US Department of State 

Dispatch, Vol 3, No 21, May 25, 1992

Title:

US Policy Toward Iraq and the Role of the CCC Program, 1989-90

Eagleburger Source: Lawrence S. Eagleburger, Deputy Secretary of State Description: Statement before the House Committee on Banking, Finance, and Urban Affairs, Washington, DC Date: May, 21 19925/21/92 Category: Speeches, Testimony, Statements Region: MidEast/North Africa Country: Iraq Subject: Trade/Economics, Development/Relief Aid [TEXT] Mr. Chairman and members of the committee, I plan this morning to do my best to set the record straight on the US Government's policy toward Iraq during the latter half of the 1980s and in 1990 and to place in context the role of the Commodity Credit Corporation (CCC) program. I intend to make clear that the Administration followed a prudent policy toward Iraq at the time-including the management of the CCC program-even though we, and other governments, were ultimately unable to restrain Saddam Hussein. In explaining US policy, I also plan to address many of the factual and legal misstatements currently being put forth by members of this committee. Quite frankly, the selective disclosure, out of context, of classified documents has led-knowingly or otherwise-to distortions of the record, half truths, and outright falsehoods, all combined into spurious conspiracy theories and charges of a "coverup." For those interested in the truth, let me make the following 10 points: First, neither the Agriculture Department's investigation of the Commodity Credit Corporation program, nor the US Attorney's investigation of BNL [Banca Nazionale del Lavoro]-Atlanta has, to date, established diversion to third countries of commodities sold to Iraq or Iraqi misuse of the CCC program to purchase military weapons. Second, we have found no indication that the State Department had, in November 1989, or has, today, specific evidence that such diversions occurred. Third, neither the criminal indictment handed down in Atlanta in February 1991 nor the May 1992 plea agreement of a US exporter to Iraq contain evidence of or allegations that CCC-guaranteed commodities for Iraq were diverted to other countries or used for military purposes. Fourth, approximately 90% of the $5 billion in credit guarantees extended to Iraq between 1983 and 1990 for the purchase of US agricultural exports was provided prior to FY 1990 and received broad support among Members of Congress and by American farmers and commodity groups. Fifth, CCC extended only one tranche of $500 million in credit guarantees to Iraq in FY 1990. Of this $500 million, over 20% of it did not become effective because of the Gulf war. Moreover, the remaining $392 million represents an official liability of the Government of Iraq. UN Security Council Resolution 687 provides that Iraq's repudiation of its foreign debts is null and void and demands that Iraq adhere to all of its obligations. The Administration intends to assert claims against Iraq for any amounts that the US Government is required to pay on CCC guarantees. Sixth, shortly after the US Attorney's office in Atlanta initiated its investigation of Banca Nazionale del Lavoro, Agriculture reached an agreement with BNL that BNL would not participate in the CCC program for FY 1990. Accordingly, BNL was not assigned any of the $392 million in CCC credit guarantees extended for agricultural exports to Iraq in FY 1990 and will not receive 1 cent in US taxpayer money for the payment of claims against those guarantees. Seventh, during the period that the CCC extended the $392 million in credit guarantees, Iraq actually made hard currency payments of approximately $847 million. Thus, despite concerns about Iraq's creditworthiness, there was a net reduction in CCC's exposure with regard to Iraq of about $455 million. Eighth, the October 13, 1989, memorandum, to which members of this committee have repeatedly referred in making certain charges, merely speculates about allegations on Iraq's use of CCC guarantees. Most of the allegations in that memorandum have not, to date, been established. Ninth, the suggestion that the Administration has sought to "cover up" its policy toward Iraq is simply not true. Few US Government policies have been so carefully and so extensively examined by the Congress and by the media as this one. To this committee alone, the State Department has provided over 4,000 pages of documents at a cost of over $100,000 in employee hours. Other agencies have provided large quantities of documents as well. Finally, the State Department has been prepared to turn over additional documents. However, in light of the knowing and unauthorized disclosure of classified materials by members of this committee, the Administration determined last week, in accordance with its obligations under Executive Order 12356, not to permit further release of documents until it receives appropriate assurances from this committee regarding the storage and protection of such materials. Failing such assurances from the chairman, the Administration is prepared to make available appropriate documents to the Speaker of the House or to members or committees that he might designate. I will now turn to a discussion of US policy toward Iraq, the role of the CCC program, and the specific questions posed by this committee.
US Policy Toward Iraq
During Iraq's 8-year conflict with Iran, there was broad bipartisan consensus in this country that an Iraqi defeat at the hands of an extremist Iran would be disastrous for our interests in the region. Many of our allies, as well as the Gulf states themselves, shared this view. Although US policy on the war was neutral, there was a subtle leaning toward Iraq in public statements as well as in selected other actions but without any provision of weapons or weapons systems to the Iraqi Government. With the end of the Iran-Iraq war in the summer of 1988 and by the time President Bush took office, Iraq had emerged as the preeminent military power in the Persian Gulf. The Administration promptly undertook an extensive review of US policy in that region, including US policy toward Iraq. The key issue was whether US interests in the Persian Gulf remained vital in view of the changed strategic environment there and, if so, whether the existing investment of American power and diplomatic influence in the region reflected that importance. We concluded that access to Persian Gulf oil and the security of key friendly states in the area were, in fact, vital to US national security and that we were committed to defending those interests, hopefully with the support and participation of our friends in the region, Western allies, and Japan. With regard to Iraq, the Administration recognized the difficulty of developing a clearcut policy. On the one hand, it appeared that Iraq had made a conscious decision to moderate its behavior since we had normalized relations in 1984. Iraq had, for example, reduced its support for terrorist groups and had, in fact, expelled the Abu Nidal Organization from its soil. Moreover, Iraq possessed significant oil reserves, was a major oil producer, and was increasing its supply of oil to this country. Post-war Iraq also appeared seriously interested in economic reconstruction and in expanding commercial ties with the West. On the other hand, we fully recognized that there were still important issues that stood in the way of close relations. These included Iraq's human rights abuses, its chemical weapons program, our suspicions that Iraq might be developing biological and nuclear weapons, Iraq's efforts to build long- range missiles, and its involvement in Lebanon. Still, Iraqi member- ship in the Arab Cooperation Council, alongside close American friends such as Egypt and Jordan, appeared to offer the prospect of moderating Iraqi behavior. We also hoped that Iraq could play a helpful role-or at least not play an unhelpful role-in the Middle East peace process. Recognizing these competing concerns, the Administration considered three major options in dealing with a post-war Iraq. First, we could expand our relations and try to embrace the Iraqis; Second, we could maintain our slow and steady course, seeking to probe, test, and encourage the Iraqis while being wary of their intentions; or Third, we could seek to isolate the Iraqis by punishing them for behavior we did not condone. Given the unpredictability of Saddam's behavior and the uncertainty about his regional aspirations, we rejected the first option of expanding relations rapidly. We also recognized that we could not effectively isolate Iraq by acting unilaterally and that there would be no support from either our European allies or our friends in the Arab world for confrontation with Iraq. The third option, therefore, offered us little leverage over Iraqi behavior while potentially undercutting our broader interests in the Persian Gulf. We thus determined that these broader interests-including continued access to the region's oil, stability of friendly area states, and deterrence of Soviet intervention and influence-required a policy that sought, if possible, to engage Iraq and to offer the Iraqis a mix of incentives and disincentives but without any illusions. In adopting this policy, we decided to make clear to the Iraqi leadership that any use of chemical or biological weapons or violations of IAEA [International Atomic Energy Agency] nuclear safeguards would lead to economic and political sanctions for which we would seek the broadest possible support from our allies and friends. We also agreed that Iraq's human rights record and its meddling in internal affairs of others would continue to weigh heavily on our policy. At the same time, we would encourage Iraq to play a constructive role in the peace process, and we agreed to support the efforts of American companies to participate in Iraq's economic reconstruction and in the development of its energy sector. In short, the Administration concluded that the evolution of normal relations with Iraq-something that would require more constructive Iraqi behavior in a number of areas-was in the US national interest. Toward this end, we determined that it was worth trying to build on our successful diplomatic cooperation with Iraq during its war with Iran and attempting to develop a modest economic relationship. However, our policy also included maintaining a capable military presence nearby, providing arms and other support to friendly states in the region, and expanding our dialogue with the Soviet Union. For a period of time, we saw some movement by Iraq in the right direction on several matters. For example, Kurds were allowed to farm again, and they received compensation for seized property; Iraq agreed to pay personal injury claims relating to the crew of the USS Stark; FAA [Federal Aviation Administration] advice on airport security was welcomed by Baghdad airport; a first-ever DEA [Drug Enforcement Administration] visit to Iraq led to agreement to cooperate against narcotics trafficking; and we had opened a new cultural center in Baghdad that was successfully reaching out to ordinary Iraqis. Moreover, at a time when Iraq was forcing other Western creditors to accept bilateral debt rescheduling, it continued to repay US- guaranteed loans. Soon, however, a number of Iraqi statements and actions demonstrated that Iraq was not prepared to adopt a more responsible approach to relations with its neighbors or ourselves. As a result, we began to adjust even our modest efforts downward. We heavily criticized Iraq's human rights record before the UN Human Rights Commission and in the State Department's human rights country report. We also expelled an Iraqi UN diplomat for involvement in a murder plot. In March 1990, US Customs, working with the British, successfully interdicted an attempt to smuggle capacitors with possible missile and nuclear applications into Iraq. We also consulted with the British about the confiscation of materials for Iraq's development of the so-called "super gun." And we continued against Iraq a strict policy of denial for sales of weapons and weapons systems and intensified our efforts with other countries to tighten existing export controls, focusing on proliferation concerns. What little remained of the US-Iraqi relationship came to an abrupt end with Iraq's brutal invasion and occupation of Kuwait in August 1990. As it turned out, the fact that the United States had followed a measured policy toward Iraq rather than having sought unilaterally to isolate the Iraqis proved to be a critical factor in our ability to assemble a coalition-which included Arab countries-to expel Saddam from Kuwait and, ultimately, to devastate his military capabilities.
The CCC Program for Iraq
The Commodity Credit Corporation (CCC) of the Department of Agriculture had first made available credit guarantees in connection with export sales to Iraq in 1983, shortly before we resumed diplomatic relations with the Iraqis in 1984. As Under Secretary [of Agriculture] Crowder will explain in greater detail, the CCC program is designed to assist US agricultural exporters and producers by developing foreign markets for US commodities. It is, in the first instance, an export promotion and market development program. The CCC guarantee covers the risk of non-payment by a foreign bank under a letter of credit opened to finance the purchase of US agricultural exports. Iraq was one of more than 40 countries participating in this program, which served to provide benefits for over 80 different types of US agricultural commodities. In many respects, our trade balance with Iraq during the latter half of the 1980s was governed by the level of US-guaranteed financing available to Iraq. As US imports of Iraqi oil rapidly expanded toward an estimated $2.5 billion by 1990, the CCC program helped lessen a growing trade deficit with Iraq. Throughout the period in question and despite its economic difficulties, Iraq maintained a record of consistently and fully meeting financial obligations incurred under the CCC program. Iraq requested $1 billion in CCC credit guarantees for FY 1990. As the Administration began to consider this request, it learned that the US Attorney in Atlanta was investigating the Atlanta branch of Banca Nazionale del Lavoro for allegedly conducting a clandestine "greybook" loan operation to Iraq. While much of the money involved in BNL's loan operation was not directly related to the CCC program, approximately $720 million of BNL- Atlanta's loan portfolio consisted of assigned obligations that were backed by CCC export credit guarantees. Accordingly, as Under Secretary Crowder will explain, investigators with Agriculture's Office of the Inspector General began assisting the US Attorney's investigation in early September 1989. The Administration took the BNL allegations seriously, even though at the time no wrongdoing on the part of Iraq had been established. Because of the allegations, the Administration initially postponed any decision on Iraq's request for CCC guarantees for FY 1990. Moreover, in Secretary Baker's October 6 meeting with then Iraqi Foreign Minister Tariq Aziz, the Secretary raised the BNL issue, emphasizing the importance of Iraqi cooperation with this investigation, and seeking assurances from the Government of Iraq that it would assist in the investigation. Aziz gave these assurances, and Iraq did cooperate when a team from the Department of Agriculture traveled to Baghdad several months later. In November 1989, the National Advisory Council on International Monetary and Financial Policies (NAC) met at a senior level to consider Iraq's CCC request. As Deputy Secretary [of the Treasury] Robson will describe further, there was a full exchange on all relevant points regarding the CCC program for Iraq. The Deputy Secretary of Agriculture specifically reported that the BNL investigation had only resulted, to date, in allegations of violations. He further reported that Agriculture's Office of the Inspector General had stated in writing that there was no evidentiary basis for withholding approval of new CCC guarantees for Iraq. In addition to discussion of the BNL investigation, representatives at the NAC meeting also discussed Iraq's creditworthiness, the importance of Iraq as an agricultural export market, and the Administration's efforts to improve the bilateral relationship. I might note as well that at this time Members of Congress, along with various agricultural trade interests, were urging the Administration to provide the full amount of credit guarantees requested by Iraq. After a careful balancing of the risks and benefits, the NAC supported the Agriculture Department's recommendation to establish a tiered approach to the CCC program rather than to grant Iraq's request outright. Under this approach, Agriculture decided to extend a first tranche of $500 million in credit guarantees, with additional guarantees for the year to depend on the results of Agriculture's own administrative review as well as the investigations by its Office of the Inspector General and the US Attorney in Atlanta. The Administration indicated to the Iraqis that the CCC program would be terminated if abuses were discovered. The Agriculture Department continued to monitor the BNL investigation and consistently received word from its Office of the Inspector General that there was no reason to recommend that the CCC program not go forward. At the same time, however, Agriculture's own administrative review of Iraq's CCC program indicated a pattern of unexpectedly high prices for certain commodities. Accordingly, by February 1990, without investigations yet completed, the Administration deferred a decision on the second tranche of $500 million of credit guarantees for Iraq. During this time, the State Department cooperated with the Justice Department in the Atlanta investigation. This is reflected in correspondence between the two departments in March 1990, in which the State Department offered to work with Justice attorneys to develop a plan to interview Iraqi officials in connection with the BNL investigation. The State Department also facilitated Agriculture's administrative review of the CCC program for Iraq. In mid-April 1990, a delegation from Agriculture, with a representative from the State Department's Office of the Legal Adviser, traveled to Baghdad for approximately 4 days to meet with the Iraqis and to review their records regarding CCC-guaranteed purchases. The officials were granted access to Iraqi records relating to these purchases. Agriculture issued a report in May on the results of this visit. The report did, in fact, find violations by Iraq of CCC program requirements but did not find diversions of commodities purchased under the program. After the Agriculture Department had released its report, the Administration chose not to proceed with the second tranche of CCC credit guarantees for Iraq. Indeed, the Administration never granted any further credit guarantees to Iraq beyond those announced in November 1989. When the United States imposed sanctions against Iraq in August 1990, there were approximately $1.9 billion in outstanding credit guarantees. Of course, the major portion of those obligations had accumulated during the 1980s. In that regard, it is worth noting that all sanctions legislation against Iraq that the Congress had proposed in the first half of 1990, except for the Inouye-Kasten bill, exempted the CCC program from whatever sanctions might be imposed. It should also be noted that, of the $500 million in CCC credit guarantees authorized for FY 1990, only about $392 million actually became effective prior to the imposition of sanctions. Moreover, during the same period, Iraq actually made hard currency payments under the CCC program of approximately $847 million. Thus, despite concerns about Iraq's creditworthiness, there was a net reduction in CCC's exposure of about $455 million. In light of the affirmation in UN Security Council Resolution 687 of Iraq's continued liability for outstanding debts, as well as our own freezing of Iraqi assets, the Administration intends to assert claims against Iraq for debts owed to the United States.
The Committee's Questions
Within this context, let me turn to the committee's questions on the FY 1990 CCC program. As noted above, the State Department, acting in accordance with Administration policy, viewed the CCC program as one of the positive elements in our effort to develop a constructive bilateral relationship with Iraq. The State Department believed, in November 1989, that continuation of CCC-supported trade offered the possibility of expanding and improving that bilateral relationship. This would, hopefully, have had the additional benefit of moderating Iraq's conduct in areas of concern to us, such as human rights. By April 1990, however, the State Department no longer supported additional CCC credit guarantees for Iraq. On the issue of creditworthiness, the State Department viewed Iraq's record of repayment of CCC obligations as excellent, even though there were minor delays from time to time. Indeed, during the period in question, Iraq actually made payments to CCC of more than twice the amount it received in new guarantees. As for the BNL scandal, that issue, of course, had considerable influence on the course of events. It contributed to the initial delay in considering Iraq's request for $1 billion in CCC credit guarantees. It led Secretary Baker to request of [Iraqi] Foreign Minister Aziz that Iraq cooperate in the investigation. And it contributed to the decision to apply a tiered approach to Iraq's CCC request, granting only a first tranche of $500 million while the investigation proceeded. Finally, the Administration remained highly critical of Iraq's human rights record, even though consideration of that record did not specifically affect the State Department's views on the CCC program. That is the end of my remarks in response to the questions that you posed. However, I feel compelled in conclusion to comment on the nature of this inquiry. As I prepared for this hearing, I could not but reflect on how the conduct of our government has changed since I began my career with the State Department more than 30 years ago. We now seem to work in an environment of distrust rather than trust, of confrontation rather than cooperation, of accusation rather than fair inquiry. What has been done by the selective disclosure-out of context-of classified documents, by the distortions of truth, and by the raising of innuendoes where no facts exist to support them is to make exceedingly difficult our ability to engage in the deliberative process necessary to formulate policy. No longer can responsible officials voice differences of opinion, provide candid advice to their superiors, or engage in open discussion and debate on an issue without the constant worry that at some point in the future someone will seek to condemn and vilify them for having done no more than perform their duties honestly and to the best of their abilities. I submit that such a situation is in no one's interest and is a disservice to the good governance of this nation. (###)
Dispatch, Vol 3, No 21, May 25, 1992 Title:

Beginning a New Relationship Between The United States and Kazakhstan

Bush Nazarbayev Source: President Bush, Kazakhstan President Nazarbayev Description: Departure remarks, White House, Washington, DC Date: May, 19 19925/19/92 Category: Speeches, Testimony, Statements Region: Eurasia Country: Kazakhstan Subject: Trade/Economics, Development/Relief Aid, Democratization, Arms Control [TEXT]
President Bush:
Mr. President, distinguished members of the Kazakhstan delegation, it's been a great pleasure to welcome you to the White House on this historic occasion, the first-ever visit of the head of state of an independent Kazakhstan. I have never been to your country, but Secretary Baker has, and he has spoken to me about the tremendous potential of a nation rich in resources, a nation stretching from the steppes of Russia to the Tien Shan in the south, four times the size of Texas. Our meeting today marks the beginning of a new relationship, a relationship made possible by the end of the long era of East-West conflict that we called the Cold War. With the passing of that bitter conflict, we enter into a new era of hope for a more democratic and free order in Eastern Europe and in Central Asia. Under your leadership, Kazakhstan is pursuing a course true to these aims. Our meetings today confirmed the many interests that we share. The United States supports your independence. We believe its security, Kazakhstan's security, is important for stability in Europe and in Asia. We welcome President Nazarbayev's commitment that Kazakhstan will join the Non- Proliferation Treaty as a non-nuclear weapons state and that it will adhere to the START Treaty [Strategic Arms Reduction Treaty]. We'll continue to work toward a signing of the new START protocol by Kazakhstan, Ukraine, Byelarus, Russia, and the United States in the very near future. I want to take this occasion to underline our pledge to maintain regular, high-level communication with the Kazakh Government on political and security issues. That means exploring the possibility of cooperative programs in nuclear non-proliferation and beginning contacts between the armed forces of our two nations. Beyond our common security interest, the United States is committed to helping Kazakhstan make the transition from the old socialist command economy to the free market. We continue to aim at a tax treaty between our nations. Today, we took very positive steps toward increased trade with the signing of agreements on trade, bilateral investment, and the Overseas Private Investment Corporation. The surest way, though, to increase trade remains for American firms to have the opportunity to compete fairly in Kazakhstan. I am pleased that the Kazakh Government has, this week, signed a landmark agreement with Chevron Corporation to open the Tengiz oil fields. In order to expand trade, I've asked for our able Secretary of Commerce, Barbara Franklin, to form a business development committee to work with your government to increase contacts between private Kazakh and American firms. We will continue to provide humanitarian assistance, including much-needed food and medical aid. The United States also stands ready with technical assistance on a range of issues, from food distribution to speeding the conversion of defense sector industry to civilian economy. But government assistance is just one part of an outpouring of American support. As President, I am pleased to see the active efforts on behalf of private citizens to provide aid to your new nation-[from] volunteer organizations like Project Hope and Mercy Corps to the city of Waukesha, Wisconsin, which has sent 40,000 lbs. of food, medical supplies, and clothing to its Kazakh sister city. Like all of the former republics of the Soviet empire, Kazakhstan faces challenges that go beyond the need to build a strong competitive economy. After more than 70 years of communist rule, Kazakhstan and its Commonwealth neighbors are engaged in the difficult task of nation- building. At issue are the first questions of government and society, respect for the rule of law, the role of political parties [and] of free press and independent media, the freedom of association, and the freedom of the individual. On behalf of all Americans, I pledge the support of the United States of America as Kazakhstan seeks a future that is peaceful, prosperous, and free. Once again, it has been a special privilege to welcome you to Washington, to welcome you to the White House. May God bless your great country.
President Nazarbayev:
Esteemed Mr. President, ladies and gentlemen, as you already know, the state delegation of the Republic of Kazakhstan, for the first time in its history, is here at an official invitation of President Bush. We have just signed the keystone documents that will regulate the economic relations between the two countries. This is the trade agreement, the investment and insurance agreement, and the agreements on the protection of investments. Very briefly, the essence revolves around trade agreements, because this is the keystone agreement that will entitle Kazakhstan and the United States to enter a new level of relations. This agreement will serve as a basis for Kazakhstan to be getting US financial assistance and encouraging various financial and export cooperations of the international bank. The documents, in their turn, obligate us to working toward the status of a most favored nation in the relations between the two countries and also in adjusting the existing legislation and some other legal acts in Kazakhstan so that they meet requirements set by the international community and GATT [General Agreement on Tariffs and Trade]. This coincides with the desire of Kazakhstan to strictly observe international norms and to follow the course approved by the international community. We people of Kazakhstan also see something different in these documents. The principles provided for in these documents will serve as a guide for Kazakhstan on its way toward a market economy. We realize that we've just made the first step toward this objective. I'd like to indicate that we came over to the United States to learn, and I'd like to assure you that we'll try to be good students and learn as much as we can. We're deeply convinced that developing these relations with foreign nations, and particularly with the United States, we'll manage to successfully follow this path. The preparedness for this is in Kazakhstan's commitment to follow all international acts-and particularly the acts of 1968-and the obligations that Kazakhstan assumes not to transfer its nuclear weapons and not to sell them. Kazakhstan also obligates itself to honor the START Treaty as one of the participating parties. The efforts that Kazakhstan is making in the formation of it and mutual assistance with the newly independent states may also be referred here and also Kazakhstan's efforts to maintain peace within the entire Commonwealth and within Kazakhstan itself. Our goal is the building of a democratic society. So I would like to use this opportunity to express my thanks to Mr. President [Bush] and the entire American people for their desire to support Kazakhstan in the process of democratic reforms and its economic cooperation and also for the hospitality that we were shown on the American soil. In your speech, I have received all the answers to the questions that I touched on in the course of our talks today. We are grateful for the trust that you showed in us, and Kazakhstan will do everything possible to justify that. We are very sincere in our move when we say that we want to have the closest and the warmest economic and political relationship with the United States. In the course of our negotiations, I extended my invitation for Mr. Bush and Mrs. Bush to visit Kazakhstan, and this invitation has been accepted. So I have every reason to believe that our relationship will be a productive and a successful one. (###)
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan Relations: Joint Declaration

