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Text: Address by Secretary Madeleine K. Albright to the Commonwealth Club San Francisco Hilton Hotel San Francisco, California June 24, 1997

Thank you, Dr. Bitterman. Secretary Shultz, President Epstein, members of the Board of Governors, guests and friends, it is wonderful to be back here in the Bay Area and an honor to be invited to speak at the Commonwealth Club, which is to free speech what the Golden Gate is to bridges and fireworks are to the Fourth of July.

This historic setting is a reminder that although we seem always to be living in the moment, our challenges are easier because of what others dared in the past, and our choices more weighty because of what they will mean to those who come after.

This continuum is reflected in the event that has brought me to this side of the Pacific en route to the other. For on the stroke of midnight Monday, one of the world's majestic places -- Hong Kong -- will be under Chinese sovereignty for the first time in more than 150 years.

This afternoon, while you finish lunch and try to think of polite, easy questions to ask following my speech, I would like to talk both about the promise and the perils inherent in the reversion of Hong Kong and in the choices faced by a rapidly modernizing China as we approach the 21st century. But first, a bit of history.

Forty-seven years ago, another Secretary of State, Dean Acheson, addressed this Club on the subject of Asia. He spoke of a turbulent continent on which more than half a billion people had just emerged from colonial status into independence. Women and men in nations such as India, Pakistan, Indonesia and the Philippines were spurred on by a fierce desire to be free of foreign domination and by a deep hunger for the fruits of a better life.

In China, Secretary Acheson saw these same aspirations for independence and growth stymied by a revolutionary movement influenced by the Soviet Union and captured by a misguided ideology. He spoke of the disillusion of many Chinese who had hoped their new rulers would clear the way for economic development. And he cited a friendship between the American people and the people of China that had been tested and proven during the firestorm of World War II.

From our vantage point, we see confirmed what Acheson could only predict: that the newly free nations of Asia would one day "participate fully and equally in the international community." We see confirmed the potent power of nationalism and the desire for economic advancement. And we see confirmed Acheson's fear that China's march to prosperity would be long delayed.

But if Acheson were here today, I suspect he would update his prognosis.

In a little more than two and a half years, we will arrive at the year 2000. If the computers don't all break down and send us back to the horse and buggy age, we can expect that the pace of technological, social, economic and political change will continue to accelerate.

And we can expect that one of the forces propelling that change will be a China that has reached the threshold of a new era in its four thousand year history; a China increasingly liberated from the Communist straitjacket, increasingly engaged in global commerce, and increasingly prominent in regional and world affairs.

In our own country there are some who see this increasing interest in China as very bad news. They point to China's rising military budget, its trade and arms export policy and poor record on human rights and say that we should oppose China, seek single-handedly to isolate it, end normal trade relations and issue threats. To them, confrontation is the only principled option we have.

I do not agree.

Effective diplomacy results not from the recitation of principle alone, but from backing principle with realistic policies; from seeing that what is worth achieving is achieved. And with respect to China and the United States, there is much that is worth achieving.

America has a security interest in seeing a China that neither threatens nor feels threatened as it advances more fully onto the world stage. We have a political interest in seeing a China that enjoys good relations with its neighbors and that plays a constructive international role. We have an economic interest in a China that opens its vast market and understands that it has a stake in a global system based on the rule of law. And we have an interest, as a people, in encouraging the development of a government in Beijing that observes international standards of respect for human rights.

In pursuing our goals, we have a variety of tools, but no magic wand. At least for the foreseeable future, we will have serious differences with China. A policy of confrontation would lock those differences in.

Instead, our policy is to seek to advance our interests with China by engaging in a strategic dialogue aimed at narrowing differences and identifying areas of common ground. For example, until a few years ago, China was selling dangerous weapons and advanced technologies with little discipline and no accountability.

