U.S. - China Economic and Security Review Commission Annual Report to Congress released

This year's U.S. - China Economic and Security Review Commission Annual Report to Congress was released on November 9, 2005\. Once again, it regards China a competitor, possibly an adversary, and a threat of conflict with the United States over Taiwan. On the Taiwan issue, it recommends Congress should take steps to facilitate strong working relationships through such measures as authorizing the exchange of general and flag officers, conducting interactive combat data exchange with Taiwan defense forces, providing increased opportunities for Taiwan officers to be trained in the United States, and establishing institutional relationships with the Legislative Yuan to improve the oversight of defense matters.

But in a different paragraph, it recommends implementing new confidence building measures (CBMs) that facilitate resolution of tensions that may develop between the two nations and to minimize misunderstanding between the nations' civilian and military leaders at the strategic, operational, and tactical levels. These CBMs could include communications mechanisms, opportunities for opposite number leaders to meet and establish relationships with each other, regular information-sharing devices, and hot lines between DoD and the PRC's Ministry of Defense.

The report analyses China's proliferation practices, its economic reforms, U.S. economic transfers to China, China's energy needs, its firms' access to the U.S. capital markets, U.S. investments in China, China's economic and security impacts in Asia, U.S.-China bilateral programs and agreements, China's record of compliance with its World Trade Organization (WTO) commitments, and its government's media control efforts. It also makes recommendations to the Congress for addressing identified concerns,

The report takes a broad view of "national security" in making its assessment and has attempted to evaluate how the U.S. relationship with China affects the economic health of the United States and its industrial base, the military and weapons proliferation dangers China poses to the United States, and the United States' political standing and influence in Asia.

The U.S.-China relationship is not inescapably destined to be adversarial, and certainly not violently so. However, while some encouraging changes are occurring in China, it is vital for the United States to recognize that in many respects China has different interests, goals, and values than the United States, and to reflect those differences in the way it deals with China. In areas where China poses challenges to the United States, the United States must meet the challenges with a variety of tools and approaches, and as aggressively as necessary to protect important U.S. interests. Perhaps the greatest challenge that faces the United States is to develop a coherent strategic framework for approaching China in a way that does protect vital U.S. interests while recognizing legitimate Chinese aspirations, minimizing the likelihood of conflict, building cooperative practices and institutions, and advancing both countries' long-term interests wherever that is possible. It then is critical for the United States to use the substantial leverage it has - because of its role as a major purchaser of Chinese exports and a major supplier of technology China wants for its economy, and because of the current U.S. status as the sole superpower - to persuade China to engage productively in the U.S.-China relationship and to work with the United States to resolve differences. The report makes recommendations to deal with the following areas of concern:

(1) On China's currency manipulation. It considers China 's recent exchange rate of 2.1 percent appreciation of the renminbi (RMB) against the U.S. dolla is not enough. China should allow the RMB to appreciate by at least 25 percent against the U.S. dollar or a transparent, trade-weighted basket of international currencies.

(2) On China's IPR violations. It recommends Congress should take measures pertaining to China's violation of IPR obligations, particularly China's failure to meet the requisite standards of effective enforcement, including criminal enforcement, explicitly imposed by the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement

(3) On China Trade and Security Matters. It recommends Congress work with the Administration to undertake more active efforts to coordinate with the European Union (EU), Japan, and other interested nations as appropriate to address mutual trade- and security-related concerns with China.

(4) On Chinese Firms Involved in Proliferation. It recommends that Congress encourage the Administration to use Executive Order 13382 to penalize firms by freezing their assets involved in WMD or missile-related proliferation, or Chinese companies or financial institutions that may be assisting or lending to such proliferators. Congress also should encourage the Administration to expand the provisions of Executive Order 13382 to the U.S. property of a parent company or the U.S. property of financial institutions under certain circumstances.

(5) On National Strategy for Technology Competitiveness. It recommends that Congress charge the Administration to develop and publish a coordinated, comprehensive national technology competitiveness strategy designed to meet China's challenge to U.S. scientific and technological leadership.