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Airport. Well, you know that just is not going to change a government's actions. In fact, one of the speakers earlier

today actually equated the Poland sanctions with the reforms in Eastern Europe that are going on now. I think that is a gross misinterpretation of history which I don't want to let go by.

Mr. GEJDENSON. I won't argue with that. But I guess the flip side of that question is, would we be seeing the pressure for change because of economic failure if we had not participated in Cocom, if we had provided unlimited loans and assistance to the East Bloc? I'm not from the hard-line school on these programs, and I recognize the failings of sanctions and restrictions. But again, if you go back during Stalin's purges, should business have continued as usual? You know, it is hard during the activity to be a perfect judge of what the proper response is.

Simply whether or not the sanction topples the government or changes the policy is not the only litmus test. During kristallnacht, when the Nazis began their rampage, it would be difficult even today, knowing all of history, to say because there was one more pogrom in Europe that the United States ought to change its policy to a rising economic power and strong Germany, that it's certainly not going to change; it will isolate the Nazis; it won't-Again, I'm not saying that that's the level we're playing on today, but it is awfully difficult, without hindsight, to determine where that line is. Whether it works or not, maybe the United States is the moral leader of the Western world, which I hope it is, and at some point we may have to say that we're drawing the line here. What we do may not be effective, it may cause injury to our own citizens and our own economy, in fact, but the outrage that has occurred has just crossed that line in the sand for us.

When Pol Pot took over in Cambodia, not only was it difficult to see where it would lead, but they basically imposed their own isolation. We didn't have to respond by cutting off economic relations.

So I think you're right. If you try to make a case in history that economic sanctions unilaterally imposed by the United States somehow toppled governments or changed the very nature of the Communist system of government in Eastern Europe, that would be a very tough case to press. But I can't accept that when we watched Stalin's purges-people estimate as many as 15 or 20 million Russians may have been liquidated by Stalin—that business as usual, had we exchanged serious economic activity, would have been acceptable.

The same thing in Afghanistan. If you are an Afghani and if those were your cousins and neighbors out there being blown to bits by bombs and what have you that the Soviets were bringing in, your line is in a little different place in the sand.

That's what we're trying to figure out here, is how, without simply being Don Quixote and charging at windmills, can we send a very serious message to the Chinese government, try not to do too much damage to American corporations, but also not simply say “well, that's their business, it's their people, and we're just going to go on and try to make a profit here.

Mr. LEWIS. I don't disagree with anything you said. I started my testimony by admitting I wasn't an expert on U.S.-China relations, so I probably should end it by admitting I'm not an expert on U.S.Eastern European relations. But, I think most of the change in Eastern Europe as well as in the Soviet Union comes not from economic sanctions, very little of it, but rather, the failure of their own systems.

I think you asked exactly the right question. How do we respond? What I hope I have pointed out in my testimony is there are different ways to respond beyond just export controls and shooting ourselves in the foot. There are serious diplomatic initiatives that I think can be effective and that we, as a nation, often discount as too ineffectual. There are serious measures that can bring pressure on governments that don't necessarily involve cutting off U.S. exports.

Mr. GEJDENSON. Thank you.
Mr. Gillespie.
Mr. GILLESPIE. Can I make one final comment?

Mr. GEJDENSON. As many as you like. You were patient enough to wait.

Mr. GILLESPIE. Again, I think U.S. business has a moral conscience, and I think basically, if the situation in China got worsesay there is an extended ugly purge and the use of force is repeated-at some point I think you probably would find U.S. business supporting sanctions.

We don't feel sanctions would be effective now. What the Bush administration is doing is a good first step. Should the U.S. Government decide on further sanctions, there would then need to be a lot of preparation to make sure they're multilateral. Let's talk about MFN certification. If we unilaterally withdrew MNF-I suspect we would have trouble getting our European and Japanese allies also to do it-it really would be a suicidal, self-destructive act.

The Chinese would almost certainly retaliate. They would raise tariffs on some of our key imports to China on grain ($700 million sales last year) fertilizers ($200 million), aircraft and parts ($334 million), wood products ($600 million) and plastics and resins ($560 million). The Chinese can play the same game and retaliate.

But what concerns me more is the fact that they might retaliate on our own strategic relationship. I was in government during the '70s and I saw that relationship develop. It developed basically because of our common strategic and political interest, and along with that materialized a common business interest. I think you have to be very, very careful about withdrawing MFN status if you don't prepare and get Europe and Japan to do it at the same time.

