DATE=04/16/99 TYPE=ON THE LINE NUMBER=1-00731 TITLE=WHITHER U.S.-CHINA RELATIONS? EDITOR=OFFICE OF POLICY - 619-0037 CONTENT= THEME: UP, HOLD UNDER AND FADE ANNCR: ON THE LINE -- A DISCUSSION OF UNITED STATES POLICIES AND CONTEMPORARY ISSUES. THIS WEEK, "WHITHER U.S.-CHINA RELATIONS?" HERE IS YOUR HOST, ROBERT REILLY. HOST: HELLO AND WELCOME TO ON THE LINE. THE RECENT VISIT TO THE U.S. BY CHINESE PREMIER ZHU RONGJI CAME AMIDST REVELATIONS OF CHINESE NUCLEAR SPYING. THERE IS ALSO GROWING CONCERN AMONG AMERICANS OVER INCREASED POLITICAL REPRESSION IN CHINA. DESPITE THESE NEW TENSIONS, BOTH PRESIDENT BILL CLINTON AND PREMIER ZHU SPOKE OF MAINTAINING A "CONSTRUCTIVE STRATEGIC PARTNERSHIP" BETWEEN THE U.S. AND CHINA. JUST WHAT LIMITS TO SUCH COOPERATION THERE MIGHT BE REMAINS A QUESTION IN THE MINDS OF MANY. JOINING ME TODAY TO DISCUSS RELATIONS BETWEEN THE U.S. AND CHINA ARE TWO EXPERTS. DAVID LAMPTON IS DIRECTOR OF CHINA STUDIES AT THE JOHNS HOPKINS SCHOOL FOR ADVANCED INTERNATIONAL STUDIES. AND STEPHEN YATES IS CHINA POLICY ANALYST AT THE HERITAGE FOUNDATION. WELCOME TO THE PROGRAM. HOST: DAVID LAMPTON, WHEN PREMIER ZHU AND PRESIDENT CLINTON BOTH REFERRED TO A CONSTRUCTIVE STRATEGIC PARTNERSHIP, WHAT WERE THEY TALKING ABOUT? LAMPTON: WELL, FIRST OF ALL I THINK IT'S VERY IMPORTANT TO REALIZE THAT NEITHER SIDE BELIEVES THEY HAVE A CONSTRUCTIVE STRATEGIC PARTNERSHIP NOW. IT'S SOMETHING BOTH ASPIRE TO AND THE REASON BOTH ASPIRE TO IT IS, QUITE FRANKLY, CHINA REALIZES THE UNITED STATES IS ESSENTIAL TO ITS OBJECTIVES OF MODERNIZATION AND GREAT POWER STATUS. WE HOLD THE KEYS WITH RESPECT TO TAIWAN. WE ARE THE BIGGEST EXPORT MARKET FOR CHINA. WE GENERATE FIFTY-SEVEN BILLION [DOLLARS] IN FOREIGN EXCHANGE. WE HAVE HIGH TECHNOLOGY. WE HAVE FIFTY THOUSAND OF THEIR STUDENTS AND SCHOLARS HERE AT ANY GIVEN TIME. SO, WE'RE VERY IMPORTANT TO CHINA AND THEY WANT TO MAINTAIN A PARTNERSHIP, AS OPPOSED TO A CONTAINMENT-TYPE RELATIONSHIP WITH THE UNITED STATES. MANY AMERICANS ASK WHAT ARE THE INTERESTS THEY HAVE WITH RESPECT TO THIS RELATIONSHIP. AND I THINK WE VALUE PEACE ON THE KOREAN PENINSULA. CHINA IS VERY IMPORTANT TO THAT. IF ANYBODY HAS ANY INFLUENCE WITH NORTH KOREA, IT'S CERTAINLY THE CHINESE. WE NEED EXPORT MARKETS FOR OUR HIGH-PAYING EXPORT RELATED JOBS. CHINA IS THE FASTEST GROWING MAJOR ECONOMY IN THE WORLD, ASIAN FINANCIAL CRISIS NOTWITHSTANDING. SO OUR ECONOMIC AND SECURITY GOALS ARE VERY BOUND UP. I THINK THERE'S JUST ONE OTHER ASPECT AND THAT IS, BASICALLY, IF THE UNITED STATES DOES NOT