them with 35 or more divisions of heavily armed troops along their northern borders. The exploitation of the balance of power potentialities of the so-called Sino-Soviet split is, in fact, widely considered around the world to be the main reason for the Nixon initiative toward Communist China and for Mao Tse-tung's willingness to have him visit and talk in Peking. In fact it goes beyond this, even to the point where many are convinced that the troubles between Peking and Moscow have resulted in conversations between authorities of the Republic of · China and those of both the Chinese Communists and the Russians. The Chinese Communists have themselves planted stories to the effect that the Republic of China had been talking and negotiating with them. On this, President Chiang Kai-shek's New Year's Day message to his own people, of 1972, stated:

"The only contacts between us and the enemy are those of blood and steel in the operations in front of and behind the enemy's lines. There are absolutely no contacts of any other kind."

In fact the balance-of-power game here is far from being a relatively simple question of Communist China, Russia, and the U.S.A., but must involve a number of other countries as well. The current initiatives of Moscow toward Tokyo show how hard it is to keep such a game within bounds. What would it profit President Nixon to gain a few odds and ends from the Communists in China, only to lose as far as Japan is concerned? Here the Russians hold some high cards in the shape of Japanese territories they have held since the end of World War II. By contrast with the Nixon diplomacy toward Okinawa, the Russians have held these territories until a vital quid pro quo could be secured for any concessions regarding them.

President Nixon no doubt entertains the notion of playing around the margins of the problem of Sino-Soviet relations and thus avoiding any entanglement with either party which would be dangerous. But if the Russians are suspicious of what he may be doing in this respect, we know already that the Chinese Communists are not merely suspicious: they are convinced from the start that President Nixon, who made his political start in life as a hard anti-Communist, could never be trusted even if he were to say only "Two plus two equals four."

Seen in this way, President Nixon's Peking trip and his later trip to Moscow are not believed in the Republic of China to be likely to change things for the better. They are also convinced that whatever may seem visibly to come out of these meetings, the unannounced results, even perhaps the secret agreements for the future, will be more important to them than what is in the communique, if there is one.

Therefore it follows, many in the Republic of China believe, that the way must be explored toward alternate sources of security in case the United States really and in secret seems to be deserting them, and no matter how long such a desertion could take. For a long time, they have been trying to build up regional security arrangements with such nations as the Republic of Korea, the Philippines, and South Vietnam. The United States has, seemingly, always discouraged these efforts on the basis that none of these countries need any more security guarantees than are given by the United States.

This argument now begins to fall on rather deaf ears not only in the Republic of China, but in all the other countries involved in the area. But the missing element is Japan, as to whose direction in the field of national defense no one can be sure. Even the current slow but steady rise in the military budget in Japan raises severe political problems there, not the least of which are caused by the strong aim in many quarters to "normalize" relations with Communist China.

Such "normalization" already faces the staggering obstacle of Japan's previously stated and now reaffirmed position as to the Republic of China as of January 11, 1972; namely, that the security of "Taiwan" is of vital importance to Japan. This so-called Taiwan clause was originally contained in the joint Nixon-Sato communique of November 19, 1969. But now, as then, any relevance it has to the security of the Republic of China is, purely and simply, a function of U.S. security arrangements on behalf of the Republic of China. Japan plays no part in any such arrangements. And, in fact, no U.S. forces on bases in Japan can be used for this or any other purpose without prior consultation with Japan and Japan's consent. This will soon apply to our bases in Okinawa. Only a sufficient and autonomous Japanese military establishment can provide any meaning or any sanctions behind Japanese desires and plans for the security of areas nearby to herself and in which her political and economic as well as

strategic vital interests are involved. This may well be a very long time in coming. But this too will depend very much upon the Japanese interpretation of the results of the Nixon visits to Peking and Moscow.

The pressure in the Japanese media for "normalization" of relations with the Chinese Communists has to be seen to be believed. Even anti-Communist circles in Japan appear to have been at least partially brainwashed by this constant pressure. Some Japanese are now beginning to urge, for example, that the Republic of China should cease to identify itself with China at all, and should abandon its title as Republic of China in favor of one which would identify it as a "separate country." Perhaps they believe that this is the only way in which it can possibly escape a takeover by the Chinese Communists. But there is little chance that the Chinese Communists would settle for anything as trifling as this. They want nothing less than the destruction of the government of the Republic of China and the takeover of its territories, people, armed forces, and total assets. And the government of President Chiang Kai-shek will never give up its present title, no matter what is advocated along these lines either at home or abroad.

