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has been no consistent pattern. They have had “hard” foreign policy lines in periods of extreme weakness and "soft" lines in periods of relative prosperity. Rather, I think rapprochement is to our long-term advantage, and I would urge that we view our policies whether trade, military expenditures, information, or what have you, in the long term.

Chairman PROXMIRE. Would you share the Řeischauer view that because our trade-say there was an equal amount of trade, a half billion dollars' exports and imports to China that this could have a significant effect on their attitude but would have a relatively small effect in this country, inasmuch as it would be a far smaller fraction of our imports and exports. It would constitute a very large proportion of theirs because they have a smaller trade operation and, therefore, that we have almost everything to gain in terms of influence and very little to lose by greatly stimulating and increasing our trade with China?

Mr. DORRILL. Certainly.
Chairman PROXMIRE. Would you share that view?

Mr. DORRILL. Certainly; the maximum potential for trade would not be such as to make us economically dependent on the People's Republic. I think it would always remain a fairly small fraction. Estimates vary widely as to the potential for trade. Some Japanese trade agencies have estimated as early as a year or so from now it could, if all systems were go, amount to as much as $200 million flow each way. I would say that is much too rosy.

Chairman PROXMIRE. I was thinking not in terms of a couple of years; I was thinking in terms of a decade or so.

Mr. DORRILL. In terms of what they have to export to us, and what we have that they want, I just can't see trade amounting to that large a fraction.

Chairman PROXMIRE. Well, they have many things that we would want, I presume. They certainly would want what Russia would want in trade that is beginning to develop; they would want the machine tools, the farm equipment, much of our technological apparatus.

Mr. DORRILL. Yes, but they have been unwilling to forego a policy of self-sufficiency; they have been unwilling to accept large-scale foreign credits; but they could modify that policy and begin to purchase whole modern industrial plants.

Chairman PROXMIRE. I was talking about what they need.

Mr. DORRILL. They have followed a very conservative fiscal policy, refusing to obligate themselves for more than they could immediately pay and cut into their financial resources. I think they have reserves estimated at about $800 million.

Chairman PROXMIRE. So then you would, I take it, contend that the economic effect would be rather small, maybe insignificant, but the cultural effect of doing business with them and visiting their country on trade missions and so forth might be more significant and more substantial?

Mr. DORRILL. Yes; exactly. Of course, I wouldn't advocate immediately making available to them the more sophisticated electronic equipment for fitting out military aircraft or other things of a strategic nature. I don't think that is necessary, but I think we should apply the same rules applied to the Soviet Union, on an equitable basis.

Chairman PROXMIRE. Mr. Hinton, how do you feel about it?

Mr. HINTON. At the recent Canton Trade Fair the Chinese made it clear to some of the Americans who were there that, in the first place, the Chinese do seriously intend to trade with the United States-one of the major reasons for this is to reduce the Japanese role in Chinese economic relations—and that China wants to balance its trade with the hard currency nations as a whole, including Hong Kong, which means that they would not mind running an adverse balance with the United States; and they made it clear that their priorities are in the field of transportation and agriculture.

If I could go back to the Chinese food production, the Chinese only publish statistics on grain production which is relatively insensitive to short-term cycles other than weather. It is grown on the commune sectors of the people's communes and subordinate parts. What really, to my mind bounces up and down sharply in response to official policy are other things, vegetables, fruits, poultry, and the like, and we don't have any figures on that.

But the Chinese themselves eat them, whether or not they are reported and I think it is pretty clear their overall food consumption is in fairly good shape.

Chairman PROXMIRE. How about textiles?

Mr. HINTON. Textiles—I can't comment; I have no knowledge. I am quite pursuaded their food situation is perfectly tolerable by Asian standards at the present time.

Chairman PROXMIRE. Colonel Fraser, isn't the nuclear program likely to go into an escalating cost production phase in the near future?

Colonel FRASER. Most certainly, sir.

Chairman PROXMIRE. And will pose a difficult problem for the Chinese to develop the kind of refined, sophisticated nuclear power that even approaches that of the United States and the Soviet Union?

Colonel FRASER. Indeed, that is the case, sir. This is one of my reasons for suggesting that they are really not going all out to achieve the sort of

Chairman PROXMIRE. It also implies there wouldn't be much sense in the Soviet Union attacking them because they are not going to become the kind of nuclear threat to the Soviet Union, let alone to this country, that-

Colonel FRASER. They will become this sort of nuclear threat eventually, I suppose. As an Australian scholar put it to me, if they had 25 ICBM's which could attack the west coast of the United States, what President of the United States would hazard 25 United States cities in a quarrel with China ? But this is the sort of hostage strategy which I think will set the limit of their construction. I see nothing like the massive number of weapons

Chairman PROXMIRE. Let's pursue the implications of that; it is fascinating

If they had 25 ICMS's, you say, hostage strategy-in other words, they would be in a position to negotiate from greater force and strength because the President of the United States would feel that otherwise we might endanger some of our cities?

