China's Trade Status With US At Issue Again

THIS could be the year the White House loses its now-annual battle to maintain preferential trading ties with China. Democrats in Congress have long charged that President Bush, a former ambassador to China, is blind to that country's human rights and economic abuses. Now they are lining up behind a proposal by Senate majority leader George Mitchell (D) of Maine to cut off China's most-favored-nation (MFN) trading status unless it meets stringent conditions dealing with political prisoners, United States access to markets, and weapons proliferation.

"We should apply to the government of China the same criteria and goals we seek elsewhere in the world," Senator Mitchell said upon introducing his measure last week.

White House officials complain that withholding MFN status won't change Chinese behavior - that, instead, it will hurt Chinese entrepreneurs and others who favor reform. Besides, they say, it would cut US business off from one of the most promising markets in the world.

"The problem with what Mitchell says is the implication that MFN is a favor to the Chinese," says a senior administration official. "If MFN is not in the US interest, we shouldn't grant it. We think it is in the US interest."

Most-favored-nation trading status means giving a country so favored the same tariff treatment as the least-restricted US trade partner. MFN status is extended to more than a few nations; China has had it since 1980.

Remembering the June 1989 Tiananmen Square crackdown, Congress urged President Bush last year to cancel China's MFN status. Instead, he renewed it for a year. The year is up on July 3.

Bush must officially announce whether he intends another renewal by June 3.

Congressional approval of renewal is not required, and its disapproval of MFN status would require legislation.

As a practical matter, disapproval of MFN treatment for China would have to be passed by a two-thirds majority vote to stick. Otherwise, it would be stopped by an almost certain presidential veto, and China's MFN renewal would take effect.

Last year the White House held out the hope that continued trade ties would act to moderate China's behavior. But both congressional critics and the White House itself say the last 12 months have seen little in the way of Chinese reform.

While US attention was riveted on events in the Persian Gulf, China put on trial dissidents arrested since the Tiananmen Square crackdown. And China's leadership is proceeding with plans to lavishly celebrate the 40th anniversary of its "liberation" of Tibet later this month.

US officials have complained in recent weeks about Chinese exports of nuclear technology to Algeria, ballistic-missile technology to Pakistan and Syria, and allegations that some Chinese exports are manufactured by forced labor.

"They've moderated a little bit, but it has been at the margins," concedes the senior administration official. "The problem is, China is dominated primarily by a very old leadership. They were badly frightened by Tiananmen Square. I'm not sure they know what to do."

The Bush administration would like to renew China's MFN status for another year. But the political reality is that this may not be possible. One reason is that China's own trade policies are only adding to Capitol Hill's ire. Trade figures announced last week show that the US trade deficit with China in March was its second largest, after that with Japan. America's Chinese trade deficit could hit $15 billion this year, and the Treasury has charged that the Chinese leadership is intentionally building th i

s deficit by holding down imports and pushing exports.

Administration officials say they are open to the idea of accepting some conditions on MFN renewal to make it palatable to Congress. The administration's idea of a "condition," however, seems to mean a provision containing condemnatory language but no real restrictions.

Senator Mitchell's legislation goes further than that. It would revoke China's MFN status 180 days after passage unless China, among other things, released all political prisoners, stopped arresting pro-democracy demonstrators, and agreed to greater protection for US patent rights and freer access for US goods.

The White House insists that talks with China on areas of concern will intensify in coming months and that this - not revocation of MFN - is the best way to change Chinese actions. Arms sales are another effective lever the US has with the Chinese, in the White House view.

With the June 3 deadline looming, it will take quick action by Bush to obtain an MFN renewal. In a hearing Friday, Sen. Frank Murkowski (R) of Alaska told a State Department official, "In my opinion, you're going to lose it unless you come up with some specific actions to get the attention of our friends in China."