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Start | US-China Trade and Economic Relationship | China's Security-Related Activities | China's Energy and Environmental Policies and Activities | China In Asia | China's Media and Information Controls Conclusions | Additional Views | Appendices
‘‘The Commission shall investigate and report on—
‘‘REGIONAL ECONOMIC AND SECURITY IMPACTS—The triangular economic and security relationship among the United States, [Taiwan], and the People’s Republic of China (including the military modernization and force deployments of the People’s Republic of China aimed at [Taiwan]), the national budget of the People’s Republic of China, and the fiscal strength of the People’s Republic of China in relation to internal instability in the People’s Republic of China and the likelihood of the externalization of problems arising from such internal instability.’’
In August 2007 a Commission delegation traveled to Taiwan to review important issues and developments in the United States’ economic and security relationship with the island, the status of Taiwan’s relationship with the People’s Republic of China, and whether U.S. commitments to Taiwan under the 1979 Taiwan Relations Act (TRA) are being upheld. During the trip, Commissioners visited both Taipei and Kaohsiung where they had conversations with senior representatives of Taiwan’s governing authority, academicians and policy experts, officials of the American Institute in Taiwan, American businessmen working in Taiwan, and others about U.S.-Taiwan bilateral relations, Taiwan’s economic and trade relationship with the United States and the PRC, Taiwan’s self-defense capabilities, and political developments on the island. In some cases, this Commission report will not attribute statements to individuals at their request to protect their anonymity.
Why Taiwan is Important to the United States
The island of Taiwan is home to more than 23 million people from a variety of ethnic and religious backgrounds. Over the last several decades, the island has transformed itself from an agrarian economy ruled by a single party to a full-fledged, vigorous democracy with world-class industry and a burgeoning high-tech sector. Living standards, political enfranchisement, and opportunities for Taiwan’s people have grown significantly, as has the island’s relationship with the United States.
Taiwan’s young democracy has been lauded as a successful democratic system.[1] Following the end of martial law in 1991, the island conducted its first Presidential election in 1996. Four years later, in 2000, Taiwan experienced its first peaceful transfer of Presidential power. Policymakers and academics often cite Taiwan’s success in establishing a functioning democratic governmental system as demonstrating that Chinese culture and democracy are compatible.
Protection of human rights, adherence to rule of law, and freedom of expression also have grown substantially on the island over the last several decades. Freedom House, a nongovernmental organization that evaluates the degree of freedom accorded to the citizens of all nations, labels Taiwan as a free society.[2] In a recent U.S. Department of State report on human rights, Taiwan received high marks for privacy rights, freedom of speech and the press, freedom of religion, freedom to assemble, and Internet freedom.[3] In those areas where the report identified deficiencies, including high levels of violence towards women, child abuse, and human trafficking,[4] Taiwan’spolitical leaders have made commitments to make further progress.[5]
Taiwan’s importance to the United States as an economic partner has grown significantly over the last twenty years. Between 1986 and 2006, bilateral trade between Taiwan and the United States has increased in total value more than ten-fold (in dollars unadjusted for inflation), from US$5.5 billion to US$61.2 billion,[6] and Taiwan currently stands as the United States’ eighth largest trading partner.[7] (It ranked sixth in 1986.[8]) Taiwan’s importance as a producer of high technology products is well known. The Institute for International Economics reports that Taiwan’s ‘‘IT sector is a source of strength both to Taiwan itself and to consumers of IT products in the United States.’’[9]
Underpinning the U.S. relationship with Taiwan is the Taiwan
Relations Act (TRA). When the United States established official diplomatic relations with the People’s Republic of China in 1979, the TRA was enacted to redefine the U.S. relationship with Taiwan after American derecognition. The TRA also describes U.S. security commitments to the island and requires the United States ‘‘to provide Taiwan with arms of a defensive character’’ and ‘‘to maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people of Taiwan.’’ [10]
The United States has an interest in maintaining peace and stability in the Taiwan Strait. According to a speech given by Deputy Assistant Secretary of State Thomas Christensen on September [11], 2007, ‘‘As a Pacific power with global interests and obligations, the United States has a natural interest in peace throughout Asia. Because the Taiwan Strait is a potential flashpoint for conflict, the area demands [the United States’] constant attention.’’ [11] Successive U.S. Presidents also have affirmed America’s interest in Taiwan.
American allies in the region often monitor this relationship to gauge U.S. attitudes on East Asian security. Indeed, one knowledgeable source referred to Taiwan as a ‘‘canary in the coal mine.’’ The U.S.-Taiwan relationship, and the way in which the United States addresses it, are of particular importance to Japan—which sees the possibility of future strategic competition or even an adversarial relationship with China, and which views its alliance with the United States as being vital to Japanese interests in many of the same ways that Taiwan’s relationship with the United States is vital to Taiwan’s survival as a self-governing democracy. In 2005 Japan joined the United States in issuing a statement[12] that Taiwan and the Taiwan Strait are a ‘‘common security concern’’ for both nations and that easing tensions across the Strait is a ‘‘common strategic objective.’’
Taiwan is situated roughly 100 miles from the coast of China’s Fujian province, 200 miles north of the Philippines, and 300 miles southwest of Okinawa. Because of its location, some PRC military strategists have suggested it would be of value to the PRC in extending its ‘‘defensive’’ perimeter and improving its ability to influence regional sea lines of communication.[13] According to one PLA military science text:
If Taiwan should be alienated from the mainland, not only [would] our natural maritime defense system lose its depth, opening a sea gateway to outside forces, but also a large area of water territory and rich resources of ocean resources [sic] would fall into the hands of others. . . . [O]ur line of foreign trade and transportation which is vital to China’s opening up and economic development will be exposed to the surveillance and threats of separatists and enemy forces, and China will forever be locked to the west of the first chain of islands in the West Pacific.[14]
Taiwan Political Situation
Taiwan as a political entity is formally known as the Republic of China (ROC), and traces its roots back to the fall of China’s Qing Dynasty in 1911. The government of the ROC ruled all of China until 1949 when, after several key defeats by Communist forces under Mao Zedong during the Chinese Civil War, the ROC ruling party, the Kuomintang (KMT), and its military commander and political leader Chiang Kai-shek retreated to Taiwan and established a government in exile. For the next several decades Chiang and the KMT governed Taiwan. Early in the KMT’s rule, the ROC government responded with force to an uprising among the local population, known as the ‘‘228 Incident,’’ which killed thousands of native Taiwanese. While the ROC’s rule on Taiwan became less violent over time, the single-party government continued martial law. The legacy of this period is still evident today in political rifts between elements of Taiwan’s society.
After martial law ended in 1991 and political reforms were instituted throughout the 1990’s, democracy took root in Taiwan. Its first Presidential elections took place in 1996 and the KMT’s candidate was elected, but four years later, in 2000, a member of the opposition Democratic Progressive Party (DPP), former Taipei mayor Chen Shui-bian, was elected President. His election ended fifty years of KMT power in Taiwan, and was hailed as a significant milestone in Taiwan’s democratization.
President Chen had campaigned on a platform of declaring Taiwan’s independence from mainland China. However, during his first term as President, he distanced himself from that pledge in order to lower cross-Strait tensions. This change was reflected in his ‘‘Four No’s Plus One’’ [15] statement issued at his inauguration. Eighteen months after President Chen’s election, the KMT lost direct control of Taiwan’s legislature, the Legislative Yuan (LY), although the party managed to retain a slim majority by ‘‘cobbling together a working coalition from its own remnants.’’ [16] This coalition of the KMT and former KMT factions, known as the Pan-Blue Coalition, has since maintained control of Taiwan’s LY. The legislative-executive split has produced ‘‘political stalemate and infighting [that have] continued to characterize Taiwan’s political scene.’’ [17]
President Chen was reelected narrowly in 2004, and his second term has been considerably more contentious than his first. Taiwan’s LY has experienced near-constant deadlock regarding major issues since 2004, and a series of scandals have hit President Chen’s family.[18] Furthermore, President Chen has seemingly backed away from his ‘‘Four No’s Plus One’’ pledge; in 2005 he ‘‘ceased the functioning of’’ [19] the National Unification Council and Guidelines that the ‘‘Four No’s’’ pronouncement said would never be eliminated. President Chen also is planning an island-wide referendum on applying for United Nations membership under the name ‘‘Taiwan,’’ a move Beijing asserts violates both its ‘‘One China Principle’’ and a vow President Chen made not to change the island’s formal title. Numerous times the U.S. government has concluded it is necessary to distance itself from President Chen’s statements or stated objectives, and on occasion has directly criticized his stances or comments pertaining to independence.
Two major elections will take place in Taiwan in 2008. In January, members of the Legislative Yuan will be elected, and in March 2008, Taiwan voters will elect a new President. The LY elections will usher in an extension of the terms of legislators from three to four years, which will bring the LY’s electoral cycle in sync with Taiwan’s Presidential election cycle; shift the LY to single-member districts; and reduce by half the number of seats—from 225 to 113.
Taiwan’s Presidential elections are scheduled in March 2008. As has been true for all Presidential contests in Taiwan in recent years, the major issues for this election to date have been Taiwan’s political status and its relationship with the PRC. The DPP historically has favored independence, while the KMT has been more accepting of Chinese concerns. It is widely agreed that no candidate will win the election without the support of centrist voters who typically embrace the status quo of de facto Taiwan independence. Issues like constitutional reform, strengthening Taiwan’s economy, and fighting corruption also are playing a part in the campaign.
The DPP has nominated former Kaohsiung mayor Frank Hsieh as its candidate for President. Mr. Hsieh is perceived as slightly more moderate then President Chen on cross-Strait issues, particularly on trade and investment links, although he is supporting President Chen’s contentious referendum on applying for U.N. membership under the name ‘‘Taiwan.’’ [20] His platform includes continued efforts to modernize Taiwan’s military and a willingness to appropriate the necessary funds to do so.[21] Mr. Hsieh also has promised to improve Taiwan’s relationship with the United States. He recently visited Washington to meet with Administration officials and Members of Congress on a trip he entitled ‘‘the trip of love and trust.’’ [22]
The KMT has nominated former Taipei mayor Ma Ying-jeou as its candidate. Mr. Ma is campaigning on a different approach to cross-Strait relations. At a meeting with the Commission’s delegation in August 2007, he denounced President Chen’s U.N. referendum and promised to improve Taiwan’s relationship with the PRC. Mr. Ma said that he hopes to negotiate a ‘‘peace agreement’’ with Beijing and wants to deepen economic integration with the PRC, perhaps even forming a common market.[23] Mr. Ma’s approach to the cross-Strait relationship causes some to question his level of commitment to further strengthening Taiwan’s military. Mr. Ma responds that a better relationship with the PRC will result in a reduced need for military forces and investments in them. He also insists that any agreement with the PRC would be predicated on Beijing removing its missiles targeting Taiwan from across the Taiwan Strait.[24]
The outcome of the coming elections will have a major impact on U.S. policies in the region. The U.S. government officially is neutral in the 2008 elections, and sees it as fortunate that both Presidential candidates have taken more moderate stances on crossStrait issues than President Chen, which could help cool tensions between Taipei and Beijing.
Status of Cross-Strait Relations Political relations
For decades Taipei and Beijing have been at odds over conflicting claims to sovereignty. China’s ‘‘One China Principle’’ declares that Beijing is the legitimate authority for all China, including the island of Taiwan. The United States chose to acknowledge Beijing’s ´ perspective in the 1979 U.S.-China Joint Communique, but did not say it agreed with that perspective. For itself, the U.S. government has taken no position on Taiwan’s sovereignty. Neither major political party in Taiwan accepts the ‘‘One China Principle’’ as stated by the PRC.
