TAIWAN ENABLING ACT REPORT OF THE COMMITTEE ON FOREIGN RELATIONS UNITED STATES SENATE TOGETHER WITH ADDITIONAL VIEWS ON S.245

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-00003R000100050014-7
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 85
• Document Creation Date: December 21, 2016
• Document Release Date: October 27, 2008
• Sequence Number: 14
• Publication Date: March 1, 1979
• Content Type: REPORT

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Calendar No. 14
96TH CONGRESS l
1st Session j
REPORT
No. 96-7
TAIWAN ENABLING ACT
REPORT
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
TOGETHER WITH ADDITIONAL VIEWS.
ON
S. 245
MARCH 1 (legislative day, FEBRUARY 22), 1979.-Ordered to be printed
U.S. GOVERNMENT PRINTING OFFICE
39-0100 WASHINGTON : 1979
*(Star Print)
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COMMITTEE ON FOREIGN RELATIONS
FRANK CHURCH, Idaho, Chairman
CLAIBORNE PELL, Rhode Island JACOB K. JAVITS, New York
GEORGE McGOVERN, South Dakota CHARLES H. PERCY, Illinois
JOSEPH R. BIDEN, JR., Delaware HOWARD H. BAKER, JR., Tennessee
JOHN GLENN, Ohio JESSE HELMS, North Carolina
RICHARD STONE, Florida S. I. HAYAKAWA, California
PAUL S. SARBANES, Maryland RICHARD G. LUGAR, Indiana
EDMUND S. MUSKIE, Maine
EDWARD ZORINSKY, Nebraska
WILLIAM B. BADER, Staff Director
'(II)
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Calendar No. 14
96TH CONGRESS SENATE 5 REPORT
1st Session No. 96-7
TAIWAN ENABLING ACT
Mr. CHURCH, from the Committee on Foreign Relations,
submitted the following
REPORT
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[To accompany S. 245]
The Committee on Foreign Relations, to which was referred the bill
(S. 245) to promote the foreign policy of the United States by au-
thorizing the maintenance of commercial, cultural, and other relations
with the people on Taiwan on an unofficial basis, and for other purposes,
having considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
Page
A. Principal purpose ------------------------------------------------ 1
B. Committee action----------------------------------------- ---- 1
C. Committee comments----------------------------------------- 3
D. Major issues--------------------------------------------- ----- 8
E. Section-by-section analysis -------------------------------------- 23
F: Cost estimate------------------------------------------------ 42
G. Evaluation of regulatory impact---------------------------------- 44
H. Changes in existing law----------------------------------------- 44
I. Additional views of Senators Pell and Helms----------------------- 45-46
J. Appendices---------------------------------------------------- 61
A. PRINCIPAL PURPOSE
The primary purpose of this bill is to provide statutory authoriza-
tion for the maintenance of commercial, cultural, and other unofficial
relations with the people on Taiwan.
B. COMMITTEE ACTION
On February 5, 6, and 7, 1979, the Committee on Foreign Rela-
tions held public hearings on S. 245 dealing with United States
relations with the people on Taiwan.
The following witnesses appeared on February 5:
The Honorable Warren Christopher, Deputy Secretary, Depart-
ment of State.
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The Honorable Herbert J. Hansell, Legal Adviser, Department of
State.
Professor Victor Li, Stanford University School of Law, Palo Alto,
California.
The Honorable John M. Thomas, Assistant Secretary, Bureau of
Administration, Department of State.
The Honorable Leonard Unger, Former Ambassador to the Republic
of China.
The Committee witnesses on February 6 were:
Senator Barry Goldwater (R-Ariz.).
Senator Edward Kennedy (D-Mass.).
Senator Alan Cranston (D-Calif.).
Senator Robert Dole (R-Kan.).
Senator Dennis DeConcini (D-Ariz.).
Senator John Danforth (R-Mo.).
Professor Parris H. Chang, Department of Political Science, Penn-
sylvania State University.
Mr. Ralph N. Clough, The Woodrow Wilson International Center
for Scholars.
Mr. Robert P. Parker, President, American Chamber of Commerce
in the Republic of China.
Professor Kenneth Lieberthal, Department of Political Science,
Swarthmore, College.
The Honorable David Kennedy, Chairman of- the Board, U.S.-
Republic of China Economic Association and former Secretary of the
Treasury.
Dr. Richard L. Walker, Director, Institute of International Studies,
University of South Carolina.
Mr. Mark Chen, President, Taiwanese Association of America,
Springfield. Virginia.
The Committee witnesses on February 7 were:
Dr. Ray S. Cline, Center for Strategic and International Studies,
Georgetown University.
Vice Admiral Edwin K. Snyder, USN (Ret.), Former Head of the
Taiwan Defense Command.
Dr. Robert A. Scalapino, Director, Institute for East Asian Studies,
University of California, Berkeley.
Mr. A. Doak Barnett, Senior Fellow, The Brookings Institution.
On February 8, 1979, the Committee on Foreign Relations met in execu-
tive session and heard the testimony of:
Mr. Michael Armacost, Deputy Assistant Secretary for East Asian
and Pacific Affairs, Department of Defense.
Lt. Gen. Richard L. Lawson (USAF), Director for Plans and Policy,
Joint Chiefs of Staff.
Mr. Roger Sullivan, Deputy Assistant Secretary for East Asian and
Pacific Affairs, Department of State, accompanied by The Honorable
Herbert J. Hansell, Legal Adviser, Department of State.
The following individuals or organizations did not appear before the
Committee as witnesses, but did submit written testimony for the
hearing record:
Col. Angus M. Fraser, USMC (Ret.), Author on Chinese Military
Matters and Former Consultant to the RAND Corporation, Alexan-
dria, Virginia.
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Mr. H. O. Reinsch, President, Bechtel Power Corporation, San
Francisco, California.
Mr. Alexander Matiuk, President, Gibbs & Hill, Inc., New York,
New York.
World United Formosans for Independence, Kearney, New Jersey.
Professor Hung-dah Chiu, University of Maryland Law School.
Professor Yuan-li Wu, former Deputy Assistant Secretary of De-
fense, Professor of Economics, University of San Fransicco.
Mr. E. A. Carter, President, Oak Industries, Inc., San Diego,
California.
Professor Michael Lindsay, Professor Emeritus of Far Eastern
Studies, The American University.
Mr. John M. Carey, National Commander, The American Legion.
Chinese National Association of Industry and Commerce, Taipei,
Taiwan.
Governor Meldrim Thomson, Jr., of New Hampshire on behalf of
the Conservative Caucus, Inc.
The Asian Center, New York, New York.
Dr. Richard C. Kagan, Assistant Professor of History, Hamline
University, St. Paul, Minnesota.
Mr. Kuo Yu-shin, President, Overseas Alliance for Democratic
Rule in Taiwan.
Dr. C. Martin Wilbur, George Sansom Professor Emeritus of
Chinese History, Columbia University.
Dr. Han-sheng Lin, Professor of History, Sonoma State University,
Petaluma, California.
Mr. Williel W. G. Reitzer, Private Citizen.
The full Committee on Foreign Relations met in open session on
February 21 to begin the markup of S. 245. At 9:00 a.m. on Feb-
ruary 22, the Committee met in executive session to hear General
David C. Jones, Chairman of the Joint Chiefs of Staff, discuss the
security aspects of U.S. policy toward Taiwan and East Asia. Follow-
ing this executive session, the Committee met at 10:30 a.m. to resume
consideration of the bill. The bill was amended and the Committee
agreed, by a 14-0 recorded vote, to report the bill favorably.
The amendments include a definition of the term "people on Tai-
wan" (section 101(b)) ; issues relating to litigation in Taiwan and the
United States (section 103); continuation in force of all international
treaties and other agreements (section 104) ; the preemptive powers of
this Act (section 106(b)); property rights (section 111); provision for
appropriate privileges and immunities (section 113) ; matters relating
to the security of the people on Taiwan and the sale of defensive arms
(section 114) ; and Congressional oversight of the American Institute
in Taiwan (section 401).
The amendments are noted individually, as they arose, in the
section-by-section analysis where a full description and explanation
is provided.
C. COMMITTEE COMMENTS
The bill approved by the Committee is intended to enable the
United States to maintain close and friendly relations with the
people on Taiwan on an unofficial basis and to do so in a manner
that contributes to the peace, stability and well-being of the Western
Pacific area. The bill attempts to deal with these extremely important
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issues in a unique manner because of the United States desire to
continue to deal with the people on Taiwan, notwithstanding its
recognition of the People's. Republic of China (PRC) as the sole legal
government of China. No appraisal of the legislation approved by
the Committee will be adequate if the bill is viewed in isolation, for
United States policy toward the people on Taiwan should be viewed
in connection with American policy toward the PRC, and in the
larger context of policy toward Asia as a whole. It is particularly
important that the United States keep in mind the interests of Japan,
its major ally and trading partner in Asia, as well as the Republic
of Korea, Australia, New Zealand, and the Philippines and the other
members of the Association of Southeast Asian Nations (ASEAN).
Nor can the steadily growing role of the Soviet Union in Asia and the
Pacific be ignored.
The fact that the United States has been willing to fight three
wars in East Asia during the past four decades indicates the impor-
tance attached to this area by the United States Government and the
American people. The fact that the United States has felt compelled
to resort to war on three occasions also demonstrates the need for a
strategy that will protect the interests of the United States without
requiring such heavy sacrifices in the future.
A central element in the problem of formulating a sound policy
toward Asia has been the difficult and complex issue of how the
United States should deal with China, Asia's largest and most populous
nation, whose geographic location and illustrious history gives it a
key role in Asian affairs. When China has been weak, other powers
have competed to dominate it. When it has been strong, its neighbors
have feared that they would be dominated by it.
The task of working out a sound China policy faced by successive
United States Administrations has been complicated by two recurring
problems. First, American attitudes toward China have tended to
vacillate between friendship and animosity. Second, the United States
has frequently overestimated or underestimated China's strength and
capabilities. China's military strength was overestimated during and
immediately after World War II. The military capability of the Com-
munist forces in China was underestimated during the civil war, as
was the strength of the newly-established People's Republic of China
in the period before the Korean War. These shifting assessments of
China's strength, and of its intentions, continued during the 1950's,
the 1960's, and into the 1,970's.
The. United States did not intervene militarily in the Chinese civil
war when the tide of battle turned against the Nationalists and the
Communists gained control of the mainland. Had it not been for the
actions of the PRC in forming an alliance with the Soviet Union early
in 1950 and entering the Korean War against United Nations and
United States forces late that year, the United States Government
might well have accorded diplomatic recognition to the PRC in the
early 1950's. However, these Chinese actions led the United States
to extend from Europe to Asia its policy of containing the power of the
Soviet Union and its allies. America's search for Asian allies led it
step-by-step to the formation of an alliance and the signing of a
Mutual Defense Treaty with the Republic of China (ROC) on
Taiwan. This series of actions and reactions froze Sino-American
relations in a pattern of bitter hostility that lasted for two decades.
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It was only after the Sino-Soviet dispute developed and reached an
intensity that led China to fear the U.S.S.R. more than the United
States that the PRC became seriously interested in a new relationship
with the United States. Only after the bitter experience of the Viet-
nam War, undertaken in large part to contain China, did the United
States undertake a serious reappraisal of China's strength, intentions,
and of American policy toward China.
This reappraisal was complicated by the Taiwan issue. China,
defeated by Japan in the Sino-Japanese War of 1895, relinquished
sovereignty over Taiwan to Japan. Japan formally relinquished its
sovereignty over Taiwan in connection with the United States-Japan
Peace Treaty of 1951, but the treaty did not specify to whom sov-
ereignty was relinquished. Thus the sovereign status of Taiwan was
left unclear.
The United States and the PRC had conducted periodic negotia-
tions aimed at alleviating specific problems during the 1950's and the
1960's, first in Geneva and then in Warsaw. However, it was only with
Henry Kissinger's secret trip to Peking in 1971 that the two countries
made their first major moves toward a rapprochement. Presi-
dent Nixon's visit to China early in 1972 and the ensuing Shanghai
Communique led both governments to pledge themselves to normalize
their relations. The PRC insisted that normalization, which involved
the establishment of full diplomatic relations, could take place only
after the United States withdrew all its military forces from Taiwan,
ended its diplomatic recognition of the Taiwan Government, and
canceled its Mutual Defense Treaty with the ROC.
By the early 1970's, the United States had cooperated closely with
the ROC for many years, and was impressed by its political stability
and economic progress. The United States believed it had an obliga-
tion to the people on Taiwan as a result of its earlier commitments,
and that it had an interest in a peaceful resolution of the Taiwan issue.
The United States had also developed extensive economic interests in
Taiwan. These were among the factors which prevented any agreement
on normalization with the PRC in the early and mid-1970's. The PRC
made a concession in 1973 by agreeing to the establishment of official
liaison offices in Washington and Peking, despite its earlier insistence
that it would never set up an official PRC office where a ROC embassy
still operated. These liaison offices were embassies in virtually all
respects but name.
The ROC was bitterly disappointed by the United States's rap-
prochement with the PRC, and by the Japanese shift of diplomatic
recognition from the ROC to the PRC in 1972. Yet Taiwan adapted
to these changes in a flexible and imaginative manner. It worked out
ways to preserve unofficial relations with Japan and with other nations
which had shifted recognition to the PRC, and Taiwan's economy
and foreign trade continued to expand rapidly. Differences between
the mainlanders, who controlled the Government on Taiwan,
and the native Taiwanese majority have diminished somewhat as
an increasing number of Taiwanese were brought into positions of
influence and as both groups drew together in response to Taiwan's
growing diplomatic isolation. Taiwan's military forces continued to
improve their capabilities, and the United States continued to provide
them with arms.
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The Carter Administration, like the Nixon and Ford Administra-
tions before it, was committed to normalization of relations with the
PRC but hesitant to meet the PRC's three conditions. Between
January 1977 and June 1978, administration officials periodically
discussed the possibility of normalization with the PRC but little
if any progress occurred. Indeed, the PRC added a fourth condi-
tion in 1977, namely that it would not tolerate the sale of arms to
Taiwan by the United States after normalization. It was not until
mid-1978 that progress began to be made. Events moved rapidly
in the final months of 1978, and on December 15, 1978, President
Carter announced that, on January 1, 1979, the United States would
recognize the PRC as the sole legal government of China and withdraw
U.S. recognition of the ROC. He also announced that the United States
was notifying the ROC that it would terminate the Mutual Defense
Treaty, in accordance with its provisions, by issuing the required one-
year's notice of termination on January 1, 1979. President Carter stated
that the United States retained an interest in a peaceful resolution of
the Taiwan issue, that it would continue to provide selective defensive
arms to Taiwan on a restricted basis after derecognition, and that he
would propose legislation that would assure the continuation of U.S.
economic and cultural relations with the people on Taiwan.
The United States' decision to shift recognition from the ROC to
the PRC at this time was apparently based on several factors. The
PRC had adopted a policy of according top priority to economic
development and modernization. It had begun to look to the Western
world and Japan for technology, capital goods, and financial assistance
to enable it to become a modern industrial nation better able to
deal with its major adversary, the Soviet Union. Any attack on
Taiwan while this ambitious, long-term program was underway
would risk undermining China's modernization effort by disrupting
its relations with the United States and Japan. Peking was adopting
a more moderate approach to the Taiwan issue, speaking of "reunifica-
tion" rather than "liberat:icn," and Vice Premier Teng Hsiao-p'ing
spoke of allowing Taiwan to retain its social and economic systems,
its higher living standards, and its own armed forces after ieunifica-
tion. The PRC's policies on these matters could change as they had
in the past, and the PRO's failure to keep its pledges to honor Tibetan
institutions after it seized control of that area in 1950 did not inspire
confidence that it would permit Taiwan to enjoy real autonomy if
unification occurred. Nonetheless, the Administration was encouraged
by the trend of the PRO's policy. Moreover, the PRC had not devel-
oped the amphibious military forces it would need to conquer Taiwan,
and it was not attempting to develop an amphibious capability.
The Administration did not press the PRC for a pledge not to use
force against Taiwan during the negotiations preceding normaliza-
tion, on the ground that no Chinese government would renounce the
use of force against what it regarded as a province of China-a position
repeatedly stated by the PRC. However, the Administration states
that it made clear to the PRC that normalization rested upon the
expectation that the Taiwan issue would be resolved peacefully. The
Administration also stressed that it had made clear to the PRC that
while the United States would terminate the Mutual Defense Treaty
in accordance with its terms, rather than abrogate it as the PRC
had earlier demanded, all other agreements would remain in force.
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Although the PRC'said it opposed continued sales of defensive arms to
Taiwan, it also said it was prepared to normalize relations even though
such sales would continue after the Mutual Defense Treaty ended.
In return, the Administration agreed not to make any additional
sales to Taiwan during calendar year 1979. On the basis of these
understandings, the United States agreed to the PRC's original three
conditions for normalization.
The PRO's motivation and timing regarding normalization probably
were influenced by Sino-Soviet rivalry in Indochina, and specifically
the signing of the Soviet Vietnamese treaty in November 1978. That
treaty may in turn have been.partly a response to the Sino-Japanese
treaty of peace and friendship signed in September 1978, in which
Japan accepted the Chinese demand that the treaty clearly state that
both parties were opposed to "hegemonism" in Asia-a code word for
opposition to the Soviet Union.
The Committee made clear. in its deliberations that it was not
opposed to normalization of relations with the PRC. Most Members
welcomed the development, noting that it had won the support of
most of America's allies and friends in Asia. However, the Committee
was concerned by the haste with which the Administration had
moved late in 1978, the lack of consultation with Congress despite
the provision in the International Security Assistance Act of 1978
which said the President should consult Congress before making
policy changes which might affect the Mutual Defense Treaty, and
the lack of adequate consultation between the United States and its
Asian allies. The Committee was also concerned that matters affecting
Taiwan's security were not being given adequate attention by the
Administration. Finally, the Committee viewed the bill submitted
by the Administration to enable the United States to maintain un-
official relations with the people on Taiwan as deficient in several
important respects.
The Administration has stated that it recognizes the People's Re-
public of China (PRC) as the sole legal government of China. It has
also acknowledged the Chinese position that Taiwan is a part of
China, but the United States has not itself agreed to this position. The
bill submitted by the Administration takes no position on the status
of Taiwan under international law, but does regard Taiwan as a
country for purposes of U.S. domestic law. The bill assumes that
any benefits to be conferred on Taiwan by statute may be conferred
without regard to Taiwan's international legal identity. The legal
scholars consulted by the Committee agreed with this view. Most of
these scholars thought it would be unwise to try to define Taiwan's
international legal status. They said that the best approach would be
to spell out the specific manner in which relations with Taiwan will be
maintained by the United States. The proposed changes and amend-
ments to S. 245 basically follow this approach.
The Administration contended that the bill it submitted contained
all the provisions necessary to enable the United States to conduct
relations with Taiwan on an unofficial basis. The Committee disagreed
on several counts. First, it believed that a definition of the phrase "the
people on Taiwan," which appears repeatedly in the bill, was required,
and that the meaning should include the governing authority as well
as the people governed by it.
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Second, the Committee was of the view that a number of matters
that were dealt with implicitly, if at all, in the bill as submitted should
be dealt with explicitly if United States relations with the people on
Taiwan were to be carried on in a sound and secure manner. This
included such matters as the legal standing of the people on Taiwan
to sue and be sued in United States courts, and the protection of
property rights of entities and persons in both countries. Such pro-
visions were included in the bill as approved by the Committee.
Third, the bill made no provision for Congressional oversight of
the American Institute in Taiwan, the private instrumentality estab-
lished to conduct United States relations with the people on Taiwan.
The bill as amended by the Committee provides for reporting agree-
ments made by the Institute in a manner that satisfies requirements
of the Case Act. It also specifies' that agreements made by the Insti-
tute are subject to the same' Congressional notification, review and
approval requirements as if such agreements had been made by or
through'a department or agency of the United States.
Fourth, the bill originally made no provision for granting any_privi-
leges and immunities to the members of offices located in the United
States of an instrumentality established by the people of Taiwan to
be the counterpart to the American Institute in Taiwan. The Com-
mittee bill authorizes and requests, but does not direct, the President
to provide extensive privileges and immunities, as appropriate, to
members of the counterpart instrumentality, subject to reciprocal
privileges and immunities being granted to the members of the Ameri-
can Institute in Taiwan working on that island.
Finally, the bill as submitted by the Administration contained no
references to the interest of the United States in Taiwan's security,
and lacked any reference to the sale of defensive arms to Taiwan. The
Committee was determined to remedy these deficiencies, and extensive
discussions took place over the appropriate language necessary to
reassure Taiwan without being inconsistent with recognition of the
PRC. The language eventually approved was designed to make clear
to the PRC that its new relationship with the United States would.
be seriously endangered if it resorted to force in an attempt to bring
about the unification of Taiwan with the mainland. This reflects the
view of the Committee that the United States attempt to establish
a new and more cooperative relationship with the PRC in order to
improve the prospects for peace and stability in Asia will be successful
only if the policies of both countries take into account the views and
interests of the other.
The Committee believes the bill as amended and approved will, if
implemented properly, enable the United States to continue to have a
close and friendly relationship with the people on Taiwan while
simultaneously developing a mutually beneficial relationship with
the People's Republic of China. The Committee therefore urges the
Senate to approve this bill.
D. MAJOR ISSUES CONSIDERED BY THE COMMITTEE
During its consideration of S. 245, the Committee focused on five
major issues:
(1) the negotiations on normalization of relations with the
PRC;
(2) the security of Taiwan;
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(3) legal matters not relating to specific sections of the bill;
(4) the international political implications of normalization;
and
(5) the economic impact of normalization.
These issues are discussed below.
1. THE NEGOTIATIONS
Most Members of the Committee welcomed the establishment of
full, normal diplomatic arrangements with the People's Republic of
China as in the interest, of the United States. There were, however,
specific aspects of the recognition agreement that were examined
critically during the Committee hearings.
a. Timing and Consultations.-The U.S.-PRC negotiations were
carried out in secrecy by a very small group of U.S. officials. According
to Administration testimony, the final agreements were negotiated
quickly after the PRC showed some signs of flexibility, primarily on
the question of future U.S. arms sales to Taiwan. The announcement
made by President Carter on December 15 came as a surprise to the
Congress and the American people. There were no meaningful prior
consultations with Congress despite section 36 of the International
Security Assistance Act of 1978, which calls for prior consultation
on any proposed policy changes affecting the continuation in force of
the Mutual Defense Treaty. Taiwan was informed only a few hours
prior to the President's December 15 announcement. Executive
Branch agencies were caught off-guard, resulting in last-minute
efforts to draft executive orders and legislation to smooth the transi-
tion. Finally, the hurried and secretive negotiations left the Adminis-
tration open to charges that it could have gotten a better deal.
b. A Better Deal?-The Administration has been criticized on
several counts for not negotiating more favorable arrangements.
First, the United States yielded on all three of the PRC's major
conditions for normalization. These conditions were (1) termination
of the Mutual Defense Treaty with Taiwan (termination on January 1,
1980), (2) U.S. troop withdrawal from Taiwan, and (3) termination of
diplomatic relations with Taiwan. Even when the PRC dropped a
newer fourth condition banning U.S. arms sales to Taiwan,,the United
States agreed to a one-year moratorium on new sales commitments.
Second, the United States did not obtain a pledge from the PRC
that it would not take military action against Taiwan.
Third, the language of the. December 15, 1978 communique goes
slightly beyond that of the 1972 Shanghai Communique in recognizing
China's claim to sovereignty over Taiwan. It also goes further than
similar statements made by, some other countries. In the Shanghai
Communique the United States "acknowledges" and agrees not to
challenge the position of Chinese on either side of the Taiwan Straits
that Taiwan is part of China.
In the December 15 Communique, the United States "acknowl-
edges" as the Chinese position that Taiwan is part of China. The
extent of this change is more marked in the Chinese translations of
the two communiques, but the Committee was assured by Deputy
Secretary of State Warren Christopher that the United States adheres
to only the English translation.
The Administration counters these criticisms by noting that:
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(1) the PRC "did not contradict" the U.S. statement that the
United States has an interest in the peaceful resolution of the Taiwan
issue;
(2) commercial, cultural, and other relations will be maintained
with the people of Taiwan;
(3) Taiwan will be able to purchase "selected defense weaponry"
on a "restricted basis"; and
(4) the Mutual Defense Treaty will not be abrogated but termi-
nated in accordance with the provisions of Article X of the Treaty,
which provides that either party can terminate the treaty with one
year's notice.
