Illustration by Bob Dahm
Just before the November election, concern about foreign influence
over U.S. trade policy suddenly emerged amid revelations that
the Clinton campaign had accepted (and then returned) illegal
donations from wealthy East Asian nationals. But as the media
focused on the connections of one fundraiser to the White House
and the debate became tinged with xenophobia, a bigger story of
influence-peddling got lost: the role of multinational corporations
that nominally fly the American flag.
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Nothing reveals this pattern better than the recent history of
the U.S. relationship with China. China has been under fire for
violations of both human rights and commercial rights. It routinely
ignores intellectual property protections, and it closes its domestic
market to much that the U.S. might export. By 1995, China's trade
surplus with the United States had ballooned to an embarrassingly
high total of $34 billion, heading upwards. [See Chalmers Johnson,
"Breaching the Great Wall."] Yet the renewal
of China's most favored nation (MFN) status was easily approved
by Congress in 1996, and its membership in the World Trade Organization
will likely follow. Bipartisan trade policy takes it for granted
that integration of China into the global trading system serves
both U.S. and Chinese interests, with surprisingly little attention
to the terms of engagement. The real issue, however, is not whether
China, with its 1.2 billion citizens, should be admitted to the
global trading system, but whether that admission should be essentially
unconditional. Thanks to the new China lobby, the interest of
U.S. firms in China's cheap labor has overwhelmed all other concerns.
THE POWER BEHIND MFN
The power of the new China lobby was evident in Beijing last March
7, when more than 100 representatives of major U.S. firms held
their annual conference under the auspices of the U.S.-China Business
Council. Delivering his first major speech since taking office
just weeks before, U.S. Ambassador James Sasser told them that
the Clinton administration was counting on aggressive pressure
from business to secure renewal of MFN status for China. "[Sasser]
also suggested that CEOs make personal calls on Congress when
they wish to relay their concerns on major China-related issues,
such as MFN," reported the China Business Review,
the bimonthly magazine of the U.S.-China Business Council. "Nothing,"
he said, "makes an impression on a member of Congress like
a visit or phone call from a CEO from the member's district or
Of course, the Fortune 500 companies that comprise the U.S.-China
Business Councilled by Boeing, Motorola, Caterpillar, AT&T,
and the American International Group (AIG)hardly needed Sasser's
encouragement. They have been working the halls of Congress intensely
since the 1972 opening to China by President Nixon. Lured by the
prospect of 1.2 billion low-wage workers and eager consumers,
America's corporate elite have done a fine job unofficially representing
the Chinese government in Washington.
Even as Sasser spoke, the lobby's troops were being mobilized
back in Washington. A coalition of America's largest companies,
drawing on their experience in the battle over the North American
Free Trade Agreement (NAFTA), had already begun to rally trade
associations, lawyers, and corporate officials for the perennial
battle to assure that China continue to receive the benefits of
MFN. The business lobbyists were worried that, however unlikely,
a coalition of labor, consumer, environmental, and human rights
groups in Washington, joined in odd alliance with the dwindling
remnants of the right-wing Taiwan lobby, might manage to raise
a brouhaha about China and win a House of Representatives vote
later in the year revoking MFN.
Three months before the vote, the omens were not good. China,
unpredictable as always, had roiled the situation by firing missiles
in the Taiwan straits on the eve of elections there. A controversy
had erupted over China's cavalier treatment of U.S. intellectual
property in computer software, movies, and compact disk recordings.
Concern was growing about the environmental implications of Beijing's
plan to erect a dam in the Three Gorges area of the Yangtze River.
There were reports that China was selling nuclear technology to
Pakistan. And there was the ever-present worry about China's human
rights policies, from suppression of dissidents to the use of
slave labor to forced abortion and sterilization. All of the uncertainty
worried lobbyists for business. "We never take anything for
granted," says Calman J. Cohen, head of the Emergency Committee
for American Trade.
Yet in the end, the 286-141 vote in the House on June 27 endorsing
China's MFN status was so lopsided that opponents minced no words
about how badly they were defeated. "There wasn't even a
debate. There wasn't even a contest. We just got shellacked,"
said Jock Nash, Washington counsel for Milliken & Co., a large
textile company that objects to the flood of Chinese-made clothing
coming into the American market. So powerful was the lobbying
to renew MFN that the issues involved in a debate about what kind
of trade policy America ought to haveabout whether unfettered
trade with developing nations adds jobs through exports or subtracts
them through cheaply made imports, and about using America's economic
power to balance business concerns with labor rightswere lost.
