DLC | The New Democrat | January 1, 2000
Expanding Trade, Projecting Values
Why I'll fight to make China's Trade Status Permanent

By President Bill Clinton

As the old century passes and a new one dawns, thoughts turn to the type of world awaiting our children. Will it be more prosperous? Will it offer greater opportunities, security, openness, and understanding? No matter how we consider the question, one nation looms large: China. Already the world's most populous country with more than one billion people, China's population and economy continue to grow at an astounding rate. Its people form a market that could become the world's biggest. It plays a central role in Asian security issues. Clearly, our own national interests demand that we engage China in a principled, purposeful way and develop with it a stable and mutually beneficial relationship.

If China is isolated and its people are denied the chance to pursue their legitimate aspirations, if it stumbles on the path to economic and political reform, this emerging power could one day become a threat, beset by internal conflicts and social dislocation. We want a prosperous China open to American exports; whose people have access to ideas and information; and that upholds the rule of law at home and plays by global rules of the road on everything from nuclear non-proliferation to human rights to trade.

Bringing China into the World Trade Organization on the terms we have negotiated will advance all these goals. It will open a growing market to American workers, farmers, and businesses. And more than any other step we can take right now, it will encourage China to choose reform, openness, and integration with the world. For these reason, I will make it a top priority in the new year to seek congressional support for permanent normal trade relations (NTR) with China, so that we can benefit when China joins the WTO.

A Good Deal for America

As the negotiators stated at the signing, this agreement creates a "win-win" result for both countries. But it is China that makes one-way concessions to open its markets to American goods, services, and farm products. That's right. The United States makes no new market access commitments. We promise only to maintain the market access policies we already apply to China by granting it permanent normal trade relations. In other words, the Chinese value so highly their current access to our market and the promise of WTO membership, they are willing to make significant market-opening concessions to the United States. These commitments are enforceable in the WTO. If China is found to have violated WTO commitments, the United States will have the right to trade retaliation against China.

On U.S. priority agricultural products, tariffs will drop from an average of 31 percent to 14 percent by January 2004, with even sharper drops for beef, poultry, pork, cheese and other commodities. China will create new tariff-rate quotas that significantly expand export opportunities for bulk commodities such as wheat, corn, and rice. Our producers may also export and distribute directly inside China for nearly every agricultural product without going through state trading enterprises or middlemen. Sales in the Chinese market will be a boon to American farmers, who have faced tough times recently.

Industrial tariffs on U.S. products will fall from an average of 24.6 percent in 1997 to an average of 9.4 percent by 2005. Considering that manufactured goods comprise a large proportion of American exports, the drop in Chinese tariffs is good news for our high-tech manufacturers and basic industries. Our manufacturers will also have the right to trade and distribute freely inside China -- something the Chinese have severely restricted in the past.

In information technology, tariffs on products such as computers, semiconductors, and all Internet-related equipment will decrease from an average of 13.3 percent to zero by 2005. Our information technology firms lead the world and stand to earn handsomely in this huge, expanding, and information-hungry market.

The agreement also opens China's market for services. China agrees to ensure current market access and activities for our service firms. The agreement also safeguards the right of American businesses to distribute products other than those they make in China as well as own or manage distribution networks, wholesaling outlets, or warehouses. For the first time, China will open its telecommunications sector and significantly expand investment and sales rights for financial services firms. And it will greatly increase the opportunities open to professional services such as law firms, architects, and engineers. Here, too, American firms lead the world and can anticipate a bounty of opportunity in China.

This agreement locks in and expands our access to a market of more than one billion people. China's economy is already the world's second largest in terms of domestic purchasing power and over the past 20 years has expanded at a phenomenal 9.8 percent annual rate. During this period, U.S. exports to China have grown from negligible levels to more than $14 billion each year and now support hundreds of thousands of American jobs. These figures can grow substantially with the new access to the Chinese market the WTO agreement creates.

Important Safeguards

Prior to the final negotiations, labor leaders as well as Democrats and Republicans in Congress raised legitimate concerns about the importance of safeguards against unfair competition. This agreement addresses those concerns and as a result, no agreement on WTO accession has ever contained stronger measures to strengthen guarantees of fair trade. Among these guarantees is a "product-specific" safeguard that allows us to take measures focused directly on China in case of an import surge that threatens a particular industry. This protection remains in effect a full 12 years after China enters the WTO and is stronger and more targeted relief than that provided under our current Section 201 law.

The agreement also provides strong protections against dumping. China agreed that for 15 years after its accession to the WTO, the United States may employ special methods, designed for non-market economies, to counteract dumping.

