where our people can undergo training without being pulled out of jobs because we have a float in our personnel system for people to go off to be trained and so I think that we have been successful in the first year in our stewardship of the Department. And I hope that you see the same thing, your staffs see the same thing, and we can enjoy your continued support this coming year and the years ahead.

Mr. Chairman, I now want to talk about foreign policy. And I will talk about it in the usual terms and the regional setting in talking about specific countries. But I hope as I do this, you will see it in a broader tapestry, the tapestry of the growth of democracy around the world, the impact that market economic principles are having around the world as more and more nations understand that this is the direction in which they must move. I hope you will see it in terms of more and more nations, notwithstanding the terrible crises that still exist and the horrible regimes that are still in place.

Nevertheless, more and more nations are understanding the power of the individual. When you empower an individual man and woman with the opportunity to reach the heights of possibility limited only by their own willingness to work and ambition, and not by the political system in which they are trapped or in which they are living, so many wonderful things have happened. So as I get into the eachs, let us not forget the power of the whole, the power of democracy and the power of the free enterprise system.

Let me begin, sir, by talking about Russia. One of the major items on my agenda over almost every single day has to do with Russia. President Bush in his conduct of our foreign policy with Russia has defied some of our critics and he has structured a very strong relationship. The meetings that he has had with President Putin and the dialog that is taking place between Russian Foreign Minister Ivanov and me and between Secretary Rumsfeld and his counterpart at a variety of other levels have positioned the United States for a strengthened relationship with Russia, the land of eleven time zones. The way that Russia responded to the events of September 11 was reflective of this positive relationship.

Russia has been a key member of the anti-terrorist coalition. It has played a crucial role in our success in Afghanistan by providing intelligence, bolstering the Northern Alliance and assisting our entry into Central Asia. As a result we have seriously eroded the capabilities of a terrorist network that posed a direct threat to both of our countries.

Just an illustration of how things have changed, a year or so ago when I first came into office, there was a bit of tension between me and my Russian colleagues over what the United States might or might not be doing in Central Asia. After September 11, after we coordinated with one another, after we had such a successful 9 or 10 months of dialog of building trust between the two administrations, things changed so radically. So much so that when my colleague, Foreign Minister Ivanov a few weeks ago was asked on television, Igor, why are you cooperating with the Americans in Central Asia, they are the enemy, aren't they?

Foreign Minister Ivanov said no, you are wrong, the enemy is terrorism. The enemy is smuggling. The enemy is extremism. The

enemy are all these other transnational threats. We are now allied with the United States in fighting these kinds of enemies. And we will find a way to move forward in cooperation.

It is this kind of most dramatic change that I think is one of the seeds of opportunity that Senator Biden talked about, and as we go forward in this next year, we are not going to let this seed be trampled out. We are going to continue working with Russia and with the countries in the region to structure a new relationship that will bring stability to the region and provide opportunities for peace and democracy and economic reform.

Similarly, the way we agreed with Russia to disagree on the ABM Treaty reflects the intense dialog we had over the 11 months before we had that decision, a dialog in which we told the Russians where we were headed. We said to them clearly, we are going forward to achieve missile defense. We are going to have missile defense, and we can work together. And if we cannot work together, then we will have to agree to disagree. We did not just pull out of a treaty on a whim. We spent time exploring opportunities with them, exploring options with them. But we made it clear where we were going, and we asked them is there a way we could do this together to go forward.

At the end of the day, we agreed to disagree and we notified Russia that we were going to withdraw from the ABM Treaty. I notified Foreign Minister Ivanov that we were going to make this decision, I went to Moscow and sat in the Kremlin with President Putin and described to him how we would unfold this decision so that he was ready for it and he could respond in an appropriate way in accordance with his national interest. President Bush talked to President Putin about it and then at the end of the day, we made our announcement.

To the surprise of a number of people, an arms race has not broken out and there is not a crisis in U.S.-Russia relations. In fact, their response was: we disagree with you. We think you made the wrong choice, but you have made that choice and now that disagreement is behind us. Our strategic relationship is still important. It is vital, and we will continue to move forward. And I think this is an indication of a mature relationship with Russia and especially a positive relationship between the two Presidents, President Bush and President Putin.

