MARCH 25, 1999



Mr. Chairman, thank you for the opportunity to address this committee
on the twentieth anniversary of the Taiwan Relations Act. I look
forward to exchanging ideas and points of view, and to affirming that
we are following the best possible path for an issue we all care a
great deal about.

As many of you may know, some twenty years ago I was a new foreign
policy specialist on Congressman Steve Solarz's staff. When President
Carter decided to recognize the People's Republic of China, I found
myself grappling with my first significant policy issue: the nature of
U.S.-Taiwan relations in a fundamentally changed world. It was, in
fact, the Taiwan question -- how to preserve the long-standing
friendship and common interests between the U.S. and Taiwan in the
absence of diplomatic relations -- that initiated my interest in Asia
and shaped my life's work.

I vividly remember the confused and anxious atmosphere of 1979, as
well as the sense of solemn urgency. Clearly, the challenge of what
ultimately became the Taiwan Relations Act -- the TRA -- was to ensure
that normalization of our relations with the People's Republic of
China did not result in the abandonment of Taiwan. This premise led to
the articulation of the fundamental goals of the TRA as laid out in
Section 2(a):

"...(1) to help maintain peace, security, and stability in the Western
Pacific; and

(2) to promote the foreign policy of the United States by authorizing
the continuation of commercial, cultural, and other relations between
the people of the United States and the people on Taiwan."

I have no hesitation in declaring the TRA a resounding success. Over
the past twenty years, the TRA has not only helped to preserve the
substance of our relationship with Taiwan, it has also contributed to
the conditions which have enabled the U.S., the PRC, and Taiwan to
achieve a great deal more.

No Zero Sum Game 

In reviewing the past twenty years of these three intertwined
relationships -- U.S.-PRC, U.S.-Taiwan, and Beijing-Taipei -- what
becomes absolutely apparent is that gains in one relationship do not
dictate a loss in either of the other two. In fact, the reverse is
true: gains in one have contributed to gains in the others.

As I noted earlier, the TRA was born of the U.S. decision to normalize
relations with the PRC. The U.S.-PRC relationship that followed that
decision -- for all of its ups and downs -- has contributed enormously
to stability and peace in Asia.

In turn, this positive Asian environment, supplemented by the specific
assurances of the TRA, has been conducive to the people of Taiwan
developing and applying their great creativity and capabilities to
bettering their lives. The result has been Taiwan's extraordinary
economic and political development. The unofficial U.S.-Taiwan
relationship has prospered accordingly.

Arguably, however, while the gains in the U.S.-PRC and the unofficial
U.S.-Taiwan relationship have been formidable, the Beijing-Taipei
relationship has actually experienced the most dramatic improvement.
The trade, personal contacts, and dialogue now taking place were
unimaginable twenty years ago when propaganda-filled artillery shells
were still being traded across the strait. Today, economic figures
tell a much different story.

In the five years from 1993 to 1998, cross-strait trade has grown on
average by over 13 percent per year, and stood at $22.5 billion at the
end of 1998. In fact, trade with the PRC accounted for over 10 percent
of Taiwan's trade with the rest of the world in 1998, making the PRC
Taiwan's third largest overall trade partner surpassed only by the
U.S. and Japan.
Imports from the PRC to Taiwan are growing even faster -- by an
average of over 40 percent per year over the last five years -- albeit
from a lower base. 3.9 percent of Taiwan's global imports came from
the PRC in 1998.

Contracted Taiwan investment in the PRC now exceeds $30 billion. With
30,000 individual Taiwan firms having invested in the PRC, over three
million mainland Chinese are now employed with firms benefiting from
that commitment of funds.
Economic ties have led to increasing personal ties. Up to 200,000
Taiwan business people now live and work in the PRC. Since the opening
of cross-strait travel a decade ago, more than ten million Taiwan
residents have visited the mainland.

This greater economic interaction is positive. Taiwan's security over
the long term depends more on the two sides coming to terms with each
other than on the particular military balance. Much like Adam Smith's
invisible hand of the market place, myriad individual economic and
social ties across the strait will contribute to an aggregate
self-interest in maintaining the best possible cross-Strait relations.

