have to do with U.N. representation or diplomatic recognition or the offshore islands or whatever. Without prior adjustment in perspective, however, to seek to deal definitively with these questions would be, to say the least, an exercise in futility.

I should emphasize before concluding that it is unlikely that there will be any eager Chinese responses to initiatives on our part. Nevertheless, I see nothing to be lost for this nation in trying to move along the lines which have been suggested. Chinese intransigence is no license for American intransigence. Our stake in the situation in the Western Pacific is too large for that sort of infantile indulgence.

I see great relevance in thinking deeply of the issues which divide China and the United States to see if they can be recast in new and uncluttered molds. There is every reason, especially for young people, to examine most closely the premises of policy regarding China which were enshrined almost two decades ago. The fact is that the breakdown in Chinese-U.S. relations was one of the great failures of my generation and it is highly doubtful that its full repair shall be seen in my lifetime. The problem, therefore, will fall largely to you. It is not a particularly happy inheritance, but there is reason to hope that it may fare better in your hands.

Unlike my generation, you know more about Asia. You have a greater awareness of its importance to this nation and to the world. In 1942, four months after Pearl Harbor, for example, an opinion poll found that sixty percent of a national sample of Americans still could not locate either China or India on an outline map of the world. Certainly that would not be the case today. Furthermore, you have not had the experience of national trauma in moving abruptly from an era marked by an almost fawning benevolence toward China to one of thorough disenchantment. You were spared the fierce hostilities which rent this nation internally, as a sense of warmth, sympathy, and security regarding China gave way to feelings of revulsion, hatred, and insecurity.

Your Chinese counterparts, the young people of today's China-they are called the "Heirs of the Revolution"-have a similar gap to bridge as they look across the Pacific. Your generation in China, too, has been contained and isolated, and its view of the United States has been colored with the hates of another time. It has had no contact with you or, indeed, with much of the world outside China. On the other hand, those young people have grown up under easier conditions than the older generation of Chinese who lived their youth in years of continuous war and revolution. It may be that they can face you and the rest of the world with greater equanimity and assurance than has been the case at any time in modern Chinese history.

I urge you to think for yourselves about China. I urge you to approach, with a new objectivity, that vast nation, with its great population of industrious and intelligent people. Bear in mind that the peace of Asia and the world will depend on China as much as it does on this nation, the Soviet Union, or any other, not because China is Communist but because China is China-among the largest countries in the world and the most populous.

Mao Tse-tung remarked in an interview several years ago that "future events would be decided by future generations." Insofar as his words involve the relationship of this nation and China, whether they prove to be a prophecy of doom or a forecast of a happier future will depend not so much on us, the "Old China Hands" of yesterday, but on you, the "New American Hands" of tomorrow.

APPENDIX H

THE PERIPHERY OF THE PEOPLE'S REPUBLIC OF CHINA

A REPORT ON TRENDS IN THE WESTERN PACIFIC SINCE THE VISIT OF PRESIDENT NIXON IN FEBRUARY 1972, TO THE MAJORITY LEADER OF THE U.S. SENATE

(By Francis R. Valeo, Secretary of the Senate, November 25, 1974)

Hon. MIKE MANSFIELD,
U.S. Senate,

LETTER OF TRANSMITTAL

NOVEMBER 25, 1974.

Washington, D.C.

DEAR SENATOR MANSFIELD: Pursuant to your request, I visited the Republic of Korea, Japan, and the Republic of the Philippines during the recent recess of the Senate. The situation in these countries was studied principally in the context of the following two considerations:

1. International trends which may have been set in motion by the Nixon visit to Asia in 1972; and

2. The impact of inflation-recession in the United States on the nations of the Western Pacific.

The report which follows is designed as background for your second journey to the People's Republic of China. It should also be pertinent to the consideration of legislative questions which may arise during the 94th Congress and which relate to our relations with the nations of the Western Pacific.

