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ASIA OVERVIEW: PROTECTING AMERICAN

INTERESTS IN CHINA AND ASIA

HEARING

BEFORE THE

SUBCOMMITTEE ON ASIA AND THE PACIFIC

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

MARCH 31, 2011

Serial No. 112–15

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

ILEANA ROS-LEHTINEN, Florida, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

DANA ROHRABACHER, California 

DONALD A. MANZULLO, Illinois 

EDWARD R. ROYCE, California 

STEVE CHABOT, Ohio 

RON PAUL, Texas 

MIKE PENCE, Indiana 

JOE WILSON, South Carolina 

CONNIE MACK, Florida 

JEFF FORTENBERRY, Nebraska 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

GUS M. BILIRAKIS, Florida 

JEAN SCHMIDT, Ohio 

BILL JOHNSON, Ohio 

DAVID RIVERA, Florida 

MIKE KELLY, Pennsylvania 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

ANN MARIE BUERKLE, New York 

RENEE ELLMERS, North Carolina 

VACANT 

HOWARD L. BERMAN, California 

GARY L. ACKERMAN, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

DONALD M. PAYNE, New Jersey 

BRAD SHERMAN, California 

ELIOT L. ENGEL, New York 

GREGORY W. MEEKS, New York 

RUSS CARNAHAN, Missouri 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

DENNIS CARDOZA, California 

BEN CHANDLER, Kentucky 

BRIAN HIGGINS, New York 

ALLYSON SCHWARTZ, Pennsylvania 

CHRISTOPHER S. MURPHY, Connecticut 

FREDERICA WILSON, Florida 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

YLEEM D.S. POBLETE, Staff Director 

RICHARD J. KESSLER, Democratic Staff Director 

SUBCOMMITTEE ON ASIA AND THE PACIFIC

DONALD A. MANZULLO, Illinois, Chairman 

RON PAUL, Texas 

BILL JOHNSON, Ohio 

DAN BURTON, Indiana 

EDWARD R. ROYCE, California 

STEVE CHABOT, Ohio 

MIKE KELLY, Pennsylvania 

JEFF DUNCAN, South Carolina 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

FREDERICA WILSON, Florida 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS CARDOZA, California 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Kurt Campbell, Assistant Secretary, Bureau of East Asian 

and Pacific Affairs, U.S. Department of State ................................................... 2

Mr. James Fellowes, chairman and chief executive officer, Fellowes, Incorporated .................................................................................................................. 35

Mr. Calman Cohen, president, Emergency Committee on American Trade ....... 43

Michael Auslin, Ph.D., director of Japan studies, American Enterprise Institute ........................................................................................................................ 52

J. Kent Millington, DBA, entrepreneur in residence and director of the Department of Technology Commercialization, Utah Valley University ............. 68

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Kurt Campbell: Prepared statement ............................................ 4

The Honorable Donald A. Manzullo, a Representative in Congress from the 

State of Illinois, and chairman, Subcommittee on Asia and the Pacific: 

Prepared statement .............................................................................................. 17

The Honorable Eni F.H. Faleomavaega, a Representative in Congress from 

American Samoa: Prepared statement ............................................................... 22

Mr. James Fellowes: Prepared statement ............................................................. 37

Mr. Calman Cohen: Prepared statement ............................................................... 45

Michael Auslin, Ph.D.: Prepared statement .......................................................... 54

J. Kent Millington, DBA: Prepared statement ...................................................... 70

APPENDIX 

Hearing notice .......................................................................................................... 92

Hearing minutes ...................................................................................................... 93

The Honorable Donald A. Manzullo: Question for the record submitted to 

the Honorable Kurt Campbell ............................................................................. 94

Response from the Honorable Kurt Campbell ................................................... 96

Mr. James Fellowes: Material submitted for the record ...................................... 99

J. Kent Millington, DBA: Material submitted for the record ............................... 102

(1)

ASIA OVERVIEW: PROTECTING AMERICAN 

INTERESTS IN CHINA AND ASIA 

THURSDAY, MARCH 31, 2011

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ASIA AND THE PACIFIC, COMMITTEE ON FOREIGN AFFAIRS, Washington, DC. 

The subcommittee met, pursuant to notice, at 2:10 p.m., in room 

2360, Rayburn House Office Building, Hon. Donald A. Manzullo 

(chairman of the subcommittee) presiding. 

Mr. MANZULLO. The subcommittee will come to order. 

We have votes coming up. What I would like to do, is to get Mr. 

Campbell’s testimony in as soon as possible, so he doesn’t have to 

sit around and wait for democracy to take place on the floor of the 

House. 

Secretary Campbell, do you want to go up and take a seat? 

What I am going to do is just give a brief bio of Secretary Campbell, and then let you get your testimony in. We will worry about 

opening statements afterward, even after you are gone, if that is 

okay with you. 

I got to know Kurt Campbell just a couple of weeks before going 

to New Zealand and Australia; he came in and did a great job at 

informing us. 

He became Assistant Secretary of State for East Asian and Pacific Affairs in June 2009. Previously, he was the CEO and cofounder of the Center for a New American Security and concurrently served as the director of the Aspen Strategy Group and 

chairman of the editorial board of The Washington Quarterly. 

He was the founder of StratAsia, a strategic advisory firm, and 

was senior VP, director of the International Security Program and 

the Henry A. Kissinger chair in national security policy at the Center for Strategic and International Studies. 

He has served in various capacities in the government, including 

as Deputy Assistant Secretary of Defense for Asia and the Pacific. 

He is eminently well-qualified. 

Mr. Secretary, the floor is yours. 

Mr. FALEOMAVAEGA. Would the chairman yield? 

Mr. MANZULLO. Oh, I am—of course. 

Mr. FALEOMAVAEGA. Mr. Chairman, before Secretary Campbell 

proceeds with his statement, I, too, would like to offer my personal 

welcome, Secretary Campbell, for coming to testify to our subcommittee. 

And I want to say that Secretary Campbell has done an outstanding job in not only representing our Nation before all of the 

2

nations of the Asia-Pacific region, but not only is he well-versed, 

the tremendous depth that this gentleman has in understanding all 

that is going on in the Asia-Pacific region. And I want him to know 

it has been my privilege over the past 2 years in working closely 

with him on some of the issues affecting this region. And I look forward to continuing our working relationship with Secretary Campbell in this regard. 

Thank you. 

Mr. MANZULLO. Mr. Secretary, go ahead. 

STATEMENT OF THE HONORABLE KURT CAMPBELL, ASSISTANT SECRETARY, BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF STATE 

Mr. CAMPBELL. Thank you, Mr. Chairman. 

Let me just say at the outset that you learn a lot about people 

during crises. And I have to say, one of the very good things that 

came out of something very bad was to see your coolness, Mr. 

Chairman, under fire and your determination to demonstrate U.S. 

Commitment and solidarity with the people of New Zealand. 

For those of us who were there on the ground with you, it was 

very inspiring and it was much appreciated. And I just want to tell 

you that I am proud to be able to stand before you today, and I 

am looking forward to exploring all dimensions of American policy 

in the Asia-Pacific region. 

And to you, Congressman Faleomavaega, it is often the case that 

people who are appointed to these jobs take guidance from our 

friends on Capitol Hill. 

One of the first things that the Congressman told me when I 

took this job is that, you know, officials say the ‘‘Asia-Pacific region,’’ but oftentimes it is the second word that doesn’t get as much 

focus as the first. And so he has urged us in the government to 

take a comprehensive look at all the things that we do in the Pacific, not just assistance, but our military policy, our support to the 

many regions. 

Some of these countries have stood with us through very challenging times. They are with us in the United Nations. They have 

been supportive of us in wars. And I am proud of the fact that I 

think we have stepped up our game generally. 

I want to just say, also, how much I appreciate your opening 

comments about the two tragedies that have befallen the Asia-Pacific region over the course of the last couple months: First, the terrible earthquake which has damaged the lovely town of Christchurch, which we had the very good fortune to have spent some 

time in. And I am confident that the strength and the determination and the resilience of the New Zealand people will lead to that 

town, that wonderful city, to be rebuilt in a way that will pay tribute to New Zealand. 

And I want to tell you that I will be part of that effort. We have 

been working very closely on the establishment of a number of organizations, including the American Friends of Christchurch, which 

will be involved directly in support to rebuild parts of that town so 

badly damaged by the earthquake. 

And then all of us have been working essentially around the 

clock; I would say there has not been a night over the course of the 

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last several that we are not working constantly to do everything 

possible to support our Japanese friends as they deal with one of 

the greatest natural disasters ever to befall any country. 

And I have to say, I have always been a deep admirer of Japan. 

I believe that the absolute rock of American engagement in Asia 

is our relationship with Japan. And I have been impressed at the 

determination of the Japanese people and their ability to soldier 

through some of the most difficult imaginable conditions. 

But I must say, I am also proud of the United States. You know, 

you hear a lot of talk about how the United States maybe doesn’t 

have the same punching power, the same abilities, capabilities as 

other nations. I would just ask all of you to take a look at the 

string of natural disasters that have hit Asia over the course of the 

last several years: The tragic tsunami that hit Aceh, some of the 

horrible rains that have buffeted the Philippines and elsewhere, 

the earthquake in New Zealand, and now the tragedy striking 

Japan. The country that is the lead at providing humanitarian assistance, nuclear know-how, military airlift is not another country 

in Asia; it is the United States. 

And I want people to see this very clearly for what it is. It is not 

only our continuing commitment to the region, but it shows very 

clearly the capabilities that, when we put our minds to it, what we 

are able to do. And I want our Japanese friends to know that this 

will not be a challenge that is over in the next several days. This 

will be with us for a substantial period of time, and the United 

States is going to be with Japan every step of the way. 

So I just want to say, the purpose of this session is to focus on 

how we in the United States Government can support American 

business as we seek to play a vital role in the affairs, both economic, strategic, political, of the Asia-Pacific region. And I look forward to answering those questions and doing the best that I can 

to convey that we are deeply engaged in this overall mission. 

But I want you to understand how much we appreciate you calling this hearing. I think sometimes people in other places start to 

think that the United States is either preoccupied on its domestic 

pursuits or on other parts of the planet, other parts of the globe. 

And, indeed, we are consequentially engaged in the enormous challenges in the Middle East, currently, where American forces are 

struggling mightily. But it is also the case that there is a deep and 

profound recognition that much of the history of the 21st century 

is going to be written in Asia. And we understand that, both in the 

executive branch and I think you do, Mr. Chairman, here in the 

legislative branch. 

And I want to commit to you that, in a very bipartisan way, we 

are here to support you and to work with you in all of the important endeavors that the American people are involved in, not just 

in Asia but globally. 

I would like to request that my full testimony be submitted for 

the record. It is not good for any of us——

Mr. MANZULLO. Without objection, of course. 

Mr. CAMPBELL. It is not good for any of us to have to read 

through that, so I will—you can look at it later. 

Mr. MANZULLO. Just speak from your heart. 

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Mr. CAMPBELL. I have just done that. So I will just leave that 

as my opening statement and look forward to answering your questions at a time of your choosing. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Campbell follows:]


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Mr. FALEOMAVAEGA. The chairman has been very kind to allow 

me to project some questions, Mr. Secretary, concerning your statement. And having the opportunity to go through your written statement, there are so many questions, we can probably take all day 

in touching on some of these issues that are very critical to this important region. 

I wanted to ask you, in terms of the five sectors or divisions that 

you have made in your statement, I hope that it isn’t putting priorities in terms of which countries are more important than the 

other. I think you are just saying, these are some of the issues that 

are important accordingly. Of course, we are here, in particular, 

discussing our bilateral trade relations with China as one very critical and important area. 

I just wanted to raise a question with you in terms of the trirelationship that we currently have with Korea, Japan, and the 

United States. Can you comment on how this triumvirate, if you 

will, relates to the rest of the region and why you consider this as 

a very critical point, probably in terms of our national strategic and 

security interests in this region? 

Mr. CAMPBELL. Thank you, Congressman. I would be pleased to 

do so. And I just want to give you all a sense of how we tried to 

construct this overall testimony. 

I think sometimes when American friends think about China, 

they only focus on China. And I think what we are trying to suggest is that good China policy is embedded in a larger regional context and that, if you want to get China right, that you also have 

to get your relations with your allies right. You have to work more 

closely with India. You have to build stronger relations with Southeast Asia. And that the only way to be effective in Asia is to be 

effective comprehensively across the board, not just militarily, not 

just strategically, but in our economic and commercial endeavors, 

as well. 

To your particular question, Congressman, it is the case that the 

linchpin, the foundations of our engagements in the Asia-Pacific region really flow from our alliances. And those alliances in Northeast Asia are very strong. We have two key bilateral relationships, 

one with Japan and one with South Korea. These are extraordinarily important to us. We have important commitments strategically to both players. 