And it will require China to demolish a set of policies designed to draw jobs and investment away from the United States and other countries. For the first time, Americans will have a means, accepted under the WTO rules, to combat such measures as forced technology transfer, mandated offsets, local content requirements, and other practices intended to drain jobs and technology away from the United States. As a result, we will be able to export to China from home, rather than seeing companies forced to set up factories in China in order to sell products there.

The agreement also increases our leverage with the Chinese in the event of a future trade dispute. As a member of the WTO, China must agree to submit disputes to that body for adjudication and would be much less likely to thwart the will of the WTO's 135 members than that of the United States acting alone.

Under WTO rules, we may -- even when dealing with a country enjoying NTR status -- continue to block imports of goods made with prison labor, maintain our export control policies, use our trade laws, and withdraw benefits including NTR itself in a national security emergency.

If Congress were to refuse to allow the United States to grant China permanent NTR, China could deny us the full benefits of the deal we negotiated. Put simply, a negative vote may well oblige American farmers and businesses to look on helplessly as European and Japanese competitors stake out privileged positions in one of the 21st century's biggest markets.

Promoting Reform and Creating a Safer World

This deal not only expands trade, it also projects our values and enhances our security. To understand why, we need to see China clearly -- its progress and problems, its policies and perceptions of us, of itself, and the world.

In the last 20 years, China has made incredible progress in building a new economy, lifting more than 200 million people out of absolute poverty. But China's working age population is increasing by more than 12 million people -- equal to the population of New England -- every year. Tens of millions of peasants are migrating from the countryside, where they see no future, to the city, where not all find work. China's economic growth has slowed just when it needs to be rising to create jobs for the unemployed and to maintain support for economic reform.

I have met a number of times with Chinese President Jiang and with Prime Minister Zhu. They are working hard to reform China's banks and state enterprises and to fight corruption. But China's progress is still held back by resistance to political reforms vital to its long term stability. As I have argued to China's leaders many times, China will be less likely to succeed if its people cannot exchange information freely; if it does not build the legal and political foundation to compete for global capital; if its political system doesn't gain the legitimacy that comes from democratic choice.

That is another reason why bringing China into the WTO is so important.

The agreement obligates China to deepen its market reforms, empowering leaders who want their country to move further and faster toward economic freedom. It will give Chinese as well as foreign businesses freedom to import and export on their own, and to sell their products without going through government middlemen. It will open China's telecommunications markets, giving its people greater access to uncensored information through satellites and the Internet.

In the past, the Chinese state was employer, landlord, shopkeeper, and news provider all rolled into one. This agreement will accelerate a process that is removing the government from vast areas of China's economic life. China's people will have greater scope to live their lives as they see fit. And as they become more mobile, more prosperous, more aware of alternative ways of life, they will seek greater say in the decisions that affect their lives.

The agreement also obliges the Chinese government to publish laws and regulations and subjects pertinent decisions to review of an international body. That will strengthen the rule of law in China and increase the likelihood that it will play by global rules as well. It will advance our larger interest in brining China into international agreements and institutions that can make it a more constructive player in the world, with a stake in preserving peace and stability, instead of reverting to the status of a brooding giant at the edge of the community of nations.

Courageous proponents of change in China agree. Martin Lee, the leader of Hong Kong's Democratic Party, says that "the participation of China in the WTO would ... serve to bolster those in China who understand that the country must embrace the rule of law." Chinese dissident Ren Wanding said upon the deal's completion: "Before, the sky was black; now it is light. This can be a new beginning."

Of course, this trade deal alone cannot bring all the change we seek, including the respect for human rights China must embrace. We must and will continue to speak out on behalf of people in China who are perse cuted for their political and religious beliefs; to press China to respect global norms on non-proliferation; to encourage China to be part of the solution to the problem of global climate change. And we will hold China to the obligations it is accepting by joining the WTO.

In short, we will protect our interests with firmness and candor. But we must do so without isolating China from the global forces empowering its people to build a better future. For that would leave the Chinese people with less access to information, less contact with the democratic world, and more resistance from their government to outside influence and ideas. No one could possibly benefit from that except for the most rigid, anti-democratic elements in China itself. Let's not give them a victory by locking China out of the WTO.

In short, it lies not only in our economic interest to grant China permanent NTR status, we must do it to encourage China to play by international rules instead of defying them; to choose integration with the world instead of self-isolation; and to respect human rights at home. This deal will advance all these goals. In the months ahead, I look forward to a vigorous, national discussion on this historic legislation and to working with Congress for its passage.