UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 860-iii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

FOREIGN AFFAIRS COMMITTEE

 

 

EAST ASIA

 

 

Wednesday 22 March 2006

DR DAFYDD FELL, DR PATRICK CRONIN and DR JOHN SWENSON-WRIGHT

Evidence heard in Public Questions 138 - 190

 

 

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Oral Evidence

Taken before the Foreign Affairs Committee

on Wednesday 22 March 2006

Members present

Mike Gapes, in the Chair

Mr David Heathcoat-Amory

Mr John Horam

Mr Eric Illsley

Mr Paul Keetch

Andrew Mackinlay

Mr John Maples

Sandra Osborne

Ms Gisela Stuart

________________

Witnesses: Dr Dafydd Fell, Department of Politics and International Studies, School of Oriental and African Studies (SOAS), Dr Patrick Cronin, Director of Studies, International Institute for Strategic Studies (IISS), and Dr John Swenson-Wright, East Asia Institute, University of Cambridge, gave evidence.

Q138 Chairman: Good afternoon everybody. I would like to welcome our witnesses this afternoon. We are going to have three witnesses but I think one is delayed, so we will start with two and go from there. When you respond could you introduce yourselves for the record, Dr Fell and Dr Swenson-Wright. Thank you for coming. Can I begin by asking you about the politics of security in the East Asian region. The United States has played a significant role for over 50 years in the security of that region. How do you feel that that will be maintained or changed in coming years, and, with the rise of China and other changes in the region, how do you think that will be developed in the future?

Dr Swenson-Wright: First of all, may I say thank you for inviting me to address the Committee. It is a great pleasure to be here.

Q139 Chairman: Could you introduce yourself as well, please?

Dr Swenson-Wright: Yes; John Swenson-Wright, University of Cambridge. I think, if we are trying to assess America's role in the region, it is clear from recent policy announcements, most strikingly the National Security Strategy that was published in February, that the United States remains committed. It sees itself as a Pacific power. It sees itself tied to the region, partly because of the obvious economic interest the country has in East Asia. It is concerned over the rising security threats of China and North Korea and, as the National Security Strategy makes clear, the Bush administration remains committed to the active promotion of democracy which reinforces its commitment to staying in the region. As you probably also know, the American administration has drafted a new security doctrine, the Global Force Posture Review, and we see in that, from a military point of view certainly, a commitment on the part of the United States to maintain a flexible presence within the region, albeit a reduced one; so one should not view the build down of military forces, whether from the Korean peninsular or the reallocation of forces from Japan to Guam, as a sign of diminishing commitment. Far from it, I see it much more as a re-emphasis of America's commitment to stay within the region in a fashion that allows it to exert maximum flexibility; a strategy based on a hub and spokes approach involving the use of both bilateral and multilateral alliances, which some people have criticised for lacking in integrated strategy, but, nonetheless, gives the United States the opportunity to build coalitions that are willing with some of its key allies, most notably Japan, emphasising the importance of flexibility; and, as we have seen from the recent meeting between Secretary of State Rice and her Japanese and Australian counterparts in Canberra recently, the United States is looking to develop new partnerships within the region to meet the challenge and the threats posed by China and other countries.

Dr Fell: I am Dafydd Fell. I am a Research Fellow at the School of Oriental and African studies. My main research area is the domestic politics and external politics of Taiwan; so I am essentially qualified to speak on areas related to Taiwan. I have not done an awful lot of work on the external relations, particularly US/Chinese relations, but I can talk a little bit about the Taiwanese point of view on this issue which generally is quite distinct from many other East Asian countries. Taiwan tends to take a rather positive view of the US role in East Asian security. Taiwan was one of the few countries that was quite supportive of the US role in Iraq, and Taiwan naturally is supportive of the US presence in East Asia. We do not see the same kind of anti-American public opinion that has been growing in both South Korea and Japan in Taiwan. Again, anti-American feeling is very, very marginal in the Taiwan case.

Q140 Chairman: Thank you. We will come later to some questions about Taiwan. Can I take it a step further? Obviously, for the United Kingdom, we want the region to be stable for economic and political reasons. If there was to be a period of instability, how would that affect us and also how would it impact on the European Union as a whole, because the European Union has clearly growing interests in the region?

Dr Swenson-Wright: Again, in a sense, I am not qualified to speak on UK military posture in the region. This is not something that I concentrate on. There are obviously issues that to some extent divide the United States from Europe and also from our country in terms of the position on the lifting of the arms embargo. The American position in this regard is very clear. This is an area where they have serious worries, and they are joined in that by Japan, which adopts a very similar position. Perhaps I can make one observation that is relevant in this context, which is the question of training and expertise. If one considers the amount of emphasis placed in the American Government on training specialists in East Asian affairs, the number of sinologists, for example, working in the CIA is numbered about 200, a similar number in the State Department Defence Intelligence Agency, the National Security Agency. There is a very sizeable proportion of people with a real expertise in the region in China. Contrast that with the training that takes place in this country, training which is often concentrated on two separate fields, both area studies and, separate from that, functional disciplines such as international relations. In this regard I think the Americans have a natural comparative advantage, as they have specialists who are trained in both disciplines and therefore have an ability to understand and anticipate change within the region. This is not a criticism of our Government's position, but I think it is an area where more could be done to ensure the long-term thinking that is necessary to understand the region.

Q141 Chairman: You mention the EU trading arms embargo. I will come on to questions about the People's Liberation Army and China's military modernisation later, but on the EU arms embargo this House, in fact, has a Quad Committee which brings together International Development, Trade and Industry, Foreign Affairs and Defence, and there was a unanimous view amongst those four committees last year that lifting the EU arms embargo would not be a good thing, for a variety of reasons. How do you see that process developing? Do you think if the EU was to lift its arms embargo on China it would in practice make any difference or would it in practice be mainly symbolic?

Dr Swenson-Wright: The simple answer is that I do not know. I am not a specialist in Chinese military technology. It is clear that the Americans and the Japanese do feel that there is reason to be concerned, but, I am afraid, I do not know the technical background.

Dr Fell: I would have thought that the lifting of the embargo would be highly symbolic, and I think perhaps that impact would be greater than the practical issue of increasing the PRC's arms capabilities. In the light of the failure to re-examine the Tiananmen student incident of 1989, which was the key factor in why the arms embargo was enforced in the first place, I cannot see that there is a clear case for lifting the arms embargo at this stage. Moving back to Taiwan, the issue of the 7/800 missiles that have been built up pointing at Taiwan, I think, should be a factor that is considered on this issue of whether or not to actually lift the arms embargo.

Q142 Mr Keetch: Gentlemen, I want to explore for a while why we have seen this astonishing modernisation and development of the People's Liberation Army, Navy and Air Force, because it really has been a step-change in military capability over a remarkably short period of time. The Army, in some respects, is being made smaller but more professional, the Air Force has got rid of most of its obsolete Soviet era stuff and is now beginning to develop modern air systems, electronic counter-measures, AWACS, et cetera, the Navy, most amazingly, particularly in its submarine development, and you mentioned, Dr Fell, some of the missile technologies as well; and China is putting men into space, it has been getting involved in Galileo. What do you think is behind this? Is it a desire to be a world superpower, to play the role that China thinks it ought to play, or is there a more worrying aspect to this, particularly if we were in Taiwan, that we might be concerned about?

Dr Swenson-Wright: I would argue that it is a precautionary measure on the part of the Chinese. Obviously there is the principal issue of Taiwan, which they feel is an issue that needs to be resolved. They worry about the asymmetry in terms of the deployment of American and Chinese forces with a much larger American presence within the region that is seen as restricting their ability to develop a wider presence in the South China Sea and beyond. Some Chinese military strategists are influenced by the doctrinal thinking of Alf Mahan, the nineteenth century American naval strategist, and some in Japan, for example, have argued that this is essentially driving their attempt to build more water naval capacity and in a way, from a worst case scenario perspective, you can understand why the Chinese would want to do this; it is in their interests. At the same time it is important to stress the extent to which China, since the mid 1990s, in a whole range of initiatives, has demonstrated that it is much more willing to identify with international norms, whether it is participation in multilateral organisations signing on to regional agreements, giving very explicit support to the role of the United Nations, perhaps more so that the United States, and I think we have to balance that against the evidence of modernisation. There is no doubt that military modernisation is an attempt to enhance China's potential power, but power that is not necessarily immediately threatening to the interests of other countries in the region.