In the area of export controls, the Bush administration has stopped liberalization, which we think is good, even though U.S. business pay a price. If you look at our own exports to China, it is clear that Čocom restrictions hurt us more than they do our allies. U.S. industry, by supporting what the Bush administration is doing—by not further liberalizing Cocom restrictions—is willing to pay the price for it. But we think that's far enough to go.

Were you to talk about restricting and reducing the green zones right now, you would be asking Cocom to restrict these for foreign policy and human rights reasons. In the past, they have been amenable to the restrictions for national security reasons, but China is not a threat right now. So I think we have to keep these problems in mind. If the situation deteriorates further, then what the U.S. Government should do is engage in very close consultation with these allies to ensure that these punitive economic sanctions are multilateral

Mr. GEJDENSON. Mr. Handal, did you have another comment?
Mr. HANDAL. Just a very minor point.

You asked a very serious question that I can't answer. I'm a businessman and I'm speaking as an association. We have interests and we talk about those kinds of things. They are very important to us. You're asking a political question. Underpaid though you are, that's what you get paid for. (Laughter.]

Mr. GEJDENSON. Thank you very much. We appreciate your time and effort here.

Without objection, the report mentioned by Mr. Neier will be included in the record. Also, without objection, an essay by Mr. Barnett will be included in the record. The record will remain open for materials that bear on the issues before the subcommittees for five days.

The hearing is now adjourned. Thank you all.
[Whereupon, at 6:13 p.m., the hearing was adjourned.]

APPENDIX 1

OPENING STATELJIT POR JOINT. HEARING ON 0.8.-CHINA RELATIONS

MR. CHAIRMAN, I COMMEND YOU FOR HOLDING THIS HEARING ON WHAT WE

SHOULD DO IN DEALING WITH THE TRAGIC CRACKDOWN IN CHINA.

ONE THING WE

CLJARLY MUST DO, WHATEVER THE REST OF OUR POLICY, IS TO CONTINUE TO

SPEAK OUT LOUDLY AND CLEARLY AGAINST THIS OPPRESSION AND FOR FREEDOM

AND DEMOCRACY.

WE MUST SPEAK WITH A VOICE AS LOUD AND FIRM AS THOSE

BRAVE VOICES AT TIANAMEN SQUARE.

AS THEIR VOICES ARE SILENCED, OURS

MUST GROW STRONGER.

WHEN WE CONSIDER SANCTIONS, HOWEVER, WE MUST REMEMBER THESE

BANCTIONS WILL BE MORE EFFECTIVE IF THEY ARE MULTILATERAL.

IT WILL DO

NO GOOD FOR US TO PULL OUT OF CHINA, ONLY TO OPEN UP MARKETS TO OTHERS

OR TO OUR COMPETITORS.

SANCTIONS, WHEN PROPERLY STRUCTURED, CAN BE AN

EFFECTIVE TOOL IN ASSISTING THE VOICES OF FREEDOM AND DEMOCRACY AS

THEY STRUGGLE TO BUILD A NEW CHINA.

INDEED, IN THE CASE OF CHINA, THERE IS ANOTHER COUNTRY WHICH HAS MORE INFLUENCE THAN WE HAVE, AND LOGICALLY WE SHOULD WORK WITH THAT

COUNTRY IN SETTING POLICY ON CHINA.

BRITAIN IS UNIQUELY SITUATED TO

INFLUENCE EVENTS IN CHINA.

NO SANCTIONS WE COULD TAKT WOULD BE AS

EFFECTIVE AS BRITAIN THREATENING TO ABROGATE THEIR TREATY WITH CHINA

ON HONG KONG.

AND THEY WOULD HAVE EVERY RIGHT TO ABROGATE THAT

TREATY.

THE TREATY STATES THAT RIGHTS AND FREEDOMS "OF SPEECH, OF THE

PRESS,

OF ASSEMBLY, OF ASSOCIATION, OP TRAVEL, OF MOVEMENT,

OT

CORRESPONDENCE" WILL BE ENSURED.

CAN ANYONE, IN LIGHT OF TIANAMEN

SQUARE AND THE SUBSEQUENT CRACKDOWN, BE CONFIDENT THAT CHINA WILL

ENSURE THOSE RIGHTS?

WITHOUT SUCH CONFIDENCE, THE HONG KONG AGREEMENT

IS NOT WORTH THE PAPER ON WHICH IT IS WRITTEN.

MR. CHAIRMAN, I LOOK FORWARD TO HEARING OUR WITNESSES TESTIFY ON U.S. POLICY IN CHINA, INCLUDING ON THE POINTS I RAISED.

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