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July 14, 1989



Dear Mr.


In response to your request at the hearing yesterday, I am pleased to explain further how Eximbank is impacted by Section 2(b) (1) B of the Export-Import Bank Act of 1945, as amended, the provision we commonly refer to as the "Chafee Amendment". since 1978, Congress has recognized that Eximbank's mandate is to support the sale of U.S. goods and services overseas and that attempts to politicize its programs are likely to hurt U.S. suppliers more than they are likely to advance policy concerns. Congress did, however, recognize that there may be situations where Eximbank should deny transactions for political reasons and specified a procedure to govern the bank.

The procedure is set forth in Section 2(b) (1) B of the ExportImport Bank Act of 1945, as amended. That section states, in pertinent part: "Only in cases where the President determines that such action would be in the national interest and where such action would clearly and importantly advance United States policy in such areas

international terrorism, nuclear proliferation, environmental protection and human rights, should the Export-Import Bank deny applications for credit for nonfinancial or noncommercial considerations". The authority to make determinations under this section has been delegated by the President to the Secretary of State.


do so,

In short, Eximbank may not currently deny applications for credit in China for human rights reasons without a determination from the Secretary of State that it is in the national interest to

either case-by-case or with respect to China generally. In view of the special sensitivity of this issue with respect to china at the present time, we are referring each application for credit there to the Department of State for a human rights clearance.

Please let me know if I can provide any further information on this matter.



William F. Ryan
Acting President and Chairman

The Honorable
Stephen J. Solarz
U.S. House of Representatives
Washington, D. c. 20515


Statement by
American Electronics Association

Electronic Industries Association

before the

House Foreign Affairs Committee Subcommittees on International Economic Policy and Trade,

Human Rights and Asian and Pacific Affairs

July 19, 1989

Thank you Mr. Chairman and other distinguished members of the committee for the opportunity to comment on the impact of economic sanctions against China. Due to the rescheduling of

the hearing, we were unable to testify; however, our industry

is unanimously united on the ineffectiveness of trade

sanctions. As a demonstration of the industry consensus on this issue, AEA and EIA are able to submit a joint statement.

We are commenting today because of the recent tragic events in

China. The massacre in Tiananman Square and the subsequent execution and repression of the students and workers is repugnant to our industry and each of us individually.

While we deplore this tragic turn of events, we believe the imposition of sanctions beyond those imposed by the

Administration is inappropriate.

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coutrnies have had little, if any, affect on the domestic

policies targetted for change by the United States.

In the case of China, additional sanctions will only serve to

further alienate China from the West.

We would argue that the

cause of democracy is best helped through continued ties with

the West.

China is and will continue to be strategically

important to the United States.

The Administration has clearly expressed its revulsion to the
Chinese government's deplorable actions, while maintaining

support and encouragement for democratic reform.


Administration's response was correctly measured and

coordinated with our allies.

We encourage. Congress to work

with the Administration in evaluating the situation and, where

necessary, taking further action.

If additional sanctions are

imposed at this time, we limit the options for future action

should the situation deteriorate further.


We believe, in situations such as this, that the country is

best served when the President is given wide discretion to respond appropriately. While we recognize that this is primarily a foreign policy issue, you have asked us to comment on the commercial implications of the existing sanctions as well as those proposed by the House Foreign Affairs committee.

Impact of sanctions on 0.8. Business

Today American business and financial institutions are being

encouraged to reduce our trade deficit and to help countries

such as Hungary and Poland with their economic reform and


Until very recently, the United States

government was urging us to make the same contribution to the

Peoples Republic of China.

Electronics manufacturers and

related companies in the aircraft industry have been in the

forefront of these challenges.

American companies were just

beginning to make in roads into China.

However, to paraphrase Schultz, trade cannot be turned on and

off like a light switch.

It is truly ironic that having

followed the Government's urging to penetrate the Chinese

market, not only to improve our trade balance, but to provide

positive role models for their economic and political reform,

we are now being told we must cease contact just when our

positive influence is most needed.


The exports of AEA and EIA companies are the types of goods that facilitate communication, the exchange of information,

and the ability to share ideas.

The ability to share

information is critical to democratic reform.

In fact, the

Chinese students used facsimile (fax) machines to communicate with each other, organize their efforts, and provide support and encouragement in the face of adversity.

While we share your outrage, the last thing we want is to

further alienate ourselves from the Chinese students and

workers and in so doing indirectly support the Chinese government in its efforts to keep out the Western democratic


In 1988, the United States exported $529.5 million in

electronics products and imported $668.2 million. While China is currently not the largest export market for the U.S.

electronics industry, its potential is tremendous.

In fact, in a survey of our members, we found that suspension of munitions license, without an exemption for commercial

sales would cost American electronics firms well over $1.6

billion representing not only lost sales but lost
opportunities as well. If commercial sales are
exempt, the loss is substantially less at $26 million.

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