Since its political liberalization, Taiwan’s people have reassessed the nature of their national character and their relationship to the PRC. While Taiwan has derived much of its culture from mainland China, its people increasingly see themselves as no longer strictly ‘‘Chinese’’ and instead have begun to embrace a national identity that is independent of the mainland.[25] This change of views has been encouraged by the DPP. Many Taiwan residents, however, recognize the risk of antagonizing the PRC on an issue that greatly matters to it, and with respect to which its leadership effectively has painted itself into a corner, leaving it little choice but to respond with armed force if Taiwan pursues the issue of independence.[26] For this reason, the majority of Taiwan residents prefer for their government not to push the matter too far, but instead to continue to enjoy de facto independence.
From the Chinese perspective, Taiwan historically has been, and remains, intrinsically a part of China. Beijing argues that it is Taiwan’s legitimate sovereign and readily cites a multitude of international documents it says support this assertion.[27] China’s Propaganda Department frequently uses Taiwan to externalize domestic problems and distract Chinese citizens from focusing on salient issues at home.[28]
No high-level meetings between PRC and Taiwan officials have been held since 1992, when they met in Hong Kong to discuss the nature of their conflicting claims to sovereignty—which is seen as a high point in cross-Strait relations. Since that time, China has demanded that Taiwan acknowledge what Beijing calls the ‘‘1992 Consensus’’ regarding the PRC’s ‘‘One China Principle’’ as a precondition for further negotiations, and Taiwan has refused.[29] While there have been no high-level meetings in over a decade, some peripheral progress in China’s and Taiwan’s bilateral relationship has been achieved. For example, postal, transportation, and economic links across the Strait have been established and then expanded and enhanced. Recently, Beijing and Taipei agreed to permit direct annual charter flights across the Strait.
In March 2005 Beijing enacted the Anti-Secession Law that typifies the way China has dealt with Taiwan. The law codified Beijing’s longtime threat to use ‘‘non-peaceful means’’ to regain control of Taiwan in the event Taiwan declares independence, or Beijing concludes that all possibility of peaceful unification is lost.[30] The law met with international criticism and fueled massive protests in Taipei. Beijing had hoped to strongly warn Taiwan’s leadership not to further distance Taiwan from PRC claims to the island, but instead the action catalyzed support among Taiwan’s people for many of the policies it had aimed to deter.
PRC actions like the Anti-Secession Law fuel responses from Taipei. President Chen recently has sought U.N. membership under the name Taiwan, and currently is advocating a referendum in Taiwan to assess the population’s wishes on that matter—despite the U.N.’s rejection of Taiwan’s prior requests for membership. China, to date, has refrained from significantly worsening the situation by threatening the island with force, and instead has voiced concern to the United States and asked for it to intercede with the Chen government to persuade it to halt this effort. In September 2007 Deputy Assistant Secretary of State Christensen characterized the referendum as a ‘‘needlessly provocative action’’ and said the United States ‘‘opposes such an initiative strongly.’’ [31] Thus far, President Chen has been unresponsive to U.S. concerns.
It is important for concerned observers of the PRC-Taiwan dialogue to understand that the rhetorical intensity in recent months can be better understood in the context of the political situation in both locations. In October 2007 the PRC held its 17th Party Congress. In the lead-up to Party Congresses, China’s leadership traditionally has made strong statements on the Taiwan issue, and taken related actions intended to rally support around the CCP and to stimulate nationalism. For example, China’s President Hu Jintao recently promoted several PLA generals who have been responsible for China’s Taiwan military contingencies. As noted above, Taiwan will conduct both Presidential and Legislative Yuan elections early in 2008, and its politicians traditionally have made aggressive statements about Taiwan’s status as Presidential and legislative elections draw nearer. Economic relations
While the political relationship between Taiwan and the PRC has been tense for the past 50 years, businesses in both places have acted in ways that increasingly have tied the two economies to each other. It is estimated that one million Taiwan citizens live and work in China.[32] For the last several decades entrepreneurs from Taiwan steadily have invested large sums of money in the PRC. While Taiwan has laws to regulate the volume and composition of these investments, Taiwan businesspeople are circumventing these rules by investing through intermediaries situated outside the legal reach of Taiwan’s control (such as in the Cayman and Virgin Islands). Most knowledgeable experts estimate that Taiwan has somewhere between US$150 billion and US$250 billion[33] invested across the Strait (as a point of comparison, the United States has invested only US$48 billion in China), a number well above the officially approved limit of US$58 billion.[34] China is estimated to be dependent on Taiwan for as much as one-tenth its total FDI,[35] making Taiwan China’s largest investor.[36] Such investments create and nurture very strong links by establishing a heavy degree of economic interdependence between Taiwan and the PRC. Some believe these ties may serve as a stabilizing force across the Strait, with both sides understanding that the blow to the standard of living and the social upheaval resulting from an armed conflict would be very costly. The economic links have brought with them peripheral improvements in relations, or at least pressures to make real efforts to achieve such improvements, such as establishing regular direct cross-Strait flights. KMT Presidential candidate Ma has gone so far as to propose establishing a common market with the PRC if he is elected in March.[37] Taiwan’s Security
Military preparedness and deterrence
Over the last several decades the balance of military power across the Taiwan Strait has shifted significantly in the PRC’s favor. Taiwan’s defense spending has declined steadily as a percentage of Taiwan’s GDP over the last decade, while a surge in China’s People’s Liberation Army (PLA) expenditures and capabilities—particularly those directly associated with Taiwan—have outpaced the island’s defensive abilities.[38] The reality is that Taiwan simply is incapable of winning an arms race with China. Because of this, Taiwan has concentrated its defense efforts and investments on capabilities designed to hold off the PLA until U.S. and possibly other allied forces can arrive to help halt an attack and repel an invasion. Ultimately, Taiwan’s entire defense strategy is rooted in U.S. military intervention.
Then-Secretary General of Taiwan’s National Security Council Mark Chen described recent trends in cross-Strait military asymmetries when he met in August 2007 with the Commission delegation to Taiwan. ‘‘In 2000 the PLA had 200 ballistic missiles pointed at Taiwan from across the Strait; today they have over 1000.’’[39] He acknowledged that Taiwan is incapable of effectively countering China’s surge in capabilities and resources. Taiwan’s Defense Minister, Lee Tian-yu, reinforced Secretary General Chen’s remarks, saying that in every war game Taiwan has conducted, it has lost to the PLA when it has fought alone. Regardless of this, Minister Lee declared that ‘‘Taiwan still has teeth and will certainly fight until the end—we will damage them severely.’’ [40]
Critics of Taiwan’s defense efforts typically cite a general decline in the percentage of Taiwan’s GDP it has allocated to the island’s defense budget (that stands at 2.85 percent of GDP).[41] President Chen has vowed to increase that budget to three percent of GDP before leaving office, and the Legislative Yuan recently approved an increase to US$9.21 billion, a 20.8 percent increase from the previous year.[42]
While its level of defense expenditures is one indication of the seriousness with which Taiwan approaches the challenge of defending itself, close observers do not believe expenditures alone reliably and accurately convey the full picture. Taiwan has made significant strides to enhance its defense capabilities in recent years by investing in a variety of weapon systems produced both domestically and abroad, including indigenously-produced CM–32 ‘‘Cloud Leopard’’ armored personal carriers and KH–6 fast attack missile boats, and a variety of sophisticated electronics equipment it has purchased from the United States. Taiwan also has modernized the structure of its military by creating a non-commissioned officer corps, augmenting its early warning radar systems, expanding its ballistic missile defense capabilities, and enhancing contingency training for its forces.
The United States is mindful of the reality that Taiwan cannot long survive an attack or invasion by the PRC without intervention by U.S. and possibly other allied forces. Any success in defeating PRC aggression against Taiwan will be greatly aided by the degree to which Taiwan and the forces of other nations that intervene on its behalf are able to coordinate and share the tasks of such an effort. For this reason, the United States has urged Taiwan to enhance its ability to conduct joint operations with allied forces, and Taiwan has made significant progress toward this goal. U.S. forces have been advising Taiwan military planners on how to conduct joint operations and have sent observers to Taiwan’s Han Kuang military exercises for the last several years.
Reflecting considerations that have guided its own defense policy and procurements, the United States has urged Taiwan to increase its use of, and integrate in its doctrine, enhanced command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR)[43] abilities, so that its forces can be utilized most efficiently, effectively, and quickly against an adversary. Taiwan has taken significant steps to employ these force multipliers.
Taiwan’s Net-Centric Warfare Capabilitiesand the Po-Sheng Project
With U.S. government assistance and approval for the involvement of U.S. defense contractors, Taiwan has been engaged in a major project to modernize its command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) warfare capabilities. During the visit of a Commission delegation to Taiwan in August 2007, Taiwan’s Ministry of National Defense briefed the delegation on these efforts and demonstrated some of its new C4ISR capabilities. A major example is the multibillion U.S. dollar modernization project known as ‘‘PoSheng’’ or ‘‘Broad Victory,’’ which has significantly advanced Taiwan’s C4ISR capabilities, and therefore has enhanced the reach and lethality of its defensive forces. It is designed to enable Taiwan to reduce its losses in a conflict, slow the advancement and effect of PLA forces, and extend the amount of time available for the United States and other allies to decide whether to join Taiwan in a coordinated defense and, if so, for their forces to arrive and engage. The program is still underway and further improvements are expected to be realized.
The key controversy in Taiwan’s defense spending is associated with an arms package offered to Taiwan in 2001 with Bush Administration approval. The original package, valued at US$18 billion, was composed of eight diesel-electric submarines, 12 P–3C Orion anti-submarine warfare (ASW) aircraft, and a Patriot Advanced Capability 3 (PAC–3) surface-to-air missile system. This proposal became a political football between the DPP presidency and the KMT-led Legislative Yuan. After the LY Procedural Committee rejected previous proposals more than 100 times, a compromise was reached in June 2007 that allocates funding to purchase the P–3C aircraft, upgrade a number of older PAC–2 missiles and their equipment, and conduct a feasibility study for the submarine package. The LY also approved initial funding for the procurement of additional F–16 fighters from the United States; however, the Bush Administration to date has not approved this request.[44]
Another controversy regarding Taiwan’s defensive capability is the question of whether the island should develop its own counterstrike capabilities. Currently, Taiwan has only a limited ability to counterattack targets on China’s mainland in the event of PRC aggression. Some within Taiwan’s defense establishment believe Taiwan can significantly challenge Beijing’s willingness to use force against the island by developing powerful conventional counterstrike abilities targeted on significant PRC military, economic, and population centers.[45] The United States has opposed such measures, arguing that deployment of long-range missiles capable of striking targets on the mainland would not contribute to the island’s ability to deter China; likely would provide only limited operational benefits; and could further complicate the already daunting escalation-control problems that would face the United States and others in the event of a cross-Strait conflict.[46] Proponents of the counterstrike missiles respond that the system would be cheaper and more effective than purchasing expensive defensive weapon systems like the PAC–3 to blanket the island and shield it from PLA missile strikes.
Container Security Initiative in Taiwan
While Taiwan does not face serious threats from acts of international terrorism, it is committed to keeping the island from becoming a springboard for such activities, according to Mr. Kuo Linwu, the Director of Taiwan’s Counterterrorism Office, with whom Commissioners met in Taipei.[47] Taiwan, therefore, is cooperating with the United States on a variety of initiatives to secure the international shipping system from acts of terrorism. It currently is participating in the U.S. Container Security Initiative (CSI) intended to scrutinize the contents of all shipping containers destined for the United States before they reach U.S. ports; it has agreed to participate in the Megaports Initiative that will screen shipments for nuclear and other radiological materials; and it has expressed interest in joining the Proliferation Security Initiative (PSI) the United States established to coordinate international efforts to interdict suspected shipments of WMD, WMD components, and equipment that could be used to manufacture WMD.
