Keynote Speaker: Christopher R. Hill, Assistant Secretary of State for East Asian and Pacific Affairs

ASSISTANT SECRETARY HILL: Thank you very much. It's a real pleasure to be here. I must say it's a little intimidating to be here, too, because as my bio suggested I'm not a China scholar although I did serve in Albania which has a sort of curious Chinese connection. I'll always remember in Albania we were giving them some cotton and weren't sure whether it would work in their textile mill. And I said, well, where did the textile mill come from? They said oh, it came from China. So we had a couple of experts go and check it out. And it said something like Moscow, in Cyrillic, on it, 1890. And what we realized was it was a gift of the Soviet people to the Chinese people who promptly or maybe not so promptly turned it around and made it a gift to the Albanian people. So I have a little familiarity from China in those days.

But I must say taking up my current position, as you see from my bio, I moved from being Ambassador to Korea to being Assistant Secretary to North Korea. We occasionally have some dealings with China. Every day I walk into my office and I walk past the picture of John Carter Vincent, who at some point I guess took up cigarette smoking because he's there with a cigarette in his mouth. I've been tempted to pick up cigarette smoking as well in this position. I also walk past the photo of W.W. Butterworth. And these are two figures who had my position and who have had to live through I think a very, very tough time in policy terms, a lot of recrimination, just took a lot of courage. And so I frankly find those people quite an inspiration.

It has been more than three decades since President Nixon and Secretary of State and National Security Advisor Kissinger made their historic breakthrough with China. It's, I think, always memorable at the Beijing banquet that honored him in 1972 President Nixon responding to Chou En-lai's toast spoke frankly, he said "Let us recognize at the outset these points. We have at time in the past been enemies. We have great differences today. What brings us together is that we have common interests which transcend those differences. Neither of us will compromise our principles. But while we cannot close the gulf between us, we can try to bridge it so that we may be able to talk across it." And indeed, I think those remarks uttered some 30 years ago at a toast are very much applicable today, very prescient remarks.

I think at a critical juncture when China's own leadership was reassessing its priorities, emerging from the isolation of the Cultural Revolution to engage on an uncertain course of opening to the west, U.S. policymakers decided that our approach to China had to be different from the way we dealt with the Soviet Union. That approach would take deeper roots once China launched its impressive domestic reform program in 1978 and the U.S. and the PRC established diplomatic relations.

Indeed I would say the policies pursued by both administrations, by administrations of both parties, by now some seven Presidents, has been to encourage China's economic reforms, to expand the trade and our contacts with China, and to especially use our influence to integrate and bind China into a rules based international system.

And I would say that policy, that policy that has been for seven Presidents has been extremely successful. China is an active player in the United Nations, a Perm 5 member, a member which we are in constant communication, constant negotiations across international issues across the globe. China's part of the WTO, virtually every other economic organization participates in international endeavors ranging from efforts to stop the spread of infectious diseases to initiatives on the development of clean energy, which is one such effort we have going in China just this month. And increasingly stepping up to take an active role in dealing with regional security issues and a prime example being China's efforts at hosting the six-party talks and dealing with North Korea's very dangerous nuclear ambition, something I'll get to a little later.

And certainly, I think this is very good for China and I think it really reflects to some extent to China's economic rise. It's GDP has grown some ten-fold since 1978, per capita income has doubled every eight and a half years. By comparison it took Great Britain 58 years to double its per capita income in the early 19th Century. It took the U.S. 47 years. It took Japan 34 years after industrialization.

China recently surpassed Italy and the United Kingdom to become the world's fourth largest economy. It trails only the U.S., Japan and Germany. But -- and I'll go back to the famous -- I call it a quote, but I hate to do that in front of historians because it's probably more apocryphal than anything else. But when President Nixon congratulated Mao Tse-tung on the enormous changes in China, Mao is reported to have said, "In fact, Mr. President, I've only been able to change a few places around Beijing."

And indeed, I think when people do go outside of Shanghai and outside of Beijing, you still see that China remains in many respects a very poor country, a per capita income that ranks 133 in the world at $1200. Over 160 million people have moved fitfully from China's rural areas to cities looking for employment, really the largest internal migration in world history. And this floating population now accounts for almost 20 percent of Beijing's residents, almost 20 percent of Shanghai's residents. Indeed it's because of this migration in less than a decade Shanghai's population has increased by a number equal to the population of China.