Both Presidents pledged to reduce further the number of their offensive nuclear weapons and we are hard at work on an agreement to record these mutual commitments. This is all part of the new strategic framework with Russia.

To your point, Senator Biden, Mr. Chairman, we do expect that as we codify this framework, it will be something that will be legally binding and we are examining different ways in which this can happen. It can be an executive agreement that both Houses of Congress might wish to speak on, or it might be a treaty. We will explore it with Russia and we will discuss it within the administration the best way to make this a legally binding or codified agreement in some way.

We even managed to come to an agreement in how we are going to work through NATO. We are now developing mechanisms for pursuing joint Russia-NATO consultations in actions at 20 on a

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number of concrete issues. Our aim is to have these mechanisms in place for the Foreign Ministers' ministerial meeting in Reykjavik in May. And as we head for the NATO summit in Prague in November, where the expansion of the alliance will be considered, I believe we will find the environment for the continued expansion of NATO a great deal calmer than we might have expected.

And, Senator Helms, I just might mention that as we talk about NATO at 20, and as we talk about the expansion of the alliance, it will all be done without Russia having any veto about what NATO might do at 19 or what the alliance will do in determining who should be allowed into the alliance.

Russians understand this perfectly. But at the same time, we are responsive to their concerns and we are trying to meet those concerns. That is what you would expect to do with somebody you are now calling a partner and not an enemy.

We will defend our interests and we will defend the interest of our alliance. But we want to work with a new partner, the Russians, who increasingly want to be drawn and are attracted and want to be integrated in the West in a way that fits the mutual interests of both sides.

I believe the way we handled the war on terrorism, the ABM Treaty, nuclear reductions, and NATO is reflective of the way we will be working together with Russia in the future.

Building on the progress we have already made will require energy, goodwill, and creativity on both sides as we seek to resolve some of the tough issues on our agenda. We have not forgotten about Russian abuse of human rights and we raised issues with them. We raise Chechnya at every opportunity. We raise freedom of the press at every opportunity. We raise proliferation activities to countries such as Iran or Russian intransigence with respect to the sanctions policy for Iraq. And there has been considerable progress on that issue and we can discuss that in greater detail when we get to the question and answer period with respect to moving to smart sanctions.

Neither have we neglected to consider what the situation in Afghanistan has made plain for all of us to see. How do we achieve that more stable security situation in Central Asia? In fact, the way we are approaching Central Asia is symbolic of the way we are approaching the relationship between us and Russia as a whole, and the growing trust between our two countries. Issues that used to be sources of contention are now sources of cooperation and we will continue to work with the Russians, as I indicated earlier, to make sure that the seeds that Senator Biden alluded to are landed in fertile ground, get the nutrition they need and blossom in a positive direction.

Mr. Chairman, we have also made significant progress in our relationship with China. We moved from what was a very volatile situation in April, when a reconnaissance plane was brought down over Hainan Island, and people were concerned that this would be such an obstacle that we wouldn't be able to go forward and things would not work out.

As it turned out, things did work out. We were able to recover our crew rather quickly and the plane came back not too long after that and both countries were interested in getting this incident be

hind us. And I think you saw as a result of the trip I took to China in the summer, but most importantly President Bush's trip to the APEC meeting in Shanghai in October, and the subsequent meeting between President Jiang Zemin and President Bush at that APEC summit, showed that the relationship was back on an improving track.

There are certain shared interests that we have with China and we have emphasized those shared interests. They are regional and global interests such as China's accession to the WTO, stability on the Korean Peninsula and combating the scourge of HIV/AIDS. On such issues as we can talk and we can produce constructive out

comes.

There are other interests where we decidedly do not see eye-toeye such as on arms sales to Taiwan, human rights, religious freedom, and missile proliferation. On such issues, we can have a dialog and try to make progress, but we do not want the issues where we differ to constrain us from pursuing those where we share common goals, and that is the basis upon which our relations are going rather smoothly at present, that and counterterrorism.