Port Security in Taiwan: Kaohsiung Harbor
While in Taiwan in August 2007, the Commission delegation visited the island’s largest port facility which is in Kaohsiung— Taiwan’s second most populous city located near the southern end of the western side of the island. The Port of Kaohsiung is one of the world’s largest and busiest ports, handling 57 percent of Taiwan’s international trade volume and more than 73 percent of the island’s container traffic.[48] The facility receives the majority of Taiwan’s petrochemical imports (which are refined locally), and contains a major Free Trade Zone (FTZ).[49] Because of the export-oriented nature of Taiwan’s economy, the port is of vital importance to the island.
Due to the high levels of trade between the United States and East Asia, the Port of Kaohsiung is important to the United States as well. Because the harbor’s deep waters can be used by the largest container ships—which are able to move goods efficiently across the Pacific—cargo from other ports in the region that lack Kaohsiung’s facilities and deep waters often is transshipped through Kaohsiung, where it is moved from smaller ships onto larger trans-ocean ships. The facility is a major hub for ocean-going freight between North America and East Asia.
Ships leaving this harbor dock at ports in Vancouver, Seattle, San Francisco, Oakland, Los Angeles, Long Beach, San Diego, Boston, New York, Baltimore, and New Orleans. U.S. Customs and Border Protection of the Department of Homeland Security reports that the harbor handled 369,500 direct shipments and 716,000 transshipments to the United States in the year 2006.[50]
Due to the high volume of shipments leaving Kaohsiung destined for the United States, the United States has sought Taiwan’s cooperation on a variety of port and shipping security programs. Under the U.S. Customs and Border Protection’s Container Security Initiative, the paperwork for all container shipments bound for the United States is examined. All Bills of Lading are checked, suspect containers are x-rayed, and some containers are physically inspected.[51] The port also has agreed to participate in the U.S. Megaports initiative. Twenty-five radiation detectors are being installed throughout the port facility to monitor shipments for dangerous nuclear and radiological cargo. Personnel at the Kaohsiung office of the American Institute in Taiwan commended Taiwan authorities for their help and responsiveness, saying that no other port in the world has been more cooperative.[52]
Diplomatic efforts
Taiwan’s democratization has brought with it the classic ‘‘guns versus butter’’ argument. According to Ms. Elizabeth Hague, who was a China research analyst at the RAND Corporation, politicians in Taiwan, especially those affiliated with the KMT, have argued that more money should be spent on social welfare programs rather than given to the military.[53] The realization that it cannot spend limitless sums on its military is one reason Taiwan has placed great emphasis on maintaining ‘‘soft power’’ through preserving the commitment and support of its allies, and by trying to prevent erosion in the number of nations that recognize it diplomatically.
Taiwan currently counts 24 nations that diplomatically recognize the Republic of China, rather than the People’s Republic of China, as the legitimate sovereign of greater China. Recently, Taiwan’s Foreign Minister James Huang explained that diplomatic allies not only afford Taiwan a degree of national pride, but also strengthen Taiwan’s position in any negotiation with the PRC because they enable Taipei to deal with Beijing on an equal footing.[54] The PRC has gone to great efforts, using large packages of various kinds of aid and other inducements, to persuade those nations that recognize the Republic of China to switch their recognition. Taiwan believes its only realistic response is to make counteroffers. To date, Taiwan’s ‘‘dollar diplomacy’’ has prevented the PRC from vanquishing Taiwan in this competition, but the PRC slowly is winning what has become a war of attrition by utilizing an array of inducements with which Taiwan simply is unable to compete.
Taiwan and the PRC also have been engaged in a series of diplomatic skirmishes, with Taiwan working to increase its acceptance and participation in international organizations, and the PRC working just as assiduously to deny membership and participation in such organizations to Taiwan. A member of the United Nations until its seat was taken by the PRC in 1971, Taiwan since that time has applied for membership 15 times and has been denied on each occasion. China works actively to oppose Taiwan’s inclusion.[55]
Taiwan also has been denied membership in the World Health Organization (WHO) for similar reasons.
Taiwan is working on another front to maintain a place in the international system and prevent the PRC from isolating it. Taiwan’s leaders have been advocating the establishment of Free Trade Agreements (FTA) with nations with which it has strong economic relations, notably including the United States. Not surprisingly, Beijing objects, and is working to dissuade nations from entering into such agreements with Taiwan.[56] Taiwan believes such an agreement with the United States would benefit both parties economically and encourage other nations to brave Beijing’s objections to establish comparable arrangements with Taiwan. Taiwan fervently believes this would have very significant salutary economic and diplomatic effects.
The Bush Administration thus far has not been enthusiastic about the prospect of a U.S.-Taiwan FTA. Ambassador Karan Bhatia, Deputy U.S. Trade Representative, has said that achieving such an agreement will be difficult not only because Trade Promotion Authority (TPA)[57] has expired, but also because Taiwan still must correct a number of economic problems in several fields that would make such an agreement unworkable for the United States, such as ‘‘intellectual property rights, pharmaceutical pricing regulations, government procurement, agricultural trade, and telecoms sector regulations.’’ [58] The Administration also believes that such an FTA would complicate relations with China. While few individual U.S. businesses have openly supported establishing an FTA with Taiwan, both the American Chamber of Commerce in Taipei and the U.S.-Taiwan Business Council have expressed support for the proposal.[59]
Conclusions
‘‘The Commission shall investigate and report on—
‘‘REGIONAL ECONOMIC AND SECURITY IMPACTS—The triangular economic and security relationship among the United States, [Taiwan], and the People’s Republic of China (including the military modernization and force deployments of the People’s Republic of China aimed at [Taiwan]), the national budget of the People’s Republic of China, and the fiscal strength of the People’s Republic of China in relation to internal instability in the People’s Republic of China and the likelihood of the externalization of problems arising from such internal instability.’’
A Commission delegation traveled to New Delhi, India in August 2007 to discuss with Indian experts and U.S. government personnel perspectives on China’s development, Sino-Indian relations, and the impact of Chinese regional influence on U.S. security and relations in Asia. The delegation met with academicians, policy experts, former diplomats and government officials, personnel of government-funded think tanks and research organizations, and a representative of the Tibetan government in exile.[60] In some cases, this Commission report will not attribute statements to individuals at their request to protect their anonymity.
Introduction to Sino-Indian Relations
China and India have a long history of political, economic, cultural, and religious relations extending back to the first century A.D. In the mid-twentieth century, China and India both underwent significant political transformations, with India gaining independence from the United Kingdom in 1947, and the Communist Party under Mao Zedong seizing control of China and forming the People’s Republic of China in 1949. In the following years, both countries aspired to lead the developing world and joined the ‘‘nonaligned’’ movement with its Five Principles of Peaceful Coexistence.[61] These principles are: ‘‘mutual respect for sovereignty and territorial integrity, mutual non-aggression, non-interference in each other’s internal affairs, equality and mutual benefit, and peaceful coexistence.’’ [62] However, in 1962, after a decade of building tension, China and India engaged in a short war over border territories—an event that has become pivotal in the minds of Indian policymakers and in their approach to Sino-Indian relations. When China invaded Tibet in 1950, India’s leadership sent a small force to India’s disputed northeast boundary with Tibet, known as the McMahon Line. In 1955, when China constructed a military supply route linking Tibet to Xinjiang province along the McMahon line, India responded with an increased military presence at the border and there was a series of minor border skirmishes over the next several years. Developing Indian diplomatic relations with the United States and a general military buildup across India convinced Chinese authorities that India was preparing to launch an incursion across the McMahon line; China responded by attacking an Indian border outpost in September 1962. Full-scale conflict lasted only a few months and resulted in a complete military victory for the Chinese and withdrawal of Indian forces. In November 1962 Chinese Premier Zhou Enlai announced a cease-fire and withdrew Chinese forces to 20 kilometers behind the ‘‘line of actual control’’ (the McMahon Line), keeping the Xinjiang-Tibet road under Chinese control but ceding the rest of the territory back to India.[63] Since that time, there have been minor skirmishes, but no full-scale attacks. However, this border region remains an area of tension and conflict between the two countries.
After the Cold War ended in the early 1990’s, both countries resumed engagement and began increasing trade, while also addressing border disputes. One academic noted that the most important recent change in Sino-Indian relations is the adoption of healthy realism by both nations. In the academic’s opinion, Indian and Chinese policymakers realize there is great economic potential in trade between the two countries, and they are willing to separate contentious issues such as border disputes from the pursuit of trade and economic ties. In 2005 China and India held a strategic dialogue and established a ‘‘strategic and cooperative partnership.’’ [64] Further, in June 2007, External Affairs Minister Shri Pranab Mukherjee stated, ‘‘While we remain fully conscious of our outstanding differences with China, including on the boundary question, the basic paradigm of our approach is to seek an all-around development of ties, without allowing these differences to define the agenda of the relationship . . . [T]he India-China partnership is an important determinant for regional and global peace and development, and for Asia’s emergence as the political and economic center of the new international order.’’ [65]
Yet a healthy dose of Indian suspicion and skepticism toward China remains and is growing. This was an evident motivator for India’s efforts to acquire nuclear capability; indeed, New Delhi stated that it acquired nuclear capacity because of the threat China poses to India, as well as China’s nuclear assistance to neighboring Pakistan with which India has a troubled history.[66] Today, this suspicion is expressed through a cautious approach by India to trade and security relations with China—for example, in protection of certain economic sectors from Chinese investment, in wariness towards China’s military modernization and in initiatives for security cooperation with China; and in development of stronger relationships with other countries on the Pacific Rim including the United States.
Significant Issues in Sino-Indian Relations Deepening Economic Relations
Sino-Indian trade has grown rapidly in the past five years, bolstered by the declaration of a ‘‘strategic and cooperative partnership’’ in 2005, and the symbolic opening of border passes to facilitate trade. In 2000, bilateral trade equaled $2.91 billion. By 2006, trade between the two countries totaled $25 billion. With this growth, India became China’s tenth largest trading partner.[67] China is on track to become India’s largest trading partner after the United States.[68] Indian exports to China are dominated by iron ore, whereas Chinese exports to India are comprised of manufactured goods such as electronics and machinery.[69] China is investing in India’s infrastructure development—totaling $50 million in 2006— even though the New Delhi government has limited Chinese investment in sectors such as ports and telecom.[70] ‘‘Indian investment in China currently stands at $130 million,’’ compared to the United States’ investment of $54 billion in China (see Chapter 1, Section 1), and is focused on information technology, pharmaceuticals, banking, energy technology, and auto components.[71] [72]
Democracy is strong in India, and the Indian experts with whom the Commission delegation met relished debating current issues. During the Commission’s visit, interlocutors expressed a variety of opinions about the impact of China’s development on Indian economic growth and regional stability. According to one academic, the most positive aspect of Sino-Indian relations is the burgeoning trade relationship, which is projected to reach $40 billion by 2010.[73] However, one economist argued that India’s economic relationship with China is one-sided, and that the nature of trade between China and India is unhealthy for the development of Indian manufacturing. Most Indian exports to China are raw materials, and most imports from China are finished goods. This academic noted that the nature of the economic relationship does not help to enhance and strengthen Indian manufacturing capabilities.
Additionally, as India and China are on a similar trajectory of economic development, they compete for similar products and services in the market. For example, Chinese antibiotics have flooded the Indian market, and several Indian enterprises producing pharmaceuticals have closed because they cannot compete with the prices of Chinese products. However, other experts countered that the quality of Chinese goods is inadequate, and that this has allowed Indian manufacturers to be competitive in the domestic Indian market by providing products of higher quality.