I would think it would be fair to say, Congressman, that over the 

course of the last several decades, that while we have had excellent 

relationships with Japan and South Korea, there has been a distance and a gap that has existed between South Korea and Japan. 

And one of the things that we have been pleased by in recent times 

is that there is a beginning of a strengthening of ties between 

Seoul and Tokyo and an attempt by both sides to put aside some 

of the problems of history, to deal directly as democracies and 

friends on the joint challenges that we all face. 

Last winter, Secretary Clinton hosted the first-ever trilateral engagement between the United States, South Korea, and Japan, in 

which we talked about our mutual commitments to our values, to 

try to ensure that North Korea abide by its various commitments, 

and our collective desire to deal——

15

Mr. FALEOMAVAEGA. Mr. Secretary, I know—I would love to have 

a—I am critical; I only have 1 minute and 30 seconds. 

Mr. CAMPBELL. Okay. I am answering too long. I will be shorter. 

Mr. FALEOMAVAEGA. Yeah, one more quick question. You know, 

the free-trade agreement with Korea is something that I certainly 

fully support, as well as, I am sure on a bipartisan basis, my colleagues in the Congress does this. 

Now there seems to be a little problem that we have the freetrade agreements with Colombia and Panama, and our friends on 

the other side of the aisle are saying that, if you don’t put all of 

these three free-trade agreements together, we are not going to approve that South Korean free-trade agreement. 

Can you comment on that? 

Mr. CAMPBELL. My primary domain is the Asia-Pacific region, as 

you know, Congressman. And I would defer to my friends on the 

economic side to comment more directly on Panaman and Colombia. 

I would simply say that the Korea free-trade agreement is essential for American leadership. It is not only important economically, 

it is important strategically. It will give us the appropriate leverage 

to be able to embark on consequential diplomacy, economic diplomacy associated with the so-called TPP. 

And it will send a very clear message that, even through difficult 

times, the United States is committed to trade, committed to an optimistic, broad, economic engagement strategy in Asia. Ultimately, 

what matters to Asian friends is not just our strategic engagement 

or our military commitment, but the fact that we are committed to 

the economic intercourse in the region as a whole. 

The Korea free-trade agreement is extraordinarily important, 

and I look forward to seeing it passed in the nearest possible time. 

Mr. FALEOMAVAEGA. Thank you, Mr. Secretary. 

Thank you, Mr. Chairman. 

Mr. MANZULLO. We have a vote. We should be back in about 25 

minutes. Is that okay with you? At least we got started and got 

your statement in. 

Mr. CAMPBELL. Nothing more important to me. And, actually, unlike your opening comment, I actually do think democracy is pretty 

good, so I am happy to wait around. 

Mr. MANZULLO. Okay. Thank you. 

We stand in recess until, let’s say, 2:45. 

[Recess.] 

Mr. MANZULLO. The hearing will now be called back to order. 

We are going to take just a couple of minutes to give the opening 

statements so we can put the testimony into context. The Secretary 

has indicated that he is good until 3:30 and he has to leave. 

Is that correct, Mr. Secretary? 

Mr. CAMPBELL. I am, Congressman. But I have to tell you honestly, if you need to go longer, I am totally prepared. So just, whatever you need to do, I am happy to support. 

Mr. MANZULLO. Okay. I appreciate that. Thank you. 

The Obama administration’s effort to increase American engagement in Asia is welcome. A lot of it has to do with recognizing 

areas in the world that are especially important, such as New Zealand and Australia, among others. That is one of the reasons why 

16

I led a delegation to New Zealand and Australia. It was the largest 

delegation to those countries, working on the Trans-Pacific Partnership. 

The President’s National Export Initiative occupies a central role 

in his domestic agenda. It takes a look at Asia as a region of tremendous opportunity for American exports. Secretary of State Hillary Clinton’s numerous trips to the region and the appointment of 

Commerce Secretary Locke as the U.S. Ambassador to the People’s 

Republic of China, reinforce this strategic approach to Asia. I support the President’s focus on Asia, in particular, his efforts to double American exports by 2014. 

While I support the President’s efforts, I do have concerns about 

the ability and tools available that the administration has for protecting American interests in China and Asia. Far too many American businesses are being hurt, as we will see on the second panel. 

We see this worrying trend increasing rather than decreasing. 

Under Secretary Francisco Sanchez wanted to be here. Unfortunately, he is leading—well, fortunately, he is leading a trade delegation to Indonesia. It consists of 55 colleges and universities that 

he is taking with him for the purpose of enhancing exports by getting kids from foreign countries interested in coming to the United 

States to study. 

We know that trade violations in China remain a persistent 

problem, and something urgent must be done to address the problem. While large corporations are much better equipped to negotiate the pitfalls of doing business in China, the reality is that 

there are many more American companies struggling to survive because of grossly unfair trade practices. 

American companies doing business in China face many serious 

threats, including piracy, intellectual property theft, corruption, 

lack of transparency regulations, and an artificially low currency 

that allows competitors to market their goods for up to 20 percent 

cheaper. 

The crux of the matter is that the Chinese market is not truly 

competitive. We are calling upon the administration to do more to 

protect our economic and commercial interests there. 

Mr. James Fellowes, chairman and CEO of Fellowes, Incorporated, is the head of a manufacturing firm in Illinois that makes 

some of the best office equipment in the world. Mr. Fellowes is here 

to testify about China’s violation of trade laws that I just described. 

Fellowes, Inc., is the case of a legitimate joint venture between 

an American company and a Chinese company being illegally hijacked by the Chinese partner to steal critical intellectual property. 

In fact, an entire line of machine tools and inventory has been 

seized in a brazen effort to force a transfer of technology. To make 

matters worse, his former Chinese joint venture partner is now in 

the process of trying to market its own line of office shredders and 

office equipment. 

The U.S. Government has failed to do anything to protect the 

rights of this investor in China, and we are at loggerheads with the 

Chinese Government to get them to recognize a valid rule of law. 

The U.S. Government must do everything in its power to pressure China to uphold its World Trade Organization commitments. 

Vital American interests are at stake, and if we fail to halt this 

17

theft, how can we ensure the future of American industry? It is 

very troubling that we are still dealing with so many problems a 

decade after China’s accession to the WTO. Something, clearly, 

needs to be done. 

I will now recognize my ranking member, Mr. Faleomavaega, for 

his opening statement. 

[The prepared statement of Mr. Manzullo follows:]


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Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. 

Let me begin by congratulating you on your new appointment as 

the chairman of the House Foreign Affairs Subcommittee on Asia 

and the Pacific. I do consider it an honor to serve with you. 

And I want to personally thank you for stopping in my little district of American Samoa during our recent CODEL visit to New 

Zealand and Australia. The people of American Samoa were deeply 

touched by your visit. And on their behalf, I want to join with you 

in extending my condolences and sympathies to our friends in New 

Zealand, as well as in Japan, who are suffering beyond comprehension. 

Two years ago, even my own little district had a little experience 

dealing with earthquakes and tsunamis. In fact, it was an earthquake that was 8.3 Richter scale, the most powerful earthquake in 

the world at that time. Only in a matter of 10, 15 minutes, we had 

tidal waves up to 20 feet high. And my people have a very deep 

appreciation and understanding when it comes to tragedies, when 

it comes to earthquakes and then to tsunamis. 

In some small way, Mr. Chairman, I hope that the good people 

of New Zealand and Japan are comforted by knowing that our Nation and the American people are committed to helping them. 

I also want to commend you for your leadership in putting America back to work. As the former chairman of the House Committee 

on Small Business, for some 4 years or 5 years in your tenure, you 

held more than 60 hearings on the state of manufacturing in America. And, no doubt, during your tenure as chairman of this subcommittee, you will focus, again, your efforts on increasing export 

opportunities for American business owners everywhere. And I 

fully support your effort in this regard. 

While today’s hearing will broadly address U.S. policy in Asia 

and its implications for U.S. Commercial interests, this hearing is 

also important to both of us at the district level, because we both 

represent constituencies that are suffering as a result of trade policies that are not working. 

For my little district of American Samoa, which I represent, we 

are barely hanging on by a thread due to increased competition 

from low-wage workers in Asia and unfair trade practices that 

have gone unchecked. 

Approximately 80 percent of my own territory’s economy depends 

on the private sector, and a workforce of about 74 percent, on two 

canneries, tuna processors in StarKist and Chicken of the Sea. Unfortunately, in 2009, Chicken of the Sea, without the courtesy of 

discussions, closed down its operations and went on to continue its 

business with the parent company, which is Thai Union, located, 

obviously, in Thailand, where the fish cleaners there are paid less 

than 70 cents an hour. 

Thailand has since reported an 11 percent increase of tuna exports, while StarKist has been forced to lay off more than 1,000 

workers due to increased competition from Thailand, which is now 

the world’s leading producer and exporter of canned tuna in the 

world. In the third quarter of 2009, Thai Union reported a remarkable 12 percent profit. The growth in its private-label canned tuna 

currently accounts for about 30 percent of the tuna sold here in the 

United States. 

21

Thai Union has previously been found to be dumping shrimp, 

and I believe there is strong evidence that it is also dumping 

canned tuna to the United States. And I certainly would like to join 

with you in calling upon the administration to take a hard look at 

where we go from here when it comes to fair trade. 

But whether we are talking about Thailand or China, Mr. Chairman, I have to say I don’t place all the blame on Asia for our trade 

deficits and imbalances. I also blame U.S. Corporations who 

outsource American jobs to low-wage countries that do not pay 

workers decent wages, all for the sake of maximizing profits for 

their shareholders. This happens in the tuna industry with companies like Chicken of the Sea, and it also happens in one industry 

after another all across America. 

Of course, Mr. Chairman, over the years, our country has always 

been challenged by finding where do we strike the proper balance 

between corporate America and our country’s workers, corporate 

profits versus the cost of living that always should be taken into 

account when we talk about the rights and the privileges of the 

American workers trying to make ends meet and to provide for 

their families, church, and taxes, as well, that they pay. 

Interestingly enough, too, Mr. Chairman, how is it that 2 percent 

of the population of our country owns 50 percent of the wealth, 

which leaves the other 90 percent of the population with only 50 

percent? I would love to make a dialogue and try to see if we can 

understand that maybe there is a disparity of the distribution of 

wealth in our own country and to see where do we need to go, what 

is happening to the middle class, and maybe we can find out a 

sense of balance, how we can do this. 

And in fairness to our Asia counterparts, Mr. Chairman, America 

must assume some responsibility for our record trade deficits. As 

CRS, the Congressional Research Service, reports, and I quote, 

‘‘The fundamental cause of the U.S. Trade deficit is excess spending by the U.S. consumers, the businesses, and the government.’’ 

Put another way, we don’t save. We buy on credit. We rob Peter 

to pay Paul. And to subsidize our lack of savings, the U.S. Borrows 

money from foreign governments, which spells debt and deficit. We 

also consume more than we produce, and, consequently, this allows 

countries to sell more to the U.S. than they buy from us. 

In my humble opinion, Mr. Chairman, something has to give, 

given that there are serious issues on both sides of the water that 

must be addressed. As we continue the dialogue, Mr. Chairman, I 

think it is extremely important that we do not politicize the challenge before us——

Mr. MANZULLO. I need to politicize the time. 

Mr. FALEOMAVAEGA. Okay. I have about 10 more pages of my 

statement, Mr. Chairman. Well, let me just give you—I would like 

to ask unanimous consent that the rest of my statement be made 

part of the record. 

Mr. MANZULLO. The entire statement will be put into the record, 

along with the entire statements of the other members. 

[The prepared statement of Mr. Faleomavaega follows:]

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Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. Again, I want to 

hear from Secretary Campbell on this. I can go on, but I understand. 

Mr. MANZULLO. Okay. I won’t let you go on. 

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. That is all right. 

Mr. MANZULLO. Thank you. 

We have opening statements from Congressman Johnson and 

then Congressman Sherman. 

Can you guys keep it kind of short, unlike his? Okay? 

Mr. JOHNSON. I will certainly be mindful of the time. Thank you, 

Mr. Chairman. 

And thank you, Secretary Campbell, for being with us today. 

Like you and my colleagues here, our hearts and prayers go out 

to the people of New Zealand and Japan for the disasters that have 

occurred in those nations to those people. 

I want to shift gears just a little bit, though. In his State of the 

Union Address last month, the President reaffirmed the pivotal 

role of exports with regard to job creation here in America. The administration’s stated goal of doubling U.S. exports to $3.14 trillion 

by 2015 will support 2 million new jobs here in the United States. 

Our commercial and economic success in reaching this goal relies 

heavily on American relations in Asia. Plain and simple, U.S. exports create U.S. jobs. 

