond what may 
happen in the diplomatic track, we have long-term strategic 
interests in Northeast Asia that I think, given our situation 
as a distant power, we will want forward-deployed forces as far 
out as these eyes can see.
    Senator Markey. China has constructed, in clear violation 
of international law, military bases on artificial islands in 
disputed areas in the South China Sea. What is the 
administration's strategy in the South China Sea? How are you 
ensuring that Beijing knows that we are heavily invested in 
seeing that the region remains free, open, and secure?
    Mr. Wong. Thank you, Senator.
    The militarization and the reclamation projects we have 
seen in the South China Sea from China are worrying to the 
United States and concerning. First of all, they violate 
certain commitments that China has made regarding commitments 
not to militarize certain features.
    But further, the militarization of the islands raises the 
prospect that China will press its claims in the South China 
Sea not in accordance with international law, but by the 
principle of might makes right and pressure and coercion on the 
other claimants of the South China Sea. That is not in line 
with U.S. policy. We want all the claimants to the features and 
to the waters of the South China Sea to resolve their disputes 
peacefully and, importantly, in accordance with international 
law. And toward that end, we take a number of efforts.
    First--and Randy can speak to this perhaps more in detail--
we have a freedom of navigation operations program, as well as 
general presence operations. Now, you understand, Senator, that 
our FONOPs program is a 40-year-old program that operates 
worldwide, but it is very important in the South China Sea that 
we continue these operations to contest excessive claims and 
put force behind our vision of maritime international law, 
which truly is the oldest international law.
    Number two, we conduct legal diplomacy throughout the 
region to ensure that our partners throughout the region 
understand the dictates of international law along the sea 
routes of the Indo-Pacific but in particular in the South China 
Sea.
    Third, we provide maritime security assistance to our 
partners. This has numerous benefits, but one ancillary benefit 
is that it provides them confidence, the courage of their 
convictions on what their view is on international law.
    And fourth, we work to encourage ASEAN in their 
negotiations of a code of conduct in the South China Sea to 
ensure that that code of conduct is meaningful and defends 
international law and is grounded in what international law 
dictates.
    Senator Markey. Thank you.
    Mr. Schriver, just following up on Senator Rubio, China's 
investments in sensitive industries are proliferating with 
Chinese acquisitions of U.S. companies reaching a record $65 
billion in 2016, a six-fold increase over the previous year. 
Mr. Schriver, how do you see this issue? Are we appropriately 
positioned to ensure that U.S. security interests are protected 
from foreign acquisition?
    Mr. Schriver. I think given the nature of the Chinese 
efforts and how aggressive they are, we can do better. We are 
looking at the defense supply chain. We are looking at the 
private sector and certain technology companies that contribute 
to the defense sector. And I think in many ways trying to 
partner with Congress to shore up, for example, the CFIUS 
system. Now we are, I think, engaged in a number of ways to 
consult with private companies to protect their intellectual 
property, protect their technology. So this is another sort of 
whole-of-government effort that is needed, but the Defense 
Department is contributing by identifying sort of these key 
areas we need to protect and these key parts of our defense 
supply chain that need protection. But it is absolutely an 
aggressive effort on the part of the Chinese that we need to 
pay attention to and counter.
    Senator Markey. Thank you.
    And next I would like to ask you about the administration's 
record in condemning Philippine President Duterte's brutal 
campaign of extrajudicial murders that has resulted in the 
deaths of at least 8,000 Filipino drug users and low level drug 
dealers. I was pleased to read in the 2017 country reports on 
human rights practices that the State Department wrote of the 
Philippines extrajudicial killings have been the chief human 
rights concern in the country for many years.
    The President has refused to criticize the Duterte 
government's use of extrajudicial killings and on the sidelines 
of the November 2017 Association of Southeast Asian Nations 
summit meeting in Manila, rather than denouncing the brutal 
campaign, the President has said that he has, quote, a great 
relationship with President Duterte and said that he always 
been a friend of the Duterte administration.
    Mr. Wong, do you believe the administration has done enough 
to prioritize the promotion and protection of human rights in 
the Philippines?
