The China Trade Debate

Next week, Congress will vote on permanent normal trade relations
for China. The vote -- which many people are calling the most
important congressional vote of the year -- would grant China the
lowest tariffs and fewest restrictions possible on trade between the
two countries. This status would not require annual review.
Despite furious lobbying on both sides, the outcome of the vote is
unknown. The American Prospect Online asks the experts:

Should Congress approve permanent normal trade relations for
China? How will that affect human rights in China? American jobs?

Robert Borosage - NO

Catharin Dalpino - YES

Jeff Faux - NO

David Vogel - YES

Annette Ramos - NO

See also: The American Prospect's June 5th Issue: China Illusions.

Robert Borosage:

What is the China trade deal about? President Clinton argues that the
Chinese leaders, who are "no fools," have made the tough decision to sign an
agreement that requires that they buy a lot of goods from the U.S. and set off
a dynamic that will sweep them out of power. Not likely.

Instead, ask why the Chinese leaders are so insistent that the U.S. waive
annual review of their trading status? They are intent on attracting more
foreign investment in China as part of their export-led development model. To do
so, they want to reassure foreign investors that access to the U.S. market is permanent and guaranteed. This reassurance is particularly needed as they begin to shut
down or privatize public enterprises (in a process rife with corruption)
while laying off literally millions of workers without much of a safety net.
The first lay-offs are already generating strikes, riots and violent
protests, which the Chinese regime routinely suppresses. With the level of resistance and
repression rising, permanent normal trade relations tells potential investors that no
matter how bad the repression becomes, access to U.S. markets will not be
disrupted. World Trade Organization (WTO) membership, combined with permanent normal trade relations, is the best guarantee the Chinese regime can give that the next Tiananmen Square massacre will not endanger access to the U.S. market. This is
literally a blank check to an undemocratic regime headed into a time of trouble.

The claim by the Clinton Administration that this agreement will open a
"market of 1.2 billion Chinese consumers" to U.S. exports is incredible on its
face. Consumers are people with money to spend. China has 1.2 billion citizens,
but few consumers. The Chinese regime and foreign investors are aiming
not at the internal markets in China, but on exporting back to the U.S. which
has, as President Clinton says, 25 percent of the world's income. China runs a trade
deficit with the rest of the world. It depends on its surplus with the U.S.
to provide the foreign reserves vital to its economic plan. This agreement
will increase our trade deficit with China, already headed towards $80 billion a

Federal Reserve Chair Alan Greenspan argues that trade deficits
needn't affect the number of jobs in the US -- the Fed's interest rates policies are
far more potent in that regard -- but that trade does affect the mix of jobs
in a country. Permanent normal trade relations with China will encourage
manufacturers to make products there to sell here. We will lose more
manufacturing jobs that pay goods salaries and benefits. A few investment
houses and law firms will benefit, presumably. The agreement will
contribute to the growing divide between rich and poor, executive and worker in this

This is not a debate about engaging China; we already do so. It is not
about trading with China or investing in China. The debate
is rather about the terms of that engagement, the rules of the global
trading system. With this agreement, the administration gives lie to its rhetoric
about democracy, labor rights and the environment. It encourages private
investment in a repressive regime at the expense of competing democracies
that allow workers the right to organize and citizens the right to speak.
It gives a blank check to repression in a disruptive transition. It is sets
off a renewed race to the bottom, with the low bid set by Chinese workers making
13 cents an hour, with forced overtime, living six to 12 in dorms
surrounded by barbed wire. It dooms efforts to build labor rights and
environmental protections into the World Trade Organization. Permanent normal trade relations for China is the extreme excess of a conservative era that is now drawing to a close.

Robert Borosage is co-founder of Campaign for America's Future.

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Catharin Dalpino:

Liberals and dissidents within China have urged that the United States grant permanent normal trade relations (PNTR) for their country. They argue that trade is too broad an instrument to promote political change in China, and that withholding PNTR will likely create a nationalist backlash, even among Chinese reformers. By contrast, some high-profile Chinese exiled dissidents resident in the United States are leading the charge to deny PNTR for China on human rights grounds. This disparity underscores the difficulty of formulating a constructive policy to promote human rights in China. U.S. human rights policy toward China is based on respect for international standards of human rights, and is keenly honed to human rights constituencies in the United States. Too often, however, U.S. officials are more inclined to rely upon the views and voices of people outside China to judge what is in China's best interests.

In its policy, the United States rightly emphasizes attempts by the regime in Beijing to suppress political opposition and to constrain freedom of speech and assembly. However, it too often fails to recognize positive trends in China which may serve as entry points for greater political and social openness: changes in administrative law which permit citizens to sue the government, the growth of legal aid, the gradual emergence of non-governmental organizations, and the growth of the Internet. Indeed, in the past decade when the U.S. Congress has used the annual renewal of China's Most Favored Nation trade status as a means of pressuring Beijing on human rights, it has refused to fund administration proposals for programs to promote the rule of law and the growth of civil society in China. Many educated Chinese, who were the engine of the reform movement a decade ago, are puzzled by the preference of some U.S. lawmakers for wrist-slapping and symbolism over measures which stand to improve the rights of everyday citizens.

