Text: Senator Lugar Urges Strategic Dialogue Between U.S., China
(Keynote speech at Hudson Institute international conference)

The Bush administration will have to find a way to lessen tensions between China and Taiwan, according to Senator Richard Lugar (Republican of Indiana).

Lugar offered that assessment in a January 11 speech at a conference on China and Taiwan sponsored by the Hudson Institute in Indianapolis, Indiana, the senator's hometown.

Lugar urged a continued active U.S. presence in the region.

"The stakes are too high for the United States to lower our security profile in East Asia," he told participants at the conference entitled "The USA, Taiwan, and the PRC: Security and Strategy after the Elections of 2000."

"Neglect of the region would have long-term consequences for U.S. security, open markets, regional stability, and the promotion of democracy," Lugar cautioned.

It is in America's self-interest, Lugar said, to "diligently seek an improvement to the unstable relationship between China and Taiwan."

Any armed conflict between Beijing and Taipei, "whatever its catalyst, would surely draw in the United States, destabilize the entire region, compel an increase in U.S. defense expenditures, adversely affect the global economy, and turn U.S.-Sino relations back to Cold War calculations," he warned.

No U.S. administration could "stay aloof during a Chinese attempt to take Taiwan by military means," he said, and if Washington were to do so, "American credibility would suffer throughout the region and beyond."

America's alliance with Japan and the U.S. forward-deployed military presence in East Asia would also suffer, the senator said. "It has been and must remain U.S. policy to convince the parties that only a peaceful resolution of their differences is acceptable," Lugar said.

The Indiana Republican said a meaningful bilateral strategic dialogue between Washington and Beijing "would warm the climate for considering Cross-Strait matters."

Similarly, Lugar said, the United States should have "a continuing and comprehensive dialogue with the new leaders in Taiwan to ensure they do not develop their policies without being fully informed of U.S. positions and interests."

Active American dialogue with Beijing and Taipei, he said, "can clarify that reckless behavior by either party will have serious and predictable consequences for U.S. support and acceptance."

While aspects of Chinese policy remain troubling, Lugar said, expanded U.S. trade and investment with China will benefit both countries.

Permanent Normal Trade Relations (PNTR) status for China, which President Clinton signed into law last year, will "help open Chinese markets" to American goods, services and investments, according to Lugar.

Furthermore, he said, PNTR will "help integrate China into the international economy; and it will subject China to rules by which the international economy is managed."

Lugar said PNTR should also encourage China's economic reformers "to continue re-structuring the economy."

While highlighting the Clinton administration's legislative victory on PNTR for China, Lugar said the Bush administration "will have to devote considerably more attention to East Asia than the Clinton administration has done."

Following is the text of Lugar's remarks:

(begin text)

United States, China, and Taiwan: The Policy Calculus
Keynote address by U.S. Sen. Dick Lugar
to the Hudson Institute international conference on
'The USA, Taiwan, and the PRC:
Security and Strategy after the Elections of 2000'

12 noon, Thursday, January 11, 2001
Downtown Adam's Mark Hotel
120 W. Market St. Indianapolis, Indiana

During the years that I served as Mayor of Indianapolis, with the encouragement of President Nixon's Administration and the academic, business, and political leadership of this city, I invited statesmen from all over the world to present and debate policies that would affect world peace, prosperity, and the expansion of human freedom.

I applaud the Hudson Institute for organizing this conference on the USA, Taiwan, and the People's Republic of China. The conference brings together distinguished officials and scholars from Taiwan, the United States, and China to analyze this critical triangular relationship. The Hudson Institute is a singularly appropriate host and the City of Indianapolis an especially desirable location for a timely meeting of minds. All the participants will find that Indianapolis and the State of Indiana take foreign policy and national security issues very seriously at a time when our national dialogue seems to relegate these issues to substantial under-attention.

Hoosiers celebrate patriotism; they recognize the necessity of vigorous foreign trade, which undergirds our jobs and a vibrant consumer economy; and they support common sense diplomacy that is backed by strong armed forces capable of deterring aggression and keeping the peace. From the time of Senator Albert Beveridge and former Ambassador to the Philippines and Governor Paul V. McNutt, we have focused strongly on East Asia. We do so, again, today.

The Status of U.S. Policy toward East Asia

The major diplomatic challenge in East Asia for the United States is to convince other nations in the Pacific that we will stay engaged and that we are prepared to allocate resources in the region commensurate with our interests. We will have to make the case that we are serious about our involvement in East Asia, despite the downsizing of our military structure and diminished public interest in foreign affairs.

