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Friday, August 19, 2011

U.S. Assistance Programs in China


Thomas Lum
Specialist in Asian Affairs

This report examines U.S. foreign assistance activities in the People’s Republic of China (PRC), including U.S. Department of State and U.S. Agency for International Development (USAID) programming, foreign operations appropriations, policy history, and legislative background. International programs supported by U.S. departments and agencies other than the Department of State and USAID are not covered in this report.

U.S. foreign assistance efforts in the PRC aim to promote human rights, democracy, the rule of law, and environmental conservation in China and Tibet and to support Tibetan livelihoods and culture. The United States Congress has played a leading role in initiating programs and determining funding levels for these objectives. Congressionally mandated rule of law, civil society, public participation, and related programs together constitute an important component of U.S. human rights policy towards China. According to the Organization for Economic Cooperation and Development, the United States is the largest provider of “government and civil society” programming among major bilateral foreign aid donors.

During the past decade, the U.S. Department of State and USAID have administered a growing number and range of programs in China. Between 2001 and 2010, the United States government authorized or made available nearly $275 million for Department of State foreign assistance efforts in the PRC, of which $229 million was devoted to human rights, democracy, rule of law, and related activities, Tibetan communities, and the environment. U.S. program areas include the following: promoting the rule of law, civil society, and democratic norms and institutions; training legal professionals; building the capacity of judicial institutions; reforming the criminal justice system; supporting sustainable livelihoods and cultural preservation in Tibetan communities; protecting the environment; and improving the prevention, care, and treatment of HIV/AIDS in China. The direct recipients of State Department and USAID grants have been predominantly U.S.-based non-governmental organizations (NGOs) and universities. Some Chinese NGOs, universities, and government entities have participated in, collaborated with, or indirectly benefited from U.S. programs and foreign aid grantees.

Some observers have debated the efficacy of U.S. foreign assistance efforts in China. Some policy analysts argue that U.S. democracy, rule of law, and related programs have had little effect in China due to political constraints and restrictions on civil society imposed by the PRC government. Furthermore, some policy makers contend that the United States should not provide assistance to a country, like China, that has significant foreign aid resources of its own. Other observers argue that U.S. assistance activities in China have helped to build social and legal foundations for political change and bolster reform-minded officials in the PRC government. Some experts also propound that U.S. programs have nurtured relationships among governmental and non-governmental actors and educational institutions in the United States and the PRC, which have helped to develop common understandings about democratic norms and principles.



Date of Report: August
9, 2011
Number of Pages:
15
Order Number: RS22
663
Price: $29.95

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Wednesday, August 17, 2011

Vietnamese Victims of Agent Orange and U.S.-Vietnam Relations

Michael F. Martin
Specialist in Asian Affairs

Since the end of the Vietnam War in 1975, there has been a gradual warming of bilateral relations between the United States and Vietnam, culminating in the appointment of the first U.S. ambassador to Vietnam in 1996 and the granting of permanent normal trade relations (PNTR) to Vietnam in 2007. Over the last three decades, many—but not all—of the major issues causing tension between the two nations have been resolved.

One major legacy of the Vietnam War that remains unresolved is the damage that Agent Orange, and its accompanying dioxin, have done to the people and the environment of Vietnam. For the last 35 years, this issue has generally been pushed to the background of bilateral discussions by other issues considered more important by the United States and/or Vietnam. With most of those issues presently resolved, the issue of Agent Orange/dioxin has emerged as a regular topic in bilateral discussions.

According to various estimates, the U.S. military sprayed approximately 11 million-12 million gallons of Agent Orange over nearly 10% of then-South Vietnam between 1961 and 1971. One scientific study estimated that between 2.1 million and 4.8 million Vietnamese were directly exposed to Agent Orange. Vietnamese advocacy groups claim that there are over 3 million Vietnamese suffering from serious health problems caused by exposure to the dioxin in Agent Orange.

In the last few years, the people of Vietnam have become increasingly concerned about the issue of Agent Orange. Various non-government organizations are placing more pressure on the Vietnamese government to remove the dioxin from the environment and provide better care to the people exposed to Agent Orange. Some government ministries are comparatively sympathetic to the public concern about Agent Orange, but other ministries are apprehensive that highlighting the dangers of dioxin could have undesired consequences for bilateral relations with the United States or for Vietnam’s economy.