Although our Nation’s economy is showing positive signs of recovery, we are still experiencing high levels of unemployment, and 

many small- and medium-sized businesses are still struggling just 

to stay afloat. In most of my district in southern and eastern Ohio, 

unemployment rates linger, on the average, at 11 percent or above, 

well above Ohio’s overall 9.8 percent rate. 

Trade agreements are important to expanding trade opportunities and opening up emerging markets for U.S. Exports. Unfortunately, we do not enjoy the trade protection offered by trade agreements with every nation with which we trade. 

One of my biggest concerns is the growing role that China is 

playing in our trade relations, accompanied by growing sources of 

economic conflict. China is the third-largest and fastest-growing 

market for U.S. exports, totaling $92 billion in 2010. However, 

these trade ties are weighed down with deep mistrust for China. 

Whether it is through currency manipulation, massive government 

subsidies to Chinese industry, or concerns surrounding indigenous 

innovation efforts, China’s trade policies pose a significant threat 

to American exports, businesses, and, therefore, jobs. 

In southern and eastern Ohio, these unfair trade practices have 

halted the growth of small businesses, led to significant job loss, 

and caused many factories to close their doors. 

I have a specific example. I came to Congress from a company 

where I was a senior executive. We have an operation, manufacturing operation, in China. I was surprised, when I joined that 

company, to learn that, at least from my understanding, if you are 

going to do business in China, you have to use an information technology system that is mandated by the Chinese Government. You 

can’t just use your own system. Everything has to go through the 

government. So they basically see everything that you are doing. 

Your financial data goes across that network, your manufacturing 

25

data goes across that network, your operational and HR data goes 

across that network. I am not sure I understand how anyone could 

consider that fair and balanced trade practices. 

I would like to touch on a few of these. In fact, in 2010, our trade 

deficit with China was $273 billion. And while this massive dollar 

amount may not be the direct result of any one policy, the fact that 

China manipulates its currency is a strong contributing factor. 

China’s deliberate efforts to keep its currency from appreciating 

against the U.S. dollar promotes Chinese job and export growth, 

leaving U.S. companies at a severe competitive disadvantage. As 

America tries to compete with the cheap imports from China, business owners face tough choices, particularly job layoffs. 

Earlier this month, I made remarks at a hearing on China’s indigenous innovation policy and its potential to severely damage the 

strides that American businesses have made to compete globally. 

Many American companies have taken great risk to develop new 

technology, and I cannot stress enough the importance of protecting 

that intellectual capital from our biggest trade rivals. 

China has announced its intent to transition its economy to a 

worldwide source of innovation within 15 years. It has subsidized 

high-tech industries such as aerospace, renewable energy, computer science, and life sciences. Simultaneously, China has placed 

limits on competition from foreign firms and denied access to China’s markets unless foreign firms operate in China and share their 

technology with Chinese firms. 

These practices are cause for strong concern. We must have safeguards in place to ensure our continued position as a global leader 

in the world economy. And I am concerned that one of our largest 

export markets is heavily involved in these unfair trade practices, 

some of which also have significant national-security implications. 

I look forward to the testimonies today and your comments and 

the chance to discuss these issues with our panelists. Thank you 

so much, again, for being here. 

I yield back. 

Mr. MANZULLO. Thank you. 

Mr. Sherman? 

Mr. SHERMAN. Thank you. 

There are some who say that our trade deficit is because of the 

American people—something the matter with them. They don’t 

save, run Federal deficits. We were in a Federal surplus under 

Clinton; we still had a tremendous trade deficit. There are even 

more people who are out there saying that our trade deficit is because our workers are lazy or overpaid. 

But the real answer is, we are running a trade deficit because 

the middle class has been betrayed by Washington and Wall Street. 

And if we had a government as good as our people, we would be 

running a trade surplus. 

Now, we can wax eloquently about how wonderful trade agreements are, but it is important to actually read the agreement, particularly Annex 22–C of the Korea free-trade agreement and the 

sourcing rules in that agreement. And when we look at that, we 

see that this agreement is not what it is made out to be. 

It is made out to be: Goods produced by Americans get entry into 

the South Korean market; goods produced by South Korea get into 

26

the U.S. market. Now, we could argue maybe that would be a good 

deal, maybe not. But the Korea free-trade agreement allows goods 

made in China and North Korea free access to the American market. 

Let’s first talk about China. I am going to use the figure 65 percent because that is the percentage that applies to autos, auto 

parts, steel, and electronics. Different percentages apply to different products. If the goods are made 65 percent in China, then 

brought to South Korea, where the other 35 percent of the work is 

done, they get free access to our markets. So China, without allowing a single additional American good into their country, gets access to our market. 

But it is not that the 35 percent of the work done in South Korea 

has to be done by South Koreans, because they have, in South 

Korea, barracks filled with Chinese workers. So the other 35 percent of the work can be done by Chinese workers living in barracks 

in South Korea. 

Now, I am told, well, don’t worry about that because at least those Chinese workers are being paid almost $4 an hour. But wait 

a minute. Those Chinese workers don’t see the $4 an hour, because 

the money is taken from them to pay for all that wonderful barracks living. So they get as much money net as the employer wants 

to give them. 

So we have goods 65 percent made in China, 35 percent made 

by Chinese workers in barracks coming into our country duty-free, 

and China doesn’t open their market to us at all. 

You have to read the agreement and see its implications. 

Even worse, North Korea: The goods are partially made in North 

Korea, partially made in South Korea; they will come to an U.S. 

port. At that point, under the agreement, they have a right to come 

into our country. But under American law, we bar them at the 

port, because we don’t accept North Korean goods. 

What is the effect? Well, our law will apply; we will bar the 

goods. And then North Korea can find us not in compliance with 

the agreement, which would have the additional disadvantage of 

being true. And then South Korea can do to us exactly what Mexico 

did: Find us in violation of a trade agreement and take away from 

us the advantages that we originally were promised when we 

signed the agreement. 

Once those goods are barred, then South Korea can raise tariffs 

by billions of dollars, just as Mexico has when we didn’t, in their 

view, adhere to NAFTA, and bar U.S. exports to North Korea. 

And then, finally, we have the Kaesong and similar special manufacturing zones, places where workers are paid perhaps $7 or $8 

a month, if they see that. They are not actually paid anything by 

the employer; the money goes to the North Korean Government. 

And under Annex 22–C, a future administration could just enter an 

executive agreement and let those goods, 100 percent made in slave 

conditions in North Korea, into the United States duty-free. An executive decision is that they would have to waive our ban on North 

Korean goods, which the executive department of this government 

can do, and they would have to reach an executive agreement with 

the South Korean Government viewing Kaesong as under the jurisdiction of the South Korean Government. 

27

So it is one thing to tell American workers that they are going 

to get access to the South Korean market and that South Koreans 

will have access to our market. But when you allow goods 65 percent made in China, 35 made by Chinese workers in barracks in 

South Korea, when you allow goods made in North Korea or goods 

made in the Kaesong industrial zone into our country, the only way 

to pass this agreement is to hide its real implications from the 

American people. 

Mr. MANZULLO. Well, these guys have opinions. 

I am glad you showed up anyway, Mr. Secretary. I appreciate it. 

I do have a couple of questions. I am going to talk about trade 

promotion, because I know that you are heavily involved in that. 

You talked about a five-part framework, at least in your written 

testimony, regarding the President’s approach to engaging the 

Asia-Pacific region. Obviously, that is one of the reasons why we 

were down in New Zealand and Australia, and that is why you 

were also there. 

I noted that ‘‘pursuing a confident, aggressive trade and economic strategy’’ is the last of the five priorities, even after ‘‘promoting multilateral organizations.’’ Why does the State Department place economic and commercial interests last? Or was that 

simply an issue of how it was listed in your testimony? 

Mr. CAMPBELL. First of all, thank you very much for each of your 

questions and, again, for the honor to be with you. 

What I tried to suggest, Mr. Chairman, is that, in our Government, agencies have certain specific responsibilities. I actually 

thought there would be someone from USTR or Commerce here. 

The primary responsibility of the U.S. Trade Representative’s Office and the Commerce Department are these particular issues. 

Our primary responsibility are some of the issues at the top. But, 

at the same time, we also recognize that, particularly in the current environment, it is essential for American diplomats to promote 

American businesses, to protect American jobs, and to secure a 

strong American economic and commercial presence in the Asia-Pacific region. 

So I would not want to suggest simply by the fact that it is listed 

at number five that it has lesser significance. In fact, I would say 

that a very large part of my time, of Secretary Clinton’s time, of 

all of my colleagues at the State Department, is to ensure that 

agreements, that arrangements, that American foreign policy supports and extends the operations and the input of critical economic 

agencies: The National Economic Council at the White House, U.S. 

Trade Representative’s Office, and the Commerce Department. 

So I just want to say that, before I knew I would be coming up 

here today, I have had extensive discussions with the U.S. Trade 

Representative’s Office. They have asked me to convey a few 

things. They have asked me to take back a few concerns that you 

and others might have to make sure, as we go forward, that some 

of those concerns can be reflected in ongoing negotiations. 

Mr. MANZULLO. Congressman Faleomavaega? 

Mr. FALEOMAVAEGA. Yes, can I finish my opening statement with 

my 5 minutes? No, I am just kidding. 

Mr. MANZULLO. Wait a second. It would be Congressman Sherman because you questioned him before. 

28

Mr. FALEOMAVAEGA. I did. I did have my 5 minutes. 

Mr. MANZULLO. Okay. 

Mr. FALEOMAVAEGA. We will just make the first round completed. 

Mr. MANZULLO. All right. 

Congressman Sherman? 

Mr. SHERMAN. Thank you. 

Sir, one of your predecessors was one of the most storied diplomats that we have had in the last 20 years. And yet, I think his 

testimony before, I believe it was, this subcommittee about 5 years 

ago illustrates what I fear is a feeling of benign neglect toward 

U.S. jobs. Because this was a man who we trusted very much and 

who wouldn’t make an obvious mistake in anything he really cared 

about, and he testified as to how, as our Ambassador to South 

Korea, was promoting Americans jobs because he put Chrysler cars 

on the lawn of the Embassy and invited South Koreans to see how 

great they were. And one of the cars was the Crossfire, a 

DaimlerChrysler product made entirely in Germany. I have 

checked; the German Embassy to South Korea did nothing to promote American-made automobiles to the South Korean market. 

I wonder whether you, sir, would come before this subcommittee 

and advocate we open our markets, duty-free, to goods that are 65 

percent made in China, 35 percent made by Chinese workers in 

barracks in South Korea? Is that something fair for American 

workers to have to compete against? 

And does it make any sense to give Chinese products access to 

our markets, when we only get access to the South Korean market 

and not to the Chinese market? 

Mr. CAMPBELL. Let me first say that I very much appreciate the 

compliments to my predecessor, who, in fact, was deeply committed 

to promoting U.S. economic interests in South Korea. And I humbly 

submit that I worked with him often in that endeavor and previously. And he was a very strong supporter for American jobs and 

American engagement in the Asia-Pacific region. 

I would like, if you will allow me, Congressman, I think there 

were a couple of things that were said that would, at least in my 

view, I would like to——

Mr. SHERMAN. Sir, I have very limited time. I would like you to 

address the question. Does it make any sense for us, in a deal that 

does not get us any access to the Chinese market, to open our markets, duty-free, to goods that are 65 percent Chinese-made? 

Mr. CAMPBELL. I would simply say, I believe the Korea free-trade 

agreement, as currently negotiated, is in the best strategic interest 

of the United States. And I believe that it will go a long way——

Mr. SHERMAN. Did you understand before my opening statement 

that goods 65 percent made in China were going to have free access 

to the United States market? 

Mr. CAMPBELL. I think perhaps in another setting we could probably go and explore whether we have differences of view on this 

particular matter. I——

Mr. SHERMAN. This is a wonderful setting, if you would just answer my question. 

Mr. CAMPBELL. Well, I would simply say that I think there were 

two statements you made—I think the issue of Chinese component 

29

in manufacturing in South Korea is something that we could debate and discuss. 

The other matter that you have discussed, about whether this 

will somehow apply to North Korea, I think is clearly incorrect. 

Mr. SHERMAN. Can you get a statement from the South Korean 

Government that they will never hold America to be in violation of 

this agreement if goods that are 1 percent North Korean-made are 

barred at our ports? 

Mr. CAMPBELL. It is longstanding U.S. policy that——

Mr. SHERMAN. No, I know the goods won’t come in. The question 

is whether the South Koreans are going to then find us in violation 

of this agreement. They are waiting for the opportunity to take 

away every concession they have made. And you can’t get them to 

make a statement like this because that takes away the advantage 

that they expect. 

Mr. CAMPBELL. I believe that—first of all, some of the details of 

this are better discussed by our representatives at the U.S. Trade 

Representative. But I happen to know that, on these particular 

issues, there was a lot of discussion back and forth between the 

United States and South Korea. And I believe there is a clear understanding on the part of our South——

Mr. SHERMAN. There could be a new administration in South 

Korea. There will be a time where there will be a pharaoh that 

knew not Joseph——

Mr. CAMPBELL. Yeah. 

