CHINA TRADE - Lion Dancing With Wolves
By Timothy W. Maier
Insight Magazine
April 21, 1997
Make no mistake about it, they are hired guns for the trade partners of the People's Republic of China. It is their access to Beijing that makes former Secretaries of State Henry Kissinger and Alexander M. Haig, a retired army general, the favorite gunslingers of U.S. firms vying to tap into the PRC's market.
Kissinger and Haig stand to profit richly from contracts with China that, in some cases, put the United States in a vulnerable position, according to current and former national-security officials. Insight has learned Kissinger personally pockets a percentage of profits generated from deals he develops for American firms, while according to the Philadelphia Inquirer Haig has collected directly from the Chinese at least once as a paid but unregistered adviser - allegedly a felony breach of the Foreign Agents Registration Act, or FARA, about which neither the Justice Department nor Haig would comment.
Greg Mastel, vice president of the Wash-ington-based Economic Strategy Institute, de-scribes Kissinger and Haig as the "third arm" of China's lobbying movement. "The Chinese Em-bassy is not very good at hiring public-relations firms," says Mastel. "The P.R. firms have not been very effective for China, so they turn to the business community. It has been a very effective way. Kissinger and Haig have access. They can send the message directly to senior officials. I think Kissinger and Haig be-lieve what they are saying about Beijing, but it is out of date."
Kissinger, a member of the Nixon and Ford administrations, has become the central adviser for the Business Coalition for U.S.-China Trade, a group of approximately 1,000 members that includes Boeing Co., McDonnell Douglas Corp., General Motors Corp., Ford Motor Co. and Chrysler Corp. The coalition is pushing to make permanent China's favorable trade status to avoid the annual debate over renewal. China critics note that they have yet to see Kissinger and Haig blast the Communist Party for engaging in human-rights violations. Instead the two are battling for "most favored nation," or MFN, trade status, for taxpayer-guaranteed credits at a time when there is a $40 billion trade surplus in China's favor, and for admitting Beijing to the World Trade Organization. Senior U.S. intelligence officials claim this is about personal profit. Take away MFN and there will be fewer deals from which Kissinger and Haig can profit, according to trade and intelligence specialists on both sides of the issue.
"Outrageous," responds L. Paul Bremer, an associate of New York-based Kissinger Associates. "Dr. Kissinger's views on China are not for sale and never have been for sale. We are a strategic consulting firm. China is not a major part of our business. We advise businesses.i We don't make investments in China." The company de-clined to disclose financial records.
Nor was Kissinger available to Insight for comment. However, when questioned a few years ago by Wall Street Journal reporter John Fialka, one of the few Western journalists to challenge Kissinger for profiteering, Kissinger snapped, "McCarthyism." Haig, for his part, has declined to be interviewed by Insight; his associates repeatedly claimed he was too busy preparing to go to China.
Many of the huge American firms tied to Kissinger and Haig have been targeted by the People's Liberation Army, or PLA, for espionage. Fialka's book War By Other Means claims that nearly 450 Chinese firms are under federal investigation for stealing technology and transferring it to the PLA. A Defense Intelligence Agency document obtained by Insight shows how this technology transfer takes place (see "PLA Espionage Means Business," March 24). It's an issue critics say Kissinger and Haig ignore.
"It is disheartening when you have senior American officials working with a Communist government that is hostile to the U.S.," says Mastel, who is writing a book on Red China's economic rise. "They try to avoid the debate that they are dealing with technology that could end up with the PLA. The PLA is the biggest manufacturer in China. Technology transfer is an important part of these contracts. The Chinese government demands technology be transferred. It's part of the deal."
The State Department tells Insight neither Kissinger nor Haig have retained top security clearances. But both are able to obtain classified information and especially to influence policy by virtue of their strong connections to American politicians and foreign leaders, says James Lucier, former Republican chief of staff of the Senate Foreign Relations Committee. The danger, Lucier says, is that the United States is putting national security into the hands of businessmen anxious to make deals from which they stand to profit enormously. "Just as you wouldn't let a color-blind person pick out your tie, you can't trust a businessman with the security interests of the U.S."
The personal payoff for these self-described "counselors" is tremendous, yet they seem to operate free of media enquiry. Kissinger, 73, has managed to keep his business deals private even when pressed for disclosure by congressional committees. He has claimed in interviews that he doesn't conduct business with the Red Chinese but only acts as an adviser to American firms that do.
During Laurence Eagleburger's confirmation hearings for the No. 2 spot at the State Department during the Bush administration, Eagleburger, who came to the job from Kissinger Associates, was grilled about Kissinger's possible financial interests in China. Details weren't forthcoming, Lucier recalls. "Kissinger says he doesn't deal with the Chinese government," Lucier tells Insight. "That's just a sham."