Instead, members of Congress gave in to unrelenting pressure from
industry, which claimed in estimates writ large and in district-by-district
totals, that denying MFN to China would cause hundreds or thousands
to be laid off back home. The 1990s version of the 1950s-era McCarthyite
query "Who Lost China?" was, "Who wants to be responsible
for losing jobs created by trade with China?"
China is fast becoming America's most troublesome trading
partner. The growing imbalance, which this fall became America's
largest trade deficit, is no accident. It is the result, at least
in part, of aggressively nationalistic policies by the Chinese
government designed specifically to build up surpluses with such
wealthy consumer nations as the United States. Whether revoking
MFN is the right instrument for correcting that imbalance is admittedly
a complicated question: It could force trade concessions from
the Chinese or it couldas defenders of MFN status claimprovoke
a backlash, in the form of military tensions or economic retaliation.
But those questions never got a fair hearing in 1996, thanks to
The story of the MFN battle is a parable for U.S. foreign policy
after the Cold War. Globally, U.S. policy is a themeless pudding,
consisting of seemingly ad hoc reactions to random hot spots from
Bosnia to Somalia, from Haiti to central Africa. Yet if any consistent
theme is beginning to gel, it is that American foreign policy
is reverting to dollar diplomacy. In championing NAFTA and the
General Agreement on Trade and Tariffs (GATT), in delinking China
trade policy from concerns about human rights, and in pushing
the Commerce Department toward unprecedented promotion of U.S.
exports and investment opportunities abroad, Clinton has cemented
economic concerns as the cornerstone of foreign affairs. Even
the State Department, the Pentagon, and U.S. intelligence agencies
have been asked to use their special skills to advance American
commerce. For 1997, Willard Workman, international vice president
for the U.S. Chamber of Commerce, says that business wants to
strengthen the Overseas Private Investment Corporation and Export-Import
Bank, adding, "We'd like to see a further reorientation of
our embassies in the direction that, now that the Cold War is
over, it's economic policy that's most important. We won the war.
Let's reap the benefits."
This transformation of foreign policy into economic policy was
inevitable and, in many ways, welcome. Ambassador Sasser and the
U.S. diplomatic corps in China excel at representing the interests
of American exporters seeking markets, U.S. importers seeking
cheap goods, and investors in search of opportunities for joint
ventures and low-wage labor. But whether such activity serves
the interests of the average American remains an open question.
Representatives of U.S. industry argue that freer trade with
China means more access to Chinese markets and thus more jobs
back home in the states. But U.S. exports to China amount to a
mere 2 percent of overall American exports. Industry's real interest
in China is its direct investment there (more than $25 billion),
and its revenue from exporting such Chinese-made goods as electrical
machinery, clothing, textiles, shoes, and toys back to the states.
These exports are highly profitable for the companies, but they
undercut labor's bargaining handand frequently take away jobsin
the United States, even as they provide a cheap source of goods.
Meanwhile, China demands that U.S. companies relocating there
hand over access to high-technology trade secrets and know-how.
The companies don't much mind, but are such transfers really in
the best interests of the U.S.?
Although quid-pro-quo sanctions and managed trade are practically
taboo in most elite circles, there are legitimate and well-respected
arguments for aggressively pursuing a more balanced relationship
with Chinaone in which China could continue to grow economically,
but not by exploiting Chinese workers or depressing living standards
in the United States. These arguments come not just from organized
labor, whose skepticism of rapidly expanding free trade is well
known, but also from centrist organizations that understand the
strategic value of economic power, such as the Economic Strategy
Institute, which is headed by a former Republican official, Clyde
Prestowitz. These arguments are sure to come up again in the next
four years, yet if the battle over MFN last year is any indicator,
lobbying by U.S. business interests will bolster the policies
of the status quo.