Politically, gains are also apparent. One of the most salutary
developments in East Asia during the early 1990s was the emergence of
a dialogue between Taiwan's Straits Exchange Foundation, or SEF,
responsible for Taiwan's unofficial relations with the mainland, and
the Mainland's Association for Relations Across the Taiwan Strait, or
ARATS. The dialogue, cut off by the PRC after the Lee Teng-hui visit
in 1995, has begun to be revived this past year. As I am sure you are
aware Mr. Chairman, in late 1998, SEF Chairman Koo Chen-fu led a
twelve-member delegation on a five-day "ice-melting" visit to the
mainland. In addition to meetings with ARATS Chairman Wang Daohan, the
visit also included a meeting with PRC President Jiang Zemin and other
ranking PRC officials. In a good will gesture, Chairman Koo was
invited to stay at the PRC's official Diaouyutai State Guest House; an
offer he accepted.

Koo's October visit was able to reach a four-point consensus which

(1) a return visit to Taiwan by ARATS Chairman Wang, a visit now
scheduled for Fall;

(2) further dialogue on political, economic, and other issues;

(3) more exchanges between SEF and ARATS; and

(4) greater assistance (on personal safety and property) for people
visiting the mainland, and vice versa.

Chairman Koo's meeting with President Jiang Zemin was the highest
level contact between Beijing and Taipei since 1949. As such, it
substantially improved the climate for cross-strait exchanges. The
consensus that was forged provides an excellent framework for
developing the approaches necessary to resolve the difficult issues
between the two sides.

Assessing the Effectiveness of the TRA

We should frankly acknowledge that Taiwan would prefer official
diplomatic relations with the United States to unofficial relations.
However, that said, the fact that our relations are unofficial has not
harmed Taiwan's core interests in achieving security, prosperity, and

Twenty years ago, Taiwan was under martial law and had significant
human rights violations. That Taiwan no longer exists. Today, to my
great pleasure, human rights violations are no longer necessary topics
of discussion. Politically, Taiwan has a vibrant democracy
characterized by free elections, a free press and dynamic political
campaigns. The 1996 direct election of the President and Vice
President stands out as a particular highpoint, and Taiwan's
competitive democratic system continues to mature.

Taiwan's political metamorphosis has been profound and serves as an
example of peaceful democratic change in the region and beyond. The
shelter of the TRA, made real by each successive administration's
commitment to its provisions, helped make this transformation

Taiwan's immediate security was a major concern twenty years ago.
There were those who feared that absent formalized defense
arrangements with the U.S., Taiwan would be subject to military
intimidation by the PRC. Clearly, the provisions of the TRA have been
critical in enhancing Taiwan's ability to defend itself.

The Department of Defense's recent assessment of the security
situation in the Taiwan Strait concludes that, except in a few areas,
despite modest qualitative improvements in the military forces of both
China and Taiwan, the dynamic equilibrium of those forces in the
Taiwan Strait has not changed dramatically over the last two decades.
This assessment means that for twenty years the TRA has been

Consistent with our obligations under the Taiwan Relations Act to
provide Taiwan with arms of a defensive character, and in close
consultation with Congress, U.S. administrations have provided Taiwan
with a range of defensive weaponry including F-16s, Knox class
frigates, helicopters, and tanks as well as a variety of air-to-air,
surface-to-air, and anti-ship defensive missiles. We continually
reevaluate Taiwan's posture to ensure we provide it with sufficient
self-defense capability while complying with the terms of the 1982

The question of Taiwan and a theoretical theater missile defense --
TMD -- strategy, has of course been a topic of much discussion
recently. First, let me set out some important technical points. TMD
is a defensive system for which no deployment decisions, other than
for protection of our own forces, have been made. This high-altitude
system technology is in the early stages of development with potential
deployment at least some years away.

But, that said, I think it is critical to emphasize that the PRC's
actions are a key factor in the region's, and Taiwan's, interest in
TMD. We have urged the PRC to exercise restraint on missiles, to work
toward confidence-building measures with Taiwan, and to press North
Korea to forgo its missile ambitions. These factors are under the
PRC's direct control or considerable influence, and the PRC's actions
can affect future perceived need for TMD. Put differently, we do not
preclude the possibility of Taiwan having access to TMD. Our decisions
on this will be guided by the same basic factors that have shaped our
decisions to date on the provision of defensive capabilities to

Political development and military security have contributed to
Taiwan's tremendous economic development over the past two decades. As
a result, the U.S. and Taiwan now share a vibrant, mutually beneficial
trade relationship. Taiwan is the 14th largest trading economy in the
world and the seventh largest market for U.S. exports. It constitutes
our fifth largest foreign agricultural market and a major market for
U.S. automobiles. For our part, the U.S. absorbs one fourth of all
Taiwan exports, and our annual bilateral trade exceeds $50 billion.