Dr Fell: I would not see the expansion in the PLA's spending as particularly an attempt to become a world power but essentially as a regional power in Eastern Asia; so it does have the potential ability to take action on areas such as Taiwan. There is a lot of debate whether or not it is seen as inevitable that there will be a military clash with the US over Taiwan, but, again, I think that is one of the scenarios that is in the PLA's forward thinking: how to actually deal with US intervention over Taiwan.

Q143 Mr Keetch: We will be coming back specifically to Taiwan later, but would you also talk to us about how this is affecting the regional balance? We saw the sino-Russian amphibious warfare exercises. I was watching some tapes of that the other day which were astonishing. They have got a naval base in Pakistan. The effect on the Japanese in terms of their self-defence structure and, of course, Taiwan. How is this affecting the regional balance, because there must clearly be knock-on effects for other countries in terms of how they perceive this?

Dr Fell: Do you have any views on that one?

Dr Swenson-Wright: I think you can see it in the effort to enhance the security partnership between the United States and Japan. It is very clear that part of the Global Force Posture Review is an attempt to deal with contingencies that might involve Taiwan. The emphasis on enhanced missile co-operation between Japan and the United States is in part prompted by the fear and the risk of the threat from North Korea but also taking into account the challenge posed by China. We see that, in terms of the technology that is being embraced as part of this new missile defence programme, much more flexible, much more mobile, sea-based and an effort, in effect, to deal with the growing risks in other theatres. We see it also in efforts on the part of the United States to build new regional coalitions, trying to persuade, for example, the Indonesians and the Malaysians, and India recently, to take a more active role in policing the Strait of Malacca. Sixty per cent of the naval traffic through that strait is on Chinese vessels which are transporting a variety of goods, but perhaps most important of all, the critical commodity, oil, and I see the United States trying to build a much more extensive range of security partnerships to deal with these new challenges within the region.

Q144 Chairman: May I welcome Dr Cronin, first of all.

Dr Cronin: My apologies.

Q145 Chairman: I understand. It is quite a difficult place sometimes to get to. Perhaps I could take the focus on to sino-American relations in a wider sense and touch on the economics as well as the military. The United States has got a huge trade deficit and China and its relations with the United States is a big factor in the American economy. How do you see that relationship developing? Is it one of potential partnership, rivalry, and where will it go as China becomes economically, politically and militarily more powerful?

Dr Cronin: It is not predetermined. It partly depends on the timeframe you are discussing, it depends on leadership and the actions of decision-makers, it also depends on potential events that could arise and slip out of control. I think you have aptly described the complexity of the relationship. It is one of both competition, rivalry, especially in the long-term, and it is also one of growing co-operation and it is that complexity that makes it uncertain, increases concern around the world and raises questions about Europe's role in the future of Asia perhaps as well. Overall I am fairly optimistic about US/China relations. I think, despite the competition, despite the hedging strategies that occur on both sides within the alliances and the coalitions were just alluded to, the reality is that there is still growing co-operation. It is codified in the very current sense in processes like the dialogue between Deputy Secretary of State Robert Zoellick and Dai Bingguo, where they have a broad agenda covering baskets of different issues from development co-operation to energy security to broader issues of military transparency, and there are clearly some areas that are right for co-operation and some areas that are very vexing. Even an issue which in Europe seems like an obvious soft-power issue like development assistance, development assistance is still a classified area for the Chinese Government. I was in Beijing in the last couple of months helping to advise the Chinese on how to set up potentially a DFID, to set up at least a development agency, in part because they are interested in becoming this corporate global stakeholder but they are not sure how far to go, how fast to get there and what the down-side is. Will they be sucked into a set of networks and processes that impede what they want to do? It is a complex relationship. Overall I am quite optimistic that major powers will realise that the ultimate interests still reside in them finding the motives for vending and getting it wrong. If you look at the latest national security strategy or the latest Quadrennial Defence Review that came out of the Pentagon last month, and when I am asked this question by the Chinese Embassy here and they want to know, "What does this American think about this issue?", I tell you the same thing I tell them, which is to say that the good news is that for all of the concerns that you have in Washington that are resident in different political constituencies there is an understanding that the major powers have to get along and have to find a co-operative way of working. That is the good news, but how you get there and the details, that is of course the devil's work.

Q146 Mr Horam: There is a lot of bad news there as well, is there not? For example, the Chinese drive to secure mineral and oil supplies on a particularly kind of mercantilist approach where they want to tie up particular supplies in a very restrictive sort of way, which totally flies in the face of the free-market American approach. Unless China revises that in some way, that could be a major source of conflict?

Dr Cronin: A major source of conflict that has to be put into perspective. It is a source of conflict, tension, rivalry, competition. It is a sore point, it is a very serious set of issues for the West and the outside world and, whether it is a Nigeria policy in dealing with oil regimes in other dodgy areas (Venezuela), there is no doubt that China has one interest, as they told me with respect to Khartoum, for instance, in the Sudan. They said, "We are not interested in genocidal killing in Darfur. That is your business. Our business is the gas treaty." I said, "No, if you are going to be a global power, you are going to have to realise that the international community has a stake in human rights, you know, the rule of law", and I say that as a realist, not as somebody who is coming at this from a human rights dimension. We have a common security. We learn that in places like Rwanda, we learn it today and China needs to realise that.

Q147 Mr Horam: You are saying that. Do you think the Chinese are taking account of that point of view? Are they modifying that particular approach?

Dr Cronin: They sign a piece of paper saying they believe in intellectual property rights; they hawk illegal DVDs on the street outside the US Embassy. We live in a world of contradictions. We have a US policy.

Q148 Mr Horam: You are saying they are not taking account of theses things?

Dr Cronin: Not sufficiently, no, but is there a political will to do so, to consider doing so? Absolutely. Is it far enough? Absolutely not. Whether it is human rights, whether it is dealing with authoritarian regimes, whether it is their own impression at home to get at minorities, all of these are real concerns.

Q149 Mr Horam: You are saying that you think they have got the point, but getting them to do something about it is a much more complicated matter?

Dr Cronin: It is much more complicated, and partly they want to humour us on the outside. I was there. To be quite frank with you, again I do not want to waste your time, the Chinese wanted to know: how can we get Robert Zoellick to tick the box saying we are being a co-operative global stakeholder? Not the question that we would like to answer, which is: how can you get more effective poverty reduction on the ground? How can you get better human rights on the ground? How can you get real security on the ground?

Q150 Mr Horam: So it is partly a public relations exercise?

Dr Cronin: Partly that, yes, but there are centres of difference, and there are reformers within the Chinese Government and there are pressures outside. It is a very diverse country. I do not travel to all 25 major regional centres alone just to get the diversity sense, maybe my colleagues have more understanding of that, but it is a very diverse country.

Q151 Andrew Mackinlay: On the exchange rate, there is a suggestion that their currency is greatly under-valued and this has a distorting effect. What say you on the impact of that? It may be there is none.

Dr Cronin: Having worked closely with our own Treasury departments and their own ambivalence on this issue, it is not an elixir that solves the problem. We do recognise as well that the Chinese are basically paying the American debt, and it is a huge debt as well, but there is this concern about competitiveness. The fact is that it does need to reflect that new value and it has not. Again, this is an area where the Chinese say they want to move in that direction but at their own pace, and we certainly are a major power and we are not going to be strong-armed into doing your base and your political timetable, this is a longer term issue, and this also has repercussions, and these are interdependencies. When you touch one part of this economic independence you are touching a lot of other things at the same time, including their very complex social structure. They are very deeply concerned about their internal insecurity. They are shifting a lot of resources into that interior because they are worried about running out of time before they can handle this politically. Those are the kinds of pressures they are under.

Dr Swenson-Wright: Could I add one brief point on the exchange rate? The Chinese official line is that, given the weakness of their internal banking sector, they worry particularly about the exposure to speculation if they were to allow their currency to float. That is the claim that they have made. They simply do not know internally what the balance of opinion is within different financial specialists within China as to whether it is appropriate to change at this point. The public language they use, perhaps much in the way that echoes their response to the commodity question, the public response they are giving to the American Government, is a positive one: "We will change." They were saying that six months ago. It has not happened yet, not in a decisive way. Whether that reflects unwillingness to change or just the intensity of this internal debate, I am not sure.

