Statement by Chairman Richard D’Amato
U.S. Capitol, July 15, 2002
Thank you for coming this morning. I will make brief remarks, as will Vice Chairman Michael Ledeen, then answer your questions.
This is the Commission’s first annual report to the Congress. Congress directed us to look at the wide scope of the U.S.-China bilateral economic and trade relationship, with a focus on its national security implications. We spent the last year holding hearings, engaging in original research and conducting meetings to serve as the eyes and ears of Congress. We have tried to augment Senators’ and members’ understanding of this complicated, big and growing relationship between the US and China, its dangers, trends, opportunities, and particularly its unknowns.
This is a bipartisan product, the results of a broad agreement among nearly all of the Commissioners, a highly varied group of people who put fresh eyes on this subject, and approved the Report by a vote of 11-1. I want to commend Vice Chairman Ledeen for his work and support in this effort, and thank all Commissioners, most of whom are in this room, for their hard work and creative diligence.
This is an educational report and an action document. Each chapter highlights findings and makes recommendations which flow from those findings. The Executive summary gives the key 21 recommendations, but you will find many others at the end of each chapter.
We have copies available of our entire hearing record, and a two volume set of our documentary annex -- original research and original translations of Chinese materials. We also have released an original survey research study done at the University of Maryland, which documents Chinese media treatment of the U.S. from various perspectives.
We found that U.S. policy toward China has been and is fragmented, lacking consistency and depth. It has often been driven solely by commercial interests, or by specific human rights issues, or by a particular military crisis – rather than by a comprehensive examination of all the issues which impact this relationship. Furthermore, over the last 30 years it has been dominated by strong Executive branch personalities and compulsive secrecy. We lack a sustainable consensus on the fundamental national interests of the U.S. among our elected leadership, particularly between the President and Congress. We think the nation is poorly served by this shortcoming, and it needs to be corrected, particularly as China grows in economic and military power, and the U.S. plays a substantial role in propelling that rise in power.
We are also very concerned over the serious differences in the perceptions held by each country of the other, lacking agreed-upon goals, core values and shared agendas. The potential for miscommunications and serious misunderstandings is apparent. It is compounded by a dismal failure, despite long American efforts, to establish bilateral institutions for confidence building, threat reduction, and crisis management.
Let me call your attention to several unique aspects of our report:
Chapter 1 on conflicting national perspectives opens the report because we think it sets the framework which needs understanding and attention by the Congress.
We think that Chinese strategic thinking that we have documented in this chapter is cause for concern. The Chinese leadership appears to be fixated on so-called asymmetrical warfare, or silver bullets, surprise weaponry and tactics they call assassin’s mace. We worry that they may be mesmerized by a self-deception that they can prevail in military scenarios with the U.S. on the cheap through such surprise strategies.
These perceptions problems are accompanied, in our view, by the steadfast refusal of the Chinese leadership to engage us constructively on the matter of building effective bilateral confidence building institutions and procedures. We are encouraging the Administration to make renewed attempts to build such institutions.
We go to some lengths to make numerous recommendations designed to enhance U.S. better understanding and knowledge of China and Chinese materials in the U.S. We recommend rebuilding the Library of Congress China collection, new national education language and area studies grants programs similar to the NDEA programs of the past, new efforts at open source collection by the intelligence community and an upgrading of the FBIS, Federal Broadcast Information Service. We know too little about China’s intentions, what they are communicating to their own people, and to us, and we need a far better level of effort.
In Chapters 2, 3, 6 and 7 we document the growing, and very unbalanced economic relationship. We have a huge $80+ billion trade deficit, large flows of investment, R&D, private and public technology to China, as well as substantial funding from U.S. capital markets. U.S. exports of goods to China remain stagnant, while China’s exports to the U.S. are exploding. Our primary exports to China are our manufacturing capacity, R&D, and investment capital, not goods – and we differ in important ways with Europe in this area. The Chinese are dependent in substantial ways on U.S. economic flows. The impacts of this flow of resources on our national industrial base and national security is poorly documented. It needs careful monitoring.
Our report calls for increased scrutiny of corporate activities in China, and a new corporate reporting system as to what investment, R&D and technology is being sent to China.
We are also concerned over China’s impact on other Asian economies, particularly the Japanese, but also ASEAN and Taiwan, and call for fuller consultations between the U.S. and our Asian friends and allies on the consequences of this phenomenon for our mutual relations.
Also there is a unique presentation in the Capital markets area (Chapter 6); a renewed call for more effective consultations and consensus building between the President and Congress on Taiwan policy (Chap 8). We are recommending refashioning the American toolbox of incentives and disincentives to enhance American leverage and encourage the Chinese to comply with their commitments -- in proliferation practices, prison labor agreement enforcement, IPR enforcement, and most importantly, with their far-reaching obligations under the WTO.
We have proposed new American assistance programs to help China come into compliance in the WTO and build a working rule of law system in China – the success or failure of this I believe is the most important benchmark of progress as this commission’s work proceeds.
The final chapter includes a series of recommendations for future Commission work, and those recommendations have now been incorporated in next years legislative appropriations bill. As you will see, they focus on proliferation, the full range and impacts of economic transfers to China, use of U.S. capital markets, corporate reporting, WTO compliance, and Asian regional impacts.
A number of our recommendations have already been communicated to Congress, and several of them have already been acted upon or are being seriously considered as we speak.
In concluding, one might ask our position on the policy we call "constructive engagement." My view is that if constructive engagement is to have any meaning or content beyond a superficial catchphrase, and be a sound basis for the refashioning of U.S. policy on a more coherent basis, it will have to become a real two-way street, not the sound of one hand clapping.
In sum, we are looking for Chinese willingness to take steps to develop relations not susceptible to constant surprise, where the common ground is expanded and understood, open and transparent, and where cooperation and a positive atmosphere is nurtured. As yet, we do not see these things happening.
Vice Chairman Ledeen.