    Mr. Wong. Senator, if you look at the Philippines, it is a 
longstanding democratic ally, as you understand. And we have 
very strong and deep people-to-people ties with the 
Philippines. We have very strong military cooperation with the 
Philippines. And in particular, we have strong cooperation on 
counterterrorism with the Philippines, which is a rising threat 
in the region.
    Now, all that said, we have concerns over the drug war that 
the Philippines is prosecuting in their nation, and we have 
repeatedly expressed those concerns to the Filipino government. 
And as you know, the U.S. law prohibits foreign assistance 
going to individuals or units involved in gross human rights 
violations, and that law applies to the Philippines as well.
    That said, the rule of law assistance that we do provide to 
the Philippines encourages and bolsters their ability to 
conduct the drug war in the right way, namely disrupting 
international trafficking, focusing on drug use prevention, 
treatment, and rehabilitation and, importantly, building the 
capacity of the justice sector to handle cases transparently, 
to handle them effectively, and to handle them in a way that 
respects fully international human rights.
    Senator Markey. I appreciate all that. But at the same 
time, I just think there should be more forceful condemnation 
of what is happening in the Philippines, how Duterte conducts 
himself, and I just think we send the wrong message to not just 
the Philippines but to other countries when the kinds of 
statements that were made by President Trump are interpreted as 
those which are giving Duterte a pass in terms of his human 
rights abuses inside of the country.
    May I go on, Mr. Chairman?
    Senator Gardner. Yes, please.
    Senator Markey. I would like to move on to Burma, if I may. 
After visiting the refugee camps in Bangladesh, which are now 
home to more than 700,000 Rohingya refugees who fled Burma, 
representatives of the United Nations Security Council are now 
considering whether the UN Security Council should refer 
Burma's brutal campaign to the International Criminal Court for 
accountability for human rights abuses, including the use of 
rape as a tool of law.
    Mr. Wong, what steps has the State Department taken to push 
for a credible accountability process?
    Mr. Wong. Thank you, Senator.
    The situation in Rakhine state in Burma is dire, and it is 
greatly concerning to the State Department and to the United 
States. And our response has been multifaceted.
    First and foremost, we provided humanitarian assistance to 
relieve the suffering by the Rohingya, by Bangladeshi host 
communities, and other internally displaced persons and asylum 
seekers. Since October 2016, we have provided over a quarter of 
a billion dollars in humanitarian assistance, and I believe 
that assistance will continue in order to ensure that the 
humanitarian suffering is, at least in part, relieved.
    Secondly, we work with a number of likeminded countries and 
partners like the UN to urge Burmese authorities to address the 
Rakhine state crisis, to end the violence, to restore the rule 
of law, to grant unhindered humanitarian access as well as 
media access to Rakhine state and to guarantee those who wish 
to voluntarily return, that they can do so in safety and do so 
with dignity.
    We are also urging cooperation on the part of the 
authorities in Burma on a credible independent investigation on 
allegations of atrocities in northern Rakhine state to make 
sure that there is accountability.
    And lastly, we will, as a broad matter, continue to support 
the democratic transition of Burma to ensure that the military 
develops professionally and develops modes of conduct subject 
to civilian control and that the military meets international 
standards of human rights and adopts standards of 
accountability for what we are seeing occurring in Rakhine 
state.
    Senator Markey. Mr. Wong, I introduced an amendment to the 
Burma human rights bill that would enhance accountability 
mechanisms for sexual and gender-based violence and conflict. 
And although the State Department and Department of Defense can 
be forward-leaning and urge greater accountability for these 
atrocities, it just has not been enough from my perspective.
    Mr. Wong, will you commit to using all existing authorities 
to punish those who use sexual violence as a tool of law?
    Mr. Wong. Senator, thank you for your work and for 
Congress' focus on Burma over a number of years, not just 
recently, but in particular recently.
    And Congress has provided the executive branch with a 
number of strong tools to address the situation in Burma and to 
address sexual violence. And we want to make sure that we can 
apply those tools in tailored fashion and in a robust fashion.
    As far as new bills and new authorities, if there are new 
tools that you will be presenting, I am sure that our Burma 
team will be happy to work with you, happy to review the tools 
to make sure that they do go toward achieving our mutual goal 
