[Congressional Record Volume 140, Number 32 (Monday, March 21, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 21, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                 CHINA: THE EMERGING ECONOMIC COLOSSUS

                                 ______


                         HON. NANCY L. JOHNSON

                             of connecticut

                    in the house of representatives

                         Monday, March 21, 1994

  Mrs. JOHNSON of Connecticut. Mr. Speaker, I am pleased to share with 
my colleagues a very thoughtful speech delivered by former Commerce 
Secretary and my Bristol, CT, constituent, Barbara Hackman Franklin. In 
her remarks, Ms. Franklin gives us considerable material to ponder as 
we examine the importance of international trade in general and with 
China in particular.

                 China: The Emerging Economic Colossus

 (By Hon. Barbara Hackman Franklin, Former U.S. Secretary of Commerce)


                                 CHINA

       China has always held a special intrigue for westerners. I 
     am no exception. This vast populous country is thought by 
     many to have the oldest culture on Earth. Certainly it was 
     the center of Eastern civilization. Many Asian neighbors drew 
     upon China as the source of their written language, religion, 
     philosophy and style of living. It was already a 
     sophisticated society when Marco Polo traveled there in the 
     fourteenth century, bringing back such treasures as silk, 
     tea, spices, noodles, fireworks, exquisite porcelain, and 
     wood block printing.
       But this special fascination has not translated into a 
     smooth and predictable relationship over the past few 
     centuries. To us, China has been alternately open, then 
     closed, and then reopened again. The result is that we do not 
     understand China very well--its ancient culture, its history, 
     its people, way of life, political structure or place in 
     today's world. But, our fascination persists, perhaps because 
     we have a sixth sense about--and emotional reaction to--the 
     huge sleeping giant on the other side of the world.
       Now the sleeping giant has awakened. It is increasingly 
     important--even urgent--that we understand this unusual 
     country, which could eclipse the United States in the size of 
     its economy in the early part of the next century. I believe 
     we have reached a defining moment in our relationship with 
     China.


               the history of the u.s.-china relationship

       Ever since Hong Kong was established--back in the days of 
     clipper ships when trade with China flourished--the United 
     States was engaged, along with Europe, in China. But having 
     existed as a self-contained society for many centuries, China 
     did not move easily into a cooperative relationship with the 
     nations of the West.
       Restriction of trade to specific ports in the eighteenth 
     and nineteenth centuries, the Boxer Rebellion, the limit on 
     trade by the mandarins in the early 20th century, the 
     Japanese occupation before and during World War II, the brief 
     reopening under Chiang Kai-shek, and the quick retreat behind 
     the walls of communism in 1949--these are some of the more 
     notable instances of the on-again, off-again flirtation China 
     has had with the West.
       It has only been since Richard Nixon's trip in 1972 that 
     China has again been reopened to the U.S. And even though 
     George Bush was sent to establish a liaison office after the 
     Nixon visit, it was not until 1979, in Jimmy Carter's 
     Presidency, that the U.S. officially recognized China.
       U.S.-China trade resumed in 1972, but remained minimal 
     until 1979 when China's ``open door'' policy began. China 
     launched its economic reforms, made efforts to attract 
     foreign investment, and created Special Economic Zones. In 
     1980, the U.S. accorded China Most Favored Nation trading 
     status. Under our laws, this status must be renewed annually. 
     It has become harder to do this every year because of the 
     growing pressure to link MFN for China with progress in human 
     rights.
       In 1983, in the Reagan years, we took our commercial 
     relationship one step further. The Joint Commission on 
     Commerce and Trade was begun--Malcolm Baldrige was Secretary 
     of Commerce--to provide a government-to-government channel to 
     increase business activity and handle problems.
       As freer markets and economic growth progressed, so too did 
     the move toward more political freedom. A high water mark was 
     reached when the democracy movement was put down forcefully 
     at Tienanmen Square in 1989. As a result, the U.S. and a 
     number of other countries imposed sanctions. The U.S. imposed 
     six--prohibiting military contacts and sales, high level 
     government contacts and government backed financial support 
     for trade and investment, among other things. Once again, 
     China openness took a backward step.
       Moves to normalize relations inched forward in 1992. Three 
     new market opening agreements were signed and were the first 
     step toward ``reopening'' China for commercial activity. A 
     trip I made last December, at the request of President Bush, 
     was another ``reopening'' step. It also removed one of the 
     sanctions--the one prohibiting high-level government contacts 
     between China and the United States. Others remained, and 
     today the U.S. is the only country still maintaining 
     sanctions against China that are linked to the Tienanmen 
     Square tragedy.