HAVE A CONSTRUCTIVE RELATIONSHIP WITH CHINA, THE 1950'S AND 1960'S INDICATED WHAT THE RESULT IS. AND WE HAD A KOREAN WAR AND, IMPORTANTLY, WE HAD A VIETNAM WAR TO WHICH CHINA WAS RELATED. SO, IF WE DON'T HAVE AT LEAST A WORKABLE, PRODUCTIVE RELATIONSHIP WITH CHINA, IT'S GOING TO BE VERY DIFFICULT TO MANAGE PEACE IN THE TWENTY-FIRST CENTURY IN ASIA. HOST: DO YOU AGREE WITH THAT, STEPHEN YATES? YATES: WELL, I THINK ONE OF THE PROBLEMS WE'VE HAD IN THE CHINA POLICY DEBATE OVER THE LAST SEVERAL MONTHS IS ESPECIALLY THAT THE ADMINISTRATION HAS OVERSOLD THE VALUE OF CHINA IN SOME OF OUR STRATEGIC OBJECTIVES. AND IN SO DOING, THEY HAVE SET STANDARDS THAT ARE VERY HIGH AND VERY EASY FOR CRITICS IN THE CONGRESS OR ELSEWHERE TO SAY, WELL, THE RESULTS OF YOUR POLICY DO NOT MATCH UP TO PREDICTIONS YOU MADE WHEN YOU SET FORTH YOUR GOALS. HOST: FOR INSTANCE? YATES: FOR INSTANCE, ON THE KOREAN PENINSULA. IT'S VERY DIFFICULT TO SAY NORTH KOREA IS A SAFER PLACE TODAY OR A LESS UNCERTAIN PLACE TODAY THAN IT WAS FOUR YEARS AGO, WHEN WE STARTED THE AGREED FRAMEWORK AND OTHER KINDS OF THINGS LIKE THAT. IT'S DIFFICULT TO SAY WHAT CHINA HAS GIVEN US TOWARD RELATIVE PEACE IN THE KOREAN PENINSULA. IN FACT, WE HAVE A LAUNCH OF SOME KIND OF DEVICE, WE THINK IT WAS A ROCKET THAT WENT OVER JAPAN. IT'S GREATLY ADDED TO THE DEBATE OVER THEATER MISSILE DEFENSE, SOMETHING CHINA NOW RESOLUTELY OPPOSES. AND SO, I THINK IN SOME WAYS OUR STRATEGIC OBJECTIVES, OR WHERE THEY COME TOGETHER IS VERY TENUOUS MEETING OF THESE OBJECTIVES, AND ONLY A FEW EVENTS HAVE TO TAKE PLACE AND THOSE OBJECTIVES CAN BEGIN TO DIVERGE. ON SOUTH ASIA, WE ARE SUPPOSED TO HAVE A PARTNERSHIP TO TRY TO BRING PEACE AND MOVE AWAY FROM NUCLEAR WEAPONS STATUS, OR AT LEAST TESTING OF NUCLEAR WEAPONS IN SOUTH ASIA. WELL, IT WASN'T THAT LONG AGO WHEN CHINA STOPPED TESTING THEIR NUCLEAR WEAPONS. SO I DON'T KNOW HOW MUCH LEVERAGE A PARTNERSHIP WITH CHINA GIVES US IN NEW DEHLI IN TRYING TO PERSUADE THEM AWAY FROM THE NUCLEAR OPTIONS THAT THEY'VE NEWLY DEVELOPED. SO I THINK THERE ARE SOME LIMITS TO WHAT WE CAN REALLY ACCOMPLISH. HOST: WELL, MIGHT THESE LIMITS BE AN EXPRESSION OF AN INCOMPATIBILITY IN THE LARGER GOALS OF EACH COUNTRY'S STRATEGIC OBJECTIVE? FOR INSTANCE, THE UNITED STATES WISHES TO REMAIN, FOR ECONOMIC AND STRATEGIC PURPOSES, A PACIFIC POWER. CHINA MIGHT VERY WELL WISH TO BECOME THE PARAMOUNT POWER IN ASIA. THE PRINCIPAL OBSTACLE TO THEIR REACHING THAT OBJECTIVE IS U.S. POWER IN THE REGION. SO IN THAT PERSPECTIVE, OUTSIDE OF THE ECONOMIC