of relieving the suffering in Burma.
    Senator Markey. Thank you, Mr. Chairman.
    Senator Gardner. Senator Kaine, are you ready to ask 
questions?
    Senator Kaine. I am glad to.
    Senator Gardner. Great. Senator Kaine?
    Senator Kaine. Thank you.
    Thank you to the witnesses.
    Section 110 of ARIA commits the U.S. to full implementation 
of sanctions against North Korea and supports the pressure 
campaign to achieve complete denuclearization of the Korean 
Peninsula.
    Could I ask you to describe what the United States 
understands by complete denuclearization? You know, recent 
press around this has been suggesting that there may be 
different views between the U.S. and North Korea about what 
complete denuclearization means. Talk to me about what that 
means to the United States pursuant to ARIA and the 
administration policy.
    Mr. Wong. Senator, thank you for your question.
    As you are aware, over the past year, the administration 
has put immense resources and the State Department has put 
immense resources into a maximum pressure campaign to impose, 
to the maximum extent, the sanctions powers that we do have. We 
have also worked with our likeminded partners and partners 
across the world and at the UN to implement new sanctions and 
new pressure to create the conditions now where we can discuss 
denuclearization of the Korean Peninsula.
    Now, I am not a part of the negotiating team, but I do 
understand that our team is clear-eyed about the track record 
of North Korea, about the track record of prior negotiations 
and how they have failed to meet our ultimate objective. So 
they are focused on that ultimate objective, which is, as you 
know, complete, verifiable, and irreversible denuclearization 
of the Korean Peninsula.
    On further details, however, I will respectfully have to 
defer to our negotiating team in the White House.
    Senator Kaine. Let me ask you this. We are here because of 
the good work of our two leaders on the Asia Reassurance 
Initiative Act. And the idea of reassurance is a reassurance 
that the United States is going to continue to play a 
leadership role. And this may be a hard question for you to 
answer because I think this is for the negotiators probably as 
well. So I will just make it as a comment and as a concern.
    I do not hesitate to criticize the administration on 
things. I think the North Korea challenge is a tough one, and 
except for not having an ambassador in South Korea, which I 
think sends a very bad sign, I do not have a lot to fault this 
administration for about the North Korea thing. I think so far 
the opening of dialogue has been positive.
    I will tell you a worry that I have, though. My worry is 
that the discussion will involve strategies that may pay 
attention on the Korean Peninsula but that may not reassure our 
allies generally. They may be strategies that are very 
favorable to China, for example. The things that the U.S. might 
do in exchange for reducing tensions on the Korean Peninsula 
might be a series of things that would be, in the grand scheme, 
very, very helpful to China, which would not reassure many of 
our allies in the region who are concerned about Chinese 
influence. And so this is one of the things that I am going to 
be watching as these discussions and negotiations progress.
    Anything we can do to bring down nuclear tensions on the 
peninsula I will sort of have a default in favor of. And yet, I 
think we do have to make sure we are not doing that at the 
expense of ceding even greater hegemony to China in the region 
in a way that our allies would find disturbing.
    So you can comment if you want, but I know that that is big 
negotiation policy. Mr. Wong?
    Mr. Wong. Two points, Senator. Thank you for your question.
    You are right that we have not yet appointed an ambassador 
to South Korea, but I do understand this is a priority for 
Secretary Pompeo. But I do have to say that we have a charge 
there, Marc Knapper, whom some of you may have met on your 
travels to Seoul, who has been very effective and has been very 
strong in getting us to this point prior to the upcoming 
summit.
    Secondly, with regard to the allies, a key part of our 
approach on DPRK is strong, lockstep coordination with our 
allies in the region, namely, first of all, South Korea with 
respect to this issue, as well as Japan. And those discussions 
continue at all levels so that we do remain on the same page, 
and we are taking every step together with our allies.
    Senator Kaine. Excellent.
    I want to move to ask a couple of questions about Burma, if 
I can. Do you believe it is important to hold accountable 
individuals of any military or security force who are involved 
in human rights abuses?
    Mr. Wong. Senator, I do, and I think our policy in Burma is 
to encourage accountability for any atrocities that have 
occurred.
    Senator Kaine. Do you believe that individuals who 
knowingly played a direct and significant role in committing 