The stakes are too high for the United States to lower our security profile in East Asia. Neglect of the region would have long-term consequences for U.S. security, open markets, regional stability, and the promotion of democracy. Our ability to deal with regional disputes on the Korean peninsula, in the Indonesia archipelago, or in the Philippines also would be impaired.

Most observers agree that China's emergence as a powerful nation in East Asia is the most fundamental change underway in the region. How China manages its transition and how other nations -- particularly the United States and Japan -- adjust to its growing power and influence is a critical question of world and regional affairs. A successful U.S. policy in Asia must include a constructive policy towards China.

With this in mind, perhaps the most significant foreign policy legislation enacted last year was the bill to establish Permanent Normal Trade Relations (PNTR) with the People's Republic of China. To the consternation of many, the roar of expanded commerce and China's accession to the World Trade Organization (WTO) muffled other contentious issues, not the least of which is China's deplorable human rights record.

Let me elaborate on PNTR, because it occupied so much of our attention during the past two years.

PNTR will help open Chinese markets to U.S. goods, services and investments; it will help integrate China into the international economy; and it will subject China to rules by which the international economy is managed. It should encourage the economic reformers in China to continue re-structuring the economy. It also will remove the contentious annual debate in the Congress on renewing China's trade status, which complicated both U.S.-Chinese relations and the ability of American businesses to operate in the Chinese market.

The Congress passed PNTR by bipartisan votes in both chambers. But we insisted upon "parallel legislation" and other side agreements that impose additional requirements on human rights, compliance with trade agreements, and certain import protections outside the parameters of its trade status.

Two security-related bills in Congress could have affected the outcome of the PNTR debate. One dealt with our security relationship with China, the other more directly with our security ties to Taiwan. Both bills are likely to surface again in the 107th Congress, and I will offer a few comments on each.

The Senate rejected an amendment to the PNTR bill by Senator Fred Thompson that would have imposed sanctions on China if our government determined that China was transferring or receiving weapons of mass destruction or associated technologies and delivery systems. Most Senators agreed that Senator Thompson's bill raised a serious national security issue. However, most also believed that it was a "killer amendment" designed to defeat PNTR and that it needed to be addressed separately from PNTR. I believe Senator Thompson will reintroduce some version of his legislation in the 107th Congress, and we will have a full debate on this issue.

The other major bill affecting our relations with Taiwan and China last year was the Taiwan Security Enhancement Act. It passed the House of Representatives by a wide margin. The bill included provisions that would deepen our security cooperation with Taiwan and authorize the sale of sophisticated weapons systems.

Although it would codify many of the authorities already possessed by the President, some feared that the degree of cooperation envisioned by the bill represented "state-to-state" relations and would provoke a crisis with China. Last Fall, as we faced imminent debate on PNTR, the Senate shelved the Taiwan Security Enhancement Act. My judgment is that it would have been defeated, at that time, by the Senate. Such an outcome would have sent a signal of U.S. indifference toward Taiwan's security needs to the new government in Taipei and, ultimately, to the leaders in China. Thus, the Senate side-stepped a diplomatic and security landmine and avoided sending a mistaken signal to Beijing and Taipei. As with the Thompson bill, the Senate almost surely will see a resurrection, in some form, of the Taiwan Security Enhancement Act in the current Congress.

The Status of Taiwan

One of the most important political events in East Asia last year was the March 18th election of Chen Shai-bien as President in Taiwan. This marked the first democratic Presidential transition in Taiwan after 50 years of one-party rule by the KMT. President Chen heads the Democratic Progressive Party (DPP), which in the past has advocated independence for Taiwan, although it has since moderated its call for separation.

It is in the self-interest of the United States to diligently seek an improvement to the unstable relationship between China and Taiwan. Any military conflict between China and Taiwan, whatever its catalyst, would surely draw in the United States, destabilize the entire region, compel an increase in U.S. defense expenditures, adversely affect the global economy, and turn U.S.-Sino relations back to Cold War calculations.

It would be unthinkable for any U.S. administration to stay aloof during a Chinese attempt to take Taiwan by military means. American credibility would suffer throughout the region and beyond. The alliance with Japan and our entire forward-military presence in East Asia would suffer a severe blow. For these reasons, it has been and must remain U.S. policy to convince the parties that only a peaceful resolution of their differences is acceptable.

