November 14, 2005    Volume 12, No. 20

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U.S. Has No Plan On How To Deal With China:
U.S.-China Commission Advises Congress To Fill Bush's Policy 'Vacuum'


The Bush administration does not have a coherent strategy for dealing with China. As a result, Congress must step into this policy "vacuum," according to the U.S.-China Economic and Security Review Commission (USCC) in its latest annual report.

"The commission's greatest concern is that the United States has not developed a fundamental assessment of how American national interests are affected by our relationship with China," said Richard D'Amato, chairman of the commission at a Capitol Hill press conference. "A detailed architecture that advances all areas of cooperation with China while reducing negative impacts on American economic and security interests still does not exist."

In contrast to the United States, "China has a very well crafted integrated plan towards us and as a consequence they are able to operate far more effectively towards us than we are toward them," added Roger Robinson, vice chairman of the commission. "This is something that we feel has to change."

On the eve of Bush's upcoming trip to China on Nov. 20, USCC commissioner Carolyn Bartholomew said: "The test of President Bush's visit is not going to be whether he brings back any more promises. The question is what are the results?" The U.S. needs China to take action on currency manipulation and protecting intellectual property rights. "What do we have to show for all the promises other than a deficit of $200 billion, the loss of billions of dollars a year in intellectual property rights and the loss of our manufacturing base?" Bartholomew asked.

When asked by Manufacturing & Technology News why a policy vacuum toward China exists within the Bush administration and whether that in itself warrants study, USCC commissioners replied that Bush has been focused on other issues. "The administration has allowed terrorism to crowd out the entire debate," USCC commissioner William Reinsch said in a conversation after the press conference. "We don't debate education any more. We don't debate economics. We don't debate manufacturing. We debate tax cuts and the war on terrorism and that's the end of the story."

Added Bartholomew: "Bush has decided that our manufacturing base doesn't matter. It's gone. What's going to happen is people are going to wake up too late on these things."

Commission members said that the Bush administration must stop treating economic issues separately from national security. Acquiescing to China on economic matters to gain cooperation on North Korea isn't working, said Robinson. "If they think the North Korea [situation] requires China's participation and activism, then look at the quality of it: there is no use of Chinese leverage to resolve the North Korea nuclear crisis. There is no support for sanctions or the Proliferation Security Initiative. It's very modest. So what are we paying for again with trade and other things?"

Robinson, who was appointed to the commission by Senate Majority Leader Bill Frist (R-Tenn.), pointed out that commission members overwhelmingly approved the USCC annual report by an 11-to-one vote. "Partisan considerations have never been an issue for this commission," he said. "It has managed to attain that often commented on but rarely achieved Washington objective of laying partisan considerations aside and focusing squarely on the national interests."

Even the one dissenting commissioner - Reinsch - said he agreed with the majority on manufacturing issues. "The commission was constrained in some of its recommendations because it's the U.S.-China Commission, it's not the Save the U.S. Manufacturing Base Commission," Reinsch said. "When it comes to doing what the United States needs to do, I'm in accord with them."

Along these lines, the commission took the unusual step in its report to reinforce the recent recommendations made by the National Academies (in its "Rising Above a Gathering Storm" report) to boost U.S. competitiveness. D'Amato said the United States "needs to pay attention to our technological competitiveness and put in place new programs - extensive programs - and even Apollo-like-level programs" in science and engineering education and research and development. "We are lagging and we can't blame the Chinese for everything," he said.

The commission recommends that Congress step into the China policy void. It supports passage of the controversial Graham-Schumer China Free Trade Bill that would impose across-the-board tariffs of 27.5 percent on all Chinese imports if China does not revalue its currency. "We have met with the staffs of the senators and they are prepared to go forward with the leadership on the bill," said D'Amato. "We think the genesis of the [Sen. Charles] Schumer [D-N.Y.] bill is as valid today as when they got their first 68 votes on the Senate floor. There has been no progress on the currency issue to speak of so we support that recommendation." Added Robinson: "We are just trying to spur action that today has eluded us."

The commission voiced equal concern over China's extensive offensive military modernization program and the strengthening of every aspect of its armed forces. Its aim is to "confront the U.S. and allied troops in the region," said Robinson. "A major [Chinese] goal is to be able to deter, delay or complicate a timely U.S. and Allied intervention in the event of an armed conflict over Taiwan so that China can overwhelm Taiwan and force a quick capitulation by its government."

Taiwan is quickly losing any military edge it might have, due to its own political squabbling over arms packages offered to it by the United States. "We need to work with Taiwan to make sure there is a robust deterrence on the part of the Taiwanese," said D'Amato. China's military superiority over Taiwan is "destabilizing," Robinson added. "In a conflict scenario we might be asked to sacrifice blood and treasure and we want to ensure that there is adequate burden sharing and commitment on the part of Taiwan."

On other issues, the U.S.-China Commission recommends that Congress reform the approval process for foreign acquisitions of U.S. companies. The Chinese have $800 billion in spare cash and will be tempted to start buying U.S. companies, said D'Amato. The Committee on Foreign Investment in the U.S. (CFIUS), chaired by the Department of Treasury, must "ensure that its standards of review include national security, which includes economic factors," he said.

The commission also recommends that Congress pass laws to forbid U.S. companies operating in China from providing Chinese authorities with information on dissidents. The recent disclosure that Yahoo had done so agitated commissioners. They encourage Congress to pass a law requiring that U.S. companies disclose any such requests from the Chinese government. "The purpose of this is to try to put some chilling effect on the Chinese government pressuring U.S. companies and give U.S. companies an argument to use as to why they should not be asked to act in this anti-democratic manner," said D'Amato. If legislation is drafted, U.S. companies "would probably be nervous about reporting requirements" and could be expected to lobby Congress against approving such a measure, said D'Amato.

Both D'Amato and Robinson said it's important for President Bush to get more involved in policy issues related to China and bone up before he travels there this month. "It's a long plane ride and this [the USCC annual report] is very good reading for the president and his staff on [their] way to China," said D'Amato. "Required reading," chimed in Robinson.

The 262-page "2005 Report To Congress of the U.S.-China Economic and Security Review Commission" is located at

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