Tag Archives: Mexico

Get on with it

(Washington, D.C.): Six months to the day after President Bush offered not only Saddam Hussein but the United Nations one last chance to disarm Iraq, the verdict is in: So long as the former is in power, he will not voluntarily, fully and permanently surrender his weapons of mass destruction programs or credibly foreswear the aggressive ambitions that drive his desire for such arms. And the United Nations will be rendered — as Mr. Bush warned — just as ineffectual as the League of Nations in dealing with the security threats of our time, thanks to the determination of Saddam’s friends in the Security Council to protect him.

The lead editorial in today’s Wall Street Journal lays out succinctly the dangers associated with allowing the so-called UN diplomatic/inspections “process” to be strung out any further. It argues persuasively for President Bush to get on with the liberation of Iraq, without further ado. We can only hope he heeds this advice, cuts the considerable losses (both domestically and internationally) incurred by the Nation’s long detour in Lilliput-on- the -East-River and begins forthwith the liberation of Iraq.

Bush in Lilliput

Delaying action in Iraq is endangering American lives

Wall Street Journal, 12 March 2003

    “The Bush Administration is putting a special focus on winning the support of Guinea…” –Yesterday’s Wall Street Journal.

We’ve never visited Guinea, which is perhaps our loss. But the spectacle of the U.S. government begging that African nation for permission to sacrifice American blood and treasure to save the world from Saddam Hussein exposes the farce that the U.N. Security Council’s Iraq debate has become. Every day of delay in starting the war matters little to Guinea but it puts more Americans at mortal risk.

President Bush is of course trying to accommodate his stalwart friend, Tony Blair. The British Prime Minister wants a nine-vote majority in the 15-member Security Council as a shield against his Labour Party critics. But Mr. Blair’s fate will surely rise or fall on how well the war goes and not on who approves it in advance. Mr. Bush has already done him the favor of going for a first U.N. resolution last fall, followed by weeks of further delay this year to seek a second.

That second effort now looks like a diplomatic blunder, given Russian and the implacable French opposition. The process itself has also forced the U.S. to give up some of the attack advantage of strategic surprise. And it now risks causing more tangible harm as the U.S. agrees to more concessions and extensions–yesterday to one beyond even the earlier “final” deadline of March 17.

This latest delay is aimed at gathering the elusive but somehow “crucial” votes of “six swing Council nations.” In addition to Guinea, those countries are Mexico, Chile, Angola, Pakistan and the always strategically vital Cameroon. The U.S. has already been reduced to bribing these countries with cash or other favors in return for their support. Yet they’ve all played hard to get, posing as Hamlet for their 10 minutes of fame on the world stage.

The Mexican and Chilean fandango is especially insulting given the preferential treatment their exports receive to the U.S. market. Maybe we should transfer to Bulgaria– which is supporting us sans bribery–the trade benefits that these two nations apparently take for granted. These columns have long tried sympathetically to explain Mexican realities to our readers, but President Vicente Fox’s U.N. war straddle will cost his country years of U.S. public goodwill.

Mexican and French soldiers will not be doing any dying once the war finally does start. That privilege will belong to Americans (and some Brits and Aussies), and every day that they are prevented from starting to disarm Saddam is one more day he is able to prepare death traps for them and for us. There are now daily reports that the Iraqi dictator has booby-trapped oil wells, dispersed his mobile poison labs or placed agents among Iraqi civilians. Yesterday’s AP dispatch had him opening “a training camp for Arab volunteers willing to carry out suicide bombings against U.S. forces.” Every day of delay also gives him, or al Qaeda, more time to plant or mobilize agents to attack the U.S. homeland.

There are other growing costs of delay. One is the economic damage from uncertainty–which is small compared with life and limb but seems large if you lose your job. Another is the lesson to other thugs, such as North Korea’s Kim Jong Il, that they can also use the U.N. to stymie and wait out American resolve. And then there is the cost to President Bush’s own political standing and credibility as he lets the world’s pygmies tie him down like Gulliver.

We could support further delay in starting the war if there were any hope at all that U.N. inspections might disarm Saddam short of costing American lives. The trend is in fact the opposite. Hans Blix, Mohammed El Baradei and the other inspectors seem more inclined than ever to forgive Iraqi intransigence. Mr. El Baradei made a public fuss last week about one British-U.S. claim that turns out to have been false, but which was in any case peripheral to Iraq’s weapons of mass destruction. Mr. Blix buried deep in his latest report the news of an illegal Iraqi drone capable of delivering chemical weapons.

As each day passes, the evidence mounts that the U.N. inspections regime is not about containing Saddam; it is about containing America. Messrs. Bush and Blair went to the U.N. in good faith to build international support, and perhaps in the process to rescue the U.N. from irrelevance. The U.N. is proving daily that is in fact another League of Nations. Mr. Bush’s obligation is not to the reputation of the U.N. but to the safety of American soldiers and citizens.

Iraq still defies UN, while U.S. receives support from Mexico, Saudi Arabia

Despite recent handover of documents to UN weapons inspectors, Chief U.N. inspector Hans Blix said today that Iraq still had not made a “fundamental decision” to disarm. Blixs comments come one week before he must present his findings on Iraqi disarmament to the UN Security Council.

The U.S. and Britain continue their drive to convince the divided Security Council to pass a second measure enforcing Iraqis repeated violations of Resolution 1441. Today, they secured Mexicos support for tough action; the first of a handful of undecided Security Council members to join the U.S., Britain and Spain.

Meanwhile, preparations for war continue. The Washington Post reports that in a major reversal, Saudi Arabia has agreed to new agreements that will allow expanded U.S. air operations from Saudi territory, including full use of Prince Sultan Air Base as an air operations center, in the event of war against Iraq, according to senior U.S. officials and diplomatic sources.

This follows a Saudi rejection of an emergency summit of the Organization of the Islamic Conference (OIC) on Iraq.

See the Center’s report on the Sami Al-Arian arrest, indictment: Terrorist arrest shows holes in White House’s Muslim outreach program; warnings ignored

Note to President Fox: Let him quit

Mexico’s Marxist Foreign Minister, Jorge Castaeda, says he’s not getting his way, so he wants to quit. President Vicente Fox hints he might not let him leave, and says he will announce a decision on Monday.

For the sake of US-Mexican relations, Fox should let Castaeda leave. Immediately.

Most press reports have inaccurately characterized Castaeda as having worked for closer Mexican-American relations. That simply isn’t so. Castaeda’s demands have generally been one-sided, ranging from immigration to the channeling of billions of US Social Security tax dollars into Mexico.

On hemispheric security issues, Castaeda has been a threat. In his own words, he has dedicated his professional life to “trying to help the Latin American left settle scores and accounts with the past.”

Just days before the September 11, 2001 terrorist attacks on the United States, Castaeda was working aggressively behind the scenes to scrap the half-century-old Inter-American Treaty of Reciprocal Assistance, better known as the Rio Treaty, which unites the entire hemisphere except Castro’s Cuba in an alliance against outside aggressors.

Castaeda’s efforts backfired when Brazil invoked the treaty in a unanimous hemispheric solidarity with the United States.

Yet Mexico was one of the last countries in the world officially to offer condolences or solidarity with America after the terrorist attacks.

After waiting a decent interval, Castaeda went at it again, threatening to wreck the Rio Treaty by withdrawing Mexico and, he hopes, inducing the new or incoming leftist regimes in Venezuela, Brazil and Ecuador to follow.

For the sake of inter-American security and solidarity, to say nothing of Mexican-American relations, President Fox should let his anachronistic foreign minister take his ball and go home.

Accounting time: Who is with us – and who is against us

For months now, President Bush has been declaring that nations around the world had a choice to make. Either they would be with us or with the terrorists. Those who are now showing themselves to be against us, rather than with us, must be held to account.

Topping the list, of course, are the three veto-wielding nations that have long supported Saddam Hussein in the UN Security Council, and who are doing so now: France, Russia and China. It could be that State Department interlocutors have encouraged the intransigence of this Axis of Greed.

There is a similar risk that Russia and China — and even more reliable “friends,” like South Korea and Japan — may perceive Bush’s temperate stance towards North Korea’s nuclear weapons program as an invitation to try to have it both ways: Suffering no costs in their relationship with us even as they continue to prop up and reward the malfeasance of one of the planet’s most dangerous regimes.

Among the other nations who are making known where they stand are Egypt and Saudi Arabia. The US can no longer afford to turn a blind eye to their profoundly unfriendly behavior. That is particularly true insofar as there is reason to believe that Wahhabi enterprises are giving rise to perhaps the most insidious enemy of all: an Islamist Fifth Column operating within this country.

Mexico, our southern neighbor for whom Americans have done so much, can be added to the list of those who are against us. The time has come to make clear who is truly with us and who is prepared, instead, to be with our enemies.

Appoint Otto Reich

(Washington, D.C.): The collapse yesterday of the government of Argentina is but the latest reminder of the Nation’s urgent need to have in the senior ranks of the State Department a seasoned policy-maker with vast experience in turbulent Latin America and the President’s confidence. The fact that it coincided with the long-delayed end of the 2001 session of the U.S. Congress creates an opportunity for President Bush: Mr. Bush can finally install such an individual — Ambassador Otto Reich — in the post to which the President nominated him months ago, the Assistant Secretary of State for Western Hemisphere Affairs.