I was out of the United States from November 7, 1974 to November 17, 1974. While the time was brief, excellent cooperation from personnel of the U.S. missions abroad and others greatly facilitated the undertaking. There was, everywhere, a readiness to discuss the two factors previously mentioned because they are recognized as central to developments in the Western Pacific. The report which follows reflects many conversations on these points and on related matters, evaluated in the light of background study and research.

I appreciate your asking me to undertake this study and I am grateful to the Chairman and the ranking Minority Member of the Committee on Foreign Relations for their support. I wish to take this opportunity, too, to thank the Department of State and the U.S. missions in the countries visited for their ready cooperation. In addition, I should note that excellent research papers were prepared by the Congressional Research Service of the Library of Congress for use in connection with this study.

Sincerely,

FRANCIS R. VALEO, Secretary of the Senate.

THE PERIPHERY OF THE PEOPLE'S REPUBLIC OF CHINA

I. General Observations

In a retrospect of almost three years, the shift in U.S. policy toward China is generally seen in the Western Pacific as an act of constructive statesmanship. This evaluation has come only in time and is not uniform throughout the region. Obviously, Taiwan has not welcomed the rapprochement with Peking although the Chinese on that island have learned, more or less, to live with the change. In the Republic of Korea, too, the shift is not regarded as an unmixed blessing. Beneath a surface acceptance, there remain many anxieties. The Korean government has been among the most militantly anti-communist in the region and also among the most dependent on U.S. support. U.S. rapprochement with China,

combined with a U.S.-Soviet détente suggests the possibility of understandings: and agreements which could operate to the detriment of the present government of South Korea. Koreans generally see themselves as constituting a small country, somewhat at the mercy of the great surrounding powers. The shift in the U.S. positions on China underscored the point.

After a long period of isolation, the People's Republic of China has emerged as a respected national state. China, in turn, is accepting its neighbors in the same spirit rather than as heretofore frowning on them as pawns of the United States. The rate of mutual acceptance is not everywhere the same. It is most advanced between Japan and China and not advanced at all in the case of South Korea. Everywhere, however, the change is in process and, seemingly, is irreversible.

This transition is part of a still larger change which embraces the entire Western Pacific. Out of the oversimplification which once described the situation as that of "communist aggression" or "Chinese aggression" held in check only by massive U.S. military power is emerging a more sophisticated mosaic. In this new formulation, the bi-polar war of ideologies has faded into the background. In its stead has emerged a new emphasis on the various national concerns. Emerging, too, is a new perception of the political stability and security of the region. It is seen as increasingly dependent not solely on the United States but on the inter-relationships of the Soviet Union, China, Japan and the United States.

It cannot be said that these changes have resulted from the sudden shift in U.S. policy towards China in early 1972. They were in the making for some time, at least since the promulgation of the Nixon Doctrine in 1969. Clearly, however, the President's visit to Peking gave them impetus and so, too, has the inflationrecession in the United States. The peripheral nations of the Western Pacific are feeling sharp repercussions from the faltering in the U.S. economy, exacerbated as it has been since the onset of manipulated world petroleum prices.

As in the case of Sino-U.S. rapproachement the impact of the inflation-recession is not uniform. Japan is particularly vulnerable to adverse economic developments in the United States. The Japanese economy is greatly dependent on the United States as a market for massive exports of manufactured goods and as a source of essential imports of agricultural products and other raw materials. Korea and Taiwan are scarcely less vulnerable since their lines of trade run heavily either directly to the United States or through Japan. For the present, the Philippines has been able to cope with the situation, in part, because of the huge worldwide demand for some of its principal export commodities, notably. raw sugar.

One effect of the U.S. inflation-recession has been to intensify a drive for diversification of trade among the Western Pacific nations. The search for new sources of materials and markets veers towards China but is not limited to that country. Efforts are being made to expand trade contacts in Western Europe and the Middle East. The markets of the Soviet Union and the Eastern Europe have also been probed with some results. Australia and New Zealand are becoming more significant factors in the region's commerce, and new initiatives towards Latin America have been helpful.

