Briefing at Brookings Institution, Thursday, April 12, 2001

Speakers: Nicholas Lardy, Brookings Intstition; Michael Armacost, president, Brookings Instituion; Bates Gill, Brookings Institution; Douglas Paal, president, Asia Pacific Society; Minxin Pei, Carnegie Endowment for International Peace


MR. ARMACOST: Every administration since normalization in 1979 has seen the first months of its tenure marked by difficulties with Beijing. President Reagan, you recall, had questions about the modus operandi for dealing with Taiwan's officials and arms sales. In President Bush's case there was the Fang Lizhi incident in the Embassy in Beijing back, I think, in the first month of his tenure, followed by all the fallout from the Tiananmen Square uprising. In President Clinton's case, the first two years of his tenure were shadowed by the effort to link human rights and trade. And of course, we've had the surveillance plane incident recently.

I don't think any of us, two weeks ago, would have expected this issue to surface as it did or to present the complications it has for our two countries. It is noteworthy, I think, that in the case of previous administrations, after those initial difficulties, people turned to and, in working with their counterparts in Beijing, managed to stabilize relations and in some cases advance to a new plateau of cooperation, and one hopes that we'll see a comparable effort this time on both sides.

I was struck, in recent weeks, also, by the degree to which, in each of the capitals, the view of the other country is so heavily contended by sharply divergent views. We've seen in our own country, of course, those who believe that China inevitably will become a military threat and they're inclined to say, "Let's get rid of the pretenses and get on with the job of containing them," and others who believe as I do that there is nothing inevitable about seeing competition turn into strategic rivalry, let alone conflict, and there are plenty of opportunities for cooperation. We've seen in Beijing also that segments of the PLA evidently already regard us as public enemy number one, while others may admire our political values, although not necessarily the way in which we proselytize on their behalf, and certainly elements of the top leadership recognize the importance of cooperation with the U.S. in advancing or hastening their own modernization.

So it's undoubtedly the case that the events of the last week will impinge on perceptions of those contending groups, reinforcing some views, perhaps prompting the revision of others. And we know that even though the immediate crisis -- if it's appropriate to call it a crisis; perhaps that's hyperbole in this case -- but these events have been brought in the immediate sense to a conclusion, but these sorts of initial impressions tend to play out in months to come because of the lessons which each side draws from the episode.

We know that the very heavy agenda of developments in U.S.-China relations over the coming year and, beginning next Wednesday, the talks in San Francisco about this event and the rules of the road, perhaps we're dealing with comparable developments in the future. And we know we've got Taiwan arms sales, we've got Most Favored Nation, or permanent normal trading rights, in the spring. We know the debate about national missile defense will have a China connection of one sort or another. The secretary of State will presumably be out in Hanoi in July for ASEAN post-ministerial talks and have an opportunity to exchange views with his counterpart, and there is the prospect of China's bid for the Olympic Games coming up about that time, too; ministerial talks on the future shape of multilateral trade negotiations; a visit to Shanghai for APEC meetings in November. So it's a very busy year, and I have no doubt that the aftereffects of the last 10 or 11 days will be visible to all of us, knowing how each side handles those events.

We have assembled what I think is quite an extraordinary array of expertise to parse these events for you, particularly to reflect on their future consequences. The moderator for today's program, Nick Lardy; since Richard Haas went back to the State Department a couple of months ago, Nick has been the interim director for our foreign policy studies program at Brookings and, as you know, is one of the world's most eminent authorities on China's economy.

Doug Paal, to Nick's right, his long-time friend and colleague in government; has worked closely both in Manila and in Tokyo. He last served in government as the Asian director for the National Security Council staff in Bush/41 and he now is the president of the Asia Pacific Policy Center here in Washington.

Bates Gill is the director of our Center for Northeast Asia Policy Studies, a senior fellow at Brookings, an expert on politics and strategy, military affairs and China.

And Minxin Pei, a former colleague of Stanford University, did a long stint at Princeton, is now a senior associate next door at the Carnegie Endowment for International Peace, working on their democracy and rule of law project.

We're very fortunate to have such an array of expertise, and I'll leave it to Nick to order the program, knowing that he will allow plenty of time for you to ask questions.


MR. LARDY: Thank you very much, Mike.

I'm going to lead off with a few minutes on the economic background, which I think is very important to understanding the outcome, and then we're going to go right down the line, with brief opening remarks by each of us and then perhaps a little bit of dialogue among our -- exchange among ourselves before we go to questions.

The central thesis I'd like to advance is really, I think, the economic background of the relationship between China and the United States is quite important in understanding the outcome. Both sides have a very large stake in a stable relationship because of the economic interchange between the two sides.

Starting with the Chinese side, if you take Jiang Zemin, there's no doubt that he has a major stake and he's made a major investment politically, domestically, in moving towards a much more open, much more marketized economy. And quite frankly, it would be very difficult to make that work without the participation of the United States.

Over the last decade or so, China has -- or the United States has emerged as far and away China's largest export market. As you know, China's trade has been growing more rapidly than that of any other country in world in recent years, over the last decade or even 15 years. And over that time period, the United States has taken a growing share of their exports. It's gone from about 16 percent in the late '80s to about 35, 40 percent today. So we have become the major market for Chinese goods, particularly the labor-intensive products in which they have increasingly specialized -- the footwear, toys, sporting goods, consumer electronics, and so forth.

This has fueled a great deal of China's growth over the last 15 years, and it's a key part of the strategy of Jiang Zemin and others around him to deliver a rising living standard and so forth. Trade is the central platform of that, and the United States is a big part of the picture.

The United States also has a significant stake in the relationship. China is our fourth-largest trading partner. It's a major market for products like aircraft, fertilizers, computers, telecommunications equipment, and so forth.

Among our large export markets, U.S. firms have accelerated their exports to China more rapidly than any other country in the world in the period between 1990 and last year. And U.S. consumers benefit substantially from the fact that entrepreneurs and firms that used to produce in Hong Kong or Taiwan or South Korea have moved their most labor-intensive production to China, and we're now getting a lot of goods from China that we used to get from those countries. And the benefit to U.S. consumers, of course, is that prices are much lower than they would be if we were still sourcing them from other countries in Asia.

So you look back at the decade of the 1990s and the very rapid growth of the U.S economy with unusually low price inflation; the openness to trade is a very important part of the reason we were able to have low inflation, and China was a big participant in that in terms of supplying us with a growing range of commodities at relatively low prices.

As Mike said, we're going to try to focus forward, and I'd like to talk really about two issues: the first, the WTO, and the second, the prospects for renewal of normal trade relation status for China this year.

