Weighing potential benefits and risks of China deal


Experts consider who would gain, lose in trade agreement

May 21, 2000|By Amanda J. Crawford

Congress is debating controversial legislation to grant China permanent normal trade relations based on an agreement negotiated in November. China now has normal trade relations subject to annual review.

In the bilateral agreement, China made a number of concessions, agreeing to a significant decrease in tariffs on a wide range of agricultural and industrial products. Tariffs on autos, for example, would fall from the current 80 percent to 100 percent to an average of 25 percent by 2006. China also would participate in the Information Technology Agreement and eliminate tariffs on computers, semiconductors and related products by 2005; open its telecommunications sectors, including Internet services; expand investment and other activities for financial services companies; and open up distribution services, such as repair and maintenance, warehousing, trucking and air couriers.

How much of a benefit would this be to American businesses? Which stand to benefit most? What are the downsides or risks? Will it hurt American workers?

Barry Naughton

Professor of economics, Graduate School of International Relations and Pacific Studies, University of California, San Diego

The main benefit is a long-term benefit: As China grows, U.S. businesses will be able to participate and take a share of that growth. The benefits can be large for individual companies, but relative to the huge American economy, it's only a modest plus. The businesses that will benefit the most will be those in advanced services such as telecommunications, insurance and banking; also, agriculture and some industries.

Morris Reid

Senior vice president, American Management Services Inc., Boston

The people that stand to benefit the most are large companies. Small businesses account for 96 percent of all U.S. exports and employ 53 percent of the workforce, yet they have no voice in this debate. Small business owners do not have the same resources the large businesses have. The risk is that the small business community will be left behind.

Y.C. Chang

Retired professor of political science, University of Delaware

Some jobs will be lost, because all of the low-skilled, labor-intensive jobs will be exported. In this country, the steel, textile, toys and shoes industries will be hurt. Some industries will suffer, and some of the jobs will be replaced by cheap labor in China. Some of that labor may be child labor, prisoner labor or low-wage employment. Not everybody will gain from this agreement. Labor has some real genuine concerns.

Peter Morici

Professor of international business, University of Maryland; former chief economist, U.S. International Trade Commission

The benefits are enormous. China's economy is already the size of California's, and before it is done, it will be bigger than ours. It will lead to a substantial increase in exports in some things. There is really no downside risk, because we are not doing anything to open our markets to China. They are opening their markets to us.

How can it hurt American workers if it will increase exports without increasing imports?

It will reduce the trade deficit, create jobs in unionized sectors, create employment for farmers and create new opportunities for workers in service sectors.

Edward Turzanski

Professor of political science, LaSalle University, Philadelphia

The Chinese have been notorious for not abiding by arrangements they have signed in the past. The central question is, will the passage of this legislation make China more likely to become less authoritarian, more democratic and less hostile to American interests?

I'm not persuaded that that's the case.... But I wonder if we are not trading long-term technological, economic and political security for a short-term benefit.

Is it worth giving up technological superiority and also some leverage to a potential adversary in return for cheap sandals and sneakers?

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