Bush Nazarbayev Source: President Bush,Kazakhstan President Nursultan Nazarbayev Description: Released by the White House, Office of the Press Secretary, Washington, DC Date: May, 19 19925/19/92 Category: Speeches, Testimony, Statements Region: Eurasia Country: Kazakhstan Subject: Trade/Economics, Democratization, Nuclear Nonproliferation, Arms Control, International Law [TEXT] Joint declaration between the United States and Kazakhstan by President Bush and Kazakhstan President Nursultan Nazarbayev, released by the White House, Office of the Press Secretary, Washington, DC, May 19, 1992. At the conclusion of this important meeting, we-the President of the United States and the President of the Republic of Kazakhstan-have resolved to develop friendly, cooperative relations between our countries and peoples and to work together to strengthen international peace and stability. Kazakhstan and the United States favor an early ratification and implementation of the START Treaty [Strategic Arms Reduction] as an important guarantor of maintaining global stability. Reaffirming its commitment to peace and security, Kazakhstan shall, at the earliest possible time, accede to the treaty on the Non-Proliferation of Nuclear Weapons as a non-nuclear state while preserving the right of control over the non-use and reductions of the nuclear weapons temporarily deployed on its territory. Kazakhstan guarantees to carry out the elimination of all types of nuclear weapons, including strategic offensive arms, within the 7- year period provided for in the START Treaty. The United States welcomes these steps and shall take necessary measures to assist Kazakhstan in this matter. Kazakhstan and the United States agree on the need to establish effective national control over non-proliferation of the weapons of mass destruction and associated technologies to third countries. The United States and Kazakhstan will work to strengthen international security on the basis of lower and more stable levels of armaments among all nations. We commit to uphold shared international principles, especially democracy, respect for borders and territorial integrity, and peaceful resolution of disputes. Together, we will promote respect for international law and the principles enshrined in the Helsinki Final Act, the Charter of Paris, other important documents of the Conference on Security and Cooperation in Europe, and the UN Charter. The United States welcomes Kazakhstan's efforts to establish equal and mutually beneficial relations with Russia and the states of Central Asia as well as with other states in accordance with these principles. Toward this end, the United States welcomes Kazakhstan's membership in multilateral institutions like the United Nations, the Conference on Security and Cooperation in Europe, the North Atlantic Cooperation Council, the International Monetary Fund, and the World Bank and its commitment to values and accepted norms of behavior in the world. We agree that our countries should maintain a regular bilateral dialogue on questions of peace and stability that are of interest to both states. We believe that the basis for the development of a lasting partnership between our states must be a shared commitment to promote the values of democracy, free markets, and world peace. In this regard, the United States supports Kazakhstan's commitment to pursue far-reaching political and economic reform. The United States welcomes Kazakhstan's desire to build its independence in full accordance with the principles of a free and democratic society, including free elections, pluralism and tolerance, freedom of emigration, the rule of law, and respect for human rights, including equal rights for all individuals belonging to ethnic or religious minorities. The US Government, in cooperation with the American private sector, will make available programs designed to help Kazakhstan establish the institutions, ideas, and practices that form the foundation of democracy. Kazakhstan will seek to accelerate its efforts to move toward a market economy through a plan for macroeconomic stabilization and structural microeconomic reform that will promote economic recovery, market development, and growth. This plan will be developed in cooperation with the International Monetary Fund and other international financial institutions. The United States will support such a plan and will encourage others to do so as well. In particular, the United States will provide Kazakhstan with access to technical assistance programs to assist its efforts to develop a market economy. Kazakhstan and the United States will work actively to promote free trade, investment, and economic cooperation between our countries. The United States and Kazakhstan have signed three economic agreements that constitute the basic framework of our economic relationship. They will promote economic ties between the two states and will further economic development. We have concluded a trade agreement that will confer most- favored-nation tariff treatment on Kazakhstan, an OPIC [Overseas Private Investment Corporation] agreement to make available investment insurance for American firms operating in Kazakhstan, and a bilateral investment treaty. We have also agreed to expedite negotiations on a tax treaty and to develop our cooperation in the area of scientific research and environmental protection. A critical feature of our cooperation will be an effort by Kazakhstan to lower barriers to trade and investment to allow greater access for American and foreign firms, especially in sectors such as oil and natural gas, mining, agriculture, manufacturing, and food processing. By agreeing to work jointly to advance these common interests, we have taken an important step in the development of a strong, lasting friendship between Kazakhstan and the United States. Through expanded cooperation between our governments and expanded contacts between our peoples, we seek to build an enduring relationship that will enhance the freedom and well-being of our nations and the world.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan Relations: Convention for the Avoidance Of Double Taxation

Bush Nazarbayev Source: President Bush,Kazakhstan President Nursultan Nazarbayev Description: Joint statement released by the Office of the Assistant Secretary/Spokesman, Washington, DC Date: May, 20 19925/20/92 Category: Speeches, Testimony, Statements Region: Eurasia Country: Kazakhstan Subject: International Law [TEXT] The United States of America and the Republic of Kazakhstan intend to conclude a new convention for the avoidance of double taxation of income to replace the Convention on Matters of Taxation, signed at Washington in 1973 by the United States of America and the Union of Soviet Socialist Republics. The new convention will establish the tax framework for what both sides hope will further the expansion of economic, technical, and cultural ties between the two countries. It will provide certainty to potential investors about their tax liability on income earned from sources in the other country and will reduce and, in some cases, eliminate the tax liability at source, so as to encourage greater investment flows. In addition, it will provide assurances of non-discriminatory tax treatment, of relief from double taxation, and for cooperation between the tax officials of the two countries to resolve potential problems of double taxation. The convention will also provide for the exchange of tax information between the tax authorities to help improve compliance with their income tax laws and the provisions of the treaty. In short, the new convention will greatly formalize the tax relations between the two countries. A great deal of progress has already been made toward agreement on the new income tax convention during meetings held recently in Alma-Ata. The two delegations are continuing to communicate through correspondence and will meet again, in Washington, during the week of June 8 for further talks. It is anticipated that agreement will be reached at that time on the outstanding issues. It will also be necessary to make appropriate adjustments in the text to reflect new Kazakh tax legislation expected to be introduced this summer. It is our common objective to have this new convention ready for signature in early October of this year.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan Relations: Convention for the Avoidance Of Double Taxation

Bush Nazarbayev Source: President Bush,Kazakhstan President Nursultan Nazarbayev Description: Joint statement released by the Office of the Assistant Secretary/Spokesman, Washington, DC Date: May, 20 19925/20/92 Category: Speeches, Testimony, Statements Region: Eurasia Country: Kazakhstan Subject: Trade/Economics, Democratization, Nuclear Nonproliferation, Arms Control, International Law [TEXT]
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan: START Ratification

Tutwiler Source: State Department Spokesman Margaret Tutwiler Description: Statement, Washington, DC Date: May, 20 19925/20/92 Category: Speeches, Testimony, Statements Region: Eurasia Country: Kazakhstan Subject: Nuclear Nonproliferation, Arms Control, International Law [TEXT] On START [the Strategic Arms Reduction Treaty] ratification, we are satisfied that there are not any remaining differences between us and Kazakhstan. We are pleased that we have been able to work out these understandings. As you know, there were departure statements at the White House yesterday and fact sheets at the White House. The understandings that we have with Kazakhstan should facilitate agreement with the others. The Secretary of State believes that we are making good progress. Hopefully, we will be in a position to put this to bed in Lisbon this weekend. There are still some important details that have to be wrapped up. Experts have been working actively on those details since they arrived here this morning.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan: Memorandum of Understanding On Unrestricted Diplomatic Travel

Tutwiler Source: State Department Spokesman Margaret Tutwiler Description: Statement, Washington, DC Date: May, 20 19925/20/92 Category: Fact Sheets Region: Eurasia Country: Kazakhstan Subject: State Department, International Law [TEXT] Before the dissolution of the USSR, travel by American and Soviet diplomatic and consular officials was severely restricted. Many areas in the USSR, including areas in Kazakhstan, were closed to travel by foreign diplomats. As a reciprocal measure, the United States closed areas of the United States to travel by Soviet diplomats. Even when diplomats were traveling to "open" areas, they were required to request permission in advance. With the signing of this memorandum of understanding, the United States and Kazakhstan signify their intention to do away with these travel restrictions. Diplomats will no longer have to file a request for permission to travel, and the system of closed areas will be eliminated. Military bases, sensitive installations, or other facilities normally closed to the public in all countries, will not, of course, be open to travel by diplomats. Unimpeded travel is essential if diplomats are to carry out their duties effectively. The removal of these travel restrictions is an indication of the desire of both the United States and Kazakhstan to establish a relationship based on mutual trust and a sense of partnership. Agreement Regarding Cooperation To Facilitate The Provision of Assistance Fact sheet released by the Office of the Assistant Secretary/Spokesman, Washington, DC, May 20, 1992. This agreement provides certain important legal protections in connection with the assistance program contemplated by the United States for Kazakhstan. In particular, the agreement provides for a series of customary arrangements, including: -- Tax and customs exemptions for US personnel and property involved in the assistance program; -- Immunity for personnel involved in providing assistance from the criminal jurisdiction of local courts and from the civil jurisdiction of those courts for official acts; and -- Standard procedures needed for inspections and audits under the assistance program as well as commitments by Kazakhstan to utilize items for the purposes for which furnished. It is contemplated that more specific agreements may be negotiated in connection with the provision of assistance under particular projects, but this agreement provides the essential foundation and framework for cooperation between the two countries in this area.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan: Agreement on Trade Relations