Mr. SHERMAN [continuing]. And the text of the agreement is the 

text of the agreement. And you have nothing in writing from the 

South Koreans that they will not point to the text of that agreement and raise tariffs on American chickens or whatever else they 

want to raise tariffs on when we bar those North Korean goods 

from our ports. 

Mr. CAMPBELL. Let me just say, it is a very longstanding American policy of which the Obama administration has no intention of 

changing that we will prohibit North Korean imports into the 

United States. The South Koreans have been made—this point has 

been made very clear to them. I believe they understand this very 

clearly——

Mr. SHERMAN. And they then understand that the moment that 

we enforce our law, they are free, under this agreement, to impose 

countervailing tariffs on American goods. And they are looking forward to that opportunity, which they will not deprive themselves 

of by sending a letter claiming that they—announcing that they 

will not use that tactic. 

Mr. CAMPBELL. With respect, Congressman, I believe that there 

is a very different understanding between the United States and 

South Korea. Now, you may say, well, look, there could——

Mr. SHERMAN. In 2 years, there will be a new South Korean Government. 

Mr. CAMPBELL. It is the case that with all agreements that are 

negotiated between two countries that you have to always be vigilant going forward. But I will tell you——

Mr. SHERMAN. If you sign an agreement that is faulty and then 

you say you are going to be vigilant——

Mr. CAMPBELL. Look, I don’t——

30

Mr. SHERMAN. My time has expired. I thank you. 

Mr. CAMPBELL. We have very clear protections, very clear protections, and we have made very clear to the South Koreans that we 

will not import goods produced in North Korea. 

Mr. SHERMAN. You have nothing signed by them. 

I yield back. 

Mr. MANZULLO. Congresswoman Wilson, do you have a question? 

I like your hat, but they won’t let you wear that on the floor, will 

they? 

Ms. WILSON. No. 

Mr. MANZULLO. So you are welcome to wear it here. 

Ms. WILSON. Thank you, Mr. Chairman. 

I came in late, and I am not sure where we are, at this point. 

But the reason I wanted to serve on this particular subcommittee 

was I was interested in job creation in my district and in a part 

of the world that I am interested in, which is Haiti, but especially 

in my 17th Congressional District. 

And I wanted to see how the Obama administration’s Asia policy 

translates into any commercial benefits to U.S. companies or workers and consumers. 

Mr. CAMPBELL. Thank you very much, Congresswoman. 

We have had a good discussion so far about American economic 

performance in Asia. And I think you will see, if you look over the 

course of the last couple of years, the area in which American exports have had the greatest success, by an order of magnitude, has 

been in the Asia-Pacific marketplace. 

I think you are going to hear from a lot of companies—and I 

have been grateful to have the opportunity to work on some of the 

specific issues that Fellowes, a very able company from Illinois, will 

present in a little bit. And it is a very tough environment in many 

places in Asia. But I think what we have seen is American businesses that are committed and recognizing that the commerce of 

the 21st century is going to be anchored in the Asia-Pacific region 

and we have to be successful there. 

So I think you see a multifaceted approach on the part of the 

Obama administration. One is to promote exports. Two is to make 

sure that any kind of trade agreements protects the interests of 

American workers and American companies. 

Three, there is, I think, a deep recognition that there has to be 

a form of rebalancing. And you heard this a little bit from Congressman Johnson and also from Chairman Manzullo. We are 

going to have to save a bit more. But, as importantly, big countries 

in Asia are going to have to spend more on American products, 

products that will assist in all aspects of their economic development. 

I think that the United States is sending a message that we are 

prepared to compete in the Asia-Pacific region and that, through 

exports, we can create good jobs. And so I think that you are seeing 

the initial fruits of that strategy playing out before you. 

This is a very difficult time. Manufacturing is struggling in almost every State if the Union. We recognize that we are facing 

very stiff competition from many countries in the Asia-Pacific region. But we believe, through a very principled application of 

American laws, clear advocacy of American firms, that the United 

31

States can be successful, that American jobs can be created, and 

American exports can penetrate some of the most challenging markets in the Asia-Pacific region. 

Ms. WILSON. Can you give me an example of the jobs that you 

have in mind? When you say that they will translate into jobs, 

what kind of jobs? 

Mr. CAMPBELL. I mean, there are a lot of examples, and I would 

hate to just choose one industry, but let me choose one, if I might, 

Congresswoman. 

When President Hu came to Washington not long ago for a meeting with President Obama, there were very detailed and intense 

discussions in advance of that trip. And when he was there, he and 

the Chinese Government agreed to purchases of American products 

somewhere between $40 billion and $50 billion over a period of 

time. 

One of the key components of that are in the realm of aerospace. 

Aerospace jobs affect many States in the Union. They are well-paying. They are unionized. They allow for the United States to maintain a technological edge. And they, in fact, allow for American 

brands to penetrate markets. 

That is just one example. But you see in a variety of areas—agricultural products, ranching products, high-tech carbon fibers, a variety of manufacturing—the United States has some unique advantages. 

Now, it is our job, once the United States is able to make these 

sales, to protect the IPR, to ensure a level playing field, and to give 

the United States the opportunity to compete fairly with Asian 

competitors. I believe that we have taken some initial steps, and, 

frankly, previous administrations have done, as well, but I am 

pleased at some of the progress we have seen of late. 

Mr. MANZULLO. Congressman Royce? 

Mr. ROYCE. Just a couple of questions, Mr. Chairman. One has 

to do with the Philippines. I wanted to ask Mr. Campbell about the 

state of affairs there. 

Three Filipino workers were put to death in China after being 

convicted for drug smuggling, and we got engaged in this. I understand the death penalty is largely disapproved of in the Philippines, as you know. So it is having an impact, especially since according to one report I have seen there are 74 more Filipinos sitting on death row in China. And these men and women are awaiting a similar fate. 

And one of the arguments is that you have Triads or you have 

those working this business that are well-established in China taking advantage of workers, who then basically are utilized as pawns 

and as couriers. And if something goes wrong, they get the death 

penalty. But the entities actually involved in setting this up and 

running the operation in which the worker may or may not know 

about their being used as a courier, there seems to be very little 

reprisal there. 

So with such an exceptionally high number, are these cases justifiable, or, in your view, is there something nefarious taking place 

here? 

And to what extent are poor Philippine workers being taken advantage of in countries like China where you have the death penVerDate 0ct 09 2002 16:54 Jun 01, 2011 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 F:\WORK\AP\033111\65495 HFA PsN: SHIRL
32

alty handed out? And now these three individuals, despite the 

international requests for clemency, for some level of mercy, they 

have all lost their lives. 

Mr. CAMPBELL. First of all, I thank you, Congressman, for bringing up the Philippines. A good country, a solid ally of the United 

States, wonderful Filipino American citizens here who contribute so 

much to our livelihood. We all celebrated when President Aquino 

came to power. We have had a very strong relationship with the 

Philippines for years. 

And you will have noted, in the last couple of months, we have 

taken a series of steps to step up our own engagement with the 

Philippines, through enhanced trade interactions, a strategic dialogue to make sure that we are coordinating on issues of mutual 

concern like the South China Sea. We are also working with the 

government of President Aquino to try to help him in his effort to 

reduce corruption and profiteering in the Philippines. And I must 

say we are very impressed by the early steps that he has taken. 

I think the way you stated that, Congressman Royce, is exactly 

accurate. I would just add one further thing, if I might. 

It is fairly unusual in Asia, when a government makes a very, 

almost personal appeal at the very highest levels—and I won’t go 

into great detail, but I think you know how strongly the Philippines Government and President Aquino’s own cabinet felt about 

this issue—to be turned away in such a manner. And I think it was 

a little bit of a surprise to Filipino friends. And I will be interacting 

with our Filipino colleagues in the coming days about this matter. 

Mr. ROYCE. Thank you. 

Mr. CAMPBELL. I do think that the overarching picture that you 

paint of, frankly, the lowest member of the totem pole of this crime 

syndicate paying the highest price is, indeed, accurate. And I believe that this is something that we will want to support our Filipino friends on, going forward. 

Mr. ROYCE. Very good. 

Mr. CAMPBELL. Not that these people don’t deserve punishment. 

They do. But, clearly, there are procedures here that should be followed. 

Mr. ROYCE. The radical disparity of the death penalty here, when 

the people organizing it get off scot-free is riveting. 

But let me ask you another question. We frequently hear the argument that China has used foreign investment—for 30 years 

now—to spark its economy and now has an abundance of domestic 

capital. So, being less dependent on foreign direct investment, 

China is changing course and deciding that ‘‘made in China’’ is 

going to be ‘‘designed in China’’ but, more importantly, is going to 

be done by breaking the rules and basically preventing U.S. firms 

from competing domestically. 

The Harvard Business Review had a good piece in December 

about how this is official state policy, basically, in China. And I 

wanted to ask you about that, because that portends—I mean, for 

investors, for hope for reform in China, this has grave consequences. 

Am I right to be concerned about this? We just had a hearing on 

it. 

33

Mr. CAMPBELL. I think it would be fair to say that we are all concerned. And, look, we are committed to having a strong and stable 

relationship with China, but it is also the case that we expect countries to play by the rules. 

Improving the protection and the enforcement of intellectual 

property rights has to be a top priority for any administration, and 

it is for the Obama administration. Continuing U.S. trade losses to 

counterfeiting and to piracy in China, frankly, remain unacceptably 

high. It is also the case that certain practices, like the so-called indigenous innovation, run contrary to established procedures of how 

to maintain an open economy. 

I will assure you that we have many fora with the Chinese interlocutors. Our Commerce Secretary, the White House, the President 

himself, Secretary Clinton, everyone underscores how important it 

will be for the United States and China to make sure that there 

is this kind of open playing field and that American firms have the 

opportunity to sell their products in China in an environment 

where they are unhindered by unfair disadvantages. 

Mr. ROYCE. Thank you, Mr. Campbell. But I don’t think quiet diplomacy is working. And we are going to have to try another strategy. 

Right, Mr. Chairman. 

Mr. MANZULLO. He is not very quiet. Talk to him one-on-one and 

you get some more——

Mr. ROYCE. No, I have worked with Mr. Campbell before. I know 

his effectiveness, and that is why I am trying to instill a little enthusiasm to help us solve this problem. 

Thank you very much, Mr. Chairman. 

Mr. MANZULLO. Thank you. 

The Secretary is going to be leaving, but Melissa Sweeney from 

his office will be staying to hear the testimony of the second panel, 

so we have continuity. 

Mr. Secretary, thank you very much for coming. We appreciate 

you spending almost 2 hours with us because of the vote. 

Mr. CAMPBELL. Thank you. 

Can I just have one appeal? 

Mr. MANZULLO. Absolutely. 

Mr. CAMPBELL. This is a rare appeal from the executive branch. 

We want more hearings on Asia. We want more hearings on American competitiveness in Asia. We want more hearings on American 

alliances in Asia. We want more hearings on American focus in 

Asia. And I can promise you willing witnesses and strong support 

for the legislative branch continuing this effort. 

Mr. MANZULLO. We appreciate that. We will do that on a couple 

of levels: First, hearings at the subcommittee level and then also 

informal get-togethers, briefings, et cetera, that are open to the 

public. 

Mr. FALEOMAVAEGA. Would the chairman yield? 

Mr. MANZULLO. Of course. 

Mr. FALEOMAVAEGA. If I could just have 30 seconds before the 

Secretary leaves. 

Mr. MANZULLO. Okay. 

Mr. FALEOMAVAEGA. Mr. Secretary, with all due respect—and I 

appreciate the fact that you have given a sense of importance about 

34

the Pacific region, but, unfortunately, as I read your testimony, you 

have all of Asia covered, you have New Zealand and Australia covered, but nothing whatsoever in reference to the 16 Pacific Island 

countries. 

And I would note also with interest that India, in my humble 

opinion, should be treated just like China because of the tremendous population and the priorities that this administration has 

given to this country. 

I just wanted to add that, Mr. Chairman. 

Mr. CAMPBELL. Let me respond, if I could, to that. 

It is absolutely the case, Congressman, that one of the most important Asia-Pacific countries in the 21st century will be India. We 

have to do everything possible to support India’s ‘‘Look East’’ policy. For any omission, that is my fault. Frankly, you always worry 

about having too long a testimony. But if that was not covered in 

great enough detail—I know I had a few sentences—I stand corrected, and I will not make that mistake again. 

The truth is, I did testify before your committee on the Pacific. 

I should have taken sections of that and put it into this testimony. 

I think you will see, Congressman, over the course of the next couple of months, we have a strategy that we are about to roll out, 

including businesses, commercial support, a new AID mission, 

thanks to your strong pushing, that I think you can be proud of in 

the months and years ahead. 