ARGUMENT YOU GAVE, WHICH IS VERY PERSUASIVE, MIGHT THERE NOT BE A FUNDAMENTAL INCOMPATIBILITY? LAMPTON: I THINK THE TRUTH OF THE MATTER IS THAT WE HAVE SOME AREAS WHERE OUR INTERESTS CONVERGE AND SOME AREAS WHERE THEY DIVERGE. AND THAT'S WHAT MAKES THIS VERY DIFFICULT TO MANAGE, BECAUSE CRITICS POINT TO THE AREAS WHERE WE DO HAVE GENUINE CONFLICTS AND PEOPLE WHO ARE MORE SUPPORTIVE OF THE RELATIONSHIP POINT TO THOSE AREAS WHERE THERE IS A CLEARER CONVERGENCE. AND THEY ARE TALKING PAST EACH OTHER. THE REALITY OF MANAGING THIS IS THAT BOTH SIDES ARE AMBIVALENT ABOUT THE OTHER. LET ME JUST GIVE YOU AN EXAMPLE. THE FORWARD PRESENCE BASING OF AMERICAN TROOPS IN KOREA AND IN JAPAN. NOW, IF THE PURPOSE OF AMERICAN TROOPS IN ASIA, IN EFFECT, IS TO REMOVE THE NECESSITY FOR JAPAN TO BECOME MILITARIZED, CHINA SHARES THAT OBJECTIVE. ON THAT PART OF IT, THEY WELCOME AMERICAN TROOPS. IF ON THE OTHER HAND, THE PURPOSE OF AMERICAN TROOPS IN JAPAN IS TO POSSIBLY INTERVENE IN A TAIWAN STRAITS CRISIS, THEY FIND THAT INTOLERABLE. SO IT'S PARTLY CHINESE UNCERTAINTY ABOUT WHAT AMERICA INTENDS TO DO, OR WHAT IT MIGHT DO WITH ITS FORCE IN THE FUTURE. SIMILARLY ON THE KOREAN PENINSULA, RIGHT AT THE MOMENT CHINA VIEWS OUR TROOPS ON THE KOREAN PENINSULA AS A BASICALLY STABILIZING FORCE. BUT IF KOREA BECAME UNIFIED, IT'S FAR FROM CLEAR TO ME, IN FACT IT'S PRETTY CLEAR TO ME THAT CHINA WOULD NOT WANT THEM THERE. AND WE'D HAVE A PROBLEM. SO LIFE HAS CHANGED, LIFE IS AMBIVALENT. WE ARE AMBIVALENT ABOUT SOME ASPECTS OF GROWING CHINESE POWER. THEY ARE AMBIVALENT ABOUT OUR PRESENCE IN THE AREA, BUT IT'S NOT A SIMPLE CASE OF ANTAGONISM ACROSS THE BOARD IN EITHER CASE. AND OUR OBJECTIVE OUGHT TO BE TO PREVENT THIS RELATIONSHIP FROM DETERIORATING INTO ACROSS-THE-BOARD ANTAGONISM. HOST: DO AGREE WITH THAT, STEPHEN? YATES: I AGREE WE SHOULD TAKE REASONABLE STEPS TO AVOID PROVOKING A FIGHT THAT DOESN'T NEED TO HAPPEN. THERE ARE DEFINITELY SOME THINGS WE COULD DO ON TAIWAN, OR SOME OTHER AREAS, THAT WOULD PROVOKE A DIPLOMATIC FIGHT, IF NOT A HOT WAR. THERE ARE ACTIONS THAT CHINA COULD TAKE THAT COULD DO THE SAME, SO WE SHOULD MAKE SURE WE HAVE CHANNELS OF COMMUNICATION OPEN SO THAT WE MAKE SURE WE DON'T RUN INTO ONE OF THESE CONFLICTS DUE TO MISCALCULATION OR MIS-COMMUNICATION. I THINK THAT'S VERY IMPORTANT. HOST: LET'S TALK ABOUT ONE OF THE AREAS IN WHICH BOTH SIDES SEEM TO BE EARNESTLY SEEKING COOPERATION, AND THAT IS IN THE ECONOMIC ARENA AND, OF COURSE, THE WORLD TRADE ORGANIZATION AND CHINA'S ENTRY INTO IT. SOME PEOPLE