2000-05-02 At The East Asian Institute

  REMARKS BY SAMUEL R. BERGER- ASSISTANT TO THE PRESIDENT FOR NATIONAL SECURITY AFFAIRS ON CHINA

The East Asian Institute Columbia University New York, New York

It seems fitting, at a time when our nation is debating an agreement that will affect our relationship with China for years to come, to come to a place that has contributed so much to our understanding of Asia and its role in the world.

The students who graduate from Columbia in two weeks enter a world where globalization not only has shrunk the map; it fundamentally has altered how the world works. Today, it is defined as much by global markets as geopolitics, megabytes as megatons.

So it comes as no surprise that the debate over whether we will give China permanent normal trade relations status -- called PNTR -- and support its entry into the World Trade Organization is seen by many as essentially a trade debate: Will our workers benefit or won't they?

Will we gain jobs or lose them? Will our economy reap the rewards or suffer the consequences? In part, that is what the debate is about. I believe the answers to those questions are clear.

The agreement we negotiated requires China to open its markets in sweeping ways to our products and services. Chinese tariffs, from telecommunications to agriculture, will fall by half or more over the next five years. For the first time, our companies will be able to sell and distribute products in China made by workers in America, without being forced to move factories to China. We will have much better access to a market of over a billion people; that will mean more American exports, growth and jobs. At the same time, this agreement provides safeguards for American producers against any surges of imports in our market from China.

What do we give in return? All we agree to do is maintain the market access we already offer to China and treat China the same as the other 132 WTO members whose trade status is not subject to yearly renewal. That's it. We do not lower our tariffs one cent. We do not in any way, shape or form make it easier for China to sell products in America. And we do not give up any safeguards that protect our market now.

Keep in mind: China will enter the WTO whether we pass PNTR or not. What the Congress must decide is whether America will enjoy the benefits of the agreement we negotiated, or whether we will forfeit those benefits to our competitors in Europe and Japan. The issue is whether, having opened the door of the world's largest market, we are simply going to hold it open for our competitors or walk in ourselves.

Some say that rejecting PNTR for China is simply a vote for the economic status quo. I disagree. In the global economy, companies must produce for global markets to remain competitive. When your competitors have that advantage over you, standing still means falling behind. One-third of America's new jobs in this decade have been tied to exports - and 96 percent of our customers lie beyond our borders. We cannot afford to take our prosperity for granted; it depends on what we do, not who we are.

In short, the economic arguments for PNTR are overwhelming. But they are only part of the reason why we should move forward. For this is a national security issue as well. What is at stake here is not only how we build our economy but also how we build a safer world. Remember: we have the luxury to focus on expanding prosperity and seeking new markets today because the hard-won victory in the Cold War made possible a world largely at peace, a world in which our values of democracy and openness are ascendant. But this is not a world without dangers. And that is especially true in Asia -- with tensions across the Taiwan Straits, on the Korean Peninsula, in South Asia, and elsewhere.

The United States is a Pacific nation. We have fought three wars in Asia in the 20th Century. Our future is tied to Asia. And the stability of Asia -- economically, politically and militarily -- is inextricably entwined with the stability and direction of China. As China develops over the next decade, the path it illuminates or the shadow it casts will be felt far from its borders.

China will write that future as it answers some fundamental questions: It has extended some freedoms -- but will it gain the stability that can only come from respecting human rights and permitting opposing political voices to be heard? It is reforming its economy -- but will it unleash the essential forces necessary for sustained growth in the information age -- namely access by its people to knowledge and encouragement of innovation? It has become engaged in the world -- but will it make a broad commitment to work within the global system and do its part to address global challenges such as the spread of weapons of mass destruction and climate change? It is growing stronger -- but will it use that strength to build a more secure Asia, or to threaten the freedom of its neighbors?