Andrew Mackinlay: We are going to China and you might give us a steer, seriously, outside this meeting, as to of whom and how to ask these particular points. I want to come on to intellectual property rights. It seems to me this is not just a serious weakness as regards their capacity or willingness to protect intellectual property rights, to police it, to prosecute, and so on - I want to raise that with you - and the matter which I either give notice about, or we might see it as one and the same thing, is this patriotic hacking which is emanating from China which, I understand, is to try and steal intellectual property rights, at very least. I wonder if it is more sinister than that. The House of Commons was attacked, I think, last September, but it has all been hushed up. The Guardian newspaper is the only paper that has carried this. The Secretary of State for Foreign Affairs refused to answer last week about this issue, but if you go onto the internet you will find it is a big issue in the United States, and it seemed to me that, unspoken, for some reason, here in London or Western Europe, there is, as we speak, a war going on - it is possible things are going the other way as well - on the internet, and, for some reason, it has all been hushed up here. I do not want to conflate it necessarily with intellectual property rights, but I understand that was one of the things which was suggested was the purpose behind this. I am interested in intellectual property rights, I am interested in this patriotic hacking and any clues as to why there is almost a conspirators' silence here in London about what is going on.

Q152 Chairman: I think we will not go into any other areas at the moment. Just let our guests deal with those.

Dr Fell: On the issue of patriotic hacking, I have been informed that a number of Taiwanese Government websites have been targeted over the last few years. I think they have only taken them down for a couple of days but there is a Taiwan issue. On the question of intellectual property rights, partly I would like to echo Dr Cronin's point that, again, it is also an issue of state capacity. Even though there may be a will to deal with these kinds of crime within the PRC, the actual capacity of the state to resolve these issues is quite limited. We have to remember that the state is not as strong as it was 20 years ago.

Dr Swenson-Wright: Just a couple of observations in terms of the response of other countries to the intellectual property right issue. It is clear, certainly from the publication of the February top to bottom review USTR has released, that the Americans are working with the Swiss and the Japanese to try and put pressure on China to produce more clarity. The Japanese themselves take this very seriously. The Ministry of Economy, Trade and Industry has been pushing the Chinese for greater clarity on IPR issues, both in terms of the remedies they use, civil and criminal procedures for dealing with violations, and to ensure greater clarity in terms of procedures. Last spring the Japanese Foreign Ministry established a new in-house team to look at this issue, specifically concerned to try and insulate the political fall-out of the bilateral relationship from having a negative impact on economic relations. Regrettably, however, they only have five individual staff in that new office, which I think is a reflection of one of the constant problems that the Japanese Government faces in dealing with these issues, which is a lack of trained manpower, but there is no doubt that METI and even the Ministry of Agriculture is pushing China and also South Korea for greater transparency on many of these intellectual property right issues. Finally, JETCO, which in a sense is the flag carrier for the Japan Export Trade Commercial Organisation, the flag carrier in a sense for Japanese corporate interest in China, has been setting up a number of seminars with their Chinese counterparts putting together joint government and private initiatives to highlight some of these problems, and so there are mechanisms which can be applied. How effective they are, though, is debatable.

Q153 Mr Heathcoat-Amory: More generally, China is a massive beneficiary of global free trade, and this country supports that. We are, in general, against anti-dumping actions to keep out Chinese textiles and shoes, and so on, but is China paying its dues? Intellectual property encompasses things like pharmaceutical patents, entertainment and films, music and so on. They do have a uniformed branch to enforce it - I have met them - but, in practice, they are not paying their way on intellectual property. What sanctions have we got? Everybody wants to do business with China. We are all partners really now. It is becoming a very one-sided relationship. Do our witnesses have any views on this?

Dr Cronin: I agree with your overall sentiment. We need sanctions, we need incentives, because we do have to deal with China because China is too big to be contained and rolled off. I would also agree with you that they are not adequately paying their dues, but they are still in the embryonic stages of becoming a member of the global trading order. I do not apologise for China, but they do have this capacity gap, and you see it in cases of corruption where they cannot even crack down on local corruption fast enough. They should be convicting and putting away local officials by the thousand now in China, not just for intellectual property rights but for larger rule of law transgressions, but they really do not have that capacity. They are woefully behind, but this is the early stage of the learning curve. This is also the right time to structure the international incentives in the sanctions to help them make the right choices and to help them accelerate that capacity and to live by the same rules that Britains, Europeans and Americans have to live by, and that is part of what the World Trade Organisation process is about, it is part of what legal action against intellectual property right violations is about; so these cases have to be prosecuted and pursued, but I am sure my colleagues have more specific initiatives.

Dr Swenson-Wright: I am not sure whether I would characterise this as an initiative but an observation of what the Americans are doing at the moment. As part of the efforts that the USTR are promoting they have established a China enforcement taskforce. They have made it clear they are very willing to use legal mechanisms to enforce IPR rights. They are trying to enhance the ability of USTR to gather information within China, establishing a formal negotiating capacity for the United States in Beijing which has been lacking to date, and, as I have mentioned already, working more closely with other countries, the Japanese in particular, to send a very unambiguous message to the Chinese Government that they need to improve their performance in this regard.

Q154 Mr Heathcoat-Amory: Can I ask Dr Cronin a matter which we touched on before he arrived about China's military capacity and access to technology and specifically China's participation in the Galileo satellite system? Dr Cronin, are you intimate with the agreement that has been signed between China and the European Union? Does this worry the Americans and is there a potential military aspect to this agreement?

Dr Cronin: Part of the complex American/Chinese relationship is a concern about China's technological use towards military purposes, because the Chinese military power is growing. They have expanded their defence spending by ten per cent every year since 1996 except for 2003. There was an exhaustive White Paper put out by the Pentagon recently. Some of those concerns are echoed again in the latest quadrangle defence review, which cites China as the really only large major power that could rival the United States. That is not all bad in terms of multi-polarity, but how would it do so and how would it use this military power? You only have to look across the Taiwan Strait to be concerned about an array of 750 ballistic missiles and 424 issue 27, 30 aircraft to worry about how they might use high technology, especially since there is so much secrecy and micro-transparency, which is another point which has been remarked upon by the Pentagon, Secretary Rumsfeld and other defence officials on their visits to China in discussions with the Chinese. Again, you can just dwell on the negatives and worry about them. You have got to put it in a larger context that China wants to do business with the world, they want to grow, they want to improve quality of life and they have many domestic challenges. In the round, China does not look quite so menacing in the short term, unless you are maybe across the Taiwan Strait, and then it looks like that balance of power is a little closer and a little more menacing. What they have done on the military, in particular as regards high technology, is to have taken what was facetiously called the world's largest military museum in the last ten years and they have created an army within the Army. So that when the Chinese call on the military, they say, "Do not worry. I still make less money in the military than my son who can go out and work for a company." Yes, except there is ten or 15 per cent of the People's Liberation Army where they have created the high technology capability and it is largely out of sight. I know. I was working, within our defence department, with the National Defence University Facts in an exchange with the Chinese during the first Gulf War and the Chinese lapped up every single lesson of high technology use in the first Gulf War back in 1991, and that is exactly what they are implementing. We have watched them and how they take this technology, as well as the know-how and the application, and they use it within the military and they do it completely, not in this kind of public setting in a democracy, they do very much out sight. So, yes, there are concerns about that. Even in Galileo, in that kind of agreement, it even extends to the lifting of the arms embargo. These are not just political symbols to the United States. They are actual steps that could increase the military capability of a China that is not yet anchored in the international community in a way that we are satisfied. Even though it is not a threat, it is not the Soviet Union, it is not the Cold War, it is more complex than that, but, yes, we do worry about that.

Q155 Chairman: Can I take that a bit further. Your colleagues answered a question that I asked earlier about the lifting of the arms embargo. How do you feel, Dr Cronin, about the lifting of the arms embargo? Would it actually mean a quantifiable increase in the capabilities of Chinese forces or is it a much more symbolic question?

Dr Cronin: It is both symbolic and real, in my opinion. It seems more symbolic here on this side of the Atlantic. I worry also about its transatlantic relationship, a relationship that has diminished in recent years. I worry about that as an American who is a committed transatlanticist and would like to see co-operation on dealing with the big issues of the twenty-first century, and integrating China is exactly one of those big issues and it is not too far afield for Britain and Europe to think about it. It is in Britain's interest, it is in Europe's interest, as Asia rises - China, India even Japan globalising - to take a more active participatory role in shaping China's immigration and shaping Asia, and also the special relationship with the United States gives you a particular ability to have influence on this as well. I do worry about lifting the arms embargo, even if it is more symbolic than real, there is a real element to it, but there is also this deterioration and undermining of a transatlantic, common shared understanding. There has to be another role for the EU and for Europe and for Britain than to be the inter-positionary force in stopping the Americans from doing bad policy. We have to have some common positive actions that we can do together, even if you really do not like American policies, and many do not like American policies that are being enacted at any given time. This is an obvious area, just as terrorism is, just as energy security, just as poverty reduction. All of these are common areas and we, the major powers, and I would include Britain as part of this within the European context, need to find common ways to foster and accelerate these good trends like the positive co-operation of China. Lifting the arms embargo, under some circumstances, could be the right move, but it has also been linked with the other issue of human rights and human rights abuses and there is a linkage issue. The Chinese say, "We do not like that linkage." That is fine, but you have to take what leverage you have, just as with intellectual property rights. You have to grab what leverage you have sometimes in policy and try to apply it. That is why it is more symbolic than real, but there is a real dimension and edge to it as well.

