Straight Talk with China

RAY SUAREZ:

The Chinese premier, 61-year-old geologist Wen Jiabao, is officially charged with managing his country's booming economy. But today's White House public appearance was dominated by geopolitics– specifically by Taiwan and the island's perceived moves toward independence. Just 90 miles from Mainland China, Taiwan has been self-governing for five decades. But Beijing considers it a renegade province, and has threatened to take it by force if the island officially declares autonomy.

U.S. policy on Taiwan has been ambiguous. It adheres to the term "one China" preferred by Beijing, while at the same time the U.S. pledges to defend Taiwan if it's attacked. In recent months, there's been talk in Taiwan of a referendum on independence, an issue pushed by President Chen Shui-Bian. He's running for reelection next spring. Last month Taiwan's parliament approved a scaled-back referendum. There's no mention of independence, but a ballot question does ask if China should withdraw its missiles aimed at Taiwan. Although Beijing criticized the measure, many Taiwanese lawmakers were defiant.

LIN CHOU-SHUI, Member, Taiwanese Parliament (Translated):

Chinese leaders are not used to democracy, so if we follow the orders from Chinese leaders, that would betray the true meaning of democracy; so we cannot stop what we are doing to please China.

RAY SUAREZ:

Yesterday, Bush administration officials warned Taiwan against any vote that would provoke China.

PRESIDENT BUSH:

Welcome.

RAY SUAREZ:

And today in the Oval Office, the Chinese premier applauded the U.S. position.

WEN JIABO, Premier, China ( Translated ):

The attempts of Taiwan authorities, headed by Chen Shui-Bian, are only using democracy as an excuse, an attempt to resort to referendum to break Taiwan away from China. Such separatist activities are what the Chinese side can absolutely not accept and tolerate.

RAY SUAREZ:

For his part, President Bush had kind words for China, for its leadership on the North Korea nuclear issue.

PRESIDENT GEORGE W. BUSH:

The goal is to dismantle a nuclear weapons program in a verifiable and irreversible way. And that is a clear message that we are sending to the North Koreans.

RAY SUAREZ:

Despite the diplomatic agreement, the two countries don't see eye to eye on trade. Chinese factory output is surging, and last year its exports to the U.S. exceeded imports by $103 billion. That number is going to be much higher this year. This fall, Treasury Secretary John Snow went to China to complain. He said China's currency was severely undervalued, giving Chinese exporters an unfair advantage over U.S. competitors. On a separate trip, Commerce Secretary Don Evans said the currency problem is part of a wider set of unfair trade policies.

DON EVANS:

Many of the sectors of the Chinese economy are tilted against American companies, and that means tilted against American workers. And that's not right, and it's our responsibility to make sure we do something about it.

RAY SUAREZ:

Last month, after complaints from U.S. textile makers, the U.S. imposed quotas on certain Chinese textile imports. Beijing said it was "shocked," and that it reserved the right to appeal to the World Trade Organization.

RAY SUAREZ:

For more on U.S.-China relations, we get two views. Kenneth Lieberthal was senior director for Asian affairs at the National Security Council during the Clinton administration. He's now a professor at the University of Michigan. And John Tkacik was the chief of the China division at the State Department's Intelligence and Research Bureau in the early 1990s. He's now at the Heritage Foundation. John Tkacik, a very clear message to Taiwan from the Bush administration. Does it represent a departure from earlier American policy?

JOHN TKACIK:

Well, my friends at the State Department tell me there's not a change. They say that President Bush has expressed his opposition to the referendum and to anything that heightens the tensions in the Taiwan Strait. But he is not … he is not opposed to independence per se. However, I have to say, having watched the performance today, that I see some very profound changes, especially when the president of the United States, who three weeks ago, proclaimed that the global expansion of democracy was a pillar of American foreign policy, to get up today and basically say the president of Taiwan, by unilaterally taking these moves toward a referendum, was provocative.