As the following editorial published in the Wall Street Journal on 13 December 2001 makes clear, the only reason Amb. Reich has not been on duty before now is because of an ideological vendetta waged against him by Senator Christopher Dodd, chairman of the Senate Foreign Relations Committee Western Hemisphere Affairs Subcommittee. Even as ominous economic, political and/or strategic developments in Latin American nations like Colombia, Venezuela, Ecuador, Mexico and Peru have demanded expert and competent leadership from the U.S. government, Sen. Dodd has blocked the Reich nomination. Worse yet, he has maliciously sullied the name of the man President Bush knows can provide such leadership while denying Amb. Reich a hearing in which to rebut false charges. The Senator’s motivation is transparent: He fears such a hearing would demonstrate to the world that it is Chris Dodd’s deplorable record on hemispheric affairs — not Otto Reich’s estimable one — that should be subjected to critical reviews.

Now that Sen. Dodd and his colleagues have finally left town, Mr. Bush should exercise his constitutional prerogative to make a recess appointment for Ambassador Reich to his State Department post. By so doing, he can simultaneously end a travesty of congressional abuse of power and give the Nation a man whose talents and abilities are more needed with every passing day.

While Caracas Burns

The Wall Street Journal, 13 December 2001

Argentina has a debt crisis, guerrilla movements are growing in Colombia and Peru, and on Monday Venezuela was all but shut down because of a nationwide protest against the creeping dictatorship of President Hugo Chavez. The success story that was once Latin America is unraveling by the day, thanks in part to a lack of U.S. leadership.

Yet while Caracas burns, the top U.S. policy maker for the region can’t assume his post for reasons of petty ideological revenge. Otto Reich — President Bush’s nominee to be Assistant Secretary of State for the Western Hemisphere — still can’t get a hearing in Connecticut Senator Chris Dodd’s subcommittee. Mr. Dodd’s petulance has gone beyond the usual Beltway payback and is now creating a leadership vacuum damaging to U.S. national security.

It’s hard to recall reading today’s headlines, but 10 years ago Latin America’s future looked bright. Democracy was on the rise, economies were growing and the era of military coups seemed to be over. The countries did this mostly on their own, but U.S. leadership was crucial. The U.S. nurtured free-market economic ideas and helped against Marxist rebels. That trend stopped during the 1990s, as the Clinton Administration mostly ignored the region for more glamorous priorities. The result today is a region threatened by repression, violence and economic decline.

Beltway fiddler

In Colombia, Marxist guerrillas now control, and claim to own, a portion of the country as large as Switzerland. Any negotiations with the government, they maintain, are about who controls the rest of Colombia, and to prove it they launch terrorist strikes, kidnap or kill innocents and sabotage electricity and oil pipelines. The narcotics trade and guerrillas are both now spilling out of Colombia into Ecuador.

Shining Path terrorism is returning to the countryside in Peru, where the State Department has issued a travel warning to Americans. The triple border area of Paraguay, Brazil and Argentina is home to a number of Islamic fundamentalist terrorist cells. In Argentina, the government is bankrupt, tariff barriers on consumer goods have been hiked to 35% and a bank run has triggered capital controls.

But nowhere have conditions deteriorated faster than in Venezuela under President Chavez, whose role model is Fidel Castro. Responding to Monday’s nationwide strike, Mr. Chavez donned military fatigues as fighter planes roared overhead. “Now we will begin tightening the screws,” he said. “Nothing stops this revolution.” He has already passed laws that will allow him to confiscate private farmland, and on Tuesday Fidel himself paid a visit and praised his handiwork.

As for Central America, crime and kidnapping rings are chasing out foreign investment, the great hope of so many jobless poor. Haitian President Jean Bertrand Aristide — restored to power by Bill Clinton — behaves like a mafia don in his destitute nation, where critics of the government are murdered with impunity. The refugee exodus has resumed, with the U.S. Coast Guard reportedly intercepting more than 300 this month.

Despite anti-Yankee rhetoric for local consumption, Latin America has long relied on the U.S. for leadership. The region is in enough trouble now that if Secretary of State Colin Powell didn’t have a war to worry about, he would have no choice but to make Latin America a priority. And the crisis explains why Messrs. Bush and Powell are both adamant in supporting Mr. Reich, a Cuban immigrant and former ambassador to Venezuela with a lifetime of experience and contacts in the region.

Mr. Dodd knows that Mr. Reich would be confirmed if he got to the Senate floor, which is why he wants to block even a hearing. He and Latin America aide Janice O’Connell bear a grudge against the Cuban-American going back to their days on opposite sides of the battle over Central America. But rather than face that difference squarely, Mr. Dodd’s strategy has been to smear Mr. Reich’s reputation, accusing him in a letter to this paper of, among other things, being soft on terrorism. U.S. officials say the public record refutes those charges, which may be why Mr. Dodd doesn’t want Mr. Reich to get his chance to make his case in the Senate.

We keep wondering when Mr. Dodd’s Democratic betters are going to call him to account for such behavior. It’d be nice to know, for example, how Florida Democrats Bob Graham and Bill Nelson feel about this treatment of a Cuban American. Tom Daschle recently met with Mr. Reich, but the majority leader has been reluctant to overrule his party’s junior barons when they get the bit in their mouths.

Mr. Bush has the recourse of a recess appointment for Mr. Reich once the Senate leaves town. Given the worsening state of Latin America, and Mr. Dodd’s irresponsibility, the President can justify such a move in the urgent national interest.



Why Do Sens. Dodd and Kerry Want to Deny Otto Reich a Hearing? To Obscure The Extremism’ of Their Own Views

(Washington, D.C.): Yesterday’s Washington Post reported that Senate Democrats are determined to block the confirmation of President Bush’s nominees to several senior posts. That’s not news. What was astounding, however, is that in at least one case — that of Ambassador Otto Reich to become the Assistant Secretary of State for the Western Hemisphere — Senators Christopher Dodd of Connecticut and John Kerry of Massachusetts are unwilling even to permit the President’s choice to have a hearing before the Senate Foreign Relations Committee.

Read Dodd’s Lips

This stance is especially puzzling insofar as Sen. Dodd declared after his party regained the majority earlier this year:

We’re going to move as quickly as we can. I think that every administration deserves to have its people in place. And if there are problems from time to time, we need to resolve those, because we want to get as many people out as quickly as we can so that we don’t have a long lag time in allowing our country to be well represented….

If ever there were a time when the United States needs to be “well represented” in this hemisphere it has to be at a moment like the present. After all, American interests are at issue all across Latin America: Venezuela — the largest foreign supplier of oil to this country — is in the hands of an increasingly autocratic and anti-American leader; Colombia is in the process of a political meltdown fomented by its narco-terrorists; strategic Panama is awash with drug money, gun-running, alien-smuggling and Chinese operatives; Argentina is in economic free-fall; major bilateral issues are in play with Mexico; Fidel Castro’s misrule in Cuba may finally be coming to an end, with huge uncertainties about what comes next; desperate agricultural and meteorological conditions are afflicting much of Central America; and, of particular relevance, Sandinista leader Daniel Ortega may be about to stage an ominous political comeback in Nicaragua.

In fact, such times were made for a man of Otto Reich’s background, expertise and skills. As a former senior official in the Reagan Administration’s Latin American policy apparatus; as a U.S. Ambassador formerly posted to Venezuela; as an Hispanic American who fled the Communist take-over of Cuba and has been intimately involved with Cuban issues ever since; and as a businessman with ties and contacts throughout the hemisphere, Amb. Reich is a man in whom President Bush has rightly reposed his confidence. Throughout his career, Mr. Reich has worked to defend his adoptive country’s interests and secure the blessings of liberty for those who live south of our border.

How could it be, then, that such a man may not even be afforded an opportunity to present his qualifications and defend his record before the Foreign Relations Committee? It appears that the Committee’s chairman, Sen. Joseph Biden, has embraced a grossly distorted portrait of Mr. Reich circulated by a handful of died-in-the-wool, left-wing non-governmental organizations and legitimated by Messrs. Dodd and Kerry. An aide to Sen. Biden, presumably reflecting his boss’ views, is quoted in yesterday’s [Washington Post] as saying the nominee “is viewed as something of an extremist. That’s not the kind of person we need in a post like this.”

Who’s the Extremist’?

The real reason why Messrs. Kerry and Dodd are fighting so hard to prevent Otto Reich from getting his day in court is that a full hearing on his nomination would likely demonstrate that there are extremists in the room, alright, but that Mr. Reich is not one of them. If anybody fits that harsh billing it would actually be Senators Kerry and Dodd.