Q156 Mr Keetch: One of the problems that we face is trying to understand what the US policy is. It seems to me that there are three separate US policies about China. There is the policy inside the belt way, which you have just described, of concern about is this a future strategic partner or a future strategic enemy, and you get the mid-west concerns about outsourcing, but if you go on to the west coast, the port of Seattle is desperate to do business with China, Boeing and Bill Gates are there regularly trying to trade, so is San Francisco, so is California. So, in a sense, the US have not got a single Chinese policy, have they, and from our point of view, I think, that means we cannot fully understand where they are going?

Dr Cronin: I agree.

Mr Keetch: Fine.

Q157 Chairman: Thank you for that. Can I move on to talk about the Japanese relationship? How is that relationship now? I know there has been a lot of tension. We have seen the Japanese, for example, trying to get on to the UN Security Council and China making it very clear that they were not supporting Japan's membership of the Security Council. How are the economic and political relations between them and how does Tokyo feel as China increases its importance in the world?

Dr Swenson-Wright: I think the first point to draw out is the extent to which, from Japan's perspective, the challenge of China is the challenge of an emerging power in the region that threatens its dominance. The Japanese worry about the economic competitiveness of China. Like the Americans, they worry about the military modernisation and the lack of transparency. They worry about China as a political rival regionally and globally. One has to say, when looking at Japan, that there are different constituencies which have a range of somewhat subtle distinctions when it comes to assessing climate from the point of view of the Japanese Foreign Ministry, which is inherently cautious when it comes to dealing with China. There is a degree of scepticism or willingness to distance itself from the more alarmist sentiment on the part of Japanese public opinion. The analogy here that I think is quite instructive is the US/Japan relationship in the 1980s when fear of growing trade competition between the two countries fuelled. You were talking earlier about outside the belt way mentalities. Within Japan, certainly three or four years ago, the fear of China was very much a dominant theme, and the bureaucracy of particularly the Foreign Ministry has been trying to dampen some of those anxieties. As for the military establishment, the focus again is principally on the security challenge, not too surprisingly, and it is a security challenge that crosses a number of important issues: the missile threat posed by China to Japan. The Taiwan issue is important because Japan critically depends on access to those sea lanes of communication given its 80 per cent dependency on oil from the Middle East, but it is not an unambiguous threat. The language that the Japanese have been using to characterise Japan is very important here, with the emphasis on the potential threat posed by China. In terms of its capabilities it represents a challenge, but its intentions, I think, are cloaked in a degree of ambiguity. Politicians anywhere, but particularly in Japan when it comes to the question of China, are notably less cautious than their bureaucratic counterparts. There have been a number of relatively outspoken remarks, including the remarks of the leader of the opposition, Maehara Seiji, which have generated a great deal of concern within Japan when he characterised China unambiguously as a threat. I have mentioned already public opinion. There has been a steady deterioration in the bilateral relationship, fuelled, in part, by the rise of popular nationalism in China which is to some extent constraining the hands of the Chinese leadership. In the past it has often been said that the historical tensions between the two countries have been used as a card by the leadership in China to exert political pressure on Japan. Now the situation is perhaps somewhat different. You have a leadership which in a sense is constrained by its own population needing to legitimise itself in terms of certain nationalistic agendas. This is pushing it into a position where it takes a very hard line on the shrine issue, for example, which is fuelling tensions between the two countries. Perhaps one of the most important reasons for the growing tension has to be the absence of real genuine dialogue. There has not been a senior global meeting between the heads of state of the two countries since 2001, and I think that is a measure of how far the two countries have moved apart from one another because of these concerns about its competing interests.

Dr Cronin: Maybe to embroider on what was just said, from the Japanese policy leap perspective, China is the number one issue and country of concern for the twenty-first century. They have no framework for a relationship with China, and they are very worried about this and they openly acknowledge this. They also have different China policies, and they refer to it as good economics, bad politics, but they do not know what the long-term relationship is and they are terribly worried about how to find that and erect that, and they have their own dialogue deputy ministry offshoot of the Foreign Ministry with Dai Bingguo as well, for instance. They also have in Japan, as a result of this concern in China's accelerative rise and the perception of it, growing nationalism. Nationalism is throughout East Asia. We have a decoupling of both Koreas from the major powers. That is an uncertainty. China's nationalism is growing, reflected in popular concerns about Japan, and the politics in Japan are moving to the right, so that poor Minister Aso will tell you, "I used to be a conservative, but now I am in the middle, I am a centrist", because the politics have moved to the right. These things all suggest the need for outside support and powers. You cannot even talk about North East Asia as a region without talking about the role of the United States, but one could also argue that Europe could play an increasing role in this as well.

Q158 Mr Keetch: We saw demonstrations against Japanese interests in China. There was this incident of Koizumi's visit to the Yasukuni Shrine, which I visited and found an abhorrent place, totally at odds, particularly on issues like Nang King or whatever. One can understand why the Chinese were so upset by that. Given that tension internally in China, where is the future for the relationship? It is clearly strained on both sides; it is getting worse on both sides to an extent. Is it something that could spill over into territorial disputes on some of the islands or is it something that you think can be kept out of the military environment?

Dr Swenson-Wright: Can I make one very important observation? Much of the dispute surrounding the shrine has to be attributed to the personality of the Prime Minister. If we are trying to explain why he has been so persistent in visiting the shrine, in part that has been explained as a product of domestic politics, but that is no longer germane, given that he is a lame duck prime minister who will be leaving in September. I think it much more reflects the fact that he sees this issue in foreign affairs much in the same way as he saw domestic politics in the last election, when, by taking a strong stand on a controversial issue, he won plaudits within his own home but also was able to succeed in pushing the issue through. I think, while there have been a number of senior members of the Japanese political establishment, not only Mr Aso but also Mr Abe, now seen as the most likely successor to the Prime Minister with approval ratings around about 38 per cent, relatively high for a potential prime minister, I think one should distinguish between, as it were, the domestic audience that these politicians are addressing and the international context. Abe, I think, is unlike Mr Aso, I think somewhat more tactically motivated in terms of his public statements and, in my conversations with Japanese officials, the understanding is that it is unlikely that he would continue with this tradition of visiting the shrine. It also has to be said that, yes, there are emerging nationalist tendencies in Japan, there has been a swing to the right, but there are also moderate voices. One hundred twenty members cross-party have put forward a proposal to establish a new alternative shrine. That would be a very constructive and immediate way of demonstrating a willingness to address this issue. I think it faces real obstacles, because the balance of force is probably against it at present, but there is a constituency within Japan that sees a more accommodating position on these very emotional, high-profile issues - bilateral discussions, for example, on establishing a new Text Book Commission. There are ways of getting around these particular problems. The territorial issues, I think, are much more fundamental, particularly over the because they deal with the immediate national interests of Japan and access to oil and gas reserves, and the position adopted by the two governments - China and Japan - underlining their claim over the territory in very different terms does not leave much room for compromise. There does not appear to be a very effective legal mechanism which can provide a route out of that particular disagreement.

Dr Fell: It would seem that the impact of domestic opinion in the PRC on this issue has increased a great deal. You cannot really imagine, 20 years ago, the PRC public opinion having a clear impact on foreign policy. I think we can see this in the sino-Japanese relations to the extent that even the PRC's hands are tied, particularly as it is increasingly using nationalism as a basis of its own legitimacy along with economic growth.

Q159 Chairman: How much is that nationalism fostered by the Communist Party of China itself and how much is it forced to adopt those positions by the fact that there is nationalism inherent in the society?

Dr Fell: It would seem that these recent anti-Japanese demonstrations have not been completely government controlled. It would seem there is a degree of spontaneity there, particularly in the use of the Internet in organising these activities. I think also the CPC itself is concerned about these demonstrations getting out of hand.