In 1989 the Wall Street Journal reported that Kissinger's company paid about-to-be deputy secretary of state Eagleburger $916,989. In 1988, The New York Times reported, about-to-be national security adviser Brent Scowcroft was paid $293,000. Both men long had supported the Kissinger and Haig line that a full engagement with China would open the door for more freedom. The same year Kissinger formed the China-America Society, a group that included such corporate clients as Chase Manhattan Bank, Coca-Cola and American Express - all heavily invested in Red China and vulnerable to billions in losses if sanctions were imposed because of Beijing's grisly human-rights policy.
Kissinger, whom former China Ambassador Winston Lord calls "Uncle Henry," personally stands to profit by millions as firms he represents contract with China and other countries where the former secretary is an active facilitator, according to Larry Abraham of Insider Report, a prestigious international-investment letter. In May 1990, Abraham obtained and published details of Kissinger contracts with corporate clients. To become a corporate client of Kissinger, Abraham revealed, a corporation pays a $200,000 fee. In some cases Kissinger also will take a seat on the company's board. In 1990, he sat on boards for American Express, Union Pacific, R.M. Macy, Continental Grain, CBS Inc., Revlon Group Inc. and Freeport-McMoran, or FMR. An example of how he is able to generate additional revenues from his deals is his relationship with Freeport-McMoran, reports Abraham from that company's public records. Around the time of the 1989 Tiananmen Square massacre, its subsidiary, Freeport International Inc., had a 6.7 percent interest in China Ventures - a limited partnership whose papers refer to a $75 million China Ventures fund set up by Kissinger to help American firms conduct business in China. Kissinger is reported in the corporate papers to have collected $375,000 for serving as chairman of China Ventures and to have received $995,000 in management fees.
Back at Freeport-McMoran, according to Abraham, Kissinger was paid $25,000 for serving on the board; plus, his firm received the standard $200,000. Kissinger also negotiated in 1989 a side deal for himself involving Kent Associates Inc., a one-man corporation for which Kissinger is board chairman and sole stockholder. Under that deal, Kissinger reportedly received $100,000 per month plus Kent's standard 2 to 5 percent of profits generated from FMR contracts. In all, the documents obtained by Insider Report indicate Kissinger personally earned $600,000 from Freeport-McMoran. In 1989, Kissinger told the Wall Street Journal that 8 percent of the revenue from Kissinger Associates and Kent came from clients requesting advice about China.
Few reporters ever question Kissinger's financial ties. Peter Jennings of ABC News surely didn't. The network paid Kissinger to serve as a consultant to help produce a special on China. In 1989, Jennings told the Wall Street Journal that Kissinger would not have been used if the company had known about his financial dealings with China. A background check would have revealed that Kissinger Associates helped set up the China Ventures fund with financial conglomerate China International Trust and Investment Corp, or CITIC, the Chinese government's banking merchant. Later, in 1995, leadership of CITIC was turned over to PLA arms dealer and White House coffee-klatch guest Wang Jun. Wang was granted access to President Clinton shortly after Clinton's Arkansas cronies with Chinese contacts dropped thousands of dollars into Clinton's legal-defense fund and donated $50,000 to the Democratic National Committee.
A further check by Insight reveals that Wang, a member of China's National People's Congress, had been a senior official of CITIC since the company opened 18 years ago and at the time it developed its intimate relationship with Kissinger. Wang also chairs the Beijing-based Poly Group, which worked closely with CITIC to export arms to Iran, Iraq and Syria during the very time when the group set up the fund with Kissinger, according to intelligence sources. (Wang's arms deals have been followed by U.S. intelligence agencies for more than a decade.) Therefore, it is inconceivable to national-security officials that Kissinger - a China expert with a top security clearance that the State Department says was activated as late as 1984 when he served on the National Bipartisan Committee on Central America - didn't know that one of his business colleagues, the "merchant banker" Wang Jun, was the chief Red Chinese arms dealer.
Haig, 72, is a former chief of staff to President Nixon, a former NATO commander, a former secretary of state and a onetime presidential candidate. He was one of the Reagan officials who helped draft the 1982 Chinese-American Joint Communique, which states that the United States would never pursue a "One China-One Taiwan" policy and would reduce arms sales to Taiwan. Haig has profited handsomely since then with his consulting firm through business with China.
In the 1980s, the Wall Street Journal reported that Haig earned $600,000 from International Signal & Control Group PLC for helping sell weapon fuses to a PLA-affiliated company shortly after leaving the White House. He is a senior consultant to United Technologies of Hartford, Conn., a jet manufacturer with at least 17 joint ventures with China. In addition, Haig is an "honorary senior adviser" to China Ocean Shipping Co., or Cosco, the world's fifth-largest shipping firm, according to the company's World Wide Web site. Federal court records show Cosco is affiliated with the PLA and is the Red Chinese company slated to take over a U.S. naval facility in Long Beach, Calif., a deal the Clinton administration encouraged.