Indian experts agreed that the security relationship with China continues to hold the potential to spoil economic relations between the two nations. As noted above, a deep mistrust of Chinese intentions remains among Indian policymakers stretching back to the 1962 border war. Indians echo frequent U.S. concerns that China’s authoritarian political system, and a lack of transparency in the policy debates and decision-making apparatus of the government and the Chinese Communist Party that controls it, make it difficult to trust and develop a strong cooperative relationship with China. They also prevent India from deeply engaging China on security matters.
Border Dispute
The border conflict over which China and India fought in 1962 remains unresolved, and the line of actual control between India and China is not fully delineated. China and India meet regularly to mediate this dispute, and have agreed on ‘‘guiding principles’’ for resolving it, but have not yet produced a solution.[74] Chinese and Indian patrols meet face-to-face several times a year, and there is no shared understanding of escalation rules. Thus, there is the potential that a border skirmish can escalate into a wider armed conflict. China claims territories under Indian control, namely the Indian state of Arunachal Pradesh. In November 2006, prior to President Hu Jintao’s visit to India, the Chinese Ambassador to India made a statement in which he called that state part of Chinese territory. China has gone so far as to deny visas to Indians from Arunachal Pradesh on the grounds they are Chinese and therefore do not need a visa to enter China.[75]
According to one former Indian military officer, China is holding this border dispute as a card to play against India, and will use it when it can derive a clear advantage. Another former government official noted that it appeared China was on track to compromise and settle the border dispute in a manner acceptable to India until the Indian government sought stronger ties with the United States. In this official’s opinion, the expansion of the U.S.Indian relationship caused China to become unwilling to offer concessions. At this point in the relationship, the official noted that both countries refuse to compromise.
China and India as Geopolitical Competitors
China has viewed India as a competitor for influence among developing nations, especially as India’s economic growth has boomed. Cheng Ruisheng, a former Chinese ambassador to India wrote, ‘‘In recent years, as the Chinese and Indian economies have developed rapidly and their comprehensive national strength has continually increased, an argument has sometimes appeared . . . that the two powers . . . are bound to clash and a future conflict will be hard to avoid.’’ However, Cheng argues that the foundation of the Sino-Indian strategic partnership, the Five Principles of Peaceful Coexistence, will prevent this from happening.[76]
Indian security experts believe that China’s objective is to emerge as the leading power in Asia, and competition with India for predominance in the region is a result of this intention. These experts view the direction of China’s military modernization efforts with concern, believing the capacities they see China acquiring will enable China to project power well beyond the Taiwan Strait and into India’s immediate sphere of influence. Dr. Toshi Yoshihara, Associate Professor at the Naval War College, testified to the Commission that China’s focus on certain niche capabilities—for example, its submarine forces—could be the ‘‘sharp end of the spear’’ to penetrate India’s defenses.[77]
China’s military modernization, including improvements in the People’s Liberation Army (PLA) Air Force’s capabilities such as inflight refueling, and modernization of its air bases in Tibet and Chengdu, has enabled the PLA to shorten the time required to prepare for a major military campaign against India. India also could be threatened by China’s movement toward a blue water navy capable of projecting power into the Indian Ocean. Dr. James Holmes, Associate Professor at the Naval War College, testified:
As [China] expands its interests in the Indian Ocean, waging a vigorous soft-power diplomacy and backing maritime aims with material power, China will encounter another rising power—India—that entertains nautical ambitions of its own. Like China, India discerns real, compelling interests in the Indian Ocean, and it enjoys venerable seafaring traditions that offer a major reserve of soft power. Strategists in New Delhi phrase their arguments in intensively geopolitical terms—jarringly so for Westerners accustomed to the notion that economic globalization has ren´ dered armed conflict passe. And the Indian economy has grown at a rapid clip—albeit not as rapidly as that of China—allowing an increasingly confident Indian government to yoke hard power, measured in ships, aircraft, and weapons systems, to a foreign policy aimed at primacy in the Indian Ocean region.[78]
As discussed in Chapter 2, Section 1 (‘‘China’s Military Modernization’’) and also in Chapter 3, Section 3 (‘‘The Strategic Impact of China’s Energy Policies and Activities’’), China appears to be energetically seeking expansion of its naval presence and reach into the Indian Ocean, with one major motivator being protection of the sea lines of communication (SLOCs) on which it depends for transport of energy resources from the Middle East and Africa to China. Dr. Holmes noted that such movement by the Chinese likely will result in a focus on expanding the PLA Navy’s capabilities for long endurance operations and greater reliance on nuclear submarines.[79]
In addition, the military will seek locations for forward operations. The PLA Navy is establishing relationships with ports throughout the Indian Ocean and Persian Gulf that could be used to support forward operations and protect SLOCs, including ports in Pakistan, Burma, Sri Lanka, and the Maldives; and it also is building what a former Indian military officer termed ‘‘strategic land bridges’’ from strategic port locations, notably in Burma, to China’s inner provinces.
This strategy has been named the ‘‘string of pearls,’’ but as one Indian security expert noted, it does not consist only of establishing military bases and projecting China’s military power, but also includes spreading economic and political influence. According to him, the ‘‘string of pearls’’ consists of economic engagement; supporting critical infrastructure projects such as building ports and pipelines; and becoming involved in regional politics. All these actions together encircle India and limit its influence in South and Southeast Asia. The concept of encirclement or containment is prominent in the minds of India policymakers and media. As one recent article stated, ‘‘China has done its own containment strategy—the ‘string of pearls’ India, however, fears that this string of pearls can become an iron necklace around it.’’ [80]
Commissioners were told in New Delhi that some Indian analysts believe China’s involvement in the Shanghai Cooperation Organization and its relations with Pakistan also have as key objectives constraining the development of Indo-Central Asian relations and may be succeeding to some extent. Security experts noted that they have observed China’s ‘‘unprincipled engagement’’ with nations in Central, South, and Southeast Asia in which it has offered arms and economic support in exchange for the support of those nations in a geostrategic alignment against Indian regional power.
The immediate and long-term impacts of China’s relationships with countries surrounding India are still debated in Indian policy circles. A former military officer stated that without Sino-Indian economic engagement, China’s encirclement of India would have become a source of instability on the subcontinent. Other interlocutors noted that some policymakers are willing to balance their concerns about China’s activities designed to constrain Indian influence with their desire to foster open trade and economic engagement.
In response to the situation, India is hedging against China’s rise to regional dominance while it simultaneously is attempting to maintain its leadership in South Asia and, more broadly, to secure a place as a leader in all of Asia. India has developed a ‘‘Look East’’ policy whose focus is the use of foreign policy instruments to seek mutually beneficial cooperation with other Asian nations, to serve as a leader for struggling democracies in the region, and to offer an alternative to partnering with China. This involves India’s participation in various multilateral dialogues such as with the Association for Southeast Asian Nations (ASEAN), and its active pursuit of strong bilateral relations in the region. In a speech in April 2007, Foreign Secretary Shri Shivshankar Menon stated:
As we look forward to an increasing role in global affairs we need to expand our network of international relationships, political engagement, and economic and technical cooperation with the world. We are looking today at expanding circles of engagement, starting with the immediate neighbourhood, West Asia, Central Asia, South-east Asia and the Indian Ocean region. This is reflected in our political, economic and defence engagement with these regions. Our Look East Policy and the consequent intensified engagement with East and South-east Asia [have] led to the rebuilding of India’s historically benign and stabilizing role in these regions premised on the commerce of ideas and goods . . . We need to strengthen political, physical, and economic connectivity between India and East Asia and broaden the underpinnings of our quest for peace and prosperity. We are also adding important elements to our traditional ties with countries of the Persian Gulf region by leveraging economic opportunities.[81]
Additionally, Dr. Holmes testified:
Indeed, both Indian thinkers and outside observers often speak of an Indian equivalent to the Monroe Doctrine that seeks to place the region off-limits to external politico-military intervention. If intervention is necessary, imply Indian leaders, India should take the lead rather than give outsiders a pretext for doing so. Such a doctrine will inevitably have a strong seafaring component to it. New Delhi has nonetheless signaled its reluctance to allow any outside power to gain territories in the Indian Ocean basin or to police the region—perhaps in search of an excuse for territorial aggrandizement. And India clearly wants the wherewithal to make good on its claim to preeminence in the region, with naval officials openly declaring that the nation needs a blue-water navy to fulfill the missions set forth in India’s 2004 Maritime Doctrine.[82]
Part of India’s ‘‘Look East’’ policy that seeks to increase India’s diplomacy in Southeast Asia promotes strengthened relations with Burma.[83] Both China and India have sought access to Burma’s natural gas resources. Burma is expected to announce the winner of a contract to develop the Shwe gas fields in western Burma, and both Indian and Chinese companies have submitted bids.[84] An Indian security expert told the Commission that Western isolation of Burma requires India to engage in order to hedge against China’s increasing its patronage of Burma, and to ensure that China does not lock up Burma’s resources. A former Indian government official argued that Burma is vital to India strategically, and that the United States should accept that all countries must have relations for their own strategic reasons, even with nations whose governments the United States finds objectionable.
Ms. Thin Thin Aung, a Burmese activist, testified before Congress in 2006 that ‘‘what was once [India’s] noble policy towards Burma based on democratic values has been replaced during the last decade by one that marginalizes aspirations for freedom of the Burmese people and our ethnic Nationalists.’’ [85] This has been observable in India’s response to the protests of Burmese citizens against the military regime in September 2007. India’s news source The Hindu reported that Indian forces on the Indo-Burmese border increased patrols to prevent activists and protesters from escaping into India.[86] India also publicly opposed the imposition of U.N. sanctions against Burma, stating that it preferred dialogue and diplomacy, and saying that it has ‘‘developed a ‘useful’ relationship with the military regime without giving up on [India’s] interests.’’ [87]
Throughout this period, India has not altered its standing policy of investment in Burma’s energy sector. India’s Petroleum Minister traveled to Burma just days following the protests against the Burmese military regime and massacre of pro-democracy activists, and representatives of the two countries signed three Production Sharing Contracts for natural gas exploration.[88] Additionally, on October 10, 2007, both countries announced that they will be signing a formal agreement to develop the Sitwee port on the Kaladan River, allowing India’s landlocked states in the northeast access to the Bay of Bengal.[89]
Iran is another relationship of strategic importance for India. In the conduct of its relationship with Iran, India is mindful of its relationship with the United States. In 2003 Iran’s President Mohammed Khatami visited India and signed seven accords regarding strategic cooperation, resources management, oil and gas exploration, and trade.[90] Indian and Iranian armed forces have conducted joint military exercises.[91] The focus of this relationship is access to energy resources. India purchases approximately 7.5 percent of Iran’s oil exports.[92]
Interestingly, India’s engagement with Iran has not always created a negative spirit of competition with China; instead it has fostered India-China cooperation. A report prepared for the Commission in 2006 concluded that:
China and India . . . are economic powers dependent on cheap Middle East oil. Their interests are in working together with major consumers to keep prices reasonable. To this end, the two states have recently signed an agreement designed to end the ‘‘mindless rivalry’’ over oil. The agreement has established a formal procedure to exchange information about oil development bidding. The agreement may lack teeth, but it demonstrates that two of the world’s major consumers have recognized that, as India’s petroleum minister put it, ‘‘rivalry only benefits those who are selling assets, no matter which country wins.’’ [93]
The report also noted that from 2005 to 2006 China, India, Russia, and Iran signed energy deals with each other valued at about $500 billion.[94]
India’s energy cooperation with Iran complicates India’s policy toward Iran’s nuclear program and noncompliance with the International Atomic Energy Agency (IAEA) safeguards and inspections requirements. It also complicates India’s relationship with the United States. U.S. law requires sanctions on investments over $20 million in one year in Iran’s energy sector.[95] From 2004 to 2006, two individuals and four companies from India were sanctioned by the United States under the Iran Nonproliferation Act of 2000.[96]
In January 2006 the U.S. ambassador to India stated that future U.S.-India civil nuclear cooperation was contingent on India’s support in the IAEA for the steps the United States took to persuade members of the IAEA to approve the referral of Iran to the Security Council for sanctions.[97] In addition, the U.S. Congress passed the Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006, declaring that the United States’ policy should be to secure India’s support for containing and, if necessary, sanctioning Iran for its efforts to develop weapons of mass destruction. At the time this Report is being published, the future of this agreement is uncertain.
