“US Relations With China”

Testimony by

FRANK J. GAFFNEY, JR.,
Director of THE CENTER FOR SECURITY POLICY

Before the HOUSE FOREIGN AFFAIRS COMMITTEE

19 July 1989

Mr. Chairman, it is a distinct privilege to be asked to contribute to the deliberations of this committee on what is, in my view, one of the most crucial security policy issues of our time: U.S. policy toward China in the aftermath of Beijing’s brutal repression of the pro-democracy movement.

This topic takes on such importance only partly because of the strategic significance of the People’s Republic of China. It also requires our urgent attention because China is only one of a number of totalitarian communist regimes faced with surging, popular demands for real political liberties and fundamental economic reforms.

Our reaction to the brutal Chinese suppression of these demands will, consequently, not only affect near-term — and possibly longer-term — relations between our two countries; it may well also have an impact on the behavior of other communist regimes toward their increasingly restive peoples.

We at the Center for Security Policy believe, accordingly, that the United States and its allies must adopt a course of action toward the Chinese government with a view to serving both of two important purposes:

We must make it unmistakably clear that the West will not turn a blind eye toward or otherwise facilitate the Chinese government’s behaving towards its people in ways anathema to Western values and traditions.

We must signal to other totalitarian communist regimes that they will have to pay real costs in terms of access to the West’s resources should they attempt to follow Beijing’s lead when their own experiments with political and economic reform give rise to similar popular challenges to the authorities’ control.

The Center for Security Policy has recently issued two short papers that argue forcefully for the imposition of vigorous economic, financial and technological sanctions against China in support of these objectives: "Building Democracy in China: The U.S. Role" (released 8 June 1989), and "Western Corporations’ ‘Short March’ Back to China: Bad Business, Awful Public Relations, Dangerous Policy" (7 July 1989). My testimony this afternoon in response to the five questions you posed will draw upon these analyses; I request that they both be included in full in the record at the conclusion of my remarks.

Let me respond to each in turn:

The Adequacy of the Bush Administration’s Sanctions Against China

Mr. Chairman, you asked that I assess the ability of the sanctions already announced by President Bush to promote freedom and democracy in China. Put simply, I believe the sanctions taken by the Bush Administration are worse than inadequate for that purpose; they are an insult to the intelligence of the American people and the Congress.

I need not tell this Committee of the outrage felt by the American people at the brutal disregard by Chinese authorities of basic human rights and the bloody suppression of popular aspirations for democratic institutions with which the United States has long been associated. The public demanded — and had a right under our democratic system to expect — from the U.S. government a vigorous and meaningful response. Instead it got a placebo, the appearance of strong medicine but, on closer inspection, nothing remotely therapeutic.

Indeed, the sanctions applied thus far by the President basically amount to a matter of taking credit for conditions imposed by circumstance. Consider the following:

Most of the munitions destined for China under previously signed arms contracts whose transfer the President temporarily suspended are not scheduled for delivery until at least 1991, according to the Office of Technology Assessment.

Similarly, the World Bank had already suspended consideration of its loans to ChinaU.S. loan programs (Eximbank) to China. when the President announced his intention to seek such a suspension. Under such circumstances, had he wanted to impose a meaningful sanction with respect to Chinese access to new money for development purposes, he should have announced that he was suspending

With respect to the Overseas Private Investment Corporation (OPIC), it prudently acted to suspended its programs in China and to halt its underwriting of additional political risk insurance policies for that country before the President "asked" it to do so. After all, doing otherwise would have been like selling hurricane insurance in the midst of the tempest!

Parenthetically on that point, Mr. Chairman, we believe that the China case illustrates the dangers of extending OPIC coverage to communist countries. In its history, OPIC has been granted two specific exceptions to its congressional mandate to limit its programs to free world countries: Romania and China. With hindsight, it is evident that encouraging U.S. investments in such nations by obliging the taxpayer to assume the risks of doing business there has not necessarily led to either structural economic or political reform. I urge the Committee to bear this painful history in mind as new proposals are advanced to provide OPIC coverage to other Soviet bloc nations.

The Effectiveness of Sanctions in Pending Legislation

We at the Center for Security Policy support fully the sorts of sanctions being considered in legislation now before the Congress. Such sanctions, in contrast to those adopted by the Administration, will get the attention of those who govern the PRC who fully appreciate the indispensability of Western economic, financial and technology assistance to China’s future viability.

I believe it is also very helpful for the stipulation of specific conditions which must be satisfied by the Chinese government prior to any termination of sanctions. At a minimum, these must include: lifting of martial law; halting of executions and other reprisals against individuals for the non-violent expression of their political beliefs; the release of political prisoners; increased respect for human rights; and a freer flow of information.