And of course, as we are very aware, and I would say the Chinese Government is more aware than anybody, average urban incomes are some four times what they are in the rural areas. So by no means is China, as way say, out of the woods in terms of what it has to do economically, but I think it is also fair to say that one should look at some of the enormous progress in that rural area. In fact, despite the disparities, the number of China's rural poor has been cut in half during the 1990s, according to the World Bank, and that a population larger than the entire population of the United States has been pulled out of abject poverty. And I would say that this development in China has been very good for the United States. China is now our fourth largest export market. It -- the trade deficit is a huge issue to be sure, but also I think U.S. exports to China, it's worth pointing out they've doubled since China joined the WTO in 2001 and that pace continues this year.

I had the pleasure of accompanying or meeting President Hu Jintao in Seattle. What the Governor of Washington said, this is the real Washington, and you will soon go to the other Washington. And I think she had a very good point, because it was truly stunning to see the volume and depth of our relationship with China.

China is going to be in the market in the next 20 years for some 2800 jets. And when Hu Jintao came to the Boeing factory and was greeted by workers there in overalls and just cheering him like he was their best customer. And there's a reason why they treated him like he was their best customer, he -- it was a real sense among the workers of how important he was. And what I really liked about the meeting -- and I've never had a chance to ask him this but I'd love to ask him, when he looked out on those sea of faces, many people wearing work overalls and baseball hats, I think he realized something very important which is Americans also need jobs now and again. America also needs to export goods now and again. And so I think when he went there he saw really I think a very good face of what our country is about, and it's not just about people in suits and the other Washington, that is in Washington, D.C., but people who are really trying to make a living as workers. And I thought it was a very important visit in that regard.

He also went to the Microsoft campus, as the factory there is called, and saw I think what was important in a number of respects, first of all, the cutting edge technology that goes on in Microsoft. But secondly, when you look at the number of Chinese engineers or people of Chinese extraction, Chinese-Americans, I think he saw not only the connection of our economies but very much the connection of our people.

In short, I think that trip to Seattle which lasted some 24 hours which -- and where he met a lot of people including a lot of Falun Gong protestors I might add, I think he saw and I think we saw in him the fact that our countries are very much linked, very much linked if not entirely by a common past then certainly by a common future.

And as one goes around in Washington, D.C. today, you will hear the occasional person talk about China as the new Soviet Union, but that is extremely rare, extremely rare indeed. I think you see very clearly from Americans of all political persuasions that this is our key relationship. This is the relationship that we have to, above all other relationships in the world, nurture and make it work. We need to make it work in a way that's true to our value, true to our interest but also make it work in a way that makes sure that U.S. and China can work together because the stakes are simply enormous. They're not only stakes in East Asia, they're all over the world and we have to work -- we have to find ways to work with China.

I think our engagement with China, which now takes place across many fora both bilaterally and multilaterally, speaks to the importance that we attach to this fundamental relationship. Bilaterally we have -- in the State Department we've had a senior dialog that was first started by then Deputy Secretary Bob Zoellick last year. And in fact, we planned -- of course we'll have a new Deputy Secretary who will continue that dialog, but we didn't want to have too many months go by. And so when I was in China just a couple of weeks ago, I approached the senior foreign policy leadership to see if we could get the dialog going as early as this month and have our Under Secretary for Political Affairs handle it, and the Chinese were very, very happy to pursue that dialog. And I think it was really a reflection of the fact that they appreciate the fact that we sit down systematically go through our political relations and not just issues that are urgent, which is often when you have diplomacy, but also issues that are important. That is, these are dialogs where we try to have the important crowd out the urgent now and again.

So we're looking forward to having the senior dialog continued in the next month by Under Secretary Burns. Of course, you are all aware of Secretary Paulson's strategic economic dialog. This is a dialog where in addition to the specific dialogs where we get down to, you know, discussing imports of chicken parts, this is a dialog that's not going to be discussing imports of chicken parts, it's going to be a dialog that will be on top of the entire economic dialog if you will flying at 20,000 feet to try to oversee some of these economic dialogs and make sure that we can make this really, really work.

In addition to this strategic economic dialogue, we have a number of other economic dialogs. The JCCT, the State Department NDRC dialogue. Our Under Secretary for Global Affairs, Paula Dobriansky, is also pursuing a global issues forum. We have a Department of Energy energy dialog as well. And these are just a few of the examples of how we interact with China today. We have very successful engagement on law enforcement cooperation. We have constant exchanges of teams to discuss areas such as human trafficking, cyber crime, combating corruption. The other day Elaine Chao from the Labor Department had her counterpart over from China and they discussed issues like labor code and especially pensions, an issue that if you've been reading the Chinese press, now is quite an issue in Shanghai.