CHINA'S BEST FRIENDS
Officially, Beijing is represented in Washington not only by its
embassy, but also by Jones, Day, Reavis and Pogue, a large blue-chip
law firm with offices in 10 countries, including Hong Kong, Taipei,
Tokyo, and New Delhi. More than 150 lawyers populate its offices
in downtown Washington, D.C. The Cleveland-based firm, which is
also a member of the U.S.-China Business Council, was paid $75,000
for lobbying services in 1995. Yet that minuscule amount pales
in comparison to the tens of millions of dollars spent by the
business community lobbying for China's MFN status.
In effect, the Fortune 500 have become China's public relations
machine. In a presentation to the Chinese embassy in November
1995, Robinson Lerer Sawyer Miller, one of Washington's leading
public relations firms, sought to win China's support for a nationwide
campaign that would use America's business community as spokesmen
for China. "Allies who have credibility and influence over
public opinion can be a critical component of China's communications
program. These include business leaders with an interest in Chinese
investment," said the firm's proposal. "These allies
can be organized into a force for change. They can be thought
leaders and commentators who present China's viewpoints to the
American public with impact and credibility." The firm, which
did not get the contract, has since broken up. But it appears
that Beijing is making use of precisely that model.
The leading organization of the new China lobby is the ad hoc
Business Coalition for U.S.-China Trade. The coalition is coordinated
by the Emergency Committee for American Trade, headed by Cal Cohen,
a $1 trillion bloc of 55 major U.S. companies committed to free
trade, including General Motors, Mobil, Exxon, Caterpillar, United
Technologies, Boeing, Cargill, Philip Morris, Procter and Gamble,
TRW, Westinghouse, IBM, and a few dozen more.
Under the umbrella of the Business Coalition is the National Association
of Manufacturers, the U.S. Chamber of Commerce, the Business Roundtable,
and various trade associations for specific industry groups, like
the American Petroleum Institute, the Pharmaceutical Research
and Manufacturing Association, and the Business Software Alliance.
Also included is the ubiquitous U.S-China Business Council, which
was founded in 1973 to help American companies do business with
the People's Republic. Its 300 members include banks, insurers,
law firms, oil companies, defense companies, drug makers, the
Big Three automakers, financial services companies, retailers,
high-tech companies, and scores of major industrial firms.
Heading this powerful coalition, and so vocal in putting forward
Beijing's point of view that he might be called the unofficial
Chinese ambassador to the United States, is Maurice R. Greenburg,
the chairman of the American International Group, Inc., one of
the world's largest international insurance companies. Some detail
on Greenberg and AIG is useful here because it shows the array
of power assembled by just one companyone out of hundreds that
worked the halls of Congress during the MFN fight.
By a curious twist of fate, AIG was founded in 1919 in
Shanghai, China, where it prospered until the communists forced
it to leave in 1950. Now headquartered in New York, in 1992 AIG
won for itself the honor of being the first foreign insurance
company to secure a license to operate in the People's Republic,
beginning in Shanghai and expanding last year to Guangzhou. Greenberg,
an aggressive, take-no-prisoners manager, is an influential player
in both the political and business worlds, and was once even mentioned
as a possible candidate for director of the Central Intelligence
Agency. AIG's operations in China are a growing part of the company's
revenue stream, and the company employs thousands of Chinese insurance
agents. Standing tall above the Shanghai skyline are the gleaming
towers of the AIG-owned Shanghai Centre, an office complex that
houses AIG, Merrill Lynch, and many other firms. In a skillful
move, Greenberg created an economic advisory body for the city
of Shanghai that later helped him win his China contract when
a Shanghai official became a top policymaker in Beijing.
During the China MFN campaign in 1996, Greenberg was chairman
of the U.S.-China Business Council. He was also a member of the
Emergency Committee; one of five members of the policy impact
panel on U.S.-China relations of the Council on Foreign Relations,
chaired by Henry Kissinger and Cyrus Vance; one of a handful of
corporate sponsors of the so-called Committee of 100, a pro-business
group of influential Chinese-Americans; an active member of the
Atlantic Council and the National Committee on U.S.-China Relations,
which co-sponsored a largely pro-MFN conference; and, last but
not least, a key player on the President's Advisory Committee
for Trade Policy and Negotiations, the official private-sector
advisory committee to the Office of the U.S. Trade Representative.