In addition to obvious policy grounds for postponing a return to the status quo ante (i.e., business-as-usual pre-4 June 1989), there are also sound business reasons for doing so. (A number of these are detailed in the Center’s paper on "Western Corporations’ ‘Short March’ Back to China"). And yet, many Western businesses are poised to resume operations there; some already have, notably Japanese firms who scarcely allowed the Tiananmen massacre to cause a hiccup in their activities in China. It is also rumored that that the suspensions on World Bank loans will be lifted in a few months — with or without a change in the PRC’s policy of repression. Only by enacting legislation that stipulates the conditions under which a return to business-as-usual can occur is Congress likely to be able prevent the thrust of U.S. sanctions from being undercut.

Consequently, we believe it is appropriate and important for Congress to enact legislation imposing meaningful economic financial and technology sanctions on China unless and until conditions like those mentioned above are realized.

One area that should be addressed in such legislation is export controls. China has enjoyed a more favored status than the Soviet Union or other Warsaw Pact countries and has, thereby, been given access to vastly more sophisticated and militarily relevant technology. While China is in a category separate from the Warsaw Pact, we believe it appropriate for the United States, together with its COCOM partners to freeze (if not down-grade), the level of Western dual-use technology currently available to the Chinese government.

In May of this year, COCOM was set to begin a major liberalization of export controls on dual-use technology for China. That effort has, for the moment, been suspended. The next opportunity for a review of the situation will be at COCOM’s high-level meetings in October. We believe that — in the absence of tangible amelioration of Beijing’s policies toward its people — no such liberalization should be contemplated.

Such a freeze would represent a body-blow to the Chinese government’s efforts to close the "technology gap" between Western capabilities and their own. If sustained over time (i.e., at least 2-3 years), this gap would grow enormously as the West’s technological base continues to advance. For this reason, we believe that the 6-month delay in further liberalizing of these controls envisioned by the Senate resolution is simply too short a period to be a significant factor in PRC decision-making.

What is more, even though some of our COCOM partners have balked at reversing past decisions on Chinese access to high technology lest sales contracts already in place be jeopardized, we believe it important that some downgrading occur. We would propose, for example, that contracts signed prior to the June 4th massacre could go forward with higher levels of technology than would be possible for contracts signed after the tragedy.

At a minimum, Congress should obtain an assessment by the security community of the impact that recent liberalizations of dual-use technologies have had on the Chinese military. Secondly, an evaluation should be made as to whether or not it is possible to maintain necessary safeguards contained in the conditions of certain approved export licenses. For example, in light of current conditions in China and travel advisories, are U.S. firms or U.S. government personnel able to conduct post-shipment, on-site inspections?

Additional Measures that Warrant Congressional Consideration

An appropriate U.S. foreign policy towards China calls for a melding of promises of improved economic ties in exchange for the demonstrated expansion of democratic institutions and free enterprise on the one hand and powerful disincentives to further totalitarian control and denial of popular aspirations for individual freedoms on the other. Accordingly, the United States should signal its willingness, in principle, to provide significant levels of economic and financial assistance — in coordination with its allies — to a fundamentally reformed China.

In the meantime, however, other means of bringing pressure to bear on the present, brutally repressive Chinese regime should be explored. Toward this end, we at the Center for Security Policy would support, in addition to those measures contained in both the House- and Senate-passed resolutions, the following further sanctions:

Suspending the Most-Favored Nation status enjoyed by the PRC since 1980;

Suspending preferential U.S.-PRC trading arrangements on textiles;

Suspending PRC access to U.S. Export-Import Bank loans and credit guarantees and all other U.S. government loan and insurance programs;

Seeking to secure cooperation from all other OECD countries to suspend official credits and credit guarantees to the PRC;

The Value of Unilateral as Opposed to Multilateral Sanctions

Obviously, it is always preferable to have concerted Western action in response to a situation like the massacre in Tiananmen Square. In fact, Beijing’s blatant disregard — indeed contempt for — Western principles or sensibilities have helped to catalyze allied reactions. In some cases (e.g., Australia and Italy and Canada), these countries have actually been prepared to go further than the United States in responding to the Chinese crackdown.

My own view is that the behavior of the Chinese government is so opprobrious — and the stakes for Western interests if this behavior is replicated elsewhere in the communist world so great — that the United States would be compelled to act even if other, allied states chose not to. What is more, were we to do so, sentiment is sufficiently strong in other democratic nations of the West that American leadership in favor of stiffer sanctions would likely result in more forceful actions being taken by our allies.

How Do We Most Help the Chinese People?

