The Policy Impact Panel took testimony during a six-hour public hearing in Washington, D.C. on
March 15, 1994 from the following persons:

## Session #1 - China in the Asian Context

C. Fred Bergsten, Director, Institute for International Economics

Yoichi Funabashi, Washington Bureau Chief, *Asahi Shimbun*

Michel Oksenberg, President, East-West Center

## Session #2 - Economics and Human Rights

Liu Binyan, Chairman of the Executive Committee, Princeton China Initiative

Lawrence W. Clarkson, Corporate Vice President, Planning and International Development
The Boeing Company

James V. Feinerman, Executive Director, Committee on Scholarly Communication with China

Jeffrey L. Fiedler, Secretary-Treasurer, Food & Allied Service Trades Department, AFL-CIO

Nicholas R. Lardy, Director, Henry M. Jackson School of International Studies
University of Washington

Elliot Sperling, Associate Professor of Tibetan Studies, Department of Central Eurasian Studies
Indiana University

## Session #3 - The U.S. China Security Relationship

James R. Lilley, Resident Fellow and Director of Asian Studies, American Enterprise Institute;
Former U.S. Ambassador to China

Douglas H. Paal, President, Asia Pacific Policy Center

Paul Wolfowitz, Dean, The Paul H. Nitze School of Advanced International Studies,
John Hopkins University

## Session #4 - Overview of the U.S. China Relationship

Lawrence S. Eagleburger, Senior Foreign Advisor, Baker, Worthington, Crossley,
Stansberry & Woolf; Former Secretary of State

Carla A. Hills, Chairman & CEO, Hills and Company; Former U.S. Trade Representative

David M. Lampton, President, National Committee on U.S. China Relations Inc.

May 11, 1994

STATEMENT OF THE POLICY IMPACT PANEL

Asia and China will loom increasingly large in the troubled world of the 1990s, and their dynamism creates both opportunities and challenges for America. For the United States and China to enhance their mutual opportunities and manage the inevitable problems, leaders on both sides must move to strengthen the central overall strategic U.S.-China relationship and set the parts properly and sensitively into the whole.

China has its issues and we have ours. Each of us should promote our positions to suit our interests, while recognizing that we have a common overriding interest in making things work out without backing away from our values. We should therefore remain in constant strategic dialogue with Beijing so as to avoid a situation in which policy failures in any one sphere -- whether in human rights, nonproliferation, trade, Asian regional issues, or other matters -- undermine Sino-U.S. cooperation across the board.

Five years after Tiananmen, it is time for America to mold a nuanced, sustainable, bipartisan policy that unites both the executive and legislative branches and that enables the United States to pursue its national interests and be true to its core values in dealing with China. To be successful, such a policy must be responsive to political realities in each capital.

With the President obligated by law to submit a recommendation to the Congress on Most Favored Nation (MFN) renewal no later than 3 June, the situation is quite fluid in both Washington and Beijing. We do not feel it is helpful in this context to provide detailed policy recommendations regarding the coming four weeks. Our policy of conditioning MFN renewal to specific improvements in human rights has been set by Presidential Executive Order and communicated repeatedly to Beijing. U.S. interests are dependent on Washington's credibility, and nobody can doubt that a major about face on this issue linkage before June 1994 would damage our credibility, with negative consequences in the future.

We nevertheless feel that this specific policy linkage should not remain a component of the American approach to China if Beijing meets the conditions laid down for MFN this year. We therefore encourage President Clinton to take the initiatives necessary to de-link future MFN renewal from our human rights goals regarding China. The goals remain important, but this particular policy tool will not after this year provide the most effective means for pursuing the objective of bringing China more into accord with generally-accepted international standards on human rights.

With regard to the period leading up to June 3rd, we encourage the Administration to make efforts to shift the initiative to the more forward looking leaders in Beijing. This requires, we believe, extensive focus on quiet diplomacy and a potential promise that successful compliance with human rights conditions this time will remove conditionality on MFN renewal henceforth. It is important for the President to assume leadership in explaining to the Congress and the public our overall interests regarding China and how they can be met without future MFN conditionality. A good outcome for the United States this spring requires that the Congress and the Administration find a way to act in concert on this vital issue.

## Long Term Policy Recommendations

For the longer run, we base our policy recommendations on the proposition that American interests lie in a China that evolves toward a more democratic, market oriented system. As China experiences major domestic changes and strengthens its role in the international arena, serious problems and misunderstandings will arise. The United States should seek to multiply those ties with China that enhance mutual understanding and that increase U.S. involvement with the more positive changes occurring in the PRC.

### A. Fundamentals

Our specific long term policy recommendations are based on the following fundamentals:

- China in the 1990s is changing economically, socially, and politically at extraordinary speed. Within this context, the U.S. has a national interest in a China that is stable, modernizing, reform-minded, cohesive, secure, outward looking, and that meets international human rights standards and pursues constructive diplomatic and security policies. "Stable" does not suggest blind maintenance of the status quo. Rather, it refers to a China that evolves at a speed sufficient to respond constructively to the new forces in Chinese society that the economic reforms and other changes are producing.

- China's leaders bridle and become more obstinate when they feel they are being treated with contempt. China has at times proven to be flexible if it is treated with respect but also firmly and convincingly told where the line is drawn.

- China's leaders, governing some 22 per cent of the human race, focus primarily on domestic concerns. There are limits to the types of changes Americans can produce in the way China operates, and all policies aimed at changing China must take into account the Chinese domestic pressures that may produce a backlash. Americans do best by encouraging ongoing changes in China rather than trying to dictate new directions from afar.