The United States should grant permanent normal trade relations to Beijing as a necessary but not sufficient measure to promote human rights in China. Doing so would relieve the U.S. of a strategy to link human rights to trade, which has failed over the past decade. Moreover, it would send a timely and critical message to the Chinese people themselves that the United States considers the welfare of ordinary citizens to be central to U.S.-China relations.
In the mid- to long-term, granting PNTR (and, more importantly, China's entry into the World Trade Organization [WTO]) will most likely have a positive spillover in Chinese social and political development.

However, China's immediate adjustment to WTO standards will be a bumpy one. State-owned enterprises will continue to decline when foreign companies gain greater hold, and both the central government and Chinese society must face the challenge of integrating former bureaucrats into the private sector. It is also possible that the regime will take pre-emptive measures (as seen in recent attempts to censure the Internet) to minimize the inevitable loss of social control it will face when foreign business becomes a more central player in China's economic life. Nevertheless, granting PNTR will be an important correction to U.S. policy to promote human rights in China: one which will focus on the long term and will emphasize tangible gains, however small, over sweeping symbols.

Catharin Dalpino is a Visiting Fellow at the Brookings Institution and author of the forthcoming book, Deferring Democracy: Promoting Openness in Authoritarian Regimes. From 1993 to 1997 she was Deputy Assistant Secretary of State for Human Rights, Democracy and Labor.

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Jeff Faux:

Congressional approval of permanent normal trade relations with China would be a tragic mistake.

First, it would signal to the world that the United States has abandoned the cause of putting worker rights and environmental standards into international economic agreements.

The Chinese government's record of oppression is well known. Its authoritarian blend of state control and privatization of public assets to elites (a la Russia and Mexico) has brutally repressed workers to keep labor costs low in the pursuit of expanding exports. Markets have not made the Chinese leaders more humane. The State Department's own 1999 human rights report on China concludes that the Chinese government's "poor human rights record deteriorated markedly throughout the year, as the government intensified efforts to suppress dissent, particularly organized dissent."

Under these conditions, U.S. sponsorship of China's membership in the World Trade Organization (WTO) reduces to zero the chances of adding any worker and environmental protections to balance the investor protections in the WTO system. Ironically, it will strengthen the arguments of those who want to abolish the WTO rather than to reform it.

Second, the China deal will encourage U.S. multinationals to outsource production -- for the purpose of importing back to the United States -- to a country where wages are suppressed at the point of a bayonet. As in the North American Free Trade Agreement (NAFTA) debate, the China lobby promises vast markets for U.S. goods. But the NAFTA experience taught us that the real prize was not the phantom Mexican middle class; it was the Mexican worker with high productivity and no bargaining power. A vote for the U.S.-China pact is a vote to exacerbate the already huge U.S. trade deficit with China -- $70 billion and rising.

The China lobby also argues that the benefits of greater trade override consideration of human rights in China and the loss of manufacturing jobs here. But the claim of great benefits does not pass the laugh test. The best the Clinton Administration could come up with is a "study" by the International Trade Commission, using an economic model embodying every possible favorable assumption to the deal. Among other omissions, it ignored the impact of outsourcing and a Chinese devaluation. Despite this rosy scenario, it managed to find benefits to the United States amounting to a grand total of $1.7 billion. In a $9 trillion dollar economy, this is less than the statistical error in calculating U.S. gross domestic product!

The false claims involved in selling this deal have been shameless. The Administration rounds up votes from farm states by saying that the Chinese have agreed to buy 7.3 million tons of wheat. Meanwhile, the Chinese negotiator publicly states that they have agreed only to give the United States a "theoretical opportunity" to sell more wheat.

Finally, we are told that we have to sign the China pact in order to support the "reform" faction in Chinese politics. This was the same argument for NAFTA, where the reformers turned out to be even more corrupt and incompetent than the old "guard" politicians they were supposed to be reforming. If the Administration couldn't get it right in Mexico, what makes us think they've got it right in a much more complex and far away China?

Not being able to convince the Congress on the economics, the Administration has fallen back to a less than credible national security rationale. We cannot, says the President, isolate China. But China needs to earn hard currency in the world. Since it is now enjoying a huge trade surplus with the United States, while running deficits with Japan and Europe, we can be certain that the one nation in the world that China will not isolate herself from is the United States.

Jeff Faux is President of the Economic Policy Institute in Washington, D.C.

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David Vogel

Congress should definitely grant China permanent normal trade relations
status. There is no downside to such a policy and the possibility of a modest
upside. If it should turn out that permanent trade liberalization with
China has a clear and negative effect on either American employment or
human rights in China, the U.S. can always impose trade restrictions on
Chinese imports. China will then raise its tariffs in return, in which case
the U.S. will be no worse off than if it never had entered into a trade
agreement with China in the first place.