The June 4th "Bloody Sunday" massacre in Tiananmen Square and subsequent repressive actions by Chinese leadership have tragically exposed the limits of political reform in China. They have also illustrated the risks of basing Western security policies vis-a-vis communist regimes on the notion that such regimes will necessarily be moderated and transformed through commercial linkages.

The events in China should send a painfully clear message to all who advocate these linkages on such grounds: Despite a decade of growing U.S.-PRC detente and considerable access to the West’s high technology, credits, capital investment, and export markets, the most doctrinaire leaders of the People’s Republic of China (PRC) were willing to risk sacrificing that country’s increasingly benign image in — and growing economic ties with –the West in order to maintain absolute political, and as necessary, military control over its population.

Unless the United States is willing to be clear in its support of reformist and democratic forces and to impose meaningful penalties in response to unacceptable conduct, the hard-line communists in Beijing will have established that they can act with impunity against the Chinese people and fear no serious economic and financial repercussions from the West.

Despite massive infusions into China of Western capital, technology, equipment, and management and marketing skills, events there have demonstrated that increased commercial relations do not necessarily contribute to the transformation of one-party totalitarian rule to true pluralism and respect for individual freedoms. For that matter, at least in the Soviet bloc, it is evident that expanding economic ties — "commercial bridge-building" as it was termed during the failed period of U.S.-Soviet detente in the 1970s — does not ensure either that internal repression is mitigated or that the foreign adventurism of communist states will be attenuated.

Acknowledging the contribution made to the current foment in China brought on by increasing popular exposure to Western values and liberties and by the Chinese tradition of student leadership in reforming society, it is modern communications, not commercial relations, that have been the largest single influence on and enabler for the popular demonstrations in Beijing.

The rapid dissemination of information through facsimiles, video, audio, and print media coverage has proven to be extremely effective in highlighting the glaring contrasts between the democratic and totalitarian worlds. These devices have also proven enormously helpful in facilitating the efforts of those who would move their regime from the latter toward the former. The contrast between the reaction — both domestic and international — to Chinese repression of dissidents and that of the Soviet Union, for example in Uzbekistan and Tiblisi, testifies to the difference modern communications technology makes where it is present and where it is not.

A key lesson the West would be well advised to draw from recent events in China involves the capacity of communist leaders to undergo dramatic and speedy changes in their public personas. For the past decade or more, Deng Xiaoping has been viewed almost universally as a "visionary reformer" who was devoted to the liberalization of China through dramatic economic change. Throughout the West, Deng was reputed to be a man who appreciated his country’s vital need for Western technology, capital, and export markets and, therefore, one who would do nothing to jeopardize its access to such resources. Deng’s reported direct role in the imposition of bloody martial law to suppress popular dissent should not only explode this "cult of personality" in China but also send a chilling signal to those currently ascribing parallel, benign qualities to Mikhail Gorbachev.

Neither should the West be under any illusions about the risks to its security interests should the mending of the Sino-Soviet rift, begun prior to martial law, continue under more hard-line communist leaders in Beijing. In fact, it should be borne in mind that the repressive elements within China’s leadership, notably Li Peng, have long been influenced by the Soviet Union. (Li received some 15 years of political education and training in the Soviet Union.) Should the anti-democratic forces in China prevail, the USSR could realize a long-sought foreign policy realignment that would trivialize the strategic significance of its recent reverses in Afghanistan, Poland and elsewhere. In this regard, Gorbachev’s depiction of the pro-democracy student demonstrators in the PRC as "hot-heads" and the absence of vigorous Soviet denunciations of the bloody efforts to destroy the Chinese reform movement are particularly illuminating.

Finally, it should be apparent that the West erred in making numerous, largely irreversible economic concessions to the Chinese in terms of access to the Free World’s economic, financial and technology resources in the mistaken belief that economic and political reform had likewise reached an "irreversible" point. Particularly noteworthy in this regard have been decisions to grant the Chinese unconditional entry into the International Monetary Fund, the World Bank, and the Asian Development Bank. With the Soviet Union clamoring for observer status or membership in these same institutions, U.S. and allied decision-makers must not fall prey to the same error once more.

Conclusion:

It is imperative that, as the United States fashions its response to events in the PRC, it does so in support of reformist elements and mindful that other totalitarian nations — most notably the Soviet Union — will be watching closely. The proposed actions in the economic, technology, and financial fields are measured ones. They are designed not to do irreparable harm to the United States’ important strategic relationship with China, but calculated to bring maximum pressure to bear for the restoration of positive trends toward economic and political liberalization in the PRC. If adopted, they can also serve to move China forward on the road to systemic reform and respect for individual liberties.