The dynamic of China’s and India’s engagement in the region generates competition for regional influence, which also affects the United States’ standing in Asia and the perception by other nations in the region of the United States as an economic and security partner. However, the relationships that China and India have with Burma and Iran, and the competition of the two giants for energy resources and other interests within Burma and Iran, create a race to the bottom in terms of fostering democratic principles, human rights, and transparent and accountable government.
Academics noted that India also is hedging against the potential collapse of China’s internal political and economic system, if the CCP cannot adapt to market forces and societal pressures and overcome the array of increasingly serious challenges it faces in managing the nation and its population. In many meetings with the Commission delegation, Indian interlocutors mentioned the rising internal instability in China and its potential to lead China into either economic collapse or external aggression, each of which may have serious consequences for the United States and India.
India is addressing both these scenarios by diversifying its trade relationships, developing multilateral relationships in the region (such as through participation or observer status in regional organizations), and strengthening bilateral relations with the United States, Japan, Australia, and Taiwan. Additionally, it is promoting its political values as an alternative to China’s authoritarian control that is anathema to many in the region.[98] Experts disagreed as to which strategy would be more effective for Indian foreign policy. Some Indian academics and policy experts noted that India’s multilateral engagement, such as the recent Malabar naval exercises with the United States, Australia, Japan, and Singapore, appears to create an Asian bloc against Chinese expansion, and would work against Indian interests by impeding India’s ability to develop a positive relationship with China. One former government official specifically argued in support of promoting bilateral relationships instead of multilateral relationships so as to avoid the appearance of ganging up on China. However, other experts countered that multilateral engagement is a sovereign nation’s right, and if it benefits India’s security interests, then India should proceed without concerning itself about China’s reaction.
Tibetan Refugees in India and the Tibetan Government-inExile
The presence of Tibetan refugees in India is a sensitive subject in Sino-Indian relations. After China took control of Tibet in 1950, India allowed refugees to enter the country and establish communities in exile. The Dalai Lama escaped to India in 1959 and established the Tibetan Government-in-exile in Dharamsala, approximately 800 miles south of Lhasa, Tibet. Approximately 85,000 Tibetans reside in communities in India, with another 14,000 living in Nepal.[99] The Commission delegation was told that India allows protests and demonstrations to express Tibetan solidarity and promote human rights, but that the Tibetan exile population, recognizing the sensitive political relationship between India and China ` vis-a-vis Tibet generally does not directly criticize Chinese policy or otherwise inflict damage or strain on Sino-Indian relations. China continues to use force against Tibetans fleeing China, as demonstrated in October 2006 when Chinese troops fired into a group of Tibetans crossing the Nangpa La pass into Nepal.[100]
China is building infrastructure actively in the provinces that border India. For example, in July 2006, China opened a railway connection from Qinghai province to Lhasa. Approximately 30,000 workers, including 10,000 Tibetans, labored to construct the rail line.[101] One motivation for this investment appears to be to improve Chinese access to Tibetan natural resources—including water, copper, gold, and chromium. Another motivation is to facilitate the movement of Han Chinese into Tibet. Additionally, China’s energy companies are pursuing hydropower projects in Tibet, which potentially could affect the downstream flows of 10 river systems providing water to China, India, Pakistan, Vietnam, Cambodia, Laos, Thailand, Nepal, Bangladesh, Burma, and Bhutan.[102] Perhaps the greatest cause for concern in India about the infrastructure developments on the Chinese side of the border is the recognition that expanded development in the Chengdu and Lanzhou military regions—including the provinces of Tibet, Xinjiang, and Yunnan—could allow Chinese forces to mass troops more quickly in the event of a border conflict with India. Absent a resolution to the long-running border dispute, continued Chinese infrastructure development in Tibet could increase tensions between China and India.
Impact of the Sino-Indian Relationship on U.S.-China Relations and U.S. Strategic Interests in Asia
The impact of the Sino-Indian relationship on U.S.-China relations has economic, security, and geopolitical facets. According to one former Indian government official, Indian foreign policy is reliant upon the nation’s relations with the United States, Russia, and China. India wants to minimize contention with China, while at the same time it boosts relations with the United States and Russia to balance China’s influence. China recognizes that security along its borders with India is necessary for stability, control of minority populations living in the border areas, and economic development; China also is interested in promoting Sino-Indian relations as a counter to U.S.-Indian relations. Depending on how China and India approach their bilateral trade and security relationship, the result could be enhanced or weakened regional stability
In the opinion of some Indian security experts, China does not want a conflict on the border because it wants to focus on developing the provinces and maintaining political stability. These experts posited that China may try to avoid a border conflict in order to facilitate development of greater trade linkages between India and some of China’s poorest provinces. This would result in greater regional trade integration and the formation of cross-border production networks. A stronger relationship might enable both countries to cooperate willingly to exploit new energy resources in places such as Burma and Iran, and to share technologies to reduce energy demand. Such a course, if it develops, will concern U.S. policymakers because U.S. influence in Asia could be curtailed as China’s and India’s influence grows. In addition, Indian-Chinese cooperation could facilitate continuation of human rights abuses and conflict in Middle Eastern and Southeast Asian nations—by funding the governments engaged in these abusive activities through the purchase of energy resources, and by selling arms to them.
However, if India perceives that China is succeeding in its efforts to encircle India and to constrain its growth and influence, India could decide to expand controls over trade and investment in an attempt to protect its economy from being undermined by inexpensive Chinese imports. India could be more assertive in its advancement of economic and energy ties around the region, and in its promotion of democracy as an alternative to China’s state-led development model. It also could adopt a more aggressive stance on the border issue with China and seek a stronger role in security matters in Asia.
India also could seek a stronger relationship with the United States. Representatives of an Indian think tank who met with the Commission delegation noted their belief that China is suspicious of the United States’ relationship with India and is wary of being edged out of Asia by a strong U.S.-India relationship. If the United States and India strengthen their relationship, China in response could work to strengthen ties further with Pakistan and other nations bordering India. China also could attempt to lessen tensions in the U.S.-China relationship in order to foster the image that it is a positive trading partner and diplomatic partner in Asia. Yet, Dr. Jing-dong Yuan from the Center for Nonproliferation Studies writes, ‘‘Washington and New Delhi share normative values such as democracy and strategic interests such as terrorism while Beijing’s ties with both are more driven by contingent rather than structural interests.’’ [103]
The interplay of Sino-Indian relations will affect not only U.S. bilateral relations with China and India, but also U.S. strategic interests in Asia. Both the United States and India are attempting to hedge against China’s rise, and a stronger U.S.-India relationship could serve as a counterweight to China’s regional influence. This common interest could facilitate greater cooperation by the United States and India on economic and security issues. For example, cooperation between U.S. and Indian military forces in the Indian Ocean can help to ensure protection of sea lines of communication and the vital resources that transit through them. Opportunities also exist for coordinating humanitarian responses and expanding trade.
Additionally, the United States has an interest in building democracy throughout the region. India, although a democracy, and China appear to have interests that are at odds with this U.S. interest. India’s and China’s relationships with Iran sustain a regime that is known to support the insurgency in Iraq, and their support of the military regime in Burma and their continued financial investment there undermine Burma’s democratic movement. Future cooperation between India and China in Iran and Burma could further stymie U.S. and multilateral initiatives to broaden global democratic governance, secure Iraq, curb Iran’s nuclear proliferation, and address the human rights violations in Burma.
Conclusions
‘‘The Commission shall investigate and report on—
‘‘REGIONAL ECONOMIC AND SECURITY IMPACTS—The triangular economic and security relationship among the United States, [Taiwan], and the People’s Republic of China (including the military modernization and force deployments of the People’s Republic of China aimed at [Taiwan]), the national budget of the People’s Republic of China, and the fiscal strength of the People’s Republic of China in relation to internal instability in the People’s Republic of China and the likelihood of the externalization of problems arising from such internal instability.
‘‘FREEDOM OF EXPRESSION—The implications of restrictions on speech and access to information in the People’s Republic of China for its relations with the United States in the areas of economic and security policy.’’
A delegation of Commission members visited Hong Kong in May 2007 and met with representatives of the Hong Kong government, Legislative Council members, business leaders, representatives of Hong Kong political parties, and democracy activists. In some cases, this Commission report will not attribute statements to individuals to protect their anonymity.
1997–2007: Hong Kong Ten Years after the Handover
On July 1, 1997, the government of the United Kingdom returned control of Hong Kong to the People’s Republic of China (PRC), and the PRC established the Hong Kong Special Administrative Region (HKSAR) as a subordinate unit. This inaugurated an experiment with what has been called a ‘‘one country, two systems’’ arrangement, where HKSAR is permitted to operate for a period of fifty years under a different set of laws, rules, procedures, rights, and responsibilities (an amalgamation of China’s system, the preceding system in Hong Kong under British colonial rule, and some new features) than applies in the PRC.
As the foundation of this new system, Hong Kong’s Basic Law, approved by the PRC’s National People’s Congress in 1994, maintains Hong Kong’s market-oriented economy while at the same time is supposed to move the polity toward a system of universal suffrage (i.e. direct elections in which all citizens have a vote).
There is a substantial difference of opinion among Hong Kong citizens concerning the extent to which the HKSAR government and the PRC government have honored their commitments under the Basic Law, and the extent to which the ‘‘one country, two systems’’ experiment has been successful. Democracy supporters believe that inadequate and insufficiently rapid progress has been made toward the protection of human rights, universal suffrage, and expansion of other individual political rights, and that the government has been inattentive to the needs of Hong Kong’s citizenry. Individuals considered ‘‘pro-Beijing’’ argue that progress has been substantial and sufficient; that ‘‘one country, two systems’’ has achieved political and, importantly, economic stability; and that further movement toward universal suffrage should only be made taking into account Hong Kong’s special status and with sufficient preparation.