I would argue that -- two things really: that China - both China and the United States continue to be working fairly hard at getting all the conditions met for China's entry in the World Trade Organization. There are a number of difficult issues left on the table. But I do think that's been handled in a separate track, and there's been no explicit linkage between developments over the last 10 to 12 days and these economic and trade issues.

I would go further and say there has been a lot of speculation in the press, at least in the United States and in Europe, that the slow down, or the inability to get into the WTO or complete the negotiations really reflects the rise of conservatives, perhaps aligned with those in the military who are less interested in having a more open economy more engaged in the world. This has been the reason for the slow down. I think, quite frankly, the evidence does not really support that. And as evidence to the contrary, I would cite the fact that China continues to make very substantial reductions in tariffs for automobiles, cars, car parts, et cetera, this year.

They're following a schedule that was outlined, really, in the 1999 bilateral agreement with the United States on their WTO accession. But they are under no obligation at all to implement that schedule until they actually come into the WTO. So the leadership is still using the WTO entry as a mechanism for putting additional pressure on inefficient state-owned companies in the domestic economy, and I don't see any evidence at all that these interest groups have been able to mount a slow-down on WTO accession as a protectionist measure to suit their own narrow interests.

I think the regime is fully committed to getting into the WTO. They are negotiating on some very tough things -- for example, on agricultural subsidies -- which I think reflects the sensitivities they have about the fact that, given the market opening they're going to be undergoing in agriculture once they come into the WTO, farm incomes in large parts of China, particularly in north China, are likely to decline, and they're looking for some flexibility on how to deal with that issue and how to handle that issue. This does not reflect particularistic interests that are trying to block WTO entry or slow it down.

So I think the WTO is going to move ahead. There are a few issues left to be resolved, but I think the leadership's fully committed to doing that. And if you look at what they've actually done in terms of trade opening this year, I think the record is fairly positive.

The second issue is, looking ahead to the renewal of China's normal trade relation status, I think it's almost certain to be renewed. First of all, the president, even during the crisis, spoke out forcefully in favor of it. He has a strong commitment to free trade, and every indication is they're going to continue the policy of previous administrations and renew the normal trade relations status, or at least issue the waiver that allows that to happen.

If you look at the vote margins in the House and the Senate last year, the margins by which the permanent -- the right to give permanent normal trade relations was given to the president, it seems very unlikely that you could have enough erosion of votes to change that outcome. Remember the margin in the House was 40 votes, the margin in the Senate was something like sixty -- I don't remember exactly -- 63 or 68 votes.

So there's been a very strong consensus in the advantages of getting China into the WTO and giving the normal trade relations status in the United States. Unless there are some further adverse developments over the next few months, I would anticipate that that will be renewed. Certainly the rhetoric will be high, there will be critics from many quarters that don't like one aspect or another of Chinese behavior, whether it's human rights, proliferation, whatever, but I think it's quite likely -- indeed, I would say virtually certain that there will be a renewal.

So I think we're moving ahead on the economic front. Hopefully, there will be more progress in the short term that will allow another working-party meeting in Geneva, which could accelerate the process of getting China into the World Trade Organization, getting it subject to the rules of the international trading system. My own sense is that that's going to proceed, there will not be a long-term negative fallout as a result of the events of the last 12 days.

Let me turn it over to Doug for his comments, and then we'll continue.

MR. PAAL: Thank you. I'd like to offer a couple of perspectives on what we just experienced in the last 12 days, and then just touch on a couple of implications, recognizing that we can talk a lot more in the Q&A.

The first observation I would make is that the reason it took the full 11 days to resolve this impasse between the two governments and to come up with the formula of the letter, I think, has to be found in the fact that China and the regime that governs China today stands on
two pillars. It's not the regime of Mao Zedong, that had ideology and the reunification of the nation; it's not Deng Xiaoping, which still had strong authority in one person. Today it's a much more precarious balance between delivering economic goods to the people, some economic
growth and creation of jobs, upon which the relationship with the United States is extraordinarily dependent because of our market; and the other pillar is nationalism, showing to the Chinese people that the government of China today is protecting the national interests of China against the background of a mythology and a history interwoven of belief, in China, that the foreigners have represented a predacious, humiliating presence in China over the last 150 years.

I think that the Chinese government found itself captured between moving on either of these. It had to play out as long as possible its need to show that it was acting in a strong and nationalistic fashion to its own people, less they be called wimps or traitors. On the other hand, if they played it out too long, they put at risk the chances of holding onto normal trade relations or finding themselves burdened in the trade relationship by new legislation that would accompany passage of the normal trade relationship bill this coming summer.

So I think the timing was a question of when do you sort of stop the loss on the American or the international trade side and maximize the gains on the side of nationalism and patriotism. And this accounts, I think, for a lot of the headlines, the bluster, the swagger in the initial period, and then the quick retreat toward the end as China tried to pick up the language uttered by Secretary Powell and President Bush to show that they had gained what they needed, even if most of us would agree that it was not what they were looking for initially. That's the first perspective.

The second is, how this was resolved depended mightily on getting those elements in the Chinese government who have a stake in the U.S. relationship to take the lead in trying to resolve the problem. In the first few days, the Chinese leadership was getting information, much of which American officials believe was bad information, from their military commanders in the South where the incident occurred, and staking very large statements on that bad information. And the United States was issuing broadsides back to try to open the channels.

What we had not succeeded in doing in the very initial phase was getting together with the people who, in the foreign ministry or the trade ministry and elsewhere, have a stake in making the relationship work so we can accomplish things together. It was a very fortuitous turn when the administration said to Secretary Powell and Ambassador Prueher, "Get something on the table to start negotiating." And, as many of you know from the journalism of the last week, the talk was initially about starting the military maritime safety consultations under that 1998 agreement, to give form for the two sides to try to resolve a problem, which was not maritime but airborne, but of the same nature. And also to get the right people at the table, to get people who had an interest in the settlement and get it out of the hands of the PLA.

Now, this was a process. It didn't happen immediately, and for many of the twists and turns, the delays and meeting our people by American embassy and consular officials who went down to Hainan, were the result of pushing and pulling between the military and the ministry of foreign affairs and civilian bureaucracies that have, as I say, a stake in better relations with the US. This worked out because we did find the right counterparts.

Now, what are the lessons from this? As you go forward, it seems to me, that it's in the interest of the United States to reward those people who cooperate and not reward those who made the problems. And, we've got a number of issues before us, the most prominent of which I'll touch on is the Taiwan arms sale, and this incident, which as you know, is pending nominally for April 24th for a decision.