Dr Swenson-Wright: On that point, there has even been a suggestion that the rights of Shanghai were to some extent tolerated by the Shanghai local political authorities in an effort more to embarrass the central government than to particularly send a signal to Japan. I think one other factor that is worth emphasising is the climate of debate, and political society in general in China has become much more pluralistic. If you look at the intelligencia, academics writing about the relationship with Japan, you find individuals, an important article written by Mah Li Chen in 2002 setting out the argument in favour of a cross-war with Japan, a much more proactive relationship putting history behind them, and it was the public reaction to that which effectively stops that as a constructive initiative, but there are other individuals within the public policy community - academics, policy-makers - who I think recognise the importance of building a co-operative relationship with Japan.

Chairman: Thank you.

Q160 Ms Stuart: Can I probe a little bit more on the riots. Previous witnesses to the Committee have suggested that the number of riots which are being reported is probably an underestimate but at the same time we should not regard this as a problem to the establishment because it is a safety valve for a system that does not have democratic accountability, that actually the establishment is not as unhappy about these riots because it lets off steam. The second thing I want to probe you a little bit more is in relation to both the Japanese and Chinese society. It is a society which is inherently suspicious of things which do not conform. I think the West has got a real problem of assuming that diversity is something desirable, which I do not think, over the centuries, is something the Chinese have always found desirable. To what extent are we reading these events which we see in their appropriate context? It is not the simmering dissent which would lead to democracy as we know it; it is a safety valve of a society that will not achieve democracy as we see it for quite a long time to come and it is just simply their way of surviving.

Dr Fell: I think in the actual context of these riots and demonstrations, it depends what is the actual target of them whether or not they are seen as a threat. Most of them tend to be locally organised anti-pollution demonstrations directed at a certain factory. That is not seen as particularly threatening. Often the target of these riots or demonstrations will be a local township government. Again, as long as it is not directed at the central government or the Communist Party itself, I think you are right that there is a kind of pressure valve there.

Dr Swenson-Wright: Of course the importance of the pressure valve argument is the impact that it has in terms of economic relations. Thirty per cent of Japanese firms in a recent survey argue that, as a result of the riots, they were willing to reconsider their investment strategy within China, but it has not had an appreciable impact yet on the trade figures or the investment figures. Japan's trade with China has been growing at a rate of 12 per cent over the last year, despite these tensions. On the question of the extent to which these are two societies that are inherently suspicious of foreigners, I cannot speak for China; but I think in the case of Japan there is an element of that but also Japan sees itself as predominantly an internationalised society. It went through a great wave of internationalisation in the 1980s because of demographic pressures. Invariably, in order to gain access to low-cost labour, Japan is going to have to substantially reconsider its attitude to allowing foreign migration to Japan, which will, I think, fundamentally over the long-term, quite significantly change some of those attitudes, make Japan inherently more open. Whether that leads to improvement in relations with in China or not I do not know.

Q161 Chairman: Can I ask you some questions about Japan's military policy and posture? Since 1945 Japan has had self-defence forces and it has not had, at least in name, armed forces for wider activities but it has been involved more and more in United Nations peace-keeping. I saw a Japanese man in a helicopter when we were in Iraq in January taking a medical evacuation, and clearly Japan has changed its view of its role in the world. How is that affecting the issues of its defence posture, where is that likely to go and how is that perceived in China and also in Taiwan?

Dr Cronin: There is still an important role to be played by outside powers. Let us roll back the history a little bit to the United States' withdrawal from South East Asia during the time of the Vietnam War and the Nixon doctrine, which said, "We will keep air forces for the Asian Pacific region, but we are basically pulling out ground troops." It was then when the Japanese secretly decided that they would even consider having a nuclear weapon. They were basically saying this was the time for them to re-arm. I say this as a close friend of the Japanese and the Japanese Government, but they went through this period saying, "My goodness, if the Americans suddenly go away, Japan has to forget about the posture of the immediate aftermath of the Second World War and become a normal power", and they started to think that. That led to a revitalisation of the US/Japan alliance, which was codified during the early Reagan period, and that strengthened it. That again started to unravel at the end of the Cold War. I was part of the group inside the US Government that helped put together a post Cold War rationale for the US/Japan relationship, in part to help steer Japan for increasing international co-operation and participation, getting away from their isolationism and away from thinking that they will be left on their own one day but growing into that role; and that is what one sees with the roles and missions Japan has been adapting ever since the first Gulf War pushed them into the embarrassment that they were not doing more than sending mine sweepers after the fighting stopped and they had been asked to pay for money. Remember, they were considered the cash-point of the world, the ATM machine of the world, for operations at this point. They have been increasing the peace operation role; they have been more active in peace building; they take a very active role diplomatically in terms of development policy and with the military forces. All of this, though, is of some consternation to China, which does not look at Japan as a small island country with self-defence forces. It looks at Japan as the high technology country. There is this antipathy that we have talked about, even while there are other forces as well. I think Japan is going in a good direction, but could it change and veer off in a bad direction? Yes, it could, not because history will repeat itself but because there is still so much anxiety, distrust and historical baggage in North East Asia that the outside powers, not just the United States, have an important role to play in making sure that two major East Asian powers, China and Japan, for the first time in modern history, can co-operate and get along; and we do this from the United States' perspective as an ally of Japan and we do this as a partner with China, but we have to find a way for these two countries to have defence capabilities, be normal countries and yet still not go to war.

Dr Fell: The Taiwan perspective on Japan's military normalisation tends to be fairly positive. I think the idea is that there is an extra counterweight against the PRC. Another factor here is that the general perspective on Japan and Taiwan is quite distinct from many of its other former colonies where there is a strong anti-Japanese sentiment. There is some anti-Japanese sentiment but it tends to be very small and marginalised among extreme Chinese nationalists. The proportion is very, very small.

Q162 Chairman: Finally on this area, you have mentioned in passing the dispute over the Senkadu Islands and there are other islands where there is a dispute. I understand that there is potential for very large gas and oil deposits in the area concerned. How big a factor is that in discussions and how much is it to do with feelings of national aspiration?

Dr Cronin: China grows a blue water navy capability, increases its air forces. As Japan normalises and considers, the next prime ministers watch a new constitution that goes beyond self-defence forces and the causes of the old constitution. China and Japan are going to increasingly bump into each other, and more than metaphorically. That does not mean they will come to blows, but we have seen Japan very anxious over Chinese incursions into territorial waters. We have seen a very assertive China when it comes to oil, gas and mineral rights. China has got an economic strategy right now. It is a quiet strategy, but on resources it is very aggressive and they will push it to the limit, and Japan is being pressed to the limit in the East China Sea. They are not likely, because they are two major powers, to go into a war over this issue in the near term, but they are likely to continue to have very tense negotiations, debates and even dust-ups at sea over some of these territorial rights. That is how I see it.

Chairman: Can we move on to Taiwan.

Q163 Mr Heathcoat-Amory: Dr Fell, relations between China and Taiwan are obviously bad at the moment, but this has happened before and the relationship has been managed. Is the relationship getting more unstable with possibly unpredictable consequences?

Dr Fell: You are right that things have been quite tense. I think you could go back ten years. Since the 1995, 1996 missile crisis things have been tense, but they have managed to resolve or get over the worst crises. An important event occurred last year when the leaders of the two main opposition parties visited the PRC. The former ruling party, the KMT's leader, visited and met with important CTP leaders. There were some positive sides to those visits last spring. There would appear particularly to have been a reduction in tensions and also the perception of tensions within Taiwan but also within the PRC itself. However, there were also some negative impacts of those visits, particularly the idea of visiting only a month or two after the passing of the Act of Secession law, which was to an extent destabilising for the elected government of Taiwan. I think that was probably a negative impact. In the short term it is quite likely that there may be continued tensions up until 2008. In 2008 we expect that there will be another Presidential election when most of us expect a change in ruling party. Following that we expect a more co-operative relationship between Taiwan and the PRC. There may be some short-term tensions but in the medium term I am fairly optimistic on cross-Strait relations. Another factor here that we need to consider is the elections that are going on in late 2007 and 2008. The 2007 parliamentary elections will be under a single member district system, which tends to encourage more centralist positions. Similarly in 2008 we have a presidential election. Traditionally presidential elections in Taiwan have encouraged more centralist positions. Again, this should have a positive impact on relations. If we look at opinion surveys generally in Taiwan, public opinion is far more moderate than the actual political parties themselves, so the parties are severely constrained by moderate public opinion. Parties are clearly aware, at least in terms of the interviews I have done, of a concern about being punished by this moderate public opinion. This is quite a positive constraining role.