The Vietnamese government has long sought U.S. assistance. Although the United States has provided scientific and technical support in the past, it has repeatedly denied any legal liability to provide assistance. It has questioned Vietnam’s assertions about the extent of the environmental and health problems attributed to Agent Orange and dioxin. As a result, there was a growing possibility of friction between the two governments over the issue of Agent Orange.

Recently, the United States has shown a greater willingness to fund remediation activities in Vietnam. Since 2007, Congress has appropriated $43.4 million for dioxin removal and related health care activities in Da Nang. However, the Vietnamese government and people would like to see the United States do more to provide help for victims of Agent Orange.

This report examines various estimates of the effects of Agent Orange on Vietnam’s people and environment, the history of U.S. policy on the issue, the current cleanup efforts in Vietnam, the various forms of assistance—including U.S. assistance—provided to people with medical conditions associated with dioxin exposure, and the implications for bilateral relations. It concludes with a brief discussion of possible congressional responses to the issue.



Date of Report: July 25, 2011
Number of Pages: 40
Order Number: RL34761
Price: $29.95

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Tuesday, August 16, 2011

Taiwan: Major U.S. Arms Sales Since 1990


Shirley A. Kan
Specialist in Asian Security Affairs

This report, updated as warranted, discusses U.S. security assistance to Taiwan, or Republic of China (ROC), including policy issues for Congress and legislation. Congress has oversight of the Taiwan Relations Act (TRA), P.L. 96-8, which has governed arms sales to Taiwan since 1979, when the United States recognized the People’s Republic of China (PRC) instead of the ROC. Two other relevant parts of the “one China” policy are the August 17, 1982, U.S.-PRC Joint Communique and the “Six Assurances” to Taiwan. U.S. arms sales to Taiwan have been significant. The United States also expanded military ties with Taiwan after the PRC’s missile firings in 1995-1996. However, the U.S.-ROC Mutual Defense Treaty terminated in 1979.

At the last U.S.-Taiwan annual arms sales talks on April 24, 2001, President George W. Bush approved for possible sale diesel-electric submarines, P-3 anti-submarine warfare (ASW) aircraft (linked to the submarine sale), four decommissioned U.S. Kidd-class destroyers, and other items. Bush also deferred decisions on Aegis-equipped destroyers and other items, while denying other requests. Afterward, attention turned to Taiwan, where the military, civilian officials, and legislators from competing political parties debated contentious issues about how much to spend on defense and which U.S. weapons to acquire, despite the increasing threat (including a missile buildup) from the People’s Liberation Army (PLA). In 2003, the Bush Administration pointed Taiwan to three priorities for defense: command and control, missile defense, and ASW. The Pentagon also has broadened its concern from Taiwan’s arms purchases to its defense spending, seriousness in self-defense and protection of secrets, joint capabilities, operational readiness, critical infrastructure protection, and asymmetrical advantages. Blocked by the Kuomintang (KMT) party in the Legislative Yuan (LY) that opposed the Democratic Progressive Party (DPP)’s president (2000-2008), the Special Budget (not passed) for submarines, P-3C ASW aircraft, and PAC-3 missile defense systems was cut from $18 billion in 2004 to $9 billion (for submarines only) in 2005. In March 2006, Taiwan’s defense minister requested a 2006 Supplemental Defense Budget (not passed) in part for submarine procurement, P-3Cs, and PAC-2 upgrades (not new PAC-3 missiles). In June 2007, the LY passed Taiwan’s 2007 defense budget with funds for P-3C planes, PAC-2 upgrades, and F-16C/D fighters. In December 2007, the LY approved $62 million to start the sub design phase. After the KMT’s Ma Ying-jeou became President in May 2008, he resumed cross-strait talks while retaining the arms requests. But Ma has cut the defense budget.

