Trade Peace with China

January 27, 1992

Just in time to avoid a nasty trade war that would be detrimental to both countries, the United States and China have signed a pact to stop China's notorious pirating of American patents, copyrights and trade secrets -- all at an estimated cost of $800 million a year. In return, the United States has canceled threatened retaliation through 100 percent tariffs against $1.5 billion worth of Chinese imports. American consumers, with access to cheaper goods, are big winners in the agreement.

In a wider context, the accord avoids another stormy chapter in relations between these two giant powers. President Bush is now in position to push for an extension of "most favored nation" trading arrangements (actually "normal" trading arrangements) with China against the opposition of lawmakers who want the Beijing regime punished for the Tiananmen Square massacre 2 1/2 years ago.

If China follows up with added trade reforms and draws closer to international organizations that set the rules for world commerce and finance, this will not necessarily mean Beijing will stop its harsh repression of democracy advocates and its violations of human rights. But it will be a victory of sorts for Mr. Bush's contention that interaction, rather than isolation, is the best way over the long run to promote freedom in China.

Burgeoning trade with China, now tilted too heavily in its favor, is carried on mainly with coastal provinces where businessmen plunging into free market economic practices pay less and less attention to doctrinaire Communists in the central regime. Had Beijing and Washington gotten into a trade war, this would have impacted most harshly on the very regions where economic reform is preparing the way for eventual political reform.

This is a message China-bashers in Congress should keep in mind. While their anger about Tiananmen Square is well bTC grounded, they should think again about what is the most effective response.

The Sino-American agreement has been crafted at a moment when world trade reform under the General Agreement on Tariffs and Trade hangs in the balance. By Easter, it will be known whether the European Community will retreat from protectionist agricultural policies that could scuttle five years of negotiation. Like agriculture and service industries, intellectual property rights of the kind covered by the U.S.-China accord are not included in the existing GATT system, which is limited mainly to manufactured products.

To the extent this agreement focuses world attention on the need for protection of patents and copyrights, it will be a major step forward.

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