Wu Bangguo, Chairman of the National People’s Congress noted in a speech commemorating the anniversary of the Basic Law that:
Our country is a single-system state, and the high degree of autonomy enjoyed by the Hong Kong SAR is not intrinsic to Hong Kong but was granted by the Central Government. The Central Government may grant those powers that are not clearly stipulated in accordance with the provisions of Article 20 of the Basic Law, and there is no issue of socalled ‘‘residual power.’’ Seen in this light, the Basic Law is a law of authorization. Fully and accurately understanding this point is of the utmost importance in guaranteeing the implementation of the guiding principles of ‘‘one country, two systems’’ and the Basic Law and in correctly handling the relations between the central authorities and the Hong Kong SAR.[104]
President Hu Jintao reiterated this principle in his speech commemorating the tenth anniversary of the handover of Hong Kong on July 1, 2007. He stated, ‘‘ ‘One country’ means that we must uphold the power vested with the Central Government and China’s sovereignty, unity, and security. ‘Two systems’ means that we should ensure the high degree of autonomy of the Hong Kong SAR and support the chief executive and SAR Government in exercising government power as mandated by law.’’ [105]
The U.S. Department of State voluntarily submitted a Hong Kong Policy Act Report in June 2007,[106] noting that the discharge of the ‘‘one country, two systems’’ theory has been largely successful, and that ‘‘the central government in Beijing has generally respected its commitment . . . to maintain a ‘high degree of autonomy’ for Hong Kong and to preserve and respect the integrity of [Hong Kong’s] distinct economic, legal, and social systems.’’ [107] However, previous Reports have questioned the strength of Hong Kong’s political autonomy. For example, in 2005, the Report noted that Beijing’s decision to interpret the Basic Law and rule out universal suffrage in 2007 ‘‘severely tested’’ Hong Kong’s political autonomy under this system.[108] In general, past reports acknowledge that Hong Kong’s economic autonomy has remained intact and robust.[109]
Chief Executive Selection
The process for selecting Hong Kong’s governmental leadership— the Chief Executive and members of the Legislative Council—has been determined by two Annexes to the Basic Law. The Chief Executive is selected by an Election Committee composed of 800 members including, among others, representatives from industry, labor, and religious groups, members of the Legislative Council, and Hong Kong deputies to the National People’s Congress. The composition of the Committee is heavily weighted toward business and industry representatives, many of whom rely on strong business ties with the mainland. Each of these constituencies selects its own Committee members.
| The Functional Constituencies | 550 Members |
|---|---|
| Agriculture and Fisheries | 40 |
| Insurance | 12 |
| Transport | 12 |
| Education | 20 |
| Legal | 20 |
| Accountancy | 20 |
| Medical | 20 |
| Health Services | 20 |
| Engineering | 20 |
| Architectural, Surveying, and Planning | 20 |
| Labour | 40 |
| Social Welfare | 40 |
| Real Estate & Construction | 12 |
| Tourism | 12 |
| Commercial (First) | 12 |
| Commercial (Second) | 12 |
| Industrial (First) | 12 |
| Industrial (Second) | 12 |
| Finance | 12 |
| Financial Services | 12 |
| Sports, Performing Arts, Culture, and Publication | 40 |
| Imports and Exports | 12 |
| Textiles and Garments | 12 |
| Wholesale and Retail | 12 |
| Information Technology | 20 |
| Catering | 11 |
| Heung Yee Kuk [111] | 21 |
| The District Councils (21 from Kowloon and HK, 21 from New Territories) | 42 |
| Special Constituencies | 114 Members |
| Higher Education | 20 |
| Hotels | 11 |
| Chinese Medicine | 20 |
| Chinese People’s Political Consultative Conference | 41 |
| Employers’ Federation of Hong Kong | 11 |
| Hong Kong Chinese Enterprises Association | 11 |
| Government Bodies | 96 Members (all ex officio) |
| National People’s Congress | 36 |
| Legislative Council | 60 |
| Religious Organizations | 40 Members |
| Catholic Diocese of Hong Kong | 7 |
| Chinese Muslim Cultural and Fraternal Association | 6 |
| Hong Kong Christian Council | 7 |
| Hong Kong Taoist Association | 6 |
| The Confucian Academy | 7 |
| The Hong Kong Buddhist Association | 7 |
Candidates for Chief Executive are nominated by Committee members and must secure support from a minimum of 100 members in order to stand for election.[112] If only one candidate is nominated through the nomination process, that candidate receives an official appointment from the PRC government. If multiple candidates are nominated, an election is conducted by the Election Committee, and the winner of that vote receives appointment from the central government. Given the Election Committee’s substantial weighting toward business interests that presumably will seek to preserve their own base of power under the current electoral system, it is likely the Committee members will continue to elect the candidate they believe will best serve their interests—Beijing’s preferred candidate.
The selection of the Chief Executive did not require elections between 1996 and 2007 because, during this period, only one candidate reached the threshold of 100 nominations each time the Chief Executive was to be selected. However, the March 2007 selection of the Chief Executive was contested. During the December 2006 nomination period, Alan Leong Kah Kit, former chairman of the Hong Kong Bar Association, received 132 nominations from members of the Election Committee, and Donald Tsang, the incumbent, received 641 nominations. Having received support for nomination from at least the minimum number of Committee members, both sought support within the Election Committee. This was extended into a campaign for public support.[113] During the campaign, incumbent Chief Executive Tsang agreed to participate in two debates with Mr. Leong, who represented the pro-democracy parties in Hong Kong. The debates occurred on March 1 and March 15, 2007, and reflected the importance of being able to articulate policy positions and respond to questions.[114] According to polls conducted by the University of Hong Kong, Mr. Leong’s public support increased dramatically after the first debate.[115] These debates were watched by over two million people in Hong Kong and, notably, the broadcasts were accessible to viewers in Guangdong Province as well. On March 25, Mr. Tsang won the election with 649 votes out of 772 cast; Mr. Leong received 123.[116] Although Mr. Leong did not win the election, the support he garnered helped to establish a significant precedent and the expectation that future elections for Chief Executive will have multiple candidates, articulated policy platforms, and open debates. Following the election, Mr. Leong stated, ‘‘In the past few months we have seen a fundamental change of political culture. There is no turning back from here. Hong Kong people’s determination to achieve universal suffrage in 2012 [when the next election for Chief Executive is scheduled to occur] remains as strong as ever.’’ [117] An interesting development since the election is that Chief Executive Tsang has tied his policy initiatives to promises made during the campaign period. He explicitly acknowledged this in his annual policy address on October 10 entitled ‘‘A New Direction for Hong Kong.’’ Specifically, he discussed policy proposals related to universal suffrage, tax relief, education, social entrepreneurship, and relations with the mainland and, with regard to each area, reiterated what his campaign statements promised.[118] The fact that Chief Executive Tsang included such references suggests that competitive elections for the Chief Executive could strengthen the accountability of Hong Kong’s government to Hong Kong’s citizens. If candidates are, indeed, required to clarify their policy platforms and propose policy reforms, the public would have a benchmark after the election by which to measure the Chief Executive’s responsiveness and trustworthiness.
Legislative Council Selection
The Legislative Council currently is comprised of 60 members, each of whom serves for a four-year term. The most recent election was in September 2004, and at that time, 30 members of the council were elected through direct elections and 30 members were elected by functional constituencies.[119] Several political parties have members represented in the Legislative Council; 25 members are loosely considered ‘‘pro-democracy,’’ and 35 members are loosely considered ‘‘pro-Beijing.’’ [120] Pro-democracy parties include the Democratic Party, the Frontier Party, the Civic Party, and the League of Social Democrats. Pro-Beijing parties include the Liberal Party and the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB).
The next election for the Legislative Council occurs in 2008.
The Role of Political Parties in Hong Kong
In meetings with Hong Kong government representatives, the Commissioners were told there is support for increasing the role of political parties in the political process, through devices such as political appointments to various senior executive positions in the HKSAR government. These appointments would expand the political appointee system from one in which only the highest-level cabinet ministers are appointed, to a system in which political appointments also are made for a number of second- and third-tier executive positions now held by career civil servants. Advocates say this would allow the appointees to gain experience in government administration, and that the Chief Executive would be able through this device to broaden the group of government executives who are dedicated to supporting and implementing the Chief Executive’s policy platforms. Given that the current election procedures are weighted toward electing a Chief Executive who is favored by Beijing and is favorable to Beijing’s policies, the proposed new system, if implemented, likely will produce a group of subordinate executives and managers who favor the Chief Executive’s policies and therefore also view Beijing’s policies favorably.
While in Hong Kong, the Commission delegation met with representatives of several political parties. Political party membership in Hong Kong is relatively small; of a total HKSAR population nearing seven million people, the DAB, a pro-Beijing party, has the largest membership with 10,000 members.[121] The DAB is attempting to consolidate its membership in Hong Kong and focus on engaging young people. Hong Kong’s pro-democratic parties have fewer members: the Democratic Party has 600 members, and the Civic Party—the party affiliation of unsuccessful Chief Executive candidate Alan Leong—has approximately 700 members.[122] These membership numbers are not reflective of the support party candidates receive in legislative elections.
Public Participation in Politics
Broadly speaking, Hong Kong residents have become more politically active over the past ten years as opportunities for activism have increased, such as through elections and the expansion of political parties.[123] In 2003, Hong Kong District Council elections had an aggregate voter turnout of 44.1 percent, or 2,418,078 voters. In 2004, turnout in the Legislative Council elections for representatives of geographical constituencies was 55.6 percent, or 3,207,227 voters. In both elections, turnout was higher than in previous elections.[124]
Political demonstrations occur regularly. In the first six months of 2005, there were 834 public meetings and processions.[125] On July 1, 2006, tens of thousands of protesters marched through Hong Kong in support of universal suffrage and labor rights.[126] On June 4, 2007, tens of thousands of protesters gathered in Hong Kong to mourn those who were killed by the People’s Liberation Army in the June 4, 1989, massacre in Tiananmen Square in Beijing.[127] In addition, many protests are conducted by groups that are outlawed in mainland China, such as the Falun Gong.[128] While participation appears to have increased, it also appears that Hong Kong residents have shifted their concerns away from political and human rights issues toward social and environmental issues. When the Commission delegation met with Legislative Council members, they remarked that the environment and pollution in Hong Kong— most of which emanates from mainland sources—is the most active political issue in Hong Kong.
Addressing Universal Suffrage in Hong Kong
One of the most politically charged issues in Hong Kong is the topic of universal suffrage. Under the Basic Law, both the Chief Executive and the Legislative Council are to be selected by election. Article 45 states:
The Chief Executive of the Hong Kong Special Administrative Region shall be selected by election or through consultations held locally and be appointed by the Central People’s Government. The method for selecting the Chief Executive shall be specified in the light of the actual situation in the Hong Kong Special Administrative Region and in accordance with the principle of gradual and orderly process. The ultimate aim is the selection of the Chief Executive by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures.[129]
With regard to the legislature, Article 68 of the Basic Law states:
The Legislative Council of the Hong Kong Special Administrative Region shall be constituted by election. The method for forming the Legislative Council shall be specified in the light of the actual situation in the Hong Kong Special Administrative Region and in accordance with the principle of gradual and orderly process. The ultimate aim is the election of all the members of the Legislative Council by universal suffrage.[130]
While the aim of the Basic Law is to institute universal suffrage, the law itself lacks a timeline for accomplishing that aim. In April 2004 the Standing Committee of China’s National People’s Congress ruled that the election of the Chief Executive in 2007 and the selection of Legislative Council members in 2008 would not be by universal suffrage.[131] The government argued that the Basic Law provides for selecting the Chief Executive and Legislative Council according to the circumstances in Hong Kong, and the Standing Committee determined that Hong Kong would not be ready for universal suffrage at that time.[132] Although democracy supporters disagreed with this ruling, Chief Executive Tsang concurred through public statements in 2005 and 2006, indicating that Hong Kong would not move toward universal suffrage in the near future.[133]
However, in Mr. Tsang’s election campaign this year, he promised to resolve the issue of universal suffrage before the end of his current term in 2012, and that his first step would be to issue a ‘‘Green Paper’’ detailing proposals for implementing universal suffrage for both the Chief Executive election and the Legislative Council election. Mr. Tsang honored his commitment and issued the report, prepared by the Constitutional and Mainland Affairs Bureau, in July 2007. According to Mr. Tsang’s plan, the Green Paper underwent a period of public consultation that concluded October 10, 2007. The HKSAR government received public submissions and comments throughout this period.
Senior advisors to Mr. Tsang told the Commission’s delegation that he will use public polls to determine which plan for moving toward universal suffrage has the greatest support among Hong Kong citizens, and then he will present that plan to the Chinese government for its approval.
Democratic activists have expressed concern that the pro-Beijing forces in Hong Kong will try to manipulate the polls by the way they present the choices to the public. If they succeed, pro-democratic forces would be placed in the difficult position of either accepting an option that offers less than complete or direct universal suffrage as guaranteed in the Basic Law, or appearing obstructionist to political reforms favored by a majority of Hong Kong’s citizens.[134]
The Green Paper on Constitutional Development [135]
The paper presents options on both the structure for implementing universal suffrage and the timeline for implementing such a change. The paper states:
Having regard to the constitutional basis and principles of design of Hong Kong’s political structure, as well as the concept of ‘universal suffrage’ as generally understood internationally, the concept of universal suffrage should include the principles of ‘universal’ and ‘equal’ suffrage. However, there is no single electoral system that suits all places, and that one should not seek to impose any particular political model or electoral system on any place. As far as an individual jurisdiction is concerned, while conforming to the general international understanding of universal suffrage, it can also develop its electoral system having regard to the particular needs and aspirations of its people, the uniqueness of its socio-economic situation, and its historical realities.