The Republic of China, post-United Nations, thus presents a picture of calm, resolute, and determined self-confidence in the face of the injustice and evil treatment which it suffered in the United Nations. It is, in fact, the United Nations which has come out badly in this matter. By contrast with the Republic of China, the United Nations has lost the confidence of millions of its supporters both in the United States and around the world, and has set its feet on the pathway toward dissolution and total impotence.

In fact, the Republic of China is today stronger than ever before. Its friends and admirers on every continent have even more reason to support it than ever. Long life to the Republic of China!

Mr. GALLAGHER. Mr. Grant.

STATEMENT OF HON. JAMES P. GRANT, PRESIDENT, OVERSEAS DEVELOPMENT COUNCIL

BIOGRAPHY

James P. Grant was born in Peiping and his lifelong familiarity with China includes such World War II and immediately postwar assignments as captain in military intelligence serving in China, UNRRA representative in North China and specialist assistant to the director of the United States Assistance Mission to China. Mr. Grant is a lawyer and former Government official whose principal posts included Deputy Assistant Secretary of State for Near Eastern and South Asian Affairs from 1962 to 1964, director of the AID mission to Turkey from 1964 to 1967 and assistant administrator for the Vietnam AID program from 1967 to 1969. Mr. Grant currently serves as president of the Overseas Development Council of Washington, D.C.

Mr. GRANT. Mr. Chairman, members of the House Foreign Affairs Committee, I appreciate this opportunity to respond to your invitation to testify on the development experience in Taiwan, the relevance. and value of this experience for other countries in the 1970's, and its implications for the reconciliation underway between the United States and the People's Republic of China.

LESSONS OF TAIWAN'S ECONOMIC GROWTH

Briefly, Taiwan's successful experience, despite its many special circumstances, has a major contribution to offer other developing countries that are also trying to create more jobs and to bring about more rapid economic and social progress for their all too numerous, and frequently increasing, poor.

This successful experience is of particular importance in the 1970's, when there is a growing crisis resulting from the fact that the developing strategies being followed by most countries are not only widen

ing the gap between their well off and their poor, but are benefiting only marginally the poorest half of their people.

Furthermore, the example of Taiwan holds important lessons for the United States, not only in terms of U.S. development assistance policies, but also for the maintenance of its own international economic position.

Finally, the overdue reconciliation between China and the United States and Japan need not adversely affect Taiwan's economic and social development if the United States and Japanese Government and business communities avoid major economic moves that actively discriminate against Taiwan.

Twenty-five years ago, Taiwan, with its 6 million people, was a province in the backwash of civil-war-torn China. While still recovering in 1947 from the devastation created by U.S. bombing in World War II, it was to witness the brutal killing of thousands of Taiwanese who wanted a greater say in their provincial government. During 1948 and 1949, Taiwan received a million refugees from the mainland, as the United States was terminating its economic aid.

WELL-BEING OF THE "LITTLE MAN”

Today, the major national political decisions are still made by a small group of Chinese from the mainland. But there probably is no country between Japan and Israel in which there has been such a rate of improvement in the material and social well-being of the "little man" as in Taiwan, or where he has greater control over the important decisions affecting his immediate livelihood.

Taiwan's exports, more than three-quarters of which are manufactured and processed agricultural goods, have soared from $174 million in 1960 to over $2 billion in 1970. Exports in 1972 may well exceed those of China and of India to make this island of 15 million people the second trading nation of Asia, following only Japan.

The gross national product of Taiwan increased four times between 1952 and 1970, and per capita income in 1970 reached $370, or approximately two-and-a-half times the real per capita income of 1952. More important, this increase in national product has been spread broadly over both the rural and urban populations. Moreover, in contrast to the experience of most developing countries, income distribution has actually improved markedly. Unemployment has decreased to the point that there is a labor shortage in both rural and urban areas.

Taiwan, despite its still very modest per capita income, now has an infant mortality rate of 19 per thousand and 98 percent of school-age children are enrolled in primary schools. These figures are quite close to those for the United States. And Taiwan is a graphic example of what can be done to control family size-birth rates having dropped from 46 per thousand in 1952 to 26 per thousand in 1970.

"So what?" one may ask: Haven't many other countries, such as Mexico, Brazil, Venezuela, and West Pakistan, also achieved outstanding growth rates in the 1960's? And isn't Taiwan a special case because of the vast amounts of economic aid the United States has provided? Besides, don't we all know how remarkably efficient and effective the average Chinese is?

ECONOMIC GROWTH AND EQUITABLE INCOME DISTRIBUTION

These are commonly asked questions that need answering if we are to determine whether the experience of Taiwan has any special relevance for other developing countries.