To me, I have to say, the president of Taiwan will not take any moves unilaterally. He will only take moves when he's got the majority of the voters voting for him on March 20, which is the presidential election, and frankly, the issue of Taiwan's identity is a core issue in that election, and I think it's a sad day when America tries to undermine the core elections in one of Asia's most vibrant and dynamic democracies.

RAY SUAREZ:

Kenneth Lieberthal, what do you make of the way the Bush administration articulated its Taiwan policy in the last two days?

KENNETH LIEBERTHAL:

Well, I think the Bush administration made a distinction that needs to be made, and that is, on the one hand we support and the Bush administration as every previous administration has, a vibrant, lively, ongoing democracy in Taiwan. But we do not support self-determination by Taiwan. In other words, Taiwan should have total domestic autonomy. It should have a vibrant democratic system. We support that, because of our values and because of our interests.

But if Taiwan chooses unilaterally to move itself out of the framework that has been in place for 30 years now, governing its position in the broader U.S.-China relationship, the president has made a change. He used to say that we would not support that. He now says we will not only oppose it, but we will oppose steps that move it in that direction. So I think the president really did tighten up policy. I think he did it because of developments in Taiwan where the Taiwanese president, in his election campaign, has really begun to push the outer edges of the preexisting framework in a way that President Bush thought was going to lead potentially to tragedy, if not in the next few months, then in the next few years.

RAY SUAREZ:

Well, Ken Lieberthal, the Chinese premier didn't come with no expectations; he came to Washington looking for some kind of statement from the Bush administration in this regard. And for their part, the Taiwanese have rejected the U.S. warning. Where does that leave things now?

KENNETH LIEBERTHAL:

Well, I think we are going to have to see how Taiwan reacts to this. This statement occurred in what is the middle of the night in Taiwan. I don't think there has been any reaction in Taipei to this point to what the president said in the news conference this morning. To have the president make that statement from the Oval Office right next to the Chinese premier is about as powerful a declaration as the president of the United States can make on this issue. So I think we'll have to see how this plays in Taiwan politics.

Let me say also, many people on Taiwan, I think, will be very nervous about a strategy by the president of Taiwan that seems to be alienating the United States and hedging U.S. support. So we're going to have to see how this plays politically. I think it is just too early to tell. It was a very substantial move by the president today.

RAY SUAREZ:

John Tkacik?

JOHN TKACIK:

Well, I mean, I have to agree. I think the impact is going to be quite profound. I'm not sure that the president understands what the nuance was, because he doesn't think in that regard. But I … you have to remember that Taiwan … we have never — the United States has never recognized Chinese sovereignty over Taiwan. Taiwan was a terra milieus after the Second World War, and unto this day, the United States position is the United States takes no position on the matter of sovereignty over Taiwan. After 15 years of having … of being Asia's most vibrant and dynamic democracy, Taiwan certainly has a right to its own self-determination. And I think it is wrong for the United States to say it is against self-determination for Taiwan. President Clinton himself said the future of the people of Taiwan shall be, should be determined with the assent of the people of Taiwan. So I think that this is a big mistake.

RAY SUAREZ:

Ken Lieberthal?

KENNETH LIEBERTHAL:

I think that somewhat misstates what I just said. I said that President Bush is against Taiwan unilaterally opting for independence, in other words, unilaterally acting on the basis of self-determination. The president did not foreclose Taiwan independence if that's the basis, if that's the outcome of a peaceful discussion across the Taiwan Strait. Shy of that, the president was very clear in wanting the mainland, that the U.S. would oppose any mainland use of force against Taiwan. So I think where the president has ended up is effectively endorsing the status quo for quite a long time to come. My own view is that is a position the mainland is reasonably comfortable with and many people on Taiwan are also comfortable with.

RAY SUAREZ:

Let's look at other aspects of the relationship. There are pending economic issues between the two states as well, John Tkacik. Likely to be any movement there?

