28 May 2005 - SUMMARY of the meeting of the Economics and Security Committee, The Glass Hall, Grand Hotel Union, Ljubljana, Slovenia

Speakers

Lanxin Xiang, Professor of International History and Politics, the Graduate Institute of International Studies, Geneva

Tarik Yousef, Professor of Economics, Centre for Contemporary Arab Studies, Georgetown University, Washington DC

I. PRESENTATIONS

a.  Presentation by Lanxin Xiang, Professor of International History and Politics, the Graduate Institute of International Studies, Geneva on China and NATO

In his presentation on China and NATO, Professor Xiang addressed three points: China's strategy concerning NATO and what must be discussed in terms of Chinese-NATO relations; the broader context of China and transatlantic relations, and Chinese regional security.  He pointed to fundamental changes in China's perception and policy towards NATO and the West, and said that it is important for China to fathom the multilateral nature of NATO.

The Chinese once saw NATO as an aggressive and dangerous power.  NATO enlargement was understood as part of a global American containment strategy.  Lately, Professor Xiang noted, there has been a fundamental change in China's view of NATO and the West.  They have come to terms with the Westphalian international system and have come to appreciate that - while the United States does have a powerful role within NATO, the alliance is truly a multilateral institution.

Professor Xiang outlined the "China Threat" thesis - the concern by some in the West that China is to the 20th century what Germany was to the 19th century and that the United States has taken on the role of imperial Britain. Modern-day China, however, is "not looking for a place in the sun, like 19th century Germany," but rather, wants to "sit in the shade and work out its domestic problems." The younger generation of Chinese is now interested in learning about European social democracy as a way to make their system more open, and to provide a soft landing from a one party state to a more pluralistic system.  He noted as well that, while the prevailing opinion in the West is that China will remain a subject of globalisation, this is not likely to be the case. He conjectured that China's rise, in fact, will alter the process of globalisation, from a process of modernity vs. tradition to something less one-sided.

Professor Xiang also pointed out that China and Russia have created the Shanghai Cooperation Organization, which is the first major collective security arrangement in the Asia Pacific.  China is thus stepping out of it's middle kingdom complex in favour of a more multilateral foreign policy.

Hugh Bayley (UK) asked about the relationship between trade and peace, particularly in the context of China's resistance to future action in Darfur on the basis of oil interests.   There was also discussion on the sustainability of China's supply of raw materials.  Professor Xiang replied that natural resources, indeed, pose a daunting challenge. Though the Chinese are looking at alternative energy sources, they have yet to solve the problem of sustainability. 

Mr Bayley also asked about the prospects for Chinese invention and innovation over the next 20 years. Professor Xiang replied that China's education system does not yet foster the kind of creativity needed to produce Nobel prize winners and that further changes in the educational system are needed. 

A member inquired about the United States - European discussions about lifting the arms embargo on China. Professor Xiang replied that doing so would be largely symbolic. The real issue at stake is that the United States and Europe have very different views of China and this is manifest in the discussions on the embargo.

Robert Hochbaum (DE) asked about the recently passed Chinese legislation warning Taiwan of the military consequences of secession. Professor Xiang replied that this law was more a reflection of a domestic political struggle than anything else - China's leaders confront intense internal pressure on these matters and did not fully anticipate Western reaction. Mr Hochbaum followed up by asking whether China's economic integration with Taiwan might lead to improved relations, or whether current tensions might spark an arms race.  Professor Xiang answered that he saw war between Taiwan and mainland China as a virtual impossibility given their strong economic interdependence.

There was also a question on the unity of the Chinese state in the face of regional diversity.  Professor Xiang noted that there have been debates over the past 5-6 years on how to decentralise decision-making without causing internal instability.  The Chinese have been looking towards a model of "one party, many factions."

Guntis Berzins (LV) asked if China might learn from the example of the Soviet Union's break-up and the emergence of several democratic states. Professor Xiang replied that China is fundamentally different from the USSR because it does not have a number of multiethnic republics that have been artificially pieced together. The problem in Taiwan, he said, has its origins in Japanese colonisation.

