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45–502 CC








MAY 22, 1997

Printed for the use of the Committee on International Relations

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BENJAMIN A. GILMAN, New York, Chairman

HENRY J. HYDE, Illinois
CASS BALLENGER, North Carolina
EDWARD R. ROYCE, California
JAY KIM, California
TOM CAMPBELL, California
JON FOX, Pennsylvania
LINDSEY GRAHAM, South Carolina
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ROY BLUNT, Missouri
SAM GEJDENSON, Connecticut
TOM LANTOS, California
PAT DANNER, Missouri
WALTER CAPPS, California
BRAD SHERMAN, California
BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida
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RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff

Subcommittee on International Operations and Human Rights
CHRISTOPHER H. SMITH, New Jersey, Chairman
HENRY J. HYDE, Illinois
CASS BALLENGER, North Carolina
LINDSEY O. GRAHAM, South Carolina
TOM LANTOS, California
GROVER JOSEPH REES, Subcommittee Staff Director and Chief Counsel
ROBERT R. KING, Democratic Professional Staff Member
ELISE M. KENDERIAN, Staff Associate

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    Mr. Hongda Harry Wu, Executive Director, The Laogai Research Foundation
    Mr. Fu Shengqi, Chinese dissident and Laogai survivor
    Ms. Maranda Yen Shieh, President, Greater Washington Network for Democracy in China
    Mr. Peter Levy, President, Labelon/Noesting Company
    Mr. Jeffrey Fiedler, President, Food and Allied Service Trades Department AFL–CIO

Prepared statements:
Hon. Christopher H. Smith, a Representative in Congress from New Jersey and Chairman, Subcommittee on International Operations and Human Rights
Mr. Harry Wu
Mr. Fu Shengqi
Ms. Maranda Yen Shieh
Mr. Peter Levy
Mr. Jeffrey Fiedler


THURSDAY, MAY 22, 1997
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House of Representatives,
Subcommittee on International Operations and Human Rights,
Committee on International Relations,
Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:16 a.m., in room 2172, Rayburn House Office Building, Washington, D.C., Hon. Christopher H. Smith (chairman of the Subcommittee) presiding.
    Mr. SMITH. The Subcommittee will come to order.
    Today's hearing is about the continued production of goods by forced labor in prisons and in the Laogai, the so-called reform-through-labor camps, maintained by the Communist Government of China.
    Thanks in large part to the heroic efforts of our witnesses today, the world can no longer claim ignorance of the Laogai. Two years ago at a hearing of this Subcommittee, Harry Wu and five other Laogai survivors bore witness to some of the cruelty they had suffered in that system.
    Chinese labor camps house countless prisoners of conscience, political dissidents, and religious believers. Camp inmates are subjected to brainwashing, torture and forced labor. By any sane reckoning, those inmates are slaves.
    The Beijing dictatorship has long used its system of labor camps to crush dissent and to remove so-called counter-revolutionaries from Chinese society. More recently, it has begun using them to turn a profit. As we will hear today, the United States and some American businesses have been complicit in making that repression profitable.
    We have long known that the Chinese dictatorship exploits the slave laborers in its camps to produce goods for exports. Laogai inmates are forced to make any number of the products that you and I end up purchasing in our local malls—from clothing to automotive parts, office supplies to Christmas decorations.
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    Under U.S. law, products of forced labor should never make their way to the American shores. Since 1983, it has been illegal to import goods made by forced labor into the United States.
    In 1992, in an effort to stem the flow of Laogai-made goods, the United States and China signed a Memorandum of Understanding designed to ensure U.S. access to the information necessary to effect its import ban on prison labor goods.
    Under the MOU, the Chinese Government committed itself to investigating suspect enterprises and allowing U.S. diplomats to visit suspect facilities. Not surprisingly, Beijing has been less than cooperative in fulfilling its obligations. Laogai-produced goods continue to enter the United States. In an effort to improve China's performance, the United States and China signed a Statement of Cooperation implementing the MOU in 1994.
    It seems increasingly clear that these agreements have failed. The law on the books does not keep slave-made Chinese products off our shelves. Beijing continues to resist compliance with the MOU. It is slow in responding to U.S. requests for information. What responses it does provide lack sufficient detail.
    The Chinese Government frequently refuses to allow the United States to inspect facilities suspected of using forced labor. Furthermore, many Laogai enterprises make it difficult to trace banned products by commingling their output with goods from non-prison sources and by selling their goods through outside businesses.
    Thus, the commercial exploitation of slaves in China's labor camps is effectively an open secret in the world of commerce. At least one of our witnesses today will detail how American businesses can and do negotiate with businesses in China to procure the less expensive products made by slaves of the Chinese dictatorship.
    The current situation is terrible. The American people are being duped into purchasing products made by slave laborers. American businesses are profiting from that slavery. Our failure to stop the import of Laogai-made products does not merely show an indifference to the repression in the PRC, but it amounts to active support of such repression.
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    Whenever those of us who work for human rights begin talking about the need to impose sanctions to discourage these inhumane practices, certain commercial interests respond with a lecture on the need for what they call constructive engagement with the Chinese regime.
    But, when their own interests are threatened, for instance, by CD and software piracy, they do not place their faith in the hope that continued openness and exposure to American values will convince the Chinese dictatorship to change its ways. Instead they work for serious, tangible economic sanctions against the Chinese Government, and I happen to think they are right.
    Whatever else the Beijing dictators may be, they are not stupid. If economic sanctions are regarded as a legitimate tool in the war against software piracy, then why not in the war against torture? Why not in the war against forced abortion, against religious and political persecution, against products produced with slave labor?
    As we will hear today, in the absence of any serious economic disincentive to forced labor, the practice will not just continue, but it is likely to get worse. The Laogai has become so profitable that the Chinese Government now plans to expand it.
    I look forward to hearing the testimony of our very distinguished witnesses, and I expect that they will help us better understand the forced-labor regime in China and how current U.S. law has failed to fulfill its aims. I hope that they will also help us decide what we can do to address this problem in the coming week and months in order to fix it.
    I would like to introduce at this time our very distinguished panel, first of all, in the order that I would ask that they make their presentations.
    Harry Wu was first arrested as a young student in Beijing for speaking out against the Soviet invasion of Hungary and criticizing the Chinese Communist party. In 1960, he was sent to the Laogai, the largest forced-labor camp system in the world today, where he was imprisoned for 19 years in 12 different forced-labor camps.
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    When he was finally released in 1979, Mr. Wu left China and came to the United States in 1985 as a visiting professor of geology of the University of California at Berkeley.
    In the summer of 1995, Mr. Wu was arrested by the Chinese Government when he tried to enter China and was held for 66 days before being convicted in a trial for stealing State secrets. He was sentenced to 15 years, but immediately expelled as a result of an extensive international campaign launched on his behalf.
    We in this Subcommittee were not slack on that issue as well. We held a hearing during Harry's incarceration and detention, and legislation that we produced got onto the House floor calling for Harry's release.
    Since his release, he has continued his work in publicizing the fight to condemn the Laogai and to document its atrocities. He is the author of three books, and he also established the Laogai Research Foundation in 1992. The Foundation is recognized as the leading source of information on the human rights situation in China's forced-labor camps.
    Our second witness today will be Mr. Fu Shengqi, who has dedicated his life to the pro-democracy movement in China since 1978. In 1980, he organized the all-China civilian publication, Publications Federation. He served as editor-in-chief of the Federation's publication and wrote as a representative of the 1979 pro-democracy activities.