Except for Japanese trade, however, the fruits of these efforts are relatively small. For the present, there is no viable alternative to a dependency on imports of U.S. food and raw materials. Nor are there markets elsewhere which can substitute for that of the United States. While it is true that Japan has become something of a trade hub within the region, its continuance in that role depends, in turn, on U.S.-Japanese economic relations.

It is in the above context that the People's Republic of China has emerged as a significant new factor in the commerce of the Western Pacific. Japanese trade with the Chinese mainland has grown rapidly. The Philippines Republic has entered into trading relations with Peking, with exchanges of Philippine products for Chinese petroleum. Only South Korea has remained outside these new trade trends. As for Hong Kong, huge imports from China have long been vital to its very existence.

China's expanding production of petroleum already yields more than enough crude to leave a small surplus for export. While the amounts presently being exported. are scarcely sufficient for two or three weeks consumption in Japan, there are indications that China's exports will grow rapidly during the next decade. China's oil reserves in the Northwest and Northeast and off-shore in

the China seas are generally believed to be very extensive. In the long run, however, how much will be avaiable for export is problematical, especially in the light of increasing internal needs. Nevertheless, China requires exportearning commodities and petroleum appears to be very promising in that regard. The search for petroleum deposits not only by China but in the waters off the other countries of the Western Pacific is spreading rapidly. There is hardly a coastline that is not being explored or drilled. Interest is also growing in alternative sources of energy. The Philippine Republic, for example, is hopeful of developing production from its vast geo-thermal resources to the point where they will supply a large percentage of its energy needs by the eighties. The use of nuclear power is expanding everywhere. Notwithstanding, petroleum will remain a principal concern to all of the peripheral nations for the foreseeable future.

II. The Situation in Korea

On the initiative of President Park Chung Hee of South Korea an effort at reconciliation with North Korea began in 1972. The principal result was the establishment of a north-south coordinating committee to work for modest improvements in the relations between the two parts of the divided peninsula. It is difficult to point to any particular achievements of this group in the three years or so of its existence. Yet, the fact that it continues to function at all is a stabilizing factor in what is still a volatile situation. The same might be said of Seoul's acceptance of the concept of two separate Koreas, at least, as an interim arrangement. This concept is also gaining interantional approval and in recent months, Australia, the Scandanavian countries and various African nations have all recognized two separate governments in Korea.

The new flexibility in the international position of the South Korean government has been accompanied by a growing rigidity in its internal political practices, Inasmuch as these practices have been widely reported in the United States where they have also been severely criticized, there is no need to recount them in detail here. It is sufficient to point out that the political structure which is now operating in South Korea sustains an authoritarian type of rule and makes possible the indefinite continuance in office of the incumbent President. This situation has been brought about by changes in the Constitutional structure and the curbing of individual rights by methods which have been repeatedly challenged by the political opposition.

In justification of its policies, the government contends that a new and unchartered course of contact with North Korea and other communist states requires a higher degree of internal conformity. Political plots, which are seen as a constant threat, are described as triangular in that they combine pressure tactics from the North, machinations on the part of the Chosen Soren (Koreans living in Japan who favor the North), and the activities of revolutionaries inside South Korea. The latter term is broad enough to embrace students, intellectuals and religious elements as well as a militant underground.

This view of the danger to the country is not accepted universally in Seoul. Some observers believe that it is more a rationale for the preservation of authoritarianism than a description of the current reality. In any event, the government's internal policies have led not only to political bitterness inside South Korea but also to strains in what has never been an easy relationship with Japan. There is a mutual suspicion between the two countries which has cultural and, perhaps, racial undertones and long historic roots. Resentments have erupted from time to time, most recently in the wake of kidnappings, assassinations, and other gruesome incidents involving nationals of both countries.

The Park government is disturbed by what is described as the unwillingness. of Japan to curb Korean leftists living in the latter country and by what seems to Seoul to be a Japanese fascination with North Korea. For its part, Japan is in the position of having to weigh grievances with regard to South Korea against a very large economic stake in the form of investment and trade in that country. While the situation is quiet at present, relations have been described as "walking on eggs."