Karel Schwarzenberg (CZ) asked about the situation in the Xinjiang region. Professor Xiang replied that, while the "Muslim question" and the region's separatist impulse have long posed something of a challenge, the government has only recently realised that, insofar as these are linked with Central Asia and the Middle East, they could be a considerable problem.  This is one of the reasons for the formation of the Shanghai Cooperation Organisation.

Jos van Gennip (NL) inquired about China's relationship with the UN. Professor Xiang replied that China is far more active in the UN than it was 20 years ago, as they no longer see it as a "Western club."

Jos van Gennip followed up with questions on China's tolerance of religious diversity. Professor Xiang admitted that the issue has been a major problem for Chinese leadership, particularly in terms of the dramatic expansion of underground churches. While they have become more tolerant since the Cultural Revolution, he said, there are still significant issues involving groups like Falun Gong.  "I think they might have made a big mistake in calling this counter-revolutionary movement," he said.  "But one thing you've got to be clear on: this is not a religion, it's a cult."

b.Presentation by Tarik Yousef, Professor of Economics, Center for Contemporary Arab Studies, Georgetown University, Washington DC, on the Prospects for Economic "Transition" in the Middle East and North Africa

Professor Yousef divided his talk into three parts: an examination of why (and whether) the Middle East needs transition, a discussion on what it will take to achieve a transition, and remarks on the prospects for regional development.  He organised his discussion in a framework of the 2002 World Bank report, which outlined the serious challenges this region faces, and the reforms that are needed to spark sustained development.  

One need not go back hundreds of years to understand why the Middle East faces its current predicament, suggested Professor Yousef.  The story really begins in the post-WWII era.  Post-war Middle Eastern governments used the state as a tool for economic transformation and political mobilisation.  Wealth re-distribution and nationalisation were carried out with the implicit consent of the people. 

Professor Yousef also detailed the effects of 30 years of oil-generated revenues on the MENA region, a capital injection that endowed the region with a means to advance its development until the mid-1980's.  Although governments implemented important reforms at that time, the rate of advance has since slowed greatly. Professor Yousef emphasised that the obstacles to this region's development are not cultural or religious, but rather can be attributed to expectations and norms created during this period. The paramount developmental and political challenge today is unemployment.  Widespread joblessness arises from a combination of slowed economic and political reform, a resulting lack of adequate economic expansion, high population growth, and an educated population which is continually frustrated by a pervasive lack of opportunity.

Professor Yousef noted that development strategies in the region must address three important transitions: from public domination to private sector-friendly economies; from closed and inward-looking economies to engagement in the global economy; from a vicious circle of volatility and dependency to more diversified economies capable of sustained growth.  Reformers confront two major obstacles, he said: 1. The continuing availability of oil rents, which reduce the incentive to reform and 2. The precarious relationship between political and economic reforms.  The region and indeed the international community is also paying dearly for the relative absence of political debate.  This has created space for the radical Islamist movements that are often seen as the sole alternative to the status quo - a perception that widespread repression has fostered.  Professor Yousef emphasised the importance of distinguishing between Islamist radicals - who seek not just change but comprehensive transformation - and moderate Islamic parties. 

Professor Yousef suggested that, after 9/11, the West missed a golden opportunity to affect positive change. He noted that, while one often hears of "Arab Spring," with regard to changes in Egypt, Lebanon, and Morocco, such moments of optimism have been short lived. "It's not clear to me," he said, "that this partial spring will bring the political and economic changes we need."

Ralph Regula (US) raised the issue of universal education.  Professor Yousef replied that education in the region has been very good in most segments of MENA countries. The problem is that it often prepares people for public sector rather than wealth-generating careers.

Aziz Akgül (TR) asked how unemployment and income inequality might be decreased in the MENA region. Professor Yousef said that the West must realise that both phenomena have to do with expectations generated from years of guaranteed employment (often in government jobs) for the middle classes.  He pointed out that poverty is significantly lower than in other regions, comparing the MENA region's average of 5% to the 20% in Southeast Asian countries.

Kurt Bodewig (DE) asked whether solving the conflict between the Israelis and Palestinians would strengthen the region's economy. Professor Yousef replied that this would likely lead to conditions conductive to economic development. 

Jos van Gennip (NL) asked Professor Yousef to comment on the late entry of the MENA to an ever more competitive world economy. Professor Yousef suggested that the region should focus on services, given its competitive advantages, including its high levels of education.