Let’s recall, Messrs. Dodd and Kerry were leaders of congressional efforts on behalf of the Sandinista cause. They assiduously sought to undermine and thwart the Contras’ ultimately successful efforts to liberate Nicaragua from the corrupt Marxist misrule of Daniel Ortega. The basis for this effort stems from Sen. Dodd’s deeply held belief that“we shouldn’t [assume] that [if] someone happens to be a Marxist, that immediately they’re going to be antagonistic to our interests or going to threaten our security.” Furthermore, his response to the idea that the Sandinista’s were “promoting revolution without frontiers” underlies his mis-characterization and subsequent criticism of Mr. Reich, when he stated that “[he doesn’t] necessarily believe that because they use that kind of rhetoric that they’re determined to overthrow every neighboring government in the Central American region.” They may, understandably, be reluctant to admit that fellow travelers like them were on the wrong side in that defining moment during the 1980s, when Latin America’s future hung in the balance — and when Ronald Reagan and outstanding subordinates, like Otto Reich, helped ensure that the region (apart from Castro’s Cuba) secured the opportunity for democratic self-governance and economic growth.

What is more, it is the likes of Senators Dodd and Kerry who are now trying to provide life- support for the one regime in the region that has successfully denied its people’s that opportunity: Fidel Castro’s government in Cuba. They seek to end the U.S. embargo — or at least to gut it by easing restrictions on American travel, agricultural sales, shipments of medicine, etc. They consider Mr. Reich as an “extremist” for having long and correctly argued a different approach: “In our relationship with Cuba we should remember how the Soviet Union was defeated [i.e. through economic warfare]a pro-active policy toward Cuba, similar in scope, can likewise succeed in bringing about peaceful and rapid end to Communism in Cuba. But it will require imagination and resources.”

The Bottom Line

If Senators Christopher Dodd and John Kerry, and their chairman, Joseph Biden, persist in denying Otto Reich a hearing, they will be not be demonstrating that he is unfit for the post which President Bush wants to entrust to him. Far from it. Instead, they will be calling into question their own fitness to sit in judgment of Mr. Reich’s nomination and, for that matter, to play a prominent role in the formulation and articulation of American foreign policy.

Senate’s Approval of P.N.T.R. Sets the Stage for China to Renew its Penetration of the U.S. Bond Market

(Washington, D.C.): According to a September 16 Reuters report, the government of China
intends to reenter the U.S. bond market in the November time-frame with a sovereign bond
offering valued, at minimum, at $1 billion. If, as expected, the offering — which will be
underwritten by Goldman Sachs, JP Morgan and Morgan Stanley Dean Witter — becomes
oversubscribed, the proceeds may be closer to $2-plus billion.

The timing could be described as “No accident, Comrade.” Beijing clearly hopes to capitalize
on
the perception that — in the wake of the U.S. Senate’s failure to attach conditions to the
Permanent Normal Trade Relations (PNTR) legislation concerning the PRC’s appalling human
rights, religious freedom and proliferation records — in the name of “engagement,” anything
goes.

China Goes for the Gold

The Chinese Communists appear especially anxious to reestablish their ability to have
unfettered,
undisciplined access to the U.S. capital markets. The opportunities thus afforded to garner vast
quantities of funds with which the leadership can do as it wishes, figure prominently in Beijing’s
economic and strategic planning. To date, the Chinese government has issued an estimated $4.2
billion in dollar-denominated bonds primarily to U.S. investors, the most recent being a
Goldman-led offering that generated $1 billion in December 1998 for the government of the
PRC.

By using the PNTR vote — and the tabling of the Thompson-Toricelli amendment — to
slipstream
a huge sovereign bond offering, China evidently thinks that it can avoid any repetition of the
difficulties encountered with its recent multi-billion dollar foray on Wall Street: the largely
unsuccessful China National Petroleum Company/PetroChina IPO in April (which was reduced
by over 71% from its original target amount of $10 billion, primarily due to massive bipartisan
political opposition from influential, non-governmental organizations). href=”#N_1_”>(1) Presumably, Beijing
also expects thereby to clear the way for a number of impending initial public offerings in New
York by such state-owned dinosaurs as China National Offshore Oil Corp., China PetroChemical
Corp. and Shanghai BaoSteel.

China may have miscalculated, however, by announcing that this bond offering will come to
market within days of the U.S. presidential election. After all, that timing may just
enable
those, like the PetroChina Coalition, who are profoundly concerned about U.S. policy
toward China to transform this sovereign debt issue, in effect, into a grassroots referendum
on that policy.

The Trouble With Undisciplined Sovereign Bonds

This possibility is heightened by the very nature of China’s latest foray into the U.S. capital
markets. Sovereign bond offerings are synonymous with general-purpose lending to foreign
governments. That is because they are not tied to underlying projects, trade transactions or other
specific uses of funds.

Financial Problems

From the 1970’s onward, this type of undisciplined, unconditioned lending to governments
has
proven to be not just bad policy, but bad banking, as well. Specifically, lenders and investors
have no idea where their money is going or how it is being used. In addition, the absence of
export-generating or import-substituting projects means that there is no identifiable, new
cash-flow earmarked for the ultimate repayment of the bond.

There are a number of ways that these types of credits can go wrong for U.S. investors and/or
American taxpayers. For instance, the latter can end up bailing out private creditors in the event
that a foreign government is deemed “too important to fail” (e.g., the Soviet Union, Mexico,
Russia, various governments involved in the Asian financial crisis in 1997-98, etc.).

There is also ample precedent for sovereign borrowers with centrally-controlled economies
(which is still the case for much of China’s GDP) to misallocate resources — thanks to the
absence of genuine, systemic market conditions — and then be forced to engage in repeated debt
reschedulings, and even forgiveness schemes, at Western taxpayer expense.

Political Risks

On the political front, the problems with general-purpose sovereign bond offerings are even
more
onerous. When the Communist government in Beijing receives what amounts to a “blank check”
to employ $1 billion-plus at its sole discretion, many investors’ non-financial
interests can be
adversely affected. For example, the PRC may employ the funding to:

  • accelerate its acquisition of mobile ICBM’s capable of targeting American cities;
  • fund supplier credits for the proliferation of weapons of mass destruction and ballistic
    missile
    delivery systems;
  • help underwrite Beijing’s robust non-nuclear military buildup;
  • subsidize genocidal and terrorist-sponsoring activities and their perpetrators in places like
    the
    Sudan, where China has major energy and geopolitical interests;
  • enable intensified religious persecution, human rights abuses, the incarceration of political
    prisoners, forced abortions, etc.
  1. perpetuate forced and child labor and massive layoffs from state-owned enterprises without
    fair compensation;
  1. pursue energy and other projects on or near the Tibetan Plateau, which threaten the identity,
    autonomy and natural resources of the Tibetan people; and
  1. despoil the environment via projects like the Three Gorges Dam.

The Bottom Line

China’s impending sovereign bond offering represents a new form of 21st century “moral
hazard”: Americans who care deeply about some or all of the aforementioned concerns could
easily end up lending their personal investment dollars to China, perhaps unwittingly through a
variety of different investment venues (e.g., insurance portfolios, corporate retirement plans,
“emerging market growth funds,” public pension plans, mutual funds, etc.).

Unfortunately, it is predictable that, all other things being equal, these serious, principled
concerns — to say nothing of the associated down-side financial and political risks — will go
largely unmentioned in the marketing “road show” Goldman and others will be undertaking
shortly on behalf of their Chinese client.

In order to ensure that American investors are fully informed about the
strategic and political, as
well as financial, implications of this latest bond offering, the William J. Casey Institute
will
be monitoring — and actively opposing — this ill-advised, undisciplined and
potentially quite
dangerous loan directly to the government of the People’s Republic of China.

– 30 –

1. See Casey Institute Publications: Fed Chairman
Greenspan Takes Aim at Use of Capital
Markets Leverage to Protect U.S. Security Interests — and Misses ( href=”/index.jsp?section=papers&code=00-C_69″>00-C 69, 20 July 2000);
Financial Time Affirms ‘Legs’ of Casey Institute’s Capital Markets Transparency
Initiative;
Underscores Market-Moving Power of PetroChina Coalition ( href=”/index.jsp?section=papers&code=00-C_66″>00-C 66, 14 July 2000); Broad-Based Coalition Plays
Pivotal Role in PetroChina’s I.P.O. — And Market’s Bleak View of
Chinese State-Owned Enterprises (00-R 36, 13
April 2000); Prudential Securities’ Melcher
Breaks The Code On The Long- Term Market Implications of PetroChina
Controversy (00-C
30, 30 March 2000); Respected Far Eastern
Economic Review Captures Broader Message to
the Markets Embodied in PetroChina’s IPO Fiasco (00-F
23, 31 March 2000); Senior
Legislators Press S.E.C.’s Levitt on PetroChina IPO — Missives from Reps. Oxley and Baucus
Should be Wake-Up Call to S.E.C, U.S. Investors (00-F
17 , 17 March 2000); Casey’s Robinson
Testifies Before California Legislature on Prospect of Global “Bad Actors” Penetrating State
Portfolios (00-R 4, 14 January 2000).