human rights violations against the Rohingya, such as senior 
military and security officials in Burma, should be held 
accountable to the full extent of U.S. and international law?
    Mr. Wong. Senator, I believe that is our policy, to hold 
accountable those who would take part in human rights 
violations, and we have taken steps to encourage 
accountability.
    Senator Kaine. Do you both agree that based on that answer, 
that this accountability should include those who were in 
charge of a unit involved in so-called clearance operations in 
the northern Rakhine state that began during or after October 
2016?
    Mr. Wong. Senator, I am not aware of the particular 
operations you are referring to. I will have to defer to the 
State Department's Burma team on that. I understand my 
colleague, Patrick Murphy, who is our acting Special 
Representative on Burma, was here on Friday for a briefing and 
he can continue to brief. But for the overall policy of 
encouraging accountability, ensuring that gross human rights 
violations are punished and prevented, that is our policy in 
Burma, as it is elsewhere around the world.
    Senator Kaine. I am going to ask that question again for 
the record in writing because it may be appropriate for others 
to weigh in on that question.
    The accountability should also be extended to those who 
knew or should have known that the official subordinates were 
committing sexual or gender-based violence and failed to take 
adequate steps to prevent such violence or punish individuals 
responsible for such violence. Should accountability extend to 
them?
    Mr. Wong. Senator, I am happy to take back the specific 
question on the specific incidents to our team. But I do want 
to emphasize that we fully support the goals that we share with 
you of ensuring accountability, ensuring that human rights 
violations are punished.
    Senator Kaine. Has the Department of State and Defense had 
a chance to review the proposed Burma Human Rights and Freedom 
Act?
    Mr. Wong. Senator, I will have to defer to our legislative 
team and our Burma team. I am not aware if we have completed 
our review yet. But overall, if there are further tools on 
Burma or any other policy, the State Department stands ready to 
review and work with Congress to ensure those tools are robust 
and well tailored to achieving our goals.
    Senator Kaine. I am going to ask for the record the 
following question. Do either of your agencies have policy 
objections to implementing the sanctions detailed in the 
bipartisan act? And I will ask that for the record for a 
written response.
    The reason I asked that series of questions is one thing 
that I found noticeable about the written testimony of each of 
you was no mention of Burma or the Rohingya. I am a believer 
that we cannot have stability in a region while there are 
ongoing atrocities happening without anybody being held 
accountable. And Burma's democratic experiment and what seems 
for now to be a failed experiment is very, very disheartening. 
And so I will ask those questions for the record and I would 
appreciate that.
    Thank you, Mr. Chair.
    Senator Gardner. Thank you, Senator Kaine.
    Secretary Schriver, Senator Markey mentioned and talked a 
little bit about the Philippines and our response in the 
Philippines, given human rights violations there. The 
Philippines also represents an opportunity from a strategic 
standpoint on the defense side of the picture.
    Could you talk a little bit about where we are with EDCA 
right now and how that should be perhaps utilized to a greater 
degree than it is, if it can be, and if it cannot be, is it the 
Philippine Government that is holding us back or is it our 
reservations?
    Mr. Schriver. Sure. Thank you, Senator.
    I think on the defense side, our relationship remains 
strong. As Mr. Wong indicated, there is a longstanding 
foundational relationship between many of the institutions 
between our two countries. I think particularly the recent 
campaign in Marawi reinforced the importance of U.S.-Philippine 
cooperation in the CT area.
    On EDCA, we are making progress I would say, and there are 
a number of steps that need to be taken. Site evaluations, for 
example, perhaps could go more quickly for our liking, but I 
would say that we are making progress. We will keep pushing 
this with our Filipino counterparts.
    Senator Gardner. It is your full intent, though, that the 
Philippines has no hesitation on the agreement, the 
partnership?
    Mr. Schriver. I do not believe there is a political 
hesitation or problem. I think it is mostly just the pace at 
which bureaucracies can move and folks can move on this.
    Senator Gardner. Section 101 of ARIA authorizes funds for 
the following goal: to bolster the United States military 
presence and readiness in the Indo-Pacific region for the 
purpose of deterring and defending against provocative actions, 
including by improving the defense infrastructure, critical 
munitions stockpiles of the United States, and critical 