These are the real questions for us today: How will China evolve, both internally and in the way it relates to the world? And how do we best encourage China to evolve in a constructive direction? It is my strong conviction that approval of PNTR and accession to the WTO will make China more likely to emerge as a more open, stable, cooperative nation that plays by the rules of the international system and provides greater freedom to its people. If we reject PNTR, I am equally convinced that we will subvert that goal and damage our national security. Let me

explain why.

As we in the United States debate the future of our relationship with China, we must remember that there is also a struggle about the future going on today in China. To understand it, we have to understand the profound challenges facing this enormously complex country.

China today is certainly not an open society, but it is more open than it was two decades ago. Over the last 20 years, China has made great progress in building a new economy, lifting more than 200 million people out of abject poverty. In ways that are incomplete, but nonetheless

real for millions of ordinary Chinese citizens, the changes within China have given its people greater scope to live their lives.

But China's economy still is not creating jobs fast enough to meet the needs of its people. Only a third of the economy is private enterprise. Today, $300 billion worth of products -- an amount equal to one-third of China's gross domestic product -- sits in Chinese warehouses because they are so poorly made. Meanwhile, at least 100 million people are looking for work. And every year, 12 million more jobs must be created for people entering the workforce.

The more reform-minded figures in the Chinese leadership who negotiated China's entry into the WTO are not blind to these realities. They realize that if they open China's antiquated market to global competition, they risk unleashing forces beyond their control -- more unemployment in the short term, perhaps even social unrest and greater demands for freedom. But they have decided that without competition from the outside, without opening their markets, without building their future in cooperation with others, China will not be able to build a modern, successful economy. By agreeing with us to join the WTO, they have made a choice with profound and potentially very positive consequences.

Why? First of all, that choice can change the way China relates to the world.

China's entry into the WTO -- into the global economy -- will enmesh China into an international system that will hold it to rules and laws universally applied. In fact, for the first time, some of China's most important decisions will be subject to the review of an international body, with binding settlement procedures to resolve disputes. Opponents say that none of this matters because China will break its promises. The fact is, for the most part, when China has entered into a global treaty regime, its record of compliance is quite good. This is true for the Biological Weapons Convention, the Chemical Weapons Convention, the Nuclear Non-Proliferation Treaty, and the Comprehensive Test Ban Treaty. China has strengthened its export controls over

dangerous materials as a result of these treaties. We still have serious problems with some of China's sales, particularly of missile technology, where China is not bound by any international obligations. But overall, China has shown that it is far more likely to abide by international norms when it is operating within an international system that it has embraced. And if China does not comply with all of its WTO obligations, its actions will be subject to rules accepted and judgments enforced by 135 nations. So it is profoundly in our interest to embrace China's entry into the WTO by passing PNTR.

By agreeing with us on the terms of their entry into the WTO, China also has chosen the path of more constructive relations with the United States. A stable, cooperative, clear-eyed relationship with China increases the likelihood that we can cooperate -- bilaterally, in the UN

Security Council and elsewhere -- on such crucial issues as nonproliferation, regional security, peacekeeping, human rights and arms control. We should have no illusions: problems with China will not disappear, but stabilizing U.S.-China relations contributes to the conditions necessary to deal directly with issues of deep concern to us. We will help do that if we now approve PNTR.

PNTR is especially important for our ability to play a constructive role on the issue of Taiwan, particularly at this critical time. Since 1979, we have tried to maintain stability across the Taiwan Strait, by recognizing one China, encouraging a peaceful resolution of differences,

and promoting dialogue. China, Taiwan -- and our relationship with both -- have benefited.

Chen Shui-bian, the newly-elected President of Taiwan, recognizes this reality. He knows that good U.S.-China relations are vital for Taiwan's own security because each benefit from a stable environment. PNTR also is very important for Taiwan economically. Taiwan companies export

products from China and benefit from a strong Chinese economy. When China joins the WTO, so will Taiwan. With both in the WTO, economic ties will grow, and so will the costs of confrontation. It is important to understand that Taiwan supports China's membership in the WTO, and is urging us to grant PNTR.