For the Chief Executive, the paper suggests different options for the size of the Election Committee and for the number of candidates the committee can nominate. After the nomination of candidates, the paper notes that the Chief Executive then can be selected by ‘‘one person, one vote.’’ The Green Paper does not suggest any constitutional changes such as removing the State Council from its role in appointing the Chief Executive after his or her election.
For the Legislative Council, the paper presents options including replacing functional constituency seats with direct election and keeping functional constituency seats but changing the method in which members are selected. Additionally, there are options for phasing in universal suffrage elections for Legislative Council members by abolishing the functional constituency seats incrementally.
Other issues in the paper include whether to implement universal suffrage for both the Chief Executive and the Legislative Council at the same time, or whether to institute universal suffrage incrementally. Also, the paper presents options for allowing universal suffrage in 2012, 2017, or after 2017.
The Hong Kong Human Rights Monitor, a non-governmental organization established in 1995 to promote human rights and democracy, submitted a formal commentary on the Green Paper. It expressed concerns that, while a majority of Hong Kong citizens support universal suffrage in 2012 for both the Chief Executive and the Legislative Council, the PRC government and the HKSAR government would not allow this to occur.[136] It criticized the Green Paper, stating:
The Green Paper is designed not to facilitate public discussions but to confuse and disinterest the public. Instead of the three integrated options as promised, it only sets out a large number of questions, each with several options, presenting a combination of hundreds of options for the public to consider. It is easy for the public to [lose] focus in such discussion. Obviously, in the light of the majority support for full democracy in the near future, the Government is attempting to use this approach to thin out public support to the numerous different combinations of alternatives to prevent the expression of a clear majority in the public’s support for full democracy in the near future.[137]
The submission also argues that the Green Paper ‘‘gives no accurate definition on universal suffrage. It is alarming that the Green Paper even includes retaining functional constituencies in certain forms as an option for the ultimate model for universal and equal suffrage. It reflects a lack of understanding of the true concept of universal suffrage.’’ [138]
Surveys conducted by the Hong Kong Transition Project [139] found that in May 2007, prior to the release of the Green Paper, 51 percent of respondents ‘‘supported’’ and 25 percent ‘‘strongly supported’’ direct elections for the Chief Executive.[140] The plurality of respondents (44 percent) supported implementing direct elections for the Chief Executive in 2017, and 16 percent favored implementation in 2012.[141] With regard to the Legislative Council, nearly three-fourths supported direct elections for council members, while 16 percent opposed them; 31 percent favored implementing direct elections in 2008 (which the National People’s Congress Standing Committee has ruled will not occur), and 29 percent supported direct elections in 2012.[142]
Beijing has not directly commented on the Green Paper, although representatives have made statements indicating the central government’s preferences. For example, Li Guikang, a deputy director of the Central People’s Government Liaison Office, remarked that ‘‘recent survey findings that more than half [of] Hong Kong people found it ‘acceptable’ if universal suffrage for the chief executive and the legislature could not be achieved in 2012 showed the increasingly ‘rational’ views of the city’s people towards constitutional development.’’ [143] His remarks did not cite the source of the information, and they were construed by the public as indicating Beijing’s preference to begin political reforms after 2012. Additionally, at the Asia-Pacific Economic Cooperation (APEC) summit in September 2007, China’s President Hu noted in a conversation with Chief Executive Tsang that the Hong Kong government should ‘‘focus on developing the economy while political reform should take place gradually.’’ [144]
A wide range of public responses and editorials to the Green Paper have been published in Hong Kong newspapers articulating both ‘‘pro-democracy’’ and ‘‘pro-Beijing’’ positions. Many acknowledge that the formula selected for achieving universal suffrage must be acceptable to Beijing, which holds the power to approve a timetable and method.[145] Hong Kong government representatives in Washington, DC, indicate that the most debated issue pertaining to the election of the Chief Executive is related to the composition of the Election Committee, and the most debated issue pertaining to election of the Legislative Council members is whether or not to abolish functional constituencies. In general, the Hong Kong government is stressing consensus among the public as a prerequisite for introducing universal suffrage.[146] If no obvious consensus can be achieved, it has been suggested that the issue could be revisited with another public consultation that offers fewer options and simplified choices in an attempt to reach a consensus.[147]
Other Significant Issues in Hong Kong Economic Growth and Competitiveness
While in Hong Kong, the Commission delegation learned that Hong Kong’s economy has recovered from the turmoil of the Asian financial crisis and the economic fallout from the Severe Acute Respiratory Syndrome (SARS) epidemic. Its economy does not appear to have been significantly affected by protests over insufficiently rapid progress toward democratization since the PRC regained political control of Hong Kong in 1997. Importantly, the PRC has not interfered with economic activities in Hong Kong or the relationship of those activities to the global economy, and it is still favored by businesses from all parts of the globe as a center for commerce in Asia, particularly commerce involving the PRC. This has enabled it to remain a key financial center for the Asia-Pacific region. Its gross domestic product (GDP) in 2006 (US$188.8 billion) increased 6.8 percent over the previous year.[148] Its per capita gross national income (GNI) in 2006 totaled US$28,460 compared to US$2,010 in mainland China.[149]
In 2003, Hong Kong and China signed the Closer Economic Partnership Agreement (CEPA), a free trade agreement covering trade in goods and services and investment facilitation.[150] The economic integration between Hong Kong and mainland China that followed this agreement has stimulated economic growth, promoted tourism by mainland travelers, and cemented Hong Kong’s role as a facilitator of investments into and out from China.[151] Hong Kong has become one of the world’s leaders in initial public offerings (IPOs), and serves as the main offshore listing venue for mainland companies.[152]
According to U.S. government officials in Hong Kong, Hong Kong is losing its status as the leading regional container port to mainland ports. Increasingly, companies located in southern China are shifting their cargo traffic to mainland ports to take advantage of lower transportation costs, cheaper services, and improvements in mainland coastal infrastructure.[153] Even though Hong Kong’s port continues to grow, the ports in Shenzhen and Shanghai are growing at a faster rate, and absorbing new business in the region. This may have unfortunate effects on the United States, because Hong Kong’s port has been among the most cooperative participants in the Container Security Initiative (CSI), and likely will be one of the first trial ports for the Secure Freight Initiative to screen shipping containers when it is implemented next year.
The International Monetary Fund notes in its assessment of Hong Kong’s economy that price competitiveness has rebounded and is associated with rising economic efficiency from improved labor productivity. However, the growth of Hong Kong’s economy is challenged by non-price competitiveness issues related to Hong Kong’s aging population, shortages of skilled labor, and concern about rising pollution.[154] As mainland China continues to undergo economic reforms and market liberalization, a future challenge for Hong Kong will be to maintain its role as a broker between mainland businesses and the international business community.[155] In facing this challenge, it has several significant advantages, notably including its reliance on rule of law, buttressed by its independent judiciary, strong record of law enforcement, and transparency.
In October, the government reported that Hong Kong’s unemployment rate fell to 4.1 percent, the lowest rate in more than nine years. However, the Commission delegation was told that Hong Kong’s income gap is rising; income increases are not always commensurate with employment increases. A recent Oxfam Report found that in 2006, 13 percent of the workforce lived in poverty, earning less than HK$5,000 a month—half of HKSAR’s median income.[156]
Energy and the Environment
During the Commission delegation’s trip to Hong Kong, delegation members learned that the environment is one of the most potent political issues in Hong Kong, as Hong Kong residents struggle to deal not only with locally-produced air and water pollution, but also with pollution generated in mainland China. In China, enforcement of environmental regulations at the local level remains a major problem, and this has a negative public health impact on both the people in those communities and those who live in other locations affected by the pollution. In interviews with the Congressional Research Service, the American Chamber of Commerce in Hong Kong indicated that air pollution, much of which emanates from China, is a major concern of businesses in Hong Kong,[157] and this concern could affect Hong Kong’s attractiveness as an investment location and hub for regional offices. China’s Guangdong Province, adjacent to the HKSAR, is the first province in China to release air quality data, and Hong Kong has established some cooperative efforts with Guangdong to address air and water quality problems.
Another air quality problem unique to this area, identified by Ms. Christine Loh of Hong Kong’s Civic Exchange, is the pollution created by ships utilizing the container ports. These ships’ emissions remain localized at ground level. Dr. Ng Chonam of the University of Hong Kong also noted that water has become a major issue in all cities in China, including Guangzhou and Hong Kong. During the dry season in Guangzhou, the outflow of the Pearl River diminishes to the point that sea water surges into the delta, harming the water supply and surrounding environment. Hong Kong now imports water from Guangdong province, so this is of concern to Hong Kong as well.
Pollution Prevention and Energy Efficiency (P2E2) —Public Facilitation, Private Investment
Rapid urbanization in the Pearl River Delta (the area of the Chinese mainland adjacent to Hong Kong, including Guangzhou), increased power generation, and an alarming rise in the number of vehicles in the area is causing a dramatic increase in air pollution that has worsened air quality in Hong Kong. In June 2006, the U.S. Consul General in Hong Kong, James Cunningham, stated, ‘‘Hong Kong is playing a vital role in the development of mainland China, whose rapid industrialization is lifting millions out of poverty. But in the short space of only a decade, the increased prosperity of the Pearl River Delta has produced the unintended consequence of an air pollution challenge of alarming proportions.’’ [158] Many of the factories and industries in the Pearl River Delta are owned or financed by Hong Kong businesses, many of which ‘‘support the global business strategies of U.S. firms.’’ [159] As a result, Hong Kong and the United States have a responsibility to promote cleaner production of energy in Guangzhou, while at the same time encouraging corporate responsibility among businesses that invest in China.
The Pollution Prevention and Energy Efficiency (P2E2) Program was designed to address this problem and was introduced in May 2005 by the commercial staff of the U.S. Consulate in Hong Kong to facilitate Hong Kong-based investment in pollution prevention and energy efficient technologies for industries in the Pearl River Delta. It does not require upfront capital from Chinese industries, and companies pay back investment in cleaner technologies through cost savings on energy. Loan guarantees are provided by the Asian Development Bank (ADB) and credits from the U.S. Export-Import Bank.[160]
There are four main steps to the program: [161]
- A Hong Kong-based environment and energy service company conducts an energy and environmental impact study for a mainland factory, power plant, or real estate development and advises on how to reduce the energy demand and improve the environmental impact through an upgrade in technology.
- The Hong Kong service company secures a loan from a Hong Kong bank to lease or purchase equipment necessary for the upgrade. ‘‘The bank would make this loan based on a performance contract and on mainland commercial credit risk, which would be partially alleviated by loan guarantees from ADB or the [U.S. Export-Import] Bank.’’ [162]
- The loan is repaid with cost savings at the Chinese factory or plant through reduced energy consumption and raw material needs. Cost savings can include reductions of raw materials, water, fuel, waste treatment, and maintenance.[163]
- To monitor the actual cost savings achieved, an independent technical auditor measures and verifies the cost savings in the Chinese factory or plant.
Potential energy savings due to increased energy efficiency can equal up to 50 percent. For example, a medium-sized steel plant in Guangdong consumes 800 gigawatt-hours of electricity costing $73 million per year. The application of energy efficient technology could produce $33 million in cost savings, or savings of 45 percent of the annual electricity costs.[164] Additionally, when these loans are applied to the power generation sector in China, the P2E2 program generates emissions credits under the Clean Development Mechanism of the Kyoto Protocol.