So we have a very -- it's just -- I've never seen anything quite as comprehensive as the relationship we have with China, and it is comprehensive because it is so fundamentally important. Still, we have to find ways not only to talk to China about things that we agree -- already agree on or things that we already disagree on, we also have to find ways to work with them together. And here I think is the -- is where the six-party process I think plays a key role in the relationship with China. I cannot tell you today that the six-party process is going to succeed in getting North Korea to disarm itself of these nuclear weapons. I think we have -- it has been a difficult process. We are dealing with difficult people. But what I can tell you is that there is a certain early harvest in the six-party process and that is the fact that we are able to work very closely with China, come up with common initiatives, make approaches to North Korea that are coordinated, have work multilaterally in very specific areas such as with the South Koreans and yes, with the Japanese because a lot has been said in recent months and recent years about the difficulty of Sino-Japanese relations. But yet, in the six-party process they actually work, they function and because we all share the interests of getting the North Koreans to give up these weapons.

A key moment, I think, came in early July when against all advice, against all admonitions all over the world North Korea decided to fire off several missiles. There was really a missile for everybody in that barrage. There were some six or seven missiles. There were short-range missiles whose only purpose in practicing would have been to hit South Korea. There were short-range longer-range missiles whose purpose would be threaten Japan, and there was Taepodong-2 missile whose purpose would have to be looked at as an intercontinental missile ultimately with the purpose of reaching the United States. In short, in that missile barrage, the North Koreans essentially validated the concept of the six-party talks. In that missile barrage, the North Koreans were essentially saying this is not a U.S.-North Korean problem. We in North Korea are going to make it a problem between us, the North Koreans and everyone else. They validated the process of making this multilateral.

And so as soon as these missile launches happened, which was for us in the afternoon of July 4th, the first example of a sense of irony I've ever seen from North Korea, we got in -- went into action diplomatically, and I went off -- I left that next day on the fifth. And normally when I'd make a trip to Asia to discuss North Korea I'd start with our allies, Japan and South Korea. In this case I went right to China. And I sat down with the Chinese and we went through what could be done, what needed to be done. And I could see in China there was a certain -- I should say a sea change in how they dealt with the North Koreans. I was not asked to be more patient. Often the dynamic between me and the Chinese is, as you can predict, the Chinese asking me to show more patience and I asking the Chinese to show less patience. But in fact, I think we got on very quickly to the task of what can we do to convince the North Koreans that they can't do this.

And indeed as we began to discuss the need to respond, the need to respond forcefully and with a sense of unity, the Chinese asked if they could be given an opportunity to get up to Pyongyang and get from the North Koreans a commitment to get back to the talks to re-impose a moratorium. And so we worked that out. We worked that out in a way that our diplomacy going on in New York with the passage -- with the work we're doing especially with the Japanese who are on the Security Council to get the -- to have a strong resolution. We gave the Chinese some time. We worked with the Chinese on their efforts to get up to Pyongyang. They sent a very senior delegation to Pyongyang. And when they came back, in fact I returned to China and we talked some more and we worked out, especially our diplomats in New York, worked out a UN Security Council Resolution 1695.

There are a couple of very important elements to that. The first element, of course, is this was a great credit to Japanese diplomacy because they were the ones who drafted it and began to press forward in the UN. But I think it was also a great credit to our ability to work with China because at the end of the day when 1695 was passed, it was actually the end of the week, it was unanimous and China was on board, on board on a unanimous resolution dealing with a neighboring country and significantly I think the word condemned, that is, the people who supported -- the countries that supported this which included Japan and China, we all used the same word, we condemn these missile launches.

We also called upon all member-states to exercise vigilance in ensuring that North Korea does not get the funds and does not get the technology to continue these types of programs. I saw in the Chinese, with respect to this North Korea missile launch, a real kindred spirit, and I think it was very important. And so someday in the annals of U.S.-China relations, we'll have to give Kim Jong-il a little credit because he brought us much closer together that week.

We have also continued to work with China in other areas of the world. We're working in Iran. We're working very, very feverishly with China to try to come up with a resolution on Iran that would encourage Iran to do the right thing on these weapons of mass destruction. This is a very difficult problem. It's a problem that's also rooted in Iran's situation and its own neighborhood, but it's also routed in the U.S. and China and the other Perm 5 members' desire to see -- to prevent nuclear arms proliferation. And this is an area were I think we're working very closely with the Chinese.