Tutwiler Source: State Department Spokesman Margaret Tutwiler Description: Statement, Washington, DC Date: May, 19 19925/19/92 Category: Fact Sheets Region: Eurasia Country: Kazakhstan Subject: Trade/Economics, International Law [TEXT] The trade agreement signed by the United States and the Republic of Kazakhstan provides for reciprocal most-favored-nation (MFN) tariff treatment to the products of each country. A trade agreement was originally concluded with the Soviet Union in June 1990 and approved by the Congress in November 1991. The United States and Kazakhstan recently reached agreement on technical adjustments to that agreement to reflect the establishment of an independent Kazakhstan. US congressional reapproval is not required. The agreement will permit Kazakhs to export goods to the United States while receiving non-discriminatory treatment of their goods. The United States expects that this agreement will create commercial opportunities for emerging Kazakh enterprises and promote the development of a market- based economy in Kazakhstan and, at the same time, will lay the groundwork for enhanced opportunities for US business. In addition to providing MFN for both parties, the agreement: -- Provides improved market access and non-discriminatory treatment for US goods and services in Kazakhstan and also calls for step-by-step provision of national treatment for US products and services; -- Facilitates business by allowing free operation of commercial representations in each country and by permitting companies to engage and serve as agents and consultants and to conduct market studies; and -- Offers strong intellectual property rights protection by reaffirming commitments to the Paris Convention and the Universal Copyright Convention, obligating adherence to the Berne Convention for the Protection of Literary and Artistic Works, providing copyright protection for computer programs and data bases and protection for sound recordings, giving product and process patent protection for virtually all areas of technology, and providing comprehensive coverage of trade secrets.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan: Bilateral Investment Treaty

Fitzwater Source: White House Press Secretary Marlin Fitzwater Description: Statement, Washington, DC Date: May, 19 19925/19/92 Category: Fact Sheets Region: Eurasia Country: Kazakhstan Subject: Trade/Economics, International Law [TEXT] The Treaty Between the United States of America and the Republic of Kazakhstan Concerning the Reciprocal Encouragement and Protection of Investment (the Bilateral Investment Treaty or BIT) will provide legal protections and assurances for investors of one country in the territory of the other country. By entering into this treaty, Kazakhstan is establishing its commitment to provide many of the prerequisites of an attractive investment climate for US investors. Several of the key requirements of the BIT are: -- Investors of each country receive treatment at least as favorable as that given to domestic enterprises in similar circumstances ("national treatment") or that given to other foreign enterprises in similar circumstances ("most-favored-nation treatment"), whichever is better for the investor, both on establishing the investment and in post-establishment operations. -- Investors are guaranteed the unrestricted transfer, in a freely usable currency, of all funds related to an investment, including profits, dividends, and capital. -- Investors are guaranteed freedom from performance requirements, which include requirements to export goods produced by the investor and requirements to purchase goods and services locally. -- Expropriation can only occur in accordance with international law: in a non-discriminatory manner; for a public purpose; and upon payment of prompt, adequate, and effective compensation. -- Investors have full access to binding international arbitration in cases of disputes with the host government, without first resorting to the local court system.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan: OPIC Agreement

Fitzwater Source: White House Press Secretary Marlin Fitzwater Description: Statement, Washington, DC Date: May, 19 19925/19/92 Category: Speeches, Testimony, Statements Region: Eurasia Country: Kazakhstan Subject: Trade/Economics, Development/Relief Aid, International Law [TEXT] The bilateral OPIC agreement signed by the United States and Kazakhstan will enable the Overseas Private Investment Corporation (OPIC) to provide investment insurance, project financing, and investor services for US private investors in Kazakhstan. Signature of this agreement demonstrates the commitment of the United States to helping the private sector in Kazakhstan develop and to assisting US companies seeking to invest there. As such, it marks an important step in establishing normal commercial relations with Kazakhstan. OPIC is a US Government agency that provides assistance to American investors in over 120 developing countries and emerging market economies throughout the world.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan: US Humanitarian Assistance to Kazakhstan

Fitzwater Source: White House Press Secretary Marlin Fitzwater Description: Statement, Washington, DC Date: May, 19 19925/19/92 Category: Speeches, Testimony, Statements Region: Eurasia Country: Kazakhstan Subject: Development/Relief Aid [TEXT]
Operation Provide Hope.
The American humanitarian assistance deliveries targeted for Kazakhstan during operation Provide Hope I amounted to 171.5 tons of food and 51.5 tons of medicines and medical supplies. Under Provide Hope II, NATO will coordinate the movement of about 74 tons of medical consumables and 500 tons of food. Although American humanitarian aid is delivered to the cities of Alma- Ata and Semipalatinsk, the final destination of the aid is often to outlying cities and regions.
President's Medical Initiative.
Under the auspices of the initiative, Project Hope to date has delivered $1.9 million of pharmaceuticals and medical supplies to Alma-Ata and the Aral Sea region.
The Fund for Democracy and Development.
The fund is a not-for- profit voluntary organization that has received funding from the United States to facilitate and maximize the transportation of privately donated humanitarian assistance. The fund has assisted numerous private organizations in the transportation of donated humanitarian aid.
Private Voluntary Organizations.
Several US private voluntary organizations have collected food, medicines, and medical supplies for shipment to the new independent states. Several of these shipments have been funded by the US Government under the $100 million appropriated for the transportation of humanitarian assistance. For example: -- Mercy Corps International. This organization has donated 80,000 lbs. of nutritious granola cereal for distribution to needy recipients in the Aral Sea region. -- Northern California Ecumenical Council, International Humanitarian Services of San Francisco. This organization has donated 12 tons of medicines and medical supplies to support the Bobek Children's Charity in Alma-Ata.
Sister Cities International.
The city of Waukesha, Wisconsin, has collected about 40,000 lbs. of hospital supplies, pharmaceuticals, foodstuffs, vitamins, and winter clothing for donation to its sister-city Kokchetav, Kazakhstan, for the Kokchetav Central Hospital.
Public Policy Training.
The United States will support long-term sister-city linkages with local and regional governments in Kazakhstan to train government officials.
Developing Free Markets and Business Relations
Farmer-to-Farmer Program.
This program will provide opportunities for US experts to give hands-on expertise on Western agribusiness methods.
Eurasia Foundation.
The Eurasia Foundation will provide a forum for cultural exchange and learning and provide a mechanism for on-the- ground expertise in the areas of management and privatization.
American Business Centers.
The United States plans to establish a regional business center where US business people can come for advice on local business opportunities, translation services, and meeting facilities, with the goal of facilitating expanded commercial relations.
Health Care Partnership.
The United States will transfer American medical knowledge and technology through the establishment of hospital-to-hospital partnerships.
Coal Mine Safety Project.
Through a US-funded project, the AFL- CIO will be providing assistance on coal mine safety in the Karaganda Basin.
Financial Sector Technical Assistance.
Treasury will send an official this summer to discuss placement of a long-term financial adviser to assist the Kazakh Government.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan: US Technical Assistance Programs to Kazakhstan

Fitzwater Source: White House Press Secretary Marlin Fitzwater Description: Statement, Washington, DC Date: May, 19 19925/19/92 Category: Speeches, Testimony, Statements Region: Eurasia Country: Kazakhstan Subject: Trade/Economics, Science/Technology, International Law [TEXT]
SABIT
(Special American Business Intern Training Program, managed by the Department of Commerce). SABIT is planning to interview candidates in Alma-Ata this summer for a 3-6 month management training program in the United States.
IESC
(International Executive Services Corps). IESC is prepared to send immediately to Kazakhstan volunteer executives to provide a range of technical assistance. Requests for these could come from the Government of Kazakhstan, businesses, or local community organizations. Volunteer executives are normally in place for 3-6 months. In addition, IESC will be placing a permanent representative in Alma-Ata in 1993.
Loaned Executives Program.
USDA (US Department of Agriculture) will place US agribusiness executives in Kazakhstan to work in Kazakh enterprises this summer.
Energy Efficiency Program.
An energy efficiency experts team visited Kazakhstan in April and proposed an audit of the Alma-Ata District Heating System. A follow-up team is in Alma- Ata conducting the audit. Based on the results of this audit, equipment will be installed (in the August-September time frame) to increase energy efficiency.
International Resident Housing Advisers Program.
The United States will place a resident housing adviser in Alma-Ata by the end of August. This adviser will be able to provide expertise to private individuals and public sector institutions on the development of a private sector housing market.
Rule of Law.
The United States is in the process of finalizing a program to bring judges and legal experts from Kazakhstan to the United States this summer for training and seminars.
Public Policy Training.
A USIA [United States Information Agency] training program in the United States for the chief of staff to the President of Kazakhstan is scheduled to begin May 20.
Democratization.
The United States is developing technical assistance programs focused on civic education, public administration, political party training, and the development of independent media.
Legal Advisers.
The United States will fund an American Bar Association technical assistance program to provide legal experts who can assist Kazakhstan in drafting constitutional and other laws. (###)
Dispatch, Vol 3, No 21, May 25, 1992 Title:

Fact Sheet: Kazakhstan

PA Source: Office of Public Communication, Bureau of Public Affairs Date: May, 19 19925/19/92 Category: Fact Sheets Region: Eurasia Country: Kazakhstan Subject: Trade/Economics, Democratization, History [TEXT] Kazakh President Nursultan Nazarbayev made his first official working visit to Washington, DC, on May 18-20, 1992, and met with President Bush, Secretary Baker, and a wide array of government and business leaders. There was discussion on a full range of issues.
US-Kazakhstan Relations
The United States recognized Kazakhstan's independence on Decem-ber 25, 1991, established relations, and opened an embassy there in January 1992- the first country to do so. US-Kazakhstan relations focus on the following key issues: the Commonwealth of Independent States (CIS); the nuclear test ban; US assistance; trade and investment; accelerating efforts to reach agreement with Russia to implement the Strategic Arms Reduction Treaty (START) with the United States; economic reform; environmental problems; the Russian minority; and Islamic revival. For FY 1992-93, the Administra-tion has asked Congress to appropriate $620 million that would continue to provide emergency humanitarian relief and technical assistance to support democratic reform and promote economic restructuring in the new republics. About 50% will go to Ukraine, Armenia, Kazakhstan, and Kyrgyzstan. The Administration also has proposed establishment of a new private organization, the Eurasia Foundation, to provide fast-disbursing grants for technical assistance, management training, and democratic institution-building.
Building Democracy
The Kazakh Parliament declared independence from the former Soviet Union on December 16, 1991. In the December 1991 presidential elections, President Nazarbayev ran unopposed and received 98% of the vote. There are four recognized non-communist political parties and numerous smaller interest or social groups. The Nevada-Semipalatinsk anti-nuclear movement played an important role in the recent ban on nuclear tests in the republic. The Kazakh Communist Party became the Socialist Party, but it has little influence. Kazakhstan joined the CIS in December 1991. It became a member of the Conference on Security and Cooperation in Europe in January 1992, and the United Nations and the North Atlantic Cooperation Council in March 1992.
Economic Conditions
Kazakhstan has a relatively undeveloped economy. In 1988, Kazakhstan's net output accounted for 4.3% of total output in the former Soviet Union. About 23% of the population are engaged in agriculture. Major products are wool, grain, and meat. The northern area of the country produces up to one-third of all wheat grown in the Commonwealth. The United States recently launched a farmer-to-farmer assistance program that will provide hands-on training in US-style farm technology and agricultural cooperatives. It is the first phase of a 3-year, $30-million program administered by the US Agency for International Development, under which five teams of volunteers will work in Kazakhstan, Russia, and Ukraine with farm groups interested in establishing private agribusiness enterprises. Kazakhstan was a Soviet industrial center during and after World War II, when the USSR moved industry east of the Urals to protect it from Nazi invasion. Mining and quarrying play a major role in Kazakhstan's economy. Abundant mineral resources-which include mineral oil, oil, natural gas, metals, gold, and coal-provide the bulk of the republic's limited hard currency. In 1989, Kazakhstan produced about 19% of total coal output in the former Soviet Union. Iron ore production was about 10% of the total. US long-term goals seek to promote self-sustaining economic reforms by encouraging the participation of US companies in trade and investment. In April 1991, a US trade negotiating team went to Moscow to work out details of several trade and investment accords with Kazakhstan. Under the Trade and Development Program, the United States is considering the development of a coal mine in the Kenderlyk region and construction of a highway from Alma-Ata to Krasnovodsk.
Kazakhstan at a Glance
Kazakhstan was first mentioned in Russian records in 1534. The origins of the Kazakh people are uncertain, but traditional similarities show that they may have descended from the Mongol Golden Horde. Kazakhs founded a great nomadic empire under Burunduk Khan and his son Kasym Khan, who ruled from 1488 to 1518. Later, the empire broke into smaller groups called khanates. The region was incorporated into the Russian empire by 1848. A Kazakh nationalist movement arose in the early 20th century. The Soviet Army occupied Kazakhstan from 1919 to 1920 before it became a republic in 1921. After 1927, the Soviets forcibly settled the Kazakhs, diluting nationalistic sentiment by resettling large groups of Russians and Ukrainians into the region, especially during the 1950s. Kazakhstan covers about 2.7 million square kilometers (about four times the size of Texas). Ethnic Kazakhs make up 18% of the population of the capital (Alma-Ata) and 50% of the surrounding countryside. In 1990, total population was 16.7 million. Ethnic Kazakhs comprise about 40% of the country's population; Russians, about 38%. Germans, Ukrainians, Koreans, and other groups make up the remainder. From 1979-89, the population grew at an annual rate of 3.5%, while the Russian population decreased by about 3%. (###)
Dispatch, Vol 3, No 21, May 25, 1992 Title:

Nagorno-Karabakh and Nakhichevan Fighting

Tutwiler Source: State Department Spokesman Margaret Tutwiler Description: Statement, Washington, DC Date: May, 19 19925/19/92 Category: Speeches, Testimony, Statements Region: Eurasia Country: Armenia, Azerbaijan Subject: Regional/Civil Unrest [TEXT] The United States strongly condemns the recent escalation of the fighting in Nagorno-Karabakh and Nakhichevan. We are concerned that these military actions threaten to undermine the prospects for good-faith negotiations to resolve the conflict and dangerously increase instability throughout the region. The US Government will not accept unilateral changes in the status of Nagorno-Karabakh, Nakhichevan, or any other territory on the basis of military actions or violence. The only way to achieve a lasting solution to this conflict is through good-faith negotiations based on CSCE [Conference on Security and Cooperation in Europe] principles. We call upon all sides to end the violence, recommit themselves to the CSCE mediation effort, and take immediate steps to de-escalate the conflict and create an environment in which good-faith negotiations can begin. The US Government has repeatedly stated that the quality and character of its relationship with both Armenia and Azerbaijan will depend on their demonstrated commitment to CSCE principles, including the peaceful settlement of disputes. (###)
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US Condemns Bangkok Violence

Tutwiler Source: State Department Spokesman Margaret Tutwiler Description: Statement, Washington, DC Date: May, 19 19925/19/92 Category: Speeches, Testimony, Statements Region: Southeast Asia Country: Thailand Subject: Regional/Civil Unrest [TEXT] We condemn the violence and loss of life in Bangkok. We are saddened by these events. As a longtime friend of the Thai people, we have made it clear that we cannot accept the use of deadly force as a means of resolving the issues that divide the opposition and the government. We have met with Thai leaders, including Prime Minister Suchinda, to condemn the violence and the loss of life and urge strongly that the Thai Government refrain from the use of deadly force. We have also raised our concerns with the opposition. In view of the continuing violence in Bangkok, we have put resumption of economic and military assistance on hold and suspended all combat elements of the military exercise Cobra Gold. It is clear that a normal relationship with the Thai Government under current conditions will be impossible.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

Cuba: Human Rights Trial

Tutwiler Source: State Department Spokesman Margaret Tutwiler Description: Statement, Washington, DC Date: May, 20 19925/20/92 Category: Speeches, Testimony, Statements Region: Caribbean Country: Cuba Subject: Human Rights [TEXT] The US Government has learned that Cuban human rights activist Yndamiro Restano will be tried today on the charge of rebellion. Restano is leader of the dissident Harmony Movement (MAR) and has been held without charge since December. He faces a term of 12 years in prison. MAR member Maria Elena Aparicio will be tried with him and faces an 8-year term. We understand that the Cuban authorities intend to claim that Restano encouraged civil disobedience and sabotage against the Cuban state. In fact, Restano has sought only to work with Cuban authorities to promote peaceful, democratic change. He has never espoused violence and [has] been guided only by the patriotic concerns of peace and prosperity for his nation and fellow Cuban citizens. The US Government deplores the exaggerated nature of the charge against Restano and Aparicio. We call for their immediate release. We are also disturbed to learn that Cuba intends to try human rights activist Sebastian Arcos on the charge of "enemy propaganda," a patently trumped-up charge, and is seeking a 6-year prison term against him. Arcos is vice president of the Cuban Committee for Human Rights and has been a tireless defender of human rights in Cuba. That Cuban authorities call this "enemy propaganda" reflects an intolerance on the part of the Cuban Government for the right of its people to aspire to the basic freedoms enjoyed elsewhere throughout the world. The cases against Arcos, Restano, and Aparicio are representative of the inability of the Cuban Government to accede to the aspirations of the Cuban people for freedom and democratic reform. We call for their immediate release.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

Meeting With Leader of Sudan's National Islamic Front

Tutwiler Source: State Department Spokesman Margaret Tutwiler Description: Statement, Washington, DC Date: May, 20 19925/20/92 Category: Speeches, Testimony, Statements Region: MidEast/North Africa Country: Sudan Subject: Democratization, Narcotics, Regional/Civil Unrest [TEXT] Deputy Assistant Secretary for African Affairs Robert Houdek met with Sudanese National Islamic Front leader Dr. Hassan Al-Turabi on May 20 at Dr. Turabi's request. The meeting was part of our ongoing dialogue with prominent Sudanese political leaders. Mr. Houdek expressed our strong concern regarding Sudan's policy of allowing known terrorists and terrorist organizations to operate in Sudan. He also raised human rights concerns and the civil war in southern Sudan. He assured Dr. Turabi that the United States does not object to Islam or to groups that make Islam part of their political platform. However, we are extremely concerned by efforts to promote political objectives outside Sudan's borders by non-democratic means. With regard to the presence of terrorists in Sudan, he issued a clear warning that if Sudanese hospitality is abused by them, Sudan will not escape responsibility. Mr. Houdek noted our serious concern over Sudan's human rights record, especially in regard to the government's continuing forcible relocation of hundreds of thousands of displaced persons in the Khartoum area. He also urged that the Government of Sudan allow humanitarian relief flights to resume to all areas of southern Sudan, where the latest government military offensive has displaced thousands of people. In regard to the continuing civil war in the south, Mr. Houdek called for the Sudanese Government to profit by the opportunity at the upcoming talks in Abuja, Nigeria, and not continue to pursue an unachievable military solution.
Dispatch, Vol 3, No 21, May 25, 1992 Title:

Serbia: Suspension of JAT Landing Rights in US

Tutwiler Source: State Department Spokesman Margaret Tutwiler Description: Statement, Washington, DC Date: May, 20 19925/20/92 Category: Speeches, Testimony, Statements Region: E/C Europe Country: Serbia-Montenegro Subject: International Law, Development/Relief Aid, Human Rights [TEXT] On May 16, on instruction from Secretary Baker, Ambassador Zimmermann sought assurances from Serbia that relief convoys would be allowed free passage into Sarajevo and that the Sarajevo airport would be reopened immediately for humanitarian flights. Ambassador Zimmermann informed Serbia that failure to take these steps would result in immediate termination of JAT landing rights in the United States. That is the Yugoslav airline. On May 18, Serbia made clear its response when Serbian forces attacked a Red Cross relief convoy heading into Sarajevo, destroying desperately needed humanitarian supplies and killing an ICRC [International Committee of the Red Cross] delegate. And yesterday, as further evidence of their intransigence and brutality, Serbian forces took hostage a convoy of women and children fleeing Sarajevo. We have various reports of that number of hostages being anywhere from 1,000 individuals to 7,000. Effective today, we have asked the Department of Transportation to terminate the authority of the Serbian national carrier, Yugoslav Airlines, to fly to and from the United States. This means that their three weekly flights from Belgrade to New York City and on to Chicago will end immediately. We are also considering a series of further measures in response to continued Serbian aggression which we will be discussing with our allies and friends over the next day or two. (###)
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Canada Trade of Enormous Benefit to Both Economies

Bush Mulroney Source: President Bush, Canadian Prime Minister Mulroney Description: Opening Remarks at a press conference, Washington, DC Date: May, 20 19925/20/92 Category: Speeches, Testimony, Statements Region: North America Country: Canada, United States Subject: North America Free Trade, Trade/Economics [TEXT]
President Bush:
I'm just delighted to have had this visit with Prime Minister Mulroney of Canada, welcoming him back to the White House. I think we covered an awful lot of ground in a short time. Just a couple of observations: I know that many are focusing on our trade issues, in particular on trade disputes; that's natural. We've got this enormous-this immense-trade that goes on between our two countries. Our bilateral trade [has] increased by $30 billion since the inception of the free trade agreement in 1989 and now stands at a volume of nearly $200 billion. I believe that this trade is of enormous benefit to the two economies and demonstrates vividly the value of that free trade agreement, and, because of the large trade between the United States and Canada, there are bound to be some bumps in the road. We have existing mechanisms for dispute settlement. We are using them, including the FTA [free trade agreement] itself. As a consequence, I can report that we're making progress in overcoming some of our recent problems. I told the Prime Minister, who forcefully presented Canada's case, that I would work with our Administration to see that these disputes receive proper high-level consideration before they go to some form of action. I think this will help. But, in any event, we discussed frankly the problems. We also talked about a wide range of international issues, including the coming summit, including the G-7 [Group of Seven industrialized nations]. So we had a very good conversation. In the Bush view-our Administration view-this relationship between Canada and the United States is very, very important to the people of the United States of America.
Prime Minister Mulroney:
As the President said, we had a very far-reaching discussion on a lot of subjects. I'd be happy to take whatever questions are appropriate. But I tried to focus on what our priority problem is at this point in time, and it's trade. For some time, Canadians have been troubled and angered by the attitude adopted by some people in Washington on major trade issues. Rather than move quickly to resolve or prevent irritants, the tendency was to retaliate against Canadian products by threatening to impose demonstrably unfair penalties on Canadian imports. These actions create uncertainty for investors and exporters and undermine the fundamental intent of the free trade agreement. The President called me a number of times over the last few weeks, conscious of some of the difficulties that have arisen in a very complex and important trading relationship. We agreed at this meeting today to follow up on it. So we had a very constructive review of these issues. We both intend to raise the level of commitment to resolve and to reduce disputes, to give a higher level of attention in order to manage the relationship and these issues. The President and I are going to work personally to that end. We both recognize that healthy trade between us is vital to recovery. We are the United States' best customer by far, and the United States is ours. We can help each other in terms of economic recovery by reducing the temperature and getting rid of a lot of these irritants rather than to allow them to fester and grow to important status. For example, Canada's merchandise trade surplus was $3.1 billion in the first quarter, as announced this morning-the largest surplus since the second quarter of 1990. For the first quarter, Canada's exports to the United States are up 8.8% from last year. As the President has pointed out, even in a difficult recessionary period, the growth in trade between Canada and the United States is up very impressively. That means jobs in the United States and jobs in Canada. We have to keep that going. It was a very constructive and helpful meeting, and I thank the President and his advisers and counselors and cabinet ministers for that. (###)
Dispatch, Vol 3, No 21, May 25, 1992 Title:

America and Asian Security In an Era of Geoeconomics

Solomon Source: Richard H. Solomon, Assistant Secretary for East Asian and Pacific Affairs Description: Address before the Pacific Rim Forum, San Diego, California Date: May, 15 19925/15/92 Category: Speeches, Testimony, Statements Region: Pacific, East Asia, Southeast Asia Country: China, Japan, South Korea, North Korea, Cambodia, Vietnam Subject: Trade/Economics, ASEAN, Nuclear Nonproliferation, Arms Control [TEXT] We are fortunate to live at a rare and promising moment in history. The demise of the Cold War is spurring a fundamental transformation of international relations in ways that hold the possibility of a world of expanded trade and economic growth and heightened collective efforts to promote security, respect for human rights, and the spread of democracy. The questions we now are grappling with are how to promote these positive trends in the face of significant challenges and how to structure the economic, political, and security institutions of the post-Cold War world. Our challenge is to grasp the major trends of our times and shape new solutions to the unending quest for national security and economic development. Let's look at the world we are entering, one shaped by the information revolution and filled with some intriguing contradictions. Instantaneous flows of communication and capital are eroding national boundaries and compressing international dealings in both time and space. In combination with such transnational problems as environmental degradation, the global trade in narcotics, and the AIDS [acquired immune deficiency syndrome] epidemic, these realities require us to transform our notions of national sovereignty. As Secretary Baker has argued, the nation-state also is being transformed "from above" by the supra-national forces of economic integration and the requirements of coalition politics in an ever more interdependent world and "from below" by the ethnic, political, and entrepreneurial demands for greater decentralization of state power. Old political feuds and ethnic rivalries unfrozen by the end of the Cold War are being replayed in today's decentralizing political environment but, this time, with the destructive power of high-tech weaponry. Today, the elements of national security are being redefined and expanded beyond classic assessments of the military balance to include factors of economic vitality, threats to the environment, and refugee flows. Yet, as we saw in last year's Gulf crisis, military challenges to our security endure. Regional leaders with great power ambitions or territorial designs pursue their aims with the high-tech arms that are all too readily available in a world of proliferating missiles and the technology to make nuclear, chemical, and biological weapons of mass destruction. For all this change and challenge, the multilateral institutions required to manage the emerging world of the 21st century, to give it order and new rules for mediating conflict, remain to be established or to evolve as existing international institutions are adapted to new realities. Amidst the uncertainty and turbulence that characterizes this period of dramatic transition, however, one fundamental trend is clear: We are entering the age of geoeconomics, with flows of trade, finance, and technology shaping the power realities and the politics of a new era. To be sure, military power remains a significant component of national strength. But in today's world, technological and commercial capabilities as much as military strength are the defining elements of national power and influence.
Impact on Asia
The nations of East Asia have been on the cutting edge of these global transformations. The end of the Cold War produced dramatic shifts in Asia's international alignments: Sino-Soviet reconciliation; Moscow's normalization of relations with Seoul; China's burgeoning ties with South Korea; Mongolia's adoption of a democratic, market-oriented reform program; Sino-Vietnamese rapprochement; and the disengagement of the major powers from Indochina. Yet remnants of the Cold War persist in the divided and heavily armed Korean peninsula and the lingering Russo-Japanese dispute over Japan's Northern Territories. Moreover, there is increasing uncertainty about prospects for Sino-American relations. The Asia-Pacific region has been the pacesetter in the global trend toward the ascendancy of economic power. It is stunning to recall that, only 2 or 3 decades ago, East Asia was engulfed in war and great power confrontation, burdened by grinding poverty, and challenged by insurgent communist movements. Our trade with the entire region until the late 1960s was less than that with Latin America. At the outset of the Cold War, we encouraged defeated former enemies like Japan and impoverished allies like Korea to pursue economic development through export-led growth. We provided them ready access to our markets, even though their own markets were highly protected. Today, we take the familiar Asian success story for granted: Japan has become an economic superpower; the four tigers of South Korea, Taiwan, Hong Kong, and Singapore may soon be joined by a dragon, as southern China grows at double-digit rates; and Thailand, Malaysia, and Indonesia seem destined to be tigers in the 21st century. While national security concerns were an important factor in our Cold War strategy for the region, we did not act out of economic altruism. Trade is not a zero-sum game; prosperity has a multiplier effect as growing allies provide expanding markets. Over the past 4 decades, US exports have grown by some 4,000%, from $10.3 billion in 1950 to almost $400 billion by 1990. Our two-way trade across the Pacific last year exceeded $310 billion- almost 50% greater than our trade with Western Europe. Today, we export more to Malaysia than to all the republics of the former Soviet Union, more to Japan than France and Germany combined, [and] more to Singapore than to Italy. Our allies and friends in Asia, however, have now become robust competitors as well as attractive markets. Their success requires them to assume the responsibilities necessary to sustain and expand the global trading system that has nurtured their growth, to grant more equal access to their domestic markets. Yet many of our relationships in the region are beset with trade tensions as economic issues move center stage. The asymmetry in the easy access which our Asian trading partners have to our markets, but with our limited access to theirs, must be remedied. In a sense, the challenge of the emerging era is far more complex than that of the Cold War years. Then the enemy was clear, the threat visible and often ominous. Today, there is no universal "enemy," the threat is diffuse, less military in character-and often, it is in our own deficiencies.
Security Challenges
What is the impact of the end of the Cold War on regional security in East Asia? During the Cold War, our forward deployed forces, sustained through a network of bilateral alliances with Japan, Korea, Australia, Thailand, and the Philippines, sheltered the region's security and its economic take-off. For 4 decades, we have been the region's power balancer, its intercessor, and security guarantor. Our presence in Asia-as part of the global strategy of containment-masked historically diverse security concerns throughout the region. Unlike Europe, the nations of East Asia have never perceived a common security threat, and a common security structure never developed-despite our efforts to organize a NATO counterpart in SEATO [South East Asia Treaty Organization], or Soviet efforts to create a collective security organization on an anti- China basis. Underneath the Cold War overlay, there was a regional dimension to our security presence that complemented local concerns in the Pacific theater. With the demise of the Cold War, our global policy of containment has evaporated and is being replaced by regional or subregional defense strategies. In the Asia-Pacific, what had been a secondary aspect of our strategic policy is now the primary rationale for our continuing security engagement: to provide balance, to prevent a strategic "empty space" from developing, to reassure allies, and to maintain a working presence in case of regional contingencies. Our bilateral alliances and defense relations remain the core of Asian security. We are bolstering our defense partnerships as allies, particularly Japan and Korea, assume a greater share of the burden of assuring stability and security. But in the emerging world I have described, new, ad hoc, multilateral security efforts are slowly emerging. The Cambodian peace process and Indonesia's efforts to initiate a forum on the contested islands of the South China Sea are examples of tailor-made conflict resolution processes that can enhance regional security. In the near term, Northeast Asia appears to hold the greatest security challenges. Generational leadership transitions in China and North Korea could produce volatile situations or spur domestic political rivals to take confrontational nationalistic positions. Thus, we see China reasserting claims to disputed territories in the South and East China Seas. Sino- Japanese and Japanese-Korean relations are burdened by a difficult past. The threat of nuclear proliferation in Korea holds the danger of provoking a regional arms race.
Korea
The most immediate threat to stability in the Asia-Pacific region is that of nuclear proliferation on the Korean peninsula, where, despite the growing dialogue between Seoul and Pyongyang, the last military confrontation of the Cold War persists. Our main concern, and that of the ROK [Republic of Korea], Japan, Russia, and China-indeed, of the international community-is that, despite Pyongyang's recent agreements with the South and with the IAEA [International Atomic Energy Agency], the suspicion persists that the North Koreans have not abandoned their quest for nuclear weapons. The acquisition of a nuclear weapons capability by North Korea would be viewed by the international community as an unacceptable threat to peace. Recent indications of a North Korean willingness to implement IAEA and bilateral nuclear controls are hopeful signs that this last remnant of the Cold War era may be easing. Yet both nuclear inspection agreements remain only commitments on paper. What is required are credible inspection regimes and their effective implementation. Only verification of Pyongyang's assertions of peaceful intent will begin to give the international community confidence that the North Koreans are genuinely honoring their commitments, that they are serious about moving away from military confrontation toward national reconciliation. Will such inspections in fact occur? Given Pyongyang's past record of unfulfilled commitments-and 4 decades of mutual mistrust-there is ample reason for skepticism. Yet times may be changing. Pyongyang now has before it a golden opportunity to allay suspicions, begin to establish some credibility, and accelerate an opening to the outside world. Since 1988, in coordination with our ally South Korea, US policy has been to encourage the North to move toward reconciliation. As a result of the important agreements between Seoul and Pyongyang on national reconciliation and a non-nuclear peninsula reached at the end of last year, we held our first political-level exchange with a senior official of the DPRK [Democratic People's Republic of Korea] in New York this past January. We are encouraged by Pyongyang's recent provision of information to the IAEA on its nuclear facilities as well as North Korea's efforts to meet some of our other stated concerns. Positive North Korean deeds will advance the process of moving beyond the heavy legacy of the past. When our concerns about Pyongyang's nuclear activities are satisfactorily addressed, as the IAEA and bilateral inspection regimes are implemented, the United States is prepared to embark on a regular, policy-level dialogue and move toward more normal US-DPRK relations. We believe other countries will respond in similar fashion. Another example of positive action by North Korea would be DPRK adherence to the Missile Technology Control Regime (MTCR). Accepting the standards of the international community for weapons exports will provide far greater economic benefits to the people of North Korea in normal commercial relations with the rest of the world than any short-term gains from exporting weapons of mass destruction. The process of reconciliation and reunification on the Korean peninsula must be advanced by the two Koreas themselves. Yet the international community, particularly those countries with a major stake in stability in Northeast Asia, have a strong interest in assuring that a non-nuclear peninsula becomes a reality and that the process of North-South reconciliation advances. In the international diplomacy surrounding the Korean nuclear issue, we continue to see the promise of multilateral cooperation in Northeast Asia.
China: An Uncertain Future