JOHN TKACIK:

I don't think so. I think a lot of them are sort of superficial. The big one seemed to be the so-called undervaluation of the Renminbi, the Chinese currency. But I think what we found with the so-called Renminbi undervaluation, it is pegged to the U.S. dollar. And over the last ten months, the Euro has appreciated over 30 percent to the dollar, yet European exports to China have increased faster than American exports to China. So clearly the currency is not an issue. What is probably a problem is the Chinese government has a policy of directing its imports, directing its state corporations to import for political reasons. They're importing a lot more from Europe than from the United States. Now that's a political issue, and it's something that is not going to be resolved by the currency issue and it's something that should be resolved now, but I'm not sure it will be.

RAY SUAREZ:

Do longstanding issues, Ken Lieberthal, in the U.S.-Chinese economic relationship end up becoming hostage to 2004 national politics in the current atmosphere?

KENNETH LIEBERTHAL:

Well I think national politics always plays into trade issues in any country. The president is under a lot of pressure to put the blame on China for the loss of manufacturing jobs in the United States. There has been a loss of manufacturing jobs, more than two and a half million since the president took office. During the roughly the same period of time, there has been a loss of nearly 20 million manufacturing jobs in China. I don't think that any economist would say that America is losing manufacturing jobs primarily because of what China is doing. But politically, it's a very, very tough issue.

We saw Wen Jiabao give the president a lift by accepting in principle that the trade deficit issue is a serious issue that has to be addressed. He recommended that a higher level than before regular meeting be established to address that issue. And I think that will convene very soon, and I think the Chinese, if they are directing where imports should come from, will start directing that they come more from the United States to relieve some of the press around this vital issue. I agree it is a very serious issue in our bilateral relationship.

RAY SUAREZ:

But, John Tkacik, you don't see any joy for American policy makers in the currency issue? I mean, the president has called for concrete progress on the currency.

JOHN TKACIK:

No, I don't think there will be. I mean, the fact is the Renminbi has been pegged to the U.S. dollar for almost exactly ten years. Currency stability is a very valuable quality in anybody's economy. And I think that it's sort of a … it's a misguided policy to sort of focus on that. I would say that China has to look at its purchases from the United States and we have two vice premiers coming in the coming year. We have Vice Premier Huang Ju and Vice Premier Wu Yi to discuss these issues and they are going to be bringing with them big procurement missions. It will be a billion here, a billion there, but I don't think it will add up to real money.

RAY SUAREZ:

Ken Lieberthal, here we have been talking about two fairly substantial sets of differences between Washington and Beijing. Does it say anything about the growing maturity of the relationship that neither one of them seems to be poised to really send things spinning off into real tumult?

KENNETH LIEBERTHAL:

I think you capture a very important point. Over the last several years, we've seen the development of what can really be called a constructive strategic relationship. There is a lot of cooperation between the U.S. and China in the global war on terrorism. There's intel sharing, its police cooperation, its diplomatic cooperation and so forth.

On North Korea, as the president highlighted today, the Chinese have taken the lead, have done so in a way that the United States finds very constructive and very helpful. Across the board, I think, we are now in a position where no single issue or even a combination of issues is likely to upset this relationship with the sole potential exception of Taiwan. And if Taiwan were to go seriously off the rails, that is the one issue that could explode the entire relationship. I think today has made that issue less likely to become explosive in the coming period of time.

RAY SUAREZ:

Quickly, John Tkacik, do you agree?

JOHN TKACIK:

No, I don't agree. I think it's daylight madness to consider Taiwan's referendum against missiles pointed at them to be somehow more provocative than China's threats to use nuclear war to resolve the Taiwan issue. I mean it's clear to me that this relationship has not matured when a nation like China can still resort to the threats of the use of force, to recapture, not even recapture — they never had it — a democratic neighbor. And I think that it's a big mistake.

RAY SUAREZ:

Gentlemen, thank you both.

KENNETH LIEBERTHAL:

Thank you.