Q164 Mr Heathcoat-Amory: Is this general optimism shared by our other witnesses?

Dr Cronin: The situation in Taiwan was considered to be one of the best situations we have had in recent times until this past year, which shows you how fragile the relations are across the Strait despite the tremendous economic interaction. Basically there is a breakdown of trust between Beijing and Chen Shui-bian. That is why the elections in 2008 become very important. Before then the most likely catalyst or trigger for conflict may be political manoeuvrings inside Taiwan by the DPP for adding amendments to the constitution, which are probably not the real "red meat" amendments of national identity but the Chinese are likely to be quite reactive to almost anything, frankly, because they do not trust Chen Shui-bian. So this could become the cause again for little dust-ups across the Strait which are not likely to lead to war and conflict in the short term but things can always slide out of control. There is enough distrust and there is a growing military balance on both sides of the Strait.

Q165 Mr Heathcoat-Amory: And is the American Government still adamant about its de facto guarantee or are they beginning to regard this as a relic and essentially disposable?

Dr Cronin: There are concerns both in Washington and Taipei about the deterioration in the relationship. It is partly reflected in things like the $20 billion procurement package that has not come to fruition but is being argued about quite a lot in Taipei, and the US policy of ambiguity of "but wink, wink, nod, nod, we are there for Taiwan, especially if the mainland takes action" which is still the paramount fundamental principle. However, now we have got this new dynamic under Chen Shui-bian which is what if Taipei takes provocative action, and that is what we have been living with and adjusting to in recent years. There is no categorical answer to your question. My supposition is that Washington would be pretty hard pressed (sic) to go to the defence of Taiwan unless it was truly reckless.

Q166 Mr Keetch: Just following on from that, it seems to me that the prospects for there being a military conflagration could actually come from Taipei in that it might well be Taipei that does something stupid or reckless, as you say, as opposed to China doing something reckless. If that strange event happened and if there was a Chinese attack, how defendable is Taiwan, particularly given the increase of what we have seen in the PLA; is it defendable?

Dr Cronin: It is obvious in the age of modern militaries that it is easier to defend than to attack and occupy. Is it defendable? Yes, it is defendable and Taiwan's military posturing has been changing radically because of the perception of the kind of war that could ensue across the Strait. Air defence is priority number one and that is where they are putting their money. The second priority is to keep the Strait open. So they have got clear ways of countering a potential Chinese onslaught that could come and punish them. The Chinese are not likely to want to do that, by the way. The Chinese are much more adept than that. They have learned from previous missile exercises during the 1990s that there are ways that they can have influence without ever really firing a shot - exercises, deployments and so on - and that is the way you signal intent. So there are ways. These things could slip out of control. It is defendable, but at the same time, from the mainland's perspective, they would be willing to put good relations and economic strategy and all that aside if they really and truly were pushed across the line. I truly believe that they would act. I have seen places where they do this planning in China. They certainly do not want to do that but they could be pushed to that. If you saw Taipei doing something really stupid you will see - or you will hear later - about the manoeuvrings behind the scenes to say, "Wait a second, what's going on here?" The stakes are very high across the Strait. There are hundreds of millions of dollars of trade, by the way, going throughout the region and across the Strait alone, so there is a lot at stake, and that is why I think the argument will be for stability, regardless of nationalism and some of the local domestic constituencies.

Q167 Mr Keetch: Is that "stupid" scene a declaration of independence?

Dr Fell: I think there is a limit to how reckless the Chen Shui-bian administration can be in its last two years, particularly when a constraining factor, apart from the elections, is the fact that the DPP government does not have a majority in parliament. It is a minority government. For example, there is a lot of talk about a new constitution and constitutional reform, but to actually pass constitutional reform they need a two-thirds or three-quarters majority in the parliament and they do not even have 50 per cent. There were some tensions created by scrapping the National Unification Guidelines and Council, which occurred in February, but again this was essentially a symbolic move. It was something that could be done without parliamentary agreement.

Dr Cronin: Which is why you are more likely to see the mainland trying to isolate the DPP, posturing for 2008, and you are more likely to see Chen Shui-bian and the DPP trying to test the limits of what they can get away with, with their constrained and limited power.

Dr Fell: I think also that the PRC has learnt from some of its previous mistakes that putting too much heavy pressure on Taiwan can actually backfire. If we look at the presidential elections in 1996 and also in 2000, in both cases PRC threats actually resulted in the wrong candidate winning the election. So we can see in subsequent elections they have been much more cautious on their policy pronouncements. Let me give you one interesting example. The Anti-Secession Law was raised just a couple of weeks after the legislative election in Taiwan. If it had been done a couple of weeks earlier it could have backfired quite seriously.

Q168 Chairman: But the fact is the Anti-Secession Law was adopted and caused enormous alarm all around the world. How significant is that vote in China?

Dr Fell: In many ways the Anti-Secession Law just formalised what had been PRC policy in the past, so in that respect there was nothing new. The reaction in Taiwan initially was very negative. There were some pretty large demonstrations. However, the opposition visits to the PRC just one month after the Anti-Secession law seem to have taken that issue off the agenda in Taiwan.

Q169 Mr Maples: I just wanted to clarify something Dr Cronin said. You did say, did you not, that the United States would be "hard-pressed not to come to the aid of Taiwan unless it did something really stupid"?

Dr Cronin: It would be likely to come. I am sorry, it was a double negative. They would be likely to, almost surely.

Q170 Mr Maples: They would have to unless Taiwan had done something really stupid?

Dr Cronin: Unless Taiwan is clearly the aggressor in some way.

Q171 Mr Maples: At the moment there is no treaty commitment to do so or is there?

Dr Cronin: Yes, the Taiwan Relations Act, and there is a whole series of communiqués and messages and policies.

Q172 Mr Maples: So there is a treaty commitment covering that?

Dr Cronin: Yes, Congress would hold the administration to that but I think, even before it got to that, the executive branch would be hard pressed (sic) to act quickly if there was any escalation in tensions and if there was conflict, and they would obviously go to the defence of Taiwan if that was the case. It may be much more murky than that; I expect it will be.

Q173 Mr Maples: I just wanted to make sure I had heard you correctly.

Dr Fell: I guess it would depend whether or not Taiwan crosses a certain red line.

Dr Cronin: That is right, that is the point. If Taiwan is doing something that is so flagrant that they are clearly provoking Beijing, and maybe it is a single politician and his party doing this, then I think you have seen in recent years the United States saying, "Wait a second, we want stability, we want peace. We have agreed to this principle so there is no unilateral change of the status quo."

Q174 Chairman: Can I take this a bit further forward. If the Kuomintang leadership come back into power and you then have a moderation of the rhetoric on both sides, is there a prospect of some deal of "one country, two systems" or "one country, two systems and a half", or some variation of the position with regard to Hong Kong, or something else that could be a realistic prospect in the long term, or is public opinion in Taiwan such that that would never be acceptable?

Dr Fell: They have been doing opinion polls on this "one country, two systems" issue in Taiwan for well over ten years. Support has never been over 15 per cent. All the major political parties have taken a position opposing the one country, two systems idea so I would say that is off the agenda in Taiwan. I believe that only one party has ever actually been supportive of one country, two systems and despite the visits to the PRC, the KMT's position is still opposed to one country, two systems. However, the visits to China by the KMT last year do show that there is some potential for agreement. I think perhaps that having such an anti-Chinese government in power for the last six years may have some kind of positive impact on forcing the PRC to accept better conditions for Taiwan in future negotiations, for example the idea of "one China" but different interpretations of what that one China is. This was the basis of negotiations in the early 1990s and this is acceptable to the KMT. This means that they agree to accept the one China principle but their definition of one China is different. In the past this was not acceptable to the PRC but now it is, so that is a significant change.

Q175 Chairman: But that would have serious implications in terms of international organisations and representation to the rest of the world and all kinds of other things, would it not? You would still be faced with the competition between the PRC and Taiwan in different venues like Africa to get votes, to get diplomatic recognition, and so on?

Dr Fell: I guess that would continue but I think the KMT position has shifted slightly. They are not so concerned with formal diplomatic relations as they were in the 1990s. In terms of PRC/ROC relations I could see some improvement in the post-2008 period.