The Committee also noted with concern the adverse Taiwanese reac-
tion to the recognition agreement as displayed during Deputy Secre-
tary of State Warren Christopher's December 1978 visit to Taipei. The
Committee believes that the legislation reported by the Committee
should reassure the people on Taiwan that the United -States will
maintain close cultural and commercial ties with Taiwan and con-
tinues to be concerned with the future security of Taiwan.
c. Collateral Assurances.-During the course of the hearings, the
Committee was assured (by a letter from the Secretary of State and
by testimony from the Deputy Secretary of State) that the United
States entered into no secret agreements or understandings with the
Peking Government concerning normalization either before De-
cember 15, 1978, or between that date and the date of the hearings.
2. SECURITY ISSUES
a. General.-The continued security of Taiwan is a principal con-
cern of the Committee. During the hearings many members expressed
their view that the Administration had not taken adequate steps
either during the normalization negotiations or in drafting S. 245 to
insure the continued security of Taiwan. The Committee heard
testimony from witnesses both in open and executive session who
expressed the entire spectrum of views concerning Taiwan's security.
Witnesses included Secretary of Defense Harold Brown, Chairman of
the Joint Chiefs of Staff David Jones, Deputy Assistant Secretary of
Defense Michael Armacost, Vice Admiral Edwin Snyder (retired),
Dr. Ray Cline, Dr. Robert Scalapino, and A. Doak Barnett.
During the course of the hearings, the Committee concluded that
any efforts by the PRC to resolve the Taiwan issue by other than
peaceful means should be considered a threat to the peace and se-
curity of the Western Pacific area and of grave concern to the United
States. The threat of an armed PRC attack against Taiwan appears
highly unlikely in the foreseeable future, and the PRC's ability to
mount a successful amphibious landing against the heavily fortified
island of Taiwan is quite limited.
The removal of U.S. forces and installations from Taiwan will not
significantly affect either the U.S. regional military posture or strategy
according to Administration testimony. Members agreed, however,
that the United States should provide Taiwan with a sufficient self-
defense capability through the provision of arms of a defensive nature.
Specific weapons systems are not mentioned in the reported Com-
mittee legislation.
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b. Analysis of the Possible Threat to Taiwan's Security.-Chinese
statements concerning their intentions to reunify with Taiwan by
force are ambiguous. Chinese Vice Premier Teng Hsiao'ping told the
Committee during his recent visit to Washington that, "so long as
Taiwan is returned to the motherland, and there is only one China, we
will fully respect the realities on Taiwan." Chinese leaders have re-
cently made similar statements on a number of occasions (including
statements to Senator Glenn) indicating a desire for peaceful reunifica-
tion. The National Chinese News Agency, however, reports that, on
January 5, Teng stated that "we cannot commit ourselves to use no
other than peaceful means to achieve reunification of the mother-
land . . . we cannot tie our hands in this matter."
Secretary of Defense Brown told the Committee that "for a variety
of reasons PRC military action against Taiwan is extremely unlikely
for the foreseeable future." There are significant political and military
reasons why a successful attack on Taiwan by the PRC is unlikely
for several years. The PRC has limited amphibious capabilities. The
island is heavily fortified and would be costly to take. The action
could make the PRC more vulnerable to a Soviet attack. The steady
rise in Sino-Vietnamese animosity during 1978 led to large-scale mili-
tary conflict between the two countries early in 1979. China will be
faced with a hostile Vietnam for many years, which will require the
PRC to maintain substantial military forces near the Sino-Vietnamese
border. And an attack on Taiwan would reverse the political gains
made in the West by the current Chinese Government and jeopardize
continued U.S. help for China's modernization.
But Committee members indicated their belief that it is prudent to
consider the possibility that current circumstances could change. This
is especially true in light of the recent PRC attack on Vietnam. Vice
Premier Teng is 74 years old and has twice been purged from office.
Chinese foreign policy could again dramatically change. A Sino-
Soviet detente would free large numbers of Chinese troops currently
near the Soviet border. The Chinese might miscalculate U.S. resolve
to continue providing security to Taiwan. Or Taiwan could take
action such as declaring its independence, acquiring nuclear weapons,
or cooperating closely with the Soviet Union, any of which might
trigger a PRC reaction.
There are several possible "non-peaceful" alternatives 'open to
Peking with regard to reunification. They include an economic boy-
cott, a military blockade, seizure of the offshore islands, invasion of
Taiwan, and nuclear blackmail.
An economic boycott could simply involve a statement that the
PRC will not trade with countries doing business with Taiwan. In
the short run, this could be more economically harmful to Peking than
Taipei since some foreign countries have more trade with Taiwan than
with the PRC.
A more effective way for the PRC to strangle Taiwan economically
would be a military blockade, which some argue might have sanction
in international law for those countries which regard Taiwan as part
of China. The blockade probably would not require air superiority if
Peking were to call on its 73 fleet class submarines. Without the U.S.
Seventh Fleet, Taiwan has a very limited anti-submarine warfare
capability. Since most of Taiwan's trade is shipped in foreign bottoms,
however, Peking would risk the international implications of inter-
fering with Western shipping.
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The PRC would have some obvious military advantages in any
attack on Taiwan. PRC assets include manpower, available weapons,
and Taiwan's heavy dependence on military resupply. The PRC
is reported to have some 700,000 troops available in the five military
regions near Taiwan, compared to Taiwan's total force of 250,000
(excluding the offshore islands).
The PRC Air Force has an estimated 5,000 combat aircraft, but
only a portion of that total might safely be deployed without weaken-
ing air defenses on the Soviet border. However, even using only 1,200
to 1,500 fighters, the PRC might eventually defeat the 316 better
equipped and piloted Taiwanese combat aircraft and gain air superi-
ority over Taiwan. In testimony before the Committee, Vice Admiral
(Retired) Edwin Snyder concluded that the PRC might neutralize
Taiwan's current air force in two to three weeks. The cost to the
PRC air force, however, would be great.
The problems facing an invading force from the mainland would be
immense even if the PRC gained limited air superiority. The PRC
naval vessels available (750 in the East and South Sea fleets plus
junks) could probably transport only 100,000-150,000 troops. A
World War II study entitled Operation Causeway concluded in 1944
that it would take 300,000 U.S. troops to defeat the 32,000 Japanese
ground forces then occupying Taiwan. According to official sources, an
amphibious landing today on Taiwan would be extremely difficult
given the PRO's limited command and control capability and limited
surface vessels. There is no evidence that the PRC is attempting to
gain an amphibious assault capability. PRC airlift capability is also
limited. Finally, PRC naval air defense is not considered good,
leaving the invading force vulnerable to counterattack. These diffi-
culties lead to the conclusion that a conventional PRC attack against
the island of Taiwan during the next few years probably would be
unsuccessful given the current and. projected force balances and
dispositions.
c. Taiwan and U.S. Security Interests.-During the hearing process,
the Committee made special efforts to examine Taiwan's direct
importance to U.S. security interests. Special testimony was taken
in executive session on this topic from the Chairman of the Joint Chiefs
of Staff, and on another occasion from the Deputy Assistant Secretary
of Defense for East Asian and Pacific Affairs and from Lt. Gen.
Lawson, Director of Plans and Policy, JCS. Secretary of Defense
Brown summarized the Administration's position on this issue during
his public testimony by stating, "We now confront an Asia much less
menacing to the United States than it appeared-and was-in the
1950's when the Russians and Chinese acted in concert".
Based on this testimony and a letter to the Chairman by Deputy
Secretary of Defense Charles Duncan, the Committee concludes that
the Administration believes that the island of Taiwan today is less
important strategically to the United States than it was during the
1950's. The following quotations from Deputy Secretary Duncan's
written response to the Chairman's inquiries illustrate this conclusion :
At present our principal security concerns in Northeast
Asia are the gradual buildup of Soviet military power in
Asia and the Pacific, and the residual danger of conflict on
the Korean peninsula. In Southeast Asia, we are concerned
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about developments in Indochina and Vietnam's close associa-
tion with the USSR which could lead to the establishment of
.Soviet bases there.
U.S. forces on Taiwan would not be well positioned to
counter these components of the Soviet threat in Asia. The
U.S. forces needed to assist the Republic of Korea in the event
of a North Korean attack are either already in South Korea
or would be deployed directly to South Korea in the event of
an attack. While U.S. bases on Taiwan could be useful for
logistics support and refueling purposes, they are certainly not
essential for the successful defense of South Korea.
In our emphasis on the Soviet and North Korean threat,
we do not discount completely the PRC just because we
have diplomatic relations. However, the PRC threat to the
United States and Taiwan is low and we position our forces
to meet the most threatening.
With regard to logistics, we are taking actions to eliminate
any adverse impacts that the removal of U.S. forces and in-
stallations from Taiwan would have on our ability to sup-
port our forces logistically.
In summary, the removal of U.S. forces and installations
from Taiwan will not significantly affect either our regional
military posture or strategy. Specifically, they will not
directly affect our ability to counter the most likely threats
to peace in Asia and we are taking steps to eliminate any
adverse impact that the removal of U.S. forces and installa-
tions from Taiwan would have on our capacity to support our
forces logistically.
Despite a possible reduction in Taiwan's strategic importance to
the United States since the 1950's, a non-peaceful resolution of the
Taiwan issue would threaten the peace and security of the Western
Pacific area. An armed attack on Taiwan would have a severe impact on
America's other allies and friends throughout Asia. Hostilities could
escalate and spread to other parts of the region.
A PRC armed attack or other hostile action against the 17 million
people of Taiwan who have long relied upon the United States for
their security would pose grave problems for the United States. The
long United States-Taiwanese association would make it extremely
difficult for the United States not to respond firmly to hostile activity
directed against Taiwan. A United States failure to respond firmly
would have grave consequences for America's international standing,
and would seriously weaken the confidence of America's other allies
in the reliability of United States protection.
?1. Impact on U.S. Forces in the Western Pacific.-During the hear-
ings, the Chairman requested information on the impact of recognition
of the PRC on the U.S. force posture in the Western Pacific. Deputy
Defense Secretary Duncan provided the following response:
The terms of normalization require the removal of the
approximately 700 military personnel on Taiwan by April 30,
1979. No combat forces are involved; our last combat units
were withdrawn in 1975. These forces performed functions
related to the 1954 Mutual Defense Treaty. They included
the following: (1) Command element (95); (2) Communica-
tions element (146) ; (3) Forces to maintain auxiliary U.S.
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facilities in caretaker status at two operational Taiwan air
bases and War Reserve Materiel (WRM) in ready-to-use
condition (206) ; and (4) Support organizations that include
a U.S. Naval hospital, a dental clinic, finance office, and
logistical and transportation units (253). When the with-
drawal of U.S. forces from Taiwan is completed, the Taiwan
Defense Command will be dissolved. However, a small
working group, called the Provisional Plans Office, will be
established at CINCPAC Headquarters in Hawaii to handle
matters pertaining to the Mutual Defense Treaty until the
end of 1979. Military personnel withdrawn from Taiwan will
be reassigned to fill requirements worldwide.
We do not expect changes in the size, structure or deploy-
ments of our forces (beyond removal of military personnel
from Taiwan) as a result of normalization of relations with
China.
As the President has stated, with the exception of our plans
gradually to withdraw U.S. ground combat forces from South
Korea, we will sustain and strengthen our military deploy-
ments in the Western Pacific. We are already replacing older
destroyers with the new and more powerful DD-963 Spruance
class. The Perry class FFG and the Los Angeles class SSN-
688 will soon be deploying with the Seventh Fleet, and by
early 1980, all four "large deck" aircraft carriers in the Pacific
Fleet will carry F-14 aircraft instead of the older F-4J. We
have already exercised the E-3 AWACS aircraft in the West-
ern Pacific and, beginning in 1980, AWACS will be deployed
full-time to Japan. Air Force F-14's will be replaced, in part,
by F-15's, beginning in late 1979, and other F-4's several
years later by F-16's. Our ability to deploy additional ground
forces into the theater will also improve as we expand our
strategic airlift capacity.
e. U.S. Arms Sales to Taiwan.-The recognition of the PRC as the
sole legal representative of China creates a requirement for additional
legislation to make Taiwan eligible for arms sales under the Arms
Export Control Act. Section 102 (a) of the Committee bill satisfies
this requirement.
More than 95 percent of Taiwan's current military inventory con-
sists of U.S. weapons, either purchased directly or produced under U.S.
license. No other countries are reliable suppliers for Taiwan. Taiwan
is, therefore, concerned about the administration's one-year freeze
on new arms sales commitments and about any restrictions on arms
sales after 1979. Taiwan has, in fact, presented the United States with
a massive arms shopping list which includes advanced fighter air-
craft. Several witnesses testifying before the committee shared Tai-
wan's concern about the one-year arms sale freeze. Vice Admiral
Snyder stated that "several vital weapons that Taiwan really needs
have been withheld from them for political reasons".
The Committee believes that the impact of the one-year freeze will
be limited if adequate new sales agreements are made beginning in
1980. Arms sales commitments made by the President in 1978 (worth
$554 million) will be honored. Congress will soon receive notifications
for letters of offer for three such cases (F-5E coproduction, Maverick
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missiles, and laser target designators). All deliveries of sales previ-
ously approved by Congress will continue in 1979. The arms delivery
pipeline is estimated by the Defense Department to be worth about
$720 million, including the F-5's and Mavericks. Other major items in
the pipeline include improved Hawk and Chapparal surface-to-air
missiles, Sidewinder air-to-air missiles, and 155 mm. Howitzers.
The long-run impact of normalization on arms sales to Taiwan will
depend upon how the President's policy of sale of defensive weapons
on a restricted basis is implemented. To make clear how this policy
should be implemented, the Committee bill states in section 114 of
its bill that it is the policy of the United States to assist the people
on Taiwan to maintain a sufficient self defense capability through the
provision of arms of a defensive character.
According to information available to the Committee the following
weapons systems have been or are being considered for sale to Taiwan:
Fighter Aircraft.-Taiwan wants a fighter aircraft with both an
all-weather and Sparrow missile capability. This would provide Taiwan
with air defense in poor weather to replace the aging F-104's and a
radar-guided air-to-air missile with alonger-range than the heat-seek-
ing Sidewinders now in Taiwan's inventory. Several alternatives have
been considered but none appears to suit both Taiwanese and U.S.
needs.
F-4's.-Taiwan has for years requested 60 F-4 aircraft, but the
United States has turned down the request because of the F-4's range
and massive payload capabilities. The PRC might perceive it as an.
offensive weapon.
Kfir.-Taiwan reportedly used the possible purchase of Israeli Kfirs
to try to force the sale of comparable U.S. F-4's. The United States
agreed to the Kfir sale (and its U.S. components). Taiwan, however,
decided primarily for political reasons not to purchase the Kfir.
F-16.-Taiwan has requested the F-16, but its 600-mile combat
radius and advanced avionics would make it more objectionable to
the PRC than the F-4. General Dynamics, however, believes it can
cheaply reduce the F-16's range, thrust, and avionics capability.
F-5G.-Northrop has begun to develop a new international fighter
to succeed the F-5E. The F-5G would replace the two small J85
engines with. one more powerful F404 engine (the F-18 has two such
engines). It would also expand the cockpit and add a modified WX160
look-down all-weather radar system (the F-16 radar at % capability).
The F-5G's capabilities would be similar to the F-4's but with a
smaller payload. Northrop requires about 400 F-5G sales to make
production profitable and Taiwan wants only 60. Production of the
F- 5G would require an exception to the President's arms transfer
policy. The President has deferred a final decision on the F-5G for
Taiwan.
More F-5E's.-Without agreement on the above options, Taiwan
has requested coproduction of an additional 48 F-5E/F's (for a total
of 250 F-5's). In addition, they may seek another 50 later this year.
The 5-5E might be modified to provide for all-weather radar, but
adding two 500-pound Sparrow missiles would greatly reduce its
performance.
Surface-to-Air Missiles.-Taiwan currently wants at least three
types of surface-to-air missiles from the United States: additional
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Improved Hawks (range 25 miles) ; Seasparrows (range 20-30 miles) ;
and additional Chapparals (range 11 miles). All are basically defensive
weapons.
Anti-Shipping Missiles.-Taiwan currently has the Israeli Gabriel
surface-to-surface missile (range 12.5 miles) and wants the U.S.-built
Harpoon to destroy enemy shipping. The Harpoon, however, has a
range of 120 miles and can be air launched, 'giving it what some argue
is an offensive capability against the PRC. The Harpoon's guidance
system is quite advanced.
Ground Attack Weapons.-Taiwan wants, and the Administration
has approved, -the sale of 500 air-to-ground Maverick missiles. The
Mavericks are optically guided "fire and forget" missiles with an
eight-mile range. They are used primarily to destroy fortifications
and tanks. They can be fired from Taiwan's F-5E's. Taiwan also
wants a large number of U.S. eight-inch Howitzers.
f. Taiwan's Nuclear Option.-The termination of the .U.S.-ROC
Mutual Defense Treaty could lead Taiwan to reconsider its nuclear
option. The Committee received testimony stating that Taiwan has
the capability to develop and produce a nuclear device quickly if the
political decision were to be made. The Taiwan Power Company has
two nuclear power plants nearing completion, two more under con-
struction, and another two planned for operation in 1985. Spent fuel
discharged from these plants would contain from 50 to 80 kilograms
of plutonium a year. In comparison, 10 kilograms is more than enough
to make a nuclear explosive. Taiwan does not now have chemical
facilities to recover this plutonium. However, it did conduct some
laboratory scale experiments for such recovery (reprocessing), which
were discovered and discontinued under U.S. pressure.
The United States would probably know on a timely basis if
Taiwan attempts to build a nuclear explosive device. Since 1972,
inspections of Taiwan's nuclear power facilities have. been made
through a special three-way arrangement between the International
Atomic Energy Agency, Taiwan, and the United States. This arrange-
ment is not affected by the termination of diplomatic relations
between the United States and Taiwan.
Most analysts conclude that it would be counterproductive for
Taiwan to build a nuclear weapon. It would increase the risk of a
PRC first strike and would provide Taiwan with little, security given
the limited Taiwanese delivery systems.
Finally, Taiwan's development of a nuclear explosive device could
jeopardize its entire relationship with the United States. In his
February 23, 1979 letter to the Chairman, Deputy Defense Secretary
Duncan stated :
Taiwan is well aware of U.S concerns and interests in this
area, and understands that not only would production of
nuclear weapons jeopardize its continued fuel supply from
the United States, but would also force the United States to
reassess its intent to continue to sell defensive arms to
Taiwan.
g. Security Assistance Issues.-Several other security assistance
issues were reviewed by the Committee. First, by March 31, 1979,
the U.S. Military Assistance Advisory Group will be withdrawn.
Under current plans, about three members of the American Institute
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in Taiwan would be responsible for military sales. Taiwan would
purchase most of its arms in Washington, where letters of offer would
be signed between Taiwan's instrumentality and the Washington
office of the American Institute in Taiwan. Taiwan's funds would
probably remain in the Foreign Military Sales (FMS) Trust Fund,
but no final decisions have been made with regard to Taiwan's con-
tinued use of the Defense Department's computerized procedure for
ordering weapons. No decisions have been made either with regard
to visits by U.S. military mobile training teams and TDY technical
teams, or with regard to military training in the United States for
Taiwanese, but that most military training probably will be conducted
by civilian firms. The military advisory and training functions per-
formed by the U.S. Government prior to January 1, 1979, can' in
general continue through other means if both parties show flexibility
and imagination. The Committee believes that the United States
should maintain a sufficient capability in Taiwan to insure continued
logistical and technical support for those U.S.-built military systems
currently in Taiwan.
Second, the modest foreign military sales credit program for Taiwan
authorized for fiscal year 1979 has been reprogramed for other coun-
tries. There is no FMS credit program requested for Taiwan for fiscal
year 1980.
And third, most of the estimated $40 million were of U.S. war-
reserve material located in Taiwan will be removed. Ownership of
some of this material, however, will be transferred to Taiwan, and
legislation authorizing this transfer is contained in the administration's
proposed International Security Assistance Act of 1979.
3. LEGAL ISSUES
Legal questions generated by specific sections of the bill are discussed
at appropriate points in the section-by-section analysis. Several issues,
however, do not relate to specific sections, and the Committee believes
that these should be pointed out.
a. International legal status of Taiwan.-Considerable discussion
has occurred concerning the status of Taiwan under international law.
The Committee concluded that it was unnecessary, in drafting this
legislation, to address this issue since, for purposes of United States
domestic law, the Executive Branch can be empowered, statutorily,
to treat Taiwan as if it were a state. This is, in fact, precisely what the
bill does in section 102. As is discussed in the analysis of section 501,
the issue also arises with respect to the President's directive of De-
cember 30, 1978, to departments and agencies of the Federal Govern-
ment.
b. Termination of the Mutual Defense Treaty with the ROC.-On
January 1, 1979, the President notified the Republic of China that,
pursuant to Article X of the Treaty, the United States intended to
terminate the Treaty as of January 1, 1980. Article X provides as
follows :
Article X
This Treaty shall remain in force indefinitely. Either
party may terminate it one year after notice has been given
to the other party.
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Because the Treaty is being terminated in accordance with its own
terms, no international obligation undertaken by the United States
will be violated; the Treaty is not being "abrogated" or breached.
Rather, the issue raised is whether the President may, without the
concurrence of the Congress or the Senate, so terminate a treaty.
The answer is unclear.' The text of the Constitution provides little
guidance; although the Treaty Clause, article II, section 2, clause 2,
empowers the President, by and with the advice and consent -of the
Senate, to "make treaties," nowhere does the Constitution specify
how treaties are to be "unmade". The intent of the Framers is am-
biguous; contradictory statements appear to have been made by the
few who addressed the question. And there is no Supreme Court case
on point.
Although the Committee thus recognizes that any firm conclusion
is impossible, it inclines to the belief that the President has not, in
giving notice of termination pursuant to the Treaty itself, exceeded
his constitutional authority. Senator Goldwater, who has brought an
action in Federal court contesting the President's action, testified
before the Committee. It was his position that the issue should be
resolved in the courts and was not required to addressed by the
Committee in this bill.
The principal argument against the President's action proceeds
from the premise that since treaties, like statutes, are the supreme
law of the land, treaties, like statutes, cannot be terminated by the
President alone.
That premise is of questionable validity. Although the Congress
has the last word in determining whether a statute is enacted, the
Senate merely authorizes the ratification of a treaty; it is the Presi-
dent's role that is determinative. He decides at the outset whether
to commence treaty negotiations. He decides whether to -sign a
treaty. He decides whether to seek Senate advice and consent. And
he decides whether to exchange instruments of ratification after a
treaty has been approved by the Senate. At each of these stages, it
is the President who has the power to determine whether to proceed--
and thus whether treaty relations will ultimately exist. It is not illogical,
therefore, to conclude that the President's authority may include
the right to terminate treaty relations.
The Committee emphasizes use of the word "may": the scope of
the President's authority would appear to be a function of action
taken-or not taken-by the legislative branch. An incompatible
expression of the will of the Congress-or of two-thirds of the Senate-
would, in the Committee's view, have placed the President's authority
on far shakier legal ground. The widely praised analysis of Mr. Justice
Jackson in Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579,
635-37 (1952) (Jackson, J., concurring) seems directly 'applicable.
He suggested three categories for determining which branch prevails
in the event of conflicting assertions of power:
(1) When the President acts pursuant to an express or implied
authorization of Congress, his authority is at its maximum, for it
includes all that he possesses in his own right plus all the Congress
can delegate. . . .
1 The Committee has compiled materials relevant to this subject which the Senate may
find informative. They appear In the Committee Print entitled "Termination of Treaties :
The Constitutional Allocation of Power," which may be obtained from the Committee.
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(2) When the President acts in the absence of either a con-
gressional grant or denial of authority, he can only rely upon his
own independent powers, but there is a zone of twilight in which
he and Congress may have concurrent authority, or in which its
distribution is uncertain. . . .
(3) When the President takes measures incompatible with the
expressed or implied will of Congress, his power is at its lowest
ebb, for then he can rely only on his own constitutional powers
minus any constitutional powers of Congress over the matter. . . .
Under this formulation, termination by the President of the
U.S.-R.O.C. Defense Treaty would fall within the "zone of twill(
of category (2) and the President would, accordingly, appear to possess
the constitutional authority to do so absent any statute enacted by the
Congress or resolution adopted by two-thirds of the Senate directing
contrary action; such measures would place the President's action in
category (3). Similarly, his actions would have fallen within category
(3) had the Congress enacted a statute prohibiting him, prospectively,
from terminating a treaty by himself, or had the Senate clone so by so
providing in a reservation to the treaty itself or in a two-thirds resolu-
tion. The authority of the Congress and of the Senate to control presi-
dential action in the area seems consistent with Van der Weyde v. Ocean
Transport Co., 297 U.S. 114 (1936), in which the Supreme Court held
that the Congress can legally direct the President to terminate a treaty.
