Asia Program

Permanent Trading Privileges for China: A Debate

Jan 01, 2001

Last fall, the United States and China reached an agreement on Chinese entrance into the World Trade Organization (WTO). The agreement enables China to enter the world trade body once it completes its negotiations with other WTO members. In exchange for gaining entrance to the WTO, China agreed to eliminate or reduce a wide range of barriers to trade and investment in China -- pending congressional extension of permanent normal trade relations status (PNTR) to Beijing.

Granting China PNTR would establish the same normal trading relationship between the United States and China that America has with nearly every other country. China has been granted this normal trade status until now on an annual, rather than permanent, basis because of congressional concerns about violations of human rights and policies in a number of other areas. Approval of PNTR would put an end to those annual reviews.

A vote on PNTR is currently scheduled in Congress for the week of May 22. There appears to be strong support for PNTR in the Senate, but House passage is more uncertain. A majority of Republicans support PNTR, but many Democrats, and some conservative Republicans, oppose it for a variety of reasons. Supporters point to the positive effects increased trade with China could have on the American economy and on internal developments in China -- promoting greater Chinese prosperity, freedom and contact with the outside world. Those opposed to PNTR say it would take away our leverage to influence Chinese behavior and would represent appeasement of a totalitarian regime that violates human and worker rights.

The Clinton administration and business groups are pushing hard for PNTR, while labor unions and some human rights groups are working to prevent its passage.

What follows is a broad spectrum of views on this issue from leading thinkers associated with the Woodrow Wilson Center or who have given talks here in the past few months.

Lee Hamilton, director of the Woodrow Wilson Center (excerpted from an article he wrote for the May 2000 issue of "America and the Future," a publication of the Goals for Americans Foundation)
Extending PNTR to China and bringing Beijing into the World Trade Organization are firmly in America's national interest. Together, these steps will eliminate many barriers to U.S. exports and investment in China, integrate China more deeply into the world economy, foster positive change within China, and enhance the prospects for peace and security in Asia and the world. Congress should vote in favor of granting China PNTR.

While requiring no sacrifices from the United States, Congressional approval of PNTR will dramatically reduce Chinese tariffs and increase American market access in a wide range of economic sectors. Once China becomes a WTO member, it can be challenged in WTO dispute-settlement proceedings if it fails to live up to its commitments. Multilateral tools are almost always more effective with China than unilateral U.S. actions.

Bringing China into the global trading system will not resolve all of the difficult issues in our relationship with China, but it will place that relationship on a stronger footing and advance many of our foreign policy goals. It will pry open China's market and substantially boost U.S. exports and profitable investment in China. It will reinforce China's move toward a transparent, rules-based economy; accelerate the growth of the information revolution in China; encourage China to evolve into an open society; and strengthen those Chinese we most want to support -- reformers, students, intellectuals, and entrepreneurs. It will keep China inside the international system and lead it to abide by additional global norms. It will enable Taiwan to enter the WTO as well.

If we do not extend permanent normal trade relations to China we will only be hurting ourselves. China will soon enter the World Trade Organization regardless of the outcome of the congressional vote. Passing PNTR will allow us to get the same benefits from Chinese membership in the WTO that our economic competitors in Asia and Europe will get from it. It will create new American jobs, advance American economic prosperity, and give us increased influence over economic and social developments in China.

Some opponents of PNTR argue that abandoning the annual review of China's trading status will take away American leverage to influence events in China. They claim that China's human rights conditions, labor standards, environmental protections, and religious freedoms are strengthened by threatening to withhold trading privileges from China, rather than by fostering a more dynamic and open Chinese economy.

But the evidence points to the opposite conclusion. The lesson of the past quarter-century in China -- and the lessons of South Korea, Taiwan, and other former authoritarian countries that have evolved into democracies -- is that economic and political engagement are the best ways for the United States to promote freedom and openness. China today is a very different country than it was 25 years ago: a sizable Chinese middle-class has developed; living conditions have improved dramatically; personal freedoms are greater than ever before; and voluntary organizations of civil society have proliferated. We should encourage these trends by increasing -- not restricting -- our contacts and trade with the Chinese people. As China opens up to foreign goods, media and other sources of information, its people will likely seek greater political freedom as well.

One of the great unknowns of the new century is the future of China. So many major issues -- international security, the world economy, the global environment -- will depend in part on China's evolution. We have a better chance of having a positive influence on China by welcoming it into the world community than by shutting it out.