AIG's own board of directors includes several former Washington
policymakers, including Carla Hills, a former U.S. trade representative,
and Barber Conable, the former congressman and ex-president of
the World Bank. Kissinger is on AIG's international advisory board.
In Washington, AIG is represented by a team of eleven lobbyists
and a stable of four elite lobbyist/law firms, including Skadden,
Arps, Slate, Meagher & Flom, where AIG's affairs are handled
by Robert Lighthizer, a top Dole adviser and former deputy U.S.
In May 1996, Greenberg testified at a key congressional hearing
on U.S.-China economic ties. Against a background of worries about
China's aggressive military posture, human rights violations,
and cutthroat business practices, he offered an apologia: "Patience
is essential. We should step back, take a deep breath and examine
carefully the ties that bind us together," he said. "An
increasing number of Chinese genuinely wonder if the U.S. has
embarked on an orchestrated campaign to obstruct their progress
and to contain China's development and interests in Asia and internationally."
Concerning MFN, Greenberg added, "Rather than subject ourselves
each year to an unproductive war dance, we should make MFN permanent,
CALLING FOR REINFORCEMENTS
So hot and heavy did the lobbyists flock to the Hill during the
preparations for the MFN vote that swinging the proverbial dead
cat would have felled numbers of them. For example: At the height
of the frenzy, Representative Howard Coble, Republican of North
Carolina, mentioned at a breakfast meeting that he was leaning
against renewal of MFN. By lunchtime that same day, his office
had logged more than 40 phone calls from corporate lobbyists urging
him to rethink his vote. And, three weeks before the vote, a Pennsylvania
Democrat found his office swarming with a team of lobbyists led
by Westinghouse Electric Co., a large Pennsylvania employer, provoking
a call to an opponent of China's MFN status from a staffer, who
said, "Help! Send reinforcements! Our office is being invaded
But reinforcements were hard to find.
"Big Labor?" asks Mark Anderson of the AFL-CIO Task
Force on Trade. "I wish!" Measured against the contingent
of business lobbyiststotaling 700, according to one estimatea
mere handful of opponents tried to stem the tide. They included
perhaps a dozen lobbyists for the AFL-CIO and its member unions,
a couple of environmentalists, Human Rights Watch, a handful of
firms such as Milliken and Burlington Industries (whose business
is threatened by cheap Chinese textile imports), and a few conservative
anticommunists and Buchananites. Lori Wallach, who coordinated
the Citizens Trade Campaign for Public Citizen, says, "Add
up all the opponents of China MFN, and it equals the staff of
just one of the major corporations supporting it."
For labor, which ought to have provided the muscle against MFN,
the issue got lost among a host of other, more high-priority issues
that the AFL-CIO was dealing with in mid-1996. "We were fighting
on a lot of fronts, including OSHA, the minimum wage, and Medicare.
And this became just another fight," says a labor lobbyist.
Agrees Wally Workman of the U.S. Chamber, "Labor didn't push
this too hard. They were afraid of offending Bill Clinton in an
In the House, opponents of China's MFN status started with a core
of about 70 votes, comprising a bloc of liberal Democrats allied
with labor and conservatives, led by Representative Dana Rohrabacher,
Republican of California, who opposed China on grounds ranging
from economic issues to abortion to treatment of religious groups.
Led by Representative Nancy Pelosi, a California Democrat, and
Representative Frank Wolf, a Virginia Republican, the anti-MFN
coalition could count on a few key allies, including a few members
of the otherwise staunchly pro-free trade House Ways and Means
Committee and Democratic House leaders Richard Gephardt of Missouri
and David Bonior of Michigan.
But the pressureand the moneyfrom the other side was simply
overwhelming. So enormous is the flow of cash from corporate America
to congressional campaigns that it is difficult to point to specific
cases of influence. One brief study by the Center for Responsive
Politics on the eve of the June vote showed that companies lobbying
on China had funneled more than $20 million in PAC money to members
of the House and Senate in little over a year. "The money
has so corrupted the process that I am convinced that unless you
have campaign finance reform you will get nowhere," says
Milliken's Jock Nash.