The current preoccupation of Koreans generally is not so much with politics as it is with economics. For several years, the growth rate in Korea has been among the highest in the world. Statistics show the country as advancing very

rapidly and the city of Seoul certainly personifies the statistics. It is a thriving metropolis of six million people who, on the whole, seem reasonably well-fed, clothed and housed. Certainy, it is a far cry from the dilapidated devastated capital which remained at the end of the Korean war.

The "little economic miracle" of Korea, as it has been termed, has owed a great deal to U.S. policies. U.S.-proposed and aid-financed measures especially after General Park became President, have been a key factor in shaping the nation's economy into a modest version of that of Japan. Foreign business interests have been stimulated to invest in Korea by U.S.-guaranteed loans and other incentives. The U.S.-government has supplied aid-grants and direct loans and access to a variety of agricultural raw materials and low-cost food under the Public Law 480 program. In addition, a U.S. military presence which still numbers about 38,000 and other forms of military aid which have made possible the maintenance of large Korean forces have served to create a climate of internal order and stability. These various subsidies coupled with low Korean labor costs and an alert and energetic population have fueled a rapid economic advance whose momentum is maintained largely on manufacturing for export.

In line with the shift of U.S. policy towards China, there have been reductions in the U.S. military establishment in Korea. Cuts have also been made in military aid to the Korean forces. In addition, the availability of cheap food and raw materials from the United States is coming to an end at a time when the U.S.Japanese market for Korean exports, such as textiles and electronics is faltering As might be expected, these developments are beginning to send shocks through the South Korean economy. Recourse is being had to such evident remedies as diversification of trade and the intensification of agricultural production but it is generally recognized that such remedies are not going to provide any substantial relief, at least not in the immediate future. As the situation now stands, it is possible that an economic decline could intersect a rising political discontent in the late spring or summer of 1975.

It is not surprising, therefore, that there is resentment at the threat of a cutoff of U.S. military aid at this point. Nor is it surprising that every effort is being made to preserve access to Public Law 480, food and other raw materials. There is also irritation with the criticism of the political reasons which are sometimes advanced in conjunction with the advocacy of a change in our policies. As one Korean put it, "The United States may have to cut off aid but don't blame it on this government. After all, it is the same government which you have been praising for the last 10 years. It hasn't changed; you have."

III. Japan

Japanese ties with the People's Republic of China have developed very rapidly. Not only have full diplomatic relations been established but subsequent thereto, Japan and China have negotiated operational agreements on aviation, trade and shipping. A fourth agreement which has to do with fishing has been held up only because of questions involving new concepts of the law of the sea.

Under the various agreements following the reestablishment of full diplomatic relations, Sino-Japanese trade has boomed. The weekly commercial flights between Shanghai and Tokyo are carrying several times the loads originally projected. A growing tonnage of Japanese shipping enters Chinese ports. Japanese are the most numerous foreign visitors in China, 10,000 for 1974 as against perhaps several hundred U.S. nationals, other than those of Chinese ancestry. Im-ports of Chinese petroleum which are small now loom large in Japanese expectations for the years ahead. Sino-Japanese trade has surpassed Japan-Taiwan trade and should receive a further boost from a Treaty of Peace and Friendship .which is about to be negotiated.

While China is reported prepared to move ahead rapidly in the unfolding of its relationships with Japan, the latter still must deal with some domestic hesitancies growing out of residual ties with Taiwan. The Japanese, for example, have large business interests in the Island. There are also personal relationships and emotional sentiments carried over from half-a-century of Japanese occupation. Still another factor coming between Japan and the People's Republic is the stiffening attitude on the part of the new generation of Chinese leaders on Taiwan. They are less reluctant than their predecessors, apparently, to take reprisals against Japan for moving closer to Peking. In retaliation for the Peking-Tokyo aviation agreement, for example, commercial airlines contact between Japan and Taiwan was suspended.