Tuesday, November 24, 2009

Financial Executive and Former Vice Chairman Joint Chiefs of Staff Bill Owens Advocates Selling Out Taiwan

{UPDATE: Yesterday's Nelson Report covered the Owens/Taiwan issue as well, with astute commentary by Eric McVadon. Chris Nelson reports that "the reaction across Washington has been shock and dismay at what is seen as a stunning lack of political sophistication. Chris adds "his long-standing affiliation with a PRC-sponsored talk-shop might be clouding both his political and strategic judgment."}

Last week, a prominent and influential American businessman based in Hong Kong published an editorial in the Financial Times that should have caused quite a stir in Taiwan.

The author, AEA Investors executive and former Vice Chairman of the Joint Chiefs of Staff Admiral Bill Owens, calls for abrogation of the Taiwan Relations Act (TRA) and a halt to arms sales. On the surface, the bulk of the editorial appears innocent. A retired senior U.S. military officer advocates friendship with China in a financial newspaper. Not a big deal, at least at first glance.

However, the author, who he represents, and what he is advocating, are worth a detailed examination. Operating at the nexus of high finance, high tech, and high level military, Owens is a very powerful and influential man. As Malcolm Gladwell argues in The Tipping Point, only a handful of people in the world are capable of initiating infectious ideas. And Owens is certainly one. His ideas are worthy of debate. But what makes his editorial alarming is that his views on the TRA and arms sales, whether intentional or not, support a broader PRC campaign to solve the “Taiwan problem,” once and for all.

Consciously or unconsciously adopting Beijing’s position, Owens fails to recognize the obstacle to solving the so-called “Taiwan issue” is the PRC’s refusal to renounce the use of force to resolve differences with Taiwan and making tangible reductions in its force posture arrayed against the island.

A Businessman and Former Senior Official Calls for Abandonment of Taiwan

In his 17 Nov 09 Financial Times editorial, Bill Owens advocates a major shift in U.S. policy. The centerpiece of his argument is what he refers to as a “thoughtful review” of the Taiwan Relations Act. Describing it as “outdated” and without offering an alternative, however, Owens implies that the legislation should be scrapped in its entirety. According to Owens, a “thoughtful” review of the TRA “would be viewed by China as a genuine attempt to set a new course for a relationship that can develop into openness, trust and even friendship.”

A “thoughtful” TRA review would focus on U.S. arms sales to Taiwan, a process that Owens deems as as “not in our best interest.” He adds:

The first step to halting arms sales might be to observe that the Chinese have stopped the short range missile build-up across the Taiwan Straits (I believe this is true). The US could then stop selling arms to Taiwan unless that build-up was renewed. We must always protect the democracy and freedoms Taiwan has developed – but weapons sales do not do this.

Owens also cautions that if current trends continue, China’s military could rival or surpass those of the United States, offering allies in the region a choice between China and the United States. He calls for a shift in how we view China from a national security perspective:

It is often politically expedient to paint China as an adversary, or worse, a future enemy. Our national security apparatus is aiming to continue the present level of defence spending and emphasising 30-year-old legislation that is doing more harm than good.

He argues: “The solution is to approach the US/China relationship not with hedging, competition or watchfulness, but with co-operation, openness and trust.” Finally, he outlines an agenda for a new China relationship:

Following Mr Obama’s visit to Beijing, I hope we see the following kinds of military initiatives: an agreement to a thoughtful review of the implementation of TRA and other outdated legislation; a commitment to true military-to-military engagement across all levels including academic exchanges between military academies; a partnership in fighting terrorism and addressing, as partners, non-proliferation of nuclear weapons (including North Korea and Iran); and an approach to addressing the increasing threat of cyberattack, perhaps with a “no first use of cyberattack” policy.

The “other outdated legislation” presumably would be the 1989 Tiananmen sanctions and Section 1201 of the 2000 National Defense Authorization Act (NDAA) restricting U.S-China military-to-military relations.

Owens argues that “many think the Chinese are unable or unwilling to accept such a progressive and innovative agenda. We will never know unless we try.”

From China’s perspective, what is there not to like about such a “progressive and innovative agenda?” Does retired ADM Owens think that the Chinese would be unable or unwilling to accept U.S. abandonment of Taiwan, halt to all arms sales, and overturning other legislation that places restrictions on our relations with the PRC? Academic exchanges already take place between PRC and U.S. military establishments. If he means letting PRC students attend our military academies, then we would have to discontinue admission of ROC students. Which of course is what he is advocating, along with the TRA review and halt to all defense assistance to Taiwan.