EXPRESS DISAPPOINTMENT THAT PRESIDENT CLINTON DID NOT OUTRIGHT SUPPORT CHINA'S ENTRY DURING PREMIER ZHU'S VISIT, SAYING A GOLDEN OPPORTUNITY WAS MISSED. WHAT DID YOU THINK? LAMPTON: WELL, I THINK THERE ARE A NUMBER OF THINGS. FIRST OF ALL, I THINK IT'S IN THE UNITED STATES INTEREST THAT CHINA JOIN THE WORLD TRADE ORGANIZATION. AND WHILE I HAVEN'T SEEN ALL THE FINE PRINT OF WHAT WAS AGREED TO THUS FAR, WHAT I UNDERSTAND LEADS ME TO THINK WE'VE NOW REACHED THE POINT THAT IT IS ALMOST INDISPUTABLY IN THE OVERALL AMERICAN INTEREST. IT DOESN'T MEAN IT'S IN THE INTEREST OF TEXTILE WORKERS OR PARTICULAR SECTORS. AND THAT CONFUSES THINGS. ALSO, I THINK IT'S A LITTLE PREMATURE YET TO SAY WE WILL NOT GET A DEAL IN THE NEXT FEW MONTHS, BUT I DO BELIEVE THE ADMINISTRATION IS QUITE WORRIED ABOUT WHETHER IT CONVINCED CONGRESS THAT THIS IS IN OUR INTEREST. IT'S NOT SELF-EVIDENT TO SOME PEOPLE ON CAPITOL HILL THAT THAT IS THE CASE. HOST: SO, YOU THINK THE DELAY MAY ACTUALLY BE MORE FOR DOMESTIC U.S. REASONS, THAN IT IS FOR SOMETHING SUBSTANTIVE IN THE NEGOTIATIONS? LAMPTON: I BELIEVE IF THIS FAILS IT WILL BECAUSE OF DOMESTIC REASONS AND IT CERTAINLY WAS DELAYED FOR DOMESTIC REASONS. HOST: DO YOU AGREE WITH THAT, STEPHEN YATES? YATES: A HUNDRED PERCENT. I BELIEVE THAT THERE ARE TWO THINGS THAT ARE POLITICAL HANDICAPS ON THE W-T-O DEAL RIGHT NOW. NUMBER ONE, IS THAT THE POLITICS OF CHINA AND WASHINGTON ARE VERY BAD. ON A NUMBER OF FRONTS, THE ADMINISTRATION'S POLICY IS UNDER ATTACK. THERE'S A LOW LEVEL OF TRUST BETWEEN CONGRESS AND THE WHITE HOUSE. THERE'S A LOW LEVEL OF TRUST BETWEEN CONGRESS AND CHINA. AND SO THOSE THINGS COMBINE TO MAKE THIS A DIFFICULT DEAL TO TALK ABOUT. ANOTHER THING IS TRADE IN GENERAL. WE SHOULDN'T FORGET THAT FAST TRACK AND OTHER IMPORTANT TRADE LEGISLATION HAVE FAILED RECENTLY IN THE CONGRESS. SO COMBINING THE CONTROVERSY SURROUNDING TRADE IN GENERAL WITH ALL THESE OTHER CONTROVERSIES THAT SEEM TO BE CONVERGING OVER CHINA, AND YOU'VE GOT A W-T-O DEAL THAT COULD BE VERY, VERY DIFFICULT IN THIS ENVIRONMENT. IF YOU WAIT UNTIL AFTER THE MOST-FAVORED-NATION NORMAL TRADE RELATION STATUS DEBATE THIS SUMMER, THERE'S SORT OF A CALM AFTER THE STORM WHERE YOU HAVE AN AUGUST AND A SEPTEMBER TIME FRAME, WHERE IT'S STILL FEASIBLE FOR A DEAL TO BE INKED AND FOR CHINA TO BE BROUGHT INTO THE W-T-O AT THE MINISTERIAL MEETING AT THE END OF THIS YEAR. IF I WERE STRATEGIZING FOR THE ADMINISTRATION, THAT'S WHAT I WOULD BE LOOKING FOR. IT BRINGS TOGETHER THE DEAL WITH THE POLITICS. LAMPTON: I