From the start, opponents of MFN realized that victory was nigh
impossible. To win, they would have to first win a vote in the
House of Representatives, against incalculable odds. Then, they
would have to win a Senate vote, which would mean first winning
a majority in that hostile environment and then securing 60 votes
to halt a filibuster. And then they would have to rally two-thirds
majorities in both the House and Senate to overcome a certain
presidential veto. Yet the apparent futility of the opponents'
efforts made it all the more astonishing that the U.S. business
community so vigorously opposed them, as if Greenberg and company
were afraid that even a close vote, rather than the one-sided
tally that resulted, would annoy the Chinese too much.
The U.S. Chamber of Commerce, the granddaddy of business
lobbies, devoted nearly six months of intensive work to the MFN
campaign. The Chamber's Asia Task Force contacted more than 200
local and state chambers and a select list of 6,800 member companies
(out of 215,000) to gear up support for MFN, providing educational
and public relations materials, a slide show, a television debate
via the weekly It's Your Business, and a helpful breakdown
of exports to China produced by each of the 50 states. Closely
coordinating their work with the Clinton administrationa calendar
of Chamber MFN activities for May 1996 shows four sessions between
Chamber staff and administration officials, including Secretary
of Commerce Mickey Kantor, in just the first week of May alonethe
Chamber developed a list of 103 House members who were uncommitted
but who might be convinced to support renewed MFN.
The Chamber's China MFN Congressional Lobbying Team, comprising
more than 40 activist companies with interests in China, was divided
into three teams, mixing manufacturers and retailers. Matching
regional presence to House members from particular parts of the
country, the three teams began setting up meetings with undecided
votes. Meanwhile, last spring the Chamber launched its grassroots
program, called GAIN (Grassroots Action Information Network),
which sought to mobilize thousands of smaller companies to contact
members of Congress. (For instance, a GAIN Action Call that went
out to California companies on June 19, a week before the vote,
said, "Call your Representative immediately. Tell him/her
to support renewal of China MFN trade status. . . . There is no
time to write.")
According to Workman, who oversaw the Chamber's efforts, once
a meeting was set with a member of Congress, between three and
fifteen company representatives would attend to make the pitch.
"The 103 House members we targeted were up in the air not
three weeks before the vote," says Workman. "We got
101 of them to vote with us."
Over at the National Association of Manufacturers, a similar
process was underway, though even more than the Chamber of Commerce,
NAM emphasized grassroots work and contacts with members of Congress
back in their districts. "We tried to do our homework in
a different way, with a lot of lobbying out in the districts,"
says NAM's Dianne Sullivan. The ten regional offices of NAM's
Congressional Dialogue concentrated on getting local company officials
and plant managers to bring the message to the congressmen. Like
the Chamber, NAM emphasized U.S. exportsand the jobs sustained
by those exports. But NAM created a highly detailed, company-by-company
spreadsheet for each state, citing specific firms, the number
of jobs dependent on exports to China, the companies' "impact
on Chinese workers," and other data.
Among larger firms, NAM highlights the work of Boeing (which chaired
NAM's China working group), Caterpillar (whose chairman leads
the Business Roundtable), TRW, and United Technologies. The four
companies led an unusual grassroots effort, sometimes called the
"China Normalization Initiative," that was organized
on a state-by-state basis in California, Illinois, Michigan, Texas
and other key states. Boeing was clearly the quarterback in this
effort, having organized many of its 20,000 suppliers across the
country into mini-lobbyists for China's MFN status. Each state
had a "captain," a business activist from a major firm.
In Michigan, General Motors and AlliedSignal, Inc., were co-captains,
while in Illinois the captain was Peoria-based Caterpillar.
Cal Cohen, coordinator of the umbrella group Business Coalition
for U.S.-China Trade, called the Boeing-led effort "sort
of the grassroots for the business coalition." And, wearing
his hat as head of the Emergency Committee for American Trade,
Cohen coordinated meetings with members of Congress for the several
dozen high-powered CEOs (or their representatives) who comprise
the committee, often in Washington but sometimes back in the members'
Meanwhile, perhaps taking Sasser's advice to heart, the U.S.-China
Business Council organized a series of events it called "China
on the Hill." One state at a time, the council would bring
company officials in a group to Washington to meet with an entire
state delegation in the House; often, according to Rich Brecher
of the council, for a particular state as many as half the members
of Congress, rather than mere staffers, would attend. "The
biggest argument we had on our side was the export argument,"
says Brecher, repeating the familiar refrain. "Any action
that would undermine MFN would endanger exports and jobs."
