U.S. Dept. of State - IIP: The United States and China

Text: Deputy Assistant Secretary of State Speech in Hong Kong
(Shirk says PNTR, WTO membership for China will benefit Hong Kong)

U.S. Deputy Assistant Secretary of State for East Asian and Pacific Affairs Susan Shirk told the American Chamber of Commerce in Hong Kong June 9 that China's acquisition of Permanent Normal Trade Relations (PNTR) status with the United States, and its accession to the World Trade Organization (WTO), will have long-term, positive consequences for both Hong Kong and the United States.

Besides the obvious economic benefits, Shirk said, PNTR and WTO membership will help cement China's commitment to further reform of its economic system and to the promotion of the rule of law.

"So as China prospers and as it develops its legal system, its institutions and values will over time become more like those of [Hong Kong]. The gap between the [China] and [Hong Kong] will narrow, to the mutual benefit of both," she said.

She added that the more China is integrated into international organizations and agreements, the less likely the United States and China will find themselves confronting one another across a hostile divide.

"The first victims of a Cold War between the U.S. and China would be the people of Hong Kong," Shirk said.

"Because of China's accession to the WTO and the passage of PNTR, I believe that the security of all - China, Hong Kong, America, our allies - will be enhanced in a positive fashion," she concluded.

Shirk expressed her hope that a PNTR bill identical to the one passed by the U.S. House of Representatives will be approved by the Senate before the July 4th recess of the United States' Congress.

Shirk also commented on recent cross-Taiwan Strait relations, noting that the United States "has been in active communication with both Beijing and Taipei, urging them to be cautious and flexible in their dealings with one another. So far they have done so."

Remarks by Susan L. Shirk
Deputy Assistant Secretary of State for East Asian and Pacific Affairs
to the American Chamber of Commerce in Hong Kong
June 9, 2000

Thank you for that very kind introduction. I am very pleased to be here, in one of my favorite cities in the world. Hong Kong holds many pleasant memories for me: I did research on China here when it was not possible to travel to the mainland, beginning in 1965. And when the doors to China finally opened in 1971, I entered the PRC from Hong Kong. What I recall most from that first trip 30 years ago was the stark contrast between colorful cosmopolitan Hong Kong and the backwardness of the mainland, which you noticed right away when you crossed into the sleepy town of Shenzhen. That certainly is not the case today. And who would have thought that Shenzhen would have become of the key economic centers of South China. I did have a similar sense of deja vu about the contrast of cities recently -- between the increasingly outward-looking, international city of Beijing and the inward looking, near monochromatic city of Pyongyang when I visited North Korea. It is always rewarding to speak about U.S.-China relations to people in Hong Kong. You have an intense interest in the subject because Hong Kong has a direct stake in the way China evolves in the future, as well as in whether the U.S. and China are able to develop a good constructive working relationship in the future.

The past year and a half have been a difficult period in US-China relations: our accidental bombing of the Belgrade Embassy, the Chinese Government's crackdown on organized groups, political, religious, social, it views as threats, and the increasing tension across the Taiwan Strait.

Despite all that has happened in the last 18 months, the relationship appears to moving along a more positive path. Today I want to talk about two dimensions of this positive progress: China's coming accession to the WTO after 13 years, including Congressional approval of PNTR; and signs of reduction of tension and possible resumption of dialogue between the PRC and Taiwan.

Approval of PNTR was President Clinton's key legislative priority for the last year of his Administration. Its passage in the House was the result of a major team effort, with very strong Presidential direction and involvement. Rarely have so many cabinet members been involved in one issue for such an extended period of time. We were pleased - and somewhat surprised - that it carried by 40 votes in the House of Representatives, by 237 to 197.

But the endgame remains to be played out in the Senate. Our concern is not with ensuring a majority of votes; but with the timing of the vote and whether the bill passed by the Senate is identical to the House version. If not, if there are amendments passed - and there are a number of them under consideration, including Senator Thompson's China Nonproliferation Act and Senator Toricelli's "Worker Rights and U.S. Corporate Responsibility" - the Congress would have to go to conference and have a second vote. I don't think anyone wants a second vote on this subject. So, we're looking for a vote before the July 4th recess. I can assure you that we will be working overtime again to ensure a successful outcome.