Since we began our dialogue, Beijing has supported extension of the Nuclear Nonproliferation Treaty, signed a ban on explosive nuclear tests, ratified the Chemical Weapons Convention and agreed to abide by rules that restrain the export of advanced missile systems and technologies. China has also curtailed its nuclear cooperation with Iran and pledged not to assist unsafeguarded nuclear facilities in other countries.

All this is important and should matter to every American. But it is not enough. China still maintains weapons supply relationships that we consider dangerous and its system of export controls is inadequate. In April, we imposed economic sanctions on Chinese companies for aiding Iran's chemical weapons program. And we will take further appropriate actions if warranted.

A second topic of our discussions with China concerns our shared interest in stability on the Korean Peninsula, where earlier this century more than 50,000 Americans and hundreds of thousands of Koreans died resisting aggression and where 37,000 U.S. troops are stationed still.

The tensions here may seem a relic of Cold War passions, but they are real, the stakes are high and China's history of good relations with Pyongyang enables it to play a potentially crucial role. In 1994, with China's cooperation, we convinced North Korea to freeze -- and pledge to dismantle -- its dangerous nuclear program. This preserved the Peninsula's stability for the short term while preparing the way for discussions that may ultimately lead to full reconciliation.

A third issue in our dialogue with China is Taiwan. The principles that guide us are set out in the 1972 Shanghai and two later Communiques in which the United States recognizes the authorities in the PRC as the sole legal government of China. At the same time, under the Taiwan Relations Act of 1979, we maintain strong unofficial ties with the people there.

These U.S. policies have contributed to stability, security and prosperity for all three parties. But this remains an intensely emotional issue. American policy must be consistent. Leaders in Beijing and Taipei must avoid miscalculation. And differences must be resolved patiently, without violence, and on the basis of free and mutual consent.

On economic matters, our dialogue is focused on continuing the trend towards a China that is more open and more fully a part of the international system.

The desire for higher living standards, which Secretary Acheson identified as a determining force in Asia 50 years ago, is a driving force in China now. Reforms begun under Deng Xiaoping have created thriving areas of growth outside the stagnant state sector, while lifting millions out of poverty and laying the basis for a market economy.

But as the Chinese themselves recognize, continued growth will require continued reform. The resource-sapping state enterprises have to be restructured. The financial system has to modernize. The growing economic disparity among China's regions has to be addressed. And China will have to make the hard choice to open its market further and observe the international rules of the game on trade.

All this matters not only to China, but to us, for the United States has both an economic and a strategic stake in whether China's reforms continue and succeed.

Commercially, we are encouraging China to join the World Trade Organization (WTO) under rules that would require it to end unfair trade barriers, permit judicial review of trade activities, enforce its trade laws uniformly, and use WTO procedures to settle disputes. If China enters the WTO under these terms, it would give the U.S. more access to China's market, boost our exports, reduce our trade deficit and create new, well-paying jobs.

Even more important are the strategic benefits both for us and China if Beijing is able to meet the needs of its people in a manner that does not threaten others and that steadily increases the exposure of Chinese society to new technologies and ideas.

Such a China would likely place a high value on stable relations with its neighbors, have a strong interest in preventing the proliferation of weapons of mass destruction and be disposed to build on progress already made in combating the global threats of pollution, terrorism and crime.

Such a China might also begin to change in an area where we currently have very fundamental differences, and that is with respect to human rights. The United States believes that certain basic rights are universal and have been so recognized internationally. Among these are the freedoms of speech, assembly, religion and the press.

We also believe that legitimate political power flows from the people. Some say this is wholly a Western concept, but that argument is belied by the growth in democracy worldwide, and by writers as venerable as the Confucian disciple Mencius, who wrote more than 2000 years ago that "The people are the foundation of the state; the national altars are second; and the sovereign is the least important of all."

It is true that people in China today generally have more options in their daily lives than did their parents. And progress has been made in revising civil and criminal law and in permitting choices in village elections.