    In April 1981, Mr. Fu was arrested and sentenced to 7 years in the Laogai on the charges of counter-revolutionary propaganda and incitement. He continued his activities after his release, and in May 1991 he was arrested for a second time because of his involvement in the publication of an underground magazine called Resurrection.
    He was held without trial for 17 months and was finally brought to trial in February 1993 as a result of international pressure. He was convicted once again for counter-revolutionary propaganda and incitement and sentenced to 2 years in prison and deprivation of his political rights. Mr. Fu was released following his conviction because of the international attention brought to bear on his case.
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    Mr. Fu was arrested again in 1993 and served in a Shanghai re-education-through-labor farm until October 1995. In 1996, he was granted political asylum in the United States.
    Peter Levy has been the president of the Labelon/ Noesting Company since January 1994. The company manufactures paper clips and fasteners for office products and is located in Mount Vernon, New York. From 1988 to 1993, Mr. Levy served as the president of the company, the predecessor of the company that he is now the head of.
    Prior to his position, Mr. Levy was part of the Management Information Consulting Division of Arthur Andersen & Company from 1983 to 1988.
    Our next witness is Maranda Shieh, who joined the Greater Washington Network for Democracy in China in 1989, and has been its president since 1992. Ms. Shieh has also served in the Washington office of Friends of Hong Kong and the Macao Association as a consultant since 1993 and then president since 1996. Ms. Shieh was also the chief editor for the bi-weekly Chinese publication, Democratic China.
    In 1995, Ms. Shieh started to work for the Laogai Research Foundation and is currently a coordinator at the Foundation for special projects, serving as a liaison between the Foundation and the Chinese communities.
    Finally, Mr. Jeffrey Fiedler is the president of the Food and Allied Service Trades Department of the AFL–CIO. He has also served as the director of the Laogai Research Foundation and frequently has provided this Subcommittee with very valuable insights and information on what is going on in China in the prison camps.
    Mr. Wu, if you could begin your testimony.
    Mr. Wu. Mr. Chairman, it is my honor to be here again for this opportunity to express my concern about the import of forced-labor products from China.
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    Why are we concerned about the products? Because the products are made by men and women. We want to know how many there are, where they are, why these people are forced to labor and how they are forced to labor. This is a human rights issue.
    The Laogai Research Foundation works very hard to identify how many camps there are today in China. We interviewed a number of the victims to better understand the whole system. Your Subcommittee has held several hearings on this issue. I very much appreciate that.
    Today I want to focus on one issue, the products. As you mentioned, the Chinese Government in October 1991 publicly guaranteed to stop the export of illegal products. They said if anyone exports the forced-labor products, they would deserve punishment. Are they keeping their word?
    Today we present evidence for you in front of you to tell you that the Chinese Government repeatedly lied to us and lied to the world. Unfortunately, the American Administration is not really working very hard to enforce the law to forbid these immoral, unethical, illegal products into the United States.
    Today I want to introduce a Chinese term to this Committee. In China, they have a term they call ''prison economy''. This has never happened in any other country in the world. Two years ago, the term was ''Laogai economy''. In December 1994, the Peoples Congress of China stopped using the term Laogai because they are afraid that Laogai would become a term used the same as Soviet gulag.
    Anyway, in China they have the so-called prison economy. They are talking about how the prison economy today is thriving, growing, rapidly growing. That means the prison enterprises, and also the prison workers, are growing.
    It is true. We find the information according to Chinese Government information. In 1996, they had 1,400,000 so-called reform-through-labor prisoners. According to Chinese information, in 1996, in China they have 1,780,000 re-education-through-labor prisoners. This is a significant growth.
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    We know that when Deng Xiaoping came to power in 1979, in re-education camps there were probably only a couple thousand people. Deng Xiaoping said we need this prosecution system.
    The number, and I just gave to you, 1,400,000 and 1,780,000, did not include the people put in the detention center waiting for trial and also forced in labor and also did not include the people serving the sentence and forced to resettle in the camp as the so-called workers. That became a large number of the forced labor.
    According to Chinese information, until 1992, there were 200 different kinds of products exported to foreign countries. As you mentioned, the United States has a law, a Federal law, since 1932 to not allow any kind of product if made or processed by forced labor or prison labor from anywhere to import to the United States.
    In 1992, the United States and China signed an agreement, a so-called Memorandum of Understanding, to try to stop the illegal importation. So far, as we learned, this memorandum can be interpreted in different ways, meaning it is useless because it does not work.
    Today on this table we can see so many products found in the United States from rubber shoes to the garments. We cannot bring the big stuff—the diesel engine and stamping machines.
    Let me give you some examples to explain the situation. In 1992, we found a very important labor camp located in Shanghai. The name is Shanghai Laodong Pipe Factory. Actually, this is the No. 4 prison. Then we found a Chinese internal document that has two different names. The real name is No. 7 Laogai Detachment.
    All the evidence we submitted to the Customs Service. There was no action. Suddenly 4 years later, the Customs, according to the Memorandum of Understanding, requests a visit. Four years later, in 1996, the Chinese Government allowed American representatives to visit the camp, a sanitized camp, and after the visit American Customs lifted the detention order. We had to approve the facilities to work in.
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    The second piece of evidence I want to present to you is a chain hoist case. We have the chain hoist right here. This is a picture. We took it at the facility.
    The name is Zhejiang Wulin Machinery Factory. They make the chain hoists. Americans have a long-term relation with them and every year they import a large quantity to the United States. Until today, the Americans did not take any action. The products are in the United States.
    The second case I want to present to you is the tools. In 1993, we received information that Diamond brand hand tools were found at an American company located in Houston. They knowingly imported the hand tools to the United States.
    Only last week, the Customs Service submitted a request to visit the prison camp, and we do not know when the Chinese will be ready for them to make a visit. No inspection yet.
    These are the prisoners actually making these hand tools. They now set up a new entrance and changed the factory name, to so-called Hangzhou Shenda Hand Tools Company. It is ready for American representatives to visit there.
    According to Chinese information, new information, a magazine titled Prison Works Newsletter issued by Guangdong Provincial Prison Bureau issued in 1996, June. There is a new facility established in the Shantou area. It is close to the special economic zone of Shantou.
    The information said since 1982, the prisoner number increased from 700 to 3,800, the number increasing until very close to 3,900. According to the information, it said this prison facility is making mineral water, garments, chinaware and artificial Christmas trees.
    Based upon this Chinese internal document, the Laogai Research Foundation conducted an investigation inside China. When finished, we will give the world the full report.
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    Today we have another witness here who is a brave American by the name of Peter Levy. Because of his consciousness and his business, he made an investigation inside China and got evidence to prove that binding clips were imported from China by OIC located in New Jersey. Today easily you can find the binding clips in Staples, everywhere. It is processed by female prisoners, and later he will give the details.
    Today in this conference I will present a very important thing, the auto parts. These auto parts——
    Mr. SMITH. If you could just hold for 1 second, Harry? The elusive switch.
    Mr. Wu. These are auto parts made by Shanxi Province No. 3 prison and imported by a Chinese Government-owned company, so-called Minmetals and MM Rotors. We found evidence that in one purchase order they shipped 160,000 pieces to American automobile secondary markets, including Midas Muffler.
    The Chinese information also said these parts are also supplied to the joint venture with Beijing and Chrysler in Beijing making the American brand Cherokee Jeep. These parts make American enterprises bankrupt because there is no cost of the labor, and American enterprises are competing.