This has its own history, but it's now intersected with the recent events. Its history is that for the last six years or more, Beijing has approached the Taiwan issue with a two-track policy. The first track is the diplomatic track, where they make proclamations about willingness to talk to Taiwan or raise demands, alternatively rigid and flexible depending on the political needs of the time. That's sort of the melody on top of the symphony. The light motif, the basic music all along has been marshal music, and that is a steady ratcheting up of military pressure opposite Taiwan. And it forces the American president to look at what are the trade-offs between working with the diplomats in the melody and dealing with this undertone of marshal music that's been playing steadily away. And, of course, the new administration comes in and confronts this. The past administration deferred a number of major arms sales in the hopes that China would show restraint.

And while the diplomacy has become more flexible recently, the military restraint has not been demonstrated.

So the incoming administration faces a number of choices. Most of you are familiar with the notion of -- menu of weapons systems that Taiwan is said to want to purchase from the United States, or technologies they want to acquire. I want to go back to say we know who our friends and who our potential adversaries are in the Chinese system, institutionally now, from this recent experience. And we've watched, through the Taiwan prism, the same sort of division of labor
on the Chinese side.

And I just would say that as we go forward in contemplating the arms sales decisions, our decisonmakers should take into account what will best reward those who have been trying to work on settling problems, and disincentivize those who have been emphasizing the military side, which would argue, in general, for a fairly strong arms sales in the first year of the new administration, even though we've just come through a dicey period, even though it's a very sensitive moment in China, and even though we know passions are aroused among the Chinese people.

It's also important, when this decision is made, that the United States make this decision in a way that will not turn away the support of our allies and friends and, hopefully, will win the support of our allies and friends, which argues for a little more moderation than you might find in some quarters.

A second implication of this episode is the reappearance, in a public form, of the feelings of the Chinese people on the question of nationalism. Over the last decade, there's been an accretion of sensitivities in China among ordinary people, and it's being documented, whether it's reported from Hainan or Beijing and elsewhere, that people feel the U.S. is out to get China; it's out to contain, to hold China down at every opportunity.

To me there's no reason why the United States should put itself in that position, or should be seen to be in that position. The U.S. should be -- when it speaks on policy and where the opportunities present themselves, divide it's rhetoric between support for the well- being and the prosperity of the Chinese people, as opposed to support for the regime in Beijing. I think there are times when you can distinguish between the two.


One such time is on the question of the Olympics. Right now there's been a lot of discussion about denying China the Olympics as payback for what took place this last two weeks. And it seems to me we ought to learn the lesson of what happened in 1993 when the U.S. actively moved against the Chinese -- selection of China as host of the Olympics for 2000. Popular resentment was very high at that time; that the United States would go out of its way to keep China from holding the Olympics.

I would say that the best posture the U.S. can take in the upcoming decision-making is not to take a decision to support or to oppose, to get out of the line of fire, get away from the ire of the
Chinese people, and let the Olympics make it through its own internal mechanisms; make its own decision.

I think this has a beneficial effect in that we don't, as I say, stoke popular resentment against the United States. And furthermore, there may be an ancillary benefit, in that if China does in fact get the Olympics, it may impose a steadying and a restraining hand on China's behavior toward Taiwan in the period leading up to those Olympics.

I'll leave it with that, and we can go into other issues when we get back to the questions and answers. Thank you.

MR. LARDY: Bates?

MR. GILL: Okay. Thanks very much.

I'll just limit my remarks to a few postmortem comments on the role of the PLA in this affair, taking off a little bit from what Doug has started, and then turn to our look ahead and consider what I see as three important issues that will need to be dealt with relatively soon in the next year by the Bush administration and try to understand how this most recent event has affected this, and then a few concluding words.

I think the PLA., as we learn more and more about this incident and how it unfolded, the decision-making, et cetera, is going to come out looking worse and worse. It's becoming clearer and clearer to people that are following this that the PLA really did play an obstructionist and difficult role in seeing to a swifter and more reasonable solution over the past 10 or 12 days. And that really started from the very moment that the incident occurred. We're increasingly aware now of who Wang Wei was and the kinds of actions that he was capable of conducting well previous to the most recent tragic accident.

And then when the time came for our plane to land, dozens and dozens of Mayday calls on various channels went unanswered. Clearly, I think, at Lingshui early on a Sunday morning, people were literally -- quite literally asleep at the switch and then were paralyzed, I
think, with what exactly should be done when this remarkable event was about to come from the skies and land at their air base.

Following that, I think, as Doug suggested, there was some misinformation, a little bit of covering their behinds in order to give a good story up the leadership chain. And that, I think, unfortunately, presented to their leadership a difficult choice. They took the wrong choice, accepted the information, and ended up painting themselves into a very small diplomatic corner, which I think we'll see over time will diminish the stature of Jiang Zemin, unfortunately for him.

Leading on from there, it was really the PLA that was in control in the early days. They had the airplane, they had the crew, and there was a lot of very difficult communication, trying to get the PLA to take decisions about how this was going to be resolved. Taking all these things together, from the very cause of the problem and through the decision-making process, I don't think the PLA comes out looking very good. We can talk more about this in a little bit.

Let's turn to this notion of looking ahead and some of the issues that we need to -- (audio break). Doug has already mentioned that when we consider who are friends are over there and who are not, I think the comments I've just made about the PLA are pretty clear about them not being really our friends and not particularly effective interlocutors in many ways, but I would argue nevertheless that that does not suggest that we should cut off military-to-military relations
with China, as some have argued, but rather, I think it strengthens all the more the case that we should do as much as we can to learn even more about this organization and not just in a strictly military, technical sense, but what its role is, precisely -- politically and within the decision-making councils of power inside China. We need to be able to better and more effectively deal with this constituency in our relationship with China, because I think we can expect over time to have -- not precisely similar occasions as we've just had in the past 10 or 12 days, but certainly, encounters will intensify over time, and the PLA will remain an important player for us to try to

Secondly, I'm looking forward to the discussions next week, April 18th, and am hopeful, although not sanguine, but hopeful that the beginnings of this can lead to a more effective channel through which our militaries can have a dialogue on rules of the road in governing what I would expect will be increasingly intense encounters over time between our armed forces and China's. So hopefully, rather than just simply being a day or two of arguments and talking points, we can hope at least that this can turn into something of a more long-term discussion.

Third, on the Taiwan arms sales issue, I think we'd be in agreement very much with Doug and others that we should do our best to avoid the linkage between these events and any decisions that would take place with regard to Taiwan arms sales at the end of this month. I think a very effective case can be made that on the practical grounds of the defense needs of Taiwan, that at the moment, at least, a transfer of the Arleigh Burke-class, Aegis-equipped destroyers is probably not a good idea, but that doesn't mean that we don't hold in our hand the possibility that at some future date we would want to make those transfers, and I'm happy to talk about that more in detail.