This outcome however is highly unlikely. Trade liberalization with China
is unlikely to affect American employment rates, which are primarily
determined by domestic fiscal and monetary policies. What lowering trade
barriers with China will do is affect the composition of American
employment. Jobs and wages will increase in those sectors in which
America enjoys a comparative advantage vis-à-vis Chinese producers, such as
high-technology products, entertainment, and agriculture, and will decline
in those sectors, such as textiles and toys, in which China enjoys a
comparative advantage. Note however, since wages in the former tend to be
higher than wages in the latter, on balance, American living standards
should modestly increase.

The impact on human rights in China is more difficult to predict. In the
short run, I do not think that a trade agreement with the United States
will lead to any improvement in human rights; the Chinese government, for a
variety of internal political reasons, now seems determined to become more
repressive and this is unlikely to change. It is certainly possible for a
government to become more economically liberal -- and more open to foreign
trade and investment -- and remain repressive for a considerable period of
time. Witness the example of Chile.

But in the long run, as more liberal economic policies lead to improved
standards of living and greater public exposure to ideas from abroad,
demands for political freedoms will grow and at some point, the government
will find itself under pressure to become less repressive.
Once again, witness the example of Chile. In sum, trade liberalization will not make
China any more repressive than it is now, and is likely in the long run, to
make it less so.

Finally, while I appreciate the sincerity of those who oppose Clinton's
trade policy toward China on humanitarian or political grounds,
the concern of American trade unions with Chinese wages and working
conditions is not credible. China could adopt the most progressive labor
policies in the world, but as long as its wages remained below those paid
to workers in the United States, they would still oppose any trade
agreement. Their only interest is in preserving the jobs of their members.
That is a quite reasonable, if misguided concern, but they should be honest
about it.

David Vogel is the Quist Professor of Business Ethics at the University of California at Berkeley's Hass School of Business.

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Annette Ramos

China should not be granted permanent normal trade relations (PNTR) when the vote comes up in Congress next week. Eliminating Congress' annual review of standards in China would eliminate crucial leverage for labor, human rights, religious, and environmental activists in both countries.

PNTR is likely to accelerate the race to the bottom, wiping out more good
jobs in both countries and creating sweatshop jobs in China. In the Southern
China "Free Trade" Zones, wages as low as 13 cents an hour, 60 to 90 hour
work weeks, and verbal and physical abuse are already common. According to
our own State Department, the persecution of pro-democracy and environmental
activists, and the widespread violation of human and religious rights have
increased in the last six years.

Eliminating the annual review would allow U.S. corporations to create
sweatshops in China with no public scrutiny. China has become an export
platform for goods to be shipped back to the U.S., much as Mexico did after the North American Free Trade Agreement (NAFTA). The Chinese apparel and toy sweatshops contracted with by many of our corporations are notorious violators of labor and safety standards. These are the same corporations that are spawning sweatshops and increasingly turning to prison labor within U.S. borders in their zeal for profits at any

Apparel and toy sweatshops is not the only employment in question;
manufacturing by multinationals of high tech products has soared in China,
further cutting into the "good jobs at good wages" the Clinton Administration says global trade will bring us. Chinese engineers and other highly skilled workers earn a fraction of what they get paid in the U.S., causing job loss at the high end as well.

Annual reviews also call attention to the huge and growing trade imbalance
between the U.S. and China. While we export to China less than we do to
Belgium and Luxembourg, they ship 42 percent of their exports to us. With World Trade Organization (WTO) accession, the trade deficit between our two countries is set to continue to rise at least 80 percent between now and 2010, despite an increase in U.S. exports to China. Jobs loss is projected in all 50 states.

Increased trade between the U.S. and China, and globalization in general,
are not bad in themselves. But we can't let this endeavor be spearheaded by
giant, unaccountable corporations loyal only to high rates of returns for
their shareholders. Fifty-one of the largest economies in the world are now
corporations, not nations. These corporations are not trying to promote
sensible economic development that would raise standards around the world.
These are the corporations that have brought us exploding CEO pay, while the
wages of typical workers everywhere in the world have either stagnated or
decreased. These are the corporations that call for oil drilling and coal
burning over wind energy and solar panels, and undermine environmental
impact assessment processes. These are the corporations that promote
genetically modified organisms and unsustainable mono-crop agriculture.
These are the corporations that promote the growth, not the reduction, of
the military-industrial complex both here and abroad. To paraphrase the
protesters' chant at the WTO and International Monetary Fund (IMF) meetings, this kind of globalization is decidedly not what democracy or global justice look like.

Although voting against PNTR is only a small step in creating the world we
want, it would constrain the economic and political elites who are so
vigorously seeking passage of this measure.

Annette Ramos is the global economy organizer for United for a Fair Economy.

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