ATTACHMENT No. 1 SAMPLE ISSUES WHICH NEED TO BE RESOLVED IN THE EVENT OF NORMALIZATION 1. PRC Regulation of U.S. Business in Taiwan To which extent, if any, would normalization mean that the U.S. recognizes the right of the PRC to regulate the activities of U.S. business, including airlines, banks, manufacturers and others in Taiwan? 2. Ex-Im Bank Loans and Guarantees As of June 1977, the ROC had loans and guarantees outstanding in the amount of more than U.S. $1.5 billion, thus making it the Exim Bank's largest customer after Brazil. What happens to these funds and will Taiwan be eligible for loans in the future? 3. U.S. Banks on Taiwan As of June 1977, eight U.S. Banks had branches on Taiwan. What will be their status after normalization? Will they be allowed to continue their operations in Taiwan? 4. U.S. Investment on Taiwan As of September 1977, there was some U.S. $508 million worth of U.S. investment on Taiwan. This investment is distributed across the range of the country's industrial projects and infrastructure. A series of questions arise which are currently adequately answered under the present Friendship, Commerce and Navigation (FCN) Treaty of 1948, but which will need review if the FCN Treaty were not to be in force. Will this investment have national treatment, meaning that U.S. investment will be subject to the same laws and enjoy the same rights as do domestic enterprises of the host country? In the event of expropriation or nationalization for a public purpose, will it be done without discrimination and accompanied by prompt, adequate and effective compensation? Will compensation under expropriation amount to the market value immediately before the expropriation itself or before the host government's official announcement that expropriation will occur? Will there be international arbitration in the event of a dispute between the U.S. investor and the host country? 5. Overseas Private Investment Company (OPIC) Coverage As of June 1977, the maximum contract value of OPIC insurance was $117M million for Inconvertability, $131 million for Expropriation, and $117 million for War. Could additional coverage be obtained? 6. Textile Quotas to the U.S. Taiwan's textile exports to the U.S. fall under the 1974 Multi-Fibre Agreement, the international framework for voluntary bilateral restraints between textile exporters and importers. On the other hand, the PRC has been unwilling to subscribe to any voluntary trade restraints, even with countries with which it has diplomatic relations. What happens to Chinese textile exports to the United States? 7. U.S. Agricultural Exports to Taiwan In 1976 the U.S. exported some $474 million worth of Agricultural products to Taiwan, and six month figures for 1977 already total $407 million. Most of these exports are conducted under several long-range agreements negotiated between the U.S. and the ROC. What happens to these agreements? 8. Nuclear Fuel for Taiwan's Nuclear Power Plants Currently 6 Nuclear Power plants are under construction in Taiwan. Under what conditions will Taiwan be able to obtain nuclear fuels for these plants? 9. Generalized Preference Scheme Will Taiwan still be eligible for duty reductions under the Generalized Preference Scheme? 98-666 0-77-19 10. Most Favored Nation Treatment The ROC currently has MFN treatment, but the PRC does not. Before MFN can be granted by the U.S. President to the PRC, the Trade Act of 1974 requires that a bilateral trade agreement be negotiated first, and then be approved by the U.S. Congress. Part and parcel of Congressional approval is the settlement of frozen assets, which has been an extremely thorny issue thus far. Anyway, what happens to the ROC's Most Favored Nation standing? Mr. BEILENSON. Thank you very much, sir. We will now hear from Mr. Harrison. STATEMENT OF SELIG S. HARRISON, SENIOR ASSOCIATE, CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE BIOGRAPHY Selig S. Harrison, a Senior Associate of the Carnegie Endowment for International Peace, has specialized in Asian affairs as a scholar and journalist for 26 years. He is the author of India: The Most Dangerous Decades, (Princeton University Press 1960); China, Oil and Asia: Conflict Ahead? (Columbia University Press, 1977) and the Widening Gulf: Asian Nationalism and American Policy (The Free Press, 1977). A 1948 graduate of Harvard College, where he was president of The Harvard Crimson, Mr. Harrison first became interested in Asia as an Associated Press correspondent based in New Delhi from 1951 through 1954. As Managing Editor of The New Republic from 1956 to 1962, he wrote frequently on U.S. relations with Asian countries. When The Washington Post launched its Foreign Service in 1962, he was appointed South Asia Bureau Chief, covering India, Pakistan, Afghanistan, Burma, Ceylon and Nepal from 1962 through 1965. From 1968 through 1972, he served as Post Bureau Chief in Northeast Asia, covering Japan, China, North and South Korea, Taiwan and the Philippines. In between his Asian travels, Mr. Harrison has been a Nieman Fellow at Harvard (1954–55), specializing in Chinese and Japanese studies; Senior Fellow in Charge of Asian Studies at the Brookings Institution (1967-68); and Senior Fellow at the East-West Center in Honolulu (1972-73). In 1973-74, he was a Professorial Lecturer in Asian Studies at the School of Advanced International Studies, Johns Hopkins University. Mr. HARRISON. My testimony today will be based primarily upon a 2-year investigation of the impact of China's emergence as a major petroleum producer conducted in behalf of the Carnegie Endowment for International Peace. It will also draw, of course, upon 26 years of experience as a foreign correspondent specializing in Asian affairs, including extensive, experience in Japan, Taiwan, South and North Korea, and the People's Republic of China. My study for the Carnegie Endowment was part of a continuing endowment program addressed to focal points of potential conflict throughout the world. Accordingly, my interest in China's petroleum plans and prospects has focused on the possible danger of conflict over offshore oil resources resulting from unresolved sea boundary disputes between Peking and neighboring capitals, and it is in this context that I shall consider some of the economic implications of normalization. This bears directly, I believe, on the range of questions, Mr. Chairman, that you presented to us at the outset and I will be quite happy to address each of those questions more specifically afterward. In my written testimony I have explained in considerable detail why China has undertaken a major offshore exploration program and how this effort could conflict with the offshore ambitions of other east Asian states, especially Taiwan and Japan. Most of China's neighbors have unilaterally granted exploration rights to domestic or foreign oil companies, private and governmental alike, in areas where Peking has implicit or explicit claims. Sooner or later I believe China is likely to react to this challenge in its own fashion. I would like to call your attention to a series of maps which I am supplying for the record, in particular, maps Nos. 5 and 61 which show the concession areas that have been allocated both by Taiwan and Japan in overlapping areas of the East China Sea. 1 See pp. 268 and 269. |