Thirdly -- or fourthly and finally, looking ahead in the near term, the president has expressed, I think with good reason, his interest to hold a summit with President Jiang Zemin in China, in
association with his visit to Shanghai, as part of the APEC meeting in October. This means that we're going to have to do a lot of work between now and then to assure that this summit can lay at least a kind of floor, if you will, or foundation upon which we can start to rebuild a more constructive and useful relationship with China. Of course, summitry has a way of gearing up bureaucracies to achieve deliverables. I'm hopeful that these deliverables won't be empty but
rather can offer some real opportunity to meet some of the big challenges we face.

Something I'm personally very interested in trying to see move forward is using this summit as an opportunity to bring China on board in a strategic discussion about how our two countries can achieve stability in the face of China's offensive nuclear modernization program on the one hand, and the steps that our government is likely to move forward in terms of strategic defense. In other words, there's a very, very serious need for us to understand how our two countries can move ahead as we take these paths in maintaining a strategic stability.

In sum, I would just say that the events of the past 12 days I'm sure make clearer than ever, if it wasn't already, that we're in for a highly difficult and complex set of relations with China. And I would like very much to see that this term "complexity" become a more central aspect of our concepts when we deal with China. It won't be simply black and white. It's going to be all sorts of layer of difficulty and complexity which require, I think demand even for our interests, resources devoted within our government in order to meet these complexities and deal with them so that, over time, we can move China in a positive direction, consistent with American interests.

MR. LARDY: Okay, Minxen?

MR. PEI: As somebody who studies Chinese domestic politics, I want to provide you with the practical context inside China in which decisions were made regarding the collision between the Chinese fighter and American reconnaissance plane, because I think in the U.S. there has been a lot of discussion, if not debate, regarding the intention between the Chinese government's response. Some of the commentators here believe that's a sign or evidence of China's
hostility to the U.S. The other view holds that it's not deliberate hostility but rather confusion, internal division, and indecision that played a much more important role in dragging this event out.

Personally, I believe -- I ascribe to the second sort of view, and here's some of my analysis to support that view.

First, we have to look at the internal Chinese dilemma in coming to grips with resolving this issue. In terms of the factors that strongly argue for a more hard-line stance toward the U.S. on this issue, you can look at the following factors. First of all, running reconnaissance flights along China's coast is a very sensitive domestic issue, especially where the Chinese military is concerned. You must remember that these flights occur on a very high frequency, 200 flights a year. That's about one every weekday. And I think before this thing was brought into public, there was no little discussion within China, but once now it is in public, I expect there will be more. But certainly within the ruling elite, and that certainly includes the Chinese military, this has long been a
contentious issue.

And second, at the popular level, one must also recognize that anti-Americanism is a political reality. We don't know how deep, how wide such sentiment is, but it is real. If you look at public opinion polls in China, they certainly reflect the rising of this. I must add that anti-Chinese sentiments are also on the rise in this country, and that is probably one of the most worrisome aspects about maintaining this relationship. Of course, from the Chinese point of view, many
people in China believe that over the last 10 to 12 years, the U.S., either through carelessness or deliberate thinking, engaged in a series of incidents that show the U.S. was not friendly to China, was not ready to accept China's rise, and one can really go through a long list of events.

And, of course the third reason is that the current leadership is really a coalition. It's a fragile coalition formed among groups with divergent interests and views. And in this kind of coalition,
decision-making is by necessity very, very slow and often is made with compromise. And also within China, the incident was perceived in a dramatically different way than it is perceived in this country. In this country, it was no more than an accident, perhaps involving a reckless Chinese pilot, but over there it's entirely different. And without understanding the Chinese perception, I think it may make us feel self-righteous to say the government is hostile, the political process is paralyzed; but this does not solve problems because at the end of the day, you've got to deal with China.

And let me now outline how this incident is perceived in China, anything that helps.

First of all, the Chinese ordinary people had no idea that American reconnaissance flights were conducted along their coastal areas on such high frequency. This is -- and the incident shocked
them, not only that such things occur, but that why -- they find it incomprehensible that the United States, which is located an ocean away, would send planes to get information along China's coast. It is like Peeping Tom at the gates, that kind of shock for them.

So they view right away that they are the victim. And of course, for a people which has been victimized by foreign powers for the last century and a half, it's very easy to associate this event with history. And of course, that association produces very powerful emotional backlash.

And second, I think, what complicates this is the loss of the Chinese pilot, because they view that not only that you send plane to our coast, but also one of our men died. Even though I think the circumstances under which the incident occurred remain murky, they believe that the death of a pilot is the fault of the U.S.

And of course, the initial demand from the Bush administration was viewed as insensitive to Chinese loss of life, because it was not mentioned at all on Monday.

And I think, lastly, this was not mentioned in the American media analysis: that is, in dealing with this incident, the Chinese leaders must also demonstrate to the rest of the world that they are not pushovers.

And of course, if you consider China's growing relationship with Russia, they must consider how the Russians view this, because the last thing they want Moscow to perceive from how Chinese deal with this issue is that the Chinese are ready to sell out, especially when the Chinese leaders remember that on the expulsion issue, the Russians played hardball and seemed to get away with it. So they cannot afford to appear to be very, very soft. Release the crew, return the plane, uninspected, within 40 hours -- I think that was clearly politically impossible for them.

However, arranged against these factors for a much more tough response to this incident are also a set of factors that argue for moderation, for care, and these are, first of all, Jiang Zemin's own personal desire to maintain this relationship on a sound footing.

He is known as somebody who has worked very hard personally to advance this relationship and to keep the more hard-line elements in check, mainly because he understands, truly, the importance of a stable relationship with the U.S. for China's economic and domestic reforms.

And secondly, as soon as the Bush administration came into the White House, Jiang Zemin himself demonstrated his own willingness to improve relations. He sent three delegations to Washington to convey a message of cooperation and he did not want to be perceived by the
Bush administration as somebody who was not really sincere in improving relations, especially when he is faced with a critical test. And finally, the Chinese leadership was afraid of escalation. So these -- factors lead to a set of mixed signals, and I think you are all very aware of how these mixed signals were received here.

And finally, I want to say that, What are the consequences for this? There were three sets of consequences. First of all, I think, in finally deciding to get a face-saving way out of this, Jiang Zemin has certainly taken a lot of risks at this very critical point in his political career. You are aware of the succession process underway, but I'm more worried about the cry for revenge, for "exacting a price," to quote one of the editorials today, out of China for its demonstrated hostility or intransigence on this issue; because I think the last thing that Jiang Zemin personally would want to see is a hefty arms sales package or some other expression of American displeasure with him, because that will certainly undermine him. So I think on this issue I probably would disagree with my friend, Doug Paal.