Attention also turned to U.S. decisions on pending arms sales. In 2008, congressional concerns mounted about a suspected “freeze” in President Bush’s notifications to Congress on arms sales. On October 3, 2008, Bush finally notified Congress. However, he submitted six of the eight pending programs (not a “package”) for a combined value of $6.5 billion. Despite the concerns in 2008, President Obama repeated that cycle to wait to decide on submissions for congressional review all at one time (on January 29, 2010) five programs with a total value of $6.4 billion. Like Bush, President Obama did not notify the submarine design program (the only one pending from decisions in 2001) and has not accepted Taiwan’s formal request for F-16C/D fighters (pending since 2006). Defense Secretary Robert Gates submitted to Congress in February 2010 an unclassified assessment of Taiwan’s air defense forces, including its F-16 fighters, finding that Taiwan faced diminished ability to deny the PRC air superiority. Legislation in the 112
th Congress includes H.Con.Res. 39 (Andrews) and H.R. 2583 (Ros-Lehtinen). Among other congressional actions, on May 26, 45 Senators wrote to President Obama to support a sale of F-16C/Ds. On July 21, Senator Cornyn lifted his hold on a nomination to urge for the pending report on Taiwan’s air defense and decisions on the F-16s, promised by October 1. On August 1, 181 Members of the House sent a letter to President Obama to urge him to sell F-16C/D fighters.


Date of Report: August 2, 2011
Number of Pages: 72
Order Number: RL30957
Price: $29.95

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U.S.-China Military Contacts: Issues for Congress


Shirley A. Kan
Specialist in Asian Security Affairs

This CRS report, updated as warranted, discusses policy issues regarding military-to-military (mil-to-mil) contacts with the People’s Republic of China (PRC) and provides a record of major contacts and crises since 1993. The United States suspended military contacts with China and imposed sanctions on arms sales in response to the Tiananmen Crackdown in 1989. In 1993, the Clinton Administration re-engaged with the top PRC leadership, including China’s military, the People’s Liberation Army (PLA). Renewed military exchanges with the PLA have not regained the closeness reached in the 1980s, when U.S.-PRC strategic cooperation against the Soviet Union included U.S. arms sales to China. Improvements and deteriorations in overall bilateral relations have affected military contacts, which were close in 1997-1998 and 2000, but marred by the 1995-1996 Taiwan Strait crisis, mistaken NATO bombing of a PRC embassy in 1999, the EP- 3 aircraft collision crisis in 2001, and aggressive naval confrontations (including in 2009).

In 2001, President Bush continued the policy of engagement with China, but the Pentagon skeptically reviewed and cautiously resumed mil-to-mil contacts. Secretary of Defense Donald Rumsfeld, in 2002, resumed the Defense Consultative Talks (DCT) with the PLA and, in 2003, hosted a Vice Chairman of the Central Military Commission (CMC)/Defense Minister.

Issues for Congress include whether the Obama Administration has complied with legislation overseeing dealings with the PLA and pursued contacts with the PLA that advance a prioritized set of U.S. security interests, especially the operational safety of U.S. military personnel. Oversight legislation includes the Foreign Relations Authorization Act for FY1990-FY1991 (P.L. 101-246) and National Defense Authorization Act (NDAA) for FY2000 (P.L. 106-65). Skeptics and proponents of military exchanges with the PRC have debated whether the contacts have achieved results in U.S. objectives and whether the contacts have contributed to the PLA’s warfighting capabilities that might harm U.S. security interests. Some have argued about whether the value that U.S. officials place on the contacts overly extends leverage to the PLA. Some believe talks can serve U.S. interests that include conflict avoidance/crisis management; militarycivilian coordination; transparency and reciprocity; tension reduction over Taiwan; weapons nonproliferation; nuclear/missile/space/cyber talks; counterterrorism; and POW/MIA accounting.

In January 2010, the PLA criticized U.S. arms sales to Taiwan and claimed to “suspend” many U.S.-PRC military contacts. Then, in 2011, the PLA hosted Secretary Gates in January, and the PLA Chief of General Staff visited in May. Admiral Mike Mullen visited China on July 9-13, 2011, the first visit by the Chairman of the Joint Chiefs of Staff since 2007.