In the 1960's, many countries achieved remarkable increases in output and the developing world as a whole increased its output to an extent unprecedented in the development history of the United States and Western Europe. But we are discovering that in most countries, unlike Taiwan, relatively few of the benefits of growth reached the bottom 20 percent to 40 percent of the population.

While it is true that over this period Taiwan received unusually large amounts of well-managed economic assistance-a total of some $150 per head by the conclusion of the economic aid program in 1965it bears remembering that other countries had even greater extraordinary income sources without achieving the same improvements in livelihood for the poorer half. Venezuela, for example, earns $150 per person from petroleum exports in only 7 months.

POLICY CHANGES KEY TO TAIWANESE GROWTH

It is also undoubtedly true that the Chinese cultural background helps to produce diligence and effective work habits in the people exposed to it. And Taiwan has had the additional special advantages of much educated talent from the mainland and-as the silver lining of colonialism-considerable numbers of lower- and middle-level manpower trained by the Japanese. But it is worth recalling that Taiwan, like Puerto Rico in the 1950's and the Punjabs of both India and Pakistan in the 1960's, did not begin to perform spectacularly until it introduced a series of highly important policy changes for the rural areas in the early 1950's and for the industrial export sector in about 1960. Even as late as 1959, it was strongly held in both Washington and the American Embassy in Taipei that Taiwan, with its extraordinary burden of a 500,000 man army, would require major infusions of economic aid indefinitely. The importance of the right policies to the progress of developing countries should never be underestimated. The Taiwan experience holds a special potential significance for other developing countries.

WIDENING RICH-POOR GAP

It should be emphasized that despite continued remarkable increases in output, there is a growing crisis in development progress in the 1970's which will threaten the survival of many governments in Asia, Africa, and Latin America. It bears many analogies to the forces for change in Europe that culminated in the revolutions of 1848 and toppled so many European thrones.

Robert McNamara in his April 14 address to UNCTAD III, in Santiago, Chile, underscored at length the crisis being created by the widening rich-poor gap in most developing countries. He said then: "The state of development in most of the developing world is unacceptable and growing more so."

What is this crisis? Why is it occurring? What light does the Taiwan experience cast on the needed solutions, and how do these solutions affect the still runaway problems of population and environment?

These are urgent questions for the 1970's that we need to address now. Fortunately, there are some hopeful signs on the horizon, if only developing and developed countries alike will take advantage of the experience gained in a number of countries, including Taiwan, and will act with the hindsight of this experience.

LATIN AMERICA-GROWTH AND UNEMPLOYMENT

The limitations of traditional development concepts for the developing world are most clearly evident in Latin America, which has had an unprecedented 5-percent growth in output each year for more than a decade. Open unemployment has risen steadily over the past 20 years and has probably quadrupled over this period to reach over 12 percent of Latin America's work force. The percentage of those who are drastically underemployed is probably even greater, and increasing rapidly.

This is due in part to the early start in Latin America of a population explosion unprecedented in Western Europe and North America. In Mexico, for example, the new entrants to the work force will increase from 300,000 in 1960 to some 850,000 in 1980. The job crisis is also due to foreign exchange, credit, and interest policies that have mistakenly favored the use of labor-displacing equipment designed in the West to fit the Western high-cost labor situation.

As Mr. McNamara reported in Santiago, Brazil's rapid—and welcome-increase in gross national product of the past 10 years has benefited the upper 5 percent greatly, but the poorest 40 percent only marginally throughout the decade.

In Mexico, too, despite unprecedented progress over the past 20 years, the poorest 40 percent have benefited only marginally, and there is considerable evidence that the increasing numbers of rural landless laborers are noticeably worse off today than 20 years ago, when there was far more work available for fewer laborers.

SOUTH ASIA AND UNEMPLOYMENT

The story of India and Pakistan is somewhat the same, except that the full force of the population explosion has yet to be felt on their already underemployed work force. The worsening nature of the problem is shown by the fact that the net weekly addition to India's work force will increase to 140,000 in 1980 as compared to the 100,000 weekly addition in 1970.

It is worth noting as well that many developing Communist countries also have had to struggle with unemployment problems as they experienced unprecedented growth.

That there is a potential for simultaneously achieving growth and overcoming several of these newly defined problems is perhaps best illustrated in East Asia by countries with very different political and economic systems-by China and possibly North Korea on the one hand, and by Taiwan in particular, but also South Korea and the citystates of Hong Kong and Singapore on the other side of the ideological barrier.

Elsewhere, countries as different as Barbados, Israel, Egypt, Ceylon, and Cuba have dealt effectively with some of these newly perceived problems.