Second, in terms of its damage on U.S.-China relations, this is just another one of a series of negative developments that hurt the relationship in the long term, even though it is very hard to precisely gauge its effects. And the analogy I use is that it's like cutting down a huge tree. The U.S.-China relations can be compared to a just huge tree, because there are significant interests that both sides value.

But over the years, all kinds of negative incidents have been eroding the foundations of the tree. It's like -- this incident is just like another whack of a big ax at the tree. So the foundation did not get destroyed this time, but it is certainly weaker.

But a silver lining in all of this is perhaps that after 12 days of haggling, recrimination, rhetoric, finally both sides perhaps have found out that even though there may be a new administration in Washington, even though the Chinese leadership is undergoing a political transition process, both sides can still do business with each other, even though the process of getting business done is
getting more and more difficult.

MR. LARDY: I think we'll go directly to questions from the audience here. Those who are watching on C-Span around the country or watching on the live webcast can e-mail questions to us and we will try to answer as many of those as possible. The e-mail address to send in questions is That's b-r-o-o-k.

When you ask a question, I'll recognize you. There will be microphones, which are necessary, and please identify yourself and indicate to whom you are addressing your question. We'll start right here in front.

Q I'm Bob Deans with Cox Newspapers. Dr. Pei, you suggest that the incident has handed Jiang Zemin a new political problem, to the extent that it has put in the public mind this whole concept of these spy plane -- these surveillance flights. Could you give us some sense of what you think the Chinese objectives are going to be in the talks next week with respect to the future of those flights? And could you tell us how important those flights are to the United States, what specific information the United States derives from the conduct of those flights, and what, realistically, in what ways would you expect the United States to perhaps modify the conduct of those flights in the context of these talks?

MR. PEI: Okay. Probably, I think, they will raise a demand which will be certainly ignored; that is, the U.S. suspend or stop those flights. But I think they probably understand that as well, so they will be looking at achievable goals.

And I outline two: One would be to set some ground rules for the routes of those flights -- how far away to the Chinese coast; should that be 70 miles, 85 miles, 100 miles? Second, I think they will probably ask for advance notification from the U.S. because that will help them to probably deal with those flights by curtailing their own electronic communications activities and so forth. But I think any bargain on this issue will be very, very difficult.

MR. GILL: I'm going to ask Doug Paal, given both his naval background and his intelligence experience to answer the first part of your question.

The second issue of whether or not we're going to modify this, I think we should be -- would be extremely doubtful. And I think the strongest argument that we're going to be able to present to the Chinese after they have made their concerns known on this question, is -- these are my terms -- that the, sort of, disingenuousness of the entire question. China conducts, based upon the very same principles and procedures of international law that we are pointing to, intelligence and monitoring and surveillance activities of its neighbors as well, as a part of its overall defense posture; namely, Vietnam, the Philippines, Taiwan and Japan. It's only in the past several months, indeed, that the Japanese government had to issue protests to the Chinese government for their naval maritime intelligence-gathering activities off the coast of Japan.

So I think it's the height of disingenuousness on the part of the Chinese to suggest that somehow these activities, which are conducted well within the bounds of international practice, should be somehow curtailed or stopped. And I think that really is the strongest leg we'll have to stand on.

Let me turn to Doug.

MR. PAAL: As I said earlier, the Chinese have, for the last six years, been acquiring considerably more, and considerably more sophisticated equipment on the coast. And the United States Congress has charged the administration with evaluating the PRC capabilities against Taiwan and the PRC capabilities generally. And that has led to an increased -- a corresponding increase in efforts to understand the systems that are being put into China and how they're used.

If you look into the literature, the defense literature, you'll see that these flights are intended to listen and excite the defense mechanisms of the countries they go past, not by provocative actions that cause them to fear attack, but simply passively pass by and listen and watch as their radars are turned on and off, so that you get a sense of what's there and how it's used, what the pattern of deployments are. And this would permit American forces, should they be called on to engage with the capabilities China has developed, to reduce casualties and be more effective with the fighting power the United States has.

MR. LARDY: Yeah. Here, in front.

Q My name is Sarah Fritz (sp). I'm with the St. Petersburg Times. This is a question for anyone who wants to answer it. Throughout the campaign, his campaign for the presidency, President Bush promised a humble foreign policy. Is there -- what did we see here in this -- in this crisis that tells us what that means, and what did we see here that tells us something about what he'll do in the future in terms of foreign relations?

MR. PAAL: I'll be glad to take that question. I thought we saw a humble foreign policy. I thought the president -- only in the second set of remarks on the second day of the stand-off, did he ratchet up the pressure a little bit, because we were not getting a response at all from the Chinese. And then he resumed a very modest approach, I think, that fulfilled his commitment in the campaign to a more humble approach as a policy.

I'm sorry. What was the second part of your question?

Q Well, is there anything else we find from this that --

MR. PAAL: Yes. If you look back at the campaign debates, and on the he issue of China, especially in the primaries, there are a number of candidates -- Gary Bauer and some others -- who took pretty strong negative postures with respect to China. Bush at that time said, China is a strategic competitor, not a strategic partner, but he resisted indulging in China-bashing language or exciting people about what the prospects are for worsening U.S.-China relations or scaring people about the future of China. And in this instance as well, he's been behaving as he did in the campaign. He approached it in a calm and, I would say, commonsensical fashion which shows considerable continuity in his approach.


MR. LARDY: Yeah.

Q My name is Yoshi Komori, and I'm with the Japanese
newspaper Sankei Shimbun.

The panelists all refer to the unique role or performance played by the PLA in the initial stage of this incident, almost going on its own way and almost defying the central political leadership. But this is in contrast to the previously prevailing view, presented by the American observers of China or even Japanese observers, that Mr. Jiang Zemin, as president, had successfully managed to bring the PLA under his political control by appointing most of the senior generals of PLA that are holding key positions, by himself, and coupled with the fact that he had appointed Vice President Funjin Pao (sp) as the deputy chairman of the Central Military Commission, as a civilian.

So would somebody shed a light on this seeming contradiction or maybe the current real situation regarding the relationship between central political leadership and the PLA, you know?

MR. GILL: My first response to that would be to suggest that this particular incident, involving, as it did so pointedly, the military -- I mean, the incident started with the military; the ship -- planes landed at a base -- but that, I think, immediately drew in and gave greater prominence to the PLA as a result. And I think Doug's going to have a few comments about how that operationalized itself.