Robert Hathaway, director of the Asia Program, Woodrow Wilson Center
The US-China relationship is likely to constitute our most important bilateral relationship over the next generation. This vote will go a long way to defining whether that relationship will be a hostile one, or whether the two countries will try to manage their many differences within an overall framework of limited cooperation. Make no mistake about it: this is not just a vote on trade. Members of Congress are being asked to make a fundamental choice about our entire relationship with China. Denying PNTR to China will be viewed in Beijing as an act of economic warfare. And we kid ourselves if we think the Chinese will consent to play by our rules on political, security, nonproliferation, or human rights issues if we have declared economic war against them.

Richard A. Gephardt, House Democratic Leader (excerpted from his 4/19/00 speech at Webster University, St. Louis, Missouri)
America should not trust the Chinese government to make progress on its own and unilaterally surrender our nation's ability to influence Chinese policy through trade. At the end of the day, maintaining the annual trade review remains the best way to keep the pressure on the Chinese government to reform its human rights policies. Only when there is real progress that addresses our concerns, PNTR should be granted.

There's no question that China will have a huge impact on the world economic and political stage in the 21st century. There's no debate about whether America should engage China; the question is how to engage so trade access can be matched with steady progress toward greater human rights and rule of law in China. We must shape the dialogue to best promote American values and interests.

Simply put, American policy must induce economic and political reform in China that benefits both the American and the Chinese people. I don't believe that an unconditional grant of PNTR will achieve this goal.

Granting PNTR this year surrenders all leverage we hold in our trading relationship to the Chinese government, and renders the United States powerless to protect our values and interests.

The WTO gives us a rules-based international trade regime that relies on the member countries to follow its rules and decisions. The probability is fairly high that a country that has a tradition of a rules-based system at home will obey the WTO's rules. But unfortunately, China has no such tradition. I believe that in the absence of external enforcement mechanisms, allowing China's entry into the WTO and trusting the Chinese government to adhere to international agreements and trading rules is a recipe for serious trouble.

Some say that having China in the WTO will actually promote change. But I am concerned that allowing China into the WTO without these enforcement mechanisms would embolden China, once admitted, to block US efforts to reform the WTO. China imprisons any worker that tries to organize an independent trade union. China imprisons activists that attempt to note the environmental shortcomings of the Three Gorges Dam and other large infrastructure projects. It appears inevitable that the Chinese government will work to stifle any US effort to raise worker rights and sustainable development at the WTO.

One of the principal reasons why we should not give China a free pass into the WTO derives from the trade record of the Chinese government over the last decade. Increased trade and investment has not moved China toward the rule of law. In fact, China has moved in the opposite direction. China has failed to fully live up to each of the major trade deals signed by its government in the 1990s.

In my discussions with Chinese dissidents, they have told me how important our annual NTR vote is. The Chinese government pays attention to our debate. What we do here matters and often exerts pressure on the Chinese government in their treatment of detainees. Absent major progress from China on human rights, I am unwilling to dispose of the only tool at hand in our haste to allow China to join the WTO.

Doug Bereuter, U.S. Representative from Nebraska and chairman, House Subcommittee on Asia and the Pacific (excerted from his 2 February 2000 speech at the Woodrow Wilson Center)
Of course, opportunities for positive change will not occur in all facets of U.S.-China relations at the same time. We should seize opportunities that are in our short- and long-term national interest when they arise. For example, the chance to make great progress on trade problems with China and simultaneously advance economic reform in China is now available to the U.S. with the pending WTO accession agreement. Congress needs to ensure that the United States benefits fully from this milestone opportunity by providing China with permanent Normal Trade Relations (PNTR) status as soon as possible.

