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The key question before us today is the extent to which the United States Government should take further steps to restrict the cooperation with China which developed over the past decade. Should the United States continue to grant preferences to China that it does not grant to the more politically and economically orthodox countries of Eastern Europe, such as most-favored nation status? Should the United States impose new economic sanctions on China, which our friends and allies are unwilling to impose? Should the United States impose new economic sanctions on China which may hurt American interests or the Chinese people more than they hurt the Chinese Government? How, in the case of China, should the United States reconcile its obvious geopolitical and economic interests with its equally obvious commitment to democracies and human rights?

To help us clarify these issues, we have with us today a series of witnesses from the Executive Branch. Next week we will hear from the private sector.

Testifying today are Ambassador Richard Williams, the Acting Deputy Assistant Secretary for East Asian and Pacific Affairs at the Department of State; Joan McEntee, the Acting Under Secretary for Export Administration in the Department of Commerce; Carl Ford, the Principal Deputy Assistant Secretary for International Security Affairs in the Department of Defense; Priscilla Rabb, the Director of the U.S. Trade and Development Program; William Ryan, President and Chairman of the Export-Import Bank of the United States; and Fred Zeder, the President and Chief Executive Officer of the Overseas Private Investment Corporation.

A little bit later in the hearing we will be temporarily suspending our discussion of China while the Subcommittee on Human Rights takes up a resolution concerning the situation in Bulgaria, but until that time we will proceed with our China hearing.

Before asking the witnesses to testify, let me yield to my colleagues on the committee first, the distinguished chairman of the Subcommittee on Human Rights, Mr. Yatron, for an opening comment.

Mr. YATRON. Thank you, Mr. Chairman.

I want to commend the subcommittee chairmen and ranking members for convening this hearing here today. The hearing is timely in light of the continuing turmoil in China.

Our reaction to the ongoing crack-down on pro-democracy demonstrators and what it means for the future of our relationship with China needs to be addressed. In responding to China's repression, the President has been entirely justified in seeking to balance our human rights concerns with our strategic interests in China, but the unanimous approval of the recently-passed sanctions amendment in the House suggests that the American people want a stronger response.

The questions before us now are: have those sanctions which are already in place effectively pressured the Beijing Government to curtail its repressive measures, and are similar sanctions being invoked by our allies?

In the past the U.S. has imposed military and economic sanctions against other countries for human rights violations, such as South Africa, Poland, Libya, the Soviet Union, and Panama

with varying degrees of success. Some will argue that China will not yield to foreign pressure and opinion and that further sanctions, as called for in the House-passed amendment, would have little or no impact on China's human rights conduct. Others will suggest that to influence change in China, a stronger U.S. reaction is in order.

One fact is clear, the repression continues with no end in sight. As of now, Congressional sanctions have not been enacted into law. A significant policy difference between the branches will only benefit Beijing, and I would hope that today's hearing will enable the Congress and the Executive to maintain a bipartisan approach to events in China.

Thank you, Mr. Chairman.

Mr. SOLARZ. Mr. Gejdenson, the chairman of the Subcommittee on International Economic Policy and Trade.

Mr. GEJDENSON. Thank you.

I would first commend Chairman Solarz for his leadership on this issue today and on the House Floor as we did the Foreign Affairs bill in recent weeks. The situation in China is one that I think all of us were moved by the bravery of the students in China, and there is some pressure to balance our other interests with our concern for the students and democracy.

But I think one thing that must be clear from our actions here and from the Executive branch is that there are no markets so immense, no profits so large, that we should set aside the values that hold us together as a nation, and I think the world was outraged at the action taken by the Chinese Government against their own people.

We have acted in the Congress in a bipartisan manner, unanimously passing these sanctions, and while there may be differences between the Congress and the Executive branch, I would say that there is no difference in our desire to see a change in the way the Chinese Government responds to its own people. I think that Congress has a better sense of the pulse of the American people and their outrage over what happened to the Chinese students and others in China.

I have drafted a discussion draft of a bill that includes additional economic measures that might be used against China. This discussion draft includes revoking China's most-favored nation status, prohibiting the Export-Import Bank from operating in China, unilaterally stopping the export of dual-use commercial goods to the Chinese military and police, multilateral negotiations to roll back the favorable export control treatment accorded to China and renegotiating the U.S.-China bilateral multi-fiber agreement.

In order to encourage a multilateral approach, which I think would be best, I have suggested in this discussion draft that the President lead our allies within six months at a conference to focus on a common approach to China. We have seen the President of the United States take leadership at economic summits and summits that deal with the defense of the Western world at NATO, and I think it is clearly his role and our role as the leading democratic nation to lead other democratic nations in a conference dealing with the freedom and the plight of the Chinese people.

Some provisions of this draft clearly fall within the jurisdiction of other House committees. For instance, we must closely work with the Ways and Means Committee on most-favored nation status, the Banking Committee on the Multilateral Development Bank, and the Government Operations Committee on U.S. Government procurement.

The Congress must realize there is no silver bullet. Sanctions passed by the House and those announced by the President will not alter the Chinese Government's behavior overnight. There is no one simple act that will put an end to the bloodshed, the massacres and the mock trials of Chinese citizens. The struggle for true democracies in China, which began 70 years ago with Chinese students participating in the May 4th movement in 1919, will be long and arduous.