Policymakers could review the approach to mil-to-mil contacts, given concerns about crises. U.S. officials have faced challenges in cooperation from the PLA. The PLA has tried to use its suspensions of exchanges while blaming U.S. “obstacles” (including arms sales to Taiwan, legal restrictions on contacts, and the Pentagon’s reports to Congress on the PLA). The PRC’s harassment of U.S. surveillance ships (in 2009) and increasing assertiveness in maritime areas have shown the limits to mil-to-mil talks and PLA restraint. Still, at the Strategic and Economic Dialogue (S&ED) in July 2009, President Obama called for military contacts to diminish disputes with China. The NDAA for FY2010 (P.L. 111-84) amended P.L. 106-65 for the report on PRC military power to expand the focus to security developments involving the PRC, add cooperative elements, and fold in another report on mil-to-mil contacts. However, the Administration was late in submitting this report in 2010 and in 2011. On May 26, 2011, the House passed H.R. 1540, the FY2012 NDAA, with sections relevant to this report and defense procurement.



Date of Report: July 26, 2011
Number of Pages: 72
Order Number: RL32496
Price: $29.95

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Friday, August 12, 2011

China’s Currency: An Analysis of the Economic Issues


Wayne M. Morrison
Specialist in Asian Trade and Finance

Marc Labonte
Specialist in Macroeconomic Policy


China’s policy of intervening in currency markets to limit or halt the appreciation of its currency, the renminbi (RMB), against the U.S. dollar and other currencies has become an issue of concern for many in Congress. Critics charge that China’s currency policy is intended to make its exports significantly cheaper, and its imports more expensive, than would if the RMB were a freely traded currency. They contend that the RMB is significantly undervalued against the dollar and that this has been a major contributor to the large annual U.S. trade deficits with China and the loss of U.S. jobs in recent years. Some Members have urged the Obama Administration take a more aggressive stand against China over its currency policy, such as by designating it as a “currency manipulator” under U.S. trade law. Others have introduced legislation that would seek to counter the perceived effects of China’s currency policy on the U.S. economy. For example, in the 112th Congress, H.R. 639, S. 328, and S. 1130 would make certain exchange rate policies an actionable subsidy under U.S. countervailing duty cases.

From July 2005 to July 2008, China’s central bank allowed the RMB to appreciate against the dollar by about 21%. However, once the effects of the global economic crisis became apparent, China halted appreciation of the RMB in an effort to help Chinese industries dependent on trade. From July 2008 to about mid-June 2010, China kept the exchange rate of the RMB relatively constant at 6.83 yuan (the base unit of the RMB) to the dollar. On June 19, 2010, the China’s central bank stated that it would resume appreciation of the RMB exchange. Since then, China has allowed the RMB/dollar exchange rate to rise by 6.0% (through August 4, 2011). Many U.S. officials have criticized this pace as being too slow, especially given China’s strong economic growth over the past few years, including its trade sector, and its rising level of foreign exchange reserves, which hit $3.2 trillion as of June 2011.

Many economists argue the that effects of China’s currency policy on the U.S. economy are mixed. If the RMB is undervalued (as many contend), then it might be viewed as an indirect export subsidy which artificially lowers the prices of Chinese products imported into the United States. This benefits U.S. consumers and U.S. firms that use Chinese-made parts and components, but could negatively affect certain U.S. import-sensitive firms. An undervalued RMB might also have the effect of limiting the level of U.S. exports to China than might occur under a floating exchange rate system. Further complicating the issue is China’s large purchases of U.S. Treasury securities, which totaled $1.2 trillion at the end of 2010. These purchases occur because China’s intervention in currency markets causes it to accumulate large levels of foreign exchange reserves, especially U.S. dollars, which are then used to purchase U.S. debt. Such purchases help the U.S. government fund the budget deficit, which helps to keep U.S. interest rates relatively low. These factors suggest that an appreciation of the RMB to the dollar could benefit some U.S. sectors, but negatively impact others. The effects of the global economic slowdown have refocused attention on the need to reduce global imbalances (e.g., savings, investment, and trade), especially in regards to China and the United States. Many economists contend that China should take steps to lessen its dependence on exports and fixed investment for its economic growth and instead rely more on domestic consumption. A market-based currency policy is seen as an important factor in achieving this goal. Further RMB appreciation could help promote the development of non-export industries in China, while boosting China’s imports, including from the United States. This report provides an economic analysis of China’s currency policy and lists current legislation and options for Congress.



Date of Report: August 3, 2011
Number of Pages: 43
Order Number: R21625
Price: $29.95

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