September 5, 2001

MEMORANDUM TO: OPINION LEADERS

FROM: GARY SCHMITT

SUBJECT: China

In the recent days, there have been a number of press stories concerning Chinese government activities and Bush Administration policies toward China. If nothing else, they suggest incoherence on the administration’s part when it comes to its China policy.

China and U.S. Ballistic Missile Defense Plans: The White House says that the U.S. missile defense program will not be aimed at countering China’s strategic ballistic systems. Why not? After all, China has said that efforts by the U.S. to intervene militarily on behalf of Taiwan would come at the cost of losing Los Angeles. By saying U.S. BMD plans will not threaten China’s strategic forces, the administration is implicitly resurrecting the very theory of deterrence -- Mutual Assured Destruction -- that the president himself has said needs to be relegated to the dustbin of history now that the Cold War is over. By stating that America’s defense plans are not aimed at China’s strategic arsenal, the administration is in fact conceding to China the former Soviet Union's role in “the delicate balance of terror.”

The truth is that a missile defense program of any merit will threaten China’s strategic capabilities. If it doesn’t, it’s probably not worth having in any case. Today’s BMD program may not immediately threaten China’s strategic capabilities, but any worthwhile system of missile defenses will inevitably devalue the Chinese arsenal. By failing to be candid now, the administration is creating political and diplomatic expectations that will hinder future efforts to fund and field more effective and advanced sea- and space-based missile defense systems.

U.S. Sanctions China for Proliferation: After months of quiet but failed diplomatic efforts with Beijing, the administration imposed economic sanctions on a major Chinese arms producer for selling missile parts and technology to Pakistan -- sales which violated Beijing’s pledge of last November to stop such transfers. As part of the sanctions, the U.S. also announced that it would not issue licenses to U.S. firms wanting to launch U.S.-made satellites on Chinese rockets. One senior administration official was quoted as saying, the past agreement “was intended to be a major transition point between past behavior and future cooperation. But instead, China has engaged in repeated violations.”

Although this is good news, it is also evident from press stories that many in the administration hope to have this matter well “behind them” before President Bush’s trip to China in October. Beijing will likely soon promise once again to stop Chinese “companies” from engaging in this sort of proliferation and will promise, once again, to tighten up its own export control “laws.” Will these new promises be sufficient for the administration to lift the sanctions and to begin licensing new launches of U.S.-made satellites on Chinese rockets? If so, Beijing will have learned that the pressure to “engage” China continues to outweigh any serious effort to stem proliferation or see to it that when China breaks its word this has consequences.

The Government Nears a Settlement with Loral: News reports indicate that the administration is close to reaching a civil settlement with Loral Space and Communications for passing sensitive missile technology to China. The settlement will apparently involve the payment of a minimal $10 million fine, no criminal charges -- despite the fact that congressional investigators concluded that “Loral...deliberately acted without the legally required license, and violated U.S. export laws” in helping the PRC's rocket program -- and approval for Loral to resume shipment of satellites to China. This is certainly the wrong message to send: For aiding and abetting a program whose missiles are aimed at the U.S. and its Asian allies, Loral will receive a slap on the wrist.

Unfortunately, the recent push in the House of Representatives to return responsibility for satellite licensing to the Commerce Department only reinforces this “slap on the wrist” approach. Less than three years ago, in the wake of the Loral investigation and the related case of Hughes Electronics, Congress passed legislation transferring the authority from Commerce to the State Department in an effort to address the national security concerns that were being ignored in the licensing process. If enacted into law, the proposed change will certainly send the signal to China, and to U.S. firms doing business with China, that when it comes to choosing between commerce and security, the former will win. So far, the administration has shown no sign that it objects to this change in the law.

Beijing Bullies Investment Banks: The press have also reported that American investment banks, including such firms as Goldman Sachs and Merrill Lynch, “backed away from helping Taiwan hold an investment promotional tour in the U.S. for fear of upsetting Beijing.” Apparently, their decision follows on the heels of Beijing’s retaliation against Credit Suisse First Boston for helping promote a similar tour for Taiwan in Europe. China punished Credit Suisse by removing it from its underwriter role in the planned share offerings by two major state-owned Chinese companies.

China’s effective strongarming of these American financial giants should serve as a useful reminded that while the U.S. government and corporations continue to pretend that commercial relations with China can be separated out from foreign policy, Beijing obviously thinks quite differently. Economic engagement was meant to change Chinese behavior. The theory goes that if China’s leaders want the benefits associated with access to the global economy, they will need to abide by its rules. But, as this story suggests, the reality is much different: China continues to use its considerable economic leverage for strategic and political purposes.

Upgrading Relations with the Pacific Allies: To its credit, the Bush Administration is serious about expanding ties with its key democratic allies in East Asia, in part to counter China’s growing power. Given both China’s ambitions in the region and the growth of democracy in East Asia, it is time that the U.S. began to think of establishing in some form a “NATO for Asia.” A new strategic era requires new strategies. In the case of East Asia, it means moving beyond the bilateral alliance structures of the past.

Moreover, the administration deserves praise for its decision to respond to China’s recent large amphibious exercises designed to simulate an invasion of Taiwan by sending two aircraft-carrier battle groups into the South China Sea. The navy exercise was a show of force designed to send a message that the U.S. was not intimidated by China’s saber-rattling and that President Bush’s statement in April about doing whatever it took to defend Taiwan was not mere rhetoric.

Challenging Beijing's Grip: Finally, kudos to the Board of International Broadcasting, the governing board for the Voice of America, for its recent decision to finance a U.S.-based network of computers designed to overcome China’s efforts to censor its citizens’ use of the World Wide Web. (The computers help disguise the Web sites an internet user is attempting to view.) Given Beijing’s increased surveillance of the web’s use by its people and the steps it has taken to control access to the web in China -- including having U.S. Internet service providers agree to electronically filter content that the government finds objectionable -- the board should be commended for taking this step.

In six weeks, President Bush will be in China. At this point, his administration has sent mixed signals on what strategic vision is guiding U.S.-China policy. Before going to China, the president should clarify to Congress and the public what his goals vis a vis China are and what trade, military and diplomatic means he intends to employ to accomplish them.