One of Cosco's ships was caught red-handed last year smuggling 2,000 AK-47s for the PLA to California street gangs at a time when one of the company's chief officials had coffee at the White House. The White House told Insight the smuggling episode was an isolated incident with one ship. But federal court records indicate the smuggling operation was approved completely by the Chinese government, for which the chief official arms peddler is Wang Jun. One year earlier, Haig had attended a Cosco reception honoring the opening of a Hong Kong subsidiary. An image on the Cosco Web site shows Haig with smiling Cosco executives in Hong Kong where the general addressed 1,000 honored guests at a "Lion Dance Ceremony."
Questions about Haig have been raised because he failed to inform the Justice Department about his role as an "honorary adviser" to Cosco, a concern because it may require him to file under FARA. Justice Department spokesman John Russell says the department can't comment on Haig because of the ongoing Chinese espionage investigation.
A senior intelligence source mentions the possibility that Haig or Kissinger may be called to testify before a Washington grand jury looking into Asian connections of Clinton fund-raisers.
With Kissinger and Haig advising American firms about rich China-trade deals and writing pro-Beijing op-ed pieces for publication nationwide, Red China has been able to mount a powerful lobby effort - much stronger than ever was initiated by the Cleveland law firm of Jones Day Reavis & Pogue, which was paid $140,000 by the Chinese Embassy to represent Beijing in 1994-96, according to FARA records.
The results of the new, sophisticated "lobbying" efforts can be seen by looking at the quiet reaction in the mainstream press to the recent leasing of the Long Beach Naval Base to Cosco or the recent leasing of two key Panama ports to another Beijing-based company, Hutchinson Whampoa Ltd.
Critics say this positions China to dominate the Panama Canal from both the Atlantic and Pacific sides. Bejing's friends say these Chinese companies have nothing to do with the PLA but are legitimate Chinese state-owned entities that have been using these bases and ports for more than a decade. The White House claims that under its reading of the 1977 treaty with Panama, Red China has every right to run those ports.
"What the hell are we doing?" asks Martin Anderson, former chief domestic adviser to President Reagan. "It's just fiction that these China companies are not run by the PLA."
Anderson, a public-policy analyst at the Hoover Institution, says people are being duped into believing China is not a threat, noting that ships entering the Red Chinese base at Long Beach will be carrying thousands of containers that will make it nearly impossible for U.S. Customs Service agents to check. "If I were going to smuggle cocaine (or arms or any other kind of contraband), that's the way I would do it," Anderson says. "U.S. Customs agents can't check every container every time. If they did, it would stop international trade."
Lucier adds that the Red Chinese presence at both ends of the Panama Canal and in Long Beach presents a serious military and economic danger that could threaten U.S trade. "It is a national-security problem because it provides beachheads for penetration and control," says the former GOP staff director of the Senate Foreign Relations Committee. "No one is going to know what is going to be in those thousands of containers on the ships entering the Long Beach base," Lucier adds. "They could be smuggling in agents that could run intelligence operations in the U.S. This also positions the Chinese in the center of the drug trade. And Panama is also a big center for smuggling manufacturing goods like small televisions and household goods."
The White House was briefed on the Panama deals and did not believe it was a national-security issue but more of a "law-enforcement issue" for Panama to handle, according to State Department spokesman Lee McClenny. "This is not a national-security issue," he insists. Intelligence sources call that nonsense.
"The question is," McClenny continues, "was there a level playing field. There were some abnormalities in the bidding process in particular with one American company that we are looking into." A military intelligence source close to the Panama deal says the American firm had the lowest bid. "Panama kept changing the rules," says the source.
Sven Kramer, who served the National Security Council at the White House under both Republican and Democratic presidents, calls the Panama and Cosco deals a major threat that basically surrenders three key ports to a communist regime. "This is the foolishness of the intelligence community," he says, adding that Clinton administration leaders have bought into China's New Lobby movement and fail to understand the national-security price America will have to pay.
Former Time Hong Kong bureau chief Ross H. Munro is concerned about that price. Munro and former Time Beijing bureau chief Richard Bernstein wrote the critical book The Coming Conflict With China. They accuse Kissinger and Haig of playing a "double role" by using their "prestige both publicly and privately to advance policies from which they profit mightily."
Munro was removed from his recent position as director of the Asia Program at the Foreign Policy Research Institute in Philadelphia shortly after the critical book was published in March. Haig sits on the board of directors for the institute. Munro was unavailable for comment. The institute president, Harvey Sicherman, says there were differences between management and Munro and would not say if Haig played a role.
This game gets rough. Republican staffers say that when House Speaker Newt Gingrich stated last year that the United States should recognize Taiwan, Kissinger got Gingrich to change his mind after heavily berating him on the phone. When Rep. Christopher Cox, a California Republican, called for sanctions against China a day before the "most favored nation" vote last year, Haig moved in quickly to get the congressman to back away, a Cox aide says. House Rules Committee Chairman Gerald Solomon of New York also re-ceived a call from Haig. Solomon's aide Bill Teeter says, "Yes, Mr. Haig called him. He refused to accept that call. He knows Mr. Haig and Mr. Kissinger. He doesn't take very well that they use their former stature to lobby."