    Mr. Chairman, I believe no American would want to buy Christmas lights from China. Nobody would want to buy artificial Christmas trees from China. I do not think Americans can enjoy the artificial flowers in the dining room made by blood and tears. I do not think the Americans like these no-cost, immoral products in their market. I wish we could stop the trade. The products made by blood and tears tell us this slavery system, the biggest slavery system today, still exists in front of us. We do nothing about it.
    The core of the human rights abuses in China is there is a huge labor camp system. When we are talking about freedom fighters, when we are talking about Muslim freedom fighters, when we talk about the suppression of underground church activities, we have to know where they are.
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    Millions and millions of people are faceless, voiceless and nameless suffering today in this slavery system. We have to stop the trade because the trade benefits the Chinese brutal system.
    Thank you.
    [The prepared statement of Mr. Wu appears in the appendix.]
    Mr. SMITH. Mr. Wu, thank you very much for your testimony.
    I would like to ask Mr. Fu if he would begin now.
    Mr. SHENGQI. Mr. Chairman, it is my honor to testify before your Committee.
    From January, 1983, I was a prisoner at the Shanghai Municipal Prison because of my political statements. The government had devised a system of work points to control the prisoners. Prisoners were forced to labor. Work points were deducted for failure to fulfill quotas.
    Once or twice a week, a prisoner could watch TV. Once a month they could watch a movie, buy foodstuffs, or meet with their family. These benefits were deprived for failure to fulfill quotas or for bad performance in reform. Hence, many prisoners were forced to labor overtime to maintain the work points. Those who were slower could have only 3 or 4 hours of sleep a day.
    I witnessed how the prison established a radio assembly shop. As I learned from the other prisoners and policemen, the prison also ran a regular print shop and other shops.
    From July, 1993, to April, 1994, I was incarcerated at the 2nd Company, 3rd Battalion, Shanghai Re-education-Through-Labor Farm located at Dafeng County, Jiangsu Province. Again, my political activities were my crime.
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    In cooperation with Shanghai No. 18 Knitting Mill, the battalion made interlock jerseys. Re-education-through-labor or Laojiao inmates were forced to labor and reform their thinking. In the busiest time, they had to labor nearly 20 hours a day. Inmates, while working at sewing machines, often fell asleep.
    In slack season, several hours a day inmates sat on benches studying, writing a report of what they learned from the studies. The 1st Company, 3rd Battalion, established a shop for making the teaching slides.
    In April, 1994, I was transferred to the 5th Battalion. In 1994 and in 1995, I witnessed how from June to October the battalion's 2nd Company assembled multi-colored Christmas lights for export for Haiman Lamps Factory and a lamps factory of the Jiangsu Province. Each box consisted of 36, 50, 100 or 200 lights on a string. The lights I have at hand are similar with those processed at the 2nd Company.
    The task was hard. Every inmate had to labor overtime, many laboring until 1 or 2 at night. Those who failed to fulfill quotas were punished. Inmates at the woolen sweater mill also often labored overtime. Inmates in farming had to labor overtime even more. For instance, inmates who transplanted rice seedlings often labored from 7 in the morning until 8 at night.
    On Laojiao farms, inmates were often beaten and cursed. The government cadres cuffed and kicked them at will. Those Laojiao inmates trusted to supervise other inmates beat and cursed them even more. I was also beaten by them.
    In China, reform-through-labor or Laogai and Laojiao facilities are not common prisons, but are the Communist party's tool for consolidating its one-party rule. Not only do the facilities force prisoners to labor for profit, they also force inmates to accept brainwashing. The thought reform made them surrender to the Communist party.
    [The prepared statement of Mr. Shengqi appears in the appendix.]
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    Mr. SMITH. Mr. Fu, thank you very, very much.
    I would like to ask our next witness, Ms. Shieh, if she would begin now.
    Ms. SHIEH. Mr. Chairman, I want to thank you for holding this hearing. I also want to show our appreciation from the Chinese community for your strong support of the human rights cause in China.
    My name is Maranda Shieh. I am here today to testify about the Laogai products that can easily be exported to the U.S. market. I would testify with my own records from my trip to China.
    Based on information from this publication, this 1996 publication by the Chinese Government, and this is a copy of it, talks about the prison economic development policy and also talks about their actual plan to expand the prison.
    Based on the information on this document, I took a trip to China this March under the direction of the Laogai Research Foundation to investigate in person the textile products exported from China to the United States.
    According to this publication, the Jieyang Prison, a prison in Guangdong formerly called the Dongjing Labor Reform Detachment, has been in the garment business for 12 years. Recently, under the new policy of the Chinese Government, they plan to move its garment factory to the new location at Jiedong County and expand its prison labor force from 150 to 1,500 in making garments. Its goals were to reach an annual revenue of $8,000,000 RMB, which is about $1,000,000 U.S. dollars, by 1996.
    They also have a close relationship with a local garment factory called Jixiang Knitting Garment Factory. Later I will call it Jixiang Factory. That factory actually has a lot of business dealings with Hong Kong businesses.
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    The Jixiang Garment Factory actually is in the Shantou Special Economic Zone, which is one of the three special zones in Guangdong Province. The new prison they plan to move to is about 32 miles north to Shantou Special Economic Zone. Jixiang Factory specializes in manufacturing garments with material and patterns provided by the buyer, most actually imported from outside China. That is how the prison operates its garment factory as well.
    I made my investigation posing as an American businesswoman. I was able to order samples like the samples shown here. I was able to order samples and sign contracts with Jixiang Knitting Garment Factory. I even arranged a special textile quota with the local textile import/export company, which is actually a government company. Only they have the right to give quotas for textile products. I was able to actually arrange for samples to be sent to both the United States and Europe. We do not know exactly if these samples are Laogai products, but we think it is highly possible.
    This contract, if it is fulfilled by our paying the quota charge and issuing the letter of credit to the supplier, then the textile products we ordered will be shipped from Shantou to Chicago via Hong Kong. The Laogai products can reach the U.S. market through the legitimate Jixiang Factory in Shantou.
    I visited the Jixiang Factory four times, and there are several observations I made which are all backed up by the pictures I took and videotapes. The factory is very small. Actually, the owner said that they have 100 workers. Originally I was going to show the pictures here, but because of the lighting situation here, I cannot. Later we found the factory actually only has less than 40 workers on a delivery day.
    According to Mr. Lee, their monthly production is 50,000 pieces of garment products. Mr. Lee also admitted he sometimes had to contract out certain types of orders when the order exceeds their capacity. He also admitted that he had a contract relationship with this particular Jieyang Prison, and he had to go to the prison himself to oversee the work there.
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    Mr. Lee also indicated, when I asked how much the price of the product would be if the products are made by the prison, he actually knew exactly how much. He said an order at $50 per dozen would probably cost only $35 per dozen, and an order of $60 per dozen probably would only cost $40. He also mentioned that the buyer needs to spend about $8 to $10 per dozen on bribes to the prison officers.
    When I asked actually how the prison would distribute their profit, Mr. Lee indicated that it will go to the prison and officers. The prisoners sometimes will get some rewards if they perform well, but he indicated and actually said, ''They are forced to labor, you know. They do not have to pay them anything.''
    When I first asked Mr. Lee to see if he could contract out our order to the prison to save some money, his reply was very circumspect. Later when I asked if he could make some arrangement for me to visit the prison so that I can be sure if their quality meets our standards, he indicated that he could make some arrangements.