Dr Cronin: This continuing stand-off and the inability to have even a dialogue on this across the Strait does affect Britain, Europe and the world on things like avian flu when Taiwan is not represented; it is not as though their birds are not affected, and we saw this with SARS. There are real implications of not incorporating somehow Taiwan into the international community.

Q176 Chairman: So what should we in the UK and the European Union do to try and assist this process in the region?

Dr Fell: Personally I would suggest that on the Taiwan issue that perhaps we should learn a little bit from our US cousins and take a slightly more pro-Taiwan position. If we are going to have an ethical foreign policy, we need to consider the fact that Taiwan is a liberal democracy, perhaps one of the few functioning liberal democracies in Asia. We can see the way that it has a very strong system of party competition, perhaps more institutionalised than any of the other East Asian democracies, even Japan or South Korea. In our relations with Taiwan we need to consider these issues.

Q177 Chairman: Do your colleagues want to come in?

Dr Cronin: I certainly would agree with getting closer to the US policy on Taiwan, but the difficulty of that in the European context is obvious in the sense that China is seen as a big market and China is quite punitive. Just as if there is some relationship in Africa or if you go to Nicaragua you can find a state building that was built by Taiwan but you cannot find many more of those because the PRC has bought off everybody else, such is the size of their economy. Maybe there is a special role for parliaments and legislative branches to especially uphold the support of liberal democracies, the support of the rule the law, being the honest broker and shining a spotlight on abuses of this. So there is maybe a role here for parliaments to play in ensuring this. Being democratically elected does not guarantee good policy, as we find out in many countries, and Taiwan may be paying the price partly for that as well, but nonetheless it is a liberal democracy and it is one that makes the world a better place overall, even if it is not stable in any given week.

Q178 Ms Stuart: I am glad that you have moved on to pointing out that Taiwan is a liberal democracy and maybe we are constrained in our actions by the perceived threat of China and its trade sanctions. I do not think the fact that they stopped trading with Nicaragua should make Europe quake in its boots. The real question is do you think the European Union is quite cowardly because within the European Union the individual Member States are pursuing their own trade policies and are fearing that they are losing trade and that trade sanctions are going to be imposed and in exchange for that we are accepting China having human right violations which in a sense we would not accept from any other country if it were not such a big potential trading partner?

Dr Cronin: I do not see any profit in calling our major ally "cowardly". I think that I would say that people are ---

Q179 Ms Stuart: "No good, crummy ally" is a phrase I once heard in America!

Dr Cronin: The mantra from Washington of course is on results and effective partnerships and alliances, and so they want to see the results of this; there is no doubt about that. We have to look at China as more than a profit-making opportunity. It has to be about more than trade policy. We have to see China in the round and that includes its human rights abuses. We were talking earlier about the Internet and so on. Go to China and try to use the Internet and try to type in a dot.org and find out how quickly they close you down. It is a very oppressive system, even with all the remarkable progress they have made. They have lifted more people out of poverty than most of the development programmes in the world ---

Q180 Ms Stuart: But, come on, they used to say this about Mao Tse-tung. This guy murdered more people than anybody in the last century but we were going round saying, "But he gave the rice bowl to the poor."

Dr Cronin: Yes, but Mao has been dead for some time and Hu Jintao is no Mao and Jiang Zemin is no Mao. They have changed. The generations are changing and there has been progress. I totally agree that from a Western concept of liberal democracy there is still a long, long way to go and there are a lot of question marks about the future. Yes, I would applaud Britain and the EU standing up on issues of democracy and the rule of law in China, and the human rights issue, for instance, that we always should run a foul on and never get anywhere. Nonetheless, I would not hold our expectations too high that this is going to evoke a lot of fear in the heart of China either. I do not see Europe being cowardly in fearing China. I see them taking advantage of the plentiful opportunities that China is making to the world because of its focus on economic gain.

Q181 Ms Stuart: Can I push you a little bit further. My argument was that the EU's voice is divided because individual Member States are pursuing their own trade interests and will only submit to a common policy under the EU when it suits their collective interests. Are we therefore sending out signals which are quite contradictory to China?

Dr Cronin: Yes, and this is the complexity of China; we all have contradictory policies. This is also part and parcel of the European Union and the whole experiment towards integration into Europe. It is not a common foreign policy. It is a fragmented foreign policy and the bilateral policies definitely conflict in interest and in type from the multilateral at times, and it makes it very difficult. On the other hand, when the EU agrees, it is extraordinarily rock solid and people stand up and listen because it has got that power and weight of unanimity. The problem is that the EU tends to focus on its neighbourhood, and Asia is a bit far afield except when it comes to the pocketbook and economics and trade, but it also has to think about democracy, the political side, social dimensions, human rights, issues globally. Europe speaks very loudly around the world on soft power, with more legitimacy than the United States these days after Abu Gharib and other problems, so it is very important for Europe to be unified and to try to speak up on these issues because they are holding up certain standards about what it means to be a member of the international community in this century.

Q182 Mr Keetch: Just getting back to Taiwan and Dr Fell's unshakeable confidence in his own ability to predict the elections in 2008, could he tell us therefore who is going to win and do his other two colleagues agree with him?

Dr Fell: The opinion polls are saying that the KMT's Ma Ying-jeou is due to win. He was over in London in February giving a speech at the LRC and in my discussions with him he appears to take quite moderate positions on cross-Strait relations, more moderate than those of some of his own more extreme KMT party members. I know that his advisers are concerned that he could lose this lead in the next 18 months but I cannot really see that happening.

Dr Cronin: We are still a long way away from 2008. The mainland was surprised last time with the outcome; it changed on them. So we are a long way away from that outcome but the KMT is the conventional favourite right now.

Dr Fell: Not being a Taiwan political specialist I would not like to hazard a guess at this stage so I will defer to my colleagues on this.

Mr Keetch: Do you have any other election predictions in addition to Taiwan?

Mr Maples: Have you got any for Britain?

Ms Stuart: A Labour win in Edgbaston!

Chairman: I have a couple of areas I will come back to but I will bring in John Maples now who has got a question.

Q183 Mr Maples: Can I go back to one of the security issues in the relationship between China and the United States on proliferation. It seems strange to me that China is not prepared to play a tougher role in North Korea. It seems to me that to have a North Korean regime such as it is with nuclear weapons on China's borders is a serious issue for China as well as her neighbours. It is a slightly different set of circumstances in the case of Iran but, again, I would have thought China as an established nuclear power had an interest in upholding the Non-Proliferation Treaty to which I think she is a signatory. I know there is an oil deal and we were discussing before China's mercantilist attitude to these sorts of deals. I do not know what you think will eventually happen in the Security Council but at the moment China seems to be playing very hard to get over trying to stop Iran acquiring nuclear weapons. I am just wondering why in two proliferation cases you think the Chinese see their interests as being very different from those of the United States?

Dr Cronin: I think the Chinese increasingly see it as a common interest but they are not integrated into the system in the way the trans-Atlantic powers are, for instance the P5 and UN Security Council, to act in concert, so they are going to try to have it both ways. They do not want to see proliferation, even on the Korean peninsular, their neighbour. At the same time that is not their only goal. They put a premium on stability, they put a premium on not having a military intervention on their border, and that has to be weighed against the prospects of what does North Korea do with a bomb in the basement? What does North Korea do with even eight bombs in the basement? They are not likely really to sell them to terrorists. They are watching them very closely. It is of concern to China and not just because of the missile test recently fired in the direction of China but it is more of a concern what Japan does as a result, which is that they take the screwdriver out and they build a nuclear bomb and say, "Guess what, we can't rely on an American nuclear umbrella, we need nuclear weapons as well," and then you uncork the bottle on nuclear proliferation around the world. Instead of going from five nuclear powers in 1968 (when the Nuclear Non-Proliferation Treaty was signed) to nine today, you go to 20 or 30 countries in the next 10 or 20 years. So China does share a very big concern about this, but how far they are willing to go to do something about it? The bet is and the assumption is and the talk inside the Government which I serve is that China was increasingly being co-operative around the table and willing to do things to put pressure to talk straight to Kim Jong-Il and to try to send signals to Kim Jong-Il to make it clear what the two paths were: the path of integration and survival or the path of not putting your highly enriched uranium programme on top of your plutonium programme on the table to be negotiated away. Right now Kim Jong-Il has not felt so much pressure that he has had to do that. He is waiting for a much better deal and he has not seen it. He may not be waiting for a better deal; he may be waiting to stretch this along and survive, to keep trying to sell his old plutonium programme and never sell his highly enriched uranium programme. You even see rhetoric out of North Korea this week that they can do a pre-emptive attack. You read this rhetoric all the time. They are completely reckless in their public diplomacy because that is how North Korea has survived after the Cold War. They have lost their patrons, they have gone to missile and nuclear diplomacy and they are going to keep that card right there ready to sell it. China knows they are playing that game to some extent and that is why they do not feel threatened by it. However, yes, they do share the international concern about proliferation. Believe me, they do share even a concern about Iran's nuclear weapon programme and what happens to that as well. But what are they willing to do about it? They see this quite differently. Just as Europe and America tend to share sometimes different priorities on how to deal with proliferating countries and even Iraq right now I would say Europe was probably a bit closer to China's view on Iran than the US or Washington these days, where to some extent Washington has increasingly talked about regime change and that is not really acceptable language here, despite some recent mentions of it.