But, the two sides remain at an impasse. As most observers have noted, the lack of trust between Beijing and Taipei complicates any steps toward conciliation and helps perpetuate the stalemate. China wants Taiwan to accept the "one China" principle before resuming official talks, while President Chen accepts the principle of "one China" but only if there are no pre-conditions for re-starting the Cross-Strait political dialogue. Statements by China's Deputy Prime Minister suggest that the sense of urgency in Beijing about reunification that was evident as recently as last year has eroded. For now, both China and Taiwan are pre-occupied with domestic issues, and leaders in both countries are likely to be constrained from bold moves toward improvement in bilateral relations.

Furthermore, in response to this impasse, China has positioned short-range missiles opposite Taiwan, thereby evoking worst-case scenarios about Beijing's intentions. China has been improving its air and naval forces, while Taiwan continues to procure or to seek procurement of sophisticated defensive weapons, particularly missile defense systems from the United States. Transfer of such systems to Taiwan would be seen as provocative by China and an affirmation that the United States is bent on helping to separate Taiwan from China.

For now, the United States can offer little immediate protection for Taiwan against Chinese ballistic missiles. We can dispatch air and naval forces to help ensure freedom of navigation in international waters. We can also underscore our promises of assistance should the Mainland attack the island or attempt to strangle it with an economic blockade. It is imperative that we make credible our commitment to assist Taiwan if China uses force to unify the island to the Mainland. The credibility of our commitment will determine the validity of our deterrence against the use of force.

American arms sales to Taiwan have been a central element in the triangular relationship with China and Taiwan. Early this year, Taiwan will present a list of proposed arms purchases to the United States. The request will likely contain major items sought by the Taiwanese military to bolster its defenses, including submarines, defensive ballistic missiles, and other advanced weapons systems.

Proponents of these sales argue that a more secure Taiwan will give it confidence to engage in a peaceful dialogue with the Mainland and that the entire region will be more stable. Opponents argue that sales of advanced weaponry could provoke a crisis with Beijing and would, at the least, accelerate the militarization of the Taiwan Strait with unpredictable consequences.

The Chinese contend that U.S. plans for rapid development of National Missile Defense or smaller Theater Missile Defense systems are aimed at diminishing the value of Chinese missiles. In particular, the Chinese believe that a Theater Missile Defense system deployed in or near Taiwan would undermine one of China's most potent levers against Taiwan and encourage moves towards independence.

The Spring 2001 timetable for new arms requests will prompt some of the toughest early national security decisions faced by the Bush Administration. The Chinese traditionally have tested new American Presidents to assess their priorities and their resolve. Bush Administration actions regarding arms sales and ballistic missile defense will be seen by both Taipei and Beijing as critical indicators of the new President's intent toward the region.

While an impasse over the status of Taiwan is preferable to hostilities, a protracted stalemate could prompt China to explore other options, including the use of long-term military intimidation. Chinese leaders may calculate that their legitimacy -- or their elevation to leadership -- depends on progress on unifying Taiwan with the mainland. The rallying cry of unification, a core element in Chinese nationalism, may become an increasingly important tool of the Chinese leadership as the appeal of Marxism-Leninism continues to diminish.

China already has applied pressure on the new government in Taipei by meeting with opposition parties. It has warned Taiwanese companies doing business in China that they may face repercussions if they support independence. Sensing that President Chen has less than 40 percent of the vote and a minority in the Legislative Yuan, Beijing has, for the moment, adopted a "wait-and-see" position. But momentum for a separate identity is increasing on Taiwan, and the political relationship between Taipei and Beijing has deteriorated, even as economic ties across the Taiwan Strait have deepened. These are not the antecedents for progress towards a peaceful resolution of the Taiwan Strait issue.

The U.S. Role

The Bush Administration should begin a review of U.S.-Sino relations and the Cross-Strait issue. It should take into consideration past policy pronouncements that are embedded in three communiques with China and in the Taiwan Relations Act. It should also consider the substantive changes that have evolved over the past two decades because China and Taiwan -- and the United States, for that matter -- are not the same countries that signed the three bilateral communiques and the Taiwan Relations Act.

Nuances are particularly important in the Cross-Strait issue. The smallest shift in language or tone by one party may have great significance to the others. Past administrations have publicly stated that the Chinese themselves should settle the question. The Reagan Administration added six assurances in 1982. These included promises that we will not mediate between Taipei and Beijing and that we will not pressure Taipei to negotiate with Beijing. In June l998, President Clinton uttered the "Three No's" on Taiwan by stating that the United States would not support independence for Taiwan, not support a two China formula, and not support a policy of Taiwanese membership in organizations for which statehood is a requirement. In July l999, the President coined a new phrase citing "three pillars " of U.S. policy: "One China," Cross-Strait dialogue, and peaceful resolution. More recently, he expanded the U.S. position on the peaceful resolution of the Taiwan issue when he pressed for approval of PNTR by adding the phrase: "...and the consent of the Taiwan people" as a condition for peaceful resolution.