There will certainly be opposition to providing China with permanent NTR, though opponents of PNTR in the U.S. have yet to propose any responsible or rational alternative that benefits the United States. Recall that with this agreement we give up nothing. This is an export-oriented agreement in which China makes all the concessions. Of course, it must be understood that opposition to China's accession to the WTO is not limited to critics in the United States. I believe that Premier Zhu Rongji and other leading economic reformers in Beijing see the internal economic restructuring required by China's WTO accession as necessary for sustaining economic growth and, therefore, maintaining relative social stability and the Communist Party's current and absolute monopoly on political power. Clearly, they are taking a gamble. Ultimately, I believe that just as economic reform and growth laid the foundation for political liberalization in Taiwan, Korea, and elsewhere,

Premier Zhu's initiatives, if successful, may mark the beginning of the probably lengthy end of the Communist Party's monopoly. Certainly, this latter possibility is a traumatizing possibility for the hard-liners in the PLA and elsewhere in the power structure. They are a powerful source of resistance to the pace and scope of Zhu's economic reforms. Zhu is their ideological enemy. Furthermore, despite the highly publicized announcements that the PLA has divested from its numerous business interests throughout China, in reality the PLA remains closely involved with a significant number of the inefficient and bankrupt state-owned enterprises which are targeted for reform and privatization. How the PLA addresses and adapts to the overall economic reforms as well as to its own internal reforms will be an important development to watch. The questions about their reactions certainly do contribute to the uncertainty in Sino-American relations.

Condoleezza Rice, chief foreign policy adviser to George W. Bush (excerpted from her 27 April 2000 speech at the Woodrow Wilson Center)
WTO, PNTR are in our national interests. Markets abroad are good for us. Business interests are in the interests of the American people.

Argeo Paul Cellucci, governor of the Commonwealth of Massachusetts (excerpted from his 15 May 2000 speech at the Woodrow Wilson Center)
I have been working with business groups in my state to urge our Congressional delegation to support PNTR. I teamed up with Secretary of State Albright when she visited Massachusetts last month to voice support for the advantages of open trade with China.

To date, the Massachusetts congressional delegation -- except for Senator Kerry, who supports it -- has been either against PNTR or silent. I don't understand how they can be against Massachusetts businesses, Massachusetts jobs, and the Massachusetts economy. This is not even a close call.

I feel strongly about normal trade relations with China because I strongly believe that if Congress seizes this opportunity, America stands to gain enormous benefit from open markets that have enormous potential. But if Congress fails to act -- and sticks its head in the sand like so many of the unions that so many in Congress are listening to -- the world will leave us behind as it pursues profitable trade with a China that is a full member of the World Trade Organization.

Global trade is important to the Massachusetts economy. There are risks associated with foreign trade but the payoffs can be great. Mainland China has more than 1.2 billion people. It ranks 14th among Massachusetts' top trading partners with $366 million in exports, and growing. Exports were up to 15.4 percent over last year, and double those of just three years ago. Companies looking to grow, prosper, and create jobs will continue to look to expand in China.

Bringing China into the World Trade Organization will encourage more openness in that society. The Chinese leaders who negotiated the WTO agreement did so at considerable political risk. Failure on our part to welcome China as a full partner in the global economic community will do nothing more than encourage the more extreme, hard-line forces there. Open trade will strengthen the rule of law in China. It will accelerate domestic reforms. It will lift many Chinese people out of poverty.

Economic growth will force the Chinese government to deal with human rights. As the people earn greater economic freedom, they will yearn for greater personal freedoms. Freedom of information is already there because of faxes, satellites, and the Internet. Once people get a taste of freedom, you can't put the genie back in the bottle.

America can be a constructive partner with China in this effort, or we can withdraw into seclusion and isolation, as we have done so many times before in our past -- and so many times to our everlasting regret.

Robert Kagan, senior associate, U.S. Leadership Program, Carnegie Endowment for International Peace (excerpted from his 23 March 2000 testimony before the Senate Finance Committee, entitled "Trade with China and Its Implications for U.S. Foreign Policy")
The common assumption is that a vote against permanent NTR would be a disaster for Sino-American relations. Lobbyists for American business warn of a destructive trade war and the displacement of American firms by their European and Japanese competitors. China experts warn of a new Cold War, an irreversible slide toward mutual hostility and conflict. They insist China will make no concessions if threatened by American economic sanctions.

Recent history tells another story, however. In the years following the June 1989 massacre of pro-democracy demonstrators in Tiananmen Square, Congress voted several times to impose significant economic sanctions against China, including a cut-off of most-favored-nation status. Each time, the famously pragmatic Chinese have responded as one might expect: pragmatically. If the past is any guide, then, a congressional vote against permanent NTR would not bring catastrophe but a more balanced and reciprocal U.S.-China relationship. It could even gain the kinds of concessions from the Chinese government that the Clinton administration's "engagement" policies have so far failed to win.