But China's overall record on human rights remains dismal. Religious harassment is common. Organized political opposition is thoroughly stifled. And dissidents such as Wei Jingsheng and Wang Dan have been imprisoned for years for daring to advocate democracy.

We believe those imprisoned for the peaceful expression of political, religious or social views should be released. We have urged that international humanitarian organizations be given access to prisoners. We have stressed the value of resuming talks between Beijing and one of your former speakers here at the Commonwealth Club, the Dalai Lama, for the purpose of preserving the unique heritage of Tibet.

With others if possible, but alone if we must, the United States will continue to shine the spotlight on human rights violations in China, as we do elsewhere around the globe. We have also pledged to work with Congress to obtain increased funding for Radio Free Asia and Voice of America broadcasts to promote the free exchange of ideas in China. And we will continue to raise human rights issues directly with officials in Beijing.

The prospects for improved U.S.-China relations, and China's standing in the world, will be affected by what happens on the far side of midnight in Hong Kong six days from now.

Hong Kong has been under foreign control for longer than San Francisco has been part of the United States.

Next Tuesday, it will peacefully re-enter the Chinese nation as the crown jewel of Asia's economic emergence. Although possessing a uniquely international outlook, Hong Kong has retained its Chinese ethnicity and character. And polls indicate that the majority of Hong Kong's people favor its return.

Next week's feasting and fireworks will not, however, tell the full story. The world will be watching to see if Beijing meets its pledge to maintain Hong Kong's autonomy, market economy and way of life for decades to come.

If that pledge is kept, China will benefit from its own huge investment in the Hong Kong economy, while integrating itself more fully into the international community and enhancing prospects for improved relations both within its own region and with the United States. If the pledge is not kept, China's international standing will be tarnished, and the freedom and continued prosperity of the Hong Kong people will be in doubt.

I look forward to representing our country at the transfer ceremony. My presence will reflect America's interests in Hong Kong, which range from our stake in law enforcement cooperation, to the more than 1,100 U.S. companies that operate there, to the example of a Hong Kong whose glittering success is based firmly on free markets and the rule of law.

I will bring to Asia a message of vigorous American support for the continued freedom and autonomy of the Hong Kong people. We do not believe it will be possible to preserve Hong Kong's way of life without preserving civil liberties.

Nor will it be possible to sustain Hong Kong's prosperity without preserving the elements of good governance -- an independent judiciary, a respected civil service, an honest system of customs, an open investment regime and leaders that are accountable to the people.

The United States is a friend to democracy in Hong Kong, as elsewhere. We know that the people of Hong Kong value their freedoms. And we expect those with authority, whether in Beijing or Hong Kong, itself, to meet fully the obligations spelled out in the Sino-British Joint Declaration of 1984 and the Hong Kong Basic Law.

Earlier this year, China arranged the appointment of a provisional legislature to replace the current elected one, and to serve until a new election is held.

The United States believes this action was unjustified and, since the provisional legislature includes 10 members defeated in the 1995 elections, it was also at odds with the popular will. As a result, I will not participate in the swearing-in ceremony for the legislature when I visit Hong Kong. And we will be watching closely to see if free and fair elections for a new legislature are conducted -- as promised -- at an early date.

Last April, President Clinton and I met with Martin Lee, a democratic leader in Hong Kong, who urged America to stay engaged with China on Hong Kong and other issues. He also expressed alarm at the proposal to end "most-favored-nation" or normal trade relations with China. Such an action would cost Hong Kong an estimated 85,000 jobs and $30,000 million in annual revenues.

It is expected that this issue will be voted on by the U.S. House of Representatives -- and I am very happy to tell you, having just gotten the signal, that the resolution to defeat most-favored-nation was itself defeated quite soundly.

Trying to influence China by denying to it the trade status we accord most other countries is analogous to a doctor performing surgery with a crowbar; the intentions may be good, but the prospects for success are not. I thank very much the Members of the House of Representatives who voted with us in doing the smart thing.