It appears to the Committee, therefore, that the constitutional
prerogatives of the Congress and the Senate have not been invaded
in that neither the Congress nor the Senate has elected to exercise
the powers granted it by the Constitution to participate in the process
of treaty termination. Had either done so, a different conclusion would
likely obtain.
Historical precedent comports with this analysis. In no instance
has any President terminated a treaty in the face of the express
opposition of the Congress or two-thirds of the Senate. Although the
Senate may find custom and practice of some interest, the Committee
is hesitant to cite historical precedent for further purposes; its com-
ments in its report on the Panama Canal Treaties are worth reiterating.
As the Committee has noted in the past, it does not believe
that a constitutionally questionable practice, by mere repe-
tition, becomes more constitutional. S. Rept. 94-605, Jan-
uary 30, 1975 (94th Congress, 2nd Session) at 15. The Con-
stitution is not amended by violation; express prohibitions
and requirements, such as those contained in the declaration-
of-war clause, the treaty clause, and the disposal-of-
property clause, are not expunged through non-observance:
Nonetheless, historical precedent can be useful for corrob-
orative purposes-not to show what the Constitution has
become or what it should be, but rather as evidence that a
given construction of that document is grounded on experi-
ence as well as logic. Executive Rept. No. 95-12, February 3,
1978 (95th Congress, 2nd Session), at 68.
(c) The American Institute in Taiwan.-The intent of the legisla-
tion is to preserve existing commercial, cultural and other unofficial
relations by authorizing the continuation of existing agreements,
statutory programs and other relevant sections of U.S. law. It also
makes provision for an entity through which future relations between
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the United States and the people on Taiwan are primarily to be con-
ducted: the American Institute in Taiwan. The Institute is a private
corporation, organized under the Nonprofit Corporation Act of the
District of Columbia. (See Appendix 2 for the Articles of Incorpora-
tion.) Its activities will be controlled by means of a contract executed
between the Institute and the Department of State. (See Appendix :3
for the draft contract.)
The United States has on many occasions contracted with non-
governmental organizations to undertake specific activities in the field
of foreign policy. Examples are contracts between the U.S. Govern-
ment and American universities (both public and private) to carry out
training programs as part of foreign aid programs, and contracts with
private business firms to undertake economic development projects
abroad.
However, the Committee is not aware of (and the Administration
has not cited) any prior examples in which such extensive and varied
functions as are normally performed by governmental entities have
been authorized to be performed by nongovernmental entities. It
is unlikely that such an arrangement would be struck down on legal
grounds as an "excessive delegation" since that doctrine has had-little
viability in American law for the past forty years-especially in the
foreign affairs area. But concern was expressed in the hearings and by
individual Senators regarding the desirability of such an arrangement
from a policy standpoint. These concerns prompted many of the
changes and additions made by the Committee to the legislation
originally proposed by the Administration, expecially with respect to
issues of oversight, including the reporting of agreements concluded
through the Institute, consultation on the appointment of its Trustees
and officers, and annual review of its operating budget.
In effect, the Committee has chosen to accept the Administration's
contention that the uniqueness of the situation, and the importance of
both normalizing relations with the People's Republic of China and
maintaining relations with the people on Taiwan, warrant the extra-
ordinary arrangements envisioned in this bill. At the same time, the
Committee has written'into the legislation a number of provisions
which safeguard the powers and prerogatives of the Congress respect-
ing the functions normally performed by government which are to be
performed in this case by the Institute. Finally, the Committee added
a new section 106(b) assuring that the provisions of this bill will
preempt any provision of state or local law with which it might be
deemed to come into conflict as a result of the privately incorporated
nature of the Institute.
4. INTERNATIONAL POLITICAL IMPLICATIONS
During its hearings, the Committee reviewed the international
political implications of U.S. recognition of the People's Republic of
China. It considered both the implications for U.S. interests in Asia
and the Asian reaction:
a. Implications for U.S. Interests in Asia.-Committee witnesses
generally agreed that American interests in Asia at least temporarily
coincide with Chinese interests, with both countries desiring to pre-
clude the growth of Soviet influence along China's frontiers. Peking's
new relationship with the United States has also reduced the possibility
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of a, major Sino-American conflict in Asia; and it has made the Chinese
less likely to disrupt the political order and economic stability of the
non-Communist Asian states-which are important to the United
States-for fear that turmoil there could open opportunities for
Soviet expansion.
This approach has particular implications for Taiwan. Chinese
leaders have repeatedly stressed their "peaceful" intentions toward
Taiwan, and they have implied strongly that Peking has no intention
to disrupt the economic progress of the islands, but would like to begin
trade and cultural exchanges with Taiwan. Peking has not referred
recently to possible Soviet interest in Taiwan, but it almost certainly
judges that Taiwan's continued close trade relations with the United
States and continued U.S. arms sales to the island are a better alterna-
tive than a precipitous U.S. withdrawal that might prompt Taipei to
seek Soviet support.
The impact of normalization on longer-term prospects for Asian
stability and U.S. interests in the region remain somewhat unclear.
Despite the establishment of Sino-American diplomatic relations,
Chine, still remains an unpredictable major power in Asia. Past expe-
rience has shown that the Chinese might be inclined to make substantial
changes in their foreign policy orientation in the event of a major
change in the makeup of the Chinese leadership, which could be
caused, for example, by the passing of Vice Premier Teng Hsiao-p'ing,
a major setback in China's very ambitious economic programs, or by
some other major domestic difficulties. In addition, substantial changes
in the foreign policies of either the Soviet Union or the United States
could prompt shifts in China's foreign policy. U.S. interests in Asia
and those of its allies there could suffer if Peking significantly alters,
its current approach to the region. Sino-American normalization is
unlikely to provide the United States with sufficient leverage with
which to preclude adverse changes in Chinese foreign policy, but does
provide a limited protection if such domestically inspired changes
take place. overnments and the
b. Asian Views on Normalization.-Asian governments
Soviet Union have been anticipating Sino-American diplomatic rela-
tions since 1972. With the exception of the U.S.S.R. and Vietnam, most
governments have welcomed the decision. However, Asian countries
will monitor how the United States deals with the security of Taiwan,
and final judgments will await evidence that a peaceful resolution to
the Taiwan issue is probable. The Japanese are particularly concerned
that U.S. recognition of Peking not affect Taiwan's continued existence
and de facto ability to act as an independent entity.
The precedent of the United States terminating a security treaty is
troubling to the South Koreans, but President Park believes normali-
zation will-in the long run-help to reduce tensions on the Korean
peninsula.
The Soviet position appears somewhat preemptive, designed to
forestall any movement toward Sino-American military cooperation.
The Soviets, however, appear to have no reservations about a normal
diplomatic or economic relationship that excludes military relations or
active diplomacy directed against the Soviet Union. In particular, the
Soviets fear a U.S.-Japan-China alliance against the Soviet Union.
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 5. IMPACT ON ECONOMIC RELATIONS
a. General.-Taiwan's GNP in 1978 was $21.9 billion with a per
capita income of about $1,200. Its economic transformation since 1950
from an agricultural economy, through light industrial manufacturing,
toward an emphasis on heavy industry and value-added products is
one of the relatively rare successes in economic development in the
Third World. The average rate of real economic growth has exceeded
ten percent since 1965 (aside from the world recession of 1973-74)
and was estimated at 13 percent in 1978. Taiwan's principal economic
problems are inflation and a small domestic market.
b. Trade.-Because Taiwan is an island with limited natural re-
sources, its economic future is hinged upon its ability to import raw
materials and export manufactured products. In 1977, Taiwan ex-
ported $9.3 billion and imported $8.5 billion worth of goods and
services.
The composition of Taiwan's foreign trade has not changed markedly
in recent years. Exports continue to be dominated by consumer goods
produced by light industry. Textile exports remain the most impor-
tant category. Electrical machinery and appliances are next in im-
portance, with 15-16 percent of the total. Imports are almost one-third
heavy equipment, machine tools, and transportation equipment and
more than half food and raw materials. Consumer goods imports are
minor.
TAIWAN'S MAJOR TRADING PARTNERS
[In percent; 1st half 19781
-Percent share
of ROC
foreign trade
Exports
Imports
?
1. United States--------------------------------------------------
2. Japan
32.3
40.9
22
3
---------------------------------------------------------
3. Hong Kong
21.9
11.8
.
33
4
____----
4. West Germany ----------------- --------------------------------
4.2
4
2
6.8
.
1.5
5. Saudi Arabia------------------------------------------
6. Kuwait
.
3.8
24..4 4.8
3
3 5.
6
-. ------------------------------------------------
7.
ia --------------
3.5
.7
.
.5
6
--
8. Other ---------------------------------
T
3.1
27.0
2.7
29.9
3.4
24.0
otal_---------
100.0
100.0
100.0
The importance of the U.S. market as a destination for Taiwan's
exports is overwhelming and, therefore, crucial to insuring future com-
mercial viability. Two-way trade is estimated at $7.3 billion for 1978,
with Taiwan 'enjoying a $2.5 billion bilateral trade surplus. Much of
the surplus is in textiles and in August, 1978, an agreement was
reached to curb textile exports.
The Committee bill contains several provisions in Title I which
insure that the United States will be able to continue unhampered its
current trading relationship with Taiwan. Export-Import Bank loans
and guarantees-currently totalling $1.8 billion-will also be continued.
c. Foreign Investment.-American private investment in Taiwan now
exceeds half a billion dollars and represents about :30 percent of all
foreign investment on the island. Continued U.S. investment is im-
portant to continued economic growth in Taiwan, and among other
factors, depends upon investor's perceptions of Taiwan's political and
upon military stability. The list below summarizes current U.S. private
investment in Taiwan.
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Electrical and electronics---------------------------- ----------------"-__------- $299
- 20.2
Chemicals--------------------------------------------------------------------- 30,073 5.6
Banking and insurance -------------------------------------------- -------------
----------------- 16,025 3.0
Services--------------------------------------------------------------------- 2.8 15 213 Plastic and rubber products------------------------------------------------- 14,109 2.6
g 670
Basic metals and metal products-------------------------------------- 1.8
Machinery and instruments-------------------------------------------------"'--- 8,303 1.5
Construction----------------------------------------------------- ------------- 7,222 1.3
Transportation------------------------------------------------------------------ 5,077 .9
Food and beverages------------------------------------------------- 4,955 .9
Non-metallic minerals------------------------------------------------ --- 2,485 .5
Garments and footwear--------------------------------------------------------- 2,089 .4
Textiles------------------------------------------------------------------------ :,895 .4
Pulp and paper----------------------------------------------------------------- 1,326 .2
Trade------------------------------------------------------ 816 .2
Leather and fur---------------------------------------------------------------- 776 .1
Lumber and bamboo------------------------------------------------- ---------- 542 .1
Fisheries and livestock------------------------------------------------------ 10,542 1.9
Other----------------------------------------------------------------------
538,600 100.0
Total---------------------------------------------------------
Percent of
total U.S
investments
Thousands approved
In the past, the United States has provided Overseas Private
Investment Corporation insurance and guarantees to Taiwan totaling
$144 million. The Committee bill contains a section 112 which will
allow OPIC to continue its programs in Taiwan, despite a $1,000 per
capita income OPIC country ceiling. The Committee recommends this
action to encourage continued U.S. private investment in Taiwan.
E. SECTION-BY-SECTION ANALYSIS
The Title
The title of the bill, as amended by the Committee, makes clear
that the maintenance of commercial, cultural, and other relations
between the people on Taiwan and the United States is authorized
by the Congress. Short Title
The Committee amended the bill to include a short title, the
"Taiwan Enabling Act."
Section 101.
Subsection (a) specifies that laws, regulations, and orders which
refer or relate to "foreign countries", or use similar terms, shall con-
tinue to apply to the people on Taiwan. It continues the eligibility of
the people on Taiwan under such statutes as the Arms Export Con-
trol Act, the Atomic Energy Act of 1954, the Export Administration
Act, the Export-Import Bank Act, the Foreign Assistance Act of 1961,
the Mutural Educational and Cultural Exchange Act of 1961, the
Trade Act of 1974, and the Foreign Sovereign Immunities Act of 1976.
The section applies to existing case law as well as to statutes; thus, the
people on Taiwan will be entitled to the act of state doctrine. It is the
view of the Committee that the authority conferred by this section is
legally necessary for the continued applicability to the people on
Taiwan of the statutes affected.
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Subsection (b) defines the term "people on Taiwan" to include the
governing authorities on Taiwan and the people governed by those
authorities on the islands of Taiwan and the Pescadores, as well as
the organizations and other entities formed under the laws of Taiwan.
Whether the term refers to authorities or to people will depend on the
context in which it is used. The phrase "recognized by the United
States prior to January 1, 1979 as the Republic of China" is intended
only to make clear that for domestic legal purposes the bill applies to
the governing authority of Taiwan by whatever name it may be referred
to and to guarantees and other obligations incurred or undertaken
before or after January 1, 1979.
The Committee, through this definition, intends to effect no change
with respect to United States policy concerning the islands of Quemoy
and Matsu.
Section 102.
Subsection (a).-This section provides that legal requirements for
the maintenance of diplomatic relations with the United States or
recognition of a foreign government by the United States will not be a
bar to eligibility of the people on Taiwan for participation in programs,
transactions or other relations under U.S. law. This will avoid ques-
tions under provisions of law such as section 620(t) of the Foreign
Assistance Act of 1961 (22 U.S.C. 2370(t)), which refers explicitly to
severance of diplomatic relations. It is also intended to satisfy re-
quirements for diplomatic relations with, or recognition by, the United
States which might be implied by terms such as "friendly country"
contained in various statutes, such as those governing military sales
and assistance (22 U.S.C. 2311, 2751), the activities of the Overseas
Private Investment Corporation (22 U.S.C. 2191), and expenditures of
funds received pursuant to the Agricultural Trade Development and
Assistance Act of 1954 (22 U.S.C. 1922). The Committee regards the
authority conferred by this section as legally necessary to permit the
United States Government to carry out such programs and continue
to conduct relations with the people on Taiwan.
Subsection (b) is directed at preserving the legal status quo of private
persons on Taiwan, including both natural persons and juridical
entities. It provides that the rights and obligations of such persons
under the laws of the United States are not affected by the normali-
zation of relations with the People's Republic of China.
Section 108.
This section removes any uncertainty concerning the status of the
authorities on Taiwan, and the instrumentality referred to in section
109, to sue and be sued in the Federal courts of the United States.
However, it makes such access dependent upon reciprocity; the
United States and the American Institute in Taiwan must be granted
comparable access to the courts on Taiwan. The Committee expects
that, in determining whether this condition has been fulfilled, the
courts of the United States will accept the judgment of the Secretary
of State. With respect to the application of the Foreign Sovereign
Immunities Act of 1976, however, the Committee does not intend to
interfere with the judgment of the courts with respect to the recogni-
tion of claims of sovereign immunity in' individual cases. Such claims
will continue to be decided by the courts on the basis of the principles
set forth in that legislation.
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Section 104.
This section was added by the Committee to remove any doubt
concerning the validity of the international agreements in force be-
tween the United States and the entity recognized as the Republic of
China prior to the normalization of relations with the People's Re-
public of China. Its effect is to make clear that these agreements have
not "lapsed" and that they continue in effect between the United
States and the people on Taiwan. The reference to all courts "in" the
ub-
Unittanted Federal law be applied by 1both sFintent ederal tand State courts.
Section 105.
This section authorizes the President and departments and agencies
to carry out programs, transactions and other relations with the people
on Taiwan under laws which provide for such programs, transactions
and relations with respect to foreign countries. Such activities should
be carried out in accordance with the applicable laws of the United
States. The Committee regards this section as legally necessary to
give the President and departments and agencies the authority to
conduct and carry out U.S. programs, transactions, and other rela-
tions authorized or required by law with respect to foreign countries,
nations, states, governments, or similar entities, with the people on
Taiwan. This will assure the continuation of authority for such impor-
tant programs as arms sales, nuclear exports, and Export-Import
Bank financing.
Section 106.
Subsection (a) provides that programs, transactions and relations
with respect to the people on Taiwan will be conducted by or through
the American Institute in Taiwan, in the manner and to the extent
directed by the President. This provision implements the President's
statement of December 15, 1978, that the American people and the
people on Taiwan "will maintain commercial, cultural and other rela-
tions without official government representation. ." The American
Institute in Taiwan is a nonprofit corporation organized under the
laws of the District of Columbia, which has been established for this
purpose. The Administration's version of this section was amended.
to make it completely clear that while U.S. relations with the people
on Taiwan will be carried out principally through -the American
Institute in Taiwan, this need not be the only channel for such rela-
tions without official government representation. . . . The American
Institute in Taiwan is a nonprofit corporation, organized under the
the Institute, substituted the words "ithe manner and to the extent
directed by the President" for the words "as the President may direct."
This makes clear that the President may conduct relations with the
people on Taiwan in a flexible manner, having, for example, the
Export-Import Bank work with commercial banks in making loans.
The Committee regarded this subsection as legally required to pro-
vide the President or departments or agencies of the United States
Government with the authority to carry out programs, transactions
or other arrangements with the people-on Taiwan through the Ameri-
can Institute in Taiwan.
Subsection (b) of section 106, added by the Committee as proposed
by Senator Javits, applies the Preemption Doctrine to any state or
local laws that may conflict with provisions of the statute under which
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the Institute operates. The supremacy clause, clause 2 of article IV
of the Constitution, provides that Federal law takes precedence over
any State law to the extent that the two cannot both stand, and it
has been further construed as allowing the Congress to "occupy the
field," or preempt, State legislation in carrying into execution its enu-
merated powers. It is the intent of the Committee, in including this
law provision,
this opu require that the pos on the same Institute be
an State the and
Umt d
States Government.
Section 107.
This section was offered as an amendment to the Administration's
bill by Senators Pell, Javits, and Percy, replacing an earlier related
amendment by Senator Pell. This section authorizes the American
Institute in Taiwan to undertake a policy of furthering human rights
when and as appropriate. Senator Javits suggested that for the purpose
of this section the applicable definition of human rights should be that
contained in the Helsinki Declaration.
The Committee made clear that this section was not to be con-
strued as authority for Institute officials to intervene in Taiwan's
domestic affairs by favoring one or another group of people on Taiwan,
or by strengthening United States links with any particular group on
Taiwan, nor was it to be construed as giving the Institute official
status. The Committee also specified that Institute officials were
not authorized to become involved in matters affecting the interna=
tional status of Taiwan.
Section 108.
This section provides for the performance and enforcement of
existing agreements, and the making of new agreements, with the
people on Taiwan by or through the Institute, to satisfy authoriza-
tions or requirements for agreements or arrangements with the people
on Taiwan. If, for. example, an agreement with a "foreign country" is
a condition of eligibility for participation in a program with respect
to the people on Taiwan, such a condition will be satisfied by an agree-
ment entered into or performed through the Institute. This section
applies not only to new agreements, but also to previous agreements,
which remain. in force unless terminated.
The Committee regarded this section as legally necessary to au-
thorize the United,States Government to perform, enforce, or have in
force agreements or arrangements or enter into new agreements or
arrangements. The Committee also changed the words "as the Presi-
dent may direct" in the Administration's bill to "in the manner and
to the extent directed by the President" to emphasize the flexibility
accorded to the President.
Section 109.
This section provides for dealing with the people on Taiwan through
an instrumentality acting on their behalf. It makes clear that pro-
visions for dealing with a "foreign government" will be satisfied with
respect to the people on Taiwan by dealing with that instrumentality.
Sections 106 and 108 and this section provide for the conduct of non-
governmental relations through the Institute and the counterpart
instrumentality of the people on Taiwan. The instrumentality re-
ferred to in this section thus is not considered an instrumentality of
the people on Taiwan as that term is defined in section 101(b).
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For example, the Arms Export Control Act authorizes sales of
defense articles and defense services to foreign countries, and requires
those countries to agree to certain conditions and to provide certain
assurances. Under the bill, these sales will be made by the Institute to
the Taiwan counterpart instrumentality, and the agreements and
assurances by that counterpart instrumentality will be accepted in
satisfaction of the requirements of the Arms Export Control Act.
This section was regarded by the Committee as legally necessary
to authorize the President and departments or agencies of the United
States Government to conduct specified relations and actions with the
people on Taiwan through an instrumentality established by the
people on Taiwan. The Committee also changed the words "as the
President may direct" in the Administration's bill to. "in the manner
and to the extent directed by the President" to emphasize the flexi-
bility available to the President in dealing with the people on Taiwan.
Section 110.
This section provides that when the application of United States
law depends upon foreign law, the law actually applied by the people
on Taiwan shall be looked to for that purpose. The provision does not
affect the enforceability of judgments rendered by the courts on
Taiwan.
The Committee expects that courts in the United States will con-
tinue to enforce judgments rendered by courts on Taiwan and that,
on a reciprocal basis, the courts on Taiwan will continue to enforce
judgments rendered by the courts in the United States.
Section 111.
Subsection (a).-This provision assures that the withdrawal of recogni-
tion does not affect the ownership of property owned by Taiwan in the
name of the Republic of China as of December 31, 1978 or thereafter
acquired or earned by them. However, the section does not apply to
the ownership of diplomatic real properties situated in the United
States and acquired by the Republic of China before October 1, 1949,
such as the former embassy at Twin Oaks, or property held by inter-
national organizations.
For purposes of section 25 of the Federal Reserve Act (12 U.S.C.
section 632) reference to "a representative of such foreign state who
is recognized by the Secretary of State as being the accredited repre-
sentatives of such foreign state to the Government of the United
States," shall include the representative of an instrumentality
established by the people on Taiwan.
The Committee regarded this section as legally necessary to make
clear that United States recognition of the People's Republic of China
as the legal government of China does not affect ownership of, or
other rights or interests in, properties, tangible and intangible, and
other things of value, owned or held on December 31, 1978, or there-
after acquired or earned by the people on Taiwan except for diplo-
matic real properties situated in the United States which were
acquired prior to October 1, 1949.
Senator Helms, who had proposed an amendment covering similar
matters, withdrew his amendment when this section was approved
by the Committee.
Subsection (b).-This provision intended to protect U.S. persons
who, prior to January 1, 1979, acquired, or thereafter acquire, contract
or property rights or have claims against the governing authority on
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Taiwan, recognized by the United States prior to January 1, 1979, as
the Republic of China and its instrumentalities and agencies. With-
drawal of recognition of the Republic of China does not affect the con-
tractual obligations and debts which it and its instrumentalities in-
curred prior to January 1, 1979, or may incur in the future. Such obli-
gations will continue to be enforceable (on the same basis) in courts in
the United States. For example, if after January 1, 1979, a U.S. bank
makes a loan to a Taiwan entity, which loan is guaranteed by the au-
thorities on Taiwan or their instrumentality, such authorities or their
instrumentality remain suable in courts in the United States on the
loan guarantee on the same basis as would have been the case prior to
January 1, 1979. Similarly, the people on Taiwan have continued
access to courts in the United States on the same terms as obtained
prior to derecognition. The Foreign Sovereign Immunities Act of 1976
will contgnue to apply to the authorities on Taiwan and their agencies
and instrumentalities to the extent it did prior to January 1, 1979.
Finally, the term "United States persons" used in section 111(b) is
intended to have the broadest possible meaning, including, but not
limited to, the meaning of the comparable term used in section 11(2)
of the Export Administration Act of 1969 as amended, as well as all
persons doing business in the United States who may become involved
in litigation in the United States relating to the people on Taiwan.
The Committee regarded this subsection as legally necessary to insure
that property rights, interests and obligations will not be affected in
any way by the absence of diplomatic relations between the United
States and the people on Taiwan or lack of United States recognition
of a government of Taiwan.
Section 112.
Subsection (a), proposed by Senator Percy, directs the Overseas
Private Investment Corporation (OPIC) to provide insurance, rein-
surance, loans, or guaranties for projects on Taiwan without regard to
the provision of Section 231 of the Foreign Assistance Act of 1961, as
amended, which restricts eligibility for OPIC programs in countries
with per capita incomes of $1,000 or more in 1975 United States
dollars. Coincidentally, Taiwan's per capita GNP will have exceeded
the $1,000 level this year for the first time, thereby making the avail-
ability of war risk, expropriation and inconvertibility insurance much
more limited at a time when uncertainties about the island's future
may have increased. The effect of this provision, therefore, is to waive
a restriction which would otherwise begin to apply to OPIC programs
with respect to investments on Taiwan.