I do not mean to suggest that our relations with China are at this point a walk in the park. We have a lot of issues, a lot of difficult issues where we deal with China. We work with China on human rights issues, on religious freedom questions. These are not easy issues. Some of these issues don't come naturally to China, and we need to work with them and try to work with China on international standards. We're not looking to impose a U.S. view on all of these issues, we're looking to really gain an international consensus on how to approach issues like human rights and religious freedom consistent with China's agreement with the UN charter and consistent with China's desire to live up to these universal values.

We also have to work very hard every day and every hour of every day on getting a level playing field for U.S. businesses. Anyone who's been to China knows that there has been improvement on intellectual property rights in the -- in a de jure sense and in a legislative sense, but on the street the picture can sometimes be different. Although I must say that if you try to buy a counterfeit version of anything to do with the Beijing Olympics, you'll be very hard pressed. In fact, the intellectual property rights of the Beijing Olympics are being very well respected. And let's see if we can use that as an inspiration for everything else including golf clubs.

So that is a work in progress, but I think we have a pretty strong and active dialog with the Chinese on that. We're also working, and I know this is a -- this continues to be an enormous issue, to look for more transparency in military budgets, in military doctrine and, in fact, in military intentions.

Now if you look at the U.S. budget, as the Chinese have done, you will notice the U.S. budget somewhat exceeds the Chinese budget, a fact that has been brought to light by Chinese analysts. We're not questioning that for a minute, but you can also find in the U.S. budget exactly where the money is going. You can find the supply of explanatory notes at times exceeding the demand for those same explanations. In short, everyone in Washington has an opinion about our military budget, and it's out for everybody to see.

China has not quite achieved, let me put it, the same degree of transparency. And what we're really looking for from the Chinese is not necessarily to reduce their budget or something like that, we're looking for transparency. What are they doing? Where is the money going? Why is it going there? What is it -- what are the contingencies they're working on? We need clarity on this and we need a good dialog. We are beginning to have a dialog with the Chinese on this. I was just with Admiral Fallon who has gone to China on several occasions, most recently just a few weeks ago. We've had some -- we had some joint exercises with the Chinese recently in San Diego. We are beginning a process to work on ways that we can agree -- we can see what each other is doing because we still do have a mountain of mistrust in this relationship, especially in this military relationship, and we need to work on that.

We're also working in I'd like to mention a couple of other regional areas. I know in Southeast Asia, an area that I also cover, that there are people who say that the U.S. is somehow staging a strategic withdrawal while China is a staging a strategic entry into that area. I really don't buy that frankly. I don't buy the idea that we're leaving, and I don't buy the idea that the Chinese want us to leave. I think there's -- more China in Southeast Asia does not mean less U.S. After all, I think China for years and years, decades and decades, the world has looked for a second engine of growth, and I think many countries are finding that second engine of growth and it's called China. It's called the China economy, and we welcome that. More China does not mean less U.S. there. And so we can work that out.

We're also working in the Pacific island states. You know, people look at the Pacific Island states, they look at the Pacific and they try to find the islands there. Very small countries. I would that say sometimes big problems can come in small places, and we need to make sure that governance issues in the Pacific Island states and capacity issues, tiny places like the Solomon Islands, you know, that those countries develop and don't become centers of problems and, therefore, we need to make sure that countries that are big donors, and China is a big donor in those states, finds ways to make sure that the assistance that China is giving is going to causes that will help those countries develop governance and capacity. And in that regard, we're going to have still another dialog with the Chinese. We're going to sit down and talk about some of our mutual assistance or assistance efforts in some of these countries.

So I think ultimately I feel that there is a real reason for optimism in this relationship. I feel that the people who worked so hard on this relationship in the late '40, early '50s, the people who really I think in some cases went to their graves with a sense that this was going to be a very, very difficult process that may not turn out well can actually, if they're still listening, realize that a lot of their work in those very troubled years has led to some very special developments. We are by no means there. We are by no means there, but I hope that future generations can look back on this period and draw from it a certain inspiration as we move forward.

So, again, I speak as a sort of a person who can maybe give some raw material to your -- to what you are doing. I am not a historian. I probably spend more time looking at the U.S. Civil War than I have at China's various civil wars. But I do believe that to understand our history with China is to understand our future with China. I'm very pleased at the publication of this. I will read every word of it later in the day I guess. But to be sure it is I think an excellent time to be reflecting on where we are with China because there's no relationship in the world that's more important to us than the relationship with China.

Thank you very much. (Applause.)