The rest of his agenda is harmless and even valid. We should partner with China, and others for that matter, in fighting terrorism, proliferation of nuclear weapons, and addressing issues associated with cyberattack. In another editorial for Carnegie, Owens proposed a U.S.-China space-based global transparency initiative. One could outline an even more aggressive bilateral agenda that would be in both PRC and U.S. interests, assuming our interests in Taiwan were not sacrificed in the process.

PRC “Stopping” Missile Deployments: Justification for a Halt in U.S. Arms Sales?

AEA Investors’ Bill Owens calls for a thoughtful review of the Taiwan Relations Act and a halt to arms sales. A halt to arms sales is justified in part by what he views as a freeze in PRC deployment of short range ballistic missiles (SRBMs) opposite Taiwan. He doesn’t cite his sources in making this assertion. But let’s assume his sources are credible, particularly since Owens is well connected in Beijing and U.S. policy and intelligence circles.

Why would the PRC stop deployment of ballistic missiles opposite Taiwan? Because the China Aerospace Science and Industry Corporation (CASIC) and China Aerospace Science and Technology Corporation (CASC) have already filled PLA production orders to satisfy out a planned force structure of seven SRBM units. Five or perhaps six are under the Second Artillery, and one or perhaps two are organic to the Nanjing Military Region. Let’s look at the Second Artillery 52 Base order of battle (in probable order of establishment):

96165 Unit (Leping)

96167 Unit (Yong’an)

96169 Unit (Meizhou)

96162 Unit (Ganzhou)

96164 Unit (Jinhua)

96166 Unit (Chizhou, in same vicinity as DF-21 unit)

Each of these brigades has as many as six battalions, each equipped with a certain number of launchers and a standardized table of organization and equipment inventory of SRBMs. It’s not clear what this standard number is, but there likely is a ceiling unless a decision is made to add another SRBM brigade under the 52 Base. The 2009 DoD Report to Congress on PRC Military Power asserted that as of September 2008 the PLA had as many as 1150 SRBMs and was “increasing” its inventory at a rate of over 100 missiles per year.

If Owens is correct, then the PLA Second Artillery 52 Base is no longer increasing its inventory. The last SRBM brigade under the 52 Base likely is the 96166 Unit in Chizhou. Does this mean that the DF-15 production facility in Beijing (211 Factory) and DF-11 factory in Hubei (the 066 Base) have stopped assembling new DF-11s and DF-15s? According to Owens, maybe the blanket order for new SRBMs has been satisfied and units have filled out their table of organization and equipment. However, filling out the final SRBM unit does not necessarily indicate peaceful intent with regards to Taiwan. It indicates that the Second Artillery 52 Base is prepared and mission ready. It is very likely that R&D and production of sub-systems, such as solid rocket motors and guidance, navigation, and control systems, would continue.

If Owens is looking for a sign of peaceful intent, he should be looking for dismantlement of SRBM brigades and their supporting infrastructure, and not a stop in new missile deployments. Furthermore, PRC military capabilities based on a Taiwan scenario go far beyond SRBMs. Land attack cruise missiles, medium range ballistic missiles, conventional fixed wing aircraft, electronic warfare assets, surface combatants, submarines, and a range of ground combat systems are important as well.

In short, a PLA judgment that it has sufficient numbers of SRBMs to fulfill its operational mission does not justify a halt to U.S. arms sales. The only justification for curtailing arms sales to Taiwan would be a PRC renunciation of use of force to resolve its differences with Taiwan, and a tangible reduction in the military capabilities that could be brought to bear against the ROC and its democratically elected leadership.

Abandonment of the TRA: What Would It Mean

Yet to Bill Owens, a halt is a halt. The Taiwan Relations Act and U.S. arms sales to Taiwan are impediments to U.S-China friendship. Therefore, Owens believes that a review and reversal of this outdated legislation is warranted. Owens is implicitly advocating removing the legal basis for U.S. relations with Taiwan, and acquiescence of the PRC’s "one country, two systems" approach to resolving its differences with Taiwan. Without the TRA, there would be no American Institute in Taiwan (AIT). Taiwan would be treated as a province of the PRC, which has longed viewed the TRA as an unwarranted intrusion by the United States into the internal affairs of China. Without the TRA, Taiwan’s democracy likely would collapse, perhaps only after a major upheaval on the island in reaction to what would be perhaps the only peaceful abandonment of a democracy to an authoritarian power in U.S. history.