Q184 Mr Maples: I would like to come to your two colleagues on this as well. So you think that China's policy in these two regards is driven entirely by her perception of her own interests? It is not an attempt to cross or make life difficult for the United States?

Dr Cronin: If there are easy opportunities to make life difficult for the United States they will cash those in as well, but it is primarily driven by China's interests.

Dr Fell: I would agree with that. I would have thought that particularly North Korea is seen as a threatening question for the PRC. I think they see it as a useful buffer state against the United States. On Iran, again I think the non-co-operation in pushing for Iran to use their nuclear technology is probably seen as a way of frustrating the US on that issue.

Dr Swenson-Wright: Just to echo what has been said on the North Korean issue; it is clear that the Chinese do worry about stability. The fact that they share an 800-mile border with North Korea, a fear of refugees and the large interaction between the Chinese community and the North Korean community close to that border is a source of concern. I think one should not underestimate the extent to which China is playing demonstrably the role of a good stakeholder in this context. A lot of people argue that without Chinese interaction North Korea would have been reluctant to come back to the fourth round of talks which were so important in setting up the new agreement. It is also important to emphasise that China acts as a powerful model of a potential way out of the current predicament in the long term through economic development, and China is making the case, privately in a low-profile sense, for engagement, even in the context of creating the opportunities for greater access to information to North Koreans. South Korean NGOs are very active in promoting access to more information, and I think the Chinese privately, away from the glare of publicity, are anxious to encourage that to see a smooth transition. Yes, they want to maintain their influence on the peninsular but they worry about the risk of instability, as my colleague mentioned.

Q185 Mr Maples: And the Chinese attitude and position on Iran?

Dr Swenson-Wright: Again, I would share the views of my colleagues on this. I think it is clear where they stand.

Q186 Chairman: Two final areas. Dr Fell, you talked about the attitude in Taiwan to Japan. I would be interested in the take of all of you on the attitude of Japan to Taiwan and to the future of Taiwan?

Dr Swenson-Wright: From Japan's perspective it would be going to far to say that Taiwan has been ignored, but up until 1997 and the articulation of the US/Japan joint guidelines, it was something that was very low on the agenda of Japanese policy makers. The reinforcement of the co-operation between the United States and Japan takes Taiwan as one of its principal concerns. Japan maintains a one China policy. There are periodic efforts by Taiwanese politicians. Former President Lee Teng-hui routinely visits Japan. Some people argue that he has some impact given his personal charisma in raising the profile of Taiwan in terms of public perceptions in Japan, but from the point of view of the policy making community they want to avoid instability, they support the American position, they want to encourage a continuing co-operative relationship. Taiwan is important principally because of where it is and the risk of instability associated with Chinese direct action.

Dr Fell: It would seem that the Taiwanese have been quite successful at lobbying in Japan in the Japanese parliament and that has been going on all the way through since the 1950s. Perhaps that is a reason why they have been able to keep quite close links between the major political parties. Another factor here is the fact that Taiwan was a Japanese colony for 50 years. Again, there are very close links there and many see that Japanese colonialism during that period was relatively benevolent, and that is a factor in the slightly more pro-Japanese sentiment within Taiwan itself.

Q187 Chairman: Finally, on the completely different issue of South China Sea regional security and the Spratley and Paracel Islands, as I understand it, there are potential disagreements between a large number of states there which clearly include those that we have been talking about but some others. I would be interested in your take on whether there is the possibility of a resolution of these disputes or whether there is the potential for conflicts of some kind to arise in that area, given again that we are talking about gas and oil and all the resource issues?

Dr Cronin: I think tensions in the South China Sea have abated in the last few years and I do not think most analysts would fear a reversion to the kind of frictions we saw in the 1990s, over Mischief Reef for instance, mostly because China is taking a different approach to these issues. Notwithstanding what I said about very assertive policies and opportunistic policies on resources and on gas, I think they understand that they have too much to lose in a multi-lateral setting like this, unlike taking on the Japanese where there is a little bit of extra political support at home for taking actions in the East China Sea. In reviewing how China has dealt with its borders - and it does have an amazing number of countries on its borders - one can look at the latest issue of International Security in which there is a wonderful article that looks at 30 border disputes and how China has handled them since the PRC was created. The cross-Strait issue is a unique issue in terms of its unbending policy but on issues like the Spratleys they show generally much more moderation and flexibility when there are other incentives to do so because they are much less doctrinaire about it, but I am sure my colleagues can add.

Dr Swenson-Wright: Part of the reason why the situation has become more stable is that China has convinced many of the key players in the region that it is acting in a constructive fashion - support for example for the ASEAN Regional Forum, its public condemnation of hegenomism, its articulation of a new strategic concept, its example in other contexts, acting as a mediator, for example, between Thailand and Cambodia in 2002. All of these send very positive signals about China's willingness to engage with international norms and prove that it is a constructive player. And of course in the economic sphere China's active support for building a free trade agreement with ASEAN and establishing, hopefully, by 2010 of an ASEAN/China free trade area. All of these are constructive efforts that reinforce the perception that China's role in this context is a positive one rather than a negative one.

Q188 Ms Stuart: An organisation which arose out of post-World War two order disputes with China was the Shanghai Co-operation Organisation, which started off life really being between Russia and China and about the border disputes but now seems to be emerging as a kind of military organisation. I am getting terribly confused as to how significant it is and how important it is depending on to whom you talk. So it is a fairly open invitation to say have you ever heard of it and what does it mean to you?

Dr Cronin: I have certainly heard of it. Central Asia is going to a play a much more prominent role in the future than it has in recent years. We recently had the Foreign Minister from Kazakhstan visit the Institute, Foreign Minister Tokayev, who explained the central role of the Shanghai Co-operation Organisation among others. He has a hard time keeping track of all the countries who are members because there are so many overlapping institutions and organisations throwing things at the wall and wondering which are going to stick, but this seems to be sticking at the moment, largely because the two major powers, Russia and China, want it to be, at a minimum, a condominium for energy access, and energy is the name of the game in Central Asia. However, in fairness and being more balanced, the Shanghai Co-operation Organisation has partly got energy and economic co-operation on the agenda but it has also done a very practical thing in terms of sharing information for counter-terrorism. That is its military and security component.

Q189 Ms Stuart: It is used for intelligence sharing? I had not realised that.

Dr Cronin: Intelligence is maybe too strong a word, it is more information sharing. I would not push it too far because when you get into multilateral counter-terrorism intelligence sharing, as soon as you have more than two countries present, the level of information goes down dramatically, but nonetheless ---

Q190 Chairman: I think we have had that trouble!

Dr Cronin: --- it is still going to be achieved by bringing together countries which share a lot of trans-national problems - porous borders, drugs, bugs and so on. You have a lot of problems in the region and they can do some good on these issues. Certainly China and Russia are concerned about these issues as well. There are concerns. The United States does not like the Shanghai Co-operation Organisation per se if you will. That is not an official policy but the point is they question anything that is too exclusive. Even the Foreign Minister of Kazakhstan admitted recently that they really cannot afford to enlarge and grow - to have Japan for instance become a real member - because they have to consolidate rather than to enlarge. Anything that is too exclusive on this issue is a concern and it begs the question what is it about. So it is not a prominent organisation yet. It is becoming more prominent because China and Russia want it to stay. The Central Asian countries want to participate because there are energy and economic gains and there is this counter-terrorism shared interest, if not policy. There are outside concerns about what it will become.

Chairman: I think that is a very good point on which to conclude. What it will become is the big question about all these discussions. Can I thank all three of you for coming along today. I think we have found this extremely valuable. Sadly, because of the Budget debate attendance was a little bit down, but nevertheless with those of us here you have the quality if not the quantity, so thank you very much!