Second of all, China's choice to join the WTO will help change China internally -- hardly overnight, but over the longer-term. To join the WTO, China has agreed to stop protecting its state-owned industries from competition. Why is that important? In the past, virtually every

Chinese citizen woke up in an apartment or house owned by the government, went to work in a factory or farm run by the government and read newspapers published by the government. State-run workplaces operated the schools where they sent their children, the clinics where

they received health care and the stores where they bought food. That system has been an important source of the Communist Party's power. Now, it is shrinking. And when China joins the WTO, the state sector will shrink faster as the private sector grows stronger. This will speed the removal of government from vast areas of people's lives. In important ways, it will take the command and control out of communism.

Already, many of China's best and brightest are starting companies, or seeking jobs with foreign-owned companies, where they generally get higher pay, more respect, and a better working environment. That causes Chinese companies to improve the benefits they offer their workers to stay competitive. This process will accelerate as China opens its markets. That is the surest way to improve labor standards in China.

At the same time, these changes have increased labor and political activism, and demands for greater representation and accountability. Last year alone, there were more than 120,000 labor disputes across China. In some places, the government has responded by cracking down. But in others, it has responded by giving people a greater say. Local elections are now held in most of China's 900,000 villages, and have been introduced in some cities as well. In many places, workers are taking grievances to court - and winning. This is the start of a process of economic and social change that we should welcome and encourage by embracing China's entry into the WTO.

To join the WTO, China's reform-minded leaders have also chosen to accelerate the information revolution within China. In the past year, the number of Internet addresses in China has more than quadrupled from two million to nine million. This year, that number is expected to grow

to over 20 million. When China joins the WTO, it will eliminate tariffs on information technology products, making the tools of communication even cheaper, better and more widely available. The four major Internet providers in China just announced that this year, they will pour more than $1 billion into improving Internet connections.

It's not just the Internet. Today only one in eight Chinese have a telephone. But just last week, as these changes gain momentum, authorities gave approval for China's mobile phone providers to offer access to more than 40 million new subscribers -- which is expected to grow to 100 million by year's end. When the Chinese people can easily communicate with each other and with people around the world, they will have gained an essential ingredient for freedom. And cutting-edge American information technology companies will have a chance to contribute to that process only if we pass PNTR.

There are no guarantees about the future that will come with China's entry into the WTO with U.S. participation. It depends on decisions that its leaders and people are yet to make. There is no assurance that they will choose political reform. But by accelerating the process of economic change, China will be forced to confront that choice sooner, and the imperative for the right choice will be stronger.

Now, some people agree we should let China into the WTO, but believe we should wait until China changes before we approve PNTR. But if I am right that joining the WTO and opening its economy will promote change in China, then the United States should be an instrument of that change, not a bystander.

Others argue that we need an annual vote in the Congress to keep the pressure on China to improve human rights or religious freedom. But for 20 years in a row, this vote simply has affirmed our trading relationship with China. It has become a contentious ritual, not an instrument for change. But that does not mean that trade should be a sufficient human rights policy or that we should let up the pressure on China to improve human rights. That's why we sanctioned China under the International Religious Freedom Act last year. That's why the State

Department issued another tough report on China's human rights record this year. That's why two weeks ago, we sponsored a resolution in the UN Human Rights Commission condemning China's record, even when many of our friends were unwilling to do so. Reform in China will come only through a combination of internal change and external validation. We must contribute to both.

I've argued today that China's membership in the WTO and a vote in favor of PNTR will encourage the right kind of change both within China and in how China interacts with the world. At the same time, I am deeply concerned that rejection of PNTR will have serious and substantial consequences for our national security.

Rejecting PNTR is a risky proposition. Rejection will set off a downward spiral that could disrupt stability in Asia, diminish the chance of dialogue across the Taiwan Strait, and deflate hopes for a more constructive relationship between the U.S. and China. Rejecting PNTR would be the worst possible blow to the best possible hope we have had in more than 30 years to encourage positive change in China.