Arms sales are the most visible manifestation of the U.S. recognition of the ROC’s unresolved international status. Besides ensuring that the cost of PRC use of force would be sufficiently high so as to deter such a course of action, the TRA and U.S. provision of defense articles and services provide an atmosphere in which Taiwan’s democratically elected leadership can negotiate with counterparts in Beijing with confidence. Taiwan’s difficult transition to a democracy, which coincides with its economic miracle that continues until today, is a possible model for democracy advocates in China. The ROC's existence as a defacto independent state is perhaps the only impetus for the PRC to transition into a multi-party system. Democracies are not as efficient in mobilizing resources as authoritarian one-party states. But they are certainly are more conducive to giving citizens greater say in how they are governed and in a more peaceful international environment.

China’s Access and Influence

Owens’ editorial is interesting from another perspective. Because it echoes a theme that the PRC has long represented, one has to examine Owens, his company, and his network as witting or unwitting channels of access and influence. One new channel with close links to Owens is a well-endowed Hong Kong non-profit entity (China-U.S. Exchange Foundation; 中美交流基金) and a new dialogue – the so-called Sanya Initiative -- that Owens and this new foundation established last year.

The Foundation’s governing board consists of leading figures in Hong Kong who facilitated its reversion back to China, members of the Chinese People’s Political Consultative Conference (CCPCC), avid supporters of China’s one-country, two systems formula for annexing Taiwan, and elite in doing big business in China. These include former governor C.H. Tung (董建華), his brother C.C. Tung, Payson Cha, Ronnie Chan, Daniel Fung, Elsie Leung, Liu Changle, Peter Woo, and Gordon Wu. Its honorary advisors include Henry Kissinger, Hank Greenberg, Xu Kuangdi, and Tang Jiaxuan. It has cross-links with the newly established China Center of International Economic Exchanges (CCIEE) in Beijing and One Country, Two Systems Research Institute in Hong Kong. U.S. financial powerhouse AIG and the Starr Foundation are prominently listed as counselors.

The website claims the Foundation’s funding “is presently derived from the support of individuals and corporations in Hong Kong who share the Foundation's commitment to fostering stronger relations between China and the United States.” No corporations are listed, but private funders include: Chao Sze Kwong George; Ms. Vivien W. W. Chen; Mr. Kenneth Fang; Mr. Timothy Fok; Dr. Stanley Ho; Mr. Albert Hung; Dr. Lee Shau Kee; Dr. K.S. Lo; Mr. Robert Ng; Dr. Charles Yeung. Li Ka-shing’s son, Richard Li, is listed as a counselor.

All that’s missing is the precise nature of its relationship with what elements of the government in Beijing, and a direct linkage likely won’t be found barring some major investigative journalism by the likes of Jimmy Lai. However, it’s worth noting that Beijing’s use of Hong Kong-based cut outs for influencing political views in Washington has precedents. The PRC –specifically the PLA – attempted to contribute at least U.S. $300,000 to the Democratic Party in 1996 using the daughter of a senior PLA general (Liu Chaoying)and a China Aerospace Corporation subsidiary as the (China Aerospace International Holdings, Ltd) as the white glove. PLA General Ji Shengde, the predecessor of Xiong Guangkai and responsible for foreign relations and intelligence, led the operation. For reporting, click here. However, the Republicans also received questionable funding from a Hong Kong source with links in China, although somewhat different. Young Brothers Development Ltd loaned around U.S. $1 million to a RNC cut out, although there is no evidence that the funds originated in China or were on behalf of China.

Having learned lessons from the past, Beijing’s use of a Hong Kong-based think tank as an agent of and funding source for influence in Washington and at the state level is fair game. The goal is to enhance bilateral relations, but the Taiwan angle should not be forgotten. Its influence operations should be watched carefully. Hong Kong is part of the PRC, and many of the Foundation’s leaders have formal PRC government positions within the CCPCC. Other initiatives have or will include funded travel for U.S. journalists, state officials, including lieutenant governors and state legislators.