China’s Mythic Market

By Alan Tonelson
The New York Times, 18 May 2000

Trade agreements cannot bring widespread benefits to the United States if they rest on false portrayals of our trade partners and of American business objectives. Americans learned that the hard way after the North American Free Trade Agreement, when Mexico turned out to be less than the rapidly prospering paragon of good government touted by President Clinton and his allies in big business. Today, the same coalition is pushing for permanent normal trade with China, with the House Ways and Means Committee approving the proposal yesterday.

The proponents would like us to believe that China is a booming market for American-made products. But although our exports of goods to China rose significantly during most of the 1990’s, they grew no faster than such exports to the world as a whole, and China still accounts for less than 2 percent of the total. In 1999, these sales to China actually fell by 8 percent. One-sixth of the sales to China, moreover, are of a single product: large commercial jets.

Chinese trade barriers are to blame, but so is a weakening Chinese economy. The growth rate has slowed by at least half in recent years. Even the official Chinese press pegs unemployment at 17 percent, and with real wages down since the mid-1990’s, Chinese who have jobs are hoarding their earnings, not buying consumer goods.

The Web sites of American multinational corporations, meanwhile, barely mention selling from their American-based factories to China — which might benefit American workers. Instead, they gush about turning the People’s Republic into a low-wage production base. Procter & Gamble, Motorola and Westinghouse state openly on their sites that they plan to substitute Chinese parts and materials steadily for the American-made ones they still send to China to put into finished goods. The predictable result is loss of high-wage American manufacturing jobs.

Meanwhile, companies like General Electric, Kodak, Dow Chemical and Ingersoll-Rand have indicated that they will displace American jobs by supplying the domestic market and markets in other countries with exports from their Chinese factories.

Nor are American companies’ China operations likely to do much to expand free markets. Most deals are in aerospace, telecommunications, utilities and transport, which in China are dominated by government agencies and state-owned companies. Motorola even says that its China business strategy “dovetails with the Chinese government’s strategy for upgrading state-owned enterprises.”

Increasingly, according to trade statistics, China is also not a primitive giant, producing labor-intensive goods that Americans should no longer even want to make. Between 1992 and 1999, high-tech products as a share of China’s exports to the United States more than tripled, to 14.5 percent; they rose more than 32 percent just last year. In contrast, American high-tech products rose only from 34.5 percent to 35.9 percent of our total exports to China. And they fell 18 percent in absolute terms in 1999. These figures do not even count our steadily rising imports of industrial machinery and other capital-intensive goods from China.

Further, thanks to planned investments by companies like Cisco, 3Com, Lucent, Microsoft, United Technologies, Motorola and Texas Instruments, if Congress approves normal trade with China, expect American and world markets to be flooded with ever higher-tech Chinese goods: broadband routers, telecommunications switches, semiconductors, servers, applications software and aerospace engine parts.

Perhaps the most frequently heard argument in favor of permanent normal trade relations with China is that without it, we will lose the China business to foreign competitors. That might be a worry if China consumed most of what it imports. But studies by the New York Federal Reserve Bank and others show that most Chinese imports are intermediate goods that are assembled into finished products in China and then sent to foreign markets. Some 40 percent of China’s exports are sold to the United States.

This means that the success of investments in China by American companies and their competitors alike depends heavily on exporting to the United States. Without easy access to their largest market, the projects in China would nosedive in value. The keys to keeping them valuable are permanent normal trade status and admission of China into the World Trade Organization, whose cumbersome procedures can keep the American market wide open.

Proponents of normal trade hope to obscure these realities with toothless amendments to the deal. But the public’s perception of normal trade with China remains on the mark: a possible bonanza for management and shareholders, at least in the short term, and nothing but trouble for workers.

Alan Tonelson, research fellow at the United States Business and Industry Council Educational Foundation, is author of the forthcoming “The Race to the Bottom.”

Enriching China Unlikely to Advance U.S. National Security

(Washington, D.C.): In recent days, President Bill Clinton and his National Security Advisor, Samuel Berger, have asserted that U.S. national security requires that China receive Permanent Normal Trade Relations (PNTR) status. The stridency with which they have adopted this line suggests that — despite the favorable “spin” proponents of PNTR are giving their prospects for success when the House of Representatives votes on that legislation on or about 22 May — they are having trouble overcoming skepticism concerning claims that the American economy will benefit greatly from China’s entry into the World Trade Organization (WTO). Unfortunately for the White House and its business and other allies, it is unlikely that a dangerous China will become less so if it has even more resources at the disposal of its military-industrial and security services.

To the contrary, past and present Chinese behavior — notably the following activities — strongly suggests that Chinese hardliners are exercising full control over the regime. They will likely redouble these and other efforts if they are, in effect, rewarded for them by being spared yearly NTR reviews.

A Bill of Particulars

China’s Long-term Strategy seeks to dominate Asia and become a global superpower. It is pursuing these goals with patience and determination. The People’s Liberation Army sees the United States as “the main enemy” and the only impediment to accomplishing this goal.

This strategy was brilliantly dissected recently by Mark Helprin in a recent edition of National Review entitled “East Wind.” Of particular note is Helprin’s discussion of the vital role that economic expansion plays in this strategy as summarized in Deng Xio Peng’s “16 Character” diktat which calls on the Chinese people to “Combine the military and civil; combine peace and war; give priority to military products; let the civil support the military.” No one should be under any illusion: Beijing envisions using its economic expansion to fuel its military buildup and expansionist ambitions.

  • Penetration by PLA- and Chinese government-affiliated entities of our capital markets: The problem posed by China’s economic program is not limited to trade. China is, among other things, making an increasingly aggressive bid to penetrate the U.S. capital markets — one of this Nation’s last great monopolies.

    As incredible — not to say absurd — as it may seem, U.S. pension funds, mutual funds, life insurance, corporate and private portfolios are all seen as sources of cash with which China can put our interests at risk. A case in point is an Initial Public Offering issued by PetroChina, a subsidiary of the PRC’s largest energy company — an entity providing resources that are allowing Sudan’s government to engage in activities from genocide to slave-trading to support for terrorism and the proliferation of weapons mass destruction. For companies like PetroChina, other state-owned and -affiliated “bad actors,” the vast resources of the U.S. debt and equity markets represent “found money” — funds that are undisciplined and largely non-transparent. It must be asked: To what uses will they be put?

  • China’s Military Modernization Program: A principal beneficiary of course is China’s military, which aspires to make what Mao once described as a “Great Leap Forward.” The PRC’s long-term strategy calls for the People’s Liberation Army to achieve a massive modernization program capable of transforming its 1950s and ’60s vintage equipment and tactics into those at the forefront of the 21st Century. In the hope of accomplishing this enormous task as rapidly and as inexpensively as possible, Beijing is taking maximum advantage of technology acquired legally or illegally from us, as well as through a growing strategic axis with Russia.

    Of particular concern is the emphasis being placed by the People’s Liberation Army on a doctrine that envisions using asymmetric means and technologies to counter American military power. Thus we see China pursuing: Information Warfare; weapons of mass destruction and long-range ballistic missiles; advanced nuclear-armed anti-ship missile systems from Russia designed to destroy American carrier battle groups; electro-magnetic pulse weapons; etc., rather than concentrating (for now at least) on building up conventional forces comparable to our own.

  • The PRC’s Regional Agenda: The Chinese are assiduously dividing and intimidating U.S. allies in the region — Taiwan, Japan, the Philippines, South Korea. They are doing this in a variety of ways, for example, by abetting North Korean belligerence and Pyongyang’s long-range ballistic missile program, as well as by brandishing their own ability to attack even American cities like Los Angeles with nuclear weapons.

    This campaign is designed to impress upon our democratic allies that the United States is a declining and unreliable power and China a rising one in the Western Pacific and East Asia. In the absence of credible American security guarantees, China is running what amounts to a protection racket, impressing upon our friends that Beijing’s help will be needed to counter North Korean and other regional threats.

    The Chinese military is also exhibiting increasing assertiveness around the Pacific Rim and Asia — from Pakistan, to Myanmar, to Malaysia, to Taiwan and the Philippines. It is actively establishing bases, intelligence collection facilities and other dominant positions from which to project power.

  • China’s espionage: The former long-time chief of the FBI’s Chinese counter-intelligence unit, Paul Moore’s made the point in a powerful op.ed. article in the New York Times last August that the PRC is pursuing a comprehensive, patient and deadly approach to intelligence collection against this country. In so doing, he notes, Beijing appeals to and/or coerces overseas Chinese to help in that effort.

    Mr. Moore explained in his essay that such practices make it very difficult to catch, let alone to prosecute successfully someone like Wen Ho Lee, suspected of spying at Los Alamos. Such individuals generally are not doing it for the money, fancy cars or bigger houses. They may not even be aware of exactly what they are doing. This makes for a huge — and possibly insoluble — counter-intelligence challenge.