Subsection (b), proposed by Senator Glenn, directs that OPIC not
apply special or discriminatory criteria for its issuance of insurance,
reinsurance,' loans or guaranties with respect to investment projects
on Taiwan as a result of the establishment of diplomatic relations
between the United States and the People's Republic of China.
Subsection (c), also agreed upon by the Committee, directs the
President to report to Congress within 5 years whether the waiver
of the per capita restriction should continue with respect to Taiwan
in light of prevailing economic conditions on Taiwan on the date of
such report.
Senator Biden asked that he be recorded in opposition to the section.
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Section 113.
In connection with this section, the Committee considered two bills
introduced by Senator Dole (S. 8) and Senator Stone (S. 46). Senator
Dole's bill called for the President to extend to any principal liaison
office of the Republic of China established in the District of Columbia
the same privileges and immunities as are enjoyed by diplomatic
missions accredited to the United States. Senator Stone's bill called
for extending full diplomatic privileges and immunities to all offices
representing the Republic of China in the United States. Both bills
were strongly opposed by the Administration on the ground that
they would confer diplomatic status on an unofficial, nongovern-
mental body, and would be inconsistent with the unofficial character
of United States relations with the people on Taiwan since January 1,
1979.
This section as approved by the Committee authorizes and requests,
but does not direct, the President to extend to the instrumentality
established by the people on Taiwan, and, as appropriate, to the
members thereof, privileges and immunities comparable to those
provided to missions of foreign countries, upon the condition that
similar privileges and immunities are extended on a reciprocal basis
to the American Institute in Taiwan.
This section as originally drafted was amended in two ways by
proposals of Senator Stone. The Committee approved his suggestions
that the words "as appropriate" be inserted before "the members
thereof," and that the words "comparable to those provided by mis-
sions of foreign countries recognized by the United States" replace
the words "subject to corresponding conditions and obligations which
are necessary for the-effective performance of their functions." Senator
Stone indicated that he believed that the first change clarified the
amendment by indicating that not all members of the instrumentality
should be accorded such privileges and immunities as were granted,
and that the second change broadened the privileges and immunities
that the President could be expected to grant to the instrumentality.
At the request of the State Department, Senator Stone agreed to drop
the words "recognized by the United States" from his second proposed
change.
Senator Stone asked the State Department to specify which of
seven categories of privileges and immunities normally given to
diplomats of foreign nations would be extended to the instrumentality
established by the people on Taiwan. The State Department responded
that the instrumentality would enjoy the following five privileges and
immunities fully: (1) the privilege of a secure pouch; (2) the right to
send and receive coded messages; (3) customs courtesies, involving
such matters as freedom from customs inspections and duties; (4)
tax exemption on income earned by the instrumentality and on the
official income of the appropriate personnel of the instrumentality,
but not for U.S. citizens or residents employed by it; and (5) invio-
lability of the premises of the instrumentality. As for the sixth
category normally accorded diplomats, the appropriate members of
the instrumentality would enjoy immunity from criminal prosecution
and civil liability for any acts committed in the performance of
their duties, but not for any acts they committed which were un-
related to their duties. The State Department said it did not plan
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to grant the seventh privilege, the use of diplomatic license plates, to
the members of the instrumentality because that appeared to be
incompatible with its unofficial status. The State Department pointed
out that the privileges and immunities it planned to grant the instru-
mentality are those derived from the International Organization and
Immunities Act, which the United States gives to international
organizations. The Committee also intends under this section that the
instrumentality and its members and employees will be exempt from
foreign agents registration requirements, and the State Department
confirms that this will be the case.
Thus, under the language of this section, the President could be
expected to grant full functional privileges and immunities to the
Taiwan instrumentality and its employees. With respect to the
premises and the organization itself, these are the same as the privileges
and immunities enjoyed by foreign missions. With respect to em-
ployees, the privileges and immunities would be complete for all
actions taken in the performance of their duties, but would not be
absolute as they are for diplomats.
Section 114.
This section was proposed and adopted unanimously as an amend-
ment to the Administration's original bill by Senators Church, Pell,
Glenn, Javits and Baker. Its purpose is to express the strong and
continuing interest of the United States in a peaceful solution to the
Taiwan issue. This is done through a unilateral statement of United
States policy objectives in subsection (a), which is supplemented by
subsection (b), which sets forth what the United States will do to
achieve the policy objectives set forth in subsection (a). The Commit-
tee made clear that each part of both subsections must be read and
interpreted in the context of all the other parts and of the entire
section. Thus subsection (b) (1), providing that the "United States
will assist the people on Taiwan to maintain a sufficient self-defense
capability through the provision of arms of a defensive character",
relates not only to the objective of subsection (a) (4), "to provide
the people on Taiwan with arms of a defensive character," but also
to the objective spelled out in subsection (a) (1), "to maintain exten-
sive, close, and friendly relations with the people on Taiwan."
Subsection (a)
The Committee discussed extensively the language in 114(a)(3)
in connection with an amendment offered to it by Senator Percy. He
proposed that the words "of grave concern to the" be replaced by the
words "to the security interests of" on the ground that this would pro-
vide a stronger and clearer statement of United States policy toward
Taiwan. This view received support from some Members of the Com-
mittee. Other Members argued that the phrase "of grave concern
to the" United States adequately conveyed the importance that the
United States should attach to a peaceful settlement of the Taiwan
issue, especially when taken together with the other provisions of the
section, while at the same time allowing the United States to respond
in a flexible manner to any effort to resolve the Taiwan issue by other
than peaceful means. The amendment proposed by Senator Percy
was defeated by a vote of 10-4. Senator Percy had earlier reserved
the right to discuss his amendment on the floor of the Senate and
possibly to offer it there if it were rejected by the Committee.
A
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Subsection (b)
The Committee made clear in its discussion of subsection (b) (1)
that the United States was concerned with external threats or coercion
rather than with internal challenges to the security or to the social
tter
th
e ma
or economic system of the people on Taiwan. In discussing
of possible coercion, the Committee indicated that the United States
would maintain its capacity to resist not only direct force but indirect
force as well, such as a blockade or a boycott, that would jeopardize
the social or economic system of the people on Taiwan. During the
hearings, several Senators emphasized the applicability of the anti-
boycott provisions of the Export Administration Act to the China-
Taiwan context. Those provisions make illegal compliance by U.S.
citizens or corporations with economic boycotts against Taiwan.
The Committee also stressed the importance of assisting the people
on Taiwan to maintain a sufficient defense capability through the pro-
vision of arms of a defensive character. The Committee indicated, in
discussing (b) (2), that in assisting the people on Taiwan to maintain
a sufficient self-defense capability, the United States was not limited
solely to the supply of arms, but could assist in other appropriate
ways. The Committee also indicated that the United States retained
the right to determine what was "sufficient".
Paragraph (3) of subsection (b) directs the President to inform the
Congress promptly of any threat to the security of Taiwan and any
danger to the interests of the United States arising from such a threat.
The language comprehends threats both military and non-military in
nature, deriving from any source external to Taiwan. It should not
be construed to derogate from the provisions of section 3 of the War
Powers Resolution, which requires the President in every possible
instance to consult with the Congress before introducing the United
States Armed Forces into hostilities or into situations where imminent
involvement in hostilities is clearly indicated by the circumstances.
Paragraph (4) of subsection (b), added by the Committee as pro-
posed by Senator Glenn and modified by Senator Javits, requires that
any action taken by the United States to meet any danger described
in paragraph (3) comply with all applicable constitutional and statu-
tory requirements.
No mutual security treaty to which the United States currently is
a party authorizes the President to introduce the armed forces into
hostilities or requires the United States to do so, automatically, if
another party to any such treaty is attacked. Each of the treaties
provides that it will be carried out by the United States in accordance
with its "constitutional processes" or contains other language to make
clear that the United States' commitment is a qualified one-that the
distribution of power within the United States Government is pre-
cisely what it would be in the absence of the treaty, and that the
United States reserves the right to determine for itself what military
action, if any, is appropriate.
Thus, an "absolute" security guarantee for Taiwan would go further
than any current mutual defense treaty to which the United States is
a party. In addition, it is questionable whether, as a matter of consti-
tutional law, an absolute security guarantee can be made-either by
treaty or by statute. Because the Constitution vests the power to
declare war in the Congress rather than in the President, it is doubtful
whether the authority to make that decision can constitutionally be
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delegated to the President-i.e., whether he can be empowered pro-
spectively to determine under what conditions the United States
armed forces will be introduced into hostilities. Under the separation
of powers doctrine, one branch of the government cannot, even will-
ingly, transfer to another branch powers and responsibilities assigned
to it by the Constitution.
Turning to the provision at hand, paragraph (4) of subsection (b),
the Committee notes that the United States is not required or com-
mitted, under this provision, to take any action. The United States,
and only the United States, will determine the existence of any danger
described in paragraph (3). If the United States determines that
such a danger exists, it and only it will determine what response, if
any, is appropriate. While action taken by the United States may
be military-provided that that action is in compliance with the
War Powers Resolution-it may also be diplomatic, economic, or of
some other form-and, indeed, it may be the judgment of the United
States that the most effective action, from the standpoint of the
United States or the people on Taiwan or both, is no action. This
broad discretion is reserved for the United States through incorpo-
ration of the reference to the United States' "constitutional pro-
cesses"; by requiting that any action taken by the United States
be in accordance therewith, this provision makes clear that no auto-
matic response of any kind is required, since those processes may
result in a decision to do nothing. The net effect is thus to make clear
that the allocation of war-making power within the United States
Government is precisely what it would have been in the absence
of the provision-that the President has no greater authority to
introduce the armed forces into hostilities than he would have had
had the provision not been enacted.
This conclusion is bolstered by section 8(a) (1) of the War Powers
Resolution, which provides as follows:
Sec. 8. (a) Authority to introduce United States Armed
Forces into hostilities or into situations wherein involvement
in hostilities is clearly indicated by the circumstances shall
not be inferred-
(1) from any provision of law (whether or not in
effect before the date of the enactment of this joint
resolution), including any provision contained in any
appropriation Act, unless such provision specifically
authorizes the introduction of United States Armed
Forces into hostilities or into such situations and states
that it is intended to constitute specific statutory author-
ization within the meaning of this joint resolution.... .
The consequence of this provision is two-fold: (1) it precludes the
President from inferring authority from paragraph (4) to introduce
the armed forces into hostilities or into situations wherein involvement
in hostilities is clearly indicated by the circumstances; and (2) it rein-
forces the non-automaticity of the United States' undertakings, since,
unless the President were authorized to introduce the armed forces
into hostilities, the United States could not be considered to have
undertaken to respond, automatically, in the event of danger.
While the Committee inserted the reference to "procedures estab-
lished by law" primarily to make clear that the War Powers Resolu-
tion is fully applicable to all actions taken in connection with this
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section, it would note that the reference is not legally necessary since
all provisions of the Resolution are applicable under their own terms.
Accordingly, the inclusion of this reference in this bill should not be
construed, in the case of some other, similar statute enacted in the
future, as suggesting in any way that the absence of any such reference
in that statute has rendered the Resolution inapplicable. The provi-
sions of the Resolution will continue to apply ex proprio vigore.
Section 201.
This section authorizes departments and agencies to provide sup-
port for the Institute's internal operations through transfers of prop-
erty and the performance of functions and services. This will provide
access by the Institute to existing Federal resources in order to reduce
costs and increase the efficiency of operations. It is expected that such
support usually will be provided on a reimbursable basis.
The Committee regarded this section as legally required since it
authorizes departments and agencies of the United States Government
to transfer property to, and perform support functions and services
for the operations of, a private organization.
Section 202.
This section authorizes departments and agencies to acquire and
accept services from the Institute. Although the initial arrangements
with the Institute are planned to be on a conventional contractual basis
this section in the Administration's bill authorized the President to
disregard normally applicable laws and regulations, such as limitations
in procurement regulations, in order to permit the development of
appropriate arrangements in these unique circumstances.
Section 202 was amended to restrict the authorization given the
U.S. Government and the President to suspend the laws and regula-
tions normally applicable when acquiring services from the Institute.
As amended, this authority will be applicable only to those restrictions
specified by the President in an Executive order which he has deter-
mined should not be applied in furtherance of the act. The amendment
is based on section 633 of the Foreign Assistance Act, which is imple-
mented by Executive order 11223. That section provides as follows :
SEC. 633. Waivers of Certain Laws.-(a) Whenever the
President determines it to be in furtherance of the purposes
of this Act, the functions authorized under this Act, may be
performed without regard to such provisions of law (other
than the Renegotiation Act of 1951, as amended (50 U.S.C.
App. 1211 et seq.)), regulating the making, performance,
amendment, or modification of contracts and the expenditure
of funds of the United States Government as the President
may specify.
The basic purpose of this amendment was to give the President and
the U.S. Government flexibility in dealing with the Institute in view
of the unique nature of this endeavor, but to limit such flexibility in a
manner similar to that specified in section 633 of the Foreign Assistance
Act.
The Committee regarded this section as legally required because of
the authority granted any department or agency to acquire and accept
services from the Institute, if the President so directed, without
regard to the laws and regulations normally applicable.
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Section 203.
This section authorizes the transfer to the Institute of alien em-
ployees of the U.S. Government and preserves their benefits under the
local compensation plan applicable in Taiwan under section 444 of the
Foreign Service Act of 1946, as amended (22 U.S.C. 889). It is expected
that the Institute will adopt this plan for its alien employees. This
section also authorizes the continued participation in U.S. Govern-
ment retirement systems by those transferred alien employees who
have heretofore been covered by such systems, subject to continued
payment of contributions and deductions to the appropriate fund.
The Committee regarded this section as legally necessary because
alien employees of the U.S. Government would not otherwise be eli-
gible to retain their allowances, benefits and rights after ceasing to be
employed by the U.S. Government, nor would they be allowed to
continue to participate in U.S. Government programs involving retire-
ment or other benefits after ceasing to be employed by the U.S.
Government.
Section 204.
This section, consisting of four subsections, provides authority for
the separation of Federal employees for employment with the Insti-
tute, preservation of their Federal benefits, and reemployment in
the Federal service in accordance with existing law. As a.result of
technical amendments added by the Committee. the section does not
provide any additional rights for Government personnel. Rather, it
provides for the continuation of existing rights such personnel had
prior to entry on duty with the Institute. For example, an employee
reinstated under this section would have no greater or lesser tenure
than he or she previously had in the Federal service. It is contemplated
that such separated Federal personnel will make up the staff of the
Institute.
Subsection (a) provides that a Federal officer or employee who
accepts employment with the Institute may be separated from his or
her agency.
Subsection (b) provides that any officer or employee so separated
is eligible upon termination of employment with the Institute, to be
reemployed or reinstated in the Federal service. Normally, reemploy-
ment for an employee in the classified service will be to the position
from which the employee was separated. However, the President is
authorized to determine the appropriateness of the position for reem-
ployment. It is anticipated that, especially in personnel systems based
on the rank in person concept, reemployment could be in a higher class.
Subsection (c) provides for continuity of Federal benefits during
service with. the Institute, including compensation for job-related
death, illness, or injury, health and life insurance, leave, and retire-
ment. Contributions, where required, must be paid in order to preserve
these benefits. This section also provides that death or retirement by
a Federal employee separated under subsection (a) while employed
by the Institute shall be considered a death in or retirement from the
Federal service. The provision for continued eligibility to participate
in Federal benefit programs is intended to permit the affected individ-
uals to retain the opportunities they.would have as Federal employees
to elect changes in those benefits, as in the case of "open season" for
changes in health insurance coverage.
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35
Subsection (d) authorizes the extension of the benefits of title II
of the bill to Federal employees serving with the Institute on leave
without pay prior to the bill's enactment.
Section 205.
The following exchange of correspondence took place with respect
to the language proposed to be inserted by the Committee in lieu of
the Administration's section 205:
U.S. SENATE,
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C., January 30,1979.
Hon. RUSSELL LONG,
Chairman, Committee on Finance,
U.S. Senate,
Washington, D.C.
DEAR MR. CHAIRMAN: As you may be aware, the executive branch
recently transmitted a copy of its proposed omnibus legislation
providing for the maintenance of commercial, cultural, and other
relations with the people of Taiwan.
I am enclosing a copy of that bill and would call to your attention
section 205. That section raises certain questions on which I believe
it would be extremely useful to have your Committee's views. I will
bring your comments to the attention of the Committee on Foreign
Relations during its markup of this legislation on February 7.
I appreciate your assistance and cooperation on this matter.
With best wishes,
Sincerely,
FRANK CHURCH,
Chairman.
U.S. SENATE,
COMMITTEE ON FINANCE,
Washington, D.C., February 5, 1979.
Hon. FRANK CHURCH,
Chairman, Committee on Foreign Relations,
U.S. Senate,
Washington, D.C.
DEAR MR. CHAIRMAN: Thank you for your letter of January 30,
1979, relating to the Taiwan legislation. The Finance Committee
does not plan to meet again until February 27, 1979, and so I will
not have an opportunity to bring up the matter you raise with the
Committee.
However, I am advised by the Committee staff that there is a
defect in the draft submitted by the Administration in section 205,
relating to the tax status of the American Institute in Taiwan. This
defect is corrected in the draft language I am enclosing.
With every good wish, I am
Sincerely,
RUSSELL LONG,
Chairman.
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U.S. SENATE,
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C., February 26, 1979.
Hon. RUSSELL B. LONG,
Chairman, Committee on Finance,
U.S. Senate,
Washington, D.C.
DEAR MR. CHAIRMAN: Thank you for your letter of February 5 in
response to my January 30 letter concerning the Taiwan legislation.
I appreciate the work of your Committee staff in revising the legis-
lation and in submitting draft language correcting the defect found
in S. 245's original language. The draft language your staff submitted
has been included as an amendment to the bill which the Committee
ordered reported on February 22.
Thank you very much for your assistance on this complex matter.
With best wishes,
Sincerely,
FRANK CHURCH, Chairman.
The Committee's analysis of the proposed amendment (prepared
with the cooperation of the Finance Committee) is as follows:
The Institute and its employees.-This section provides that the
Institute, its property, and its income are generally exempt from all
taxation now or hereafter imposed by the United States or by any
State or local taxing authority of the United States. The only excep-
tion to this rule is for Social Security taxes of certain Institute em-
ployees, as discussed below. In addition, contributions to or for the
use of the Institute will qualify (within the limits otherwise applicable)
as deductions for Federal income, estate and gift tax purposes.
Employees of the Institute will be treated for Federal tax purposes
in the same manner as employees of the Federal Government are
treated. Thus, employees of the Institute will be exempt from tax on
overseas allowances and benefits they receive which are equivalent to
the tax-exempt overseas allowances and benefits received by civilian
officers and employees of the United States Government (sec. 912 of
.the Internal Revenue Code). As a corollary, compensation paid to
employees by the Institute will not be "earned income" qualifying
them for the deduction or exclusion provided to individuals working
in the private sector (secs. 911 and 913 of the Code).
As is the case with most Federal employees, the Institute and its
employees generally will not be subject to Social Security (FICA)
taxes and service for the Institute generally will not earn its employ-
ees quarters of coverage toward qualification for Social Security bene-
fits. However, under section 204(c) of the bill, employees of the
Institute who have been separated from Federal service are entitled
to continue to participate in any benefit program in which they were
covered prior to employment by the Institute. This includes the Social
Security program. Thus, in the event that an Institute employee was
covered by Social Security in his Federal employment immediately
prior to separation, he or she will continue to be covered while em-
ployed by the Institute. In that situation, both the Institute and the
employee will be subject to FICA taxes on wages paid by the Insti-
tute, and service for the Institute will be covered employment under
title II of the Social Security Act. Former Institute employees may
generally use their Federal service toward qualification for coverage
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under State unemployment compensation programs. This coverage
is pursuant to the right of Institute employees separated from Federal
service to continue to participate in two benefit programs, Unemploy-
ment Compensation for Federal Civilian Employees and Unemploy-
ment Compensation for Ex-Servicemen. The Institute will not be
subject to taxation under the Federal Unemployment Tax Act
(FUTA).2
The governing authority of Taiwan and its employees.-Section 102
of the bill provides that whenever any law, regulation, or order, of the
United States refers or relates to a foreign country, nation, state
government, or similar entity, the term is to include, and the law,
regulation, or order is to apply with respect to, the "people on Tai-
wan." Section 205(d) provides that, for tax purposes, the term "people
on Taiwan" means the governing authority on Taiwan and its agen-
cies, instrumentalities, and political subdivisions; as contrasted with
the definition provided in section 101(b) for other purposes, the term
does not refer to the people governed by that authority. Thus, any
U.S. source income of the governing authority on Taiwan would be
exempt from Federal income taxation to the same extent as the in-
come of a foreign government (sec. 892 of the Code). (The exemption
from tax for foreign governments would not apply to the people gov-
erned by that governing authority.) Similarly, employees of the
governing authority on Taiwan would be exempt from Federal income
taxation to the same extent as employees of a foreign government
(sec. 893).
Income from Taiwan.-Because the governing authority on Taiwan
is treated as a foreign country, taxes imposed by that governing
authority will be treated as taxes imposed by a foreign country. Thus,
Taiwanese real property taxes would generally be deductible (sec.
164 of the Code) and income taxes would be deductible or creditable
(sec. 33 of the Code) if the other requirements of the Code are met.
Section 205(d) of the bill also provides that when the term foreign
country is used in a geographical sense for Federal tax purposes, the
term means the islands of Taiwan and the Pescadores. Thus, for exam-
ple, residence or presence in these islands would be treated as residence
or presence in a "foreign country" to determine eligibility for the deduc-
tion for excess foreign living costs (sec. 913 of the Code).
Institute not an instrumentality of the U.S.-This section also pro-
vides explicitly that the Institute is not an agency or instrumentality
of the United States, its employees are not employees of the United
States, and, in representing the Institute, its employees are exempt
from section 207 of Title 18, United States Code (relating to the dis-
qualification of former government employees from certain repre-
sentational activities).
Section 206.
This section provides that employees of the American Institute in
"Taiwan may be authorized by the Institute to perform specific acts
that are necessary for business purposes and in connection with deaths
abroad. The Committee regarded this section as legally necessary so
that such acts will be valid in the United States.
Because the Institute is not an instrumentality of the United States, sections 3112 and
3308 of the Internal Revenue Code, relating to the requirements for exemption from FICA
and FUTA taxes, do not apply.
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38
TITLE III
Section 501.
This section authorizes appropriations to the Secretary of State of
funds necessary to carry out the bill. It is contemplated that the funds
necessary for the operation and support of the Institute on behalf of all
departments and agencies will be consolidated into a single account.
However, this section preserves the continued ability of departments
and agencies to utilize the Institute for the performance of functions
involving the use of funds appropriated to the department or agency
concerned. Funds appropriated under this section could be made
available until expended.
The Committee adopted an amendment to this section, offered
by the Chairman, which made the authorization effective for fiscal
year 1980 only. The effect is to eliminate the permanent authorization
proposed by the Administration and substitute, in effect, a requirement
for annual authorizations. The Committee expects that annual review
of budgetary matters involving the Institute will aid it in carrying out
its oversight responsibilities more effectively.
Section 302.
This section authorizes the Secretary of State to use the funds made
available under the bill to further the maintenance of commercial,
cultural, and other relations with the people on Taiwan on an un-
official basis. In particular, it authorizes the Secretary to provide these
funds to the Institute for this purpose. The use of appropriated funds
by the Institute will be governed by an appropriate contractual
arrangement with the Secretary of State, which will contain limitations
on expenses, such as limitations on the compensation of Institute
employees. The Institute will be required under this arrangement to
adhere generally to the limitations applicable to Federal employees.
The Committee regards this section as legally necessary because it
authorizes the use of U.S. Government funds made available under the
bill to further United States relations with the people on Taiwan by
providing such funds to a private organization.
Section 303.
This section requires that departments and agencies assure access
by the Comptroller General to the Institute's books and records, and
that they provide the Comptroller General the opportunity to audit
the Institute's operations.
Section 304.
This section authorizes the President to prescribe appropriate rules
.and regulations to carry out the bill's purposes. The section was
amended by the Committee ensure that all rules and regulations,
public or classified, will be transmitted promptly to the Committee.
The Committee regarded the amendment as legally necessary because
it imposes a specific reporting requirement on the Executive Branch.
Section 401.