But more broadly, on the issue of civil-military relations in China, I think it's still generally true that the analysis you presented -- and attributing to American and Japanese -- that Jiang Zemin has managed to assert his management of the PLA -- I think that that's still the case. Indeed, the resolution of this, although it dragged out and went longer than we would have liked, I think, remains an indication that at the end of the day, he along with fellows like Qian Qichen and American watchers in China were able to right this wayward ship, if you will, and get it in the right direction. So I think we did the sort of reassertion in civilian control over the military come out in the end.

One of the interesting points that has been made by a lot of watchers of China is that the PLA itself really wishes to be less politicized and less a central political player, and would very much like to become a more professional military. But that doesn't mean that it's necessarily going to be out of -- or have no role at all in politics. But I think what it means -- and turning here to people like Ellis Joffey's (sp) analysis -- it means, though, that as it becomes a more professionalized, corporate entity within the Chinese body politic, it will have a stronger say on certain issues, certain issues that are clearly, identifiably military in nature.

And this was one of them. Taiwan question, especially a military response to Taiwan, is another where they will have a major voice. And of course, on the broader issues of maintaining for the national defense, clearly they're going to be the top voice. But I think we'll see them getting less and less involved in other aspects of Chinese politics, and ultimately civilian control will remain prominent.

MR. PAAL: Mr. Komori, there's another story within the story here, and that's the Guangzhou military region is different from other military regions. When our planes fly the China coast, they're routinely intercepted in a safe fashion by Chinese defense fighters, except in the Guangzhou military region, where we have the cowboy antics. It's also true that Guangzhou has been under pressure from Beijing's military authorities to get out of the business they used to be in of stealing Bentleys and Rolls Royces from the streets of Hong Kong and shipping them up to Guangzhou. They are out of the business, or they're getting them out of the business of shipping guns, cigarettes and drugs to Taiwan for profit.

And it has been a habit in the South -- it's almost a "wild west" quality -- which has found its final and sad expression in the way this incident ended for pilot Wang Wei. And I'm hoping to start watching the story of Beijing trying to further professionalize its relationship with that regional component of the armed forces.

MR. LARDY: I'm going to take an e-mail question. The question is, to what extent does the panel believe that the PRC would risk conflict with the United States in a potential future military operation against Taiwan; say, for example, if Taiwan would declare independence or would come under a theater ballistic missile defense with the United States?

MR. GILL: I think we ought to expect a very severe military response from China should Taiwan declare independence. I mean, I think we ought to be pretty clear about that. I think the compelling nationalist sentiment about Taiwan is so strong that, even knowing that defeat might occur or that there would be very, very severe military loss, I think the leadership in Beijing would be compelled nevertheless to take this step in the face of an independence declaration by Taiwan. I don't think we should have any mistakes about that.

So, under those very extreme circumstances, which I don't think are going to happen, but just to respond to the question, I think China would take that risk.

MR LARDY: In the back.

Q I'm from Guangming Daily, Chinese newspaper. I think when we evaluate this event, maybe we need to make some comparisons. If 10 days is too long, how many days is justified and good? Four days? Three days?

I think we should look at the two governments paid much attention to control this event as an accident. So both governments didn't want to make it spill over. In the beginning, from the very first statement, the Chinese foreign ministry spokesman said this is an accident, and it took place about 74 miles off the coast. So very clear, it's accident. And only when United States government increased the pressure, the Chinese government also raised their voices.

So I think it took some time to solve this kind of an international dispute. You will think 10 days is too long. We can think this Cuban boy, Elian, his ship was not conducting a reconnaissance and it was sunken by itself, but how many days it took to solve this problem? So I think there is complexity in that issue. So we should see positive signs in this development, not only see the
media finger-pointing in the process. Only by these comparisons we can see both governments just keep very calm and just want to make this issue solve at the right time. So, do you think -- (laughs.)

MR. : Does anyone want to take a -- yeah, over here, go ahead. The gentleman on the aisle, yeah.

Q Jim Lobe (sp), Interpress Service.

I wanted to ask that if you could pretend that you were in Beijing right now and were meeting with the Chinese leadership, what do you think they would be saying about the lessons learned about what the U.S. did during this period and what happened to the United States that applied to their policymaking in the future?

MR. PEI: Okay, several things. First of all, they would say that President George Bush is a serious guy. He has ability to control his own people. His government speaks with one voice. And that's a lesson we've all to learn, because if you compare how the Pentagon reacted to this and how the Chinese minister of defense reacted to this, you ought to give Don Rumsfeld a medal for being silent. (Laughs.)

And second one, I think they should -- they may also understand that they're not going to please any of their enemies with concessions, that's for sure. Because if you look at the reaction by the, what I call, card-carrying anti-China hawks -- (laughs) -- in this town, their reaction yesterday was totally predictable: China has done us egregious wrong, they tried to rub our nose in the sand -- in the soil, and one of them said the U.S. should feel soiled about this.

So that's predictable. But a third lesson is that in the future if China wants to work with the U.S., they've got tow work with the moderates and those who have a less fixed view on China. Probably they're going to write off the right-wingers.

MR. PAAL: I'd like to answer your question a little indirectly. And the story I'm going to tell is not entirely apposite, but it ought to inform a little bit of how we think about the episode in retrospect.

Some years back, in Brezhnev's days, a German 16-year old flew a single-engine plane and landed it in Red Square. And the consequence of that was to enrage the Kremlin leadership, and they gave instructions that such a thing should never happen again and humiliate them before the world. And the direct consequence of that was when the KAL-007 drifted over the Soviet Far East, the first instinct was to shoot it down with all its hundreds of civilian passengers. And one has to hope that when the Chinese sort through their reactions, the emphasis will be on better discipline, less hair-trigger response, more professional conduct of their armed forces who are protecting their borders.

MR. LARDY: Yeah, right here.

Q Hi. Nadia Chao (sp) with Liberty Times. I have a question for the panel. In the past few days, we saw the report that actually a lot of U.S. officials mentioned that there is more attention from China to those so-called spy planes, and there's more harassment and (distractions ?), you know, even before the incident occurred. So I just wanted to ask, did you see an intention or a strategic intention behind this? Some people said that they are forecasting more confrontation in the South China Sea. Or do you think the Chinese intentionally did this; you know, not by the crash, but they gave certain kind of direction to their pilots to approach U.S. airplanes close? Because we know this happened in the Cold War. So what's your viewpoints here? Thanks.

MR. PAAL: I've had serious Chinese officials tell me that they feel that 50 meters is close -- is safe when the planes approach each other in these intercepts.