    In this publication, there is one paragraph specifically indicating the relationship between the prison and the Hong Kong businesses. The translation is:
    ''Hong Kong businesses want to cooperate with Jieyang in the garment project because their representatives saw the advantageous conditions we have in management and the labor force. Our garment project is our first large-scale production and processing line where we cooperated with foreign business; the orders are abundant; and our production runs relatively effectively. It is the pillar enterprise which will bring economic development at Jieyang Prison...''
    This was according to Mr. Lee, and actually Mr. Lee gave me the name cards from these Hong Kong companies. Later we actually called these companies, and they admit that they have close relationships with Jixiang Garment Factory. Those factories are: the first one is Roxy Garment, and they actually sell Esprit brand products; Sam Wing Garment Factory; Chaifa Holdings, Ltd., and that company sells Playboy, Garfield and Arnold Palmer brand products; and the last is Worldwise Industrial, Ltd. All of them are very active in the international market.
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    I went to the Jieyang Prison twice to take a closer look at the facility. Because there are some ''Prison Forbidden Area'' signs near the entrances, I did not venture in. However, I was really shocked by the brand new modern high rise buildings in that desolated countryside.
    In conclusion, there are three major findings from this investigation. First, we find out that it is extremely easy for Laogai garments to reach the world market, including the American market, even with government textile quota restrictions.
    Second, the Chinese Government clearly does not show any concern or worry about selling forced-labor products to the world market. There is no indication they would stop doing this.
    Third, we learned that any private enterprise, new or old, including those in Hong Kong, can be established easily and used as front companies for the export of Laogai goods. The Laogai products can then easily be exported to the American market without any trace of the original source.
    Thank you.
    [The prepared statement of Ms. Shieh appears in the appendix.]
    Mr. SMITH. Thank you very much, Ms. Shieh.
    Mr. Levy.
    Mr. LEVY. Mr. Chairman, I appreciate the opportunity today to discuss the problem of forced labor in China from the perspective of an American businessman.
    My name is Peter Levy. I am the president of a small manufacturer of paper clips and paper fasteners for the office products industry. My company employs approximately 20 people in Mount Vernon, New York, and has been in existence since 1913. In addition to our manufacturing plant in New York, we also import some products from China.
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    My adventure sprang from a conversation in the first half of 1995 about a competitor who was able to sell a certain product, binder clips, at very low prices. The competitor discussed was Officemate International of Edison, New Jersey. During that conversation, I was told that Officemate was purchasing their binder clips from a Chinese manufacturer that was using prison labor to assemble the product.
    Since then, I have learned that the binder clip manufacturer in question is Allied International Manufacturers Stationery Company, Ltd., which is also known as AIMCO Nanjing, which was incorporated as a subsidiary of a New Jersey corporation named Allied International Manufacturers Company, also known as AIMCO New Jersey, by Mr. Peter Chen.
    Mr. Chen is listed as the chairman of the board on the 1992 business license issued in China for AIMCO Nanjing. Mr. Chen and his wife, Shwu Chen, are listed as the major owners of Officemate International, which is a distributor of these products in the United States.
    In January, 1986, before I made the decision to undertake my own research, I informally contacted the Department of State and the U.S. Customs Service regarding my suspicions. I was told that the State Department did not feel that the Chinese Government was living up to the Memorandum of Understanding on prison labor.
    The Customs Service suggested that we petition the Service as specified in Section 12.42 of Title 19 of the U.S. Code. However, the State Department had also told me that the Customs Service was not allowed to make unscheduled inspections of the prison camps.
    It was my opinion that the U.S. Government was not in a position to effectively investigate this matter. It was at that time that I made the decision to research this matter on my own.
    From import information I obtained from the Port Import Export Reporting Service, I was able to ascertain that Officemate International was importing binding clips from AIMCO Nanjing. From the name, it was apparent that the plant was located in Nanjing, China.
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    In March 1996, I made a special stop in Nanjing as part of a business trip to China. With the help of a translator, we made arrangements for transportation and located the AIMCO factory.
    The next day of my visit to Nanjing, we parked outside the entrance of the AIMCO Nanjing factory. After a wait of a few hours, a large truck left the plant. The crates on the truck were not covered, and here are some pictures I think you can make out, hopefully, of the crates on top.
    As the parts in the crates on the truck were not covered, it appeared that they were transporting unassembled binder clip parts. We began to follow the truck.
    At a point where the truck stopped due to traffic conditions, I was able to get out of the car and look into the cartons stacked on the truck. I was able to confirm that the truck was transporting unassembled binder clip parts, and here is what we are talking about.
    Here is an assembled binder clip where you have the body and the handles. What they had were these large milk crates, some with just the handles in them, and others had the clips in them.
    When the traffic cleared, we continued to follow the truck across the Yangtze River to what I was told was a Chinese prison camp.
    Shortly after my return to the United States, I contacted a representative of the AFL–CIO. The representative put me in contact with the Laogai Research Foundation, and the Foundation was able to independently confirm that the facility in question was a prison camp.
    I recently made another trip to Nanjing. Are we going to roll the tape?
    Here you see the AIMCO factory in Nanjing. It is on one of the thoroughfares in the city there. Their logo is clear there. Here you see a container inside their gate or their yard, which would be loaded for export. Again, here is the truck. The truck has left their factory. There you can clearly see the unassembled handles. There you are seeing the bodies of the clips.
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    Again, here is the truck. We are moving across the large bridge which goes across the Yangtze River from one side of Nanjing to the other. Here we are. That sign has the name of the prison camp on it, the area where the prison camp is.
    Here are the walls of the prison camp. There is a high brick wall that surrounds it. Here you see the barbed wire on the top of the camp walls. We are going to approach the gate here where you will see the sign which has the name of the prison camp which is there, which is the Nanjing Women's Reform and Detention, a women's unit.
    There you can see the sign on the door which has the name of the factory in Nanjing. This is the truck that had left the prison camp and which is now headed back to the factory, and here we are approaching the factory.
    What I was able to do on this trip was to see the truck leave the factory in Nanjing, stop on the way, determine that there were unassembled parts in it, follow it to the prison camp. We waited approximately 2 hours where they unloaded the assembled parts and put the assembled parts on.
    The truck left. Again there was a stop in the traffic. I was able to get on the truck again and confirm that there were, in fact, assembled parts, and then we followed the truck back to the factory.
    During my two visits to Nanjing, I spent 2 days watching for a truck to take parts to the prison camp for assembly. Both days the truck was in action, and I saw parts for three different products move back and forth.
    Yesterday, Senator Biden introduced a letter from Officemate, a response to the allegations that have been made. In this letter, Officemate states that they learned earlier this week that one of their China suppliers may have utilized convict labor for assembling the binder clips sold to us.
    I think one of the important things to note is that as I testified, and as ABC reported on Nightline last night, that the sister companies, the factory in Nanjing and Officemate International, Edison, New Jersey, and Peter Chen, one of the owners of Officemate, also have a major interest in the Nanjing factory.
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    The laws of the United States address the issue of importation and sale of goods manufactured with Chinese prison labor in two key areas. First is U.S. Code, Title 19, Customs Duties, which prohibits the importation of convict-made goods.
    The Code of Federal Regulations, Section 12.42, of Title 19, Customs Duties, states that, ''If the Commissioner of Customs finds at any time that information available reasonably, but not conclusively, indicates that merchandise within the purview of Section 307 is being or is likely to be imported, he will promptly advise all port directors accordingly, and the port directors shall thereupon withhold release of any such merchandise pending instructions from the Commission.''