Any U.S. policy review must consider recent events and developments that have changed -- and in several cases, continue to change -- the underlying fundamentals of the Cross-Strait situation.

-- First, Taiwan has become a bone fide democracy, with new legitimacy for the elected government and a larger voice for opponents who reject unification with the PRC. Ironically, this may make it more difficult to forge a consensus in Taiwan on its relationship to the Mainland;

-- Second, the violent crackdown in Tiananmen in 1989 and continuing Chinese human rights violations drastically altered the limits of constructive change on the Mainland and soured sentiments in Taiwan and the United States for re-unification;

-- Third, the end of the Cold War with the Soviet Union rendered the original strategic rationale for U.S.-PRC rapprochement less compelling, although it has not disappeared entirely;

-- Fourth, the Gulf War awakened the Chinese to the military impact of our new technologies and forced them to focus on their own military deficiencies relative to our capabilities:

-- Fifth, the Chinese military maneuvers directed at Taiwan and the firing of ballistic missiles in the Taiwan Strait in 1995 and 1996 re-directed U.S. attention to consider possible confrontation with China;

-- Sixth, Taiwan has become the single largest investor in the Mainland with countless cross-Strait visits and other linkages not evident during early U.S. policy formulations; and

-- Seventh, China's -- and Taiwan's -- imminent accession to the World Trade Organization impels both to adhere to the rules and standards of international commerce and enhances their stakes in stability and economic growth in the new global economy.

Hence, the overall strategic context of Cross-Strait relations has changed and our policy review should factor in these developments -- even if Taipei and Beijing remain at an impasse over renewing the dialogue.

With this in mind, I believe the U.S. role should be to energize the parties and help bring about the conditions for a resumption of the Cross-Strait dialogue. We should facilitate, but not determine, the content and the outcome of any Cross-Strait talks. We are an interested party, but the principal parties must themselves find common ground for a peaceful resolution. We must recognize, however, that the status quo will not last forever. The tensions between China and Taiwan will, if not mitigated, lead to a confrontation that will seriously jeopardize U.S. interests.

We should make clear that our policy is to respond to any attempt by the PRC to resolve the status of Taiwan through the use of force, but we should be ambivalent on the kind of response or assistance that we have in mind. By the same logic, we should strongly counsel opposition to any unilateral declaration of independence by Taiwan.

We also should provide defensive weapons to Taiwan consistent with their security needs -- as we see them -- but we should be careful about transferring sophisticated weapons systems that will ignite an arms race or further militarize the Taiwan Strait. This will require a thorough high-level U. S. review of Taiwan's defense needs.

From a broader perspective, we should support Taiwan's economic and democratic way of life and explore opportunities to develop more friendly and cooperative ties with China. We should support programs on the rule of law, local village elections, and improved transparency and accountability in government agencies. It is critical that we lend support to human rights organizations and individuals in China. We should not be shy about citing Taiwan as a model for the Mainland to emulate. And, we should not be timid about pushing an aggressive human rights agenda in our bilateral contracts with China or in appropriate international fora.

To reduce the dangers of military miscalculation or accidents, we should support confidence-building measures between Taiwan and China. We also can encourage joint PRC-ROC membership in international organizations that do not require national sovereignty, while promoting progress on implementing Taiwan's so-called "three direct links" of trade, transportation, and postal communication.

In this regard, a step was taken earlier this month when the direct transport ban was lifted between Quemoy and Matsu islands and the Mainland. This brought back vivid memories to me of briefing U.S. Chief of Naval Operations, Arleigh Burke on a daily basis about developments in the Quemoy-Matsu crisis during l959 and l960. I was then a young Naval intelligence officer. Forty years have passed.

China has downplayed the significance of the end of the direct transport ban, and trans-shipping Chinese goods to Taiwan itself is still prohibited. Yet even small openings, over time, may have the potential to ease tensions and create a framework for a broader dialogue.