Appeasement and accommodation generally strengthen the hard-liners. The Clinton administration's "engagement" policy, which has included lavish Washington receptions for China's hard-line defense minister and a meeting in Beijing between Vice President Gore and hard-line Politburo member Li Peng, has, not surprisingly, done nothing to improve Chinese behavior at home or abroad. Paradoxical though it may seem to some, the best way to foster moderate tendencies in China is to take a firm and, at times, even confrontational stand in defense of our interests and principles.

Any sound policy toward China must have sticks as well as carrots. A congressional vote against permanent NTR this year can actually improve Sino-American relations by strengthening an American hand that the administration has kept deliberately weak. Even the Bush administration's ambassador to Beijing, James Lilley, recently acknowledged that from 1989 to 1991 the "bad cops" in Congress gave "good cops" like him more leverage with the Chinese. A couple of years ago, then Treasury Secretary Robert Rubin used growing anti-NTR pressures in Congress to warn his Chinese counterpart that China had better improve its human rights policies and preserve Hong Kong's political autonomy. This is called linkage. Congress can help preserve this linkage and provide some balance to an American policy toward China that so far has been all concessions and no penalties.

Contrary to the prevailing wisdom, this is the only prudent strategy for dealing with a China whose future course is unpredictable and may be antithetical to American interests. Today the American people are being told that everything will work out, and that there are no tests ahead of them. This is not only misleading; it is also dangerous because it almost guarantees that we will be unprepared for problems in the future. At the very least, we owe ourselves an honest and open debate about China.

Samuel ("Sandy") Berger, National Security Adviser to President Clinton (excerpted from his 2 February 2000 speech at the Woodrow Wilson Center)
Since President Nixon went to China in 1972, the United States has sought to develop a constructive relationship with Beijing, initially as a counterweight to the Soviet Union and later in recognition of China's growing importance in its own right. We have worked for the emergence of a China that contributes to peace in Asia. A China with an economy that is open to American products, farmers, and businesses. A China whose people have access to ideas and information, that upholds the rule of law at home and adheres to global rules on everything from nuclear non-proliferation to human rights to trade.

Our interest lies in encouraging both stability and change in China by encouraging it to meet, not stifle, the growing demands of its people for openness, accountability, freedom and reform. Bringing China into the WTO will help in three ways.

First, this is not just an agreement to expand trade between our two countries. It will obligate China to deepen its market reforms and open its economy to the world. It will increase the pace of change in China.

China's top leaders understand that economic change is both essential and risky. It is risky because opening China's antiquated economy to global competition is likely to cause more short-term unemployment and the specter of social unrest. But, interestingly, they also understand that this change is essential because China cannot make the next leap in development without world-class industries and products that can compete in the global economy. And the only way to produce competitive industries is to open the country to outside competition. With this WTO agreement, they have chosen to continue opening their economy, despite the risks that path entails. Do we really want to reject that choice?

Second, by accelerating economic change, the agreement we reached also has the potential to encourage China to evolve into a more open society.

In ways that are incomplete, but nonetheless real for millions of ordinary Chinese citizens, China's economic opening already has given its people greater scope to live their lives. Take Shanghai, for example, the city that has been most open to international influence. Ten years ago, people in China did not own their own homes. Today, 25 percent of Shanghai residents are homeowners. When reforms began, there were no supermarkets, and citizens had to buy food from state-run outlets using coupons. Today, there are more than 1,000 supermarkets and no more rationing of food. A decade ago, Chinese citizens could rarely travel in or out of their own country. Last year, on New Year's Day, airlines added more than 250 flights to international destinations from Shanghai alone. Nationwide, China has seen the emergence of more than one million nonprofit and social organizations -- professional associations, consumer groups, tenant organizations, environmental groups; a 2,500 percent explosion of print and broadcast media; and local elections in the vast majority of the country's 900,000 villages.

Finally, by opening China's telecommunications market to cutting-edge American technology and international firms, the WTO agreement will help bring the information revolution to cities and towns across China. A year ago, China had two million Internet addresses. Today, it has nine million. Soon, people in some of the most remote villages in interior China will have access to CNN. And as they become more mobile, more prosperous, and more aware of alternative ways of life, I believe they will seek a stronger voice in shaping their destiny.