munitions stockpiles of the United States Armed forces.
    Could you talk a little bit about that goal, what 
improvement the Department of Defense would like to see, Mr. 
Schriver, and where you think we should have improvements and 
perhaps just give us an update on the state of readiness on the 
armed forces within the Indo-Pacific region?
    Mr. Schriver. Thank you. I probably would want to give a 
more fulsome answer by taking the question and giving a more 
detailed briefing on plans for dispersal and for how we would 
plan to have ammunition storage, et cetera, the number of 
things that you mentioned in your question.
    I think as a general matter, we understand the 
implementation of the National Defense Strategy in dealing with 
the challenges that China poses will require a different 
approach, a different perhaps posture, but also this ability 
for dispersal, this ability for survivable, sustainable 
logistics to include ammunitions support for our forward-
deployed forces.
    I can give you a more fulsome answer by taking the 
question, but certainly as a general matter, these are our 
goals and we appreciate the support, as expressed in your 
efforts here at the committee.
    Senator Gardner. Thanks. Perhaps we can follow up on that 
question a little bit more.
    Mr. Wong, talking a little bit about the competition and 
China's practices, economic practices, economic coercion, 
predatory economics, it has been characterized a number of 
ways. What is our strategy right now as it relates to the BRI 
initiative of China and how to counter them?
    Mr. Wong. Thank you, Senator.
    The One Belt One Road initiative or the Belt and Road 
Initiative, is essentially a state-financed, state-backed 
infrastructure initiative to build infrastructure across 
Central Asia and other parts of the Indo-Pacific. When we look 
at the Belt and Road Initiative, the United States is less 
concerned about where the money comes from or from which 
country the money comes from. We are much more concerned with, 
A, how the financing for the infrastructure is structured, 
number one; and number two, how the particular projects are 
conceived and implemented. So we are concerned with the debt 
structuring because if these deals and this financing is not 
structured in a way that recipient nations across the Indo-
Pacific can pay them back in a sustainable manner, what we will 
see over time is that these projects will compromise the 
sovereignty of these nations to the detriment of their national 
security. And we are concerned about the particular projects.
    Senator Gardner. But yet, those nations continue to take 
the dollars, the projects. Do they understand that?
    Mr. Wong. Well, Senator, we have a number of efforts across 
the Indo-Pacific and truly around the world to build the 
capacity of partner governments to understand lifecycle 
costing, to understand what a proper bid process is up to 
international standards, and to understand how they can 
structure debt, drive a harder bargain to ensure that they 
preserve their sovereignty, preserve their economies over time 
as they partner with other nations or private sector actors on 
their infrastructure, whether that is China, whether that is 
Japan, whether that is us or private capital markets.
    But going back to the particular projects, we want to 
ensure also that countries conceive of these projects focused 
in a way that--on economic growth, that these projects are 
truly feasible economically, that they are connected to the 
economies of these nations, and that they are focused not on 
certain strategic designs, but on economic designs because if 
they are not conceived and implemented in that manner, what we 
will see is that these projects will not lift up the nations' 
economies but, in fact, weigh them down. So that is a message 
we are bringing to our partners.
    And we are also putting our capacity building efforts 
behind this effort, something we have done literally for 
decades. Perhaps we should talk about it more but the United 
States has facilitated hundreds upon hundreds of connectivity 
projects around the Indo-Pacific to drive regional integration 
in a positive manner, to raise GDPs, to increase stability and 
the economic growth of these nations. We want to continue that 
trend and ensure that other initiatives do not diminish the 
positive growth of the region.
    Senator Gardner. Secretary Schriver, you mentioned the 
CFIUS and CFIUS review processes. Some have talked about 
perhaps maybe a more global approach to a CFIUS review system. 
Other countries are having the same questions about national 
security and investments in their country by SOE type of 
organizations or other government intervention- funded 
enterprises. Have we looked at a global type of CFIUS with 
partners like Australia and Japan? Because we share a common 
national security interest. And what would that look like if we 
did?
    Mr. Schriver. It is a great question, Senator, a little bit 