- All Asian leaders agree that the People's Republic of China will be a major--and growing--

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force in the region for many years to come. The fear throughout the region is that sharp deterioration
in Sino-U.S. relations will encourage undesirable developments in China and will erode American
domestic support for forward involvement in Asia, thereby casting doubt on America's overall ability
to work effectively together with an Asia on the rise. This regional context should be an important
factor in American thinking about China.

--The United States should differentiate between those issues with China that are basically bilateral and those that are essentially multilateral. On multilateral issues in which the United States is attempting to increase China's compliance with international standards--issues such as proliferation and human rights--Washington should focus its efforts to the maximum extent possible on utilizing multilateral approaches to the Chinese.

B. Promoting Human Rights

Our objective should be to enhance Beijing's awareness of and receptivity to international
standards of human rights without tainting United States efforts with the opprobrium of foreign
interference in China's domestic affairs. Our specific recommendations are to:

--Promote exchange relationships that enhance China's knowledge and appreciation of law.

--Recognizing the many ways in which market-based economic development, tied to greater contacts with the international arena, promote freedom of choice and freedom of thought, shun policies that curtail such development because these policies ultimately damage the prospects for human rights improvements in China.

--Actively seek China's implementation of the rights-related obligations it has freely assumed and be prepared to work with others where possible--and alone where necessary--to bring China into compliance with these responsibilities. Should sanctions be imposed, care should be taken to make them directly related to the offending behavior and reversible if that behavior is corrected.

--Establish a formal, high level bilateral human rights commission that holds meetings at fixed intervals.

--When there are egregious human rights violations, including in Tibet, the United States should work with the international community to rectify them. It should also facilitate dialogue and encourage understanding between Chinese and Tibetans.

The above efforts seek to strengthen positive changes already under way in China while avoiding activities that place America on the wrong side of Chinese nationalism and of Chinese reform. We recommend that all be pursued steadily and vigorously in the belief that realism and

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C. Economic Issues

The United States -- overall -- benefits in many ways from China's steady economic
development and growing integration into the international community via strong Sino-U.S.
economic ties. But the U.S. should vigilantly apply pertinent American laws and international
standards when problems arise. Specifically, it should:

--Vigorously enforce bilateral agreements signed between the two sides.

--Press China for adequate inspection rights to determine whether violations concerning "country of origin" labeling and prison labor exports are occurring.

--Promote actively China's early accession to the General Agreement on Tariffs and Trade (GATT),¹ provided that China is in conformity with the basic requirements for accession. We further recommend that the United States not exercise its right to exempt Sino-American trade from the GATT regime, a measure whose major effect would be to preserve the U.S. option of failing to renew China's MFN status each year.

--Encourage efforts that build the human capital and aid the institutional developments necessary for enhancement of the market economy in China.

--Nurture and expand U.S.-China bilateral forums for discussing economic issues.

--Drop U.S. opposition in international financial institutions to funding Chinese economic development. If China's activities seriously violate the standards expected of a major country, though, the U.S. should consider using its influence in multinational institutions such as the World Bank to bring appropriate remedial pressures to bear on the PRC.

D. Security

American security concerns regarding China are both regional and global. China possesses the technology for production of weapons of mass destruction and their means of delivery. It has substantial foreign military sales. It is a "Perm Five" member of the United Nations Security Council and thus has veto power over all Security Council resolutions. And it has territorial claims, most notably but not exclusively in the South China Sea, that conflict with those of other countries in the region. China thus engages American security concerns in the post Cold War era in the spheres of proliferation, peacekeeping, and Asian regional security.

¹ In 1995 GATT will be replaced by the World Trade Organization (WTO). These comments apply equally to the period after this change.

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The U.S. interest lies in bringing China more fully into international regimes to control proliferation. China has viewed such regimes with suspicion in the past, and it has not yet developed a cadre of arms control specialists that have easy access to the top leadership and substantial credibility in the PRC. Part of the U.S. policy should be to support bilateral and multilateral efforts to develop just such a cadre of Chinese specialists. The U.S. should also begin to consider whether to work toward Chinese membership in the expanding Missile Technology Control Regime.

It is in America's interests to create a reservoir of mutual understanding through active contacts with the Chinese military at all levels of the two security establishments, including military academies and think-tanks. A basic American posture of engaging rather than seeking to isolate the Chinese military should pay dividends through improved mutual understanding and concrete gains in issues such as transparency of foreign military sales.

## E. Asian Regional Considerations

It is vital to America's future that the United States remain fully and actively engaged in Asia. Asian governments generally regard China's increasing growth and strength as both an opportunity and a cause for some apprehension.

Long-term U.S. interests are well served by greater cooperation among Asian countries in institutions and international regimes that include a very prominent American presence and role. United States policy toward China directly affects regional ties throughout Asia and should be brought into line with our broader regional interests. This requires both increased policy coordination in Washington and expanded consultation throughout Asia. For Washington simultaneously to alienate both Tokyo and Beijing, for example, could produce a shift in alignments that would be of historic magnitude and highly adverse to America's national interests.

## Conclusion

America's fundamental interests with China are best served by a policy of balanced reciprocity and comprehensive engagement. "Engagement" does not mean support for Beijing in all spheres or agreement with China's policies. It, rather, means that the United States should normalize its ties with China so that failures in one realm cannot undermine the entire relationship.

America must develop a bipartisan consensus on which we can build a constructive policy

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