WOULD JUST SAY THERE WAS ONE OTHER THING THOUGH AND THAT IS PRESIDENTIAL POLITICS. AND EVERY DAY THIS DEAL IS DELAYED THE INCENTIVES FOR POLARIZATION WITHIN BOTH PARTIES GROW BECAUSE YOU HAVE MORE CANDIDATES MORE DESPERATELY LOOKING FOR MONEY, MORE DESPERATELY LOOKING FOR FOOT SOLDIERS TO KNOCK ON DOORS TO GET SUPPORT IN THE PRIMARIES. SO WHILE THERE MAY BE SUMMER RECESS IN CONGRESS, AND THAT MIGHT GIVE A BREATHER, WE'RE ON A STRAIGHT LINE TO GREATER POLARIZATION IN OUR PRESIDENTIAL POLITICS RIGHT NOW. HOST: ON THE OTHER HAND, YOU DO HAVE A HUGE AMERICAN BUSINESS COMMUNITY WHICH IS HEAVILY INTERESTED IN SEEING CHINA ENTER THE W-T-O SO TRADE CAN INCREASE, AND CHINESE TARIFFS DROP AGAINST U-S GOODS. LAMPTON: FRANKLY, I THINK ONE REASON THE PRESIDENT DEFERED, IF THAT'S WHAT HAPPENED HERE, AN AGREEMENT WAS TO SEE IF THE AMERICAN BUSINESS COMMUNITY WOULD MOBILIZE AND, IN FACT, KNOCK DOWN SOME OF THE CONGRESSIONAL BARRIERS, SO HE WOULDN'T HAVE TO EXPEND WHAT LITTLE POLITICAL CAPITAL HE HAS LEFT. HOST: ALL RIGHT, WELL, NOT ALL OF THESE PROBLEMS ARE DOMESTIC U-S POLITICAL PROBLEMS, AS WE KNOW. THE UNITED STATES DECIDED, ON THE BASIS OF RECENT HUMAN RIGHTS PERFORMANCE WITHIN CHINA, TO TABLE A RESOLUTION AT THE U-N HUMAN RIGHTS COMMISSION MEETING IN GENEVA TO FOCUS ON HUMAN RIGHTS ABUSES THERE. PREMIER ZHU OBJECTED TO THIS DURING HIS VISIT SAYING THIS WAS UNWARRANTED INTERNAL INTERFERENCE IN THE AFFAIRS OF CHINA. WHEREAS CHINA, HOWEVER, RECENTLY SIGNED THE INTERNATIONAL COVENANT ON CIVIL AND RELIGIOUS RIGHTS. THIS LEAVES THE POLITICAL PEOPLE IN BOTH PARTIES IN THE CONGRESS WONDERING WHETHER THEY OUGHT TO BE SUPPORTING A REGIME THAT THEY CAN'T UNDERSTAND IN TERMS OF THESE TWO STANDS. YATES: TABLING THE RESOLUTION IN GENEVA AT THE HUMAN RIGHTS COMMISSION, I THINK, WAS ABSOLUTELY NECESSARY TO TRY TO ADDRESS THE POLITICAL ENVIRONMENT HERE, BUT ALSO THERE'S A STANDARD THAT IS SET HERE, TOO. THIS ISN'T JUST CRITICIZING CHINA FOR THE SAKE OF CRITICIZING CHINA. THERE IS A GREATER LEVEL OF LEGITIMACY WHEN THERE'S AN INTERNATIONAL COVENANT SIGNED. AND YOU PERCEIVE THERE TO HAVE BEEN ACTION TAKEN THAT VIOLATES THE SPIRIT OR THE LETTER OF THAT COVENANT. THERE'S A FORUM WITHIN WHICH THESE DIFFERENCES CAN BE RESOLVED, AND IT'S THAT HUMAN RIGHTS COMMISSION. SO I THINK IT'S ENTIRELY APPROPRIATE ON ITS SUBSTANCE, BUT ALSO IN TERMS OF ITS POLITICS. IT WAS A NECESSARY STEP FOR THE ADMINISTRATION TO DEMONSTRATE THAT WE DON'T HAVE A COMMERCE-ONLY CHINA POLICY. THEY ARE WILLING AND ABLE TO STAND UP ON HUMAN