This section, like the amendment offered by the Chairman to section
301, is directed at ensuring more effective congressional oversight of the
Institute's activities. Subsections (a) and (b) require the ?ecretary
of State to transmit to the Congress agreements between the Institute
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39
and the Taiwan instrumentality (or the Taiwan authorities) as though
those agreements were subject to the Case Act. It is the Committee's
intent that trivial and inconsequential agreements not be transmitted,
just as they are not under the Case Act. These subsections also require
the reporting of agreements between the Institute and U.S. Govern-
ment agencies even though these are not of the character of inter-
national agreements.
Subsection (c) ensures that procedures parallel to all currently
applicable notification, review, and approval procedures will apply
to agreements and other transactions by or through the Institute.
Those include procedures for international agreements, such as those
under section 123 of the Atomic Energy Act, as well as procedures
applicable to other transactions, such as those set forth in sections 3 (d)
and 36(b) of the Arms Export Control Act.
Section 402.
This section, which was an amendment proposed by Senator Stone,
was adopted by the Committee so that it would be kept informed on a
regular basis of developments in economic relations between the United
States and the people on Taiwan, especially as regards any interference
with normal commercial relations. The Committee's decision reflected
its concern not only over such possible interference with normal com-
mercial relations but also the fact that economic relations between the
United States and the people on Taiwan will be conducted in a unique
manner. The Congress may need to consider further legislation on this
matter if unforeseen problems arise during the period that new methods
and procedures for conducting such economic relations are established.
The Committee regarded this section as legally necessary because it
imposes a specific reporting requirement on the Secretary of State.
In response to concerns raised by Committee members regarding the
accountability of trustees of the Institute, the Committee received
the following letter from Secretary Vance:
THE SECRETARY OF STATE,
Washington, February 23, 1979.
Hon. FRANK CHURCH,
Chairman, Committee on Foreign Relations,
U.S. Senate.
DEAR MR. CHAIRMAN: As you know, under the articles of incorpora-
tion and bylaws of the American Institute in Taiwan, the Secretary of
State appoints and removes the trustees of the Institute.
Because the Institute is not an agency or instrumentality of the
Government, and because its trustees are not officers of the United
States, it would not be appropriate for the Senate to advise and consent
to the appointment of trustees or officers. However, the names of
prospective trustees and officers will be forwarded to the Foreign Rela-
tions Committee. If the Committee expresses reservations about a
prospective trustee or officer, we will undertake to discuss and resolve
the matter fully with the Committee before proceeding.
This arrangement will enable the Institute to retain its character as a
private corporation and enable the Senate to participate in the selec-
tion of trustees in an appropriate manner.
Sincerely,
CYRUS VANCE.
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Section 501. TITLE V
This section was adopted by the Committee as a substitute for
section 304 in the Administration's draft bill. That section would have
provided that the Congress "approved" and "confirmed" certain ac-
tions taken by the President following recognition of the People's
Republic of China on January 1, 1979; it would, in effect, have placed
the Congress on record as agreeing that the President's directive of
December 30, 1978, was within the scope of his constitutional
authority. That directive was as follows:
Memorandum of December 30, 1978
Relations With the People on Taiwan
Memorandum for All Departments and Agencies
THE WHITE HOUSE,
Washington, December 30, 1978.
As President of the United States, I have constitutional responsibility
for the conduct of the foreign relations of the nation. The United
,States has announced that on January 1, 1979, it is recognizing the
government of the People's Republic of China as the sole legal gov-
ernment of China and is terminating diplomatic relations with the
Republic of China. The United States has also stated that, in the
future, the American people will maintain commercial, cultural and
other rel
ti
h
i
h
a
ons w
t
t
e people of Taiwan without official government
representation and without diplomatic relations. I am issuing this
d
memoran
um to facilitate maintaining those relations pending the
enactment of legislation on the subject.
I therefore declare and direct that:
(A) Departments and agencies currently having authority to con-
duct or carry out programs, transactions, or other relations with or
relating to Taiwan are directed to conduct and carry out those pro-
grams, transactions, and relations beginning January 1, 1979, in
accordance with such authority and, as appropriate, through the
instrumentality referred to in paragraph D below.
(B) Existing international agreements and arrangements in force
between the United States and Taiwan shall continue in force and shall
be performed and enforced by departments and agencies beginning
January 1, 1979, in accordance with their terms and, as appropriate,
through that instrumentality.
(C) In order to effectuate all of the provisions of this memorandum,
whenever any law, regulation, or order of the United States refers to
a foreign country, nation, state, government, or similar entity, depart-
ments and agencies shall construe those terms and apply those laws,
regulations, or orders to include Taiwan.
(D) In conducting and carrying out programs, transactions, and
other relations with the people on Taiwan, interests of the people of
the United States will be represented as appropriate by an unofficial
instrumentality in corporate form, to be identified shortly.
(E) The above directives shall apply to and be carried out by all
departments and agencies, except as I may otherwise determine.
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I shall submit to the Congress a request for legislation relative to
nongovernmental relationships between the American people and the
people on Taiwan.
This memorandum shall be published in the Federal Register.
JIMMY CARTER.
[FR Doc. 79-479 Filed 1-2-79; 4:26 pm]
The Committee doubts that the power to issue this directive is
within the authority conferred upon the President by the Constitu-
tion. While it is true that the President has some "constitutional
responsibility for the conduct of the foreign relations of the nation,"
it is not true that he possesses all powers granted by the Constitution
to do so; his exclusive authority to recognize and to negotiate with
foreign governments has never been construed as having in any way
narrowed or diminished the many powers of the Congress over foreign
affairs matters, including the power to regulate commerce with foreign
nations (art. I, sec. 8, cl. 3), to spend for the general welfare (art. I,
sec. 8, cl. 1), and to control Federal expenditures (art. 1, sec. 9, cl. 7).
It is these powers upon which many of the provisions of this bill are
based, and it is the Committee's judgment that the enactment of these
provisions is legally required-not simply politically desirable, but
legally required-if the President is to be enabled to continue to
conduct the myriad programs concerning Taiwan. The reason is that
the statutes authorizing such programs invariably authorize the
President to carry out those programs only with respect to foreign
countries, nations, or states, and the President, on December 19, stated
that, as of January 1, 1979, "Taiwan will no longer be a nation in the
view of our own country."
The Committee has drafted this bill on the premise that the issue of
Taiwan's international legal status need not be addressed herein,
inasmuch as Taiwan can be treated as a country for domestic juridical
purposes whatever its international legal identify. However, the
Committee does not believe that the Congress, in enacting the various
program authorities applicable to foreign nations, intended that the
President be empowered to carry out those programs with respect to
an entity that he does not view as a nation. The question is, in sum,
one of Congressional constitutional prerogatives: can the President
unilaterally redefine statutory terms and decree a statute to be appli-
cable where he by his own statements has rendered it inapplicable? The
Committee does not believe so.
Accordingly, the Committee has, on the motion of Senator Javits,
stricken section 304 as proposed by the Administration and, in lieu
thereof, made retroactive the effective date of the bill to January 1,
1979. While the juridical effect will be identical-the legality of U.S.
relations with Taiwan during the statutory hiatus cannot be ques-
tioned-a retroactive effective date will make clear that the Congress
does not concur in the President's claim of power and that his action
does not serve as a precedent for arrogating to himself the authority
to conduct programs which can be authorized only by statute.
Section 502.
This section, a standard "separability clause", was offered by
Senator Javits. It is self-explanatory.
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42
F. COST ESTIMATE
Section 252(a) (1) of the Legislative Reorganization Act of 1970
requires that Committees' reports on bills and joint resolutions con-
tain an estimate of the costs of carrying out such legislation in the
current year and in each of the five years that follow. This estimate is
set forth in part 5 of the report of the Congressional Budget Office,
set forth below :
CONGRESSIONAL BUDGET OFFICE,
U.S. CONGRESS,
Washington, D.C., February 27, 1979.
Hon. FRANK CHURCH,
Chairman, Committee on Foreign Relations, U.S. Senate, Room 4229,
Dirksen Senate Office Building, Washington, D.C.
DEAR MR. CHAIRMAN: Pursuant to section 403 of the Congressional
Budget Act of 1974, the Congressional Budget Office has prepared the
attached cost estimate for S. 245, a bill to promote the foreign policy
of the United States by authorizing the maintenance of commercial,
cultural, and other relations with the people on Taiwan on an un-
official basis, and for other purposes.
Should the Committee so desire, we would be pleased to provide
further detail on the attached cost estimate.
ROBERT A. LEVINE,
(For Alice M. Rivlin, Director).
CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
FEBRUARY 27, 1979.
1. Bill number : S. 245.
2. Bill title: A bill to promote the foreign policy of the United States
by authorizing the maintenance of commercial, cultural, and other
relations with the people on Taiwan on an unofficial basis, and for
other purposes.
3. Bill status: As ordered' reported by the Senate Foreign Relations
Committee on February 23, 1979.
4. Bill purpose: This legislation outlines the policy of the United
States vis-a-vis Taiwan and authorizes the United States to maintain
commercial, cultural and other relations with the people on Taiwan
on an unofficial basis. It further describes the manner by which activ-
ities of the U.S. Government shall be carried out by or through the
American Institute on Taiwan. Specifically, the bill:
Authorizes any department or agency of the U.S. Government:
1. To sell, loan, or lease properties and to provide administrative
and technical support functions and services to the Institute;
2. To acquire and accept services from the Institute;
3. To transfer alien personnel employed in Taiwan and their
accrued allowances, benefits and rights to the Institute;
4. To separate from government service for a specified period
any employee who accepts employment with the Institute;
Authorizes the President:
1. To extend privileges and immunities comparable to those
provided to missions of foreign countries to the instrumentality
established by the people on Taiwan;
2. To prescribe such rules and regulations as he may deem
appropriate to carry out the purposes of this Act;
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Authorizes to be appropriated to the Secretary of State for fiscal
year 1980 such funds as may be necessary to carry out the purposes
of this act; and,
Authorizes the Secretary of State to use funds made available to
carry out this act to further the maintenance of commercial, cultural,
and other relations with the people on Taiwan on an unofficial basis.
5. Cost estimate :
Budget function 150:
Authorization:
1980----------------------------------------------------
$5,065
1981----------------------------------------------------
0
1982----------------------------------------------------
0
1983----------------------------------------------------
0
1984----------------------------------------------------
0
Estimated outlays:
1980----------------------------------------------------
3,913
1981----------------------------------------------------
649
1982----------------------------------------------------
309
1983----------------------------------------------------
52
1984----------------------------------------------------
32
6. Basis for estimate: For fiscal year 1979, this estimate assumes
that the cost of the American Institute of Taiwan will be met by the
reprograming of amounts which were previously appropriated to
cover operating expenses of the U.S. Embassy in Taiwan for fiscal
year 1979. Assuming that the Institute begins operations on March 1,
1979, the amount of funds requiring reprograming from the State
Department and other agencies is approximately $3 million. The
enactment of this bill will have no net budget impact in fiscal year
1979.
The fiscal year 1980 estimate is the authorization level requested
in the President's budget for each U.S. government department and/or
agency which currently plans to operate through the American In-
stitute of Taiwan in fiscal year 1980. Since submission of the budget
request, some agencies have decided to transfer their activities out of
Taiwan. No estimate was included in the authorization level for these
agencies.
When these activities were funded on a reimbursable basis through
the U.S. Embassy in Taiwan, they were authorized in separate Acts
and fell under separate budget functions. This bill authorizes aggregate
Institute activities.
Because the sections dealing with employee benefits simply restate
existing law and provide no new benefits, there is no net budget cost
associated with the employee sections. The estimate assumes full
appropriation of the authorization estimate. Because the size and
nature of the Institute have not yet been fully determined, this
estimate is subject to considerable uncertainty.
Costs in 1980 were estimated by applying historical outlay rates to
the amounts assumed to be appropriated.
7. Estimate comparison: None.
8. Previous CBO Estimate : None.
9. Estimate prepared by: Rita J. Seymour (225-4844).
10. Estimate approved by:
C. G. NUCKOLS,
(For James L. Blum,
Assistant Director for Budget Analysis).
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44
G. EVALUATION OF REGULATORY IMPACT
In accordance with Rule XXIX of the Standing Rules of the
Senate, the Committee has evaluated the regulatory impact of the
bill. Because the bill preserves the substance of commercial, cultural
and other relations with the people on Taiwan through continued
application of laws relating to foreign countries, no substantive
regulatory activity should result from the bill's enactment. Pro-
cedural rules concerning the relationships between Government
agencies and the American Institute in Taiwan are foreseen.
However, since this bill affects the entire range of unofficial pro-
grams, transactions and relations with the people on Taiwan, and
because implementing procedures for each of the myriad affected
activities have not yet been devised, it is impracticable to estimate
the numbers and identify the categories of individuals that would be
affected. Nor can the economic impact or amount of additional paper-
work be determined. It is clear that the situation that would exist
if the bill were not enacted would have a substantial adverse economic
impact that the bill will avoid. The bill will not create any impact on
the privacy of individuals.
H. CHANGES IN EXISTING LAW
In compliance with paragraph 4 of Rule XXIX of the Standing
Rules of the Senate, the Committee reports that no changes in
existing law are made by this bill.
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I. ADDITIONAL VIEWS OF SENATOR CLAIBORNE PELL
The language of the last sentence of section 107 of this bill is the
result of a compromise reached by the Committee on the original text
which I introduced during the Committee markup. My original pro-
posal read as follows:
In carrying out its activities, the Institute shall take all
appropriate steps to strengthen and expand the ties between
the people of the United States and those individuals and en-
tities on Taiwan that are representative of the majority of the
people on Taiwan.
In proposing this amendment, it was my intention to underscore
the need for the United States to show its concern for the rights of
the native Taiwanese who constitute 85 percent of Taiwan's popula-
tion, but who share in little of the island's political power. The roots
of the Taiwanese majority go back some 300 years, and the native
Taiwanese always have considered themselves to be separate from
mainland China. The regime of the mainlanders who arrived only
after World War II has been characterized by severe repression of the
human rights of native Taiwanese, although there has been some
S improvement in recent years. Tensions between the native Tai-
wanese and the Nationalist government have, not surprisingly, been
high as the Taiwanese sought to have a greater say in their own
government.
In my view, the United States should have been faithful to its
adherence to the principle of self-determination by pushing for an
independent Taiwan after World War II. That did not happen; but
I believe the Senate should, in this bill, give some recognition to
the plight of the Taiwanese majority and the need for the new Insti-
tute to concern itself with the human rights of this majority. The
recent events in Iran have, I hope, made it clear that the United
States ought not be seen as the underwriter of a particular regime.
In promoting human rights on Taiwan, it is my expectation that
the new Institute will apply all of the elements, including the one
relating to political rights, that Secretary of State Vance set forth
in his Athens, Georgia, speech of April 30,'1977.
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ADDITIONAL VIEWS OF SENATOR JESSE HELMS OF
NORTH CAROLINA
The concept of the American Institute in Taiwan contains at its
heart a fatal flaw which cannot be eradicated. That flaw is, in turn,
a reflection of the calculated ambivalence of the New China Policy-
an ambivalence which can be explained only by fundamental intel-
lectual dishonesty.
The Institute is an attempt to yoke together two logically contra-
dictory propositions under a semantic gloss in order to avoid the
inherent consequences of our actions. The New China Policy seeks to
deny the juridical existence of the sovereignty exercised by the govern-
ment of the Republic of China, while at the same time reaping benefits
which can be conferred only by recognizing that sovereignty. More-
over, in a move which is even more reprehensible, it pretends to pre-
serve those benefits at the same time that it contemplates the eventual
extinction of the liberty and independence which is the moral basis of
human dignity. The denial of sovereignty is the denial of the inherent
right of self-defense, and is itself a form of immoral coercion.
Seduced by the glittering phantasm of personal triumph, the archi-
tects of the New China Policy rashly promised the rulers of Peking
that our support of the sovereignty of the Republic of China would
be withdrawn. Having clone so, the same architects want to evade,
before the American people, the moral responsibility of handing over
18 million people to "peaceful reunification" with the mainland. It is
as though Herod tried to pretend to himself that the head he was
offering to the insatiable Salome was made of paper.
Unfortunately, the real head of Taiwan is already on the platter.
The Institute is a device to distract the people on Taiwan from that
soreness around the neck, and to convince them that everything is
just the same. The Committee struggled manfully to resolve the
logical inconsistencies of the Administration bill with the brutal
reality of the deed. Although many changes were made on a practical
level to warp the structure of the Institute back to the demands of the
real world, the fatal flaw remains.
That fatal flaw goes back to the announcement of President Carter
on December 15, 1978, when he said:
The Government of the United States of America acknowl-
edges the Chinese position that there is but one China and
Taiwan is part of China.
The key word in that sentence is "acknowledges." The use of the
word "acknowledges" has been described by Administration spokes-
men as stopping short of "accepts." In other words, the United
States takes note that the government of the People's Republic of
China claims to have sovereignty over Tawian, but the United States
takes no position on whether or not the United States agrees with the
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47
claim of the PRC. The implication is that the United States draws
back, on the brink, of recognizing the PRC claim to sovereignty over
Taiwan and the territories actually administered by the government
of the Republic of China. The further implication, essential to the
concept of the Institute, is that the government of the Republic of
China retains some residuum of sovereignty, a de facto exercise of
sovereignty, if not de jure.
But is that residuum of sovereignty enough to support the operation
of the Institute?
By failing to take a position on the crucial issue, the logic of the
New China Policy collapses.
If the position of Peking is correct, that is to say, the position that
the United States "acknowledges," then Taiwan is juridically part of
China and the exercise of sovereignty by the ROC is a rebellion against
the legitimate authority of the PRC. If the position of Peking is cor-
rect, then the fact of that rebellion is a domestic matter, an internal
affair which Peking may resolve as it sees fit. Under international law,
Peking would have the perfect right to extinguish the rebellion either
by negotiation, or, should negotiations fail, by economic or military
pressures.
Moreover, if the position of Peking is correct, then the United States
has no right under international law to interfere in an internal affair
of the PRC. Under international law, the United States cannot have
a "people to people" relationship that is not conducted under the
authority of the central government of the PRC. We would have no
right to object to any economic or diplomatic pressures applied by
the PRC to induce "reunification." And most emphatically, we would
not have the right to supply weapons, or go to war, as President
Carter claims, to support the purported rebellion against the de lure
sovereign authority in Peking.
That this is Peking's view is borne out by the press conference of the
PRC Prime Minister, Hua Kuo-feng, in Peking on December 16. When
asked whether the United States would be permitted to continue pro
viding Taiwan with access to military equipment for defensive pur-
poses, he said :
During the negotiations the U.S. side mentioned that after
normalization it would continue to sell limited amounts of
arms to Taiwan for defensive purposes. We made it clear that
we resolutely would not agree to this. In all discussions the
Chinese side repeatedly made clear its position on this ques-
tion. We held that after the normalization continued sales of
arms to Taiwan by the United States would not conform to
the principles of normalization, would be detrimental to the
peaceful solution of the Taiwan issue and would exercise an
unfavorable influence on the peace and stability in the Asia
and Pacific regions. So our two sides had differences on this
point.
This attitude was further confirmed by Ambassador Leonard Wood-
cock, as quoted in an article in the Washington Post by Jay Mathews,
datelined Peking, January 1, 1979. The article said:
Woodcock said he is certain, however, that the Chinese will
continue to oppose such arms sales for the record. The first
time Washington agrees to a major sales of arms after the
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DOES THE UNITED STATES ACCEPT?
But suppose by the term "acknowledges" the United States merely
notes, but does not "accept" the PRC view that the PRC has de
jure sovereignty over Taiwan and the territories controlled by the
government of the ROC? In that case, then, the logic of the United
States position would permit the development of another sort of
relationship with the governing authorities on Taiwan. If the United
States does not accept the PRC claim to sovereignty over Taiwan,
then it is appropriate for the United States to continue a relationship
with the people on Taiwan, and with the governing authorities there.
It would be appropriate to continue our agreements, including cul-
tural, economic, and military relationships.
Moreover, if the United States does not accept the PRC claim to
sovereignty over Taiwan, then our attitude towards the PRC should
be entirely different. If the government of the Republic of China
retains even a residual de facto sovereignty over the territory it now
governs; then the PRC's refusal to foreswear the use of force as the
ultimate pressure to induce unification takes on another light entirely.
In that case, the ROC is indeed a "state," and the PRC's use of
force or the threat of force is a violation of international law and the
United Nations Charter. Despite the PRC's refusal to rule out the
threat of force, the ROC remains an independent state, with all the
privileges and immunities of an independent state. If the United
States does not "accept" the PRC view, then it is incumbent upon I
us to state categorically that we do not.
mutual security treaty with Taiwan expires in a year, Wood-
cock said, he expects the Chinese to make an official protest.
It is therefore highly significant that the Administration later
revealed that it had also promised Peking that the United States
would sell no defensive armament to Taiwan during 1979. In other
words, no arms would be sold during the final year remaining of the
Mutual Defense Treaty, a period during which treaty obligations
required the United States to defend Taiwan. Left indeterminant
was the question of whether we would sell arms after the end of the
abrogation period of the treaty. In short, the United States promised
that we would supply no arms during the period when we were
juridically obliged to supply arms; the only period that the United
States left open for the supply of arms to Taiwan was the period
which, in the Peking view, it would be illegal for the United States
to supply. arms under international law.
Clearly, then, the success of "normalization" depends upon both
the PRC and the United States exercising (restraint in fulfilling the
logic of their positions. If the United States insists on preserving the
independence and sovereignty of the ROC government (that is to
say, the people on Taiwan) through the supply of arms, then the
PRC must decline to insist upon the logic of its view of sovereignty.
If the PRC insists on the its view of the rights of sovereignty, then
the United States must refrain from fulfilling its promises to the people
on Taiwan. If the United States "acknowledges" the position of the
PRC, then sooner or later one side or the other must concede.
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Indeed, the Institute bill, as it emerges from Committee, makes a
straightforward case that the United States, or at least the Commit-
tee on Foreign Relations of the United States Senate does not accept
the PRC view. It should be noted that:
(1) In. section 101(b), the term "people on Taiwan" is defined as
including the governing authority on Taiwan recognized by the United
States prior to January 1, 1979, as the Republic of China;
(2) In section 102(a), the rights and obligations under the laws of
the United States of natural persons on Taiwan and the Pescadores
shall not be affected by the absence of diplomatic relations;
(3) In section 103, in the case of any action brought in any court
of the United States on behalf of or against the people on Taiwan
prior to the date of enactment of the act, the authorities on Taiwan
shall continue to represent the people on Taiwan;
(4) In section 104, for all purposes, including actions in all courts
in the United. States, Congress approves the continuation in force or
all international treaties and other agreements entered into between
the United States and the Government recognized as the Republic
of China prior to January 1, 1979;
(5) In section 106, programs and other relations conducted by the
President or the U.S. Government with respect to the people on Tai-
wan shall be conducted by the Institute;
(6) In section 108, whenever the President or the Government is
authorized or required by or pursuant to the United States law to
enter into any agreement or arrangement relative to the people of
Taiwan, such arrangements shall be conducted through the Institute.
(7) In section 110, whenever the application of a rule of law of the
United States depends upon the law applied on Taiwan, the law on
Taiwan shall be considered the applicable law for that purpose;
(8) In section 111, for all purposes, recognition of the PRC shall
not affect the ownership of tangible and intangible properties owned
by the people on Taiwan on January 1, 1979;
(9) In section 112, OPIC guarantees are continued with regard to
U.S. private investments in Taiwan;
(10) In section 113, the President is authorized to extend diplo-
matic immunity to the instrumentality established in the United
States by the people on Taiwan.
(11) In section 114, Congress states that it is the policy of the
United States that the PRC will refrain from the use of force in the
resolution of the Taiwan issue, and that the United States will pro-
vide the people on Taiwan with arms of a defensive character.
All of these provisions demonstrate clearly-that the United States
intends to consider the governing authorities on Taiwan to be seized
of the exercise of sovereign authority over the territories controlled
on January 1, 1979, and that the American Institute on Taiwan is
tanatamount to an official diplomatic mission of the United States.
This position is reinforced by the explicit provisions of section 114
regarding defense. The ultimate attribute of sovereignty is self-
defense. Indeed, the test of sovereignty is whether a nation possesses
the capability, either alone or in conjunction with allies, of defending
itself against aggression from another power. The claim of the United.