Aside from the impact on Hong Kong, ending MFN would severely damage our overall leadership in Asia, while reducing prospects for Chinese cooperation on issues of strategic importance to the United States. These include North Korea, proliferation, Taiwan, the global environment and matters coming before the U.N. Security Council, of which China is a permanent member.

What's more, denial of MFN is opposed by many leading Chinese dissidents and by U.S. groups involved in religious outreach in China because they want China influenced not isolated by the international community.

Now that this year's debate is over, it is a very good time to take stock.

We know that ending normal trade relations with China would not be productive.

But just as clearly, a policy of acquiescence in which we fail to make clear to China our own views and values would not be appropriate.

This argues, at least generally, for the current U.S. approach, not because it guarantees instant results, but because it serves American interests and reflects the reality of the U.S.-China relationship over the long term.

Engagement is not the same as endorsement. Our approach includes frank talk about differences. When warranted, it includes targeted sanctions or other appropriate measures to make tangible our disapproval. But it also includes an active search for areas where we can work with China for our own benefit, and that of the region and the whole world.

Today, the economic and security future of Asia is not a zero sum game. China has the ability to pursue its prosperity and maintain its security without harming its neighbors or Taiwan.

The United States can -- and will -- maintain its alliances and other interests in the region without threatening the legitimate rights and interests of any other country.

Our allies and partners in the region are thoroughly defense-oriented.

And the nations of Southeast Asia are committed through ASEAN and the ASEAN Regional Forum to resolve existing territorial and other disputes peacefully.

Some might agree with this assessment, but insist it is only temporary, that Beijing and Washington are destined to become bitter enemies as China's economic and military power grows.

The administration does not base its policy on any assumptions -- positive or negative -- about the future. But we are not prepared to make the less desirable outcome more likely by treating it as inevitable. Nor can we disregard the powerful currents of change that are working to keep China on a cooperative rather than a confrontational track.

Every day, in universities from Seoul to San Francisco, Chinese students are learning how systems based on open markets and the rule of law operate. Every week, thousands of Chinese are added to the payrolls of companies that operate under a free enterprise system, while many others go into business for themselves.

The ideology that drove earlier generations of Chinese leaders cannot guide the world's largest country into the next century. Beijing's new leaders know this. And they know that the shift from central planning to private enterprise cannot be reversed except at enormous economic and social cost.

Regardless of the policy choices we make, China will be a rising force in Asian and world affairs. The history of this century teaches us the wisdom of trying to bring such a power into the fold as a responsible participant in the international system, rather than driving it out into the wilderness of isolation.

Domestically, we Americans should not let the differences aired in the debate over U.S.-China trade issue obscure our agreement on long-term goals. Whether our particular interest in China is diplomatic, security, commercial or humanitarian, our overriding objective is to encourage China's integration into a regional and global system designed to solve problems peacefully and in accordance with law.

If you are a business person, you will care whether China's legal structure respects individual rights, and whether the political environment is stable. If you are a military planner, you will want to see China moving ahead with reform because you know that an open society contributes to peace. If you are a human rights activist, you will welcome the potential liberalizing effects of expanded commerce, a strong private sector and a broad dialogue between China and the world's democracies.

And if you are Secretary of State, you will be determined to move ahead on all fronts, encouraging the evolution of a China that defines its own interests in a manner compatible with those of the United States.

Forty-seven years ago, Dean Acheson told this historic club that Americans are interested in the peoples of Asia as people. We do not want to deny them any opportunity, any freedom, any right. We do not want to use them for any purpose of our own...the basic objective of American foreign policy is to make possible a world in which all peoples, including the peoples of Asia, can work, in their own way, toward a better life.

So much has changed since those remarks were made. But American purpose has not changed.

Whatever choices others may make, America will keep its commitments. We will honor our principles. We will defend freedom. And we will keep open the hand of friendship to all who will work with us to make the next century a golden era for the Golden State, our nation and the world.

Thank you for your attention.