-Caveat Lector-
NATIONAL ISSUE
RESPINNING CHINA'S TRADE
STATUS Switch To 'Normal' From 'Most
Favored' Eased Vote
Date: 7/29/99
Author: Peter Cleary
Can a change in the name of a term be important? It may have just
made the difference in a critical foreign-policy vote in
Congress.
On Tuesday - the first time since lawmakers swapped the term Most
Favored Nation (MFN) trading status for Normal Trade Relations
(NTR) -the House considered a measure to deny preferred trade
status for China.
Backers of free trade with China say it's a good thing Congress
changed the terms last year. Recent revelations of Chinese
espionage unearthed by a House committee led by Rep. Chris Cox,
R-Calif., have made China anything but most favored on Capitol
Hill.
With new name in hand, lawmakers extended China's NTR status for
another year by a 260-170 vote.
What's more, China may well be admitted to the World Trade
Organization this year - a move that would effectively make its
NTR status with the U.S. permanent.
What happened? Free-traders were able to convince lawmakers that
punitive measures against Chinese trade would hurt U.S.
businesses and consumers more than they would harm Beijing.
Take Rep. Roy Blunt, R-Mo. He voted against China's MFN status
last year, but switched his vote Tuesday.
''There have been significant openings of markets and business
opportunities (in China) in the last year,'' Blunt said in a
statement. ''My vote to continue Normal Trade Relations with
China is based on the likelihood that China will be in full
compliance with WTO agreements by the end of this year.''
Though not unexpected, this year's pro-China vote was
surprisingly lopsided. In 1998, 78 Republicans and 87 Democrats
voted to deny China MFN status. This year, despite the general
mistrust of China, only 71 Republicans and 98 Democrats voted to
revoke NTR.
The Senate has yet to consider the measure.
Chinese spying compounded perennial worries about China's
human-rights record and widespread religious persecution. Last
week, Beijing cracked down on Falun Gong, a spiritual movement,
arresting 5,000 of its members.
The Family Research Council and other socially conservative
groups, worried about religious persecution in China, joined
forces with labor unions, which have opposed every major trade
vote this decade. Unions also oppose China's use of prison labor
to produce low-cost goods for export.
Together, this odd left-right coalition mounted an intense
lobbying campaign to deny China NTR status.
But to no avail.
Normalizing trade with China ''is a strange thing to do,
considering there is nothing normal about U.S. relations with
China,'' said FRC spokeswoman Janet Parshall.
''The State Department has issued a report that states during the
last year alone, China's human-rights record has significantly
deteriorated,'' she added. ''It is obvious that the policy of
constructive engagement has not worked.''
Six rogue nations - Afghanistan, Cuba, Laos, North Korea, Vietnam
and Yugoslavia - don't enjoy NTR with the U.S. Basically, that
means they must pay higher tariffs on goods than other nations.
Only Iran, Iraq and Libya don't trade at all with the U.S.
Why does Congress have this vote every year?
Since trade with China was opened in the early 1980s, its trade
status has been maintained through waivers of the Jackson-Vanik
amendment of the Trade Act of 1974.
Jackson-Vanik passed as a result of U.S. outrage over the Soviet
Union's refusal to let Russian Jews emigrate to Israel. The
provision denies normal trade status to nonmarket economies that
lack open emigration policies. Under Jackson-Vanik, China's trade
status must be reviewed annually.
Each year the president must OK or deny the favorable trade
status for nations that fall under the provisions of
Jackson-Vanik. Then Congress has 90 days to overturn the
president's recommendation.
Human-rights violations and the oppressive policies of Beijing,
embodied in the June 1989 massacre of pro-democracy demonstrators
in Tiananmen Square, have led to calls to withdraw China's
favored-trade status each year.
Congress has mulled laws to withdraw, substantially limit or make
conditional China's trade status. In 1993, President Clinton
required China to meet additional human-rights conditions by 1994
to get its MFN status renewed.
But in 1994, Clinton reversed policy and ''de-linked''
human-rights violations from trade policies. Since then, Congress
has consistently rejected pressures from unions and family groups
to revoke or put substantial conditions on renewal.
This year, a key question was whether renewing NTR was the proper
way to address concerns about national security and China's
dismal record on human rights.
U.S. Business & Industry Council President Kevin Kearns charges
that the trade policy between the U.S. and China is driven by
Fortune 500 companies with plants in China. He says these
companies want to sell products back to America at low prices.
The Small Business Survival Committee, a free-market group that
actively lobbied for renewal of China's NTR status, doubts that.
''Small businesses are increasingly active in international
markets and are the strongest area of growth for U.S. exports,''
SBSC chief economist Ray Keating said. ''According to the Small
Business Administration, 86% of U.S. businesses involved in
international trade are wholesalers and other intermediaries, and
these businesses are typically small.''
Had China lost NTR, it would face tariff rates based on the
Smoot-Hawley levels set in the 1930s, the Congressional Research
Service reports.
''These tariffs would apply to over 90% of U.S. imports from
China and increase the cost of Chinese goods an average of 33%,''
said Anita Donaldson, director of regulatory policy for Citizens
for a Sound Economy.
She says many goods would face tariff hikes of 65% or more.
''The effect would be to drive Chinese goods out of the American
market altogether,'' Donaldson added. ''This would cost U.S.
consumers as much as $29 billion per year, which is the
equivalent of a $302 annual (per capita) tax on the American
people.''
Those who support trade with China say it's easy to understand
why family groups and labor unions are upset by its repressive
internal policies. They admit that forced abortions, religious
persecutions and the use of prisoners as laborers run contrary to
American values.
But free-traders say trade policy isn't the right tool to use if
we want to force China to become more democratic - or rein in its
global ambitions.
''It's like doing brain surgery with a hacksaw,'' said Willard
Workman, a vice president of the U.S. Chamber of Commerce.
''(Since) tariffs on foreign goods are paid by American consumers
to the U.S. government, revoking NTR from China would really just
be a tax increase that would hurt U.S. citizens and businesses
much more quickly than it would affect Chinese corporations or
citizens,'' Donaldson said.
''In the short- term, expansion of the private sector is the best
immediate solution to affecting (China's) policies,'' said
Stephen Yates, a China-policy expert with the Heritage
Foundation.
Yates says Clinton's engagement policy hasn't helped.
''If people had more confidence in the Clinton administration to
stand up for American interests in respect to China, things might
be different,'' Yates said. ''To the American public, it seems
that Clinton is more intent on explaining Beijing policy to the
U.S. than in explaining American interests to China.''
Could Tuesday's vote to extend NTR bolster China's efforts to
enter the WTO? Yates says there's not as much opposition to WTO
entry as the White House has claimed.
''They are either acting on bad information or are using Congress
as a skirt to hide behind, because they find it difficult to
stand up to China when it comes to (protecting) American
interests,'' Yates said.
Talks about China's WTO entry broke down in April after China
repeatedly rejected political and security concessions demanded
by the U.S.
The talks also were tainted by reports of Chinese spying. They
were officially halted May 7, when Beijing refused to accept
NATO's explanation for the bombing of the Chinese Embassy in
Yugoslavia.
Lawmakers must approve China's entry into the WTO, along with an
amendment that would lift Jackson- Vanik's annual trade-status
review. China is pushing hard for that privilege, especially now
that its economy is starting to flag as exports stagnate and
direct foreign investment stalls.
(C) Copyright 1999 Investors Business Daily, Inc.
Metadata: E/IBD E/SN1 E/FRT E/NI
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