  • China’s penetration of our hemisphere: This problem has been much in the news lately, from Long Beach and Palmdale here in California to strategic bases at either end of the Panama Canal. There are estimated to be several thousand front companies working for the People’s Liberation Army and/or Chinese intelligence services in this country. The Chinese are also actively engaged in drug, alien and arms smuggling into the US. They are also actively insinuating themselves in an ominous fashion into other parts of the Western hemisphere including: Ecuador, Venezuela, Brazil, Mexico and Cuba.
  • Chinese proliferation: The PRC is the leading exporter of weapons of mass destruction and ballistic missile technology to dangerous developing nations — nations they see not as we do, as “rogue states” but as clients. Indeed, Beijing sees such trade as more than simply a means of securing vital energy resources from oil-rich countries like Libya, Iraq, Iran and Sudan.

    The Chinese also understand that, by building up the offensive power of these states, as well as that of Cuba and North Korea, their clients can help buy the PRC freedom of maneuver by distracting, tying up and otherwise stressing the world’s one global power, the United States. Proliferation can also prove helpful in increasing pressure on America’s democratic and other allies to seek China’s influence and protection. Israel’s sale of powerful early warning aircraft and other advanced weapons technology is a case in point.

    PRC efforts to increase the forces of instability around the world has even had the effect of augmenting China’s leverage on the United States as we seek its help in controlling such threats.

  • China’s penetration of our political system: Last, but hardly least, there is the matter of illegal Chinese campaign contributions to the Clinton-Gore campaigns. Is it a coincidence or is it cause and effect that Clinton has made momentous changes in granting China access to satellite and missile technology, supercomputers, embraced Beijing’s position on Taiwan, largely ignored the PRC’s violations of human rights (recently it failed to secure votes in Geneva for resolution condemning China’s record), given China access to the WTO, etc.?

    Such behavior on the part of China is all the more worrisome because it comes against the backdrop of significant internal unrest in China. Will Beijing engage in what the political scientists call “social engineering” — using phony claims of “external aggression” as a pretext for imposing greater control at home and diverting public anger from a failed government to foreign “barbarians”? Will China actually accelerate its timetable for using force against Taiwan, leading to conflict with the United States?

The Bottom Line

It is unlikely that the American economy as a whole will, on balance, benefit from granting China Permanent Normal Trade Status. There is, however, no chance that a China engaged in such an ominous array of malevolent activities while it is, at least nominally, subject to close annual scrutiny as part of the Normal Trade Status review process will become less of a threat to U.S. national security once that leverage no longer exists. Representations to the contrary are cynical, reckless and a disservice to the very important debate about PNTR now taking shape.

Future of the Panama Canal

7 December 1999
Washington, D.C.

On Pearl Harbor Day, one week before today’s official ceremony marking the United States’ relinquishing of the Panama Canal, the Center for Security Policy convened its latest High-Level Roundtable Discussion to address what comes next. This Roundtable, entitled “After the Hand-over: the Future of the Panama Canal and U.S. Hemispheric Interests,” provided an indispensable guide to the strategic challenges to American interests and security now arising in much of the Western Hemisphere — challenges that will likely be exacerbated by the loss of U.S. bases, training and intelligence capabilities and the capacity to provide physical security for Panama and the Canal, and by extension, the region.

More than 100 experienced national security practitioners, retired senior military officers, former Members of Congress, congressional aides and members of the press participated in this Roundtable. Highlights of the remarks made by the Lead Discussants and other participants in the course of this extraordinary three-and-a-half hour conversation included the following:

Overviews

The stage was set by former House Rules Committee Chairman Gerald Solomon and Admiral Leon ‘Bud’ Edney (USN, Ret.), former Supreme Allied Commander Atlantic. Rep. Solomon provided an excellent summary of how the United States came to be a party to the 1977 treaties relinquishing control over the Panama Canal and how the intervening years have proven the critics of those treaties to be right.

Rep. Solomon also read a letter prepared for the Roundtable by former Senator Paul Laxalt, leader in the Senate of the opponents to the Panama Canal Treaties. Sen. Laxalt expressed the view that, had he and his colleagues known then what is now known about the hemispheric context and Communist Chinese penetration of the Canal Zone (among other places in the region), there would almost certainly have been the votes needed to reject that accord.

Admiral Edney decried the “benign neglect” with which successive U.S. administrations have treated the Western hemisphere, giving rise to a situation in which it is too late to reconsider the wisdom of relinquishing the Canal. He also expressed grave concern at the present Administration’s failure to apply the basic tenets of the Monroe Doctrine with respect to China’s ominous and growing involvement in our backyard.

As Admiral Edney pointed out:


  • “We [have] neglected to apply the basic tenets of the Monroe Doctrine, which goes back to the fundamental history and security interests of the United States in this hemisphere….We’ve ignored that, because if anyone believes that the Hutchison Whampoa Company is like any other Western…operation and does not have a direct security interest and intelligence-gathering interest to the People’s Liberation Army and the Chinese government, they are sadly mistaken and naive.”




  • “Dependable access to the Panama Canal is essential to the hemispheric national security and economic needs of the United States.”




  • “We are also being naive if we believe the assurances of the current political announcements coming out of Washington that say that the only non-democratic [government] in the hemisphere is Cuba. If you consider that Haiti is a democracy — and all those other southern and Central American countries that are struggling with improvements — are consolidated democracies which includes a free press, balanced security interests and which includes a financial rectitude, and viable parties — then you look at the world through much more rose-colored glasses than I do.”




  • “As always, we have the right to go back in, but…it’s easier to get out than it is to get back in. And I view this kind of event which has been going on…since 1977 and now is going to be finally accomplished on the 31st of December, as a sad day for the United States of America.”




  • Admiral Edney also warned about the decision effectively to halt the use of the live-fire training range on the island of Vieques near Puerto Rico. He observed that, without access to that unique facility, the Navy will have no need for the near-by Roosevelt Roads naval base, giving rise to a likely withdrawal from the latter.


In addition, the Roundtable benefitted from written inputs by two of the Nation’s most eminent security policy practitioners. Former Secretary of Defense Caspar Weinberger observed:


    “In the context of a general ongoing Chinese shift toward more outward-looking activities and in keeping with their three millennia of statecraft, it is not logical to assume that they would pass up a chance to acquire a major foothold in one of the world’s three major naval choke-points — especially if it can be done with little cost or risk. It suits their diplomatic, economic, military and intelligence interests, just as such a capability in potentially unfriendly hands can be a threat to ours.”

In a letter to the Senate’s President pro tem, Senator Strom Thurmond, publicly released at the Roundtable, former Chairman of the Joint Chiefs of Staff Admiral Thomas Moorer rebutted the proposition that the 1977 treaties mitigate security concerns arising from the Chinese or others’ ability to interfere with Canal operations:


    “Right of passage in an emergency is too time sensitive for Panamanian court action or administrative rulings by Panamanian bureaucrats when the safety and effectiveness of our forward deployed units are threatened. Further, with the current departure of our forces it may be only a short period of time before that vacuum is filled by hostile foreign troops which could, in turn, make any current plan, law or treaty ineffective. With U.S. forces no longer present, the likelihood of damage by terrorists or similar catastrophes that could put the Canal out of commission is increased.”

The Roundtable next focused on three subjects: 1) The Strategic Environment — Ominous Developments in the Hemisphere; 2) The Abiding Strategic, Military and Economic Importance of the Panama Canal to the United States; and 3) Is China an Emerging Threat to the Canal — and to Hemispheric Security More Generally?

Strategic Environment

This first section featured lead discussants: Dr. J. Michael Waller, Vice President, American Foreign Policy Council; Dr. Norman Bailey, former Senior Director, International Economic Affairs, National Security Council; Tomas Cabal, journalist and professor, University of Panama; and Dr. Constantine Menges, former Senior Director for Latin America, National Security Council.

Among the topics discussed in this section were: the instability in Columbia, which is facing challenges from three armed groups; the growing authoritarianism, leftist radicalism and anti-Americanism of Venezuelan President Chavez; the increasingly warm entente between China and Cuba; escalating economic difficulties and rampant corruption in Mexico and Ecuador; and drug-, arms- and alien-smuggling by the PRC, the Russian mafia, the made-over KGB and other parties in the region. Of particular note were the following:

Dr. J. Michael Waller


  • “General Charles Wilhelm, who is the Commander-in-Chief of U.S. Southern Command, is constantly telling anyone who will listen that our intelligence, surveillance, and reconnaissance capabilities and assets in the region are terribly eroded — in some places virtually completely eroded. We have extremely limited resources, yet more problems and more duties than ever before.”




  • “The first [problem], obviously, is Panama and the whole question of what are the Chinese companies involved with Panama. When you figure that the Senate Majority Leader, Trent Lott, takes a personal interest in the story, has the Senate Armed Services Committee hold a hearing on this exact question, and then won’t invite a single expert witness on China or the Chinese military or Chinese enterprises and treats it as a Latin America event….[and] after four hours of testimony, Senator Bob Smith asked each of the administration witnesses, as well as the head of the Panama Canal Commission, the American deputy head of the Commission, a State Department official, and the Assistant Secretary of Defense for SOLIC and said, ‘what do you know about Chinese companies and their service in the interest of the Chinese military,’ and all of them said they didn’t know, yet all had just been testifying for four hours on the fact that this company, Hutchison Whampoa presented no threat at all.”