The China-US Exchange Foundation is no simple philanthropically-oriented institution. It has retained high powered lobbying firms, including Brown Lloyd James and Fontheim International, as part of its influence operations mission. Fontheim has registered with the Senate to lobby on behalf the the Foundation.

The Sanya Initiative: Working the U.S. Military Old Boy Network

One of the first orders of business for the China-US Exchange Foundation was support for a new dialogue between retired senior U.S. military officers and counterparts from the PLA. Funding support was provided not only by the Foundation, but also Owens’ company, AEA Investors and CV Starr (click here for pre-Sanya meeting coverage in the Financial Times). The dialogue, termed the Sanya Initiative, included five senior PLA general officers led by retired General Xiong Guangkai. The four retired U.S. officers include Bill Owens and General Ronald R. Fogleman, former Chief of Staff of the U.S. Air Force. In addition to consulting for Boeing, Fogleman has been Senior Vice Chairman, Projects International, a company that has close ties in Beijing through its founder, Chas Freeman. Fogleman was just recently appointed as CEO of a major defense firm, Alliant Techsystems, Inc. Other participants include General John M. Keane, and General Charles E. Wilhelm. Wives were invited along as well.

The meeting in Sanya took place on February 21 in order to commemorate the anniversary of former U.S. president Richard Nixon's historic trip to China in 1972 to meet with Chairman Mao Zedong. Immediately preceding the dialogue, Owens’ published his first editorial in the Financial Times with similar themes as last week's, minus the Taiwan-related issues.

The participants pledged after the February 2008 dialogue to maintain “continuous communication through various channels such as personal letters, bi-monthly telecommunications, and a second meeting to be convened later this year.” The group also allegedly committed to launching a strategic media campaign to correct U.S. misperceptions of the Chinese military.

All are honorable and served their country with distinction while in uniform, and continue to contribute where they can. However, all four of these officers also settled in to lucrative corporate positions after taking off their uniforms, with the leader of this well-connected U.S. team – Bill Owens – having the clearest and most significant business interests in China.

A Retired Admiral Turns Businessman

After stepping down as Vice Chairman, Joint Chiefs of Staff (the second highest ranking uniformed officer in the military), Bill Owens aggressively entered the business world. He started in the defense industry (SAIC), moved to Teledesic, then to Nortel, a major telecommunications company with significant business interests in China. Observers note Owens’ demanded a substantial severance package after only just over a year with Nortel. After his brief stint as CEO of the troubled Nortel, Bill Owens moved to spearhead the China investment arm of the U.S. private equity firm AEA, which includes clients or partners such as AIG, C.V. Starr, and JPMorgan Chase. It’s here where paths cross with the political-economic godfathers of the U.S.-China relationship, such as Henry Kissinger, Hank Greenberg, and Gen (ret) Al Haig.

Owens also has or is serving on the corporate boards of Teledesic, LLC, Polycom, Viasat, Microvision, TIBCO, Symantec, Metal Storm LLC, Telstra, Nortel Corp. Ltd., BAT, Cray, and Biolase. He has served on the boards of Carnegie Foundation, Brookings Institute, Harvard Kennedy School, and the Pentagon’s Defense Policy Board.

Regardless, China has grown quite adept at leveraging the business interests of former senior U.S. officials in order to further its own political agenda. And getting the U.S. to break on its relations with the Republic of China (Taiwan), particularly arms sales, is perhaps the highest priority. The China-U.S. Exchange Foundation and its recruitment of these four flag/general officers is an example of how sophisticated China’s influence operations have become. The targeting of senior retired U.S. military officers appears to be the Foundation’s first order of business, with the Sanya Initiative taking place less than a month after being established (28 January 2008). It also was two months before Taiwan’s presidential elections and nine before before the U.S. presidential elections.

As a final note, Owens’ advocacy on making China a friend coincides with some major financial business dealings that are unclear at this point. Owens’ firm, AEA Investors, has been making a run to buy a portion of PLA-affiliated Huawei. Media reporting noted that Owens was the brains and muscle behind making it to the short list. One report noted that Huawei’s intent in opening up to foreign investors is to gain a foothold in the U.S. and overcome political opposition from Congress. Media reporting also indicates that Owens had aggressively sought out a strategic alliance between Nortel and Huawei while he served as Nortel CEO.

In short, while ADM (ret) Owens probably had noble motives in calling for the abandonment of Taiwan, his ideas should be brought into proper context. This story is still unfolding, and there’s likely more to come.


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