RIGHTS. LAMPTON: I WOULD JUST SAY THERE ARE TWO ASPECTS OF THIS ONE. ONE IS WHETHER THE UNITED STATES GOES TO GENEVA TO SEEK CONDEMNATION OR NOT. THAT'S ONE DECISION. ANOTHER IS WHETHER WE TIE CONSIDERATION OF W-T-O TO THE ISSUE OF OUR DISSATISFACTION WITH HUMAN RIGHTS. I THINK THE CHINESE POSITION IS VERY CLEAR. ECONOMICS OUGHT TO STAY WITH ECONOMICS AND HUMAN RIGHTS SHOULD STAY IN A DISCRETE ZONE. THE FEELING IN MANY QUARTERS OF CAPITOL HILL IS THAT THESE THINGS OUGHT TO BE LINKED. SO YOU HAVE A SEPARATE POLICY QUESTION. SHOULD WE LINK THESE? YOU PUT THE QUESTION, AS I RECALL JUST A SECOND AGO, THAT PEOPLE ARE OPPOSED TO REWARDING THE CHINESE WITH, IN EFFECT, W-T-O OR TRADE ARRANGEMENTS WHEN THEIR POLICIES WITH RESPECT TO HUMAN RIGHTS ARE SO DEPLORABLE. I THINK WE HAVE TO SEPARATE THESE IN MY VIEW A LITTLE BIT. THE W-T-O AGREEMENT IS IN THE INTEREST OF THE UNITED STATES, OR AT LEAST IT SHOULD BE CONSIDERED WHETHER OR NOT IT IS IN THE ECONOMIC INTERESTS OF THE UNITED STATES. ALSO, GETTING CHINA COMMITTED TO A TIMETABLE BY WHICH IT WILL OBSERVE LEGAL REGULATIONS IN ITS GLOBAL BEHAVIOR, I THINK, IS DESIRABLE AND HAS IMPLICATIONS FOR HUMAN RIGHTS. SO, THERE ARE TWO QUESTIONS. ONE, DO YOU GO TO GENEVA? I THINK THERE IS A CASE TO BE MADE THAT YOU SHOULD. ON THE OTHER HAND, DO YOU LINK THAT TO ALL THE OTHER ISSUES IN THE RELATIONSHIP LIKE W-T-O. THERE, I THINK THAT'S ILL-ADVISED. HOST: ON THE OTHER HAND, MANY PEOPLE WERE HOPING THAT THE ECONOMIC REFORMS THAT ZHU RONGJI AND OTHERS HAVE SPONSORED INSIDE CHINA WOULD PRODUCE PRECISELY THE KIND OF POLITICAL TRANSFORMATION THAT THEY WERE HOPING TO SEE IN CHINA WITH GREATER DEMOCRATIZATION. AND INSTEAD, WE SEE THREE LEADERS OF THE NEW CHINA DEMOCRACY PARTY PUT IN JAIL IN A CLOSED-DOOR TRIAL. MIGHT NOT THAT BE PART OF THE FRUSTRATION? THAT THE WHOLE POLITICAL PREMISE IN ENGAGING IN BROAD ECONOMIC COOPERATION -- THAT THE ECONOMIC ENGINE WOULD EVER SO SLOWLY TRANSFORM THE POLITICS OF CHINA, AWAY FROM THE COMMUNISM THEY STILL OPENLY ESPOUSE, TO GREATER AND GREATER FREEDOM -- IS THAT A FALSE PREMISE? STEPHEN YATES, HAS THAT BEEN DISPROVED NOW? YATES: I DON'T THINK ITS BEEN DISPROVEN. I THINK WHAT WE HAVE IS AN INCOMPATIBILITY BETWEEN THE POLITICAL GOAL AND THE TIME HORIZON IT SETS AND THE KIND OF DAY-TO-DAY, HOUR-BY-HOUR, NEWS-DRIVEN POLITICS WE HAVE HERE. THAT WE HAVE PEOPLE WHO STAND BEFORE A CAMERA EVERY DAY AND ARE EXPRESSING AN OPINION ON WHAT'S HAPPENING HERE AND NOW. AND WE HAVE A POLICY IN PLACE THAT'S SUPPOSED TO TRANSFORM CHINA OVER FIFTY TO