The economic partnership, moreover, continues to grow. Taiwan's
sophisticated economy is largely withstanding the Asian Financial
Crisis and acting as a support for the region. Taipei is now pursuing
an ambitious, multi-billion dollar series of infrastructure projects
-- projects for which U.S. firms are helping to provide professional
services and equipment. Taiwan and the U.S. passed a milestone in
their economic relationship last year with the successful completion
of bilateral market access negotiations concerning Taiwan's
application to the World Trade Organization. All indications are that
Taiwan will continue to be an important export market for the United

Clinton Administration Policy

The Clinton Administration has been faithful to both the letter and
the spirit of the TRA.

In 1994 the Administration carried out a lengthy interagency review of
U.S.-Taiwan policy -- the first such review launched by any
administration of either political party since 1979 -- in order to
determine that all that could be done was being done. On the basis of
that review, the Administration has undertaken a number of specific
steps. While these steps were briefed extensively to the Congress at
the time the decisions were made, I think it would be helpful to
review some of the decisions.

First, high level U.S. officials from economic and technical agencies
up to cabinet level, are now authorized to travel to Taiwan when
appropriate. Last November, Energy Secretary Richardson traveled to
Taipei to attend the annual meeting of the U.S.-Taiwan Business
Council, following the precedents set in 1994 and 1996, when then
Secretary of Transportation Pena and then Small Business Administrator
Lader attended similar meetings. Cabinet-level officials have attended
the Council's meetings in the United States in the alternate years.

Second, the Trade and Investment Framework Agreement -- TIFA -- talks
and the Subcabinet-Level Economic Dialogue -- SLED -- were established
to promote bilateral economic ties. In 1998, under the auspices of AIT
and TECRO, they were hosted here in Washington and addressed a large
spectrum of economic issues. TIFA meetings have been led by the USTR
and the SLED talks by Treasury. Since 1994, then Under Secretary and
now Deputy Treasury Secretary Larry Summers headed SLED for Treasury.

Third, it was decided that the United States would support Taiwan's
participation in international organizations that do not require
statehood as a basis for membership, and would support opportunities
for Taiwan's voice to be heard where membership is not possible. Since
then, Taiwan has joined some technical organizations like the Global
Government Forum on Semiconductors. Frankly, however, movement on this
front has not been nearly as rapid as we had envisioned. We have found
that there simply are not as many opportunities as we initially
estimated, and the PRC has been actively and adamantly opposed to many
of Taiwan's attempts at membership or participation.

However, we view successful Taiwan participation in the Olympics, the
Asian Development Bank, and APEC as clear examples of the
contributions that Taiwan can make, and should be able to make, in
international settings. These contributions are possible because
Beijing and Taipei found formulas to resolve participation. In the
future, we hope that improved relations in the strait that may grow
out of enhanced cross-strait dialogue, can lead to similarly creative
solutions to the issue of greater access for Taiwan to additional
international organizations.
Finally, let me emphasize one aspect of the Administration's policy
that has not changed. The Administration continues to insist that
cross strait differences be resolved peacefully. The depth and
firmness of the Administration's resolve on this point was
dramatically demonstrated in March of 1996, when President Clinton
ordered two U.S. carriers to the waters near Taiwan in response to
provocative PRC missile tests. The visible U.S. strength, and the
obvious U.S. signal of continued support for peaceful resolution of
issues between the PRC and Taiwan, was effective in counteracting the
escalating tensions in the region.


U.S. relations with the PRC and the people of Taiwan are likely to be
one of our most complex and important foreign policy challenges for
many years to come. This Administration, like the five Republican and
Democratic Administrations before it, firmly believes that the future
of cross-strait relations is a matter for Beijing and Taipei to
resolve. No Administration has taken a position on how or when they
should do so. What we have said, and what I repeat here today, is that
the United States has an abiding interest that any resolution be

Over the last twenty years the TRA has served our interests well. I
fully expect that it will continue to do so during the next twenty