However problematic the situation in Korea may be, an even weightier uncertainty is the future of China's international role and, with it, the future of Sino-American relations. In a single, tragic night in June of 1989, violence at Tiananmen Square shattered 2 decades of efforts to normalize US-China relations. Ever since, tensions over human rights practices, nuclear and missile proliferation issues, and a rapidly growing trade deficit have formed a corrosive mixture that threatens to erode what remains of the normal US-China relationship that was built up over the 1970s and 1980s. There is strong sentiment in Congress to punish China by denying the country unconditional MFN [most-favored-nation] trading status. The Administration, conversely, is pursuing a policy of applying targeted sanctions in specific areas of concern but believes that blanket trade sanctions are counterproductive, as they work against the economic forces promoting openness and reform. As President Bush has said, no nation has yet discovered a way to import the world's goods and services while stopping foreign ideas at the border. Indeed, it was the decade of 10% per year growth-initiated by Deng Xiaoping in late 1978-that opened China to the outside world, stimulated new thinking and reform, and eventually led to the demonstrations at Tiananmen. In this regard, we are encouraged by Deng Xiaoping's January visit to Shenzhen, the special economic zone bordering on Hong Kong, and the Chinese politburo's subsequent endorsement of Deng's renewed support for policies of economic openness and reform, which, it stated, should be sustained for the next 100 years. These developments underscore the success of a rapidly growing market-oriented economy in south China tied to the world economy and the importance the leadership attaches to it for China's future. To be sure, China remains repressive, and the prospects for political reform are uncertain. The question is whether we have the patience and the political will to remain engaged with China as it undergoes its inevitable transformation and whether China chooses the path of cooperation. We should not allow our serious differences over human rights, economic practices, or China's missile and nuclear exports-which we will continue to address in appropriate ways-[to] lead to a rupture of normal commercial relations with 23% of the human race and a renewal of confrontation with the PRC [People's Republic of China]. The basis for a productive post-Cold War Sino-American strategic relationship does exist. What China does or does not do internationally can significantly affect our national interests-on the Korean peninsula, in Cambodia, in Southwest Asia, and at the United Nations. Nor can we meet transnational challenges such as narcotics trafficking and environmental degradation in the absence of some measure of cooperation with Beijing. We must engage China not only in areas where our interests converge, but also in those areas where our values and practices diverge. The alternative is renewed Sino-American confrontation, which would have destabilizing effects not only on China's modernization and on stability throughout East Asia but, more broadly, for the post-Cold War international order we are trying to forge. Before embarking on such a course, all concerned would be well advised to consider carefully the consequences.
Southeast Asia
In Southeast Asia, the successful negotiation of the Cambodia peace accord- signed last October in Paris-Vietnam's military disengagement from Cambodia, and Sino-Vietnamese normalization have substantially eased regional tensions. Implementation of the UN settlement plan for Cambodia- still a formidable task-promises to usher in a new era for strife-ridden Indochina and, with it, the prospect of finally laying to rest America's burdens from the Vietnam War era. At present, there is no immediate security threat in Southeast Asia. In this environment, our defense strategy and military presence are undergoing significant changes. The combination of the forces of nature and nationalism have led to the closing of Clark Air Base and a decision by the Philippine senate that we should completely withdraw all US forces from Subic Bay Naval Base by the end of this year. These developments in the Philippines are accelerating a trend in our security planning toward a more diversified set of defense relationships in Southeast Asia based on access to local military facilities. In 1990, we signed an access agreement with Singapore, and we are in the process of enhancing our defense cooperation with other ASEAN [Association of South East Asian Nations] friends in support of a restructured and dispersed forward deployment of our naval and air forces. The United States does intend to remain engaged in Southeast Asia as a force for regional stability by enhancing defense cooperation through such access arrangements, through joint training, exercises, and military education and assistance programs. As well, we are prepared to discuss appropriate security issues in the ASEAN-PMC [post-ministerial conference] forum.
Hot Economies
While Asian security concerns have a diverse, sub-regional character, burgeoning trans-Pacific and intra-regional trade and investment provide a major area of shared interest, an adhesive for binding together the hot economies of the region. But Asia's rapid developers present daunting challenges for US policy: reinvigorating an open global trading regime, thwarting economic regionalism and national protectionism, and enhancing our competitiveness as the world's largest trading nation. We have a game plan for meeting these challenges. Economics is in command. The Administration is pressing for open trade on three related fronts-multilateral, regional, and bilateral-all of which complement and support each other. First and foremost is the effort to attain a successful conclusion of the Uruguay Round of the GATT [General Agreement on Tariffs and Trade] negotiations. The President, at each stop on his January trip to Asia, stressed the importance we attach to updating and enhancing the GATT system along the lines of the Dunkel draft. A relatively open global trading system is the sine qua non for sustaining economic growth worldwide and avoiding a fragmentation of the international economy into regional trade blocs. To counter trends toward economic Balkanization, the United States is promoting GATT-compatible free trade arrangements as the component elements of a global free trading system. These range from the NAFTA [North American Free Trade Agreement] to the ASEAN Free Trade Area (AFTA), which was recently adopted by our friends in Southeast Asia. It also includes APEC, the Asia- Pacific Economic Cooperation initiative-about which I will say more in a moment. But let me first briefly touch on our bilateral economic challenges.
Japan
Japan remains the keystone of our engagement in East Asia-and the world. With some 40% of the world's GNP between us, a cooperative US-Japan partnership can be-and must be-a major factor in shaping the post-Cold War world. This was the vision embodied in the Tokyo Declaration of global partnership issued by President Bush and Prime Minister Miyazawa in January [See Dispatch, Vol. 3, No. 3]. But the political requirements of such a collaborative relationship demand that we set right the economic imbalance in our commercial dealings. US-Japan relations have changed profoundly over the past decade, and we must rise above bashing and adjust to new realities. Recent emotional outbursts on both sides of the Pacific betray the profound stakes we both have in each other and the genuine progress we have achieved in many aspects of the relationship. Today's sour public mood, with its tinges of racism and loss of self- confidence, contrasts sharply with the more complex economic and political realities of the US-Japan relationship. For example, you would never know from the press that our exports to Japan have grown by 120% over the past 5 years; that our bilateral trade deficit shrank from $57 billion in 1987 to $42 billion last year; or that, except for the Gulf states, Japan was the largest financial contributor to [Operation] Desert Storm. To be sure, we have much more work to do to resolve our economic tensions. But, through SII [Structural Impediments Initiative], sectoral market- opening talks, and macro-economic policy adjustments, we are working to redress the unsustainable economic imbalance and its structural causes. The President's visit to Japan produced important market access gains in sectors important to our exporters, such as computers, glass, paper products, and auto parts. For all the recent progress, however, the bilateral trade deficit-still more than $40-some billion per year-remains unsustainably high. Moreover, it could well increase in the short run as the US economy strengthens and we expand our imports and if the Japanese economy enters a period of sluggish domestic growth. I must add that Japan's current global account surplus for FY 1991 of $91 billion-almost double that of the previous year-indicates that its imbalances are of growing concern to Europe and others in Asia as well. Japan's challenge is to make the transition from a production-biased, export-oriented economy to one of consumer orientation and domestic-led growth. Otherwise, it will face increasing opposition in other parts of the world where it seeks to market its products.
ASEAN
Let me say a word about US-ASEAN relations. The six countries of ASEAN- the Association of South East Asian Nations-and its 320 million people together comprise our fifth largest trading partner. The organization is the focal point of our engagement in Southeast Asia. We work closely with ASEAN on regional issues such as Cambodia, Burma, and narcotics as well as to strengthen our growing economic ties with the region. We strongly support ASEAN's efforts to build a free trade area as an important component of a global, open trading regime. GATT-compatible regionalism such as [the] ASEAN Free Trade Area strengthens efforts to sustain and expand a global free trade regime. Closed, exclusionary groupings, however, would be very costly for trading partners on both sides of the Pacific. Such a development would go against the trend toward trans-Pacific economic interdependence and defies the lessons of history, geography, and political good sense.
APEC: Cohesion in the Pacific Community
Our objective for the future economic architecture of the Asia-Pacific region is APEC, the governmental counterpart to the robust private sector economic ties across the Pacific. APEC was formed less than 3 years ago but is rapidly becoming the institutional vehicle of our multilateral economic engagement in the region. Its 15 members together have a GNP of over $10 trillion and includes the world's most dynamic developers. The ASEAN economies, for example, grew at an average annual rate of 7% last year. APEC is designed as a trans-Pacific forum that can help reduce impediments to market-oriented growth, promote global and regional trade liberalization, and stimulate development of the infrastructure-the telecommunications networks, air and sea transportation capacity-that will encourage greater regional integration and growth throughout the Pacific Basin. APEC holds the promise of fostering a true sense of Asia-Pacific community.
Conclusion: The Challenge of Competitiveness
For the United States, East Asia has become the focal region for the challenge of economic competitiveness. This challenge has two dimensions: the external-sustaining open markets for our goods and eliminating barriers in traditional and emerging sectors; and the internal-that of attaining adequate domestic savings and investment rates, boosting educational skills, increasing productivity, and commercializing new technologies. To be sure, the challenges ahead for our relations with Asia are political and military as well as economic. But if we meet the challenge of economic competitiveness, our leadership and our security role in the region will be well-grounded. This is the meaning of the age of geoeconomics. If we get the economics right-domestically, bilaterally, regionally, and globally-we will succeed in laying the basis for a stable and secure Pacific community. The increasingly multidimensional character of security I mentioned earlier means that the economic factor looms ever larger as an element of comprehensive security. It also means that overlapping institutions-from APEC to the US-Japan security alliance to extra-regional groupings such as the anti-proliferation Missile Technology Control Regime-form the layers of an emerging new international system. Our tremendous stake in the most economically dynamic region of the world, our hope to see the continuing spread of democracy and respect for human rights, and the enduring importance of our security presence provide powerful arguments for sustaining America's engagement in East Asia and the Pacific on all fronts. As a maritime trading power, our goals of commercial access, freedom of navigation, and forestalling domination of the region by any hegemon have not changed over the century since the days of the "Open Door" policy. They are no less compelling today. (###)
Dispatch, Vol 3, No 21, May 25, 1992 Title:

Drug Trafficking in China

Levitsky Source: Melvyn Levitsky, Assistant Secretary for International Narcotics Matters Description: Statement before the Senate Judiciary Committee, Washington, DC Date: May, 19 19925/19/92 Category: Speeches, Testimony, Statements Region: East Asia Country: China, Hong Kong Subject: Narcotics [TEXT] I am pleased to come before the Judiciary Committee today and testify on drug trafficking in and through the People's Republic of China [PRC]. This is a matter of increasing concern to the [State Department] Bureau of International Narcotics Matters [INM], the Drug Enforcement Administration (DEA), and all enforcement agencies that are involved in the war on drugs. This year, we added China to the list of countries considered to be major producing or transit states based on the volume of reports we have received about the amount of illicit drugs that pass through Chinese territory. [DEA] Administrator [Robert] Bonner and I have both been to China in the last year to see for ourselves what the situation is and how we could best work with the Chinese authorities. I believe I can safely say that the Chinese Government shows an increasing concern over drug trafficking and abuse in China. They have acknowledged they have a rapidly worsening problem and have taken a series of steps to address the issue before narco-trafficking and drug abuse grow beyond their current levels. The Chinese remember their century of struggle against opium and that only 40 years ago they still faced a massive drug-abuse problem with an estimated 20 million people addicted to opium. The committee has asked for an estimate of the volume of narcotics transiting the PRC and, of that, the amount entering the United States. As much as we would like to be able to give you a precise number, we are unable to do so. Since narcotics are an illicit commodity and usually smuggled in legitimate cargo, it is impossible for us to provide even a ballpark estimate. What I can say is that, based on data from a variety of sources, the problem is clearly growing. For example, our estimate of the potential opium production in Burma is over 2,300 metric tons (mt) for the current growing season, an increase of about 100 mt over the previous year's production. While much of that opium is consumed locally, substantial amounts are turned into heroin products that leave Burma through China. That may also be the case for opium produced in Vietnam, although we have even less specific information about the volume on that particular route. Opium production in Burma is estimated to be twice what it was just 5 years ago and enough to satisfy a substantial portion of regional and international demand. There are indications that opium cultivation in China is once again a problem. Chinese press reports have identified production in as many as 15 provinces, including Inner Mongolia where the authorities discovered and eradicated several hectares of poppy last year. Most domestic cultivation is thought to be relatively small scale and for local consumption. We are watching this closely. However, heroin trans-shipment through China remains the focus of our concern. The southwestern portion of China, especially those parts of Yunnan Province that border Burma, has become a significant area for the movement of opiates from the border regions of Laos, Burma, and Thailand-an area commonly referred to as the Golden Triangle. The long, mountainous boundary is essentially open to traffickers, many of whom belong to ethnic groups that live on both sides of the border. This fact, plus the corruption of local officials, facilitates the movement of narcotics through the region. I had an opportunity to visit this part of China in July of 1991, one of the first US officials to do so since 1949. This remote, porous border area is extremely hard to control. For example, at one point, I saw that only a small stream, which traffickers could easily cross with narcotics, separated China from Burma. The bridge on which we stood was guarded on the Burmese side by a boy who looked about 10 with a rifle that was almost as tall as he was. At another border crossing, a long line of trucks laden with everything from teak logs and rice to fish and raw materials lined up for a random, quick inspection by Chinese customs. Meanwhile, people walked back and forth with little if any hindrance. The rough terrain, remote location, and ethnic affinities on both sides of the border give smugglers a tremendous advantage.
Consequences of Drug Flow
What are the consequences of this flow of drugs into China? -- There is evidence that traffickers have begun to resort to violence in order to resist inspection and seizure. The Chinese told me of armed clashes between police and narcotics traffickers. -- China is experiencing an alarming increase in addiction. Recent Chinese media reports of seizures and increased drug-related crime suggest that heavy drug usage is migrating from border areas to urban areas of interior provinces. -- Modern drug addiction leads to another scourge-the incidence of AIDS arising from the use of injected heroin. This problem, too, is growing. Most registered AIDS patients are in Yunnan Province, which abuts Burma. What is the PRC doing to address these problems? Government officials have taken the following series of steps against the drug threat: -- Created a national narcotics control commission to coordinate policy making, enforcement, research, and international cooperation; -- Held various workshops and conferences throughout the country to educate the public on the dangers of narcotics; -- Passed in 1990 a strong drug law with harsh penalties including capital punishment. There have been public executions for violation of the law. Throughout southern China, I saw posters in cities and villages depicting criminals arrested for drug crimes and indicating which of them had been executed. The Chinese told me they executed over 35 people for drug trafficking crimes last year. -- Launched a major public relations campaign called the "People's War on Drugs" with high profile leadership; -- Stepped up enforcement efforts with various police agencies handling more narcotics-related cases and seizures than at any time in the past 40 years. Over 1,950 kgs of heroin were seized in 1991, substantially more than in past years, and over 2,000 kgs of opium, more than double that seized in 1990; -- Made plans to expand and better equip anti-drug task forces to include intelligence-sharing via computer and narcotics detection dogs. I should note that the UN International Drug Control Program (UNDCP) has played an important role in China's law enforcement upgrade efforts. A project providing vehicles and communications equipment ended in 1991. A follow-on project is under design. -- Held discussions with Burma, Laos, and Thailand on various international cooperative programs; and -- Expanded treatment and rehabilitation programs for addicts. We cannot, however, ignore the existence of corruption in China, which appears to have flourished in recent years as economic and some political controls have been relaxed. Common crime has increased tremendously in both urban and rural areas. It is, therefore, not surprising that criminal elements as well as ordinary people have become involved in drug trafficking. Increased narcotics flows have probably led to and been facilitated by instances of official corruption. Drug traffickers are able to offer substantial bribes to poorly paid local police, military, customs, and civilian officials. China has repeatedly launched campaigns against official corruption, though it has not yet publicized action against any narcotics- related corruption. Nonetheless, China's accomplishments are impressive. I believe it demonstrates the commitment of the central [government] and certain provincial governments to address the mounting narcotics problem. I believe the Chinese realize that narcotics are a threat to their national security. History provides a grim lesson about the threat narcotics can bring to their country. And today, government officials are determined to control narcotics abuse in China.
US-Chinese Efforts
The committee has asked what the United States is doing to assist the PRC in its efforts. One of the main objectives of Administrator Bonner's and my visits to China last year was to advance our bilateral counter-narcotics agenda. It had been several years since we had held senior-level narcotics discussions, and we believed the time might be right to try to overcome obstacles to bilateral cooperation. I regret to say the seemingly intractable problem of the "Goldfish" case continues to be an irritant and barrier to Sino-US narcotics cooperation. In late 1989, US-Chinese narcotics law enforcement cooperation reached new levels when Chinese authorities sent a drug trafficker to the United States to testify for the prosecution in a trial involving heroin trafficking from China to the United States. This cooperation exceeded Chinese law enforcement cooperation with other nations before or since and was all the more notable in that it occurred against a backdrop of general deterioration in bilateral relations after Tienanmen in June 1989. Unfortunately, the witness requested political asylum although he has admitted his participation in smuggling heroin to the United States. His asylum request has been denied, but his legal appeals are moving slowly with little prospect that the case will be resolved anytime soon. During our meetings with the Chinese, we emphasized that this case should not stand in the way of continued cooperation. The Chinese officials also wanted to increase cooperation but held fast to the principle that improved cooperation was not possible until we uphold our agreement to return the witness to China. The PRC officials, including several top law enforcement personnel, who went out on a limb in 1988 and 1989 to send this witness to the United States believe that they have reason to question our commitment to narcotics cooperation. We have explained that our options are limited by our constitutional and legal procedures. This difference of views has negatively affected the tone and level of our narcotics relations, although limited information sharing has continued. While I believe local and provincial narcotics officials wish to augment cooperation with DEA and other international law enforcement agencies, I suggest the overall Chinese Government attitude toward international contacts and liaison, particularly in as sensitive an area as police work, will prevent as close cooperation as with other, more open societies. An additional impediment to official cooperation is the centralization of Chinese police liaison with foreign law enforcement agencies. Although most drug trafficking and abuse is located in the southern provinces, the government requires that all communications between provincial or local narcotics police officials and foreigners be channeled through the Beijing public security bureau headquarters. This requirement reduces the specificity, pertinence, and timeliness of the information we seek to exchange. Nonetheless, there has been US-Chinese cooperation in several different areas. For example, -- DEA agents from Hong Kong have visited China several times in recent months seeking to engage their counterparts in an enforcement dialogue; -- In April 1991, three PRC customs officials attended an INM-funded DEA enforcement seminar in Hong Kong; -- In May 1991, DEA conducted a conference in Beijing on chemicals used to process drugs; -- In November 1991, INM sponsored a therapeutic community workshop with 55 participants; -- There are ongoing joint research efforts in addiction treatment; -- Later this year, we hope to hold an enforcement seminar for officials in a southwestern province. During his May 7-8 meetings in Beijing, Under Secretary [Arnold] Kanter discussed enhanced cooperation in counter-narcotics efforts. So our bilateral efforts, modest though they may be, continue and-we hope-expand as we attempt to put the "Goldfish" obstacle behind us.
Chinese Initiatives
Contrary to the limits in our bilateral cooperation, the Chinese have been active internationally with their neighbors in the region. I noted earlier the Chinese involvement with Burma, Laos, and Thailand, and the UNDCP. Recently, the Chinese signed a UNDCP-funded crop- and income- substitution project that will also involve the Burmese. It is a 3-year, $4.5-million project including agriculture, livestock, education, health, power, water supply, and law enforcement components. Hong Kong authorities have provided training to PRC officials in the management of air and sea ports, narcotics intelligence collection, and how to identify illicit drugs. The Chinese Government seeks to remain engaged at the international level by participating in seminars and conferences which share information and build counter-narcotics cooperation.
Hong Kong and 1997
What are the implications for drug control upon the reversion of Hong Kong to Chinese sovereignty in 1997? The Chinese have not told us exactly what type of counter-narcotics relationship they will have with Hong Kong authorities after 1997. The question is not an easy one to answer, but I would speculate that, given the strong commitment of both the PRC and Hong Kong Governments to drug control, there will be no significant change in the resolve of the unified country. How much impact this resolve will have on control efforts is difficult to forecast. On our part, we hope to continue our cooperative counter-narcotics relations, which are excellent, with the authorities in Hong Kong after 1997. We are working to ensure our bilateral agreements with Hong Kong will endure through the end of the decade and beyond. Just as we have problems in controlling the flow of drugs through our country and in reducing demand, so do the Chinese. I believe it is in the interest of the United States to work together with the Chinese on the projects we now have under way. In order to carry on the fight against heroin traffickers, it is imperative that we attack every link in the heroin chain. Our work with the PRC underscores this continuing effort, and we would welcome the committee's support. (###)
Dispatch, Vol 3, No 21, May 25, 1992 Title:

US-Kazakhstan Trade Agreements And Bilateral Investment Treaty

PA Source: Office of Public Communication, Bureau of Public Affairs Date: May, 25 19925/25/92 Category: Focus on Emerging Democracies Region: Eurasia Country: Kazakhstan Subject: Trade/Economics, International Law [TEXT] On May 19, 1992, the United States and Kazakhstan signed a series of agreements, including a bilateral investment treaty, designed to expand commercial relations between the two countries. The Treaty on Reciprocal Encouragement and Protection of Investment provides specific legal protections for investors, including guarantees for unrestricted transfer of investment profits, dividends, and capital. It also exempts investors from requirements to purchase goods and services locally and allows access to international arbitration in cases of disputes with the host government. Other trade agreements provide reciprocal most-favored-nation tariff treatment and authorize the Overseas Private Investment Corporation to offer investment insurance to US private investors. A new tax convention, scheduled to be finalized in the fall, aims to avoid instances of double taxation and assure non-discriminatory tax treatment. President Bush also announced the creation of a business development committee, headed by the Secretary of Commerce, to identify measures to increase contacts between private Kazakh and American firms. The US Embassy in Kazakhstan is located in the Seyfullona Building, Alma- Ata, telephone (7) (3272) 63-13-75, The Charge d'Affaires ad interim is William H. Courtney. The economic officer is Jackson McDonald. (###)