States to provide the people on Taiwan (that is to say, according to
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section 101(b), a category that includes the ROC government) with
weapons of a defensive character, even in the absence of a Mutual
Defense Treaty after 1980, is tantamount to a declaration by Congress
that the ROC governing authorities legitimately exercise sovereign
authority and power. Indeed, the implicit acknowledgment by the
President of the United States that the Mutual Defense Treaty will
continue until December 31, 1979, despite the recognition of the PRC
as "sole government of China" on January 1, 1979, is legally tanta-
mount to recognition of ROC sovereignty.
This view is buttressed by the provisions of Title II, which estab-
lishes the Institute as. a surrogate diplomatic mission under United
States law, and gives the employees of the Institute rights which are
derived from their former status as employees of the U.S. Govern-
ment, including the diplomatic service. Indeed, although section
205(2) (e) states that "the Institute shall not be an agency or instru-
mentality of the United States," that section must be read in con-
junction with the whole Title, which takes pains to establish the
Institute as a beneficiary of the President's directives (sections 201
and 202), as an entity which has par with other departments and
agencies of the U.S. Government as regards personnel benefits (sec-
tion 203), as an entity whose personnel may return to other Govern-
ment agencies as if it were an agency of the United States and con-
tinue to participate in contributions towards U.S. Government
compensation and pension systems, and accrue time in U.S. Govern-
ment programs for their terms of service. In short, for all practical
purposes, the Institute is treated as a U.S. Government agency,
despite the attempt to establish its status otherwise.
Even from a financial point of view, Title III establishes clearly
that the funding of the Institute comes from U.S. Government
appropriations, and the Secretary of State is authorized to use such
funds to carry on through the Institute the same functions he would
carry on through a diplomatic mission. Indeed, the Institute's ex-
penditure of such funds is made contingent upon an audit by the
Comptroller General of the United States. The fact that the Institute
is a creature of Congress is emphasized by section 401(c) which
provides that any agreements made by or through the American
Institute in Taiwan shall be subject to the same approval as though
the agreements were made directly by a department or agency of
the United States.
No one can deny, therefore, that, despite disclaimers, the Institute
is a veritable agency of the United States Government, providing a
direct relationship with. the people on Taiwan, including, of course,
the governing authorities which the United States recognized as the
government of the Republic of China until January 1, 1979. All that
is lacking is official recognition of that status.
The Institute gives much of the substance of diplomatic relation-
ship without the official recognition of such a status. But is that
enough? Will that suffice for our relationship with the ROC govern-
ment in the long run?
The New China Policy places the United States in the moral position
of an ambitious man who divorces his first wife to marry a socially
prominent and attractive second. wife, all the while promising wife
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51
No. 1 that they will continue to live together as though nothing had
happened. Such an anomaly cannot lead to stability or fulfillment; in
fact, it is bound to become a destabilizing element if the expectations
of the new partner are not fulfilled.
The whole question of the future security of Taiwan is cast- into a
deep shade by the failure of the Administration to secure commitments
and practical arrangements that would guarantee Taiwan's freedom of
action. More deeply disturbing is not simply the failure to obtain such
guarantees; the most damaging blow is the admission that Taiwan's
future was conceded in advance to the will of Peking. The testimony
of Ambassador Woodcock before this Committee was startling in its
revelation of the abject capitulation of the United States before the
rulers of Peking:
It had been the American position that we were seeking a
guarantee of the nonuse of force in the settlement of the
Taiwan question. I personally came to the conclusion-and
I am now speaking in personal terms-that to insist upon
that would be to run into a roadblock because it was, in
essence, the negotiation of sovereignty. It isn't a question
of who we look upon in the situation. The Chinese in Peking
and the Chinese in Taipei both insisted that there was one
China. It was a question of trying to negotiate directly a
guarantee of the nonuse of force by a sovereign government
against what in the mind of that government is its own
province.
So central to our negotiations beginning in the period of
July, 1978, was our insistance and our expectancy that it
would be settled on a peaceful basis, but recognizing the
roadblock of the sovereignty issue, which would have led
the negotiations nowhere.
I think in a very practical sense, I myself am convinced
that we have the best possible assurance in that regard,
and I think the statements particularly of Vice Premier
Teng Hsiao-P'ing, beginning in late November of 1978,
reiterated forcefully to the Nunn senatorial delegation, of
which Senator Glenn was a member, in early January 1979,
that we are getting the most positive response from the
Chinese government in this regard.
The CHAIRMAN. At any time during the negotiations over
the period that you were in Peking, was the matter of an ex-
press commitment by Peking against the use of force in
settling the Taiwan question posed?
Ambassador WOODCOCK. Not by me, sir. No.
Keeping in mind that the Ambassador was the sole channel for
the negotiations which led to "normalization," we must conclude the
following:
1. Peking considers that it has sovereign authority over Taiwan.
2. The use of force is the ultimate determinate of sovereignty.
3. Peking's ultimate sovereignty over Taiwan was a nonnegotiable
item for Peking.
4. The United States view of Peking's sovereignty over Taiwan is
irrelevant to Peking's intention to assert that sovereignty.
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5. The United States, in refusing even. to attempt to negotiate the
question, conceded the ultimate disposition of Taiwan to Peking's
authority.
6. The United States encourages the incorporation of Taiwan into
the People's Republic of China by. peaceful means.
7. The United States would be displeased if force were-used to bring
about unification, but we expect that "unification" by some means
would be the "settlement" of the Taiwan question.
A "DECENT INTERVAL" FOR TAIWAN
These conclusions, which flow indisputably from Ambassador Wood-
cock's testimony, can leave no particle of doubt that the New China
Policy has already surrendered the legal and moral status of Taiwan
to the Communist rulers of Peking. All that is retained is a pragmatic,
under-the-table relationship, designed to provide a temporary um-
brella, a "decent interval," as it were, to shield the people on Taiwan
from an immediate blow, to give time to phase our American capital
investment there if necessary, and to bamboozle the American people.
. The. impact of the New China Policy is that both Peking and the
United States agree that Taiwan has only one option: To come under
Communist hegemony, to use the word that Peking always applies
to the Soviet Union. The only question remaining for Taiwan is a
question of timing. We are saying that Taiwan has no right to refuse
indefinitely. And to help Taiwan to negotiate quickly, both the PRC
and the United States hold the ultimate levers: the PRC retaining the
right to use force, and the United States retaining the right to supply
defensive weapons. Our right to supply weapons conceivably could be
continued at such a level as to force the PRC into a better deal for
Taiwan and for American investment there; but it could also be with-
held if Taiwan were recalcitrant and refused to be absorbed into the
Communist system. The execution of the New China Policy so far
ought to be a warning to the people on Taiwan that the present leader-
ship of the United States is willing to subordinate the human rights
and dignity of the people on Taiwan to other considerations.
It is for this reason that I have found a widespread concern among
my colleagues over the exact nature of the security guarantees to
Taiwan. The question turns upon whether the policy of the United
States is to support the indefinite automony of the people on Taiwan,
or whether our security assistance is to support the interests of the
New China Policy. The information, at first suppressed, that no new
weapons would be supplied under the Mutual Defense Treaty during
the last year of its existence is further. evidence that the architects of
the New China Policy are seeking to avoid any real test of our true
intentions.
The notion that Taiwan's social, economic, and political autonomy
could be preserved within the sovereignty of the PRC will hardly bear
the least examination. The notorious example of Tibet, which con-
cluded a written agreement with Peking guaranteeing its religious,
social, and political systems, demonstrates the extent to which Peking
will perpetrate cultural genocide. The example of Hong Kong, osten-
sibly under British rule, but in reality dominated by PRC finance,
trade, kickbacks and corruption, survives because it fulfills a special
need to which Taiwan would be superfluous. Rather Taiwan could
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expect to become the victim of economic and political subversion-
pressed from without by restrictions and boycotts, and assaulted from
within by seducing business leaders with special deals and economic
dependencies. Once political control were established, key leaders
and cultural figures would disappear for "reeducation."
Nor should our enthusiasm for China's "four modernizations"-
one of which is the modernization of the Chinese military capability-
blind us to the fact that no amount of capital expenditure or political
pragmatism will bring about modernization without the element
which has been found essential wherever substantial economic progress
has been made in the world. The essential element is personal freedom.
China is a totalitarian country whose extreme poverty is matched
by its poverty of freedom. An authoritarian country can progress if it
allows a large measure of economic freedom to its citizens; but a
totalitarian country, by definition, is one in which every decision for
every citizen is dictated by political considerations. Upwards of 65
million Chinese died to establish that political dictatorship; even today
reliable estimates say that between 7 million and 25 million Chinese
are in forced labor camps at the present time.
Such a system is inherently unstable. The purges and counter-purges
in the leadership circles have been matched by a continuing history of
uprisings and local rebellions. The instability of the present system is
evident in the fact that Teng Hsiao-p'ing, the controlling personality,
is not No. 1 in either the hierarchy of the Communist Party or of the
state. He himself was purged twice, and rehabilitated three times. His
present consolidation of power extends back no more than 18 months.
Moreover, his power rests solely upon the strength of the military
commanders who sheltered him when he was purged by Mao. The
impotence and disarray of the central government is evident when one
considers the fact that Mao could not arrest Teng so long as Teng
was in the protection of the provincial military commanders.
Nor is there any established mechanism for the transfer of power
from a leader who is now 74. Nor is there a legal framework for the
protection of human rights. A study by the Library of Congress shows
that Chinese laws are not codified, and that the directives of the Party
or of local personalities are superior to the rule of law. Taiwan could
not expect that any written guarantees of the freedom of the people
on Taiwan would be carried out.
Two GOVERNMENTS IN ONE CHINA
The New China Policy is predicated upon the expectation that
Taiwan will eventually come under the domination of the Communist
government in Peking. The Institute provides a restraining mecha-
nism for slowing down that process; if strengthened, it could help
thwart that process completely:
Hopefully, the Institute can provide a bridge to a more realistic
China policy. The reality is that China has two governments which
each effectively control different parts of Chinese territory. A realistic
policy would recognize each government as competent in the territory
it controls. There is no need to recognize the claim which each makes
to the territory controlled by the other, nor is there any need to deny
such claims. Above all, the United States should refrain from actions
which would tend to coerce "unification."
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The New China Policy is despicable not because it tries to deal with
Mainland China, but because its aim is to consign the people on
Taiwan- to a fate which they would not freely choose. It attempts to
retain the substance of sovereignty for Taiwan while conceding the
juridical basis for sovereignty to the Communist rulers of Peking. In-
sofar as the Institute retains the substance of a relationship with a
sovereign power, the Institute should be encouraged and strengthened.
For the decision of the President of the United States is not determina-
tive de jure of the existence of a sovereign state. The Republic of
China remains a sovereign state as long as it effectively controls its
own territory. As long as a small nation retains the help of allies who
will back up its sovereign powers with a defensive capability, it can
retain its independence. The Institute, for the time being, can perform
that function.
Congress must keep a close oversight on the Institute to ensure that
it is used to preserve Taiwan's independent options, not to destroy
them. Congress must avoid complicity in the New China Policy.
Had not the actions taken by the President in withdrawing diplo-
matic representation with the Republic of China been so precipitate,
nor the legislation considered by this Committee in pursuance of the
President's actions so unprecedented, there would be no need to
submit these additional views.
However, the President has in fact engaged in actions of an un-
precedented nature, and seeks Congressional ratification of his actions
through legislation, S. 245.
It is worthwhile, therefore, to review the major background issues
with regard to S. 245.
Three major issues were raised by the President's actions of Decem-
ber 15, 1978.
First, the President derecognized a long-time ally and friend, the
Republic of China. This precipitate action not only was unnecessary,
it came at the worst possible time. As the world looked to the United
States for a demonstration of resolve and fidelity after a period of
growing setbacks for American interests, the world saw instead vacil-
lation, weakness and betrayal of friendship in the derecognition of
the Republic of China.
It is not up to the Congress to change that action. The President
may choose the nations he wishes to recognize, and which he does not.
The issue of derecognition may well be a matter to be dealt with in
the 1980 Presidential elections. That is a more proper forum for
settlement of that issue.
The second issue raised by the President's actions of December 15,
1978, is the termination of a mutual defense treaty with an ally in
time of peace.
Needless to say, this unprecedented action has not gone without
notice by allies and opponents alike around the world. Despite Admin-
istration protestations to the contrary, many of our allies rightfully
question the value of the United States' mutual security commitments.
Newspaper reports that the Ambassador to the United States from
one nation bordering the Indian Ocean littoral has sought to be moved
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to Moscow because "that is where the power is" cannot be brushed
aside as reportage of a mere diplomatic aberration. How much the
Presidential decision to abandon the people on Taiwan affected the
Ambassador's decision one only can speculate; but it is difficult to
believe that it had no effect.
The Congress may not be the proper forum to deal with the specific
issue of termination of the treaty, per se; although Congress certainly
must deal with the broader issue of the defense of the people on
Taiwan. Already, a court suit has been undertaken to deal- with the
particulars of the treaty termination matter. Its outcome will say
much about the scope of the President's power to terminate a treaty
with an ally, unilaterally and without prior consultation with and
approval by the Congress. At a time when the American public is
wary of overextension of Executive power, a proper resolution of the
issues raised in the suit will do much to define the limits of Executive
power.
The final issue raised by the President's actions of December 15,
1978, is the protection of the interests of the people of the United
States in Taiwan, and the concurrent protection of the legitimate
interests of our friends and allies, the people of the Republic of
China on Taiwan.
This, Congress most properly can and must address. Congress
begins that process with consideration of S. 245, proposed by the
Administration to set up an unofficial relationship with the Republic
of China, or-as it now is termed-"the people on Taiwan."
The legislation proposes to set up what amounts to a legal fiction:
the United States will recognize the Republic of China as a legal,
sovereign entity in all matters except those in which the Republic of
China or the people of the Republic of China on Taiwan must deal
with the United States on an official basis. This borders on being a
charade, and is given the legitimacy of law by S. 245 in order to
accommodate the President in his policy of derecognition of the
Republic of China. That the Congress is willing to make such an
accommodation, this political favor to the President, I"cannot under-
stand, especially in view of the questionable nature of basis underlying
the legislation proposed by the Administration.
In spite of this legislation, there are many issues which need to be
addressed by the Congress, so as not to jeopardize our valuable rela-
tions with the people on Taiwan. Foremost is the continuing interest
of the people of the United States in the security and defense of the
people on Taiwan. Nor should the value of Taiwan to legitimate
U.S. and allied security interests in the Pacific be overlooked. Close
scrutiny should be made of the People's Republic of China, not only
in terms of what good can come of the new United States relations
with that nation, but also what pitfalls exist for U.S. policymakers.
Protection of U.S. interests in Taiwan certainly will require much
fine-tuning of the legislation now before the Congress. Such is to be
expected, given the haste in which the whole matter has been
considered.
THE PROCESS OF "NORMALIZATION"
Congress came to deal with the so-called Taiwan issue and the
legislative proposal now before us because of President Carter's
"normalization" of U.S. relations with the People's Republic of China.
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It was a hasty action. By early December, the President's much-
publicized Camp David initiative was coming to naught. His Decem-
ber 17 deadline for a final peace agreement would come, and pass,
with no agreement.
It was at this time, with imminent failure in the Middle East the
headlines across America, that the rush began for "normalization."
Although under a Congressional mandate to consult with the Con-
gress over any possible termination of the mutual defense treaty with
the Republic of China, and under a personal mandate-a campaign
pledge-to conduct foreign affairs in the open, the President and his
men moved headlong towards full recognition of Peking, on Peking's
terms.
Peking's terms became the only terms for recognition because of
the need the President felt to accomplish "normalization" quickly.
Thus, it was learned later, the President did not even attempt to
seek a pledge from Peking not to use force to "liberate" Taiwan or
seek reunification with the island-nation.
Congressional consultation flew out the window. Almost as an
afterthought some Congressional leaders were invited to the White
House a few bare hours before announcement of the President's
decision of "normalization" to hear the President's decision. So much
for consultation.
The Republic of China was not even accorded that much courtesy.
According to U.S. Ambassador Unger's testimony before the Com-
mittee, the leadership of the government of the people on Taiwan was
awakened at 2:00 a.m.-in the early hours of the morning-and told
of the President's decision. -
Thus, no attempt was made to ease the fact of recognition. No
contingency plans were able to be made on Taiwan; hence, the popular
outbursts of feeling on Taiwan, and resultant violence.
Lacking prior consultation, major issues that could have been
addressed jointly by the Congress and President with the Peking
government were left to be handled by Congress alone, with the
Executive alternately pleading and threatening lest anything short
of the fait accompli, it presented to the Congress be adopted.
Nor was it possible for any Congressional consideration to be
given, nor input, concerning the nature of the U.S. relationship with
the Peking government. Events in Vietnam, with the possibility of
Soviet intervention, cast a new light on the nature of the regime that
the United States is dealing with in Peking, as did the anti-Soviet,
belligerent rhetoric of Vice- Premier Teng during his visit.
THE BENEFICIARY OF "NORMALIZATION": THE PRC
With whom are we dealing in the PRC?
Like a novice playing poker for the first time, we have placed all
of our bets on Vice-Premier Teng. Right now, he appears to be holding
all of the right cards. And so he did, several years ago, too, when
President Ford held discussions with him. "The most powerful man
in China," he was represented as being back then; 90 days later, he
was out of power, purged.
There is a naive hope in the Administration that such will not
happen again; that, somehow, U.S. policy will help Teng shore up
his power base and line of succession. Other Administrations held
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similar views of omnipotence. The Kennedy and Johnson years had
their Vietnam and the Nixon and Ford Administrations had Iran.
But right-now, Teng has power, it is believed. Whether Teng's
successors will continue his policies-economic, modernization, toward
Taiwan, etc.-is a matter of serious concern.
The China Teng rules has, perhaps, the worst human rights record
in the history of modern times. One witness before the Committee
recited figures-from 50 to 64 million persons killed during the struggle
for power that brought to power the elite that now governs China-
the magnitude of which boggle the mind. So many deaths are beyond
comprehension. Spoken on so large a scale, the story overlooks the
human suffering that accompanied those deaths.
If this were only a historical event, there are some who might be
willing to excuse it all. But it is not just a fact of past history;' the
misery continues even today. One need not look just to organizations
like Amnesty International for clearly documented charges of gross
human rights violations by the current Peking regime; the President,
himself, one witness informed the Committee, is reported to have
had a detailed briefing on the sad state of human rights observance
in the PRC more than a year ago. Yet, he proceeded with "normaliza-
tion," as far as can-be determined, without a whisper about China's
human rights record.
China has a huge population, the largest nation on Earth, a billion
people, give or take a few million. Unfortunately, China is economi-
cally backward, with serious questions about its potential for modern-
ization before the end of the century. Nor are the signs good for bring-
ing off an economic miracle such as the one accomplished on Taiwan
? over the past 30 years. China does not possess the infrastructure to
bring about the miracle: it has no free economy or free labor, and very
little incentive for the individual. Trade with the people on Taiwan
is enormous: today, the Republic of China is our eighth largest trading
partner, surpassing Saudi Arabia and other oil producers who so
often are charged with causing such large trade deficits. Trade with
Taiwan is two-way trade, and valuable to the United States; it is
trade of one industrial power with another. Trade with the PRC,
on the other hand, is very small by comparison; the PRC is a-back-
wards nation industrially, offering no real potential for mutually
beneficial trade for years to come.
The PRC remains territorially ambitious. One need witness only
the recent incursion into Vietnam for an example. PRC imperialism
extends to the radical regime in Cambodia, where the PRC finds an
acceptable client-state relationship much to its liking. And who can
forget Tibet, or the Indian border war of past years?
Strategically, the PRC is of questionable importance to the Untied
States. If one is to give credence to the theory that the PRC "ties
down" a large Soviet force in their common border, the PRC would
do so with or without U.S. recognition, no matter the terms. Of greater
concern to the United States should be the ability of the PRC to
drag the United States into a potential conflict situation with the
Soviet Union, or into a surrogate war.
The old Chinese strategem, playing the near barbarian (the U.S.S.R.)
off against the far barbarian (the United States), continues to hold
sway in the minds of Peking's strategists.
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One need witness only the language of Vice-Premier Teng on'his
U.S. visit to see that strategem verbalized.
Thus, the question arises, what is the real U.S. interest in the PRC?
Is it so great that the United States need accept Peking's terms for
recognition?
More importantly, is the interest of the PRC in having a U.S.
ally, economic and political, so great that the PRC can accommodate
whatever status Taiwan wishes to have short of political control
of the Mainland?
The PRC needs the United States far more than the United States
needs the PRC, a fact completely overlooked by the Administration
in its negotiations, so-called, with the PRC concerning the Taiwan
issue.
TAIWAN, AN ALLY AND LONGSTANDING FRIEND
As America's eighth largest trading partner, the Republic.of China
remains an important economic asset of the United States. One expert
has told me that withdrawal of Taiwan's funds from the banks in
New York would precipitate a severe economic situation, forcing
some banks to face possible bankruptcy as a result. Thus, many
would not want to antagonize Taiwan too harshly.
Strategically, Taiwan serves as an important intelligence resource
for the United States off the coast of Mainland China. While some
may contend that a larger U.S. presence in the PRC will facilitate
intelligence gathering and obviate, somewhat; Taiwan's importance,
many do not agree with that conclusion. One need only consider
the restrictions on movement in the Soviet Union to see how the
other major totalitarian state in the region deals with human intelli-
gence gathering. The Taiwan post is important for the United States,
and will remain so. Nor should anyone be deluded into believing
that such intelligence gathering is unnecessary, now that the United
States has opened up full relations with Peking.
We must not forget that Peking views any relationship with the
United States as only a matter of necessity-again, playing off the
far barbarian against the near one. Peking's relationship with the
United States still remains an adversary one over the long haul, as
even top China hands in the Carter Administration are quick to admit.
With rumored new missile capability under development, with a
missile possibly able to reach the United States said to be part of the
Chinese strategic nuclear delivery program; the United States has
every need to be wary of Peking's long-term intentions. Thus, the need
continues for a Taiwan base, not only for intelligence gathering, but
as an advance-base for U.S. forces in any emergency, either on the
Mainland, or in Japan or Korea.
Some may have forgotten that the Japanese attack on Pearl Harbor
was launched from Taiwan, in part. Strategically, Taiwan sits in an
important location, serving as a vital choke-point for shipping around
the coast of China. This includes not only commercial shipping so
vital to U.S. allies Japan and Korea; but also Soviet naval ships bound
for action in'the Southern Pacific or Indian Ocean.
Thus, the United States continues to have important economic and
strategic interests in Taiwan.
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TAIWAN'S SECURITY NEEDS
The Committee has attempted to provide the people on Taiwan
with some security assurances in Section 114 of S. 245, the legislation
it has reported to deal with the Taiwan issue.
While the section gives some hope to the people on Taiwan, it is
an insufficient guarantee of their security. What is needed is a forth-
right statement by the Congress that the proper security needs of the
people on Taiwan will be met.
What are those needs? All are based on the supply of advanced U.S.
defensive weaponry to the people on Taiwan. Basic to the needs of the
people on Taiwan is an all weather fighter. Mentioned prominently are
the F5-G and the F-16 or F-4, all of which have an all-weather cap-
bility. With such a fighter, the people on Taiwan could protect their
airspace from foreign incursions well into the 1980's.
Secondly, the people on Taiwan need sufficient anti-ship weaponry,
including anti-submarine warfare (ASW) weapons. This is critical to
the credibility of any deterrence of an amphibious assault on Taiwan,
or an attempted blockade of shipping to the island. Mentioned promi-
nently here are such weapons as the Sea-Sparrow and the Harpoon anti-
ship missiles, as well as ASW helicopters.
Other types of defensive weaponry supplied in such amounts as to
give the people on Taiwan a credible deterrent capability are necessary
if Taiwan is to have the security it feels it needs. Without such security,
there can be no basis from which to begin talks about "reunification"-
which appears to be the goal of the Carter Administration in its
? dealings with the people on Taiwan. Nor can the United States be
assured that Taiwan will not take some sort of desperate action lacking
such supply and commitment from the United States.
Faced with U.S. acquiescence in the eventual "reunification" with
the Mainland and concommitant withholding of needed U.S. defensive
weaponry, Taiwan well could seek allies elsewhere, or go nuclear.
Is there anyone in Congress who wants to force Taiwan into the
Soviet camp, or the nuclear club?
But both eventualities could take place.
