ECONOMICS AND   SECURITY 128 ESC 05 E Original: English NAT O   Pa rl i a me n t a ry  As s e mb l y SUMMARY of the meeting of the Economics and Security Committee The Glass Hall, Grand Hotel Union, Ljubljana, Slovenia Saturday 28 May 2005 International Secretariat May 2005

128 ESC 05 E i ATTENDANCE LIST Chairman Paul E. Gillmor (United States) Vice-Chairpersons Jean-Luc Reitzer (France) Monika Heubaum (Germany) General Rapporteur Jos van Gennip (Netherlands) Chairman of the Sub-Committee on Transatlantic Hugh Bayley (United Kingdom) Economic Relations Co-Rapporteurs of the Sub-Committee on Michael Gapes (United Kingdom) Transatlantic Economic Relations John Boozman (United States) Rapporteur of the Sub-Committee on Kurt Bodewig (Germany) East-West Economic Co-operation and Convergence NATO PA President Pierre Lellouche (France) NATO PA Secretary General Simon Lunn Member Delegations Belgium Philippe Mahoux Luc Willems Canada Leon Benoit Frank W. Mahovlich Czech Republic Karel Schwarzenberg Radim Turek France Francis Hillmeyer Germany Wolfgang Gö tzer Robert Hochbaum Erwin Marschewski Kurt J. Rossmanith Andreas Weigel Greece Ilias Papailias Assimina Xirotiri-Aikaterinari Hungary Agnes Vá dai Iceland Magnús S tefánsson Italy Luigi Marino Gianni Nieddu Paolo Ricciotti Latvia Guntis Berzins Lithuania Petras Austrevicius Rasa Jukneviciene Luxembourg Lydia Mutsch Norway Ranveig Froeiland Poland Andrzej Chronowski Zdzislaw Kalamaga Jerzy Pieniazek Jerzy Wenderlich

128 ESC 05 E ii Portugal José Mota de Andrade Antonio Ramos Preto Romania Cristian Valeriu Buzea Constantin Nita Marcu Tudor Slovakia Gyö rgy Juhá sz Slovenia Franc Capuder Spain Segundo Bru Alejandro Muñoz-Alonso Roberto Soravilla Turkey Aziz Akgül Memduh Hacioglu United Kingdom Donald Anderson Lord Clark of Windermere Harry Cohen Bruce George Peter Viggers United States Michael Enzi Dennis Moore James Oberstar Ralph Regula John Tanner Associate Delegations Austria Katharina Pfeffer Croatia Velimir Plesa Finland Suvi-Anne Siimes Russian Federation Victor Dobrosotski Franis Sayfullin Anatoly Semenchenko Oleg Tolkachev Victor Voitenko Vladimir Zhirinovskiy Switzerland Edi Engelberger Hans Hess Ukraine Anatoliy Domanskyi Volodymyr Zaplatynskyi Mediterranean Associate Delegations Algeria Abdelkrim Harchaoui Abdelhamid Latrèche Mauritania Matt Mint Ewnen Cherif Ahmed Ould Mohamed Moussa Parliamentary Observer Japan Masataka Suzuki Interparliamentary Assembly Assembly of the Western European Union Pedro Agramunt Font de Mora

128 ESC 05 E iii 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 International Secretariat Paul Cook, Director Helen Cadwallender, Co-ordinator Sarah Atwood, Research Assistant Srdjan Cvijic, Research Assistant

128 ESC 05 E 1 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 20^th century what Germany was to the 19^th 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  19^th  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

128 ESC 05 E 2 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

128 ESC 05 E 3 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.

128 ESC 05 E 4 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 11^th 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.

128 ESC 05 E 5 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.