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China Vote: A Vote For Big Business
Published on Monday, May 22, 2000 in the Washington Post
China Vote:
A Vote For Big Business
by Jerome I. Levinson
The principal argument of those who support permanent normal trade relations with China is that if Congress votes to continue its annual reviews of that country's human rights, American firms will be at a disadvantage in the Chinese market against competitors in Japan and Europe.

This is at best a dubious argument. If Congress votes against normal trade relations, China will still become a member of the World Trade Organization. As far as rights issues go, the United States would then simply invoke a procedure it has used with other transition economies that joined the WTO, which would allow Congress to continue to conduct annual reviews of these matters.

True, if the China bill is rejected, the United States will not be able to use WTO dispute settlement procedures when it comes into conflict with China over specific trade and investment disputes. But in the circumstances of China, this would actually be an advantage, because rights issues can be raised under U.S. trade legislation. Would China retaliate against U.S. firms if Congress decided to continue annual reviews on granting normal trade status to China? Not likely. First, the United States has a 1979 bilateral trade treaty with China, in which both parties agree to "accord firms, companies and corporations, and trading organizations of the other party treatment no less favorable than is offered to any third party or region."

Aside from the legalities, however, there is the reality of the trade statistics with China: The Chinese have an annual trade surplus of approximately $70 billion with the United States. Discriminatory treatment of American firms would almost certainly bring a negative reaction from Congress, with the prospect of retaliatory measures against Chinese exports. A trade war with China is clearly undesirable, but equally clearly the balance of power rests with the United States. There is no way China can replace that surplus, or any substantial part of it, with access to other markets. The United States, in trade terms, is not a pitiful, helpless giant lacking negotiating leverage with the Chinese.

President Clinton, recognizing the implausibility of the discrimination argument, more recently has invoked national security considerations. This argument seems to have resonated with members of Congress. Denying normal trade relations, it is argued, would reinforce the "hawks" in China in the debate within the Chinese leadership about how much and how fast China should liberalize its economy and society.

But that debate is likely to continue for some years; it is not a one-time-only event, with a defined start and end. And it is likely to be decided upon a multiplicity of issues: the reaction to a U.S. decision to proceed with a missile shield, the outcome of negotiations on the future status of Taiwan, and the ability to manage the internal social dislocations that are likely to accompany economic liberalization.

We should have learned from the Russian experience that a too-rapid economic liberalization, encouraged by the United States, the International Monetary Fund and the World Bank, can have near-catastrophic consequences. It is unlikely that the Chinese will relent with respect to the labor repression that, in their view, gives them a competitive advantage in attracting foreign direct investment.

And if economic liberalization leads, as is possible, to even greater political repression, the United States would, by limiting itself to the rigid WTO economic dispute settlement process, also limit its ability to react with economic measures. That is because such measures would be barred under WTO rules.

Retaining some measure of bilateral flexibility with respect to China, then, makes a great deal of sense. Such a strategy also implies an acceptance that it is not in the U.S. national interest to have a one-size-fits-all international trade, investment and finance regime.

Organized labor, in opposing normal trade relations, has done us all a favor by exposing the excessively narrow economic-interest approach of the Clinton administration, its big-business allies and what, for want of a better phrase, we call the American Establishment.

The argument that American economic interests will be prejudiced if Congress votes no on the China legislation is flawed on its own terms. But much more is at stake: What values are really important to us, and what kind of trade, investment and finance regime is in the American national--not just the corporate--interest.

That is the issue that labor and the rest of the opposition to normal trade relations force us to confront.

The writer is a professor at American University's Washington College of Law.

© 2000 The Washington Post Company


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