This was supposed to be a banner year for America’s China boosters. The plan was for the Clinton administration to hammer out an agreement for China’s accession to the World Trade Organization, maybe in time for a Rose Garden ceremony with President Jiang Zemin this fall. That deal would confer on Beijing the prestige it wants as a full-time player in major-league international economics — and magically transform the Chinese market into a free and orderly system in which U.S. corporations could make lots more money. Then, in honor of this “transformation,” the United States would grant Beijing permanent “most-favored-nation” status.
Annual review of MFN status, which lowers tariffs, would finally be a thing of the past. There would be no more embarrassing congressional debates about the pestilential reality of Chinese communism — and about U.S. corporate and diplomatic complicity therein. Warm normalcy would envelop Sino-American relations. At long last, the two countries could get down to business. Literally.
But things haven’t worked out this way. There is no World Trade Organization deal. So far, the Chinese refuse even to pretend they’re willing to observe the free-market norms required for membership. Here, as elsewhere, Beijing intends the world to bend its way; other people’s rules be damned. And they don’t much care who knows about it. In full public view, the Beijing politburo is systematically stripping the flesh off Hong Kong’s civil liberties, even before the British crown colony’s reversion to Chinese sovereignty on July 1. Last week, the Danish government bravely sponsored a U. N. resolution critical of Chinese humanrights practices. The resolution was doomed from the start by European cowardice and weak American support. But Beijing’s foreign ministry nevertheless went out of its way to compare Denmark to a fragile “bird” — and promised that China would wield a “rock that smashes on the Danish government’s head.”
Then there is the matter of China’s apparent illegal financial interference in last year’s U.S. elections. American business groups aren’t happy about this latest controversy, which — on top of all the other bad recent Beijing p.r. — guarantees what they’d hoped to avoid: another uncomfortable MFN debate this summer. John Motley of the National Retail Federation mourns China’s “ham-handed” manipulation of American politics; “I wish they’d stay the hell out of it,” he says. Motley and other well-funded lobbyists are convinced they can perform the same manipulation better, all by themselves. So the U.S.-China Business Council, the umbrella organization of American corporations profiting from trade with communism, is dusting off its standard arguments. Congressional revocation of China’s MFN status, the Council insists, would kill U.S. jobs, violate American free-trade principles, and do nothing to improve Beijing’s domestic and international behavior. “Substance, substance, substance,” Council president Robert A. Knapp advises his members. He’s convinced they can win on the merits.
He’s wrong. They can’t. The merits work against them. The pro-MFN crowd is wrong first about American jobs. True, in recent years China’s economy has been growing by leaps and bounds, and rapidly developing countries usually cannot produce enough to satisfy domestic demand — so they tend to be magnets for U.S. exports. And U.S. exports usually create jobs. But not in this case, not to any appreciable degree. China still represents less than 2 percent of the worldwide American export market. Several far smaller Asian nations continue to import more each year from the United States than China does. And there’s reason to believe the China market cannot significantly expand any time soon. There remains no sizable Chinese middle class to purchase high-dollar American consumer goods. And near-term Chinese economic growth is expected to slow down, which will further depress American exports.
During last year’s congressional MFN debate, business lobbyists claimed that all of the roughly 190,000 American jobs supposedly dependent on trade with China would be at risk should Beijing’s favorable tariff rates be repealed. The research that spawned that “frightening” number — which remains in circulation this year — is specious. It assumes that higher U.S. tariffs would reduce eastward trade by 40 percent, and that China would retaliate by imposing a total embargo on westward shipments and investment. Highly unlikely. The Chinese, as academic Sinologists are always reminding us, are a “pragmatic” and purposeful people. They need our money. And they are meticulously managing their economy so as to keep it.
Which is another reason why U.S. trade with China hasn’t produced more jobs: Beijing won’t allow it. Americans cannot do business in China without acquiring “trading rights” from the central government. Those rights are granted only when they are consistent with Beijing’s established five-year national economic plans, which are detailed on an industry-by-industry basis. Particular deals invariably require U.S. companies to transfer manufacturing technology to China, enter joint ventures with Chinese firms, use Chinese raw materials in their factories, and then sell the resulting products anywhere except China. Many American corporations don’t mind; low Chinese labor rates reduce their expenses. But they don’t wind up “exporting” much of anything. Instead, they simply help develop a domestic Chinese industrial capacity — well more than half of it owned or subsidized by the Communist party — that increasingly competes directly with our own.
This is not “free trade.” It is command-economy mercantilism conducted by an aggressive Communist regime, and directed deliberately against the global political and commercial system the United States exists to uphold. Why must we pretend otherwise, and decline ever to retaliate, economically or in any other fashion? Because, say the business lobbyists and the Clinton administration, the Chinese respond only to friendship. To ensure the reform we want from Beijing, we must always be nice. The threat of real American sanctions — anything more than occasional expressions of disappointment with Chinese actions on trade or human rights or weapons proliferation — can, they say, only make things worse.
You hear this over and over again. It is nonsense, really. We have been as nice as possible to Beijing since 1994, and it has got us nothing. Every bit of “progress” commonly cited by China apologists, every bit, falls apart on closer inspection. The Chinese do as they will, and mock us for our acquiescence.
It wasn’t always so. The last time Congress seriously threatened revocation of MFN, in the aftermath of the 1989 Tiananmen massacre, Beijing did alter its behavior in response to pressure. The politburo was worried we might actually do it. So in 1990 they ended martial law. Then they released 600 political prisoners. Then they released another 200. Then they released 100 more. And announced a purchase of Boeing aircraft. And let dissident Fang Lizhi leave the country. The following year, the same pattern obtained. President Bush’s veto of MFN revocation was barely sustained in the Senate. Before that vote, still fearing it might lose its MFN status, China promised to ban the export of goods produced by convict labor. China promised to stop illegal textile shipments. China promised better protection of U.S. intellectual property. China promised to boost U.S. imports. China finally placed the nuclear reactor it was building in Algeria under international supervision.
Yes, the Chinese are pragmatic. They do respond to incentives and disincentives. But first those incentives and disincentives must exist. At the moment, they do not. Sino-American relations, having been “de-linked” from the question of human rights by the Clinton administration, are no longer linked to anything. It is now all a game of chicken in which the Chinese are allowed constantly to press forward — and only the United States swears never to act “irresponsibly.” We announce in advance that at the last minute we will yank the steering wheel, no matter what. And then, for some reason, we wonder why we always find ourselves in the ditch.
Enough, already. MFN may not be an absolutely ideal vehicle with which to penalize China for its persistent outrages. It is, as they say, a “blunt” foreignpolicy instrument. But there is no plausible alternative at the moment. The Clinton administration obstinately refuses to link U.S. China policy to anything the Chinese do or fail to do. Linkage must be reestablished; equilibrium must be restored to the relationship between the United States and its most troublesome and persistent challenger. That mission falls to the Congress, by default. China’s current mostfavored-nation status expires on June 3. President Clinton will act to extend MFN for China. This time — better late than never — Congress should say no.
David Tell, for the Editors