                    china's place in the world today

       Today, China is a country in transition. Much change is 
     occurring--economically, politically and socially. And the 
     course of the change is not always smooth or even; semi-
     controlled chaos might be one way to describe it. But the 
     outcome has tremendous significance for us in the United 
     States as well as for all the rest of the world.
       China is the world's most populous country--1.2 billion 
     people. This statistic alone gives China great weight in the 
     community of nations, but there are other reasons that it has 
     tremendous strategic importance.
       Its geography is one. China is the geographic center of 
     Asia. It shares a border with 14 different countries--Russia, 
     India, Pakistan, North Korea, Vietnam, Laos, Burma (now 
     Myanmar), Mongolia and Nepal, to name a few. China has 
     more common borders than any other country in the world.
       China also has a significant role in political and security 
     terms. It has one of the seven permanent seats on the United 
     Nations Security Council. This means China has a voice--and a 
     veto--over the decisions made by this organization, mainly 
     involving peace-keeping missions the nations of the world 
     should undertake and how to conduct them.
       Finally, and most importantly, we now have China's 
     escalating economic clout. China's economy is the fastest 
     growing large economy in the world. The International 
     Monetary Fund already ranks China as the third largest 
     economy in the world, behind the U.S. and Japan. Predictions 
     are that the Chinese economy will grow between 13 and 14 
     percent this year despite stringent efforts to rein it in and 
     cool it down. This is after a 12 percent growth rate last 
     year.
       No end is in sight. Economists around the world expect 
     China's economy to continue growing at least 6 to 8 percent 
     annually for the next 10 years. In contrast, growth rates for 
     industrialized countries, including the United States, are 
     predicted to remain at only 2 to 3 percent for at least the 
     next five years. This means that China could overtake the 
     U.S. as the world's largest economy within the next decade.
       Right now, China is the largest market in the world--for 
     aircraft, for telephones, for construction equipment and, 
     increasingly, for consumer goods. The country needs virtually 
     everything we produce and sell. And demand is growing 
     rapidly. In cities like Shenzhen, one of the first special 
     economic zones located in the south of China just across the 
     border from Hong Kong, one can stand on the street corner and 
     feel the dynamism and the energy as the Chinese people build 
     another Hong Kong. I have never before seen and felt that 
     kind of dynamic growth in any other place.
       However, there are still contradictions. Some parts of 
     China, especially in the north and west, have not yet been 
     touched by the freedom of the special economic zones. They 
     are not as advanced nor prosperous. But, one thing is clear--
     the Chinese want to advance, to prosper, to accumulate 
     wealth.
       The economic promise of China is heightened by Hong Kong 
     and Taiwan.
       Hong Kong will revert to China from Britain in 1997. Though 
     there are ongoing controversies between China and Britain 
     about how much democracy there should be in Hong Kong's 
     governance, I believe, that in the end, the reversion will 
     take place without incident. Hong Kong is by far the largest 
     investor in China, and the economies of the two are 
     unmistakably intertwined.
       Taiwan is the second largest investor in China today. The 
     people of Taiwan have done well economically since the 
     Nationalist Chinese retreated there after the Communists 
     assumed control of mainland China in 1949. And while tensions 
     and political differences still exist between China and 
     Taiwan, economic ties are flourishing. If one day in the 
     next century Taiwan and China should decide to join 
     together again, that would further accelerate the dynamism 
     and size of the Chinese economy.
       So, for all these reasons--population, geography, politics, 
     and especially, economic potential--China must be reckoned 
     with and understood.
       I came away from my trip there last year more convinced 
     than ever that we must remain engaged in China. This is the 
     only way the United States can hope to influence the 
     direction of change and help ensure a positive outcome--a 
     market-oriented economy paired with a more open and free 
     society.
       However, there are others who think differently. There are 
     a number of people, historically and now, who think the U.S. 
     should not have contact or do business with China. There are 
     those who are concerned about China's human rights record, 
     such things as imprisonment of dissidents, use of prison 
     labor to produce products for export, and coercive birth 
     control measures. There are others who think we should not 
     deal with any regime that is Communist, and therefore, an 
     enemy. And, there are still others in our intelligence and 
     defense establishments, who see a threat in China's military 
     modernization and arms sales to other nations.
       This jumble of attitudes and opinions about China and what 
     the U.S.-China relationship should be made for a complex 
     situation here at home.