outside my lane. In DOD channels, we do talk about the 
challenges that China poses, particularly in the countries you 
mentioned. To the extent we can share our experiences and trade 
notes on Chinese behavior, we do that in DOD channels in terms 
of promoting an overall global CFIUS. I would have to refer to 
other colleagues in government if that has been a conversation.
    Senator Gardner. Thank you.
    Mr. Wong, do you want to address that at all?
    Mr. Wong. Senator, it is a little bit outside my tent as 
well, but I understand I think the administration is working 
together with Congress on certain bills and reviewing certain 
bills with regard to the CFIUS process, to reform it and 
strengthen it.
    Senator Gardner. Senator Markey?
    Senator Markey. Thank you, Mr. Chairman. I just have one 
final question.
    During his confirmation process to head of the Pacific 
Command, Admiral Philip Davidson submitted to the Senate Armed 
Services committee that, quote, I believe the INF Treaty today 
unfairly puts the United States at a disadvantage and places 
our forces at risk because China is not a signatory. Admiral 
Harry Harris has made similar assertions.
    Mr. Schriver, can you explain how DOD recommends that the 
United States respond to this asserted disadvantage with the 
noncompliance with the INF?
    Mr. Schriver. Well, the discussion about the future of that 
treaty would belong to my colleagues at State. I would say from 
a DOD perspective, I think it is about 85 percent of Chinese 
missiles that would be INF noncompliant. Really the backbone of 
their power projection are ballistic and cruise missiles that 
would be INF noncompliant. So unless something is done about 
that either through treaty efforts or through other diplomatic 
efforts, we have to accommodate for that capability. People 
describe it as an anti-access/area denial strategy on the part 
of China. And so we account for that by some of the efforts I 
described earlier, greater dispersal opportunities, more access 
opportunities, longer-range power projection ourselves, staying 
outside threat envelopes. But it is a very dynamic challenge 
and it is one that if we are going to be able to implement our 
National Defense Strategy, compete effectively with China, we 
do have to account for that.
    Senator Markey. Mr. Wong, what is the State Department's 
plan to deal with this issue? What is the initiative that you 
are taking in order to close this problem off?
    Mr. Wong. Thank you, Senator.
    I am aware of the testimony from Admiral Davidson and 
Admiral Harry Harris, and I am aware of the current strictures 
and requirements of the INF Treaty both in Europe and Asia.
    With regard to any modification of those treaties, I will 
have to take that question back to our international security 
team at the State Department and am happy to provide you an 
answer.
    Senator Markey. Yes. Would you? Just listening to Mr. 
Schriver, it is clearly a huge issue. I think the number you 
just used was 85 percent are not in compliance with the INF.
    Mr. Schriver. If they were to try to join or if they were 
to have those restrictions imposed on them, I believe that is 
about the right figure.
    Senator Markey. Yes. That is a big, big issue.
    Thank you, Mr. Chairman.
    Senator Gardner. In ARIA, we talk about human rights. You 
have talked about human rights in your testimony and answers 
today. We talked about the democratic values in the Indo-
Pacific region and that is, indeed, part of United States 
national interests, national security interests.
    Could you talk a little bit about how ARIA, you believe, 
could help you address the mission or the goal of addressing 
human rights? Mr. Wong?
    Mr. Wong. Senator, I am glad that human rights is mentioned 
in ARIA, and I assure that we talk about this constantly within 
our interagency process and at the State Department not just 
with regard to the free and open Indo-Pacific strategy but our 
diplomatic efforts around the world. You, as well as I, know 
that the U.S. has a strong tradition of advocating for human 
rights. This is for a number of reasons. Number one, it is our 
comparative advantage when we talk about competition abroad. 
Number two, it has benefits in terms of stability and 
prosperity if human rights were respected in more parts of the 
world than they are today. But lastly--and this is perhaps the 
most important--it is simply morally right. It is the right 
thing to do. It is a part of the U.S. creed and a part of our 
founding. It is what has always been a part of our enduring 
interest and our ideals.
    I am glad, again, that ARIA highlights this and that we are 
continuing to focus on this at the State Department, and that 
the United States is the world's strongest power, but we are 
also the world's most moral actor. And we have a unique role in 
speaking for those who cannot freely speak for themselves in 
advocating for their rights.
    Senator Gardner. Thank you, Mr. Wong.