Michael Gapes (UK) asked whether the current "Arab Spring" in selected countries could provide an example for the Arab World as a whole in the same way as Nasser's pan-Arab movement did in the 50's and 60's. Professor Yousef responded that we are likely to see small groups of countries that form successful blocs like the Gulf Cooperation Council (GCC) has done. Professor Yousef said that "Nasser is long gone" and so the foundation for any regional groupings will be very different.

II.
CONSIDERATION OF THE DRAFT REPORTS

a.Consideration of the draft report of the Sub-Committee on East-West Economic Co-operation and Convergence, Economic Transition in the Middle East and North Africa [060 ESCEW 05 E] presented by Kurt Bodewig (D), Rapporteur

Mr Bayley noted that the Sub-Committee has to shift its focus not only on East-West issues, but also on North-South matters.  He suggested that a proposal for a new name of the Sub-Committee.  One possibility would be to call it "The Sub-Committee on Transition, Development and Security."

He also suggested that the final report explicitly discuss the linkage between the MENA region's economic underperformance and potential, security problems.  These are matters that should be dealt with through the exercise of "soft power" rather than "hard power".  Citing paragraph 59, he suggested that the report did not give enough emphasis to the diversity of the countries in the MENA region.  

Abdelkrim Harchaoui (DZ) noted that, while the report was correct in pointing out that unemployment poses a significant challenge to the region, MENA countries have serious problems in creating jobs because they receive only 1% of global FDI.  He suggested that the Committee should look at mechanisms to address this. The Rapporteur replied that the region requires political as well as economic reforms, and that the West can help by investing more capital there.

b.  Consideration of the draft general report on Policy Implications of the Risk Society [059 ESC 05 E] presented by Jos van Gennip (NL), General Rapporteur

In his presentation, the General Rapporteur suggested that the September 11th attack revealed a range of western vulnerabilities that had heretofore not been fully understood. He emphasised that, because risk assessment is conditioned by politics and culture, policymakers must accept that there will never be unanimous agreement on the nature of dangers and the remedies that lower risk.

In the discussion, Mr Bayley pointed out that multilateral institutions can play a fundamental role in combating risk. Mr Bodewig suggested that resource scarcity and the need for the new sources of energy constitute grave risks to global order, and could become sources of future conflicts. AIDS will remain the paramount health risk. While reiterating the report's calls for multilateralism, the Rapporteur noted that the French referendum had posed grave questions about the purpose of Europe. Victor Voitenko (RU) pointed out that there is no international consensus in the recognition of future threats.  As such, he asked for the Rapporteur's opinion on the creation of a center for evaluation of international threats to make the global community take these threats seriously. Harry Cohen (UK) suggested that risk management means learning both to minimise risk and to accept some level of it.

c.  Consideration of the draft report of the Sub-Committee on Transatlantic Economic Relations An Emerging China and the Transatlantic Economy [061 ESCTER 05 E] presented by Michael Gapes (UK) and John Boozman (US), Co-Rapporteurs

The Co-Rapporteurs discussed China's emergence as an economic, military and political superpower, as well as the geopolitical effects of this emergence on trans-Atlantic relations. The arms embargo issue was extensively explored, with Mr Boozman asserting that the US congress was united in its opposition to any change in the status quo.

In the discussion, Mr Regula lamented Chinese theft of intellectual property and the global imbalances created by its accumulation of dollars and other foreign currency. Mr Gapes asserted that as China has joined the WTO, it must now comply with international standards.  Mr Gapes indicated that protectionism is not the answer to the Chinese challenge.  Mr Regula disagreed and suggested that some level of protectionism may prove both economically and politically necessary. 

Mr Voitenko said that USSR's experience illustrates the dangers of excessive haste in carrying out political reforms. Mr Boozman agreed that China is developing rapidly as a US trading partner, but reiterated that Taiwan remains a trouble spot.  He warned that the west must be careful about selling China advanced weapons. At the end of the meeting, Mr Voitenko suggested that the bilateral relationship between Russia and China was a vital issue not sufficiently discussed in the report.  He offered to draft a report on this topic for the November meeting and the Committee agreed to this offer.