                  my mission to china, december, 1992

       Let me talk for a moment about my trip to China, where it 
     fits into this mosaic, and what it accomplished.
       Just after the 1992 election, President Bush asked me to go 
     to China to reconvene the Joint Commission on Commerce and 
     Trade with my counterpart Li Lanqing, then head of the 
     Ministry of Foreign Economics and Trade. (He has since been 
     elevated to Vice Premier and the Ministry has been renamed 
     the Ministry of Foreign Trade and Economic Relations.) The 
     Commission had been moribund since 1989 because of the 
     sanction barring ministerial contact with China. As I said 
     before, my trip lifted that sanction. It was the first 
     Cabinet-level contact since Tienanmen Square.
       As I also mentioned before, the trip was the next logical 
     step in normalizing the U.S.-China commercial relationship, 
     following the signing of three new market-opening agreements. 
     These agreements dealt with market access, protection of 
     intellectual property and a prohibition against using prison 
     labor to make products for export to the U.S. The trip's 
     objective was the advancement of U.S. commercial interests 
     and the continued encouragement of economic reform and 
     political freedom in China. To underscore the commercial 
     aspects, I took six U.S. business people with me.
       Before going, I met here with the Chinese Ministers of 
     Aerospace and Telecommunications. I strongly indicated to 
     both that our growing trade deficit with China was becoming 
     an increasing problem and that the only way to address it was 
     for China to buy more U.S. products. I had a list of pending 
     U.S. sales--at the top was Boeing aircraft purchase. When I 
     arrived in China, ten days later, and had my first bilateral 
     meeting with Minister Li, he was quick to inform me that we 
     would get our Boeing contract and that, to underscore Chinese 
     good faith, it would be signed while I was in China. It was, 
     as were other contracts between Chinese companies and AT&T 
     and Northern Telecom. All told, we brought back more than $1 
     billion in new contracts for American companies. Let us 
     remind ourselves that every billion dollars in export creates 
     or supports more than 19,000 jobs in the U.S.
       And, the discussions had with various other government and 
     business officials were the stimulus for more U.S. business, 
     signed later--including an order for GE engines, for more 
     Boeing aircraft, a major AT&T joint venture, plus other sales 
     of automobiles, satellites, and power generation equipment.
       Other things accomplished on the trip--the whole of which 
     netted more than either President Bush or I had expected--
     were these:
       We moved forward on implementing the trade agreements, 
     agreeing to specific deadlines, targets, and vehicles to 
     accomplish specific objectives.
       We agreed to negotiate a Memorandum of Understanding on 
     end-user checks on ``dual-use'' technology products, such as 
     computers, which could have both civilian and military uses. 
     We indicated that if China agreed to allow checks of the end 
     use of these products, it would be easier to convince our 
     intelligence and military establishments that the Chinese 
     were using them for peaceful purposes. That would provide 
     leverage for the loosening of controls over the export of 
     such products.
       We agreed to resume negotiations on a bilateral investment 
     treaty, to facilitate investment between our two countries.
       During my talks with Primer Li Peng and other Chinese 
     leaders, I made very clear that the U.S. also wanted to see 
     substantial progress in a number of areas. I stressed that 
     reducing the trade deficit, achieving full implementation of 
     trade agreements, and addressing U.S. concerns in the areas 
     of human rights and arms proliferation were the best ways to 
     ensure a good working relationship between the U.S. and 
     China.
       I am proud of what we did to reopen commercial 
     relationships with China more fully, to place the full weight 
     of our government behind our business people, and to mend the 
     U.S.-China relationship.