Thank you. 

Mr. MANZULLO. Thank you, Mr. Secretary. 

If the staff could get the second panel. While they are setting up, 

I am going to be introducing the panel, so we can maximize our 

time. 

On the second panel, we have James Fellowes. He is the chairman and CEO of Fellowes, Inc. It is one of Chicago’s oldest and 

largest family-owned businesses. This is the firm that started making what we know as the ‘‘Bankers Box’’ and now is one of the premier makers of residential and industrial paper shredders. Recognized throughout the entire business community, Mr. Fellowes received Ernst and Young’s Illinois Master Entrepreneur of the Year 

award in 1997. 

Also joining us on the panel is another survivor of the New Zealand earthquake, Cal Cohen. He is president of the Emergency 

Committee for American Trade. It is an organization whose purpose is to promote economic growth through the expansion of international trade and investment. 

Mr. Cohen has worked with Members of Congress and the executive branch on a wide range of investment and trade issues, such 

as NAFTA, China’s World Trade Organization accession, and, more 

recently, the pending trade agreements with Colombia, Panama, 

and South Korea. In New Zealand, we discussed the salient issues 

involved in the Trans-Pacific Partnership. 

Dr. Michael Auslin is resident scholar in foreign and defense policy studies and concurrently director of Japanese studies at the 

American Enterprise Institute for Public Policy Research in Washington. He is also a columnist for the Wall Street Journal, writing 

on Japanese and Asian topics. Previously, he was an associate professor of history at Yale University and senior research fellow at 

35

Yale’s Macmillan Center for International and Area Studies prior 

to joining AEI. 

I also want to note that Dr. Auslin’s young son, Ben, is in the 

audience today to watch his father testify, and who shadowed me 

when we went to the floor, helped me make some very important 

votes, and asked some very important questions about the State of 

Illinois, on which he is writing a paper for his school. 

Also joining us is Mr. Kent Millington. He is entrepreneur in residence and director of the Department of Technology Commercialization at Utah Valley University. He has 25 years of experience in the business community, helping build one of the world’s 

largest Internet companies, with extensive international experience 

in Asia. He has 9 years of experience teaching at the university 

level and is currently teaching innovative outline MBA courses to 

students worldwide and serves as adjunct professor of entrepreneurship at the University of Science and Technology of China. 

Without objection, the complete statements of all the witnesses 

will be made part of the record. 

I now give Mr. Fellowes the floor. 

Mr. Fellowes, we look forward to your testimony. 

STATEMENT OF MR. JAMES FELLOWES, CHAIRMAN AND 

CHIEF EXECUTIVE OFFICER, FELLOWES, INCORPORATED 

Mr. FELLOWES. Chairman Manzullo, Ranking Member 

Faleomavaega, members of the subcommittee, my name is James 

Fellowes. I am a third-generation chairman and chief executive officer of Fellowes, Inc. Thank you for providing this opportunity for 

me to testify today. 

Fellowes, a family-owned business headquartered in Itasca, Illinois, produces business machines and office products that reach 

customers in over 100 countries. Until the time of our difficulties 

last August, we employed approximately 2,700 workers in 16 countries, including 625 workers in the United States. The company is 

perhaps best known for our market-leading line of paper shredders. 

Fellowes’ engineering expertise and intellectual property is what 

sets our shredders apart. 

Although Fellowes produces many products domestically, we 

began manufacturing our shredders in China in 1998 to serve the 

global market. In 2006, Fellowes entered into a joint venture agreement with Jiangsu Shinri Machinery Company in Changzhou, 

China. Under the terms of the contract, Fellowes retained ownership over the tooling and the IP used to manufacture the Fellowesbrand shredders in the JV facilities. Moreover, the JV contract specifically provided Fellowes the right to manage the day-to-day operations of this business. 

For over 3 years, this engagement resulted in a very productive 

relationship with Shinri to manufacture and ship our goods to 

Fellowes locations around the world. Shinri enjoyed a 100 percentplus return on investment for each of the years, and this return on 

investment was always paid on time. 

In 2009, Shinri methodically imposed unreasonable requirements 

on Fellowes in an effort to extort more profit and ultimately control 

our global shredder business, in direct violation to our contract. 

Specifically, unless Fellowes would assign its 100-percent-owned 

36

tools to the JV, and unless Fellowes would assign its 100-percentowned engineering capability and its 100-percent-owned Chinese 

sales division to the JV, and unless Fellowes immediately increased 

its prices by 40 percent, and unless Fellowes agreed to unilaterally 

contribute over $10 million to the JV, then Shinri would close down 

our operation as legal representative of the JV. 

When Fellowes refused these illegal demands, Shinri proceeded 

to destroy our business. They illegally obstructed shipments of 

paper shredders, beginning on August 7, 2010, forcing the JV to 

stop production. This ultimately led to the bankruptcy of the JV. 

They placed security guards and trucks at the gates of the JV to 

prevent entrance of our personnel, shipment of our goods, and 

transfer of our wholly owned assets. They expelled Fellowes-appointed management personnel from the facility, and they illegally 

detained Fellowes’ injection molding tools. 

Immediately after the closure of our facility, I traveled to 

Changzhou and met with local Chinese Government officials. They 

sympathized with our plight but were either unable or unwilling to 

force our Chinese partner to open our factory and they were unable 

to facilitate a purchase of the JV by Fellowes. 

Fellowes’ global sales volume for these blocked products was 

$168 million. The cumulative impact of these actions is an economic loss to Fellowes totaling over $100 million. 

Also, we recently learned that affiliates of Shinri are planning to 

compete directly with Fellowes in the shredder business, all while 

using illegal tactics to block Fellowes from recovering its custom 

molding tools that represent the embodiment of Fellowes’ engineering investment and intellectual property. 

As a result of Shinri’s decision to stop shipments, suppliers filed 

lawsuits against the JV for its failure to pay its invoices. The 

Changzhou intermediate court has initiated proceedings to liquidate the JV and to auction the assets to satisfy the debts of the 

JV. 

The sale of Fellowes’ tooling and/or finished goods inventory to 

anyone other than Fellowes would directly violate our intellectual 

property rights. The immediate release of our tools is a great concern for us today. We have been restricted from these tools for 

nearly 8 months, and that has greatly hampered our ability to recover. 

We also want to close by commenting that we are working 

around the clock to retool our products and to bring up new factories. One of these factories will be in Itasca, Illinois. We will 

bring two high-performance shredder models up, with the hope of 

adding more products in time. This will immediately create about 

30 jobs at Fellowes and about twice that amount to the approximately 15 suppliers that will supply parts to us in the Midwest. 

We are grateful for your efforts, Mr. Chairman and Ranking 

Member Faleomavaega, as well as the assistance that we have received from Senators Durbin and Kirk and Congressman Roskam. 

We hope the U.S. Government will act to protect the rights of 

American companies like ours. 

[The prepared statement of Mr. Fellowes follows:]

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Mr. MANZULLO. Thank you very much. 

The next witness will be Cal Cohen. 

STATEMENT OF MR. CALMAN COHEN, PRESIDENT, 

EMERGENCY COMMITTEE ON AMERICAN TRADE 

Mr. COHEN. Thank you, Mr. Chairman, Ranking Member 

Faleomavaega, members of the committee, for this opportunity to 

testify. 

ECAT, which I represent, is an association of the chief executives 

of leading U.S. business enterprises with global operations that 

was founded more than four decades ago to promote expansionary 

trade and investment. ECAT and ECAT companies have played an 

active role in policies, negotiations, and legislation related to U.S. 

commercial and economic policy in the Asia Pacific. 

U.S. trade and investment with Asia and the Asia Pacific have 

expanded significantly over the last decade. Nevertheless, U.S. exports represent a declining portion of Asia’s imports, as other countries have pursued a much more aggressive policy of entering into 

new arrangements with our Asian and Asia-Pacific trading partners. 

In March 2010, eight countries formally began the TPP negotiations, including the United States. Malaysia became the last member to join these negotiations in October 2010. From ECAT’s perspective, the TPP, the Trans-Pacific Partnership, should be viewed 

as a building block that could eventually bring other major trading 

countries, including Canada, Mexico, Japan, and Korea, into a common set of rules and market openings that will provide even greater benefits for the United States. 

I have appended to my written testimony a summary of the key 

negotiating objectives that ECAT and ECAT business members 

would like to see from these negotiations. Let me just focus on five 

of these objectives. 

First, we believe the negotiations should create new market 

openings among the negotiating partners. The agreement should be 

comprehensive, covering all sectors and subsectors, goods and services, and digital and traditional trade. 

Second, the agreement should simplify trade throughout the Asia 

Pacific. Negotiators indicate that they are seeking a 21st-century 

agreement. For many of us, that includes addressing day-to-day 

costs and delays that companies with global supply chains and 

global operations face every day. The TPP needs, too, to create a 

regulatory environment among the TPP countries that builds effective, mutually coherent regulatory systems. 

Third, we believe the TPP should achieve high standards on all 

core issues, including intellectual property and investment. IP is a 

major contributor to U.S. economic growth and employment in IPdependent industries that span every sector of the U.S. economy. 

It is vital that the final agreement provide the highest protections 

for all industries. IP protection should build off of, but not diminish, IP protections found in each of the existing trade agreements 

that the United States has with TPP countries and the currently 

pending U.S.-Korea FTA. 

We in the business community see major challenges in the protection of IP among several of our TPP negotiating partners. In last 

44

year’s Special 301 Report on intellectual property, Chile was listed 

on the priority watchlist. Industry is concerned by actions in New 

Zealand and potentially other countries, such as Australia, that 

would weaken strong IP-protection regimes. 

Industry is strongly seeking a final agreement in which all the 

negotiating partners agree to high-standard IP protections and effective enforcement for all sectors, including trademark, patent, 

and copyright protection. A successful TPP agreement should incorporate strong investment protections as well, covering market access and investor-state and state-to-state dispute settlement. 

Fourth, the TPP has the potential to create a living framework, 

both in terms of membership and activities, that will expand its 

reach and make it relevant for years to come. 

And, fifth, the TPP must be concluded as quickly and as smartly 

as possible. Many, starting with an initiative of our coalition, have 

called for the agreement to be reached by the November 2011 

APEC Leaders’ meeting. While such a deadline will require focused 

and intensive negotiations, we believe it is an achievable outcome. 

Beyond the TPP negotiations, the United States must continue 

to advance its economic engagement with leading countries 

throughout the Asia Pacific, including through the Doha Development Agenda negotiations and the work program of the Asia-Pacific Economic Cooperation forum. 

As well, engagement with China and Japan are critical. For the 

United States, China is both a major market and a major competitor. U.S. exports to China have quadrupled since 2000. It is America’s fastest-growing export market in the world. Among the key 

issues on which ECAT and ECAT companies are focused are the 

following: China’s indigenous-innovation policies that restrict market access, China’s inadequate intellectual-property protection and 

enforcement, and China’s government-procurement restrictions and 

discrimination. 

Lastly, as regards to Japan, I would just seek to point out that 

it is now trying to recover and move forward from the horrific 

earthquake and tsunami, as well as address its nuclear crisis, we 

are even more mindful of the special relationship between the 

United States and Japan. 

The only point that I would make at this time is that, before the 

recent shocking events, Japan had been actively engaged in considering joining the TPP negotiations. That focus was predicated on 

decisions within the government to address longstanding agricultural issues. We look forward to hearing more from the Japanese 

Government at the appropriate time on its continued interest in 

these negotiations. 

Having, like both of you, recently returned from a New Zealand 

visit, I wanted to associate myself with your comments about how 

we all support the reconstruction and the restoration to economic 

health of both of those countries, Japan and New Zealand. We believe that the TPP could also be a vehicle to assist in the economic 

recovery of right now New Zealand but also, over the long term, 

Japan. 

In conclusion, America’s role as the world’s economic leader is 

being put to a difficult test in the Asia Pacific. Expanding our network of commercial engagements through regional and bilateral 

45

trade and investment agreements, as well as the APEC forum and 

other activities, must become, as both of you have pointed out, a 

top priority to ensure American goods, services, and investments 

grow strongly in the bourgeoning Asia-Pacific market, including the 

Pacific Islands, and can help sustain and grow American jobs. 

Thank you. 

[The prepared statement of Mr. Cohen follows:]


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Mr. MANZULLO. Thank you. 

Dr. Auslin? 

STATEMENT OF MICHAEL AUSLIN, PH.D., DIRECTOR OF JAPAN 

STUDIES, AMERICAN ENTERPRISE INSTITUTE 

Mr. AUSLIN. Mr. Chairman, Mr. Faleomavaega, members of the 

committee, thank you for inviting me to testify here today. 