  • “The problem is a lot larger than Panama [insofar as] you have a lot of these small island republics in the Caribbean becoming independent little narco-states of their own, where they have banking secrecy laws, where you can buy passports. You have all these Ukrainians and Russians running around with Dominican or St. Lucia passports. You have even some countries where we’re running our new counter-drug operations out of which have huge drug operations of their own, particularly in the Netherlands Antilles.”




  • “And you have Cuba, which has not only been allowing certain types of trafficking to be run through Cuba as a transshipment point, and has not only allowed the Russians to upgrade their electronic intelligence facilities, but is also allowing Russia to begin flying Tupalev 160 strategic nuclear bombers in and out of there again. [Havana] has brought the Chinese in now to set up at least two electronic intelligence facilities of their own, as well, on their territory.”




  • “Now, I’d like to comment a little bit on Colombia….First of all, they seem to be losing…the drug war down there, both the opium poppies and the coca….You have a very high morale, very aggressive, very professional, very honest, and very trusted police force there….Now, the goal, obviously, is to help the army do the same thing. But the Colombians are being hamstrung for a couple of things. First, lack of commitment of the United States to make fighting the drug war a priority. We send down antiquated equipment, completely insufficient equipment with insufficient quantities or with, in the case of the Blackhawks, insufficient or nonexistent spare parts….




    “But also, we have encouraged them to get into this peace process with the guerillas. There are two Marxist guerilla groups, the FARC and the ELN. They’re both Marxist. The FARC is mostly rural-based, but with the peace process, the Colombians, with U.S. cajoling, have given them a demilitarized zone about the size of Switzerland, which they’re using not only to regroup and to resupply and to build themselves up and probably to launch attacks on Bogota….Also, they’re inviting in foreign investments. And who are the foreign investors they’re bringing in? The Iranians.”

Norman Bailey

  • “Just a very few words about Ecuador. To start out with, Ecuador is in the process of disintegration — socially, politically, and economically, having suffered through El Nino and the drop in oil prices, but particularly a series of governments which can only be described as an amalgamation of the Three Stooges and the Marx Brothers put together.




    “The result of that has been a situation at the present time in Ecuador where the country is…totally bankrupt, where everyone is at everyone else’s throat, where the government has no authority and no control over much of anything. The armed forces have recently been making some not terribly subtle statements about how awful the civilians are running things, and I don’t think it’s out of the question, although I’m certainly not predicting it…that there will be some kind of (probably somewhat disguised) military coup in Ecuador.”



  • “The Venezuelan situation is extremely volatile and extremely dangerous. You have a former coup leader who’s been elected president of Venezuela. This is a man who is following through on the plan that he developed through many years of conspiratorial activities, and during his time in jail….Mr. Chavez is deadly serious about what he intends to do with Venezuela, and anyone who is still under any illusions as to what he has in mind can only be described as a complete and utter fool, not to put a fine point on it. What he does have in mind is to become a civilian dictator with the support, not only the support of the armed forces, but with the military in many of the most important positions in the country.




    “As far as the United States is concerned, there are many dangers to that situation. The most dangerous of all is the fact that as a result of [Chavez’s] total mismanagement and likely future worse management of the economic situation, petroleum production in Venezuela is likely to peak and decline, whereas it should have, if properly managed, continued to increase and Venezuela, depending on which month you’re talking about, is either the first or second petroleum supplier to the United States.”



  • “[Chavez] also is very actively interfering in his neighbors’ business. He has reawakened the boundary dispute with Guyana on one border and he has actively interfered in the so-called peace process in Colombia, interestingly enough, on the side of the guerillas. He was stationed on the border during a substantial period of his military career and he established excellent relations with the Colombian guerillas and he maintains those relations. And he and Fidel Castro have every intention of being involved in the so-called peace process, and in the case of Castro, of course, with the agreement and at the request of the Colombian president, about which more later.”




  • “The Colombian situation is one of extreme danger and instability. You have five different armed forces fighting each other for control of the national territory. Some comments have been already made about the situation. The aspect that I would most like to comment on is the fact that the border with Panama is totally uncontrolled. Panama has absolutely no capacity whatsoever to control their own border with Colombia. The guerillas of the FARC and the ELN and the paramilitary forces go in and out of Panama at will.”




  • “The more serious aspect of it is the fact that there is no security in the Canal area. Once the American forces have evacuated and most of them are gone already and they’ll all be gone by the end of this month, the security situation in the Canal Zone is absolutely nonexistent….There is no security. The possibility of sabotage on the part of Colombian groups, on the part, for that matter, of any other kind of terrorist group and so on, are enormous and would be extremely easy to carry out.”


Tomas Cabal


  • “The increasing presence of Red China and their companies, which in the long run, may provide a threat to the geopolitical interests of Panama and the United States.”




  • “I do think that there still is a window of opportunity which has been presented by the current administration’s opening negotiations of a wide security agreement with the Republic of Panama. As part of that negotiation, the government has already set aside portions of Howard Air Force Base, Rodman Naval Station, the communications center at Curacao, and facilities on the Atlantic side of Fort Davis and at the general training school at Fort Sherman.”




  • “There is also a possibility that Panama can extend either forward operating landing rights for American aircraft or simply to reach a new agreement to utilize Howard Air Force Base for American aircraft. It seems to me ironic that the Clinton administration will be spending $100 million to upgrade an Ecuadorian air base…and they’re also negotiating with the governments of Curacao and Aruba to secure landing rights. When you add those figures to the increased fuel bill [entailed in] operating AWACS aircraft out of Key West, then one fails to understand why the Clinton administration could not agree that some type of economic package could have been signed and secured with the Panamanian government.”


Constantine Menges


  • “The situation that I think is emerging now is a new constellation of threat that involves: the Castro regime, as always, using its covert resources through its intelligence service and its long-established connections in the region; the emerging radical military dictatorship in Venezuela; and then, with its large checkbook and political influence operations, Communist China is moving into the region both in the Panama Canal zone — having through corrupt means won that contract to manage the ports….I think this context of simultaneous threat is something that requires thought and action.”




  • “Colonel Chavez has had a life-long history of activism on the radical left….Reliable reports indicate that he lived for a time with the Colombian communist guerillas in Colombia; in 1996, Chavez was engaged in smuggling weapons of the Venezuelan armed forces to the Colombian guerillas. And in his established political movement and in his campaign for the presidency in 1998, he received extensive support, financial and otherwise, from Saddam Hussein and the regime in Libya.”




  • “And, in fact, having taken office as president in February 1999, Colonel Chavez has, in my judgment, essentially acted time after time contrary to the existing constitution of Venezuela….He has also established his control over the armed forces, bringing back to the military the people who were his fellow coup- plotters, the officers. They’re now in charge of the military, the intelligence services, the national guard. He has established parallel military committees in 16 of the 22 states of Venezuela that have, in fact, taken over the governmental functions of the elected governors of the states.”




  • “Chavez has gone to China. He has gone to Cuba on November 18 and told Castro once again that he is ‘with Castro.’ ‘Castro is not alone.’ He will lead the Venezuelan people to ‘the same sea as Castro has led the Cuban people….’ And we see a situation where this regime, in my view, will, once the dictatorship is consolidated there, it is still not too late.”




  • “We see a situation where, in my view, Colombia is very fragile. It is a country in which the Communists can come to power either through power-sharing, the false kind of political settlement that was attempted in the 1980s, or through a victory leading to a collapse of the armed forces and taking power more or less in the Vietnam scenario or the China 1949 scenario. It is in a very fragile situation. Castro hopes to use Colonel Chavez as his ostensible neutral intermediary to try to persuade the Colombian president to accept conditions politically that would lead to the end of democracy in Colombia and to the victory of the communists.”


Discussion


  • “There are people in this Administration who have told me, very high level, that the canal is going to be closed”




  • “All polls indicate that over 76 percent of the Panamanian people welcome a continued military presence of the United States in Panama.”




  • “The new Foreign Minister of Panama, Aleman, said, under no circumstances would the American military be permitted to return to Panama.”




  • The Clinton Administration made no real effort to pursue negotiations with the Panamanians to permit the U.S. to maintain a military presence in Panama.




  • It is offensive to the people of Panama than neither President Clinton nor Vice President Gore [nor even Secretary of State Albright] will be present for the hand-over ceremony.


The Continuing Importance of the Panama Canal

The Symposium next moved onto its discussion of “The Abiding Strategic, Military and Economic Importance of the Panama Canal to the United States” with Lead Ddiscussants: Vice Admiral James Perkins (USN Ret.), former Deputy Commander-in-Chief , U.S. Southern Command, and former Commander, Military Sealift Command; and Lieutenant General Gordon Sumner (Ret.), former Chairman, Inter-American Defense Board.

These distinguished former military officers and other knowledgeable participants confirmed that U.S. economic and military interests would be seriously and adversely affected should the Nation be denied the use of the Canal for a protracted period of time — or even a relatively short period at a strategically inopportune juncture. The following comments were of particular interest:

Admiral Perkins


  • “[The United States] spends millions of dollars in places [whose names] end in “stan” and we spend so little time, effort and money in our own hemisphere from a military standpoint.”