    Yesterday we heard a great deal from the Administration and the Commissioner of Customs about this problem. Here we have over 50 containers which came in from Allied Nanjing last year. Many of them are listed as binder clips. If there were 50 containers, there are probably four or five on the water now, and we are going to be requesting that Customs detain these containers and investigate this matter further.
    The second key area of the U.S. Code that addresses this subject is Title 18, Crimes and Criminal Procedures. There are two sections that address this. Section 1761 makes it a criminal offense to knowingly import goods made with prison labor.
    Probably equally important is Section 1762, which sets a much lower standard. Section 1762 makes no reference to the word ''knowingly'', and people that violate this section may have the merchandise forfeited to the U.S. Government.
    I think one of the main points of Section 1762 is to prevent unsuspecting consumers from going into a store and purchasing goods that would have to say ''made in a Chinese prison'' because the law specifies that if somehow goods got into this country, they are required to be marked with the name of the penal institution and the fact that they were made in a prison.
    My purpose in testifying here today is to present the results of my research and to request that the Customs Service and the appropriate U.S. Attorney immediately investigate this matter to ensure that the laws of the United States are enforced.
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    Before I conclude, I need to make clear that there is absolutely no evidence and absolutely no thought that the distributors of Officemate products have any idea that the product they are purchasing may have been made in a Chinese prison.
    Mr. Chairman, in conclusion, I want to thank you for this opportunity to present this important information.
    [The prepared statement of Mr. Levy appears in the appendix.]
    Mr. SMITH. Thank you very much, Mr. Levy, and we do appreciate the good investigative work that you have done as well.
    You American businessmen have shown an inclination to do the kind of followup that you have done here. If only our Customs people and our State Department people were as vigilant in trying to track down origin of products.
    We do appreciate the videotape. We will echo and try to amplify your requests that have been made as well to make sure that this issue is put to rest.
    We do have one final witness, but I would like to ask Congresswoman Ileana Ros-Lehtinen if she would have any opening statement?
    Ms. ROS-LEHTINEN. Thank you, Mr. Chairman. I just want to congratulate you for being a constant leader on this issue.
    This is very shocking, the kind of evidence that is presented before us. I was not here for the beginning, but I had looked through the testimony that was presented. I echo your comments that we wish our Federal agencies were as vigilant in follow-through to making sure that these products do not come into our country and that these individuals who are part of this conspiracy are brought to justice because there are a lot of businesses involved, a lot of individuals who want to look the other way and pretend that the problem does not exist. Not only is it a human rights issue, but it also affects our economy as well.
    As we debate most favored nation status to China coming up in these coming weeks, I think the evidence presented here today should go a long way to highlighting that much needs to be done before we continue the status quo and pretend that this terrible tragedy is not existing, not only for the enslaved people in China, but for all of us here in the United States as well. It is to our detriment.
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    Mr. SMITH. I thank the gentlelady.
    Ms. ROS-LEHTINEN. I thank you for your leadership.
    Mr. SMITH. I appreciate that.
    Jeffrey Fiedler. Jeff, if you could proceed.
    Mr. FIEDLER. Thank you, Mr. Chairman. With your permission, I will enter my full remarks in the record.
    Mr. SMITH. Without objection, it will be made a part of the record.
    Mr. FIEDLER. The real point we are at is what are we going to do about it?
    The Bush Administration first negotiated a Memorandum of Understanding on so-called prison labor in August 1992. That agreement did not work. As you recall, President Clinton conditioned the renewal of MFN in 1994 in compliance with the Memorandum of Understanding.
    The Administration saw that they had a problem. It was a must-do condition. They knew that they could not certify compliance, so Secretary Benson went to Beijing and laid the ground work for what became the Statement of Cooperation, an implementation agreement that was allegedly going to make the MOU meaningful. We, by the way, have always called the MOU the Meaning of Useless.
    While it pains me to say so, I think that this process was little more than a political deception because they could not honestly claim compliance so they said that the signing of the Statement of Cooperation was evidence of compliance in a sort of a new-think way.
    Now, the problem is not just that the U.S. Government lacks the will, in my view, to enforce the law, but rather the law perhaps needs revisiting. I do not mean in a way that would just increase fines or increase penalties, whether it be time in jail for parties in the United States found guilty.
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    The problem is the U.S. law is designed to prosecute people in the United States. It is not designed to punish the Chinese companies that underlie the trade, and so the proposals that we are making are designed to stop the trade, not to punish Americans who may well be guilty, but are really not the source of the problem. They succumb to temptation awfully to be sure, but the thresholds of evidence required for prosecutions are understandably and necessarily high.
    If we were to prosecute someone in the United States, and let's say they even paid a fine and went to jail, the Chinese trading company would go unmolested, unpunished, and the trade would continue.
    Now, last year we came to the brink of a trade war with China over intellectual property—movies, CDs, sound recordings, and things of the like. We were going to sanction $3,000,000,000 in electronics, shoes and other things all for CDs.
    Currently you have not given the Customs authority the authority to do something similar in the case of forced labor. In other words, institutionally we have put property before people. We have put effective law enforcement in an impossible position.
    I think that what we have to do is if we find solid evidence, we have to give the Customs the authority to ban categories of products that we find, we meaning the United States, coming into the United States, so hand tools, binder clips. If we have solid evidence, the United States does, we say to the Chinese look, no more hand tools for the next X amount of time. This is the only way, in our view, that we are going to incentivize the Chinese Government to take action that they claim is against their own law.
    Also, I think that it is important to take action against the State trading company system. In the case Harry laid out, Minmetals, we have a Chinese trading company operating in the United States. If they are found guilty, the subsidiary, they can go to jail, but the Chinese parent in the United States can just ship the products in by some other means. There is no punishment for them.
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    The law is topsy-turvy, and I would say, Mr. Chairman, that while we are talking about this in the context of MFN, and I mean time period context of MFN, and while this may be other evidence and perhaps your view and my view that we need to revoke MFN, I would say to you that forced-labor products trade is a soluble problem well outside the context of MFN if we provide the government the tools and, most importantly, the government has the will to act. That remains quite dubious at this point.
    Thank you.
    [The prepared statement of Mr. Fiedler appears in the appendix.]
    Mr. SMITH. Mr. Fiedler, thank you for your very fine recommendations.
    You know, I would agree with you. We have lacked the will. And that even goes for the Bush Administration because, as you might recall, when the Memorandum of Understanding was first signed we took a good look at it and felt it was not worth the paper it was written on.
    When the Statement of Cooperation was hatched, that became a diplomatic fiction that takes the cake. I mean, you look at that, and it made an already weak MOU even weaker because obviously the Chinese Government would have to do the investigation first. There were all kinds of delays.
    There were 60 days to present a report when a violation is alleged by our side, another 60 days for us to come back and make a recommendation as to whether or not we think their findings are true or not, and then before any U.S. personnel step into that prison camp there has to be another 60 days. Even if they want to let us walk in that door, they will so sanitize it that the investigators would almost assuredly find nothing.
    Mr. FIEDLER. It is premised on the notion that the Chinese will incriminate themselves,——
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    Mr. SMITH. Exactly.
    Mr. FIEDLER [continuing]. which, by the way, is even in U.S. law. Why would we even think that they would provide us information that would show evidence of their guilt?
    Mr. SMITH. It is ludicrous on its face, and that is why I think your recommendations for beefing up the policy side with new law and then trying to get a prosecution strategy on the part of the Customs people to really implement this aggressively, that may be one good thing to come out of not just this hearing, but this renewed emphasis on MFN, the growing number of people who want to make a difference on this, as witnessed by yesterday's press conference, which you were a part of.