A desperate nation often takes desperate measures. Taiwan in the
nuclear club would be subject to economic blackmail by other natione
desiring nuclear weapons. Who can say that, perhaps, Saudi Arabia
or Libya, might seek to trade oil so badly needed by the people on
Taiwan for Taiwan's nuclear technology. Without a firm U.S. com-
mitment to Taiwan's defense and security, with a steady supply of
defensive weaponry as proof of that commitment, Taiwan well could
fall prey to such economic blackmail. Similar blackmail could come
from South Africa, perhaps, which supplies Taiwan with large amounts
of uranium needed by Taiwan for its electricity-generating nuclear
reactors. The potential is there, and dangerous it is.
Or, Taiwan might decide that the Soviet Union well could be a
partner of convenience, much like Peking finds the United States at
present.
These are unpleasant scenarios, but well within the realm of possi-
bility for the people on Taiwan if they feel abandoned by their long-
time ally, the United States.
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President Carter has stated that the United States could go to war
to protect the people on Taiwan. There is no need for such useless
flag-waving, for committing American soldiers where such commitment
is not necessary. And it should be unnecessary for the United States
to commit one American soldier to the defense of Taiwan and its
people, if the United States merely supplies the people on Taiwan with
the weaponry they need to defend themselves.
Congress can commit that weaponry in the legislation now before it,
or by other legislative means. Congress can, and should, make a com-
mitment to the security of the people on Taiwan, a commitment of such
strength and force as to leave no doubt in Taipei Or Peking as to what
the people of the United States feel about the security of the people
on Taiwan.
The public supports such a commitment; a recent survey finds that
a large majority of Americans feel that the United States should
continue to supply the people on Taiwan with the defensive weaponry
they need.
Thus, any commitment, both in words and action in supplying
weaponry to the people on Taiwan not only is consistent with U.S.
interests in Taiwan and the Pacific, but also meets with the approval
of the public.
Certainly, it fulfills a moral obligation of the people of the United
States to the people on Taiwan.
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THE WHITE HOUSE.
To the Congress of the United States:
The United States of America has recognized the Government of
the People's Republic of China as the sole legal government of China
and is establishing diplomatic relations with that government. The
Joint Communique issued by the United States and the Peo le's Re-
public of China was the culmination of a long process begun by Presi-
dent Nixon and continued by President Ford and me.
I have also announced that, in the future, the American people will
maintain- commercial, cultural, and other relations with the people on
Taiwan without official government representation and without dip-
lomatic relations. In furtherance of that policy, and pending enactment
of legislation on the subject, I have directed all departments and
agencies to continue unofficially to conduct programs, transactions
and other relations with Taiwan.
To authorize legally the permanent implementation of that policy,
I am today transmitting to the Congress a bill "to promote the foreign
policy of the United States through the maintenance of commercial,
cultural and other relations with the people on Taiwan on an un-
official basis, and for other purposes."
This bill will confirm the continued eligibility of . the people on Tai-
wan for participation in programs and activities that under United
States law are to be carried out with foreign governments; provide for
the carrying out of such programs and activities on an unofficial basis
through the American Institute in Taiwan, a nonprofit corporation,
and the corresponding instrumentality being established by the people
on Taiwan; and establish funding, staffing and administrative rela-
tionships of the Institute. It also contains other authorizations and
provisions relating to the foregoing matters.
I am confident the Congress shares my view that it is in the national
interest that these unofficial relations between the American people
and the people on Taiwan be maintained. It is highly desirable that
this legislation be enacted as promptly as possible. I look forward to
working with the Congress on this important project.
JIMMY CARTER.
THE WHITE HOUSE, January 26, 1979.
A BILL To promote the foreign policy of the United States through the main-
tenance of commercial, cultural and other relations with the people on Taiwan
on an unofficial basis, and for other purposes
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
(61)
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TITLE I
SECTION 101. No requirement for maintenance of diplomatic
relations with the United States, or for recognition of a government by
the United States, as a condition of eligibility for participation in
programs, transactions or other relations authorized by or pursuant
to United States law shall apply with respect to the people on Taiwan.
SEC. 102. Whenever any law, regulation or order of the United States
refers or relates to a foreign country, nation, state, government or
similar entity, such terms shall include, and such law, regulation or
order shall apply with respect to, the people on Taiwan.
SEC. 103. Whenever authorized or required by or pursuant to
United States law to conduct or carry out programs, transactions or
other relations with respect to a foreign country, nation, state, govern-
ment or similar entity, the President or any department or agency
of the United States Government is authorized to conduct and carry
out such programs, transactions and other relations with respect to
the people on Taiwan, in accordance with applicable laws of the
United States.
SEC. 104. Programs, transactions and other relations conducted
or carried out by the President or any department or agency of the
United States Government with respect to the people on Taiwan
shall, as the President may direct, be conducted and carried out by
or through the American Insitute in Taiwan, a nonprofit corporation
incorporated under the laws of the District of Columbia (herein-
after "the Institute").
SEC. 105. Whenever the President or any department or agency of
the United States Government is authorized or - required, by or
pursuant to United States law to enter into, perform, enforce, or
have in force an agreement or arrangement relative to the people
on Taiwan, such agreement or arrangement shall be entered into, or
performed and enforced, as the President may direct, by or through
the Insitute.
SEC. 106. Whenever the President or any department or agency
of the United States Government is authorized or required by or
pursuant to United States law to render or provide to, or to receive
or accept from, the people on Taiwan any performance, communica-
tion, assurance, undertaking or other action, such action shall, as
the President may direct, be rendered or provided to, or received or
accepted from, an instrumentality established by the people on
Taiwan.
SEC. 107. Whenever the application of a rule of law of the United
States depends upon foreign law, or compliance with foreign law, thA
law applied by the people on Taiwan shall be considered foreign law
for that purpose.
TITLE II
SEC. 201. Any department or agency of the United States Govern-
ment is authorized to sell, loan or lease property, including interests
therein, to, and to perform administrative and technical support
functions and services for the operations of, the Institute upon such
terms and conditions as the President may direct. Reimbursements to
departments and agencies under this section shall be credited to the
current applicable appropriation of the department or agency
concerned.
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SEC. 202. Any department or agency of the United States Govern-
ment is authorized to acquire and accept services from the Institute
upon such terms and conditions as the President may direct, without,
regard to the laws and regulations normally applicable to the acquis'-
tion of services by such department or agency.
SEC. 203. Any department or agency of the United States Govern-
ment employing alien personnel in Taiwan is authorized to transfer
such personnel, with accrued allowances, benefits and rights, to the
Institute without a break in service for purposes of retirement and
other benefits, including continued participation in any system
established by law or regulation for the retirement of employees, under
which such personnel were covered prior to the transfer to the Insti-
tute : Provided, That employee deductions and employer contribu-
tions, as required, in payment for such participation for the period
of employment with the Institute, are currently deposited in the
system's fund or depository.
SEC. 204. (a) Under such terms and conditions as the President may
direct, any department or agency of the United States Government
is authorized to separate from Government service for a specified
period any officer or employee of that department or agency who
accepts employment with the Institute.
(b) An officer or employee separated, under subsection (a) of this
section shall be entitled upon termination of such employment with
the Institute to reemployment or reinstatement with that depart-
ment or agency or a successor agency in an appropriate position
with attendant rights, privileges and benefits which the officer or
employee would have had or acquired had he or she not been so sepa-
rated, subject to such time period and other conditions as the President
may prescribe.
(c) An officer or employee entitled to reemployment or reinstate-
ment rights under subsection (b) of this section shall, while continu-
ously employed by the Institute with no break in continuity of service,
continue to participate in any benefit program in which such officer
or employee was covered prior to employment by the Institute, in-
cluding programs for compensation for job-related death, injury or
illness; for health and life insurance; for annual, sick and other
statutory leave; and for retirement under any system established by
law or regulation: Provided, That employee deductions and employer
contributions, as required, in payment for such participation for the
period of employment with the Institute, must be currently deposited
in the program's or system's fund or depository. Death or retirement
of any such officer or employee during approved service with the
Institute and prior to reemployment or reinstatement sliall be con-
sidered a death in service or retirement from the service for the pur-
poses of any employee or survivor benefits acquired by reason of
service with a department or agency of the United States
Government.
(d) Any employee of a department or agency of the United States
Government who entered into service with the Institute on approved
leave of absence without pay prior to the enactment of this Act shall
receive the benefits of this title for the period of such service.
SEC. 205. The Institute shall be treated as a tax exempt organization
described in section 501(c) (3) of the Internal Revenue Code of 1954,
and shall not be an agency or instrumentality of the United States.
Employees of the Institute shall not be employees of the United
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States and, in representing the Institute, shall be exempt from section
207 of title 18, United States Code. The salaries and allowances paid
to employees of the Institute shall be treated in the same way for tax
purposes, under sections 911, 912, and 913 of the Internal Revenue
Code of 1954, as salaries and equivalent allowances paid by depart-
ments and agencies of the United States Government.
TITLE III
SEC. 301. In addition to funds otherwise available for the purposes
of this Act, there are authorized to be appropriated to the Secretary
of State from time to time such funds as may be necessary to carry
out such purposes. Such funds are authorized to remain available
until expended.
SEC. 302. The Secretary of State is authorized to use funds made
available to carry out this Act to further the maintenance of com-
mercial, cultural and other relations with the people on Taiwan on an
unofficial basis. The Secretary may provide such funds to the Institute
for expenses directly related to the purposes of this Act, including-
(1) Payment of salaries and benefits to Institute employees;
(2) Acquisition and maintenance of buildings and facilities
necessary to the conduct of Institute business;
(3) Maintenance of adequate security for Institute employees
and facilities; and
(4) Such other expenses as may be necessary for the effective
functioning of the Institute.
SEC. 303. Any department or agency of the United States Govern-
ment making funds available to the Institute in accordance with this
Act shall make arrangements with the Institute for the Comptroller
General of the United States to have access to the books and records
of the Institute and the opportunity to audit the operations of the
Institute.
SEC. 304. The programs, transactions and other relations carried
out by the President or any department or agency of the United
States Government with respect to the people on Taiwan since Jan-
uary 1, 1979, are approved and confirmed.
SEC. 305. The President is authorized to prescribe such rules and
.regulations as he may deem appropriate to carry out the purposes of
this Act.
SECTION-BY-SECTION ANALYSIS OF THE PROPOSED ACT TO PROMOTE
THE FOREIGN POLICY OF THE UNITED STATES THROUGH THE MAIN-
TENANCE OF COMMERCIAL, CULTURAL AND OTHER RELATIONS WITH
THE PEOPLE ON TAIWAN ON AN UNOFFICIAL BASIS, AND FOR OTHER
PURPOSES
1. INTRODUCTION
The legislation (hereinafter "the bill") is being proposed as the result
of the recognition by the United States of the People's Republic of
China as the sole legal government of China and the establishment of
diplomatic relations between the United States and the People's
Republic of China. Its purpose is to facilitate continuation of com-
mercial, cultural and other relations between the American people
and the people on Taiwan on an unofficial basis.
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The bill clarifies the application of laws of the United States to the
people on Taiwan in light of the changed diplomatic situation, and
provides for the continued conduct of programs and transactions with
the people on Taiwan. It also contains a number of provisions on ad-
ministrative, financial and related subjects which will facilitate this
new nongovernmental relationship with the people on Taiwan.
The term "people on Taiwan," as used in the bill, reflects the non-
existence of a government-to-government relationship, and encom-
passes both the authorities and . the inhabitants on the islands of
Taiwan and the Pescadores.
II. PROVISIONS OF THE BILL
Section 101
This section provides that legal requirements for the maintenance
of diplomatic relations with the United States or recognition of a
foreign government by the United States will not be a bar to eligibility
of the people on Taiwan for participation in programs, transactions
or other relations under U.S. law. This will avoid questions under
provisions of law such as section 620(t) of the Foreign Assistance Act
of 1961 (22 U.S.C. 2370(t)), which refers explicitly to severance of
diplomatic relations. It is also intended to satisfy requirements for
diplomatic relations with or recognition by the United States which
might be implied by terms such as "friendly country" contained in
various statutes.
Section 102
This section specifies that laws, regulations and orders which refer
or relate to "foreign countries," or use similar terms, shall continue
to include and apply to the people on Taiwan. The President has
directed the heads of all departments and agencies to construe such
laws as continuing to apply to the people on Taiwan. This directive
has facilitated maintenance of unofficial relations pending action by
the Congress. This section is intended to confirm continued eligibility
of the people of Taiwan under such important legislation as the Arms
Export Control Act, Atomic Energy Act of 1954, the Export-Import
Bank Act, the Foreign Assistance Act of 1961, the Mutual Educational
and Cultural Exchange Act of 1961 and the Trade Act of 1974.
Section 103
This section expressly confirms the authority of the President and
departments and agencies to carry out programs, transactions and
other relations with the people on Taiwan under laws which provide
for such programs, transactions and relations with respect to foreign
countries.
Section 104
This section provides that programs, transactions and relations
with respect to the people on Taiwan will be conducted by or through
the American Institute in Taiwan, in the manner and to the extent
directed by the President. This provision implements the President's
statement of December 15, 1978, that the American people and the
people on Taiwan "will maintain commercial, cultural and other rela-
tions without official government representation. . . ." The American
Institute in Taiwan is a nonprofit corporation organized under the
laws of the District of Columbia, which has been established for this
purpose.
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Section 105
This section provides for the performance and enforcement of exist-
ing agreements, and the making of new agreements, with the people
on Taiwan by or through the Institute, to satisfy authorizations or
requirements for agreements or arrangements with the people on
Taiwan. If, for example, an agreement with a "foreign country" is a
condition of eligibility for participation in a program, with respect
to the people on Taiwan such a condition will be satisfied by an agree-
ment entered into or performed through the Institute. This section
applies not only to new agreements, but also to previous agreements,
which remain in force unless terminated.
Section 106 '
This section provides for dealing with the people on Taiwan through
an instrumentality acting on their behalf. It makes clear that provi-
sions for dealing with a "foreign government" will be satisfied with
respect to the people on Taiwan by dealing with that instrumentality.
Section 104 and 105 and this section provide for the conduct of non-
governmental relations through the Institute and the counterpart
instrumentality of the people on Taiwan.
Section 107
This section provides that when the application of U.S. law depends
upon foreign law, the law applied by the people on Taiwan shall be
looked to for that purpose.
Section 201
This section authorizes departments and agencies to provide support
for the Institute's internal operations through transfers of property
and the performance of functions and services. This will provide access
by the Institute to existing Federal resources in order to reduce costs
and increase the efficiency of operations. It is expected that such sup-
port usually will be provided on a reimbursable basis.
Section 202
This section authorizes departments and agencies to acquire and
accept services from the Institute. Although the initial arrangements
with the Institute are on a conventional contractual basis, this section
authorizes the President to disregard normally applicable laws and
regulations, such as limitations in procurement regulations, in order to
permit the development of appropriate arrangements in these unique
circumstances.
Section 203
This section authorizes the transfer to the Institute of alien em-
ployees of the U.S. Government and preserves their benefits under the
the compensation plan applicable in Taiwan under section 444 of the
Foreign Service Act of 1946, as amended (22 U.S.C. 889). It is ex-
pected that the Institute will adopt this plan for its alien employees.
This section also authorizes the continued, participation in U.S.
Government retirement systems by those transferred alien employees
who have heretofore been' covered by such systems, subject to con-
tinued payment of contributions and deductions to the appropriate
fund.
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Section 204
This section, consisting of five subsections, provides authority for
the separation of Federal employees for employment with the Insti-
tute, preservation of their Federal benefits, and reemployment rights
in the Federal service. It is contemplated that such separated Federal
personnel will make up the staff of the Institute.
Subsection (a) provides that a Federal officer or employee who
accepts employment with the Institute may be separated from his or
her agency.
Subsection (b) provides that any officer or employee so separated
is entitled, upon termination of employment with the Institute, to be
reemployed or reinstated in the Federal service. Normally, reemploy-
ment for an employee in the classified service will be to the position
from which the employee was separated. However, the President is
authorized to determine the appropriateness of the position for re-
employment. It is anticipated that, especially in personnel systems
based on the rank in person concept, reemployment could be in a higher
class.
Subsection (c) provides for continuity of Federal benefits during
service with the Institute, including compensation for job related
death, illness or injury; health and life insurance, leave, and retire-
ment. Contributions, where required, must be paid in order to pre-
serve these benefits. This section also provides that death or retire-
ment by a Federal employee separated under subsection (a) while
employed by the Institute shall be considered a death in or retirement
from the Federal service for purposes of benefit entitlement.
? Subsection (d) authorizes the extension of the benefits of title II of
the bill to Federal employees serving with the Institute on leave with-
out pay prior to the bill's enactment.
Section P205
This section addresses several questions relating to the status of the
Institute and its employees. It specifies that the Institute shall be
exempt from Federal taxation and shall not be an agency or instru-
mentality of the United States. With respect to the Institute's em-
ployees, this section provides that they shall not be employees of the
United States, and that they shall be exempt from the statutory pro-
hibition against dealing with their former agencies in representing the
Institute. It also provides that the salaries and allowances of Institute
employees shall be taxable in the same way as salaries and allowances
of Federal employees.
Section 301
This section authorizes appropriations to the Secretary of State of
funds necessary to carry out the bill. It is contemplated that the funds
necessary for the operation and support of the Institute on behalf of
all departments and agencies will be consolidated into a single account.
However, this section preserves the continued ability of departments
and agencies to utilize the Institute for the performance of functions
involving the use of funds appropriated to the department or agency
concerned. Funds appropriated under this section could be made
available until expended.
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Section 302
This section authorizes the Secretary of State to use the funds
made available under the bill to further the maintenance of com-
mercial, cultural and other relations with the people on Taiwan on an
unofficial basis. In particular, it authorizes the Secretary to provide
these funds to the Institute for this purpose. The use of appropriated
funds by the Institute will be goverened by an appropriate contractual
arrangement with the Secretary of State, which will contain limitations
on expenses, such as limitations on the compensation of Institute em-
ployees. The Institute will be required under this arrangement to ad-
here generally to the limitations applicable to Federal employees.
Section 303
This section requires that departments and agencies assure access
by the Comptroller General to the Institute's books and records, and
that they provide the Comptroller General the opportunity to audit
the Institute's operations.
Section 304 - -
This section approves and confirms the U.S. Government actions
taken since January 1, 1979, and prior to the bill's enactment with
respect to the people on Taiwan.
Section 305
This section authorizes the President to prescribe appropriate rules
and regulations to carry out the bill's purposes.
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APPENDIX 2
ARTICLES OF INCORPORATION OF. THE AMERICAN
INSTITUTE IN TAIWAN
(Known in Chinese as "Mei Chou Tsai Taiwan Hsiieh Huei")
To: The Recorder of Deeds, Washington, D.C.
We, the undersigned natural persons of the age of twenty-one
years or more, acting as incorporators of a corporation, adopt the
following Articles of Incorporation pursuant to the District of Colum-
bia Nonprofit Corporation Act, District of Columbia Code (1973 ed.)
Title 29, Chapter 10:
First: The name of the Corporation is The American Institute in
Taiwan (the "Institute").
Second: The period of duration of the Institute is perpetual.
Third : The Institute is organized to engage exclusively in charitable,
educational, and scientific activities and, in furtherance of such
activities (and without limitation) :
(a) To enable the American people and the people on Taiwan
to maintain commercial, cultural, or other relations without
official government representation or diplomatic relations;
(b) To represent the interests of the United States and its
people in conducting and carrying out programs, transactions,
and other relations with the people on Taiwan;
(c) To enable international agreements and arrangements to be
performed and enforced in a manner consistent with subpara-
graphs (a) and (b) above; and
(d) To perform functions, on. behalf of the American people,
that would otherwise be performed by Government.
Fourth : The Institute shall have no members.
Fifth: The manner of election or appointment of directors of the
Institute, who shall be designated as Trustees, shall be provided for
in the bylaws.
Sixth: The internal affairs of the Institute shall be regulated by the
bylaws, and the business and affairs of the Institute shall be managed
and conducted by the Trustees in accordance with the bylaws. The
initial bylaws shall be adopted by the initial Board of Trustees. The
power to amend or repeal the bylaws shall be vested in the Trustees.
The provisions of the bylaws and the management of the Institute in
accordance therewith shall be subject to the following:
(a) The Institute shall not be conducted for profit or operated
for the purpose of carrying on a trade. or business for profit;
(b) The Institute shall not exercise any power or authority,
engage in any activity, or solicit or accept any contribution that
would prevent it from obtaining exemption from United States
Federal income taxation as a corporation described in section
501 (c) (3) of the Internal Revenue Code or cause it to lose its
exempt status under such secton;
(69)
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(c) No part of any contribution to, or of the net earnings or
assets of, the Institute shall insure to the benefit of or be distrib-
utable to its Trustees, officers, or other private persons, pro-
vided that nothing herein shall preclude the Institute from
paying reasonable compensation for services rendered, making in
reasonable amounts reimbursements for expenses incurred or
advances for expenses to be incurred on behalf of the Institute,
and making payments and distributions in furtherance of the
purposes set forth in Article Third hereof;
(d) No substantial part of the activities of the Institute shall
be the carrying on of propaganda, or otherwise attempting, to
influence legislation except as permitted by section 501(c) (3) and
(h) (if a proper election is made thereunder) of the Internal
Revenue Code;
(e) The Institute shall not participate in, or intervene in (in-
cluding the publishing or distribution of statements), any political
campaign on behalf of any candidate for public office;
(f) In the event of dissolution or final liquidation of the Insti-
tute, the Board of Trustees shall,. after paying or providing for
the payment of all the liabilities of the Institute, distribute all of
the assets of the Institute to the Government of the United
States.
For purposes of this Article Sixth, the term "Internal Revenue
Code" means the Internal Revenue Code of 1954 as amended, and
citations in sections of the Internal Revenue Code shall be deemed to
include the corresponding provisions of any subsequent Federal tax
laws.
Seventh: The private property of the Trustees and officers of the
Institute shall not be subject to payment of corporate debts.
Eighth : The address, including street and number, of the initial
registered office of the Institute is 1761 N Street, N.W., Washington,
D.C. 20036, and the name of its initial registered agent at such address
is L. Dean Brown.
Ninth: The number of Trustees constituting the initial board of
Trustees is three (3), and the names and addresses, including street
and number, of the persons who are to serve as the initial Trustees are :
L. Dean Brown, 3030 Cambridge Place, NW., Washington, D,.C.
David Dean, 10020 Colvin Run Road, Great Falls, Va.
Edwin M. Martin, 4101 Cathedral Avenue, NW., Washington, D:C.
They shall hold office until their successors are appointed.
Tenth: The name and address, including street and number, of
each incorporator is:
L. Dean Brown, 3030 Cambridge Place, NW:, Washington, D.C.
David Dean, 10020 Colvin Run Road, Great Falls, Va.
Edwin M. Martin, 4101 Cathedral Avenue, NW., Washington, D.C.
Dated the 10th day of January, 1979.
L. DEAN BROWN,
DAVID DEAN,
EDWIN M. MARTIN,
Incorporators.
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District of Columbia, ss:
I, Irene Ingalls, a Notary Public in and for the District of Columbia,
hereby certify that on the 10th day of January 1979, personally ap-
peared before me L. Dean Brown, David Dean and Edwin M. Martin
who signed the foregoing document as incorporators, and swore that
the statements contained in it are true.
IRENE INGALLS,
Notary Public of the District of Columbia.
My Commission expires June 14, 1979.
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DEPARTMENT OF STATE-NEGOTIATED CONTRACT
Issuing office: U.S. Dept. of State, Supply and Transportation
Division, Washington, D.C.
Contracting officer: Gerald L. John [phone].
Contractor: The American Institute in Taiwan.
Type of Instrument: Cost Reimbursement Contract.
Administration By: Procurement Branch, Supply and Transpor-
tation Division, Department of State.
This Contract is entered into by and between the Department of
State on behalf of the United States of America (hereinafter "the
Department" or "the Government") represented by the Contracting
Officer, and the American Institute in Taiwan (hereinafter "the In-
stitute"), a District of Columbia nonprofit corporation. The rights
and obligations of the parties are governed by the following Schedule,
General Provisions and Attachments A through C, described in the
Table of Contents below. In the event of any inconsistency between
the Schedule and the General Provisions, the Schedule shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Contract.
THE UNITED STATES OF AMIERICA,
GERALD L. JOHN, Contracting Officer.
THE AMERICAN INSTITUTE IN TAIWAN,
Contractor.
1. Schedule :
Article I-Scope of Work.
Article II-Contracting Officer's Representative.
Article III-Period of Performance.
Article IV-Other U.S. Government Agency Participation
Article V-Estimated Cost.
Article VI-Financing and Funds Control.
Article VII-Prohibition Against Assignment.
Article VIII-Compensation and Benefits of Employees.