And I've had American pilots say they think that's about right. To me, that's kind of scarifying, 150 feet distance between planes when you've got winds and other factors involved.

This is -- I'm not really sure where you were going with the question, Nadia, but I think that the fact is, we're on a path toward increasingly bumping up against each other. And it would be valuable, although I'm skeptical we'll get the result, if the talks that begin next week on the 18th could produce some rules of the road, keeping that 50-meter distance, if that's really a safe distance, or maybe a larger distance and having some notification methods to prevent further accidents and inflammation of our publics on these issues.

MR. LARDY: Let's go to the other side, on the aisle. Yes.

Q Joe Bosco (sp) with the Asian studies program at Georgetown. Much has been made by all the panelists and by other commentators as well of the fact that the leadership in China has to
deal with its own nationalist domestic forces. But it seems to me there's almost a self-fulfilling aspect to that, and I wondered if you would comment on that way the government handled the information that it disseminated to the public. For example, the Chinese people were not aware that the planes -- or that the collision occurred in international airspace. They were not aware of the scores of "Mayday" calls that Bates Gill referred to. They were not aware of Secretary Powell's early expression of regret. They were not aware finally, and perhaps most significantly, of the U.S. offer to assist in the search- and-rescue operation, which conceivably could have saved that pilot's life.

So I wonder to what extent you believe they have been manipulating their own public opinion in order to then say, "Gee, we cannot take a moderate tone here because we've got to deal with the domestic public."

MR. PEI: I think government control of the access to information and manipulation of the flow of information certainly played a role both in this instance and in past instances, such as the embassy bombing, which was a far more egregious case of manipulating public opinion. And certainly this kind of manipulation limits the government's own ability to make compromises, and in the end makes itself look quite silly.

This I think is caused by several reasons. First of all, the propaganda department is one of the most conservative departments. I don't know how you compare PLA with the propaganda department of the communist party. (Chuckles.) And secondly, they have a rather rigid
guideline -- they have a set of rigid guidelines set at the beginning of an incident.

And it's difficult to change those, or people run greater risks for being truer to the facts than being more loyal to those guidelines.

But this aside, I want to also say that independent of official sources of information, the Chinese public now increasingly gets their own sources of information, not only from Western sources, but from independent Chinese sources, especially smaller newspapers, such as provincial newspapers, evening papers, tabloids, and so forth. And those newspapers report things not necessarily according to the instructions of the government's propaganda department.

However, limited by their own source of information and also motivated by their marketing desire, they may exaggerate events or sensationalize events involving incidents with foreign parties. And that's another source of China's population's, I think, nationalist sentiment.

MR. PAAL: And we live in a world of instant communication, and yet this episode revealed just how slowly information and decision- making moves in China. The system is very slow-moving because it's got a cumbersome institutional structure.

For some time, outside and internal observers in China have thought they really have a need, in the world of split-second information flows, to develop a National Security Council-like
structure and situation room-like structure, so that the leadership will receive the various views and the various interpretations at the earliest possible moment of events, rather than become captive to the first thing that comes over the transom and then in the business of spilling propaganda out to support something that may have been undermined by subsequent revelations.

It's a truism of any crisis-management manager that the first information you get is not good. And I remember seeing flash messages from this agency or that, and that's almost -- that's always the one you first throw away, because it'll be 180 degrees or 90 degrees different than the second and third messages.

China is vulnerable in this area.

They have fought and made some movement toward creating a national security council-like structure that would have the military and civilian and other bureaucracies with instantaneous communication at the core of the Chinese leadership so they could respond effectively. This is all the more clearly needed as a result of this episode.

MR. LARDY: I'm going to take another question from e-mail, and it's a general question about what this episode tells us about conduct of foreign policy by the Bush administration.

"Obviously there's been a lot of criticism of the early months of the administration in the conduct of its foreign policy, both in Asia and in Europe. Does this last 12 days increase the worries of the critics or allies, or does it suggest the administration is doing much better?"

MR. GILL: I'm reassured, I think, given the initial hand that the administration was dealt and very difficult circumstances of the incident. I'm reassured that moderation and diplomacy prevailed on a very sensitive set of issues.

I think one of the more interesting aspects of this, too, is that at a relatively early stage in the administration, a lot of persons who would normally be in place and sitting there and with full access to the information, weren't, because they haven't been named or confirmed. And so a lot of responsibility fell to persons who aren't political appointees but rather are work-a-day career-long foreign service personnel, both here in Washington as well as in Beijing.

Maybe in some ways it's fortunate that persons who had -- you know, who were more deeply steeped in the issues that China was facing, and that we were facing, were able to have a slightly more responsible role in trying to reach a solution here. I think that worked out pretty well under the circumstances.

MR. PEI: Well, let me hazard one little comment. I think, on this issue certainly, President Bush has passed with flying scores -- with very high scores. He showed his, both resolve and moderation and care.

However, one can look at the way he dealt with China from a different point of view. That is, on the previous occasions when he had to make key foreign policy decisions on North Korea, on Kyoto, on relations with Russia, he took a rather confrontational approach -- unilateral approach, and perhaps that saved him enough political capital with which he found very, very useful in dealing with the China incident.

So even though we can say he passed this test, we should not be sure that this test alone, this incident alone, is a predictor for the future.

MR. GILL: I would add, yeah, that in the end of the day we can't have this sort of crisis-to-crisis, lurch-to-lurch approach. That's not a very good idea. It really is a relationship that requires day- to-day care and cultivation.

MR. PAAL: And on that point, I think when the president welcomed Qian Qichen three weeks ago and tried to put a positive spin on the relationship, and as he plans to go to China -- to go to Shanghai in October, I think the path has been charted for that kind of steadiness.

I would just take an exception, for a footnote here, on the question of the Kyoto Protocol. I don't know why people were so surprised the administration came out against the Kyoto Protocol. The Congress won't consider it, the Republican Party has advertised all along that it doesn't want it, and President Bush campaigned against it. So I'm surprised at the surprise.

MR. LARDY: Yeah. Way in the back.

Q Al Milliken (sp), Washington Independent Writers. I was wondering if the other panelists would, any of them would have any serious disagreement with the opinion piece that had been in the Los Angeles Times that Bates Gill wrote about "China's weaknesses: What makes it so dangerous?" And I'm wondering, it seems to me that in both countries there were a lot of accusations and perceptions of weakness which seemed to really have a lot of significance, but would you say those were influential, and what does that bode for the future?

MR. PAAL: I'm not going to talk about China's weakness; we could spend a lot of time on that. And the history of the last two centuries has shown that China's weakness is a problem for its neighbors as much as for itself, and we would hope that they wouldn't become weak like that again.