Finally, it is vital that both the President and the U.S. Congress are singing from the same sheet of music with regard to Cross-Strait relations. This will, of course, require active Presidential consultation with the Congress, and a greater recognition among lawmakers of the serious issues at stake in East Asia. If the Congress is not an active and informed player in any solution to Sino-American relations, it will almost surely add to the problem. Too often during the past decade, Congress and the President have worked in conflicting directions on policy related to China and Taiwan. Absent a coherent U.S. policy, China and Taiwan may be tempted to exploit perceived internal American divisions in pursuit of international advantage, rather than building on their cultural and historical identity to forge a real accommodation between themselves.

The U.S. Policy Debate

The foundation of U.S. policy towards China and Taiwan must be built on our firm opposition to Beijing's use of force against Taiwan, a commitment to safeguard our economic and security interests in the region, and an emphasis on improving human rights in China. I believe there is general agreement on these three principles of U.S. policy. There is disagreement, however, on the approaches we should follow to implement these principles.

Some assert that a less confrontational posture towards China will promote our interests. They believe that China's expanding economy and its national strength provide opportunities for the United States. In this policy perspective, a productive U.S. relationship with China will promote stability in the region and contribute to problem-solving on the Korean peninsula and improved PRC-Japanese relations. They propose a policy of active engagement in order to channel China into international activities compatible with American interests. Critical to this view has been passage of PNTR and China's imminent accession to the WTO. Others propose a less accommodating approach to China. They advise that we should maintain a strong and vigilant military force in the region as a counterweight to rising Chinese ambitions and power. In this view, priority should be given to holding firm on arms proliferation, human rights, trade and other disputes with China and cooperating with other friends and allies along China's periphery to deal with assertiveness from Beijing. They cite allegations of Chinese espionage against the United States and make note of its long-range missiles capable of carrying lethal payloads targeted against the United States. China's suspicions of U.S. hegemony or containment -- as exemplified in the Chinese Defense White Paper issued last year -- are, in this view, a side cost of vigilance and prudent long-term planning.

A third approach simply posits that the United States has little real hope of developing a constructive and friendly relationship with China in the absence of a fundamental regime change. In this view, we should concentrate U.S. policy on programs that would change China internally with the intent of transforming the politically repressive government to a more benign regime that abides by acceptable international norms of behavior. This orientation would be coupled with the maintenance of a strong military posture and presence in order to deal with possible disruptive Chinese behavior.

These three views co-exist to varying degrees in our foreign affairs agencies, in Congress and in the think tank, academic, and business communities. Each has some germ of validity in its depiction of China. This diversity is a compelling reason for initiating a policy review of U.S. relations with China and Taiwan as soon as possible.

Improving the Sino-American Dialogue

But, it also suggests that the United States and China should initiate a high level strategic dialogue on Sino-American relations. Such a dialogue should go well beyond the bilateral talks that now exist and should be given more tangible content. Both sides need a forum for airing grievances, clearing up misperceptions, spelling out national concerns, and prioritizing each others' goals and expectations. At the very least, a serious "cooperative strategic dialogue" could help identify where each country stands on a full range of regional and world issues, including the status of Taiwan and human rights.

Admiral Blair, our CINCPAC Commander, has advanced the argument that we should seek to expand the circle of shared interests and cooperation with China in areas such as counter-terrorism, maritime search and rescue operations, and combating international crimes -- including piracy, smuggling, and illegal narcotics. I believe this is sound advice. Unlike Europe, the East Asia-Pacific region lacks a formal security organization -- apart from the ASEAN Regional Forum. In this respect, some consideration should be given to creating a Northeast Asia Regional Forum to complement ASEAN. We should make clear that we want to have a constructive relationship with China and that we can build on shared interests.

While we should have no illusions, past experience reveals that when Sino-American relations are good, relations across the Strait and relations between Taiwan and the United States also tend to improve. A meaningful bilateral strategic dialogue would warm the climate for considering Cross-Strait matters.

By the same logic, we should have a continuing and comprehensive dialogue with the new leaders in Taiwan to ensure they do not develop their policies without being fully informed of U.S. positions and interests. Active dialogue with China and Taiwan can clarify that reckless behavior by either party will have serious and predictable consequences for U.S. support and acceptance.

The Bush administration will have to devote considerably more attention to East Asia than the Clinton administration has done. Many colleagues inside and outside the government share this view. But the case will have to be pressed forward, not only with the Bush Administration, but in Congress and among the American people. For my part, I hope to convey to our new leadership in the executive branch and to my colleagues in the Congress the analysis that I have advanced today and the imperative of elevating our interests in this region to a higher priority. Thank you very much.

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(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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