For U.S. and China, stakes of trade high

Effects of proposal on American jobs, Beijing reform at issue

Contentious trade proposal could shape China's future

May 07, 2000|By Jay Hancock | By Jay Hancock,SUN NATIONAL STAFF

WASHINGTON -- If Congress approves a sweeping new trade agreement with China this month, the price in Guangzhou of a Caterpillar D-11 earth mover, made with tank tracks and an 850-horse engine in Peoria, Ill., will fall by $60,000.

Whether the agreement will also nurture Chinese democracy and advance world peace is another matter.

But the Clinton administration's proposal to grant permanent normal trading relations to China is seen by backers and opponents as transcending the arid commercial details of its text. The decision on the measure could also shape the social and political future for 1.2 billion Chinese, both sides say.

The administration is pushing the trade deal, to be considered by Congress the week of May 22, as a way for the United States to reap the benefits of China's impending entry into the World Trade Organization. The pact would cut Chinese import tariffs for many U.S. industrial and agricultural products and allow American insurers and telephone companies to buy stakes in their Chinese counterparts.

A diverse coalition of liberal labor groups and conservative Republicans passionately opposes the agreement. It would cost American jobs, these groups argue, and aid a brutally repressive Beijing government.

"We think it will open up the floodgates" for U.S. job losses, said Mark Levinson, chief economist for the Union of Needletrades, Industrial and Textile Employees. "It gives us the right to sanction China for some of the worst human rights and worker abuses in the world."

Proponents -- another eclectic band, made up of big-business interests and moderate Democrats and Republicans -- argue with equal fervor that enhanced trade with China will benefit U.S. workers, help raise millions of Chinese out of poverty and plant the seeds of democracy in that country.

"Free trade, resulting in market reform, will make the conditions for democracy much more favorable in China," said Brink Lindsey, director of the Center for Trade Policy Studies at the libertarian Cato Institute. "Bringing China into the World Trade Organization is the best single way we can exert influence on China in a positive direction."

The vote on permanent normal trading relations, sometimes referred to as PNTR, is expected to be extremely close. Each side predicts victory, though lately the momentum in Congress has shifted in favor of the pro-traders.

Much is at stake. The proposal touches many of the political issues guaranteed to stir emotion and goad opinion: jobs, human rights, corporate profits and democracy.

Many liken the deal to the landmark North American Free Trade Agreement, which was passed in 1994 amid much acrimony and dismantled commercial barriers with Mexico and Canada.

But for all of NAFTA's significance, the China agreement looms larger. This time, the U.S. negotiating partner is 10 times as populous as Mexico and Canada combined, possesses nuclear weapons and has lately been threatening Taiwan, a stable democracy and U.S. friend.

The China deal, signed by the Clinton administration in November but requiring Congress' approval, is seen as a critical test for global trade generally. Passage is a requirement for the United States to enjoy the full benefits of China's entry into the WTO, which is expected in the next year or so.

Approval by Congress would imply that the recent popular protests against the WTO, the World Bank and the International Monetary Fund were relatively minor potholes on the road toward expansion of international business. On the other hand, the measure's defeat in Congress would embolden opponents of globalism and could affect U.S. politics in the November elections and beyond.

"You're seeing real concern inside the Democratic Party that they will be labeled the party of protectionism if they don't let this thing pass," said Peter Morici, a professor at the University of Maryland and former chief economist for the U.S. International Trade Commission. "You're seeing a struggle for the future leadership of the party."

Model in Taiwan

Supporters of the China measure point to hundreds of studies showing the close relationships between trade growth and rising living standards, longer lifespans and other improvements in human welfare. And they assert that a growing middle class of Chinese workers, traders and small-business owners will generate internal pressures for political reform.

Their favorite case study is Taiwan, whose transformation from dictatorship to democracy has occurred simultaneously with its integration into the global economy.

"It is my strong conviction that approval of PNTR and accession to the WTO will make China more likely to emerge as a more open, stable, cooperative nation that plays by the rules of the international system and provides greater freedom to its people," White House national security adviser Samuel R. Berger said last week.

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