A HUNDRED YEARS. I THINK ONE THING IT'S IMPORTANT TO REMEMBER, WE HAD A VERY CLOSE AND COOPERATIVE RELATIONSHIP WITH THE REPUBLIC OF CHINA ON TAIWAN FOR MANY DECADES. AND IT TOOK A VERY LONG TIME FOR HUMAN RIGHTS AND DEMOCRACY TO FLOURISH IN THAT SOCIETY. WE HAD A GREAT DEAL OF AID, WE HAD MILITARY COOPERATION. AND IT WASN'T REALLY UNTIL THE MIDDLE 1980'S THAT THINGS BEGAN TO OPEN UP MORE. AND IT WASN'T UNTIL THE MID-1990'S THAT EVERY LEVEL OF LEADERSHIP IN TAIWAN WAS ELECTED DIRECTLY BY THE PEOPLE. AND SO I THINK THIS IS A LONG-TERM STRATEGY. HOST: BUT THE ANSWER YOU WOULD LIKELY RECEIVE FROM SOMEONE LIKE JEANE KIRKPATRICK WOULD BE THAT THE REPUBLIC OF CHINA ON TAIWAN WAS AN AUTHORITARIAN REGIME, NOT A TOTALITARIAN ONE. YATES: AND JEAN KIRKPATRICK SAYS TODAY THAT CHINA IS A AUTHORITARIAN REGIME AND NOT A TOTALITARIAN REGIME. SHE MAKES THE DISTINCTION OF MAO TO DENG. HOST: DO WE AGREE WITH THAT? YATES: I DO AGREE WITH THAT BECAUSE I THINK THERE ARE AREAS OF CHINESE SOCIETY THAT ARE OPEN TO BE INFLUENCED RIGHT NOW. THERE ARE WAYS OF HAVING INTERACTION WITH ORDINARY CHINESE PEOPLE AND THEY ARE HAVING EXPOSURE TO OUR IDEAS. THEIR HAVING OPPORTUNITIES TO CREATE FREEDOM THEMSELVES. IT'S SLOWLY GROWING AND EXPANDING. AND WE SHOULD BE TRYING TO EXPLOIT THESE CRACKS IN THE SYSTEM TO TRY TO HELP BUILD GREATER AREAS OF FREEDOM, RATHER THAN CLOSING THOSE OFF AND WAITING FOR CHANGE TO OCCUR. HOST: ASIDE FROM THE WORLD TRADE ORGANIZATION HOW, DO WE DO THAT, DAVID LAMPTON? LAMPTON: WELL FIRST OF ALL, I THINK ONE OF THE GREAT HIDDEN SECRETS OF AMERICAN FOREIGN POLICY HAS BEEN THE SUCCESS WE'VE HAD IN DEALING WITH CHINA, IN MY VIEW. IN 1978 WE DECIDED TO ALLOW IN FIVE HUNDRED CHINESE STUDENTS AND SCHOLARS. THAT'S GROWN NOW TO FIFTY THOUSAND. MANY OF THEM, A LOT OF THEM ARE NOT GOING BACK, BUT MANY OF THEM ARE GOING BACK. THEY ARE TRANSFORMING THE FACE OF COMMERCE IN CHINA. THEY ARE BEGINNING TO MOVE IN TO THE POLITICAL SYSTEM. THEY ARE BEGINNING TO CREATE SOCIAL ORGANIZATIONS. SO I THINK JUST THE CULTURAL EXCHANGE HAS HAD AN ENORMOUS EFFECT. IF YOU LOOK IN THE ECONOMIC AREA, BEYOND WORLD TRADE ORGANIZATION, WORLD BANK, I-M-F, CHINA DRAWS MORE FOREIGN DIRECT INVESTMENT THAN ANY OTHER COUNTRY IN THE WORLD OTHER THAN THE UNITED STATES. IN MANY RESPECTS IN TERMS OF INVESTMENT, CHINA IS MORE OPEN TO FOREIGN INVESTMENT THAN JAPAN. IN OTHER AREAS, WE HAVE DIFFICULTY WITH MARKET ACCESS, SO IT'S NOT AN UNDIFFERENTIATED GOOD RECORD, LET ME BE CLEAR ON THAT. HOST: LET ME JUST STOP ON THAT POINT AND ASK