Currently, around twenty Hong Kong-based energy and environment service companies are active in this program, seeking mainland partners for assessments and investments. These companies are active in the aluminum, cement, electronics, food processing, iron and steel, power generation, real estate, and textile sectors. The U.S. Commercial Service predicts that this program will expand when the ADB implements US$1 billion in loan guarantees and loans under its Energy Efficiency Initiative in September 2007, and as the International Finance Corporation fulfills its commitment for US$300 million in P2E2 support.[165]
Freedom of the Press
The nature of the Hong Kong press has changed in the past ten years. Dr. Francis L.F. Lee, professor at the City University of Hong Kong, and Dr. Angel M. Y. Lin, professor at the Chinese University of Hong Kong, write that since 1997 newspapers critical of the Chinese government have moved toward a less critical, more centrist stance, and the ‘‘range of ideological viewpoints propounded by the media has been narrowed down.’’ [166] While Chinese officials have not openly interfered in the press, journalists and editors have responded to subtle pressures to avoid controversial news by engaging in self-censorship. The 2007 Hong Kong Policy Act Report states that in Hong Kong ‘‘a robust dialogue among all concerned parties continues [that] is covered in a largely unfettered press.’’ However, it goes on, ‘‘[a] wide and growing perception exists . . . that much of the Hong Kong press engages in a degree of selfcensorship regarding issues sensitive to the PRC central government.’’ [167]
Self-censorship is defined as ‘‘a set of editorial actions ranging from omission, dilution, distortion, change of emphasis, to choice of rhetorical devices by journalists, their organizations, and even the entire media community in anticipation of currying reward and avoiding punishment from the power structure.’’ [168] Self-censorship in Hong Kong occurs by minimizing negative news, especially related to mainland China, and limiting reports that may damage a publication’s economic interests, such as its advertising partners.[169] Additionally, criticisms of the Chinese government are often printed as editorials from individuals outside the news organization, thus reducing the risk to professional journalists.[170] Even among these criticisms, editorials often avoid criticizing Chinese leaders personally.[171] The Hong Kong Journalists Association 2007 Annual Report identifies several different types of pressures exerted on journalists that factor into the decision to self-censor. These include political pressure, restrictions on the ability to cover news in the PRC, advertising boycotts, and editorial pressure from within the media organization.[172] In addition, the arrest and prosecution of journalists is a powerful motivation to self-censor investigations and reporting. In November 2006, a Beijing court upheld a conviction of Hong Kong journalist Ching Cheong, who worked for the Singapore-based Straits Times, for selling state secrets to Taiwan.[173] Mr.Cheong was arrested in 2005 while seeking papers linked to Secretary Zhao Zhiyang,[174] who opposed the Tiananmen massacre in 1989.[175] Mr. Cheong is serving a five-year sentence, and the Hong Kong Journalists Association has been calling for him to be released on medical grounds following reports that his health is failing.[176]
Conclusions
Taiwan
India
Hong Kong
1. Deputy Assistant Secretary of State Thomas Christensen, A Strong and Moderate Taiwan, U.S.-Taiwan Defense Industry Conference, September 11, 2007.
2. Freedom House, 2007 Country Report: Taiwan, (Washington, DC: 2007). www.freedomhouse.org/template.cfm?page=22&country=7283&year=2007.
3. U.S. Department of State, 2006 Country Report on Human Rights Practices—China (Taiwan only), (Washington, DC: March 2007).
4. U.S. Department of State, 2006 Country Report on Human Rights Practices—China (Taiwan only), (Washington, DC: March 2007).
5. Taiwan Government Information Office, Taiwan Yearbook 2006, (Taipei, Taiwan: 2007), Section 15. www.gio.gov.tw/taiwan-website/5-gp/yearbook/15Society.htm #HumanRights.
6. U.S. Census Bureau, Foreign Trade Division, Trade in Goods (Imports, Exports, and Trade Balance) with Taiwan. www.census.gov/foreign-trade/balance/ c5830.html#2006.
7. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by an AIT official, August 20, 2007.
8. Jeff Harbee, ‘‘There has been a better time for U.S. companies to sell to Taiwan,’’ Business America, August 3, 1987. findarticles.com/p/articles/milm1052/ islv10/ail5127993.
9. Institute for International Economics, Prospects for a U.S.-Taiwan Free Trade Agreement (Washington, DC: December 2004).
10. 1979 Taiwan Relations Act. www.ait.org.tw/en/aboutlait/tra/.
11. Deputy Assistant Secretary of State Thomas Christensen, A Strong and Moderate Taiwan, U.S.-Taiwan Defense Industry Conference, September 11, 2007.
12. This joint statement, known as the ‘‘two-plus-two’’ statement, was made following a meeting between senior members of the Japanese and the United States governments in February 2005. The statement suggests that Japan may choose to join the United States in interceding in an armed conflict across the Taiwan Strait.
13. U.S. Department of Defense, Annual Report to Congress: Military Power of the People’s Republic of China, (Washington, DC: 2007), p. 22.
14. U.S. Department of Defense, Annual Report to Congress: Military Power of the People’s Republic of China, (Washington, DC: 2007), p. 22.
15. In this statement, President Chen promised: 1) not to declare Taiwan independence, 2) not to change the national title from the Republic of China to the Republic of Taiwan, 3) not to change Taiwan’s constitutional relationship with the People’s Republic of China, 4) not to promote a referendum on Taiwan independence or unification, and 5) not to abolish Taiwan’s National Unification Council (NUC) or National Unification Guidelines (NUG)—institutions designed to negotiate Taiwan’s reunification with mainland China.
16. Congressional Research Service, Taiwan: Recent Developments and U.S. Policy Choices (Washington, DC: January 2006), p. 6.
17. Congressional Research Service, Taiwan: Recent Developments and U.S. Policy Choices (Washington, DC: January 2006), p. 6.
18. BBC News, Profile: Chen Shui-bian, November 3, 2007.
19. In Chen’s 2000 ‘‘Four Noes and One Without’’ pledge he vowed not to abolish the NUC or NUG. However, on February 27, 2006, President Chen dismantled both, saying that they will cease functioning and the budget will no longer be appropriated.
20. Charles Snyder, ‘‘Frank Hsieh takes tough line on U.N. bid, cross-Strait issues in Washington,’’ Taipei Times, July 25, 2007.
21. U.S.-Taiwan Business Council, Defense & Security Report: Second Quarter,
2007 (Washington, DC: July 2007), p. 8.
22. ‘‘Taiwanese presidential candidate pledges to restore trust with U.S.,’’ International Herald Tribune, July 23, 2007.
23. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by Ma Ying-jeou, August 20, 2007.
24. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by Ma Ying-jeou, August 20, 2007.
25. Rich Chang, ‘‘‘Taiwan Identity’ growing: study,’’ Taipei Times, March 12, 2006.
26. See China’s Anti-Secession Law. ´
27. See 1979 U.S.-PRC Joint Communique (the normalization communique). ´
28. See Chapter Five.
29. Beijing claims that during the 1992 meeting in Hong Kong, Taiwan representatives agreed to China’s ‘‘One China Principle.’’
253
30. Liu Shyh-Fang, China’s Anti-Secession Law, an event held at the Center for Strategic and International Studies (CSIS), March 21, 2005.
31. Deputy Assistant Secretary of State Thomas Christensen, A Strong and Moderate Taiwan, U.S.-Taiwan Defense Industry Conference, September 11, 2007.
32. Shih Hsiu-chuan, ‘‘Analysis: Absentee voting needs careful study: analysts,’’ Taipei Times, March 30, 2007. www.taipeitimes.com/News/taiwan/archives/2007/03/ 30/2003354483.
33. Murray Scot Tanner, Chinese Economic Coercion Against Taiwan, (RAND Corporation: 2007), p. 82.
34. Mainland Affairs Council, Cross-Strait Economic Statistics Monthly, No. 174, (Taipei, Taiwan), p. 30.
35. Murray Scot Tanner, Chinese Economic Coercion Against Taiwan, (RAND Corporation: 2007), p. 140.
36. U.S. Department of Defense, Annual Report to Congress: Military Power of the People’s Republic of China, 2006, (Washington, DC: 2006), p. 40.
37. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by Ma Ying-jeou, August 20, 2007.
38. U.S. Department of Defense, Annual Report to Congress: Military Power of the People’s Republic of China, 2006, (Washington, DC: 2006), p. 37.
39. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, NSC statement made by Secretary General Mark Chen, August 20, 2007.
40. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by Defense Minister Lee Tian-yu, August 22, 2007.
41. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by Defense Minister Lee Tian-yu, August 22, 2007.
42. U.S.-Taiwan Business Council, Defense & Security Report: Second Quarter, 2007 (Washington, DC: July 2007), p. 12.
43. C4ISR, or ‘command, control, communication, computers, intelligence, surveillance, reconnaissance,’ lists key facets of a military’s capability to obtain and provide to its and allied forces timely information about the location, capabilities, intentions, and actions of opposition and friendly forces to enable it to effectively and rapidly take the most productive steps to prevail against the opponent.
44. Pete Kasperowicz, ‘‘Lockheed Martin has 4-month window to secure F–16 sale to Taiwan,’’ AFX News Limited, June 19, 2007.
45. Michael Chase, ‘‘Taiwan’s Han Kuang 23 Military Exercise and the Offensive Counterstrike Debate,’’ Jamestown Foundation, China Brief, July 26, 2007.
46. Michael Chase, ‘‘Taiwan’s Han Kuang 23 Military Exercise and the Offensive Counterstrike Debate,’’ Jamestown Foundation, China Brief, July 26, 2007.
47. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by Kuo Lin-wu, August 20, 2007.
48. Port of Kaohsiung Brochure, 2007.
49. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by Port of Kaohsiung Harbor Master Tsai Ding-yi, August 21, 2007.
50. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by an AIT official, August 21, 2007.
51. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by an AIT official, August 21, 2007.
52. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by an AIT official, August 21, 2007.
53. Elizabeth Hague, Taiwan’s Dilemma: A Democracy Divided over National Security, (Woodrow Wilson Center, Washington, DC: June 2007).
54. Edward Cody, ‘‘China’s Diplomatic Gain is Taiwan’s Loss,’’ the Washington Post, July 9, 2007.
55. ‘‘UN rejects membership for Taiwan,’’ BBC News, September 19, 2007.
56. U.S.-China Economic and Security Review Commission August 2007 Asia Trip, statement made by Taiwan Vice Minister of Economic Affairs Hsieh Fa-da, August 20, 2007.
57. Trade Promotion Authority (TPA) is a program for expediting trade agreements granted by the U.S. Congress to the President. The most recent incarnation of TPA expired on July 1, 2007.
58. Kathrin Hill, ‘‘US hits Taiwan hopes of trade pact,’’ The Financial Times, May 22, 2007.
59. Michelle Hsu, ‘‘FTA is of mutual interest to Taiwan and the U.S.,’’ China Post, September 4, 2007.
60. Meetings scheduled with Indian government officials were cancelled at the Indian government’s request, due to the political climate at that time.
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61. Derek J. Mitchell and Chietigj Bajpaee, ‘‘China and India,’’ The China Balance Sheet in 2007, 152.
62. ‘‘Carrying Forward the Five Principles of Peaceful Coexistence in the Promotion of Peace and Development,’’ Speech by Premier Wen Jiabao, June 28, 2004. www.fmprc.gov.cn/eng/topics/seminaronfiveprinciples/t140777.htm.
63. James Barnard, ‘‘The China-India Border War,’’ Marine Corps Command and Staff College, April, 1984. www.globalsecurity.org/military/library/report/1984/ CJB.htm; Sino-Indian War-Dedication, www.globalsecurity.org/military/library/report/1984/CJB.htm; John W. Garver, ‘‘China’s decision for war with India in 1962