U.S. targets Chinese military firms in most-favored-nation dispute

May 22, 1994|By Robert Benjamin | Robert Benjamin,Beijing Bureau of The Sun

BEIJING -- The Xinxing Corp.'s colorful catalog offers dozens of items for both Third-World warriors and wealthy Westerners: camouflage gear and tuxedos, high-top boots and high-gloss loafers, mess kits and briefcases, medical supplies and anti-dandruff shampoos, bulldozers and station wagons.

The goods are all available for export. Profits from their sale supplement the Chinese military's meager official budget -- Xinxing is one of the People's Liberation Army's (PLA) largest corporations.

Xinxing and other Chinese state-owned exporters to the United States are specific targets in the Clinton administration's frantic search for a way to punish China for its human-rights abuses, while avoiding the disastrous impact of total withdrawal of its most-favored-nation (MFN) trade status with the United States.

Ending MFN would raise tariffs on most Chinese goods so high they couldn't be sold in the United States, setting off a trade war with the world's fastest-growing economy -- a war that would hurt American consumers, workers and companies as well as China.

But China at best has been slow to meet U.S. demands on human rights, even with the recent releases of some prominent dissidents. With less than two weeks before the June 3 deadline for the MFN decision, Mr. Clinton appears to be searching for a limited step that would allow him to save face while beginning to undo the link between trade and human rights -- a link that's backfired for the United States.

And targeting the exports of state-owned or even just PLA-owned companies for MFN withdrawal is high on the list of the limited moves under consideration.

Proponents of unconditional renewal of China's MFN status -- virtually the entire U.S. business community -- say limited withdrawal of MFN in this way would sour Sino- American relations just the same as total MFN withdrawal. It also might be a nightmare to enforce.

But many critics of China's human-rights record have been pushing hard for limited sanctions of some sort, particularly the move against Chinese military products.

"Our objective is to get a sanction that's real, not cosmetic," Jeffrey Fielder, secretary-treasurer of the AFL-CIO's food and allied service unions, said in a telephone interview from Washington last week. "The PLA are the gunmen who shot up the folks in Tiananmen Square, and the U.S. government is unwittingly subsidizing them by letting them do business freely in the U.S."

There's no question such sanctions would come at a bad time for China's more than 100,000 large and medium-sized state enterprises. Two-thirds don't make money; many soon must begin massive layoffs or go under. Many military factories are in the same bad shape.

But targeting Chinese state or PLA enterprises may hurt the United States as much or more than China, even though China sells to the United States almost four times more than it buys from it.

That's because state firms, including PLA companies, were the main buyers of last year's $8.8 billion of U.S. exports to China, largely aircraft, computers, telecommunications gear, power equipment and wheat.

China's state sector might have accounted for just a third of its $33 billion of exports to the Unites States last year. The top Chinese exports -- toys, shoes, textiles and electronics -- came largely from rural and foreign-funded enterprises.

Moreover, targeting PLA factories runs directly counter to a U.S. Defense Department initiative last fall to improve ties with the PLA. The theory is that the military will play a leading role in the political struggle likely to follow the death of ailing patriarch Deng Xiaoping.

Ironically, a key part of this initiative is the formation of a joint commission on military conversion, a move premised on the notion that China has a lot to teach the United States about converting defense industries to civilian production.

At the second-rate hotel in western Beijing that serves as Xinxing's headquarters, company officials are proud of the rapidly increasing quality and diversity of their products, about 80 percent of which are for civilian use.

With 140,000 workers at more than 100 factories throughout China, the 5-year-old conglomerate operates directly under the PLA's General Logistics Department; its officials are former army officers. They say they'd hate to lose the American market, but it wouldn't be a disaster for them.

"We do want to expand our exports to America, but right now they're really very small," said Wu Haiqing, director of the office of Xinxing's president. "

Xinxing's exports totaled $100 million last year, Mr. Wu says, with only about $5 million going to the Unites States. By contrast, he says, the company bought more than $10 million of U.S. goods.

But U.S. import records obtained by the AFL-CIO's Mr. Fielder and sent to The Sun show Xinxing may be more vulnerable to the loss of the U.S. market than Mr. Wu admits.

Range of shipments

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