I look forward to the testimony from the administration today. I hope that these discussions will help maintain the bipartisan spirit of cooperation which has thus far guided the response to the China situation.

I thank you, Mr. Chairman.
[The prepared statement of Hon. Sam Gejdenson follows:

OPENING STATEMENT

REPRESENTATIVE SAM GEJDENSON

CHAIRMAN, SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY AND TRADE

THURSDAY, JULY 13, 1989

U.S.-CHINA RELATIONS

I AM PLEASED TO JOIN TODAY WITH MY COLLEAGUES CHAIRMAN YATRON AND

CHAIRMAN SOLARZ TO DISCUSS THE CRUCIAL ISSUE OF U.S.-CHINA RELATIONS.

THE FOREIGN AFFAIRS COMMITTEE STRUGGLED IN THE FOREIGN AID BILL, AND

WILL STRUGGLE THROUGHOUT THIS SESSION OF CONGRESS, TO CONSTRUCT A

BI-PARTISAN POLICY TO PROMOTE FREEDOM AND DEMOCRACY IN CHINA,

THE

FACT THAT THREE SUBCOMMITTEES HAVE COME TOGETHER TO HOLD TODAY'S

HEARI NG DEMONSTRATES THE COMPLEX NATURE OF CRAFTING SUCH A POLICY.

OVER THE PAST SEVERAL YEARS, WITNESS AFTER WITNESS TESTIFIED

BEFORE THIS COMMITTEE THAT THERE ARE SIGNIFICANT ECONOMIC
OPPORTUNITIES AND PROFITS IN CHINA FOR AMERICAN BUSINESS.

BUT THERE

ARE NO MARKETS SO IMMENSE AND NO PROFITS SO LARGE THAT WE SHOULD SET

ASIDE THE VALUES THAT HOLD AMERICANS TOGETHER AS A NATION.

BECAUSE THE ACTIONS OF THE CHINESE GOVERNMENT ARE SO ABHORRENT TO

INTERNATIONALLY RECOGNIZED STANDARDS OF HUMAN RIGHTS, THE HOUSE OF REPRESENTATIVES HAS ALREADY APPROVED A PAR-REACHING PACKAGE OP ECONOMIC SANCTIONS AGAINST CHINA, THIS PACKAGE CODIPIRS INTO LAW SANCTIONS ALREADY ANNOUNCED BY PRESIDENT BUSH, ESTABLISHES CONDITIONS

UNDER WHICH THE SANCTIONS SHOULD BE LIFTED, AND IMPOSES ADDITIONAL
SANCTIONS NOT IMPOSED BY THE EXECUTIVE BRANCH.

THE PURPOSE OF TODAY'S HEARING IS NOT ONLY TO EXAMINE THE ACTIONS

ALREADY TAKEN BY THE ADMINISTRATION AND CONGRESS, BUT ALSO TO LOOK AT

THE WISDOM AND POTENTIAL EFFECTS OF IMPOSING ADDITIONAL SANCTIONS UPON

CHINA.

I HAVE RECENTLY DEVELOPED A DISCUSSION DRAFT OF LEGISLATION

WHICH GOES BEYOND THE ACTIONS ALREADY TAKEN BY THE ADMINISTRATION AND

THE HOUSE.

WHILE I AM NOT AT THIS POINT ADVOCATING ALL OF THE

LEGISLATIVE OPTIONS IN THIS DISCUSSION DRAFT, I BELIEVE IT IS

IMPORTANT THAT CONGRESS CONSIDER THE FULL-RANGE OF REASONABLE OPTIONS

AND BE PREPARED TO RESPOND QUICKLY TO THE EVER-CHANGING SITUATION IN

THE PRC.

WE MUST BE READY TO MOVE ON MORE THAN ONE LEGISLATIVE TRACK

WITH RESPECT TO CHINA SANCTIONS.

SUBSEQUENT TO THE HOUSE PASSING THE CHINA AMENDMENT TO THE

FOREIGN AID BILL, THE SITUATION IN CHINA HAS CONTINUED TO DETERIORATE.

NEWS REPORTS DISCLOSED THAT OVER 10,000 CHINESE CITIZENS HAVE BEEN

ARRESTED IN THE CRACKDOWN.

A SECOND VOICE OF AMERICA REPORTER HAS

ALSO BEEN EXPELLED FROM CHINA.

FURTHERMORE, A C.I.A. BRIEFING ON THE

CHINA SITUATION ON TUESDAY ONLY REINFORCED MY CONSIDERABLE CONCERN

ABOUT THE POLITICAL AND HUMAN RIGHTS SITUATION IN CHINA.

THE TYPES OF ADDITIONAL MEASURES AGAINST CHINA IN THE DISCUSSION

DRAFT INCLUDE REVOKING CHINA'S MOST-FAVORED-NATION STATUS,

PROHIBITING

THE EXPORT-IMPORT BANK FROM OPERATING IN CHINA, UNILATERALLY STOPPING

THE EXPORT OF DUAL-USE TECHNOLOGY TO CHINA IF THE CHINESE MILITARY AND

POLICE ARE THE END-USERS, MULTILATERALLY NEGOTIATING TO ROLL BACK THE

FAVORABLE TREATMENT ACCORDED TO CHINA IN EXPORT CONTROLS, AND

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