President Jiang Zemin was one of the first world leaders to call President Bush and offer his sorrow and condolences for the tragic events of September 11. And in the almost 5 months since that date, China has helped in the war against terrorism. Beijing has also helped in the reconstruction of Afghanistan and we hope will help even more in the future.

Moreover, China has played a constructive role in helping us manage, over these past few weeks, the very dangerous situation in South Asia between India and Pakistan.

When I could call the Foreign Minister of China, Mr. Tang, and have a good discussion, making sure that our policies were known and understood, it made for a more reasoned approach to what was a volatile situation between India and Pakistan. As a result, China supported the approach that the rest of the international community had taken. Beijing was not trying to be a spoiler, but instead was trying to help us alleviate tensions and convince the two parties to scale down their dangerous confrontation, which now it appears they are trying very hard to do.

So it is a case where this so-called coalition that has been formed has a utility far beyond terrorism in Afghanistan. We are just talking to each other a lot more. We are finding other areas in which we can cooperate and the India-Pakistan crisis was one of them.

All of this cooperation, however, came as a result of our careful efforts to build a relationship over the months since the reconnaissance plane incident. We never walked away from our commitment to human rights and nonproliferation or religious freedom. And we never walked away from the position that we do not think the Chinese political system is right for the 21st century. We do not. But we, at the same time, are anxious to engage and we continue to tell the Chinese that if their economic development continues apace and the Chinese people see the benefits of being part of a world at rest in the rule of law, we can continue to work together constructively.

A candid, constructive, and cooperative relationship is what we are building with China; candid where we disagree, constructive

where we can see some daylight and cooperative where we have common regional, global, or economic interests.

These are the principles that President Bush will take with him to Beijing later this month when he meets again with President Jiang Zemin.

As we improved our relationships with China, we also reinvigorated our bilateral alliance with Japan, Korea and Australia. Nowhere has this been more visible than the war on terrorism, where cooperation has been solid and helpful from all of our Pacific and Asian allies and friends.

Prime Minister Koizumi of Japan immediately offered Japan's strong support within the confines of its constitution and he is working carefully to enhance Japan's capability to contribute to such global and regional actions in the future. Always the linchpin of our security strategy in East Asia, the U.S.-Japan Security Alliance now is as strong a bond between our two countries as it has been in a half century of its existence. Our shared interests, values and concerns, plus the dictates of regional security, make it imperative that we sustain this renewed vigor in our key Pacific alliance, and we will.

With respect to the peninsula, our alliance with the Republic of Korea has also been strengthened by Korea's response to the war on terrorism and by our careful analysis of and our consultations with the South Koreans on where we needed to take the dialog with North Korea. President Bush has made it clear we are dissatisfied with the actions of North Korea, that they continue to develop and sell missiles that can carry weapons of mass destruction. But both we and the Republic of Korea are ready to resume dialog with Pyongyang on this or any other matter at any time North Koreans decide to come back to the table. The ball is in their court. We conducted our review last year. When that review was finished in the summer, I communicated to the North Koreans and communicated to our South Korean friends that the United States was ready to talk any time, any place, anywhere without any preconditions with North Korea.

North Korea has chosen not to respond. North Korea has chosen to continue to develop missiles, although they comply with the moratorium that they placed upon themselves and they stay within the KEDO agreement as we do. But nevertheless, their actions have not been responsible and their people are still starving and we are helping to feed those people.

So while we are open to dialog, I see no reason that we should not call it the way it is, and refer to them by the terms that are appropriate to their conduct and to their behavior and those of us who are in the business of dealing with North Korea realize it is a very, very difficult account. At the same time, we are waiting for them to come out and realize that a better world awaits them if only they would put this horrid past behind them.

Other friends in the region have also been forward leaning and I could list all of them but just let me say that our Australian friends in particular have been forward-leaning in their efforts to support the war on terrorism. Heavily committed in East Timor already, Australia nonetheless offered its help immediately and we