We were very pleased by the helpful role Hong Kong - everyone from the Chief Executive to the Chambers of Commerce -- played in the vote. Your door-knock this year was very timely and well received, by members of the Administration as well as by Members of Congress.

As Chief Executive Tung told the President during his April 7 visit, "PNTR is important for HK because we are at the beginning of an economic recovery" and "it will give us an extra boost." A day later, in an address in Washington, he pointed out that "China's accession is not simply about business opportunities. It is also about strengthening economic stability in the region. It is about developing the global economy on responsible, rules-based principles. It is about maintaining the steady momentum of growth for the betterment of everyone in the world." Martin Lee was especially eloquent in dealing with Congressional concerns over human rights. He said in a letter to President Clinton last November that the participation of China in the WTO would not only have economic and political benefits, but would serve to bolster those in China who understand that the country must embrace the rule of law. And he hammered home this theme in meetings in Washington in early May.

When we look at the long-term consequences of China's WTO accession and PNTR, we see positive consequences for HK as well as the U.S. in three distinct areas. First, it is an economic win. Without minimizing the adverse side of China's WTO accession -- more competition for Hong Kong companies from foreign enterprises; some short-term diminution of the SAR's role as a gateway to the mainland; some structural adjustment in its employment mix - there are more positives than negatives. Among them:

* Hong Kong banks will be doing more business in China, especially with relaxation on rules for conducting renminbi business.

* Hong Kong has the services capability -- telecommunications, especially in e-commerce, and insurance expertise -- to support the expansion of business operations on and with the Mainland.

* Hong Kong's playing field offers the guarantees -- rule of law, convertible currency, free flow of information -- that business needs to prosper in an increasingly internationalized market place.

* Increased prosperity in South China will translate into growth in retail sales. HK trade companies will be able to extend their distribution networks in the PRC. * While there will be structural adjustment in employment, there will also be new opportunities for people involved in trade, tourism, accounting, advertising - anything and everything associated with China, in both its domestic development as well as its international outreach. Overall, the Hong Kong Government's own economist sees more pluses than negatives in the PRC's WTO accession, with Hong Kong's exports involving the mainland raised by 15 percent by 2010 and its GDP by 5.5 percent by the same time. Second, China's WTO accession helps cement China's commitment to further reform of its economic system and to the promotion of the rule of law. The result will be continued change inside China. China's leaders recognize this. They understand that to lift the 400 million people who currently live below the poverty line they will need to extend the reforms of the past twenty years. And they can only do that by enhancing competition and providing incentives to the Chinese people to make the required investments to modernize their own country. To do this, they must also establish the legal protections for these investments.

So as China prospers and as it develops its legal system, its institutions and values will over time become more like those of HK. The gap between the PRC and the SAR will narrow, to the mutual benefit of both.

Third, the more China is integrated into international organizations and agreements - whether the WTO or the UN - the more likely the U.S. and China will be able to work together constructively, and the less likely we will find ourselves confronting one another across a hostile divide. The first victims of a Cold War between the U.S. and China would be the people of Hong Kong. Because of China's accession to the WTO and the passage of PNTR, I believe that the security of all - China, Hong Kong, America, our allies - will be enhanced in a positive fashion. Now let me turn to cross-Strait relations:

On March 18 - and to the surprise of many - Chen Shui-bian, was elected President in Taiwan. His party, the Democratic Progressive Party, has always stood for Taiwan independence. This unnerved many in Beijing, who had forecast a victory by James Soong or Lian Chan, and who could not fathom, let alone plan for, a non-Nationalist Party victory.

As you know, Taiwan is the number one issue for the PRC, an issue of sovereignty intensely felt by officials and public alike, not just in the aftermath of the successful reversions of Hong Kong and Macao but in the sense of realizing the national reunification aspirations of the present day leadership. It has also been, at times, the "dark cloud" over U.S. relations. China's leaders have communicated to its citizens a sense of increasing impatience to bring about the reunification of Taiwan. This puts them at odds, of course, with the people on Taiwan who have ruled themselves for fifty years and who have turned Taiwan into a vibrant market democracy.

Bellicose rhetoric, threats of military action, or actual military action will only further alienate the people of Taiwan and could risk all that China has achieved over the past decades economically and internationally. The U.S. has numerous times expressed its firm interest in a peaceful resolution of differences across the Strait.