One area of concern I do have, though, is the Chinese perception which you mentioned of our weakness. And that particularly focuses not on our technology, because they know it's world-class, not on our ability to put armed forces in the field. It's their sense that we won't take a casualty that worries me, and they saw the extraordinary attention to these 24 air people, air crewmen, and that's reinforced that lesson. And we're going to have to watch to make sure we don't do more things to lead them to the impression that we really cannot take a casualty, because that will directly inform their attitude as to what the range of risk factors are in the Taiwan situation.

MR. LARDY: I'm going to take another e-mail question: "Is there any foreseeable implication for U.S.-China trade policy and/or the trade balance between the two countries as a result of this affair?"

My own view on this is that the economic relationship between the two sides is fairly robust. We've had a lot of discussion about the ups and downs in the political relationship over the years, the Belgrade bombing and this incident, other flashpoints that have occurred on the political side. But throughout the whole period, trade has continued to grow at an extraordinarily rapid rate, about 15, 16, 17 percent per year, so that the economic relationship is now fairly complex and deep, as I described at the outset, and seems to move ahead almost independently of problems on the political front.

Obviously, in a worst case, where there would be a magnitude of much larger size, you could have a situation where MFN or permanent normal trade relations -- normal trade relations status was not renewed and the economic relationship would go in the tank; there's absolutely no question about it. Take that away, and tariffs on Chinese goods would be between 90 and 100 percent, and their sales in this market would go to nothing. And if we put on those kinds of tariffs, they would retaliate and we would lose our market for the products that I mentioned at the outset.

So there are risks, but I do think the economic relationship is one of the foundations of the relationship and does provide some kind of stability or acts as a stabilizing force in the overall relationship as we see these political fluctuations on the bilateral side. The economic relationship has a momentum and a seeming durability that will help, I think, the overall relationship.

Maybe we can take one or two more questions from the audience here. Yeah? In the front row.

Q I'm Yochin Shito (ph) of the Sankei Japanese Daily. I'd like to put this question to Mr. Paal. You said that the Hainan Island area was a very dangerous, "wild-west"-like area. My question is, why is it, then, so important for the United States to continue with such reconnaissance flights despite such a danger? Is it because that area is a powder keg of Asia, powder keg of Asia?

MR. PAAL: I think I can answer in part by saying some of the most important Chinese naval facilities are located there, and at the southern end of Hainan Island are the Paracel Islands, which have been the launch point for China's acquisition of territory in the South China Sea. A very interesting pattern there. China has three times seized territory in the South China Sea. And the first time was they seized islands from Saigon in 1974. They seized them just as the United States had reached an agreement with North Vietnam and was clearly on its way out of South Vietnam, and the Vietnamese were looking like orphans, the Saigon government.

China saw vulnerability and seized it.

The second time was 1988, shortly after Gorbachev had indicated that he was going to reduce assistance to Vietnam and back out of that relationship with Vietnam. The Chinese calculated that Hanoi had no more friends to back them up, and it seized seven islands that Hanoi held.

And it was only a year after the United States' agreement with the Philippines had expired that the Chinese seized Mischief Reef in the winter of '74, '75.

So there's been a pattern there, and so it behooves the United States to keep an eye on the activities of the Chinese forces, which have been used in the past in territorial seizures in that area.

MR. LARDY: I'll take one more e-mail question. (Reading.) For Bates, "I understand that under the Clinton administration, there were some joint military maneuvers with the Chinese. Some on the right have claimed these as having opened the door too wide, revealing too much to a potential adversary. How would you assess the gains and risks, risks and benefits of such programs?"

MR. GILL: Well, first, as a clarifying point, the term "maneuver" has a very special meaning, I think, in military parlance. And to my knowledge, there have been no joint maneuvers of our armed forces out in the field. That's never happened, and I don't think it's going to happen any time soon.

But if what the writer is intending to mean is the ongoing military-to-military exchange relationship between the United States and China, they are right. It was established and made more intense, I think, beginning in the mid- -- late -- early to mid-1990s, as we got our relationship back from the Tiananmen massacre, and includes a range of activities, including port visits by Chinese ships or our ships to Chinese ports, exchange at a high level amongst the services, commanders of services going in each direction. There was also a very senior level set of exchanges between, for example, their defense minister and our defense minister. And there have also been more lower-level exchanges, working-level exchanges, where we discussed such things as humanitarian disaster relief, military medical information exchanges, and the like. These have come under a great deal of criticism.


Now Secretary Rumsfeld, during Qian Qichen's visit in March, expressed his support, at least in principle, to continue the military-to-military exchanges between the United States and China.

I think there's a very good reason for that.

At the end of the day, in spite of Chinese opportunities to, you know, visit some places in the United States and to sit down with our officers and learn a little bit about how they think about military affairs, at the end of the day we gain a lot more out of these exchanges than the Chinese would. We have virtually no other major avenue, at least in the open source area, to peer into the PLA and try to learn more about it. In fact, I think the best evidence that these things work is the resistance that the Chinese themselves have put up to try and expand and improve and intensify these military-to-military exchanges because, indeed, it does lift the veil in many ways that are useful to us.

Also, importantly, I think the military-to-military exchange I think helps clarify any misperceptions that the Chinese may have about our capabilities, about our resolve and about our values and the willingness that we have to use military force if need be to defend those attributes of our society. The worst thing we would want would be to have the kind of relationship with the Chinese military where they get bad information, misperceptions, misunderstandings, and then miscalculate and lead us into an unnecessary conflict.

So overall, I think we do benefit. We should certainly be careful that these exchanges don't allow for the transfer of information that we don't want, but I think, generally speaking, these exchanges, the problems that these exchanges might have caused for our national security, are vastly over-exaggerated and that the benefits far outweigh the downside.

MR. PAAL: I have two quick points on this. First, the Congress, under the Defense Authorization Act, has conditioned and set down criteria for these exchanges, which are pretty severe but are also such that the Defense Department has said they can work with them.

The second point, I don't know whether Bates is right or wrong as to whether we benefit more than the Chinese do, but I do like to remind people that there was -- at the time Japan decided to attack Pearl Harbor, there was only one person in the high command who said, "Don't do it. These guys are too big. They'll defeat us," and that was Admiral Yamamoto (sp). And he was the only one who had been to the United States, and he'd seen our shipyards and our steel mills, and it made a difference in his thinking. And just project that picture to China and the present, and I think it helps to inform a decision on whether to go ahead or not.

MR. LARDY: I want to thank the members of the panel, and thank all of you for coming to the briefing. We are adjourned.