Colonel FRASER. They would have, as I said earlier, sir, a ticket to the meeting wherein

Chairman ProXMIRE. How would that give them any real kind of ticket? On the one hand, they might be able to attack or might not be able to attack, and destroy some of our cities. If they did, we would be in position to pulverize China; there would be nothing left. It would be an ash heap.

Colonel FRASER. Of course, this is true, but, on the other hand, to pulverize China would be considerably inhibited if they had, say, 25 intercontinental weapons of 25 megatons each.

Chairman PROXMIRE. Well, I just wonder
Colonel FRASER. Can you see the President of the United States-

Chairman PROXMIRE. If I were President of the United States, that kind of bluff would have no effect on me at all, none.

Colonel FRASER. I don't think it is a bluff.

Chairman PROXMIRE. After all, what can they do? They could threaten we are going to take care of some of your cities; although we know if we do that, there won't be anything left of our country; we would enlarge the Pacific Ocean by the size of China; it would be just a great big hole. Isn't that what would happen?

Colonel FRASER. That was not my concept of the strategy involved. I was not thinking of the 25 Chinese ICBM's as an initial or first strike force; I was thinking of it as a deterrent and as an inhibitor

Chairman PROXMIRE. I know.

Colonel FRASER (continuing). To keep the United States from firing at China.

Chairman PROXMIRE. Why would that be a deterrent if it is so unbelievable? It would be so utterly ridiculous. Anybody can do anything, of course, any irresponsible nut, any maniač who has his finger on the button. Any Lavelle, General Lavelle, can apparently start a nuclear war; that can happen and unfortunately and sadly there is not much we can do about that; but as far as negotiating, if they said, “Now, we expect a ticket to the club, we expect to be on a parity basis; we have enough to wipe out some of your west coast cities,” it seems to me we are in a position where we have to talk with Moscow on this basis but not with China.

Colonel FRASER. The discussion, I suggest, sir, would turn about what the Chinese have always stated as their goal, the total and thorough destruction of all nuclear weapons. Obviously they feel menaced. Obviously they are in the fix of the swift runner of Zeno's second paradox.

Chairman PROXMIRE. You left me at the post.

Mr. DORRILL. I hope you have something more comforting to offer than Zeno's paradox.

Chairman PROXMIRE. We are getting into the Greek-Turkish aid program? Zeno's second paradox?

Colonel FRASER. The illustration is the very swift runner who starts behind the very slow runner and with each stride closes half the distance between them; but since there is always an increment of one half, he never catches him. No matter how fast the Chinese move, they are in the same paradoxical position.

Chairman PROXMIRE. Whoever figured out that paradox was not talking to a jogger because I find that zeno is wrong. You catch up or fall behind. (Laughter.]

Mr. Hinton. Ženo was not a jogger.

Colonel FRASER. Zeno was not a jogger; that is only one of eight paradoxes; you might try some of the others.

[blocks in formation]

Seriously, Senator, I obviously muddied up my own argument. I am not suggesting the Chinese would build an intercontinental force of 25 missiles and say, "Now, do as we suggest, or cooperate with us, or we will clobber you,” because the price is China; however, they could then afford to be a little more carefree or a little more straightforward in their planning about dealing with us if they had a second strike capability which would be used if the United States attacked China.

Chairman PROXMIRE. Well, I can see how a nuclear capability might result in a situation with respect to Japan; it might change the situation quite dramatically if Japan does not develop nuclear power, or with a situation in respect to South Korea, but not to this country and Russia because, as I say, our nuclear power is just overwhelming; retaliation would be just absolutely destructive.

Colonel FRASER. I am not talking about retaliation.
Chairman PROXMIRE. But what would we have to talk about?

Colonel FRASER. I am not talking about retaliation; my basic premise is they would never fire first.

Mr. Hinton. Colonel Fraser is talking about a situation of mutual deterrence.

Chairman PROXMIRE. That is what I mean. I don't have any mutual deterrence with respect to Joe Frazier; I couldn't go up to him and say, “Joe, unless you are going to talk with me, I am going to give you one on the chops.” I might give him a little tiny shiner, but that would be the end of Proxmire, and I think this is the problem that China has with respect to the United States and the Soviet Union.

Colonel FRASER. This is exactly why I suggest that China does not realistically seek to develop any massive nuclear power, that some sort of array which-the right words are mutual deterrence—is about all they can hope for.