Of course, just last week, Beijing announced that it was cracking down on the Internet. It's outrageous -- but it's also futile. In this information age, cracking down on the Internet is like King Canute trying to still the waters. Indeed, the fact that the Chinese government is pushing back against the increasing flow of information to the Chinese people only proves that the changes China is undergoing are real and threatening to the status quo. This kind of repression is not an argument for slowing down the effort to bring China into the world; it's an argument for accelerating it.

The question is not whether or not this trade agreement by itself will cure serious and disturbing issues of economic and political freedom in China; the issue is whether it will push things in the right direction. President Clinton believes it will. Some of the most courageous proponents of change in China agree. Martin Lee, leader of Hong Kong's Democratic Party, says that without entry to the WTO, "any hope for the political and reform process would also recede." And Chinese dissident Ren Wanding said upon the deal's completion: "Before, the sky was black. now it is light. This can be a new beginning."

Dimon Liu, human rights activist and writer (excerpted from her remarks delivered at the 9 May 2000 conference held by the Center's Asia Program)
Supporters of PNTR for China tell us the United States is giving up nothing in its trade deal with the regime in Beijing, that China is making all the concessions. This claim is patently false.

The United States is giving up something of profound importance -- its ability to aid other people in their struggle for human rights and democracy. Due to its enormous economic clout, the United States wields great power. Though Washington has been loathe to use this power against Chinese Communist tyranny, nonetheless it exists. Beijing fully recognizes this power, even if Washington does not.

Framing the debate on WTO and PNTR as "keeping the door open" is misleading. America's door is open. The door to China is only half open. However, even with the door half open, the Chinese people have learned enough to know that they lack the basic rights other people enjoy. The Chinese people know very well their losses both in terms of basic rights and lost loved ones they have suffered under brutal Chinese Communist rule and of the excruciating pain they must still bear daily. The Chinese people could see for themselves the vast differences between democratic societies and tyrannical societies. No one needs to explain to them this reality.

The question is, can trade alone open China's door the rest of the way? The answer, to anyone who is an objective observer, is obviously no. If the U.S. Congress gives China PNTR now, it will only legitimize this current status quo as the way things are and should be. To certify Communist China as "normal" in its currently abnormal state would deprive reformers within the government of needed pressure to push for more changes. Without adequate pressure, there is simply no hope for positive change.

The claim that PNTR will give American access to the "vast Chinese market" is specious. Any businessman can tell you that this "vast Chinese market" does not exist. Chinese workers have no rights. They cannot organize independent unions to demand higher wages, better treatments, or even minimum protection for themselves and their families. Consequently, the vast majority of Chinese consumers -- the workers and their families -- have no money. Simply put, we cannot construct the "vast Chinese market" without first instituting the rule of law fairly and consistently -- as President Lincoln put it, "by a government of the people, by the people, and for the people."

In fact, the multinational business community is guilty of an unholy alliance with Chinese tyranny. The Communist government uses brutality to subjugate Chinese workers while American corporations use the threat of moving their factories to countries similar to China to undercut American workers' demand for higher wages. Businesses in territories on China's periphery -- Japan, South Korea, Thailand, Taiwan, and Hong Kong -- will not hesitate to exploit slave labor in China to flood the vast U.S. market. In fact, the PNTR is a lose-lose proposition for most workers everywhere, but especially for China's.

Neville Chamberlain's claim of "peace in our time" reverberates in the current debate, but history has taught us that the sacrifice of Czechoslovakia to appease Hitler did not preserve the peace; it only whetted Hitler's appetite. Likewise, appeasing Communist China will not save Taiwan but will endanger the whole region. Beijing currently lacks the capital needed to carry out their explicit threats to invade Taiwan, but PNTR will give them the capital, advance technology -- and much more. The claim that trade deters war is also wrong. The 19th century was full of wars fueled by trade issues.

Nonetheless, the basic principle against PNTR is simple: if PNTR is granted, the United States surrenders its power to be a force for positive change -- its power to promote human rights, to deter China's increasingly aggressive military posture, and to compel the regime to live up to its economic promises. How can anyone call this moral, economic, and political leverage "nothing"?

At this point, what the Chinese people need most is help from foreign friends in pressuring the Chinese government to provide better protection of human rights and the environment. Many say such "open pressure" does not work, but this claim is fraudulent. South Africa, and the former USSR are but the two best examples of what open pressure can achieve.

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