The council also paid particular attention to the scores of House
freshmen, whose views on trade with China were generally up for
grabs; in the end, 55 of 74 GOP freshmen voted for MFN.
Realizing that the longer the delay in voting on the issue, the
more chance that the opponents of MFN had to organize their own
grassroots sentiment against China, the business groups worked
with Speaker Newt Gingrich and the Republican leadership in the
House to accelerate the timetable for a vote. Driving them was
the awareness that China, with its loose-cannon proclivities,
might also stumble into some new controversy that would fuel anti-Beijing
sentiment in Washington. In early June, opponents of MFN were
operating on the assumption that the vote would come in mid- to
late July; in fact, it occurred on June 27 with less than one
day's notice. Says Jock Nash, the Milliken counsel, "We didn't
have the time, the money or the resources. There is no way on
God's earth that you can mount a grassroots effort to bring popular
pressure on Washington that will overcome the pressure being put
on them by the Fortune 500."
In Michigan, the Big Three automakers capped their lobbying of
the delegation with a campaign fundraiser held just a couple of
weeks before the vote, and such key Democratic House members as
John Conyers, Dale Kildee, James Barcia, and Sander Levin joined
most of the Michigan delegation in voting for MFN. In California,
defense and aerospace firms pushed hard and won the votes of Representatives
Julian Dixon, Howard Berman, and George Brown. In Illinois, it
was Caterpillar; in the Northwest, Boeing and Nike; in the New
York suburbs, IBM; and in the grain states, Cargill and Continental.
New York's staunchly liberal representative Charles Rangel, a
Harlem Democrat and friend of labor, abandoned the AFL-CIO on
the MFN vote; as the ranking Democrat on Ways and Means, Rangel
was busily cultivating friends on Wall Street and raising campaign
cash for fellow Democrats. "On trade issues, Rangel is very
much a free trader," says the Chamber's Workman, satisfied.
MAKING IT NORMAL
The 1996 MFN vote may be the last. Early in 1997, legislation
is expected to be introduced in both the House and Senate that
would guarantee permanent MFN status for China. Strongly supported
by the business community, this effort would eliminate the annual
clashes over China trade; critics fear that it will wipe out any
chance that Congress will have to address issues concerning China
at all. Yet both sides agree that Congress is tired of being involved
in a nasty and unproductive MFN battle each year and might look
forward to eliminating the issue once and for all. A parallel
campaign would soften the impact of MFN by changing its name to
something innocuous, perhaps "normal trade relations."
That would make it more difficult for opponents of MFN to tar
supporters with the notion that they are calling China "most
Before this can happen, however, the Clinton administration and
Congress must deal with the thorny issue of China's entry into
the World Trade Organization (WTO). So far, two years of talks
between China and the United States have gone nowhere, with Washington
claiming that Beijing is refusing to make even the barest concessions
in order to join WTO and abide by its rules. In public, the business
community is backing the administration's view that China must
make important concessions, but AFL-CIO officials are skeptical.
"When push comes to shove, industry will cave on all the
important issues," said one. Brecher of the U.S-China Business
Council hints in this direction when he says, "I don't expect
we're gonna get every 't' crossed and 'i' dotted. We've got to
focus on a few priorities. If we try to hold China to an absolute
agreement, we'll get nothing." Likewise, referring to China's
insistence on entering WTO as a "developing country,"
which would soften some of the standards it would have to meet,
the Chamber of Commerce's Workman says, "We think that China
is in many ways a developing country."
Business is divided on exactly what should be the bottom line
on China's WTO entry, and groups like the U.S.-China Business
Council are surveying their members to see what they think. But
if the MFN battle is emblematic, it doesn't really matter which
view industry decides to adopt: They'll have the attention of
both Congress and the President anyway
Statement of Ambassador Michael Kantor
Public Citizen Global Trade Watch
U.S. International Trade Statistics from the Census Bureau
International Trade Instruments, Treaties, Conventions, Laws, and Rules
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