    ARIA also talks about, in section 202, the multilateral, 
bilateral, regional trade agreements that increase U.S. 
employment and expand our economy. Could you talk a little bit 
about your role--excuse me--the State Department's support or 
whether they do not support it--that goal in terms of trade 
agreements, multilateral, bilateral trade agreements, and what 
would the State Department's role be in negotiating such 
agreements--engagements I should say?
    Mr. Wong. Sure. Senator, as I mentioned in my opening 
statement, we have a very deep and broad economic relationship 
in the Indo-Pacific, again the number one trading partner for 
the Indo-Pacific, the number one foreign direct investor. So 
strengthening those economic relationships, strengthening the 
investment environments in the Indo-Pacific is not only in the 
interest of the nations geographically in the Pacific but also 
is in our interests. And the Trump administration, President 
Trump, is very focused on defending the interests and improving 
the lot of U.S. businesses and U.S. workers. Toward that end in 
the Indo-Pacific, we have a number of actions.
    First, that we work for ambitious agendas in APEC so that 
we can work through APEC to collectively lower trade barriers 
and lower investment barriers to improve economic prospects for 
all the nations in the Indo-Pacific, the U.S. included.
    Second, the President supported bilateral trade agreements 
with any country that is open to free, fair, and reciprocal 
trade, and we are looking at that.
    And third, we have talked a little bit about connectivity. 
We want to engage more on this economic front because best 
value energy infrastructure, digital infrastructure, transport 
infrastructure in the Indo-Pacific can redound to our benefit 
by, first, improving the economies in the Indo-Pacific and make 
them better trade partners but also particularly with energy, 
the prospect for exports for U.S. businesses and U.S. workers 
and lowering the trade deficits that we have with countries in 
the Indo-Pacific holds a lot of benefits and good prospects in 
terms of benefits. And this is something that is talked about 
in ARIA.
    Senator Gardner. And do we need to restructure any of our 
sort of our trade and investment organizations, our development 
infrastructure, our investment infrastructure for further 
engagement in Asia?
    Mr. Wong. I understand that the administration has 
supported the goals of--I believe it is called the BUILD Act, 
which would essentially consolidate most, not all but most of 
our development finance agencies here in the United States 
under one roof so we can have uniform policy direction, uniform 
authorities, perhaps increased capacities to foster the type of 
private sector investment we want to see in connectivity 
projects around the world, but also in particular for my 
purposes in the Indo-Pacific. I think that would be very 
helpful because it again provides uniform policy direction, but 
it gives the U.S. private sector, as well as our partner 
governments at the national and provincial level, a one-stop 
shop, a place they know they can go to when they want to 
discuss best value practices for fostering connectivity.
    Senator Gardner. Thank you, Mr. Wong.
    Final question. You mentioned APEC. Where do you see ASEAN 
and our relationship with ASEAN fitting in the Indo-Pacific?
    Mr. Wong. Senator, the strategic logic of ASEAN is that 
small and medium-sized nations in Southeast Asia can band 
together and use their collective weight to resist outside 
coercion and foster a free and open order, a rules-based order. 
So we support that. We support the centrality of ASEAN.
    When I was out in the region, I was in Jakarta, and I told 
our partners there--I had a meeting with the permanent 
representatives of ASEAN. And I said if you were to devise from 
scratch a body to promote a free and open order, you would band 
together the nations at the fulcrum of the region in Southeast 
Asia. You would have this body be able to convene the nations 
of the Indo-Pacific. You would have it work in a consensus 
manner so that its decisions were strong and respected. You 
would, in fact, create ASEAN. So the good thing is we do not 
have to create it. We have ASEAN already.
    So the corollary policy for the United States is to 
strengthen ASEAN, is to work with them so that their decisions 
are meaningful and that they can tackle larger regional 
security issues and other issues that we need to support the 
type of rules-based, free and open order that we want to 
promote.
    Senator Gardner. Thank you both for your time and testimony 
today.
    And, Senator Kaine, I believe you may have had some 
questions for the record. The record will remain open until 
close of business on Thursday. Please have your questions 
submitted by then. I would ask the witnesses to please respond 
as quickly as possible, and those responses will be made part 
of the record.
    And with the thanks of this committee, the committee is now 
adjourned.