Your original question asked me where I thought they were going. They have not faced the expense of the program yet.

Chairman PROXMIRE. My original question was based on the fact that a much greater expansion would be very expensive for China. The cost of nuclear development would be prohibitive for her relatively limited economy.

Colonel FRASER. On expense—they have not gone into serious production, so far as we know, on any significant force. This is where the costs lie. You have to put together the assembly lines and technical facilities to make a whole string of weapons, to do the necessary proving and proof testing and this sort of thing. You run into a new order of costs, and the Chinese have not faced those yet.

Chairman PROXMIRE. Well, gentlemen, I want to thank all of you. This has been kind of a rambling interrogation and I apologize for that, but you are so competent and your presentations have been so solid that I think you have made an excellent record today. I think your responses have been most helpful to me and the committee.

As I indicated earlier, the distinguished majority leader of the House, who is a member of this committee, will soon make a 10-day visit to the People's Republic of China. He has most graciously offered to provide this committee with a statement setting forth his observations and conclusions about economic matters upon his return. This would be a most desirable addition to our inquiry and I ask, without objection, that we keep the record open for submission of the report.

(The report, in letter form, was subsequently supplied for the record:)

CONGRESS OF THE UNITED STATES,

HOUSE OF REPRESENTATIVES,
OFFICE OF THE MAJORITY LEADER,

Washington, D.C., July 10, 1972.
Hon. William PROXMIRE,
Chairman,
Joint Economic Committee,
Congress of the United States,
Washington, D.C.

DEAR MR. CHAIRMAN: I have, as you know, just returned from a 10-day visit to the People's Republic of China. This journey was undertaken with Representative Gerald Ford, the House Minority Leader, and it was intended to aid our understanding of China and to contribute toward the normalization of relations between our two countries.

Progress toward that goal was one of the objectives agreed to by both sides in the Joint Communique issued in Shanghai on February 27, 1972 during the President's China visit.

We departed for China on June 23, 1972, and therefore we were fortunate to have had the benefit of this Committee's excellent study entitled People's Republic of China: An Economic Assessment, released late in May as well as to have had the benefit of the Committee's three days of hearings concerning that report held in June. We furnished copies of the study to a number of Chinese officials. I was also pleased to have accompany me to China Mr. Eugene Theroux, Special Counsel to the Committee, who proved a valuable aide.

In addition to reports to the President and to the Congress on my mission to China, I have assembled here for the use of the Committee and of others interested in China some thoughts and findings concerning the outlook for Sino-U.S. Trade.

A substantial portion of my discussions with Chinese leaders, including talks with Premier Chou En-lai, was devoted to the matter of bilateral trade. The Joint Communique last February set the stage for such discussions in these words:

Both sides view bilateral trade as another area from which mutual benefit can be derived, and agreed that economic relations based on equality and mutual benefit are in the interest of the peoples of the two countries. They agree to facilitate the progressive development of trade between their two countries."

Great enthusiasm was generated in the United States among persons interested in closer trade relations with the Chinese following the President's journey, but my experience in China suggests that some Americans may be excessively optimistic as far as any very significant increases in bilateral trade in the near future are concerned. Certainly no dramatic increases are likely until the process of normalizing state relations progresses measurably further than it has at present. At least this is the impression I received in my talks with Chinese political leaders and with officials of the China Council for the Promotion of International Trade (CCPIT) in Peking.

CURRENT OBSTACLES TO TRADE

While I believe that progress toward normal state relations with China is a condition precedent to any dramatic increases in the range and volume of goods traded, this is not to say that some significant trade cannot occur before an exchange of Ambassadors. Obviously, some trade can itself play an important part in bringing about diplomatic ties, and in this context the RCA satellite ground station purchase, the more recent negotiation for purchase by China of ten Boeing 707 Aircraft, and the private U.S. purchases made in Canton this past spring are good examples.

But trade events, even major ones, can go only so far in laying a basis for more general high volume trade. Before too long, if trade relations are to improve, progress will have to be made in resolving the conflict in Indochina; the status of Taiwan and our relationship to it must eventually be resolved; current tariff and non-tariff barriers to trade between our countries must be reduced-and this of course raises the question of Most Favored Nation status for China; a start must be made on resolving the current disagreements between our countries— over private claims of U.S. citizens for property seized by China and over Chinese assets we froze at the time of the Korean war; the U.S. must follow a reasonable policy respecting export licensing and end-use requirements in order to permit U.S. business to compete effectively for the Chinese market; the U.S. should remove legislative restraints on several kinds of fur skins insofar as they discriminate against China and reciprocal mechanisms must be worked out for trade promotion.

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