                            the status today

       The question now is: where is our relationship with China 
     today, and where do we want it to go?
       On balance, right now, in November of 1993, I think our 
     relationship with China is one of mixed signals and 
     escalating tensions, which holds the possibility of undoing 
     much of our recent progress.
       The Clinton Administration seems conflicted in its attitude 
     toward China. Administration officials appear to be working 
     at cross purposes. Strong objections to some of China's 
     policies and actions are uttered at the same time a stream of 
     high level visitors is traveling to China to extend olive 
     branches. A meeting between President Clinton and China's 
     President Jiang Zemin has been scheduled to be held during 
     the Asia Pacific Economic Cooperation (APEC) conference in 
     Seattle on November 18 and 19 as part of this campaign to 
     soothe the troubled waters of the U.S.-China relationship.


                          commercial relations

       There is some good news. The efforts we began last year 
     seem to be moving forward.
       On the business front, U.S. companies continue to rush to 
     explore business opportunities, send more exports, and sign 
     more contracts in China. About 2,000 U.S. companies have 
     about $6 billion invested there now, making the U.S. the 
     third largest investor in China. U.S. exports are growing 
     substantially.
       We continue to move forward on implementation of the market 
     access agreement. The Clinton Administration is considering a 
     bigger push on services; however, progress is slower than we 
     would like. More programs has been made on implementation of 
     the intellectual property rights agreement. The Chinese have 
     taken significant steps by changing laws and setting up 
     courts. The issue now is enforcement. Our government intends 
     to pursue this concern.
       Unfortunately, the progress in these areas has not done 
     much yet to reduce our trade deficit with China. Estimates 
     are that the deficit will climb to $23 billion this year, a 
     significant jump from the almost $19 billion deficit recorded 
     in 1992.
       One thing that could be done to shave almost $2 billion off 
     that deficit quickly would be for China to get serious about 
     stopping illegal transshipments of textiles to the U.S. This 
     is a continuing--and growing--problem. Textile products are 
     shipped through Hong Kong, Taiwan and other Asian ports to 
     obscure the country of origin and thereby avoid import quotas 
     set by a textile agreement between the U.S. and China.
       The current agreement is due to expire at the end of this 
     year. The Chinese are dragging their feet on concluding a new 
     one. Resolving this issue would help reduce the trade deficit 
     and remove one point of tension in the U.S.-China 
     relationship.


                          escalating tensions

       The rest of the news about our relationship with China is 
     not so good. A number of other incidents are causing tensions 
     to escalate.
       First, came the debate about whether Most Favored Nation 
     status should be renewed for another year. President Clinton 
     did the right thing--renewed it--but indicated there would be 
     human rights conditions the Chinese would be expected to meet 
     if MFN is to be renewed again next year. Even though the 
     conditions irritated the Chinese, there was a sign of relief 
     on both sides of the Pacific.
       From here, things have deteriorated fast.
       Perhaps the most significant event--the one that angered 
     the Chinese the most--was the vocal opposition in the U.S. to 
     China's bid for the Olympics. China desperately wanted to 
     host the 2000 Olympics, viewed it as a right of passage that 
     would enable the country to demonstrate that, economically at 
     least, it had arrived as a player in the modern world.
       However, some here in the United States launched a 
     campaign, saying China did not deserve to host the Olympics 
     because of its human right record. Human rights groups, some 
     in the media and some members of Congress loudly and 
     emphatically expressed their opposition to China being 
     awarded the honor of hosting the games. The Chinese 
     vigorously protested this injection of politics into the 
     Olympic games site selection process and no one will ever 
     know whether it played any role in the Committee's decision 
     to award the games to Sydney, Australia. The Chinese think it 
     did.
       Another incident contributing to rising tensions was the 
     August finding by the State Department that China had 
     delivered missile parts and technology to Pakistan. If the 
     technology was sold to Pakistan, the action would be a 
     violation of the Missile Technology Control Regime guidelines 
     to which China has promised adherence. The evidence may not 
     be conclusive, and China has denied violating the treaty. But 
     nonetheless, the finding automatically triggered sanctions 
     against the sale of certain high technology equipment to 
     China.
       Sanctions can cost U.S. businesses billions of dollars and 
     throw thousands of Americans out of work. To complicate 
     matters, the U.S. action was unilateral. No other country 
     which is part of the regime has joined us. Thus, our 
     competitors are moving quickly to capture the business that 
     U.S. companies are losing.
       The U.S. business community has protested and President 
     Clinton has agreed to review this decision. Hughes Aircraft 
     Company and Martin Marietta Corporation, two companies that 
     are being hurt most, are leading the charge. Hughes could 
     lose contracts to sell 10 satellites to China, sales worth 
     $250 million, jeopardizing 3,000 jobs, according to the 
     Washington Post.
       On the heels of the sanction decision was the confrontation 
     in August and September over U.S. suspicions that a Chinese 
     freighter bound for Iran was transporting chemical weapons. 
     U.S. naval vessels prevented the ship from docking, and after 
     weeks of intense negotiations, the Chinese agreed to let the 
     ship put in at a Saudi port and be inspected by officials of 
     all three countries. No weapons were found, and the Chinese 
     have demanded an official apology.
       And then came the Chinese underground nuclear test just 
     weeks go, performed over our objections. One wonders if the 
     Chinese weren't just showing the U.S. that they would not 
     tolerate interference in their affairs.
       Now we are threatening more sanctions because of alleged 
     violations of treaties protecting endangered species. China 
     and Taiwan are accused of trading in rhinoceros and tiger 
     parts, ingredients of traditional Chinese medicines. Both 
     animals are on endangered species lists. If sanctions are 
     imposed, millions of dollars of trade in flowers, timber and 
     other plant and animal products would be affected.
       We are also fast approaching the deadline for a six-month 
     report due from the State Department to Congress on China's 
     progress in resolving human rights issues. It is bound to be 
     a focal point for reviving debate about China's human rights 
     stance and the appropriate U.S. response. And whatever 
     happens will be a major factor in 1994's annual debate about 
     MFN renewal.