  • “Day-to-day, pound-for-pound, I think we get more bang for the buck as Americans from the mentoring and the training and the example that these young men and women provide to the Latin American militaries than any other place in the world.”




  • “Civilian control of the military is not a proud tradition in that part of the world, and I think the example that our sailors and soldiers and airmen and Marines and Coast Guardsmen provide on a day-to-day basis is absolutely essential to continuing the process of civilian control of the military in Latin America, which is doing pretty well in some places, not doing so well in others. It’s a tenuous sort of day-to-day thing.”




  • “[The United States relies on] the Military Sealift Command in time of war or national emergency to deploy the force by sea. Ninety-five percent of the stuff that went to the Gulf went on a ship….and I think that’s become more and more important as we pull back from Germany and from Europe and from other places and become, in fact, a continental army.”




  • “From my perspective as a Military Sealift commander, clearly, there are other ways of getting to places besides going through the Panama Canal — but it takes longer and it’s harder. So [as] we look very closely at the Panama Canal, we’re concerned as it evolved toward the 31st of December this year.”




  • “…The counter-drug effort that was mounted out of Panama was significant. Howard Air Force Base, a piece of it in airborne surveillance and interceptors, is absolutely critical. I’m very concerned that the basing arrangements that we’ve ginned up since that time in Ecuador and in the islands are going to be sufficient to pick up the slack.”




  • “Plus, another threat to the canal and to Panama itself is the narco-threat. It was clear to me when I was there that the Darien province down on the border with Colombia is full of narco- guerillas. They used to use it for a ‘rest and relaxation (R&R)’ camp at one stage. Without the deterrent factor of U.S. military troops in Panama, one has to wonder, what’s the next logical step? I don’t think it’s necessarily a good one.”


General Gordnon Sumner


  • “This country has been focused East versus West….We have strategic myopia when it comes to the Western Hemisphere. The tragedy is that as far as the professional life of a military officer is concerned,, the Western Hemisphere is a backwater. It is a backwater. We have about 1,000 general and flag officers in the Navy, Marine Corps, Air Force, and Army….We have about a dozen out of 1,000 assigned to the Western Hemisphere. That gives you exactly what this country thinks strategically of this hemisphere.”




  • “This is a major problem for this country. The last time we went in there, we were on the ground, and I was very much involved with getting Max Thurmond to run that operation. We were on the ground. Wait until we try to go in the next time and the FARC is on the ground, the ELN, the Chinese.”




  • “[Former Panamanian Dictator] Omar Torrijos told me…the winds of communism were coming [from the East]. Right now, the winds are blowing from the West, the Chinese winds.




    “But we have a strategic problem here that I don’t see anyone in the executive branch of the government dealing with, and very few people in the legislative branch of the government dealing with. History has a way of coming up, and a major power that…does not understand its national interest [is] destined to the ash heap of history.”

Discussion

  • Concern was expressed that Russia’s SVR, the successor to the KGB, and Russian organized crime is also exploiting the perceived vacuum of power and growing instability in Latin America. Evidence was cited that Iraq and Iran are doing so, as well.




  • “But to offer some thoughts on what can be done on Panama, there’s a newly-elected president….I think the United States Government, members of Congress, could write a letter to the President and perhaps try and get the President to focus on this in a competent way, in spite of his extraordinary comment on November 30, as reported by Reuters, that he thought the Chinese would do a very efficient job in managing the canal (subsequently corrected by the State Department spokesman to indicate that he meant the Panamanians would do an efficient job. But he actually meant the Chinese, because the question was specifically asked him about the Chinese.”




  • “If you look at OPEC production, it’s 30 million barrels a day, 15 million of which Chavez and the radicals will control. The price has gone up a large amount, from 12 to 24, since he’s become president. The oil weapon against the industrial democracies, I think, is part of this. Global production is 72 million barrels a day, so there’s enough supply to overcome it in time, if it’s dealt with in time.




    “Russia produces seven million barrels a day. So if it adds to the 15 million that the Chavez group will have in OPEC, you’ve got 22 million a day. You actually have a situation in which, at a number of different levels, political [steps], covert action, the oil weapon, the radical entente can start and reinforce and act against the interest of the United States and its major allies, and I think that’s happening.”



  • “I think that if leaders in Congress will focus on the Hutchison Whampoa issue in the next week and will make public statements — whether they go to Panama or make them here — it can be an issue in Panama and we can get some traction among those people in Panama who might agree with us….After all, the bribes were not paid to the current administration. And, after all, Ambassador Hughes, Clinton’s own ambassador, called it a corruptly concluded agreement.




    “This is the starting point. If we break the dam on this, it paves the way for making progress in other areas. I think we should focus on canceling the Hutchison Whampoa contract. But that will be achieved only if there is some indication from elected officials of the United States Government that there is a concern about it.”

A particularly noteworthy intervention was made by Major General John Thompson (USA), the current Chairman of the Inter-American Defense Board. Speaking in a personal capacity, Gen. Thompson spoke passionately about the need for a greatly increased focus by U.S. executive and legislative branch policy-makers on hemispheric security matters in the wake of the Canal’s handover. Special and urgent attention needs to be paid to the fact that “Important U.S. strategic interests in Colombia are dying the death of 1,000 cuts every day.” According to General Thompson:

  • “One of the things that’s very important that this group can do a lot to help is that we can require our political leaders to have a deeper understanding of the tremendous interest that America has in this hemisphere. Indeed, there have been significant changes in the security paradigm. With the end of the Cold War, there are new forces that are unleashed. There are new expectations that people have all over the world, but especially in this hemisphere, and as we have heard ample evidence of today, there are an awful lot of very serious problems, we could almost say conundrums, facing some of the democracies of this hemisphere.”




  • “I don’t know how many of you read an article about four weeks ago in the Washington Times written by Bobby Charles….But Bobby’s article expressed his deeply-felt disappointment and frustration over Congress’ inability to come to grips with important American strategic interests in Colombia and to take bipartisan action to help a country, a longstanding, albeit imperfect, democracy that Colombia is who is dying the death of 1,000 cuts almost every day while her great friend, the United States, sits by shaking our head, spending more energy discussing the imperfections that exist in Colombia than doing anything of the many things that are within our power to do something about.




    “Colombians are not asking Americans to die for them. They were terribly embarrassed that five Americans died several weeks ago in a tragic aviation accident. They don’t want our soldiers to come to die for Colombia. But they do need help.”



  • “In the past, not only have we not helped the Colombians help themselves, we have refused them access to materials that they wanted to buy from us when they were in much better economic condition. And they’re still desperately trying to get materials from us. Many of us here should be doing a better job of advocating their interest.”




  • “We [‘Cold Warriors’] still believe that there are people out there who mean us ill. I find many of my friends in this town amused when I suggest that there are people who are waging psychological warfare against our society and against the other democracies of this hemisphere. I absolutely know that that is true, but I don’t think it’s politically correct to talk like that today.”


Is China an Emerging Threat?

The final segment of the CSP Roundtable dealt with the topic “Is China an Emerging Threat to the Canal — and to Hemispheric Security More Generally?” It featured as Lead Discussants: Al Santoli, the editor of the American Foreign Policy Council’s China Reform Monitor and congressional investigator; Roger Robinson, former Senior Director of International Economic Affairs, National Security Council; and Dr. Richard Fisher, Office of Rep. Chris Cox. Among the important interventions offered in this section was a contribution by Edward Timberlake, co-author with William Triplett of the best-selling books Year of the Rat and the newly released Red Dragon Rising.

During this section the Roundtable heard additional, compelling evidence of: China’s cooperation with Cuba in areas of intelligence; the PRC’s willingness to use “engineer battalions” to introduce military personnel into the Western Hemisphere under the guise of infrastructure construction; Beijing’s use of military-to-military ties with Ecuador to acquire “aggressor” training for the People’s Liberation Army to defeat the tactics and weapon systems the United States has employed and has shared with its allies; the PLA and other Chinese entities’ increasing exploitation of American debt and equities markets to raise large sums of money for activities — whether in Venezuela, Sudan, Iraq or elsewhere — that are highly inimical to U.S. interests; and Chinese attempts to penetrate, corrupt or otherwise undermine democratic processes in the hemisphere. Among the most noteworthy points were the following:

Al Santoli


  • “[There] is a Chinese-language publication produced by the People’s Liberation Army early this year called Unconventional Warfare, written by two strategists who are colonels in the PLA. Since this book has come out, it’s gotten some attention in terms of their concepts of asymmetrical warfare, non-conventional warfare, which is the way that they’re studying the Gulf War and studying what we have done in Kosovo and other places. [Their focus is on] how to defeat the United States. Myself being a part-time martial artist and understanding some of the general concepts of how you take down a bigger opponent, you a) look for their weaknesses and b) you try to defeat them with their own strength.