And, Mr. Chairman, I would like to thank you very much for giving my son, Ben, an extraordinary experience in direct democracy 

in our legislative branch today which I know he won’t forget. 

I guess I am a bit of the odd man out here today. I am not here 

to talk about jobs, but what I am here to talk about is the broader 

strategic context of our position in the Asia Pacific and the threats 

to it and the opportunities, as well. 

There are questions in Washington, as you are well aware, 

whether the extraordinary expense that we commit to maintaining 

our position in Asia is worthwhile, whether that money can be 

spent better in other places or not. And I think the answer is absolutely that the United States has extreme direct interests in maintaining the liberal, democratic trends in this region, because it is, 

without question, I think, the most important region in the Earth 

to our long-term prosperity and stability here at home. 

Mr. Chairman, you asked in this hearing to consider whether or 

not we are protecting our interests. And I guess there are two 

ways, I think, to answer that. 

The first is to look at what we are doing today. And Secretary 

Campbell and others can attest to the fact that we have our top 

officials going over to the Asia Pacific regularly. We have good relations with most of the countries there. We have economic ties, we 

have political ties, we have military ties. We have problems, and 

some that we seem not to be able to solve like North Korea. But 

on the whole, when we look in the past, let’s say, compared to other 

periods in history, it seems to be a fairly benign time. 

Within that, we have heard today, at least, from the economic 

end about some of the problems we face with China. And I think 

that the concern that we hear echoed in Washington about the 

challenge that China poses politically and militarily, politically and 

economically as well, is something that will grow in coming years. 

What I think we have to face and accept is that China sees its 

interests very differently from ours; that is not simple and easy for 

us to engage simply in a conversation that is going to get them to 

accept our definition of norms of international behavior. 

At the same time, I think it is important not to overstate China’s 

strength or make unrealistic predictions that it one day will supplant us in Asia. But while we do that, we also have to understand 

the immensity of the impact that China is having on the region. 

Its actions over the past several years, be they in the economic 

sphere or, more importantly, I think, in the political and military 

sphere, have increased the sense of insecurity on the part of many 

of our friends and partners in the region. 

And, as we saw with the Japan-China clash over the Senkakus 

last year, with the very recent interaction between the Philippine 

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stability in connection with China’s expansive maritime territorial 

claims. 

The United States has played a key role in underwriting security 

in this region for the past 70 years. It is a role that I think we cannot give up, and I don’t think that any administration would claim 

that it is giving up. The question is, where do we go from here? 

How do we more effectively play that underwriting role, that assurance role that we have played for the past half-century and longer. 

We may think that our commitment to Asia is not waning, but 

nations around the region—and you have been there, Mr. Chairman; and, Mr. Faleomavaega, I know you have been there often—

are undoubtedly concerned about the future of our position. They 

question how our defense spending cuts will impact our ability to 

live up to our security commitments. They watch in concern as we 

bend over backward not to antagonize China. They question whether we are wavering in defining what interests we are willing to defend. 

The point is that they see us active in the region, but they question to what end. Are we committed just simply to stability for 

stability’s sake or to some larger goal? 

So I think the answer to your question, Mr. Chairman, are we 

protecting our interests, is actually not enough. We need to actively 

promote them. And I think we can do that and help to bring about 

an Asia that contributes to global prosperity, liberalism, and stability by doing two things. 

First, we need to broaden our perspective beyond merely Asia 

and the Pacific. And I certainly echo Mr. Faleomavaega’s comments 

that we need to include the many nations of the Pacific in this. But 

the region we are really concerned with is one that stretches from 

the Western Pacific all the way to the Indian Ocean. And it came 

up at the very end of Secretary Campbell’s comments, but it includes India. There is simply no way that we can make effective 

policy in this region by excluding India. And I would argue that 

both our legislative and executive branches should reorganize so as 

to focus on this broader Indo-Pacific, as opposed to the Asia Pacific. 

And then, finally, I think we need to move beyond the hub and 

spoke that has structured our alliances for the past half-century—

not get rid of them, but expand them. There is something that I 

have included in my formal testimony and a map that is what I 

call the concentric triangles, a way of linking together both our 

closest allies and strategic partners in the region in a grand triangle or an outer triangle of Japan, South Korea, Australia, and 

India, along with an inner triangle that is focused on the lower 

South China Sea, which links us with Indonesia, Malaysia, Singapore, and Vietnam. 

If we are able to focus our efforts on creating a working relationship with these two interlocking triangles on issues of job growth, 

standards and best practices, on freedom of navigation and maritime security, then I think we will best serve our interests and promote those of the region as a whole. The 21st century almost certainly will be an Indo-Pacific one. It is up to us whether to make 

it an Americasian one, as well. 

Thank you for the opportunity to testify, and I look forward to 

your questions. 

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[The prepared statement of Mr. Auslin follows:]


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Mr. MANZULLO. Thank you. 

Mr. Millington? 

STATEMENT OF J. KENT MILLINGTON, DBA, ENTREPRENEUR 

IN RESIDENCE AND DIRECTOR OF THE DEPARTMENT OF 

TECHNOLOGY COMMERCIALIZATION, UTAH VALLEY UNIVERSITY 

Mr. MILLINGTON. Thank you, Chairman Manzullo, Representative Faleomavaega. Thank you for the opportunity to be here today. 

Because I have been involved in the development and deployment of technologies on both sides of the Pacific, I am optimistic 

about the future. 

There is no question that America leads the world in the development of technologies of all kinds. In this area, we have a strong 

competitive advantage, one that we can use not only to create jobs, 

opportunity, and growth for ourselves, but to forge strong relationships between America and the nations of the Pacific Rim. 

These nations are important to us. They are part of our economic 

ecosystem and are necessary for our future. There are obvious challenges and even threats. However, I believe these are outweighed 

by opportunity. And that begins with our technological prowess, an 

advantage that gives us an opportunity to change the current environment that sometimes hinders our U.S. companies in China or 

prevents them from effectively competing in the Chinese markets. 

It has been my experience with students and business leaders in 

China that there is a strong desire to do business with American 

companies. They are eager to develop business relationships that 

can be mutually beneficial, in spite of official policies that sometimes limit market access. 

China has made numerous changes and improvements in the last 

30 years. Let me point out some of the beneficial effects of these 

changes. 

Over 100,000 Chinese students currently study in America, with 

65 percent of them being in graduate schools, mostly technological 

or engineering schools. This level has been maintained for most of 

the last 15 years. Many of these former students are now producing 

a quality and quantity of technology that is approaching world 

standards, if not leading the world. 

For example, China has become the world leader in research of 

nanotechnologies. A specific use for one nanotechnology is that the 

Chinese Academy of Sciences has found that sheets of a new technology called graphene oxide are highly effective at killing bacteria 

such as E. coli. This means that graphene could be used in applications for packaging that will keep food fresh for a longer period of 

time. 

I have worked with Chinese researchers in areas as diverse as 

emissions controls and medicine and have found them to be of 

world class. 

The science parks throughout China are populated by U.S. companies, both large and small. One American company, GEM, a 

maker of semiconductors, has a large semiconductor plant in Hefei, 

in Anhui province, currently employing 600 employees and plans to 

expand to 1,500 employees. And this is to service the making of 

69

laptops that are then shipped to the United States. Most of the 

laptops in the world are made in China. 

It is in the area of technological development and moving these 

technologies to the marketplace by innovating good, new products 

where the U.S. and China can realize substantial improvement in 

bilateral relations. I am convinced that people want this to happen 

and are willing to make the necessary changes in order to allow it 

to happen. 

Moving from a centralized planning system to a more open market system has not come without pain. It is no secret that companies, such as Fellowes, doing business in China have had a variety 

of legal problems, including intellectual property violations and 

contract disputes. Both of these major issues stem from the lack of 

a well-developed legal system in China. 

The government is taking a variety of steps to correct these 

abuses by developing a more robust and recognized legal system. 

Improvements in the law are being made at a rather rapid pace. 

Adherence to these new laws will take some time, as there are entrenched practices that must be routed out and a new order of business accepted. 

U.S. ingenuity is still the best in the world. The technologies discovered here and the products that flow from our technological advances are still the envy of the world. As we continue our technological leadership, China will be a cooperative partner and will be 

able to strengthen political, cultural, and economic ties. 

There are some things that the United States can do to assist 

China in its transition to a stronger legal system that will allow 

for more cordial and profitable economic interactions: First, provide 

legal tutoring and legal training for Chinese students and attorneys in the area of business and contract law and intellectual property law. 

Second, assist in the development of intellectual property law 

and observance by inviting patent office and government officials in 

China to intern in the United States at universities and at the U.S. 

PTO. 

Finally, promote scientific and technological exchanges, especially in areas that address mutual problems of health, the environment, energy, and medicine. Instead of further isolating China, we 

need to engage China’s leaders as well as business and legal professionals in a systematic process of dialogue. 

We protect America’s interests best when we assist others in seeing the value of the systems and processes we have put into place 

and show how effectively they work to provide a functional business environment. 

Thank you for allowing me to make this presentation. 

[The prepared statement of Mr. Millington follows:]

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Mr. MANZULLO. I appreciate that very much. 

I chaired the U.S.-China Interparliamentary Exchange for years. 

Mr. Millington, I am going to take great disagreement. I see China 

as going backward. I have never in my life, as a Member of ConVerDate 0ct 09 2002 16:54 Jun 01, 2011 Jkt 000000 PO 00000 Frm 00082 Fmt 6633 Sfmt 6633 F:\WORK\AP\033111\65495 HFA PsN: SHIRL

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gress, seen so many complaints over outrageous stealing of intellectual property, and making a folly over the rule of law. 

The Chinese know—we don’t need to have legal tutoring for 

them. Many of them in the government have gone to law schools 

in this country. They know the rule of law. They just are not interested in enforcing it because they don’t have the same principles 

of private property as we do. It is an entirely different culture. 

Along with intellectual property, we had a company back home, 

Aqua-Aerobic, that made wastewater treatment facilities, et cetera, 

from Rockford, Illinois. They were in the process of bidding and installing a waste-treatment facility in China, and somebody there locally stole everything, I mean, even wiped out their Web site. 

While at one time we had a working relationship with the Chinese Embassy, we no longer do. We have written five letters to the 

Ambassador of China. Each time, he has refused to answer those 

letters. With prior ambassadors, we have asked them to come into 

the office for this case involving Aqua-Aerobic. We showed them 

the evidence, and the Chinese Government became actively involved in that litigation, along with our Commerce Department, 

and made sure the litigation ended up favoring the American company. 

However, I see the Chinese going in the opposite direction, based 

upon the number of complaints that are coming in. I can’t believe 

that the people who are tearing apart Mr. Fellowes’ company lack 

any type of knowledge about property law, intellectual property 

law, or the legal system. 

In fact, I am a member of the Legislative Commission on Human 

Rights, which was set up at the time that China came into the 

WTO. We see more and more egregious abuses in the area of 

human rights, so I just see China as going in the opposite direction. 

If the Ambassador of China wants to blow off Members of Congress, which he has been doing over the past several months, that 

is up to him. To me, that is no indication of any breath of fresh 

air going through that country. 

Did you—I have to give you the opportunity to respond to that. 

It wouldn’t be fair. 

Mr. MILLINGTON. Thank you very much for the observation. 

There is no question, as I already indicated in my testimony and 

at longer length in the written submission, that there are problems 

there. Part of the reason that we see an increase in these problems 

is simply because we have had a fourfold increase in interaction 

with China in the last 10 years. Obviously, we are going to see an 

increase in problems. 

I have already testified that, while the laws may be changing, observance of the law will take longer to change. I have not suggested 

at all that we should stop putting pressure on China to effect these 

changes in observance, not just in passing the laws. And that is the 

issue that will take longer, of course. 

You are exactly correct, in that many of these people understand 

the law. They are moving from a central-planned, dictated way of 

doing business to a more market-oriented way of doing business, 

and that shift will take some time. 

Mr. MANZULLO. Do you really believe that? 

80

Mr. MILLINGTON. Yes, I do. 

Mr. MANZULLO. I mean, maybe I am missing something here. 

You have extraordinarily impressive credentials, 25 years of experience in dealing with this, way beyond the business experience that 

I have on it, but I can’t see that. 

China will say, ‘‘Well, you know, we are still a struggling country. We are not market-oriented. We are not there yet.’’ If I could 

bring Mr. Fellowes into this discussion, as it were, your facility in 

China opened, was it 19 or 16 years ago? 

Mr. FELLOWES. No. It opened in—the facility that became our JV 

operation opened in about 2000, 2001. 

Mr. MANZULLO. Oh, okay. So you have about 10 years. 

Mr. FELLOWES. Yes. 

Mr. MANZULLO. Do you want to get into this dialogue as to what 

you see going on in regards to openness and rule of law and what 

you have been seeing going on over the last several years? 