    I thank you for those recommendations, and I hope you and others who are testifying today will work with us on language to try to beef up that action.
    I do have a couple of questions I would like to pose and then yield to my two distinguished colleagues who are here.
    Let me just ask you, and maybe I will start with you, Mr. Levy, because you did bring up a very specific case about Officemate International, and you did point out that letter that was sent yesterday that had four questions, one of which was, ''Do you employ any prison or forced labor?'', and then they have a circle ''Yes'' or ''No''.
    Does that provide plausible deniability to an American company which otherwise might just say OK, we are off the hook on this one? We are getting a great low price. Therefore, as long as we get that little X in the box our culpability is mitigated.
    What should be done in terms of trying to ensure that origin of product is true and real and not some bogus deal like we have here?
    Mr. LEVY. Right. You know, I cannot address the specific import questionnaire audit that they filled out. I think in general, all of us as manufacturers have some responsibility to inspect the factories that we are purchasing from to determine what kind of conditions and who is making the goods for us.
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    In our particular case, we notified our suppliers in China that that is against our company policy and have asked them to sign an acknowledgement of that fact. In addition, we make frequent trips to China to visit our factories and want to make sure. I think that is what most companies do.
    You know, Harry presented one of the cases with these brake rotors where the American company had actually had evidence of going over there and seeing the prison camp. Now they are using this information in a lawsuit to, I guess, get out of payment, but initially they had inspected the plant.
    I think we as manufacturers have some obligation to stop this practice also.
    Mr. SMITH. Mr. Wu, how would you describe the will as it exists both at the State Department and in Customs and the U.S. Embassy in Beijing in trying to bring to heel this use of the Laogai for the manufacture and then the exportation of those goods?
    If anyone has any information on what the ratio of embassy personnel tasked for this issue is, I would like to hear it. My understanding is we only have two people in China that deal with this issue, and that is not their full portfolio, to the best of my knowledge.
    During one of my human rights trips to China, one of three, I met with those two people. They had other things on their plate that they had to deal with in addition to this, and yet in the area of trade promotion there seems to be one group after another, you know. There is just no limit, it seems, to the number of people who are dedicated to that mission. If you have information on the ratio, that would be helpful, or we can get that from the Administration.
    This idea of political will, does it exist, or are we talking about with the MOUs something so that when the Assistant Secretary comes up here they have a talking point about how we have this MOU and that gives them cover?
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    When we get into floor debate on most favored nation status or any issue dealing with human rights in China, right away that MOU is thrust in our face as proof positive of goodwill on the part of the Chinese Government.
    Mr. Wu. I think just like the time of the German Nazis, if you wanted to visit their concentration camp I do not think you would ever get cooperation with Hitler. If you wanted to visit Stalin's gulag, I do not think you can get into it.
    Trying to cooperate with the Chinese Communists to investigate or inspect—they did not use the term; they use visit, visit the camp—I think is a terrible idea. Americans have the law to ban the illegal products. I think we should just take action to ban it. There are many ways if you are willing to do it.
    Mr. FIEDLER. Mr. Chairman.
    Mr. SMITH. Yes.
    Mr. FIEDLER. Let me add that you are correct. They have two people. I think only actually one of them in Beijing is tasked with looking into forced-labor questions. They also are circumscribed by diplomatic protocols from operating even relatively freely.
    I think that political will is demonstrated by resources, and I think that if you examine and ask the Administration what are the actual resources devoted to this, actually there may have been more resources devoted to it in the last 5 days in anticipation of scrutiny than in the previous 5 or 6 months.
    Mr. SMITH. Would anyone else like to respond to that?
    I would ask Members of the Subcommittee if they have not looked at it recently to do so, and I would ask unanimous consent to make both the MOU and the Statement of Cooperation on the implementation of the Memorandum of Understanding a part of the record. They are only two pages long, each of them.
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    I think as Members read it and as members of the press take the time to look at it, they will see how outrageous it is that this fiction parades around as a breakthrough and an advancement in the area of human rights compliance.
    One of the clauses in the Statement of Cooperation states that both sides agree that arrangements for U.S. diplomats to visit suspected facilities in principle will proceed after the visit to a previous suspected facility is completely ended and a report indicating the results of the visit is submitted. In other words, we can only do one at a time, and that is only after the full report is made.
    My understanding is that in 1996 there were no site visits. There were requests made previous to that, and some of those came true many months after the request was made, again giving the Chinese time to clean up their act.
    Mr. FIEDLER. The most classic example of the failure of the MOU is Shanghai Loudong. Harry visited it in 1991 and filmed it with 60 minutes. In 1992, after the MOU was signed, the Administration asked for a visit. They visited it in 1996.
    As a result of the visit, they could not find evidence of export to the United States. Oh, my. You would expect to find it 5 years later? They lifted the detention order. I would submit to you that that is insidious, insidious in that let's give the Chinese one. Show them that we will lift the detention order.
    The problem is that they went to a place across the street from the prison, knew that there was a prison over there, and it is my understanding did not ask to visit the camp. I find that offensive at a minimum.
    Mr. SMITH. Harry.
    Mr. Wu. Mr. Chairman, until a couple months ago, we only found American companies knowingly or unknowingly importing the products.
    This is the first time a Chinese Government company brought the products directly from the prison facility to the United States and sold it to an American company in the United States. How should we treat this government company?
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    Mr. FIEDLER. Let me just correct you, Harry, so it is clear. The Chinese State trading company is located in California.
    Mr. Wu. And make the American companies bankrupt.
    Mr. SMITH. Let me ask you a question regarding the issue of routing through Hong Kong. Again, proof of origin is always a difficult task, particularly when you have such a lack of concern on the part of the Customs people.
    What happens after July 1 when Hong Kong reverts back to the PRC? Does that make it even harder, or do you see it as a neutral? It is already hard enough, and it is not going to make it any worse.
    Mr. FIEDLER. My understanding is that the Hong Kong Customs has sort of been moving backwards in its relationship with U.S. Customs over the last year or so.
    You would have to confirm that with Customs, but I think it is going to be virtually impossible when the political cost to the Custom Service in Hong Kong, no matter how independent it is on paper, will be too great for them to take any action. The political cost, frankly, of the Hong Kong Customs has been too great now. Hong Kong Customs has never determined anything.
    Mr. Wu. Hong Kong, after July 1, becomes a part of China, so all goods coming from China are treated as the goods coming from mainland China. This is fully under their control.
    Mr. SMITH. I will ask one final question and then yield to Mr. Payne.
    This whole issue of inspection of facilities is always used by the Administration. That goes for Bush even before the Clinton Administration. As a suggestion, and you pointed out, Mr. Fiedler, that just signing this second increment here was taken as a positive step in the right direction.
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    But imagine if its approach were applied to on-site missile or weapons verification. Two years from now or 6 months from now or even 30 or 60 days from now, the missiles could be moved, the evidence could be completely sanitized to appear that there was nothing there. It is ludicrous on its face.
    Also factor in that the MOUs require that the Chinese Government do the investigation. Before we even get to the site-visit part of the protocol, the Chinese Government has to work up its own investigation, so the dictatorship investigates the dictatorship, or one of its tentacles.
    As we all know, the People's Liberation Army has a hand in the profit taking, if not the actual running, of many of these businesses. Are they going to tell us it is a real problem and give us honest, verifiable information?
    The same regime that tells us over and over again there are not political prisoners, that they are not killing people for their organs for transplant—despite the tremendous and growing number of evidence that Mr. Wu has provided—and that forced abortion does not occur? You can go right down the line in every category. Religious persecution is non-existent, which is what they claim.
