U.S. Relations with the People's Republic of China (2006)

U.S. Department of State

Interview on Kudlow and Company With Larry Kudlow

Secretary Condoleezza Rice
Washington, DC
October 31, 2006

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QUESTION: A breakthrough today in the six-party talks over in North Korea presumably, some say, brokered by China. What can you tell us?

SECRETARY RICE: Well, indeed, the North Koreans today agreed to come back to the six-party talks. I think several things have happened here. The international community spoke with one voice with Resolution 1718 after the North Koreans tested a nuclear weapon. China has been an effective member -- an effective important member of this coalition of states that is dealing with the North Korean issue. And the Chinese asked if we would be prepared to attend a meeting that the North Koreans had suggested, an informal meeting in Beijing. We did. The North Koreans agreed to come back to the talks. And now, Larry, we have to make certain that we really prepare the talks well so that we can have a good outcome and can get some implementation of the agreement that was actually signed in September of 2005.

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QUESTION: On the UN sponsored trade sanctions, the financial sanctions, the weaponry sanctions, are you satisfied with the Chinese response?

SECRETARY RICE: Yes, well, Resolution 1718 which does indeed place sanctions on North Korea so that it can't engage in this illicit trade in nuclear weapons and other dangerous materials so that we can stop assistance in any way to its program. And by the way, there is a ban on luxury goods, which goes right at the regime's tendency to have luxury goods while the North Korean people, of course, are seeking humanitarian assistance. And so --

QUESTION: They're eating bark off the trees. That's the news reports.

SECRETARY RICE: Well, yes. Sadly, these are people who have suffered way too long, and we hope the North Korean regime will make other choices so that their people can have a better life.

But Resolution 1718, which is a Chapter 7 resolution, meaning that it's mandatory, a resolution that I think many would never have believed China would actually sign on to given its relationship with North Korea. We are very confident, after my discussions out in the region and subsequent discussions by other U.S. officials that these states, China, Russia, others, intend to implement 1718, to do so fully because no one wants North Korea to continue its nuclear weapons program, particularly after the North Koreans tested a nuclear device.

QUESTION: As I'm sure you might imagine, critics of the Administration are going to charge that this comes on the eve of the election, a breakthrough for political purposes. Do you have a repast to that?

SECRETARY RICE: Well, Larry, I'm not worrying about the calendar here. I'm just trying to move the diplomacy forward. And in fact, this is a request for this meeting that came from the Chinese, the Chinese having heard from the North Koreans that they would like to have discussions in Beijing, having heard from the North Koreans that they wanted the United States to be a part of these trilateral discussions. The Chinese approached us several days ago, five or six days ago, setting a very close timeline, October 31st for the talks. We agreed and the talks took place on that timeline, on no other timeline but the diplomatic one.

QUESTION: Treasury Secretary Henry Paulson, the new man, distinguished Wall Street player is nominally in charge of the economic portfolio with China. It's a complicated account I'm sure. How do you interact with Mr. Paulson on this?

SECRETARY RICE: Well, first, Hank Paulson and I sat right in the room that you're sitting in now when he first became Treasury Secretary and talked about how to have a more effective strategic economic dialogue with China that would reinforce our overall strategic dialogue with China. And I think it was in part out of that conversation and the fact that Hank has very longstanding relations in China that this notion of a strategic economic dialogue that would really bring together all elements of the American economic policies toward China was born. And I think it's going to work very, very well.

The Chinese are very excited about it. I was there, as you know, a couple of weeks ago. They're looking forward to those talks. But they'll be mutually reinforcing because we maintain an overall strategic relationship, vis-à-vis China. We have to work on the economic issues, we also have to work on issues that are sometimes difficult, human rights issues, religious freedom issues, because ultimately we believe that China is going to be a strong partner and the strongest partner when the domestic transition, domestic transformation of China toward a more open, pluralistic society also takes place. And so I think these dialogues will be mutually reinforcing.