    [Whereupon, at 11:30 a.m., the hearing was adjourned.]



                              ----------                              



              Additional Material Submitted for the Record

           Responses to Additional Questions for the Record 
              Submitted to Alex Wong by Senator Tim Kaine

    Question 1.  At the hearing, both of you testified that we should 
hold accountable to the full extent U.S. law allows, individuals of any 
military or security force who are involved in human rights abuses. Do 
you agree this should include those who: were in charge of a unit 
involved in so called ``clearance operations'' in Northern Rakhine 
state that began during or after October 2016; and who knew, or should 
have known, that the official's subordinates were committing sexual or 
gender-based violence and failed to take adequate steps to prevent such 
violence or punish the individuals responsible for such violence?

    Answer. The Department is committed to using all of the tools at 
our disposal, including targeted sanctions on Burmese military 
officials and not issuing JADE Act travel waivers for senior military 
figures, to show there are serious consequences for those who commit 
serious human rights abuses and violations. General Maung Maung Soe, 
who was a leader of units responsible for widespread human rights abuse 
against Rohingya in Rakhine State, was included in the first tranche of 
persons sanctioned under the Global Magnitsky Human Rights 
Accountability Act in December 2017.
    The State Department has made a determination that ethnic cleansing 
occurred in Burma and we continue to call on Burma to hold accountable 
those responsible for human rights abuses and violations, including the 
atrocities in Rahkine State and in other areas of Burma, including 
Kachin and Shan States. At the same time, we continue to collect new 
information about these abuses and review the full range of tools 
available in order to seek accountability for those responsible.

    Question 2.  Please provide your Department's position on the Burma 
Human Rights and Freedom Act. Do your Departments support the 
legislation? If not, detail your Department's policy objections, 
including to implementing the sanctions detailed in this bipartisan 
Act.

    Answer. We appreciate that Congress shares the same goals of 
working to ensure justice for victims of violence in Rakhine State, and 
that those responsible for atrocities and other human rights violations 
and abuses will face appropriate consequences. Justice and 
accountability are important for Burma's democratic transition. We look 
forward to working with you to assist Burma in this transition and to 
realize the country's full potential, but the Department assesses that 
the current tools such as the Junta's Anti-Democratic Efforts (JADE) 
Act and the Global Magnitsky Human Rights Accountability Act available 
to the U.S. government are sufficient to pursue accountability.

    Question 3.  Would sanctioning senior military and security forces 
officials in Burma who were found to be involved in human rights 
violations help or harm U.S. efforts in reforming the Burmese military 
to become a more professional and effective military?

    Answer. We are committed to utilizing the full range of policy 
tools and working with the international community to promote 
accountability for those responsible for human rights violations and 
abuses including ethnic cleansing, and other atrocities in Rahkine 
State and elsewhere in the country, and to promote reform and 
professionalization of the Burmese military. Sanctions are one such 
tool, and we have sanctioned Maung Maung Soe, a senior general who was 
a leader of the units responsible for serious human rights abuses in 
Rahkine State, under Executive Order 13818, which implements the Global 
Magnitsky Human Rights Accountability Act. We are also considering 
additional measures and have advocated for other countries to do the 
same.
    We continue to call on both the civilian and the military 
leadership in Burma to hold those who are responsible for the ethnic 
cleansing and other atrocities in Rahkine State to account, and to 
reform and professionalize the armed forces in a manner that would 
advance Burma's democratic transition.

    Question 4.  Does the administration intend to lift or relax 
sanctions put in place on North [Korea] for its gross human rights 
violations in exchange for agreements on denuclearization? Please 
detail the Administration's current strategy to address North Korea 
human rights abuses.

    Answer. We remain deeply concerned by the gross human rights 
violations and abuses committed by the North Korean government. Many of 
the current sanctions on North Korea were put in place due to the 
regime's egregious and widespread human rights violations and abuses. 
Our commitment to achieving the complete, verifiable, and irreversible 
denuclearization of the Korean Peninsula does not negate our resolve to 
press the North Korean government to respect the fundamental freedoms 
and human rights of its citizens. Our strategy to promote human rights 
in North Korea focuses on three core objectives, including increasing 
international awareness; expanding access to information, voices of 
freedom and democracy, and visibility into the world outside; and 
promoting accountability for those responsible for human rights 
violations and abuses in North Korea.

    Question 5.  North Korean defector Thae Yong Ho, the regime's 
former deputy ambassador in London, said that it is unlikely North 
Korea will agree to Washington's version of ``complete, verifiable, 
irreversible denuclearization'' because it would challenge the 
fundamental structure of North Korea's political system. Instead, he 
suggested North Korea will push for a watered down version. In light of 
this assessment by the highest profile defector to date, please explain 
what acceptable denuclearization would look like from the 
Administration's perspective?

    Answer. The goal remains the same: the complete, verifiable, 
irreversible, denuclearization of the Korean Peninsula. This means the 
permanent and verifiable elimination of North Korea's nuclear program 
and delivery systems. We have seen that the incremental, phased 
approaches of past negotiations all failed. The Trump Administration is 
not interested in negotiations allowing North Korea to buy time. In the 
meantime, the global maximum pressure campaign will continue until 
North Korea denuclearizes.



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