    I think you have perhaps put it right that we are talking about pathological lying, and we are supposed to believe them when they produce some kind of document.
    Mr. FIEDLER. We, of course, do not believe anything and, frankly, have no expectation of truth emitting from the Chinese Government. We do, on the other hand, and should have expectation that truth emits from the U.S. Government.
    We have a bit of a problem here in the repetition of Chinese lies by Administration officials, one. Two, the difference between the word visit and inspect in diplomatic terminology is this far apart, yet if you read the documents that have been entered into the record on the MOU and the SOC, you will never see the word inspect, yet the government witnesses, and even when they are not in a witness situation, will use the term inspect. They visit. That is the operative term.
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    It is not like a nuclear inspection in Iraq when Saddam Hussein has to have his facilities inspected by international agencies on a surprise basis. It is disingenuous in the extreme to use that term. Why I say it is disingenuous is I do not think any State Department official can misuse the word inspect because they understand it better than anyone else.
    That is why, Mr. Chairman, I am deeply troubled by the demonstrated lack of will and slight of hand in dealing with the truth and also the unwillingness to fix what is clearly broken.
    Mr. SMITH. I appreciate that clarification for the record so people will better understand this situation.
    You might recall Congressman Frank Wolf and I visited a prison camp in Beijing in the early 1990's and actually took out jelly shoes and socks that were, we believed, being exported.
    We did ask the warden, Joe his name was, to talk to the 40 Tiananmen Square activists who were being used to make these garments for export, and we were refused. The fact that we were even in his prison camp was a great irritation to him, and he could not believe that we were actually there.
    As you point out, a visit is much different than an inspection because we had no access to the individuals. We were shown what they wanted to show us, and even what they showed us turned out to be information that we were able to bring back to here and use to shut that facility down.
    Mr. Payne, any questions?
    Mr. PAYNE. Thank you very much, Mr. Chairman. Let me commend you for your continued pursuance of this very important matter.
    Unfortunately, I missed the testimony, and the questions that I have, primarily you have asked those about Hong Kong and how can we really know whether these items are being made in prison camps.
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    I do have perhaps a question, though, that I might just ask your comment on. It does not relate particularly to that, but I read a week or so ago, 2 weeks ago perhaps, that a large aircraft, an airplane, contract of the Airbus was granted to France recently. There was a bid by Boeing and a bid by Airbus, which is, as you know, the European consortium where Italy, France and Britain all do parts and make the Airbus, which competes with the Boeing and the other aircraft that are made by U.S. companies.
    The disturbing part of that was that the French were awarded the contract for a large number of Airbuses because they were soft on an amendment in the United Nations criticizing the People's Republic of China and that the feeling was that the PRC Government was sending a message or giving a benefit to France because of their defense of the PRC.
    I wonder if any of you are familiar with that, and what do you think the ramifications of that will be as we attempt to get the U.S. Government more engaged in doing the right thing? What impact do you think that that kind of message sending will have to the corporate community in this country that we have had a hard enough time trying to have them do the right thing, and with this action I do not see it making it any easier.
    Would anyone like to comment on that?
    Mr. Wu. Mr. Congressman, when I was in Europe, I heard from European politicians and businessmen. They said you see, if we condemn Chinese human right violations, then we lose our business. I come over here and people say see, if we are tough, Boeing lost a contract. Airbus got a contract.
    Anyway, all these conversations are based on one thing. Money. The people today try to tell you that the economic development in China is pretty good. The capitalist system is thriving, and democracy and human rights sooner or later will go back to China.
    It is a very new idea. This kind of ideology is not applied to Cuba, did not apply to the former Soviet Union and even did not apply to South Africa. They never engaged South Africa by trade and money. They never engaged by trade and business with Cuba.
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    Burma recently was given an economic sanction, because of human rights violations. The State Department report is clear that the human rights situation in China is worse. Why do you have a new idea saying the money can change that?
    We cannot convince the businessman about human rights. They are concerned about copyrights. When the copyrights come up, they say sanctions. When the human rights come up, they say well, they have their own values system. Do not impose the American western values system to them.
    America tried to impose the American values about copyrights and the stock market and the banking system and the credit card system on them because they want this $1,000,000,000 cheap labor.
    The Chinese dictators do not treat the Chinese as human beings. They treat them as forced laborers. Unfortunately, American businessmen, including French businessmen and Japanese businessmen, do not want you thinking this way. They want to make money. That is fine.
    The other issue right here is security. I remember last December Warren Christopher, former Secretary of State, ended his diplomatic trip in Beijing. We said we are seeking a cooperative relationship with China because China is a super power.
    I think if you ask the common American who is the super power, probably they will tell you America or the former Soviet Union. Now we have a new super power, China, and it is Communist China. Do you want to see another Communist giant in the east?
    For 40 years you have had a debate of who lost China, and now I will say very soon you will have another debate on who renewed Communist China? Your money and your technology, just as the fuel in a tank driving a Communist vehicle.
    Thank you.
    Mr. FIEDLER. Mr. Chairman, it is hard to follow up after that, but Boeing has, I believe, 70 percent of the China market, Airbus the other 30 or maybe McDonnell Douglas a little bit.
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    Do you know why the Chinese buy Boeing aircraft? Best aircraft around. Do you know why they buy an occasional Airbus? Because they do not want to be fully dependent on Boeing. There are only two choices in the world basically.
    To even allow a Boeing/Airbus discussion into a policy discussion of an import that involves national security, U.S. interest and everything else is virtually ludicrous in the sense that we are not going to hold hostage our foreign policy to a couple billion dollars worth of aircraft a year even, nor should we, nor should Boeing expect us to.
    Ms. SHIEH. Can I say something?
    Mr. SMITH. If you would just yield briefly?
    But we do, and that is exactly, unfortunately, what has happened.
    Mr. FIEDLER. Yes.
    Ms. SHIEH. Years ago when we saw President Clinton e-link the MFN and de-link it from human rights on the issue of MFN, we felt that maybe the business community would be in the front line to protect American business. Based on the constructive engagement policy, maybe they can influence China through business dealings.
    After all these years, we see clearly, just by the failure of the MOU, and we know that the MFN actually is being used as a means for the U.S./China policy maneuvering. Because people are not standing strong, we actually failed in that too. Right now, MFN is not just a simple trade policy. It is just a means for the foreign policy maneuvering.
    If I may go back to the ratio business that Mr. Chairman raised before, the ratio I think is not that important. The importance is the ratio is increasing with all the evidence that we have seen in these couple days. We know it is increasing rapidly.
    In the article, China's Government clearly knows that they have opportunities. They say the resources are abundant. Our government is embracing China as a trading partner. Have we questioned how they do it and who they are getting all the resources from?
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    About the question about routing through Hong Kong, we know a lot of companies, a lot of Chinese companies, including PLA or government agencies. They have companies set up in Hong Kong, so definitely they are going to enjoy whatever trade favors they are going to get there. After July 1, they are definitely going to enjoy more if we allow them and if the Hong Kong people do not have the environment to stand up for themselves.
    Mr. PAYNE. I think that as the Chairman said when you completed your statement, but it does. You know, it is certainly not new that much of the policy is driven because of the economics.
    I mean, if we look at some of our foreign policy, we have supported the wrong people a long time. We had the Shah of Iran who did a terrible job in Iran, who was our guy. We took him out when he needed to be taken out. We supported Marcos and even before that with Samosa, I guess. Someone asked the President at that time. They said Samosa is a dictator. He said yes, but he is our dictator.