QUESTION: On the economic point, it's interesting. Since 9/11, when you take a look at the world economy, it has boomed. The IMF is looking for a four to five percent economic growth last year, this year, maybe even next year. Even more interesting, global stock markets that peer into the future, whether it's the stock markets for the Middle East or across Europe or the United States, Asia, have absolutely boomed. Most of them are up two and three-fold.

With all of the tensions in global politics, is it possible that these stock markets are saying, look, capitalism is triumphing worldwide and that may be more important than the jihadist attack on this very economic freedom? Is it possible that economic freedom could be a major card in the global terror war going forward?

SECRETARY RICE: Oh, I definitely think that economic freedom is a major card. Outside of the real extremes -- people who want to put suicide belts on themselves and blow up innocent people and a few repositories of socialist economics like Cuba -- there are very few places in the world where when I sit down to have a conversation with my counterparts, those conversations don't start with trade and open markets and getting foreign direct investment into countries and dealing with structural economic problems and trying to find reliable energy supplies so that economies can grow. And that's true whether you're talking about the discussions that we would have in India or China or Vietnam where we're going to hold the APEC meetings very soon or in Latin America where even governments from the left with which we have no difficulty dealing, Brazil or Chile, are still devoted to sound macroeconomic principles, still devoted to opening markets, still devoted to bringing in foreign direct investment. So I think since the end of the Cold War this question of what economic model and what economic conditions actually produce growth and stability, that question has been settled.

QUESTION: Milton Friedman always argued that economic liberalization would precede political liberalization and democratization and political freedom. And I think it's fair to say China is an example of that at least in some measure. Is it possible, Madame Secretary, that that rule could be applied to some of the darker corners of the world including Iran, including Syria, including, heaven forbid, North Korea? Does that model work? Is it part of your diplomacy?

SECRETARY RICE: Well, there is no doubt that economic openings -- countries that want to join the world economy, that want to be welcoming places for economic investment are going to have a hard time doing that if they're closed off from the normal diplomatic course, and I would certainly hope so. It's not automatic. I think we have to recognize that we need an agenda that promotes both economic freedom and political freedom.

I sometimes hear it's as if it's almost an automatic matter that when there's economic freedom there will be greater political freedom. Well, I think you have to work at both. But certainly in parts of the world where you are seeing reformers even in some places that don't have very much political freedom make an argument to people like us, well, you see, if we're in the WTO, if we are working for foreign direct investment that begins to change the way that our laws are applied. It begins to change the openness of the society. It begins to enshrine rule of law because you can't get investments, you can't get contracts unless people believe that there's going to be a stable rule of law environment. And of course, rule of law in the economic sphere is hard to bring about if there isn't general respect for rule of law.

So I think these work very well together. And indeed, when I go out for conversation in, for instance the developing world, it's a set of principles which go together. Good governance, fighting corruption, opening markets, advancing free trade, these all go together.

QUESTION: But that's -- even -- let me go to the darker corners, okay? They're eating the bark off the trees in North Korea. That's incredible how much poverty. They're migrating out of there. I mean there's in fact some news reports that they're storming the U.S. Embassy over the line in China to seek safe haven and so forth. Is it possible, as we apply sanctions to stop the nuclearization of North Korea, that there is a way to put in some economic liberalization rules? After all, you know, when China gave some liberalization to the farming peasants, what, 30 years ago, that seemed to open the door. Can that be part of the deal here with North Korea?

SECRETARY RICE: Well, nothing would be better than a North Korea that is opening up to the world and, therefore, opening up possibilities for its people. And obviously, Larry, as you're just noting, we're talking about even the smallest of openings in a place like North Korea that could potentially make a very big difference.

It's interesting that when we talked about the agreement that was signed in September 2005, it doesn't just talk about the nuclear area. It talks about the possibilities for moving toward more openness, moving toward more engagement. And you can't help but think that if you were opening up more to investment, opening up so that international financial institutions could go in and deal with issues in North Korea that that would have a positive effect. I don't know that the North Korean regime has really decided to go there, but it's really the only way that their people, these long-suffering people who are really living in the most appalling circumstances are going to be able to take advantage of what is there for every population in the world.

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