Mr. FELLOWES. Well, our own experience has been a case of ignoring rule of law. That is exactly the situation in which we find 

ourselves. 

I would not have any particular perspective on how the trend has 

been unfolding here, except to say that, in our conversations with 

U.S. Government officials, we keep hearing that our case is not a 

one-off kind of case, that we hear of these things frequently. 

Mr. COHEN. Mr. Chairman? 

Mr. MANZULLO. Yes, go ahead, please. 

Mr. COHEN. Just picking up on the theme of the discussion, I 

would say, at the time of China’s accession to the WTO, we in 

ECAT and the broader business community saw a desire on the 

part of China to open its market to allow for increased engagement 

and commercial exchange. 

In recent years, we have seen a partial shift that you are addressing, where increasingly the focus of its leadership is on 

autochthonous development, to the exclusion of imports from outside the country. I say that at the same time that the exports of 

the American business community continue to grow and the market remains our fastest-growing market, as I said in my written 

testimony. 

Nonetheless, we do, in the business community, see the shift that 

you are referring to. And, in some cases, the shift brings about specific actions that are inconsistent with China’s obligations under 

the world trading system. As a result, you do see American business availing themselves of dispute settlement under the rules of 

the World Trade Organization. That is to say, we do have some 

mechanisms in place to address these issues. 

It doesn’t mean that we can justify them. It means that we have 

to be aggressive, to use the terms of your hearing, to protect and 

advance America’s interests. And that means pressing China to live 

up to its obligations and to abide, in the area of intellectual property, by the commitments that it has made. 

Mr. MANZULLO. Let me get Dr. Auslin’s, and then, Eni, I will just 

double your time, as I did mine. Okay? 

Mr. AUSLIN. Thank you, Mr. Chairman. Actually, I would like, if 

I can, just to expand the frame a little bit and say that I think 

what Mr. Fellowes——

81

Mr. MANZULLO. Well, I picked on Mr. Millington, so—I didn’t 

mean to do that. You know that. 

Mr. MILLINGTON. That is just fine. You are welcome to do that. 

Mr. AUSLIN. Well, I think, actually, what Mr. Millington and Mr. 

Fellowes have shown is——

Mr. MANZULLO. They are saying the same. 

Mr. AUSLIN. Well, in one way they are saying the same, but they 

also really represent the two views of how do we deal with China. 

Mr. Millington’s view, which is very widely accepted, is that the 

more we engage, the more we help shape the Chinese eventual 

adoption of our principles and norms. And what I think Mr. 

Fellowes has shown is that the Chinese act very much—and the 

state will support this—in their own interests when they determine 

that that is where they want to go, regardless of that framework. 

I think, Mr. Chairman, you pinned it when you said that they 

simply don’t share the same principles that we do. We don’t see 

this only in the economic sphere, and that is really what I want 

to bring up. We see it in the political sphere, we see it in the military sphere. We see a China that, as it has grown stronger and 

more confident, it has become more assertive. I don’t think there 

is any observer who would really doubt that. It has become more 

confrontational. It has become less willing to accede to the norms 

that we have helped establish in the region and that other states 

have tried to adhere to. That, I think, is the great concern. 

For example, when so many of the states in the region are concerned about clashes over these maritime territorial areas, it is not 

that the Chinese Navy is going to these small islands, it is individual private fishing boats. But what is happening is that the Chinese Coast Guard—it is not often the PLAN—but the Coast Guard 

is then supporting these small fishing boats. It is that the state has 

made a choice to uphold what it perceives to be Chinese interests 

regardless of the declarations of other states over EEZs and the 

like. 

So I think that what we are hearing today not only reflects the 

different views on how to deal with China, but it has to be understood in the broader context, that it is not just economic. This is 

how we face China’s emergence into the world, and I would agree 

that it is probably becoming less cooperative and more 

confrontational. 

Mr. MANZULLO. Congressman Faleomavaega? 

Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. 

I agree with the chairman, and I disagree with him, on the basis 

that I think I take a more broader view of the situation in our bilateral relationship with China. 

China has experienced a colonial legacy like many other Asian 

countries—the British in Burma and China, the Dutch in Indonesia, the French in Laos, Cambodia, and Vietnam. I would say 

that probably 99 percent of the American people had no idea that 

Vietnam was a colony of the French for some 100 years before we 

stepped into the picture. 

The point I wanted to make here is that, when China finally 

achieved its independence in 1949, there were 400 million people 

living in China at that time. In our own history of well over 226 

82

years, we have just barely reached 310 million people as a population. 

So I take the view of the fact that now we have 1.3 billion people 

living in China. And I say, I don’t care what kind of a governmental system you have in that country, but you have to give them 

some kind of a credit to the leaders and those who are trying to 

figure, how are we going to feed 1.3 billion people? 

The fact that China, as we all know, despite all its media hype 

about it is now the second most powerful economic country in the 

world, the fact that 800 million people in China still live below the 

poverty level. Barely 400 million are trying to, in some way, reach 

some element of being in the middle class. 

I think Professor Auslin stated quite accurately that Mr. 

Fellowes has become one of the victims, in terms of how he was 

treated as a company. 

But I would like to ask Mr. Fellowes, what prompted your company to want to go do business in China to begin with? 

Mr. FELLOWES. Our company began to move some of our manufacturing to China in the period of late 1990s and early 2000s. We 

did so because we could not be competitive in manufacturing these 

products in the United States. 

Mr. FALEOMAVAEGA. Competitive because you were having to pay 

your workers how much, in terms of the wage? 

Mr. FELLOWES. Yes, considerably more than in China, perhaps $15 an hour or $12 an hour. I can’t remember precisely at this 

time. We would have preferred to keep all of those positions in the 

United States, but the economics of it forced us to move to China. 

And China had the infrastructure to make the parts that go into 

our kind of product. They were readily available. They are not 

readily available, that technology is not readily available in all 

countries that you might imagine. So that is the reason that we 

made that choice. 

Mr. FALEOMAVAEGA. And in the process of the 10-year period 

when you were in partnership your counterparts in China, did you 

make the reasonable margin of profit in those years that you were 

an active participant or as a partner in doing business in China? 

Mr. FELLOWES. Truthfully, we have had a mixed picture in terms 

of the profitability. Our category is a very competitive category. 

Our company invented the first personal shredder and envisioned 

a residential product, a household product. And we made these 

products in the United States, and they were copied and made in 

China within, literally, a matter of months from the time that we 

launched these machines. 

Mr. FALEOMAVAEGA. Well, I know that what the chairman—and 

I totally agree with the chairman that this has been one of the biggest problems in dealing with China, intellectual property piracy, 

to the extent that many of our companies who have gone to China 

and do business——

Mr. FELLOWES. Right. 

Mr. FALEOMAVAEGA. And you are not the only company. I have 

had other companies also complain to me about the fact that they 

will let you come in, do the business, and all of a sudden chase you 

out, and then continue on doing the business. And by that time, 

they have taken all of your technology, they know how to do the—

83

fix the tractors or whatever it is that they wanted to do. And there 

is no question there is a violation of law here, in that respect. 

China—and, again, in reference to what Mr. Millington is trying 

to share with us—it is a huge, huge—just to consider the bureaucracy, if you want to talk about a bureaucracy, how do you provide 

a governmental system, which has taken us over 220 years and it 

is still not perfect, to the extent that they definitely have administrative problems. 

You know, when you talk about the Parliament of China, there 

are 3,000 members that make up the Parliament of China. I don’t 

know of any other Parliament in the world or any country of the 

world that has that many people representing someone 1.3 billion 

people, let alone with our own 535 or 541 Members representing 

310 million people. To me, that is peanuts compared to the leaders 

of these countries like China, like India. 

I would like to feel a sense of encouragement. India has very serious problems. It is the largest democracy in the world. And to say 

their kind of democracy effectively implements the principles of 

democratic principles in a country like China, I think it can. 

I think Deng Xiaoping’s decision in 1978 to change China’s whole 

economic structure by getting into the free-market system has been 

a totally diametric opposition to the idealogy of a socialist, planned 

economic system that they found after years of doing has been an 

utter failure. And now it is one of the most unique features of a 

communistic country practicing free-market system somewhat. 

And yet, ironically, in the middle of this global recession, even 

in our country it almost went to pot because of what Wall Street 

has done to our own economy. Which country happens to have the 

most stable economy in the midst of the global recession? And I am 

sure Professor Auslin knows about it. And my guess, it is China. 

Because they had control systems like we had at one point in time. 

I think it was Glass law that did pass through that put an I&R 

on Wall Street for which for years Wall Street wanted to get rid 

of. And, ironically, it was the Clinton administration that took out 

that Glass law to keep an eye on our Wall Street moneymakers, for 

which—when that left, I think that is how we ended up with derivatives and wraparounds and the housing market losing its fence. 

If I am wrong, correct me on that. 

Professor Auslin? 

Mr. AUSLIN. Well, Mr. Faleomavaega, I think that what you are 

pointing out is the question of, how do you make a balance? And 

it is true that China emerged in relatively good condition from the 

financial crisis, but so did Canada, for example. 

Mr. FALEOMAVAEGA. Yes. 

Mr. AUSLIN. And Canada maintained all of the property rights 

of owners but had a——

Mr. FALEOMAVAEGA. And so did North Dakota. 

Mr. AUSLIN. Actually, what is interesting and ironic, perhaps, 

what you were saying about China being a socialist system with a 

more capitalist economy is that India, the largest democracy in the 

world, had a socialist economy that it is now trying to get rid of. 

Mr. FALEOMAVAEGA. And so were most of the countries in Europe 

in the past—democracies, but they are somewhat socialistic. And 

84

that has caused a lot of problems with their economies, if you want 

to put it in those terms. 

Mr. AUSLIN. But I think, just very briefly, what you have said 

I think is right, I agree with. And what I think it requires from 

us, then, is just simply a realism, to understand that this process—

and I don’t disagree with Mr. Millington here—that is going on is 

something we cannot fool ourselves about, as to where China is. 

Mr. FALEOMAVAEGA. Right. 

Mr. AUSLIN. And I think that that would reduce a lot of the disappointment and uncertainties, whether it is agreements that we 

make with them or expectations for Chinese behavior. But if we expect that simply because we have engaged them they are going to 

change, we are in for, I think, a much rougher ride. 

Mr. FALEOMAVAEGA. Mr. Cohen? 

Mr. COHEN. I just want to pick up on some of the discussion of 

the panel and of you, Congressman, and Congressman Manzullo. 

I recognize the importance of historical and cultural analysis and 

developmental processes, including how long development takes. 

But there is another part of the interest aspect of your hearing 

that, again, I just wanted to address. And perhaps one of the best 

ways to address it is by giving a real example, just as the one that 

we heard from the Fellowes company. 

And that is, at a time when China is developing, we do need to 

give it some time to take on all the obligations of an industrial, advanced economy. Having said that, there are areas where China 

can be doing much more, and has the capacity to do much more, 

but it has chosen not to. 

The example I want to give is how the Chinese Government operates its system. They are using in all its bureaucracies counterfeit 

software. This is government, over which, it has in the Beijing 

area, control. But the agencies of government in China are using 

purloined, counterfeit software. 

And for several years now, they have said they will put in place 

a system to end that process that has not been enforced. When the 

President of China was here most recently, he committed to doing 

an inventory of the software being used in government agencies. 

I say this not to be a critic of China, but to say we do have some 

core commercial interests tied to the success of our own companies 

and the workers at those companies who are paying the price for 

this illegal activity in China. 

Does that mean we don’t want to trade with China? Does that 

mean we want to wall off China? Absolutely not. Our companies 

and the companies I represent are among the major investors in 

China, the major traders with China. But we believe that systems 

have been put in place, commitments have been made, and they do 

need to be held to account. 

And that is all that the American business community is saying 

right now. We are not saying that we want to end or somehow not 

recognize the importance of China. We are not saying that we don’t 

realize they need more time to develop. But there are certain 

things that they can do that they are choosing not to. We believe 

it is a national policy that has been put in place to favor its own 

companies and not protect the intellectual property of foreign companies, and that does need to be challenged. 

85

Mr. FALEOMAVAEGA. I just want to make a comment in closing. 

Thank you, Mr. Chairman, for extending my time. 

Probably the biggest challenge that China currently faces is the 

fact that you have one political party, which is the Communist 

Party. Then you have to figure, how are you going to keep controlling every aspect of the community, 1.3 billion people? You are 

talking about free speech, you are talking about the right to—even 

Twitter or Google, all these things that the world community is actively participating in. 

And I think there is probably a subtle fear among the leadership 

in the Communist Party: How are we going to continue controlling 

this number of people and make it in our own political way? Because, right now, I think the level of governments in the provinces—I think there are 33 provinces in China—there is beginning 

to be a little schism between these provincial governments and the 

central government and the Communist Party, because these provincial governments are wanting to expand their own respectives, 

just like the 50 States that we have here. And it is a question of 

how the central committee, how the central government is going to 

continue putting its control over these provincial governments who 

want to expand trade. 