    We can go through a number of our poor choices through the years that we have supported. A lot of it was because we were fighting communism. All of a sudden, as you mentioned, communism is not so bad. The way you fight communism is to keep sending in money and buying their products, and that will defeat communism.
    We did not use that philosophy anywhere else. We even support an apartheid government in South Africa because they did not like communism or a brutal dictator like Mobutu with $4,000,000,000 or $5,000,000,000 in the bank because he did not like the Communists either. Of course, he did not like his own people, and he was a thief and a criminal and a murderer, but he did not like the Communists so that meant he was all right.
    Even today in the drug program in Mexico, you know, we have it, but they are big trading partners so you kind of look at the certification process a little bit differently.
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    If you look at Nigeria and their brutal dictator, they have oil, so we have to perhaps not have sanctions because bilateral sanctions will hurt the United States. It is a good grade of oil, so we do not want to hurt Shell and all the other oil companies.
    There is Zaire with the diamonds. They might have had a little blood on them, but just clean them up. Mobutu is all right to be supported through the years.
    The problem basically is the business community and where the morals happen to be. Up to now, there is a solid majority, I guess, and they are still solid. Maybe in their hearts they know we are right, but it seems like the bottom line is the thing that is moving everything today. Like we said, we had the biggest uproar over CD records and the copyright, but human rights is another story.
    I do not have any questions. We have a lot of work to do, and some of us are willing to try to help along as best we can.
    Thank you.
    Mr. SMITH. Thank you, Mr. Payne.
    Let me ask just a couple of final questions. I wonder if you could just tell us—and, Mr. Levy, you might want to touch on this as well—how many of our business people who do business in China are really snowed by the graciousness and by the red carpet treatment that they get?
    It has been my experience working on human rights for the last 17 years and trips to Romania, Russia, many of the Communist countries, that even though the delegation and I were visiting to gather information on human rights, we were treated in a way that if you did not know any better, you would ask, ''Why am I here?'' Everything seems so nice until you get into a gulag or really get down to business. All of a sudden, the demeanor changes.
    I wonder how many of our people are disarmed by that approach because as you pointed out, Mr. Wu, in one of your previous tapes, very often they take off the military uniforms, some of these CEOs, and put on their pinstripes. If you go into the other room, they still have the military uniform on. Perhaps you would want to speak to that.
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    Mr. LEVY. I can only speak from my own experience. When I go to China, it is just like going to any other vendor in the United States that I deal with. If they provide a good-quality product and good service, I am going to buy from them. If they cannot deliver, I am not going to buy from them. I think for the most part, again people are trying to get a product out of there.
    Clearly the way business is conducted is different than it is in the United States. I mean, you go over there, and these people adopt you for as long as you are there, whereas in the United States you have a meeting for an hour, and please leave my office and let me get you back to the airport and out of my hair. It clearly is different how business is conducted.
    We are talking about the use of prison labor. If people see it and they want to turn their eye to it and say well, I am going to say a few extra pennies and do it, I do not think it is going to be so much because of the relationship. I think it is just going to be a lack of morals or greed or whatever you want to call it.
    Mr. SMITH. Just one final comment on that. When I met with the U.S. Chamber of Commerce in Beijing for a 2-hour, very contentious meeting, I was surprised how unaware they were of who the dissidents were. They had never met with the dissidents. I asked, ''Have you ever had Wei Jingsheng or any of these other people come in to address you?'' He is now back in prison, as we all know. Their answer was a big no on that.
    When we got to the area of religious freedom, one of the business executives said, ''My secretary goes to church every week. You can go with her.'' But that is part of the officially recognized Catholic church in this case, and it is run by the government, which very carefully circumscribes its activities. Nobody under the age of 18 can learn about God. Whole books of the Bible have been excised.
    The point is: they buy into it. It is almost like this MOU. They give you enough to give you a sense of comfort, and then aggressively push that with smiles and other good manners. The next thing you know, you are oblivious to what is really going on. I just wanted to raise that to see if that might be your experience.
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    On May 15, U.S. Customs submitted a request for information about a hardware tools plant in Hangzhou. Do you have any information—perhaps, Mr. Fiedler, you might—as to what prompted Customs to take that action and whether or not it may be timed to coincide with the hearings that are going on both on the Senate and House side?
    Mr. FIEDLER. That is known as the Qinq Jiang case, which we have been working on for quite a number of years to gather up documentation. In 1994, Harry visited that prison. It happens to be located directly next to Wu Lin, which is also known as Hang Chou Super Power Hoist Works. We had done an investigation about the importation into Buffalo of these chain hoists.
    We gathered evidence that they were importing or exporting to a company in Houston, Texas, and nothing happened. It was Cosmos Company. It says on the document the prison name and the Cosmos name. Dilly dally, dilly dally. They did nothing. I do not know.
    The true and full answer to that question is if I were to speculate, I would think it is because they thought that there was going to be some more attention come on it in the coming weeks that they finally got off their duffs, if you will, and began to do some action.
    Mr. Wu. Mr. Chairman, Mr. Fu wants to make a short statement. He said he would appreciate this opportunity to express his own view.
    He said China is the largest populated country of the world. This means 1,200,000,000. If the human rights in the world have to improve, I think first we will have to improve the human rights situation in China because this is a big part of the whole world. America plays a very important role and major role in this improvement.
    He appreciates this opportunity to express his viewpoint.
    Mr. SMITH. Let me just conclude because, unfortunately, there is a vote on the floor.
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    I think in the style that you did last time, you anticipated a lot of the questions and, thankfully, your testimonies covered that, but I wonder if any of the political prisoners, the prisoners of conscience, are aware that the products they are making are ultimately being exported?
    Is that kind of knowledge available in the prison camps in the Laogai, and how does it make them feel knowing that it is ending up on the shelves of western democracies who give a lot of lip service to human rights?
    Mr. Wu. Mr. Fu said yes, most of these prisoners are aware, including himself. He is aware that the goods made by prisoners and sold to the United States are illegal, and also he is aware that this is fundamentally against human rights. He is aware of that.
    Mr. SMITH. I think the next time Li Peng celebrates Christmas will be the first, so I think that is a good assumption too.
    Let me ask for one final statement. Regarding the Memorandum of Understanding and the Statement of Cooperation, I would just like to know what your reaction is in 30 seconds or less. It says that the U.S. Government recognizes and respects Chinese legal regulations concerning the prohibition of the export of prison labor goods, and the United States takes note and appreciates the good intentions and efforts made by both sides in implementing the MOU signed in August 1992.
    Mr. FIEDLER. Balderdash.
    Mr. SMITH. That is less than 30 seconds.
    Does anybody else want to comment on that? Ms. Shieh.
    Ms. SHIEH. Based on our experience with them, we know that they not only do not abide by their promise, but they actually ignore it and do the opposite. Based on the information stated in that publication, they actually do not care what they are doing, and they do it knowingly.
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    Thank you.
    Mr. SMITH. Thank you.
    I want to thank our very distinguished witnesses for their very fine presentations and, above all, for the work you do on behalf of those suffering in the Laogai.
    We will follow up as a Subcommittee, as we have each and every time, on this issue. I think Mr. Fiedler has provided us with some very good recommendations. We will flesh out those details.
    I think we need to hold the Administration even more accountable for its lack of action on this weak and ineffective MOU, and hopefully we will see some real progress.
    I want to thank you very much. This hearing is adjourned.
    [Whereupon, at 11:55 a.m. the Subcommittee was adjourned.]


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