                               the future

       It is time we focused on our long-term relationship. We 
     need to adopt a consistent, stable policy toward China. We 
     need to develop a long-term vision of what our relationship 
     should be. We must stop reacting to individual incidents and 
     respond only in the context of this long-term vision.
       And what should that vision be? I think it has to be rooted 
     in a goal of being a friend, of helping China transform 
     itself into a full-fledged modern, free market economy. This 
     is the key to attaining a more free and open society in the 
     most populous country in the world.
       This means the U.S. has to stay engaged in China. We 
     achieve nothing from withdrawal except a loss of influence. 
     As an old China hand I know said, ``we might go away in Asia, 
     but China never will.'' Only by increasing the ties that bind 
     us can we affect change.
       We should have an expanding commercial relationship. We 
     should pursue or agenda--pushing for full implementation of 
     the market-opening agreements we have, reducing our trade 
     deficit and supporting China's quest for membership in the 
     GATT. We should intelligently balance all our interests in 
     China--the commercial as well as our human rights and arms 
     proliferation concerns.
       To do this, we need to exercise the best of diplomatic 
     judgement and skills, to disagree with the Chinese when we 
     must, be tough-minded when necessary, but do so in the 
     context of fostering an important friendship. We need to 
     encourage, cajole and coax the Chinese forward, instead of 
     blustering, threatening and shouting at them in public. Above 
     all, we need to treat our Chinese friends--as we would any 
     friends--with dignity and fairness.
       I'm told by some close observers that the Chinese 
     leadership is very upset about the deteriorating relationship 
     with the U.S. They are rethinking whether they want a long-
     term partnership with our government. They fear the U.S. will 
     not be a constant and consistent partner and will not treat 
     them with the dignity and fairness they feel they deserve.
       We in the U.S. must remember that China has other options. 
     Japan and Europe are waiting in the wings, eager to forge 
     stronger ties with the world's fastest growing large market.
       Much remains to be done in China to fully resolve our 
     concerns about human rights and arms proliferation. But the 
     best way to promote progress is to stay engaged, to encourage 
     China's economic reform and integration into the world 
     economy. History has shown that economic freedom inevitably 
     leads to personal freedom.
       Let's not turn our back on the possibility of helping free 
     markets and democracy along in China. If we are short-sighted 
     and fail to adopt a long-term vision about our relationship, 
     if we continue our current schizophrenic approach to a China 
     policy, who knows what direction change could take. The 
     U.S.--and the world--cannot afford to take this risk.

                          ____________________