For starters, it will hurt the forces within China that are trying to open that country to change, and help those determined to oppose change at any cost. The very same interests in China most threatened by the decision of its leaders to accept the WTO reforms and open their economy

are also the hard-liners on China's course in the world. These are the ones who've argued that cooperating with the US is a mistake; who are ready to settle differences with Taiwan by force; who have the most at stake in selling dangerous technologies around the world. In their view, China should respond to the pressures of globalization by hunkering down instead of opening up.

Because the WTO agreement we negotiated is so manifestly in our economic interest, the Chinese government and people simply will not believe we rejected it for economic reasons. They will suspect that rejection of PNTR is a strategic decision -- whether it is or not -- to pursue a course of confrontation, contention, and containment. And if we treat China as an adversary, we are more likely to make it so, and we will find ourselves confronting each other across Asia and the world.

Ask yourself: would we be more secure five or ten years down the road taking that path? What message would we be sending China about the benefits of making concessions to the United States? What kind of progress do you think we would make in China on labor rights, human

rights or the environment? What kind of cooperation do you think we would get on critical issues such as proliferation, arms control, and peacekeeping? That too is what is at stake in this decision.

A second consequence of rejecting PNTR is that it could weaken China in ways that would harm our interests. If reformers in China are dealt a blow and China turns inward, economic and environmental degradation would deepen. The hard-line leadership would likely stoke anti-Western nationalism to cope with the resulting social and political strains. In the face of internal decline, uncertain Chinese authorities are more likely to clamp down and lash out. If we've learned anything from Japan's long recession and Russia's economic troubles, it is that the

weakness of great nations can pose as big a challenge to America as their strength.

A third consequence of rejecting PNTR would be to increase tensions and instability between China and Taiwan at a critical time. China's suspicions about our motives would increase and our ability to play a positive, stabilizing role would decrease. That is not in Taiwan's interest. That is not in China's interest. And that most certainly is not in our interest.

Fourth, rejection of PNTR would weaken the United States throughout Asia. Every country in the region supports our taking this action. All our friends and allies in Asia regard U.S.-China relations as critical to the future stability, prosperity, and peace of the region. All look to us to strike the right balance -- to avoid the twin threats of Chinese weakness and Chinese belligerence.

Asian leaders could well regard American rejection of PNTR as a sign that America no longer recognizes the basic requirements of our role as a leader in. Because many countries would see these developments, at least in part, as a result of American short-sightedness, we could end

up with reluctant and uncertain friends. Japan and the Republic of Korea would be particularly apprehensive under these conditions.

Fifth, and more broadly, I believe rejection of PNTR would send a jarring signal to friends and allies in the world that America is turning inward; that ironically, at the moment of our greatest strength and prosperity, we chose to retreat instead of lead. If America is seen as an increasingly unreliable, increasingly unilateral nation, our capacity to lead on a broad range of issues -- from arms control to global poverty to peacemaking -- would be compromised. That would be a deep self-inflicted wound.

The choice before us could not be more clear, or consequential.

By embracing China's membership in the WTO and approving PNTR; by strengthening the reformers instead of the hard-liners in China; we have a chance to encourage the best possible outcome: a China with a leadership that finds strength in partnership with its people and the world. Rejecting PNTR, on the other hand, wouldn't free a single prisoner in China, or create a single job in America, or reassure a single American ally in Asia. It simply would empower the most rigid, nationalistic elements in China. And our friends and allies would wonder why, after 30 years of pushing China in the right direction, we turned our backs when it finally appeared to be willing to undergo many of the reforms we have been urging.

We know that the path China takes to the future is a choice only China can make. We cannot control that choice, we can only seek to influence it. Granting China PNTR won't create a perfect China and it certainly won't put an end to all of our concerns. But it will increase the

probability of a future of greater openness and freedom for China. It will contribute to a more peaceful and secure Asia. And it will help create a future of greater peace and prosperity for the world our children will inherit.

This is an historic opportunity. It's the right thing to do. I hope our Congress will agree.