  • “And so what I see the Chinese doing now in Panama is a microcosm of this, is a triangulation of the United States — a triangulation involving: ports (Bahamas and Panama’s Colon grigiop, which are the two major ports in the Southern hemisphere, very closely tied to our economy; Vancouver, above us on the coast, as well as setting up shop throughout Canada. And this is one of the things that has shocked Canadian security officials, is the extent that Li Ka-shing, Henry Fox, Stanley Ho, and some of the others who are tied into the Riadys and the CPP group in Thailand, all of whom are Chuchao Chinese.“




  • “[In the] November 2, 1999 [editions of] the Hong Kong Ming Pao Chinese language newspaper was a story where they were citing Chinese military sources about how the PLA navy is now refitting COSCO ships for, specifically, they went into in the outset of the story, warfare against Taiwan. (We know that COSCO is the merchant marine, besides the chief merchant fleet, it’s also the merchant marine for the PLA.) In this particular article, they went into detail of how these COSCO ships are being refitted for the event of an invasion of Taiwan.




    “However, deeper into the story that goes into how Haifeng container ships are being reequipped to stay within the merchant fleet, but at the same time to be able to conduct military operations, such as sealing off the sea, fighting submarines, controlling air space, mine-laying and mine-sweeping, and monitoring missions, for example, blockade warfare and information warfare, using counter-electronics and other means.”



  • “Li Ka-shing and Hutchison are directly involved with COSCO, not only in our own hemisphere. COSCO is a big user of the Panama Canal with or without Hutchison, but they are partners with Hutchison, but also North Korea. Li Ka-shing and Hutchison have the only outside foreign port holdings in North Korea, and tell me if anybody in this room would think the North Koreans would have somebody hold the ports if they were not part of the Chinese communist government and closely connected to the Chinese military.”




  • “If we go to war with China over Taiwan, in our hemisphere, if they want to block our shipping, our supplies, or just to create financial [and] economic warfare, they are in position to do so. And the maintenance of the canal and their port facilities on that canal, in tandem with their control of Freeport, Bahamas, as well as Vancouver ports, as well as COSCO activities up and down our coast, is a strategic advantage for the Chinese.”


Roger Robinson


  • “China, as many of you know, is in a kind of energy crisis itself….they are net importers today of about 1.5 million to 2 million barrels per day. By 2009, that number is expected, very conservatively, to grow to 11 million barrels a day. So they really are scouring the earth for oil, and not surprisingly, they have decided to forego what’s called the Japan model in the oil business, particularly for large importers.”




    “In doing so, it really means that they’re not going to rely on world market mechanisms. They’re not going to buy their oil on the spot market, for example. They don’t trust it. They want what MIT Professor Dan Fine…calls “flagship assets” to secure physical product. It’s the old fashioned way. The dirt and the oil in the ground is what they have in mind.”



  • “Now, prior to coming to this subject, we’ve been sort of following China National Petroleum Corporation, particularly in other areas of concern from a national security perspective, the most immediate being the Sudan….Well, it turns out that China National Petroleum, just to give you an example, because I think it’s relevant to the Venezuela case, has put about $1.5 billion to $2 billion in Sudan, so far. They’re planning to ramp up to $5 billion.”




  • “The Chinese government with its flagship China National Petroleum [has] a flag asset putting down concrete stakes. Now, just to give you a sense of where else they’re hanging their hat: They have about $1.4 billion in Iraq, all primed and ready to go the first day that the sanctions are lifted, which, of course, they’re working daily to do against Saddam Hussein. And they’re also involved in a trans-Iranian pipeline. In other words, they find out where we can’t be and they march in there, sometimes with conventional weapons, not to mention a fat wallet, in places like Sudan, and with more exotic weaponry, components for weapons of mass destruction and ballistic missile delivery systems and the like [on offer] for their Iranian and Iraqi partners.”




  • “Not surprisingly, they warmed up to the Chavez idea in a very profound and quick way. Thus far, China Petroleum has put in some $750 million…into Venezuela. They’ve already been awarded some of the highest quality blocks (as they’re referred to) of offshore oil deposits. And just two months ago, when the first Venezuelan oil arrived in Beijing, it wasn’t some quiet, discrete event that you’d [expect from] a commercial venture. [Rather], it was greeted with almost a state visit, I mean, major fanfare. And that was, of course, about the time that Chavez showed up in Beijing to identify himself with the Maoist revolution — just as he did so in the case of Havana more recently.”




  • “Now, the tragic part about this is that the U.S. investor community may be providing multi-billion-dollar support for China Petroleum’s consolidation of its activity in Venezuela, not to mention the new signals intelligence listening post in Cuba and their other hemispheric penetrations with an announced listing on the New York Stock Exchange in January or February of this year with an initial public offering estimated between $5 and $10 billion. The best number I have is $8 billion, which would make it by far the largest IPO in New York Stock Exchange history, led by one of the premier U.S. investment banks in this country and involving almost all of the others because of the size of the offering.”


Richard Fisher


  • “My conclusion, based on my own review of developments and the facts as they stand, is that there is nothing phony about China’s interests south of our border and we have every reason to be wary, if not scared. This is a serious undertaking on the part of the People’s Republic of China. I am very thankful for Al Santoli’s expansive and round explanation of how the unofficial and the underworlds of the Chinas collude and combine with the open and the business world to advance the interests of the PRC, and Roger’s eloquent explanation of the paramount economic interests that we must never forget.”




  • “China is pursuing their own interests, and they are preparing, not just south of our border but around the world, for the day — sooner, they hope, rather than later — [when] China will be exercising power, political power, military, economic power, on a par with our own, if not beyond. I am almost certain that this is not an immediate goal, it’s a medium-term goal, possibly by the year 2030, 2050, to be as influential in our hemisphere potentially as we are today. I point to activities that are already underway as signs to me, as demonstrations to me that this process is continuing apace and accelerating.”




  • “I also look to the accelerating level of People’s Liberation Army diplomacy in our hemisphere. I think it’s instructive, it may be obvious or simplistic, but the PLA’s power position within the People’s Republic automatically creates an affinity with militaries in our hemisphere that also have a tradition of political involvement and political activity.




    “My cursory review of the FBIS files of the last year lead me to conclude that, roughly, PLA delegations [and] South American and Central American delegations have had contacts that would roughly cover 80 percent of the countries south of our border. There’s a lot there for the PLA to work for and many reasons for the PLA to want to expand these relationships.”



  • “[For example,] ten years ago, Brazil and China entered into a codevelopment enterprise to build an earth resources satellite, the CBERS, China-Brazil Earth Resource Satellite. It had a long gestation period. It had some financial difficulties. But on this past October 14, the satellite was launched successfully. [True,] it supplies low-resolution imagery best mainly for following vegetation in agriculture matters, but this is just the beginning. China has benefitted from some technology that only Brazil could acquire, and where could this go?




    “Well, if you look at the globe, Brazil is almost on a polar opposite position from the PRC. In order to be supporting a robust civil and military space presence, China needs to establish a global ground- tracking network. There have been reports that Brazil is considering cooperation with China in this area. China already has a ground tracking station in Tarawa….But Brazil, Tarawa, Pakistan, a few places in Africa, and voila, China has a global space tracking network, and in a few years, when China has its own one meter or better imaging and radar satellites, it can then begin to [employ] in the same kind of strategic information that we’ve been trafficking in for years to our own benefit. China will play that same game to its benefit south of our border.”

Discussion

  • “Many people in the government, in the Panamanian government, believe that, somehow, you need to play the game of pitting the Taiwanese against Communist China in an effort to get much more resources. However, as one of the government’s advisors told me one time, the problem with Red China is that they don’t seem willing or able to come up with anything in exchange for this diplomatic recognition.”




  • “However, what we’re noticing now is that, apparently, in conversations with the Chinese, they have told the government of Panama that, if there is a switch in allegiance (i.e., in effect, if they abandon Taipei)…then hundreds of millions of dollars needed by the current Panamanian administration will be forthcoming (not necessarily through the Chinese government directly, but through their international corporations).”


While no effort was made to reach a formal consensus among the Roundtable’s participants, the President of the Center for Security Policy, Frank J. Gaffney, Jr., who chaired the session summarized the points that seemed to enjoy broad support. These included the following:


  • “I’ve been impressed by the description of how serious the problem is in our hemisphere. Even as of this morning, when I was writing about it, I think I hadn’t fully appreciated just how much the peril to American interests, certainly over the medium, if not the nearer, term are, not only in Panama, but in Venezuela and Colombia, and obviously in Cuba”




  • “We’ve had several good suggestions made as to things that can be done now, first and foremost, I gather, being challenging Hutchison Whampoa’s corrupt transactions; assuring that American companies can get access to some of the bases that are up for grabs now, as well, hopefully, as Balboa and Christobo; developing Congressional interest in and support for finding ways to effect these kind of turnarounds; and also for helping Colombia and for dissuading the countries of the region from accepting what seems to be the open invitation of the Chinese corps of engineers to come in and build infrastructure for them.”




  • “And not least, of course, I think the point that was made several times in the course of the day, that there’s an awful lot riding on what happens in Venezuela over the next few weeks. It does seem to me it bears considerable attention and creative thought to think about how, without becoming involved unhelpfully in the internal political affairs of a country, the common interest in having democracy survive the present crisis in Venezuela does seem to me to be generally viewed here as something we ought to be giving serious attention and thought to.”