It seems obvious that the only way for Beijing to help resolve the Taiwan issue is to appeal positively to the people of Taiwan and to find ways to make them better off than they are now. In other words, persuasion rather than threats should be used to induce the people of Taiwan to affiliate, in some agreed-upon manner, with the Mainland. The U.S. has been in active communication with both Beijing and Taipei, urging them to be cautious and flexible in their dealings with one another So far they have done so. We will continue to urge them to find ways to restore dialogue with one another and to work things out peacefully. I think a lot of credit is due to Chen Shui-bian. He moderated his position on independence and on relations with the mainland considerably during the campaign and since his election. His inaugural speech reflected a desire to reassure Beijing that he would not tamper with the institutional and legal infrastructure of the previous government (such as the Constitution and the Reunification Guidelines) in which the concept of "one China" is embedded. The PRC's response was moderate as well. It offered a version of its "one China" precondition, i.e. the so-called 1992 consensus, which the previous Taiwan Government had at one time embraced. Recent PRC statements also hint at the possible beginnings of a new recognition in Beijing that positive appeals will be necessary to build trust with the people of Taiwan -- although Beijing continues to use the Hong Kong press to stress its determination to use force should positive efforts fail. The risk of confrontation remains, but I believe that the two sides, rather than moving further apart, appear to be moving closer together and inching their way back to talks.

When both the PRC and Taiwan join the WTO, hopefully by the end of the year, the economic ties between them will be strengthened, building mutual confidence, and providing a good underpinning for the improvements in their political relations. We already see President Chen calling for movement forward on the three-links - aviation, telecommunications and maritime - a recognition that further economic confidence building and the working out of technical and administrative details in the relationship can enhance dialogue in other areas.

As for the U.S. role, some newspapers have suggested that the U.S. envisions being a mediator. Nothing could be further from the truth. Neither side has sought U.S. mediation, and our long-standing policy is that we should not get in the middle. What we do, however, as I have already noted, is actively encourage the two sides to work out their differences directly with one another through dialogue. Stabilizing cross-Strait relations through dialogue will have a very salutary effect on U.S.- China relations. When tensions between Beijing and Taipei are high, it is difficult for the PRC to focus on anything other than the Taiwan issue. And just as difficult for us not to get drawn into the equation. Once these tensions have eased, it can free us up to make progress in all the other important areas of our bilateral relations, such as nonproliferation, human rights, environment, law enforcement, etc.

We've also seen how cross-Strait tensions can spill over into Hong Kong in ways that run counter to Hong Kong's tradition of press freedom and free trade. We were disturbed by several recent statements on Taiwan by PRC representatives in Hong Kong. In one instance, in the first week of April, a mainland official was critical of the Hong Kong media for reporting views that "advocate Taiwan independence as normal news." Such a stance contradicted mainland guarantees that Hong Kong would be able to maintain free speech and a free press. In another instance, at the end of May, another mainland official reportedly warned Hong Kong businessmen about trading with Taiwan firms that support Taiwan independence. This contradicted the Sino-British Joint Declaration's and Basic Law's clear protection of Hong Kong's autonomy in trade and economic affairs. It would be highly regrettable if Hong Kong's high degree of autonomy were to fall victim to cross-Strait tensions. For our part, we have many times made the case that reversion has worked so well because the Chinese Government has respected the basic promises it made regarding Hong Kong's high degree of autonomy and statements like the ones I just cited have been infrequent. The Hong Kong Government, in both these instances, reiterated strongly its continued adherence to freedom of the press and free trade. And, as a result, Hong Kong has maintained its ability to retain its pre-reversion vitality and its role as an open, international City and key regional financial and commercial center.

To sum up: As the Clinton administration enters its last months, those of us in the government are continuing to work to develop a positive foundation for U.S.-China relations that we hope the next administration will be able to build upon. Once the challenges I have discussed today --bringing China and Taiwan into the WTO and restoring cross-Strait dialogue -- are successfully met, the prospects for a constructive working relationship between our two important countries will be greatly enhanced, and we will again be well on the way toward a constructive, cooperative and even civil engagement on issues - bilateral, regional, strategic - that will affect our security and prosperity in the days ahead.

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