Article IX-Key Personnel.
Article X-Security Requirements.
Article XI-Reporting Requirements.
Article XII-Accounting and Audit.
Article XIII-Payment.
Article XIV-Allowable Costs.
Article XV-Records Management, Privacy and Freedon.
of Information.
Article XVI-Property (GFP) and Services (GFS) Fur-
nished to the Institute.
Article XVII-Procurement of Goods and Services.
(72)
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Article XVIII-Insurance and Bonds.
Article XIX-Conformity of Institute Operations with
Regulations.
Article XX-Immunity from Local Jurisdiction.
Article XXI-Unsatisfactory Performance.
Article XXII-Ethical Conduct.
II. General Provisions: Department of State General Provisions,
Form DS-1762 (11/77). Clause l.a. therein is restated as
follows: "As used in the General Provisions, the term 'Admin-
istrator,' or `Deputy Administrator' of the `Agency' shall
mean the `Secretary,' or `Deputy Secretary' of `State.' `His
duly authorized representative' means `any person or persons
or board (other than the Contracting Officer) authorized to
act for the head of the department or the Secretary.'
III. Attachments:
A. Compensation and Benefits for Institute Employees.
B. Contract Security Classification Specification, Form
DD-254.
C. List of Property Furnished to the Institute.
The Institute will perform the following services :
(a) Maintain offices in Washington, D.C. and other locations as
mutually agreed to by the parties;
? (b) Immediately prepare to commence operations in Taiwan no
later than March 1, 1979 (Preparations will include the development
of staffing, accounting, payroll and administrative systems as may be
necessary to carry out the Institute's responsibilities under this
contract) ;
(c) Carry out, on an unofficial basis, programs, transactions, and
other relations with or relating to the people on Taiwan, and perform
and enforce existing international and other agreements and arrange-
ments between the Government or any department or agency thereof
and the people on Taiwan, in accordance with the President's Memo-
randum of December 30, 1978, to Heads of Departments and Agencies,
entitled "Relations with the People on Taiwan" (44 Fed. Reg. 1075) ;
and
(d) Otherwise represent the United States and the American people,
and carry out functions on their behalf, as directed by the Contracting
Officer or the Contracting Officer's Representative, with respect to
the people on Taiwan.
ARTICLE II-CONTRACTING OFFICER'S REPRESENTATIVE
(a) The Contracting Officer's Representative (COR) shall be an
official designated in writing by the Contracting Officer.
(b) The COR is authorized to provide guidance and direction to
the Institute to implement the general scope of the work, within the
terms of this contract. The Institute will notify the Contracting Officer
and secure his or her approval before implementing any guidance or
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direction which the Institute believes will affect the cost of perform-
ance to the extent that additional funds will be required for perform-
ance. Whenever an increase in funding pursuant to this provision is
anticipated, the Institute shall provide an estimate of the cost of
performance with its request for the Contracting Officer's approval.
The COR shall be the Department official who is authorized to certify
that the invoiced goods and services have been received as outlined
in Articles XIII and XIV hereof.
(a) This contract shall be terminated on September 30, 1979, unless
earlier terminated in accordance with the General Provisions, or ex-
tended pursuant to paragraph (c) of this Article.
(b) Not later than June 30, 1979, the Institute will submit to the
Contracting -Officer -an estimate -of the costs of continuing to perform
services. The estimate must contain detailed information concerning
projected staffing, salaries, property, and other costs. On the basis of
this estimate, the parties will discuss the replacement of this contract
with a successor arrangement.
(c) If the parties have not entered into a successor arrangement by
August 30, 1979, the Government may at its option extend and re-
quire continued performance under this contract for an additional
period or periods not exceeding one year after September 30, 1979.
(d) The Institute shall not incur any costs or obligations beyond
September 30, 1979, unless specifically approved by the Contracting
Officer.
Subject to the approval of the Department's Contracting Officer,
the Institute may perform services for any other department or agency
of the Government, or third parties, under this contract or any other
arrangement. Directions to the Institute to perform additional serv-
ices for other departments and agencies under this contract will be in
the form of a Delivery Order against this contract, issued by a duly
authorized Contracting Officer of the department or agency concerned,
and shall include a definition of the work to be performed, an appro-
priate citation of funds obligated for this purpose and, if appropriate,
special billing instructions.
The total estimated cost of this contract to the Government is
$--------------
(a) Purpose.-Subject to the conditions set forth below, the Govern-
ment will advance funds or credit to the Institute in the amount of
$ - - - - - - - - - - - - - - to provide working capital for operations in accord-
ance with Department of Treasury Advance Financing Regulations
31 CFR 205 (Treasury Department Circular Number 1075). The
Director of the Office of Budget and Finance in the Bureau of Admin-
istration or whomever that official may designate in writing, herein-
after the "Administrator" of this advance or credit account, shall
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determine the initial amount of funds or credit to be made available,
as well as the future needs for such advances.
(b) Special Bank Account(s).-All advances or other payments under
the contract shall be made to the Institute's Special Bank Account(s)
with a bank or.banks approved by the Administrator. The funds in
such Special Bank Account(s) shall not be mingled with other funds
of the Institute and shall be withdrawn from such account only as
hereinafter provided.
(c) Use of Funds.-The funds in a Special Bank Account may be
used by the Institute solely to pay allowable costs as defined in Article
XIV of this contract, entitled "Allowable Costs".
(d) Bank Agreement.-Before any advance is made to a Special
Bank Account, the Institute shall enter into an agreement with the
bank at which such account is to be established in the form prescribed
by the Administrator clearly setting forth the character of the account
and the responsibilities of the bank with respect to it.
. (e) Lien on Special Bank Account(s).-The Government shall have
a lien upon any balance in the Special Bank Account(s) paramount to
all other liens, to secure the repayment of any advances made here-
under together with interest.
(f) Lien on Property.-A lien in favor of the Government, paramount
to all other liens upon the supplies and all other property of the
Institute, shall be secured to cover any and all advances made here-
under. The.Institute shall maintain adequate accounting control over
such property on its books and records. If at any time during,the
performance of this contract it becomes necessary to deliver any item
or items and materials upon which the Government has a lien as
aforesaid to a third person, the Institute shall notify such third person
of the lien herein provided and shall obtain from such third person a
receipt, in duplicate, acknowledging, inter alia, the existence of such
lien. A copy of each receipt shall be delivered to the-Contracting
Officer. If this contract is terminated in whole or in part and the
Institute is authorized to sell or retain termination inventory acquired
for or allocated to this contract, such sale or retention shall be made
only if approved by the Contracting Officer. Such approval shall con-
stitute a release of the Government's lien hereunder to the extent
that the proceeds of the sale, or the credit allowed for such retention,
is applied in reduction of advances then outstanding hereunder.
(g) Withdrawal and Withholding of Payments.-The Institute may
at any time repay all or any part of the funds advanced under this
contract. When so requested in writing by the Administrator, the
Institute shall repay such of the advances as are in the Administrator's
opinion in excess of current requirements. If the Institute fails to
comply with such a request, the Administrator (i) may withdraw
advances from the Special Bank Account by checks payable to the
Government signed solely by the Administrator, or (ii) withhold
amounts due the Institute from invoices submitted pursuant to Article
XIII, entitled "Payment". Upon completion or termination of the
contract, all remaining advances and interest charges shall be fully
refunded. In any event the Contracting Officer may unilaterally take
the following actions:
(i) Demand immediate repayment of the remaining balance of
advances made hereunder; and
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(ii) Take possession of and sell at public sale, at which the
Government may be the purchaser, or at a private sale, all of
any part of the property on which the Government has a lien
under this contract and, after deducting any expenses incident
to such sale, apply the net proceeds of such sale in reduction of
any remaining balance of advances hereunder; and
(iii) The Government may apply such returns of advances to
reduce any claims by employees of the Institute, claims of the
Government, or other claims against the Institute;
(h) Local Currency.-The Institute shall, to the extent practicable,
pay its expenses in Taiwan in local currency, and shall obtain its
local currency from a Disbursing Officer or other source designated by
the Administrator or the Contracting Officer.
(i) Interest Charges.-No interest shall be charged by the Depart-
ment for advances made hereunder. The Institute shall charge interest
at the rate established pursuant to Public Law 92-41, 85 Stat. 97, for
the Renegotiation Board on subadvances or down payments to sub-
contractors, and such interest will be credited to the account of the
Government. However, interest need not be charged on subadvances
on subcontracts with nonprofit educational or research institutions
for experimental, developmental or research work or as otherwise
authorized by the Contracting Officer. To the maximum extent pos-
sible, funds in possession of the Institute pursuant to this Article or
from any other source shall be deposited in interest bearing accounts
which offer the maximum benefit to the Government.
(j) Covenants.-During the period of time that advances may be
made hereunder and so long as any such advances remain available
to the Institute, it shall not without the prior written consent of the
Administrator:
(i) Mortgage, pledge, or otherwise encumber, or suffer to be
encumbered, any of the assets of the Institute whenever acquired;
(ii) Sell, assign, transfer, or otherwise dispose of accounts
receivable, notes or claims for money due or to become due;
(iii) Sell, convey, or lease any of its assets;
(iv) Acquire for value the stock or other securities of any
corporation, municipality, or governmental authority, except
direct obligations of the United States;
(v) Make any advance or loan to or incur any liability as
guarantor, surety, or accommodation endorser for any other firm,
person, or corporation;
(vi) Permit a writ of attachment or any similar process to be
issued against its property without procuring release thereof or
bonding the same within 30 clays after the entry of the writ of
attachment or any similar process;
(vii) Make any substantial change in management, ownership,
or control of the corporation;
(viii) Deposit any of its funds in a bank not approved by the
Administrator;
(ix) Create or incur indebtedness for borrowed money or
advances other than advances to be made hereunder, except as
specified herein;
(x) Make or convenant itself to make any capital expendi-
tures; or
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(xi) Make any payments on account of the obligations under
this contract except in the manner and to the extent herein
provided.
(k) Pursuant to the provisions of (b) through (j) above, the
Institute may be required to receive, control, account for and disburse
other Government funds as directed by the Administrator or the
Contracting Officer.
ARICLE VII-PROHIBITION AGAINST ASSIGNMENT (IN LIEU OF CLAUSE 10
OF THE GENERAL PROVISIONS)
Notwithstanding any other provisions of this contract, the In-
stitute shall not transfer, pledge, or otherwise assign this contract, or
any interest therein or any claim arising thereunder, to any party or
parties, bank, trust company, or other financing institution.
ARTICLE VIII-COMPENSATION AND BENEFITS OF EMPLOYEES
Employees shall be compensated in accordance with Attachment
A, entitled "Compensation and Benefits for Institute Employees."
Payments by the Institute for personnel costs incurred in accordance
with that Attachment shall be allowable costs under Article XIV of
this Schedule. All American positions will be classified in accordance
with position classification standards followed by the U.S. Govern-
ment (Foreign Service or General Service, as appropriate) . The posi-
tion classification structure for the Institute will be subject to approval
by the COR at the outset of performance, and on an annual basis
thereafter.
ARTICLE IX-KEY PERSONNEL
(a) The Institute personnel currently filling the positions of the Di-
rector, Secretary, and Treasurer in Washington, D.C., and the head of
the Institute's Taipei office, his or her deputy, and the administrative
officer are considered essential-to the successful performance of this
contract. The COR may alter this list of such positions by notifying the
Institute in writing.
(b) Any proposed replacement of such personnel by the Institute
shall require the agreement of the COR in writing, The Institute shall
provide the COR in advance of any proposed replacement with suf-
ficient data outlining the background, education, experience and other
qualifications for the position and of the individual concernced as the
COR may require.
Security Requirements shall be as specified on Form DD-254, At-
tachment B, hereto.
The Institute shall furnish the following reports:
(a) Progress Reports.-Monthly, or more frequently as required by
the COR, written reports of the progress of the Institute will be sub-
mitted to the COR. These reports shall be prepared to keep the COR
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apprised on a timely basis of the Institute's programs, transactions, and
other relations with or relating to the people on Taiwan and of events
which might have an impact on the Institute or its intended mission.
(b) Contract Status Reports.-All other activities of the Institute
not covered by the Progress Report shall be reported to the COR with
a copy to the Contracting Officer on a monthly basis. Contract status
reports shall cover separately all functions for which the Institute is
responsible under this contract, including such items as finances, staff-
ing, transportation, supply, housing, utilities, maintenance and com-
munications. Identification of any actual or potential problems with
the Institute's administrative plans for handling any problems should
be indentified.
(c) Financial Reports.-The Institute shall submit periodic financial
management reports to the Administrator, describing such items as
costs incurred, percentage of estimated cost expended under the con-
tract, or other items which would indicate a change in the Institute's
financial conditions.
(d) Personnel Reports.-The Institute shall submit reports concern-
ing its personnel as may be required by the COR.
(e) The form, content and detail of the above reports will be specified
by the Contracting Officer, the COR or the Administrator.
ARTICLE XII-ACCOUNTING AND AUDIT
(a) The Institute shall promptly establish accounting and payroll
systems which as a minimum will meet the applicable requirements
of title 41, Code of Federal Regulations (CFR), chapter 1, section ?
1-15, and will provide other financial data required by the Admin-
istrator. Section 15 of 32 CFR shall be referred to if further guidance
is needed.
(b) The accounting system shall be designed to charge the Depart-
ment for all direct costs associated with the performance of the work
covered under this contract and for all indirect costs which normally
would be charged to General and Administrative or Overhead ac-
counts for allocation to or among other cost centers (customers). The
system should provide for accounting for allocable direct costs which
may be incurred as a result of performance of functions contracted or
otherwise provided for outside of this contract or for special projects
which are being performed under this contract.
(c) The Administrator shall approve the Institute's accounting
system prior to implementation. Subsequently, the Institute shall
make changes in the accounting system upon the request of the
Administrator.
(d) The Institute shall have a Certified Public Accountant, approved
by the Administrator, audit all accounting and fiscal activities of the
Institute at least once each year. Said accounting firm shall prepare and
certify the Balance Sheets, a Statement of Financial Condition (similar
to a Profit and Loss Statement) and a Cash Flow Statement for the
annual period ending September 30 of each year and shall submit
them to the Contracting Officer by November 1 of that year.
(e) The Institute shall permit the Comptroller General of the United
States and other persons designated by the Contracting Officer to
have.access to the books and records of the Institute and to audit its
operations. The Institute shall include provision for such access and
audit in its grants and contracts, as directed by the Contracting Officer.
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?
(a) Once each month, or more frequently if authorized by the
Contracting Officer or the COR, the Institute may submit to the COR,
in such form and detail as may be directed, vouchers or invoices for
the payment of costs incurred in accordance with Clause Number 7
of the General Provisions, entitled "Allowable Cost and Payment."
(b) When receipt of goods or services has been certified, payment
in the form of funds or continued credit shall be made into the Special
Bank Account(s) established under article VI (b) of this Schedule by
the following: Office of Finance-General Claims, P.O. Box 9487,
Rossyln Station, Arlington, Va.
(c) Separate billing instructions will be provided to the Institute
by the Contracting Officer, as appropriate, with respect to services
performed by the Institute under article IV of, this Schedule.
Except as otherwise provided herein, all contract costs will be re-
imbursed as specified in Clause 7 of the General Provisions, entitled
"Allowable Cost and Payment." Any charges for which the allowa-
bility is questioned by the COR or the Department's Auditor shall be
submitted to the Contracting Officer for approval prior to payment.
The decision of the Contracting Officer as to allowability of such
charges shall be final and not subject to Clause 25 of the General
Provisions, entitled "Disputes". Representational costs shall be con-
sidered allowable costs only to the extent approved by the Adminis-
trator in writing.
ARTICLE XV-RECORDS MANAGEMENT, PRIVACY AND FREEDOM OF
INFORMATION
Even though the Institute as a private corporation is not subject
to the Freedom of Information Act, the Privacy Act, or the Records
Management Act, the Institute shall nevertheless establish records
management policies and procedures which are consistent with the
policies and procedures applicable to Government records covered
by the Records Management Act, and shall maintain such records
consistent with the Freedom of Information and Privacy Acts as if
such acts applied to the Institute. The Institute shall refer requests
from the public for access to the Institute's records to the COR.
ARTICLE XVI-PROPERTY (GFP) AND SERVICES (GFS) FURNISHED TO
THE INSTITUTE
(a) GFP will be furnished to the Institute as described in Attach-
ment C. For the purposes of this contract, GFP shall include data and
records transferred to the Institute or any records or data created in
the performance of this contract. The list of GFP in Attachment
C shall be updated quarterly for quantity changes and property
additions and deletions. The Institute shall receive and utilize the
GFP in accordance with Clause 23 of the General Provisions.
(b) Before implementing any management plan that contemplates
the performance of a function by or for the Institute which would
involve an increase in staff or the procurement of goods and/or
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services, the Institute will first obtain a determination from the
ARTICLE XVII-PROCUREMENT OF GOODS AND SERVICES
than goods 1 h
extent possible
w
e
regula
set and Chapters 1 and 6 of 41 CFR. In each case where the Institute
therefor must be full documented in the files.
(b) The Institute is hereby authorized to use approved Govern-
ment sources of supply such as executive agency contracts, General
Services Administration Schedule Contracts and such procurement
11 d
ARTICLE XVIII-INSURANCE, BONDS AND CLAIMS
g Officer, d bject to his
pproval, the Institute shall:
(a) Obtain Fidelity a,~nd Forcrery bonds on individuals empowered
dispense funds, obtain services and control or dispose of GFP to
b Provide Liability to Persons f ll (I
lieu of Clause 24 of the General Provisions):
procure b
(i) Throughout the performance of this contract, the (bodily injury and property damage) insurance, with respect to
?
performance under this contract, and such other insurance as the not
lldb
the Institute unless such other property is controlled by the
amounts of
ability (iii) The Institute shall be reimbursed: (1) the reasonable cost of thi
exception 4
s clause
without
d to an
d as
(other than property (A) owned, occupied or used by the Institute tute,
1 d
by insurance p
pd by Judgments
its liabiliti
b b
y perfor
the Institute with respect to his or her functions as an employee
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81
of the Institute), the cost and expense of which may be reimburs-
able.to the Institute under the provisions of this contract and the
risk of which is then uninsured or in which the amount claimed
exceeds the amount of coverage. The Institute shall furnish im-
mediately to the Contracting Officer copies of all pertinent papers
received by the Institute. If the amount of the liability claimed
exceeds the amount of coverage, the Institute shall authorize the
Contracting Officer to collaborate with counsel for the insurance
carrier, if any, in settling or defending such claim. If the liability
is not insured or covered by bond, the Institute shall, if required
by the Contracting Officer, authorize the Contracting Officer or
his or her representative to settle or defend any such claim and to
represent the Institute in or take charge of any litigation in
connection therewith; provided, however, that the Institute may
be associated with the Contracting Officer or his or her representa-
tive in the settlement or defense of any such claim-or litigation.
(v) The Institute shall provide insurance coverage up to the
following amounts:
Third Party Liability: Bodily Injury-$300,000 each
occurrence. Property Damage-$10,000 each occurrence.
Auto Liability: Bodily Injury-$100,000 each person,
$300,000, each occurrence. Property Damage-$20,000 each
occurrence.
The Institute shall determine if local statutes or customs would
dictate lesser amounts, and if so, advise the Contracting Officer.
ARTICLE XIX-CONFORMITY OF INSTITUTE OPERATIONS WITH
REGULATIONS
In addition to specific requirements set out in this contract, the
Institute shall in the conduct of its operations be guided by, and as
directed by the COR conform to, current or future regulations and
directives applicable to the Department.
ARTICLE XX-IMMUNITY FROM LOCAL JURISDICTIONS
Any immunity accorded by the people on Taiwan to the Institute
or its personnel may be waived by the COR in any case in which the
COR determines such action to be appropriate.
ARTICLE XXI-UNSATISFACTORY PERFORMANCE
If the Contracting Officer advises the Institute that its performance
under this contract is unsatisfactory, the Institute shall take corrective
action within 30 days and notify the Contracting Officer what action
has been taken. If no action is taken or the Contracting Officer deter-
mines that the action is' inadequate, the Contracting Officer may
require the Institute to call a meeting of the trustees of the Institute,
at which time corrective action shall be discussed and a plan of action
agreed upon by the trustees and the Contracting Officer.
ARTICLE XXII-ETHICAL CONDUCT
The Institute shall require in all of its contracts of employment that
all of its trustees, employees, consultants, and other advisors conduct
themselves during and subsequent to their relationship with the
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82
and implementing regulations, as if such statutes applied to such
Institute in a manner consistent with EMPLOYEES 18 U.S.C. 201, 202, 205-209
trustees, employees, consultants, and advisors. The Institute shall
enforce the provisions of this Article during and subsequent to the
terms of such contracts through all appropriate means, including the
institution of judicial proceedings.
ATTACHMENT A-COMPENSATION AND BENEFITS FOR INSTITUTE
U.S. CITIZEN EMPLOYEES
on those of the U.S.
1. The Institute will base its salary schedule
Foreign Service and the U.S. Civil Service (General Schedule).
have reemployment rights with the U.S. Government the same salary they receive
positions.
d in
3. The Institute will, upon notice by an employee's former agency,
r former increase e sa ary o a ormer .
th 1 f f U.Government employee employed
by the Institute so as to give effect to any promotion which could
b lb such agency.
have een granted y suc5924 in accordance with the Regulations (Government
1 V -,
Standardized R 1ati (Gevernment
and m
Civilians, foreign areas) publishes lby the Department of 1State and may
"U.S Tl _ -_ _ __L___ _~L of
Taiwan
State Indexes of Living Cost Abroad" published by for the Bureau of
L Statisti Cost of Living Abroad (COLA).
use the local Th I tit t will t es which may be assessed in Taiwan
5. a ns u e wi pay any ax
paid by the Institute to its U.S. citizen
against the compensation
empl oyees.
6. The Institute will pay a tax equalization allowance as may be
necessary to assure that amounts paid by the Institute to its U.S.
citizen employees result in after tax income as if those employees
t d b Government agency.
were employed an paid y a e
7 Th basic salary paid by the Institute to any employee who is
simultaneously receiving an annuity or retired pay from the U.S.
Government will be reduced as necessary to assure that the aggregate
of ? ch salary and annuity or retired pay will not exceed in any calen-
have
oyee could
empl
the
amount
daryear
rece ployed by the Government in a position of comparable salary.
8. The Institute shall establish annual, sick and home leave plans,,,
travel and transportation regulations, standards for claims and reim-
bursements for loss of property, injury or death incident to service,
continuation of salary and allowance in a missing status and medical
and other benefits based upon those applicable to the u.a. Foreign
ee's leave rivile es the em p
Service In determining an employ p g P
prior U.S. Government Employees service, including leave balances, will be taken
into account. may transfer ,.nnua sick an d home leave
. Claims
Institute
the
overnment
G
ith the
b eld
fil pursuant to these standards shall be referred to the Department for
processing.
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FOREIGN NATIONALS.
9. Subject to the Contracting Officer's approval, the Institute will
adopt a Subject
compensation plan for.salaries and benefits (including
workmen's compensation) for its foreign national personnel in Taiwan,
and will adjust such plan from time to time in accordance with locally
prevailing compensation practices.
10. Foreign national personnel who are to be initially hired by the
Institute in Taiwan and who already have Civil Service Retirement
(CSR) coverage will be offered an opportunity to continue such
coverage, to the extent this is possible under U.S. law. Those without
CSR coverage and aliens hired in the future will not be given CSR
coverage but will receive prevailing benefits.
11. The Institute shall amend its local compensation plan to pro-
vide local retirement or local social security or provident plan coverage
based on prevailing local practices for its foreign national employees
not covered under CSR.
12. Foreign national employees who were employed by the U.S.
Government just prior to their employment by the Institute may
have their existing annual and sick leave balances in their U.S.
Government positions carried over to their Institute positions as well
as longevity for the purposes of determining periodic step increases
and severance pay benefits provided such employees did not receive
severance pay or immediate retirement or lump sum leave payments
at the conclusion of their former employment.
13. The Institute may employ under contract part-time, intermit-
tent or temporary personnel.
14. The Institute will make employee deductions and will make
current payments of such employee deductions and employer con-
tributions to U.S. retirement and insurance programs as required to
maintain coverage of its employees under such programs.
15. Except as may be otherwise specifically provided in this contract,
the benefits provided to any of the trustees, officers, employees,
consultants, advisors, or any other persons retained, by the Institute
shall not exceed in type or amount the benefits accorded to Govern-
ment employees in similar circumstances.
O
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