And I am sure the chairman must have had delegations and delegations of these people coming from these different provinces. 

They want to expand. They want to do things. Basically, they want 

to be free to do the economic things. Why? So they can benefit. 

I remember, when I was in Shanghai, I was amazed to see, the 

provinces surrounding just the city of Shanghai, you are talking 

about 400 million people, just around Shanghai. And Shanghai is 

only about, what, 16 million people? When we talk about 60,000 

people who died in a catastrophe, to China that is not even a pea 

in a pod. But to us, it is a major, major catastrophe or something 

that we feel very much, and simply because of the numbers. 

So I don’t think that, when I say the numbers are so small, that 

the leaders don’t have a sense of compassion or understanding or 

sympathy for what has happened. But just the sheer numbers 

makes me wonder sometimes, too, is, how do we really deal with 

a country—right now, basically, we have allies—and I think you 

noted in one of the comments made by Professor Auslin—allies 

versus strategic partners. 

Who are our strategic partners? I suspect that China is one of 

those strategic partners. And what is our new policy toward China? 

It is called hedging. It is called, who has the upper leg over whatever policy or whatever issue that we are having problems in resolving. But just a sense of, who is getting the better end of the 

stick, if you will, about whatever happens—economics, political. 

And this is the other thing that I think sometimes when our allies put pressure on China, saying, ‘‘Do this,’’ you know what China 

would say? And I would feel the same way. ‘‘I am not your messenger boy. You know, treat me with a little more respect, North 

Korea, all other countries. Let’s work it together, rather than to 

think that I am just going to jump simply because you request it.’’

And I think that is the essence of where sometimes we have 

these difficulties in communications. And this is where I—I support 

your concerns, Mr. Fellowes. At the same time, I support Mr. 

86

Millington’s advocacy of the idea that we need to continue the engagement process. And I honestly believe it can only lessen the tensions and the problems, that China could really be a big help, in 

working together with our country, in resolving the problems. 

Thank you, Mr. Chairman. 

Mr. MANZULLO. I have a question. Mr. Fellowes, what happens 

if you don’t prevail in the litigation with this former joint venture 

partner? I mean, they locked you out of the facility; is that correct? 

What happens? What happens to you? What happens to your company? 

Mr. FELLOWES. Well, our company has basically walked away 

from the joint venture. It is bankrupt. And we have established, or 

are in the process or establishing, new supply chains. We are 

bringing up three new factories; we may bring up a fourth factory. 

We are retooling. We are concluding that our recovery should not 

be based on our recapturing these assets. 

Mr. MANZULLO. You are presuming that you are going to lose in 

the Chinese courts, which you already have. 

Mr. FELLOWES. Well, I wouldn’t exactly choose those words. We 

are going to fight very, very hard. It is extremely important to us. 

Mr. MANZULLO. The plans you are making——

Mr. FELLOWES. Yes. 

Mr. MANZULLO [continuing]. Are on the basis that you can defend? 

Mr. FELLOWES. Exactly. 

Mr. MANZULLO. I found something very interesting. You said 

that you were making a new line of shredders, and then, within a 

few months, some copycat came along and China started making 

the same thing. 

Mr. FELLOWES. Yes. 

Mr. MANZULLO. Did you seek counsel at the time? Or was there 

just nothing you could do because of the price that was involved in 

fighting it? Or did you just accept the fact that they had 

commoditized and stolen your invention? 

Mr. FELLOWES. The shredders that I was referencing were the 

first personal shredders that we brought into the market in about 

2000, or 1999, 2000. And we did not have patent protection around 

them, so we had no legal case to bring against them. 

Mr. MANZULLO. Okay. 

There has been a very extraordinarily disturbing decision from 

the WTO on tires. It involves a company back home, Titan Tires, 

which was not impacted, but at one time, if the Chinese Government owned a company, a wholly state-owned enterprise, it was 

presumed that one was the alter ego of the other, to use an old law 

school term. Now the WTO has come out with an astonishing decision that says, in order to impose countervailing duties on that 

company, in light of predatory pricing, one actually has to show 

manipulative policy on the part of the Chinese Government toward 

a company which it owns 100 percent. 

Are any of you familiar with that latest decision? 

Mr. COHEN. I have read of that decision. I know our Government 

has indicated that it has problems with this outcome and is seeking 

clarification and has registered its concern. 

Mr. MANZULLO. Okay. 

87

Professor Auslin? 

Mr. AUSLIN. I would just like to, not necessarily on that but connected——

Mr. MANZULLO. That is okay. Go ahead. 

Mr. AUSLIN [continuing]. If I could, just two very brief points. 

One is on the nature of economic development in China over the 

past decade. One thing that is not reported on as much and I think 

we have to pay attention to is that the PLA, the army, has moved 

dramatically and rapidly into productive facilities and capabilities 

and exporting. Huawei, for example, the company that tried to buy 

into one of our major telecoms, is a wholly owned subsidiary of the 

PLA. 

So when we talk about state control, we are talking not only 

about, in many cases, military control but, in fact, about a tension 

between the state and the military. And I think it is something we 

should pay attention to. 

Very briefly, Mr. Chairman, if I could just pick up on what Mr. 

Faleomavaega stated about the concerns of the regime to maintain 

control. This is probably the greatest issue facing China. This is a 

very brittle regime. It is a regime that has scrubbed the word 

‘‘Egypt,’’ for example, from its Internet sensors. People in China are 

not able to see what is happening in the Arab Spring. It is a regime that is faced with enormous income disparities throughout 

the country. It is a regime that arrests Nobel Prize winners and 

arrests their families. 

There is no doubt that what we need to be paying attention to, 

I believe, in Washington, DC, is not necessarily a China that grows 

linearly over the next decade; it is a China that may suddenly stop 

growing and would have dramatic repercussions, not only economically for our companies, but throughout the region and for the instability that we and our allies would be drawn into. This is a 

great issue of concern. 

Mr. MILLINGTON. If I may comment, just a couple of things. 

China continues its rapid development of all kinds of technologies. And regardless of policies that we put into place, we will 

not stop that. Their reliance upon their own inventions will grow 

simply because they are inventing great technologies. I have provided in my written testimony the history of how the technologies 

of China ignited the Renaissance in the 15th century. Well, China 

is getting back to its inventive ways, and it will continue to do 

that. 

Now, we will notice a further reliance on internal technology advancements simply because they are making them. And they will 

not look to us for further technology advancements. And so we need 

to pay attention to our own technology advancement and protecting 

our IP and then learning ways to share. And, in that way, we can 

mutually be beneficial. 

May I take issue with Professor Auslin just briefly? I returned 

from China 10 days ago, and I was there during the Arab Spring. 

And I found references on the Internet to Egypt and the Arab 

Spring and much of what was going on, both on television and on 

the Internet. And I was there, inside of China, where I had been 

teaching at the EMBA program for Zhongguo Keji Daxue. So, yes, 

88

they have put some limits. They are not total. You can still find 

that information. 

I do not apologize for their brutality. I recognize that. I am a realist. I have been there for many, many years. And I make no excuses for their behavior in that regard, in human rights. 

But I am optimistic about the possibilities as we engage China 

in technological advancements, because it is technology that advances economies. And, as we work together, we will mutually advance economics and cultural and political ties. And that is perhaps 

the only way that we will be able to continue to be engaged with 

China. Because they will make advancements in technology, 

whether we want them to or not. 

Mr. FALEOMAVAEGA. Mr. Chairman, would you——

Mr. MANZULLO. Well, sure. 

Mr. FALEOMAVAEGA. I was watching television the other evening, 

3 o’clock in the morning, watching the situation in Japan. And 

there was an announcement that there was a Chinese cruiser ship, 

a frigate—you know, this is a big, big, big—almost close to a battleship—came all the way from China, went through the Straits of 

Malacca, and went right through the Suez Canal for the purpose 

of picking up some 36,000 Chinese nationals who were working either in Egypt or whatever it was. 

But it was something that was so new, I think, in the eyes of the 

world, to see, here is China coming with up with this huge ship 

that came right through the Suez Canal, and it was just simply to 

say looking after the interest of some 36,000 Chinese nationals who 

were working in Libya and Egypt, to pick them up, just like what 

we are doing with our own people whenever there is a catastrophe 

or an emergency. 

Interestingly enough, what I was trying to say in terms of, where 

or what should we do? I mean, are we going to consider China as 

the next monster or the next Soviet Union, or are we going to consider China truly as a strategic partner? Where there are issues, 

we are going to continue to disagree, as well as there are issues 

that we could work together and solve some of the serious problems 

that the world community is now confronted with. 

And, Mr. Chairman, I totally agree with your premise, the fact 

that intellectual property violations of companies like Mr. 

Fellowes’, we need to continue the engagement process. And I feel 

for you, the fact that the Embassy and the officials of the Chinese 

Government have not even bothered to respond to your letters and 

requests from you and some of our colleagues. And why they have 

not done so, that is a very good question. 

Mr. MANZULLO. Well, we finally got a letter, a two-page letter, 

after our staff engaged with the Embassy. 

Well, this has been an extraordinary hearing—four people of vast 

backgrounds: Academic, hands-on victim of what has been going on 

in China. We will be having, if not more hearings, roundtables, and 

informal discussions. I am very much concerned—there are a lot of 

things we could go into: The U.S. trying to change its own patent 

system to ‘‘harmonize with Europe.’’

Mr. Millington, I take it—and we can talk afterwards—that you 

are not too much in favor of that and have a lot of problems with 

it. 

89

We have a long way to go on this issue. My big concern is in the 

attitude of the Chinese. I thought, when I voted for WTO, that was 

a tough vote. I purposely joined the Commission on Human Rights 

because I wanted to see if the condition of human rights would improve for the Chinese people. 

In one of several trips that I made to China, we were at Johns 

Hopkins University in Shanghai and at another university in Beijing, interacting with American students and the Chinese students. 

At the forum in Shanghai, one of the Chinese students asked an 

extraordinary question. There were 13 Members of Congress there. 

I had led the largest U.S. Delegation of Members of Congress to 

China. The extraordinary question was: Do you think that China, 

the Chinese, are ready for democracy? 

This was a Chinese student asking that question, and I think we 

all gasped when we heard that because, number one, it wasn’t a 

lack of information. This student had studied in the United States, 

knew what democracy was, and asked the question, are they ready 

for democracy? 

The second thing that happened at that extraordinary town hall 

meeting with 13 Members of Congress and over 200 U.S. and Chinese students, is one of the Chinese students asked, of all the seminal documents that make up the American experience, which of 

these do you consider to be most appropriate? 

Congressman Pascrell from New Jersey gave the most brilliant 

definition and defense of the doctrine of natural law that I have 

ever seen. We were in absolute astonishment as how he described 

the basis of personal property rights and liberties. He said, ‘‘In our 

country, we believe that God is the author of rights, that he is the 

author of liberties, not man.’’ If God is the author of liberties, only 

God can take them away; but in China, you don’t have such a belief. They believe that man only has the liberties to which other 

men give him. 

This went on for about 15 or 20 minutes—I think the most brilliant lecture in defense of the doctrine of natural law that I have 

ever heard in my entire life. I have known Bill Pascrell for a long 

time, and he used to teach at a community college on the method 

of learning. So he just—this was just tucked deep within his heart, 

as he just expounded. 

I think that is where we are, between the United States and 

China. Our systems come from such different constructs that it is 

almost impossible for the Chinese to understand the dignity of personal property. That is not within their definition. They have no 

idea what personal property means. 

You talk about what they are doing in their cities, if they don’t 

like somebody’s house, they just put an X on it. Well, of course, we 

have some horrible situations taking place here in our country, 

where the Supreme Court actually condoned condemnation for economic purposes, but nothing near what the Chinese are doing. 

What I expected to see after joining the WTO, was a whole new 

way of thinking in China. They had wanted to be a part of the 

international market for years. It would behoove them, they would 

actually benefit from embracing democracy. It would help their 

economy. It would help their people, but they simply do not underVerDate 0ct 09 2002 16:54 Jun 01, 2011 Jkt 000000 PO 00000 Frm 00093 Fmt 6633 Sfmt 6633 F:\WORK\AP\033111\65495 HFA PsN: SHIRL
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stand, notwithstanding the years of studies here in this country at 

our marvelous universities, the concept of private property. 

Anyway, I appreciate you coming. If there is anything additional 

that you want to add to your testimony, even though we have had 

a lot of time, please feel free to send it to us. I will just keep the 

record open for 21 days. Even if it is a simple letter that you want 

to send to us, we would be willing to work with it. 

Thank you very much for coming. 

This hearing is adjourned. 

[Whereupon, at 4:57 p.m., the subcommittee was adjourned.] 

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