WHETHER YOU ARE WORRIED ABOUT AN ECONOMIC SLOWDOWN IN CHINA BECAUSE A NUMBER OF PEOPLE HAVE POINTED OUT THAT THE CAPITAL INFLOWS HAVE SLOWED CONSIDERABLY AND THAT, AFTER ALL, THE FREE MARKET IN CHINA STILL IS ONLY PERHAPS TWENTY PERCENT OF THEIR ECONOMY. AND THEY ARE STILL FUNNELING STATE BANK MONEY INTO THESE STATE BANK ENTERPRISES. AND THEY ARE FACING HUGE, HUGE PROBLEMS IN THEIR NEXT STEP. HOW DO YOU ASSESS THEIR CHANCES OF DOING THIS SUCCESSFULLY? YATES: I, ALONG WITH A LOT OF PEOPLE IN THIS TOWN, REALLY RELY ON THE WORK OF ONE EMINENT SCHOLAR IN THIS FIELD, AND THAT'S NICK LARDY. HE'S WRITTEN AN IMPORTANT BOOK THAT LOOKS AT CHINA'S FINANCIAL SYSTEM AND BANKING SYSTEM, AND OUTLINES A VERY CHALLENGING ROAD AHEAD IF THEY WANT TO FINISH THE REFORM PROGRAM THEY BEGAN MANY YEARS AGO. AND IN MANY WAYS, THE MOST DIFFICULT REFORMS HAVE BEEN LEFT FOR THE LAST. I BELIEVE THAT YOU CAN'T REALLY HAVE A SUCCESSFUL FREE MARKET ECONOMY WITHOUT CERTAIN INSTITUTIONS BEING HEALTHY AND FUNCTIONING WITHIN YOUR SYSTEM. I THINK THE OPENING OF THE FORMER SOVIET UNION, TODAY'S RUSSIA, PROVES THAT FREE ACCESS TO THE WORLD MARKETS CAN DESTROY AN ECONOMY IF YOU DON'T HAVE INSTITUTIONS THAT WORK. AND I THINK THAT THE ARTERIES OF A FREE MARKET ECONOMY ARE FUNCTIONING BANKS. THEY HAVE TO BE WELL SUPERVISED. THEY NEED TO HAVE CAPITAL IN THEM THAT IS DISPERSED ACCORDING TO MARKET DECISIONS, NOT POLICY DECISIONS. AND I THINK CHINA KNOWS WHAT NEEDS TO BE DONE, AND I THINK PREMIER ZHU RONGJI KNOWS BETTER THAN ANY ONE ELSE IN CHINA WHAT NEEDS TO BE DONE. THE QUESTION IS: HOW DO YOU UNDO THE ENMESHING OF POLICY AND BANKING THAT'S GROWN OVER DECADES, OVER A SHORT PERIOD OF TIME, COMBINED WITH A SHORT W-T-O TRANSITION PERIOD? IT'S A HUGE CHALLENGE. CAN IT BE DONE? I BELIEVE IT CAN BE, BUT IT IS GOING TO NECESSARILY SLOW GROWTH. IT IS GOING TO NECESSARILY INCREASE UNEMPLOYMENT. AND THE CHALLENGE FOR ZHU RONGJI IS, HOW DOES HE CONVINCE THE WORLD THAT THIS SLOWDOWN IS A RESULT OF DOING THINGS THAT ARE RIGHT FOR CHINA, RIGHT FOR CHINA. THIS IS SHORT-TERM PAIN FOR LONG-TERM GAIN. AND KEEP IT FROM APPEARING AS THE OTHER SHOE DROPPING IN THE ASIAN FINANCIAL CRISIS. HOST: I'M AFRAID THAT'S ALL THE TIME WE HAVE THIS WEEK. I'D LIKE TO THANK OUR GUESTS -- DAVID LAMPTON FROM THE JOHNS HOPKINS SCHOOL FOR ADVANCED INTERNATIONAL STUDIES AND STEPHEN YATES FROM THE HERITAGE FOUNDATION -- FOR JOINING ME TO DISCUSS U.S.-CHINA RELATIONS. THIS IS ROBERT REILLY FOR ON THE LINE. 16-Apr-99 1:55 PM EDT (1755 UTC) NNNN Source: Voice of America .