US Faces Tough Choice on China

PRESIDENT Clinton confronts a bewildering Chinese puzzle. By June 3, he must decide whether to renew China's most-favored-nation (MFN) trade status.

His decision could have long-term consequences - not only for Asia's future, but also for Mr. Clinton's reputation for toughness.

The MFN decision comes at a tricky moment in United States-China relations.

China, the world's most populous nation, has a booming economy, which surged last year by a record-setting 13 percent. Industrial output, much of it designed for export, was up 25 percent. Many urban Chinese are getting rich, and millions are prospering because of new jobs, particularly in the coastal provinces.

Behind its glittering economic performance, however, China remains politically and religiously repressive, according to the US Department of State. Asia Watch, a human rights group, claims ``political repression is increasing'' in virtually every region of China.

During the last several years, China used its low-tariff, MFN access to American markets to sell billions of dollars' worth of shoes, toys, apparel, plastic products, and other light manufactured goods. Critics ask: Why is the US helping a nation that oppresses many of its own people?

All this now has landed on Clinton's desk because of the impending June deadline on MFN - and because of promises he made during the 1992 presidential campaign.

Candidate Clinton excoriated China's human rights record. When he reached the Oval Office, he vowed that China's MFN privileges would be canceled this year unless its rights record improved substantially. Now the deadline is near.

The president is being bombarded with conflicting advice. Some in Congress would get tough on China. Others argue for restraint. They say trade has begun to break down China's walls to the outside world. This is no time to slow the flow of trade, they insist.

The administration is reported to be searching for a face-saving compromise.

Analysts say there is no longer any prospect that Clinton will cancel MFN outright. Doing so could cripple US companies trying to compete in the most dynamic market in the world. Wu Yi, China's foreign trade minister, predicts that his country's imports ``may well reach $1 trillion'' during the next seven years.

A new study by the American Enterprise Institute (AEI), ``Beyond MFN,'' puts the China debate in context. The study, edited by former US ambassador to China James Lilley and former Commerce Department counsel Wendell Willkie II, says that by 2010 China may boast the world's biggest economy, with ``a large and prosperous middle class conducting business throughout East Asia and the world.''

US Sen. Max Baucus (D) of Montana told a recent AEI conference on China that if Clinton cancels MFN, US trade opportunities in this awakening China ``would disappear.''

The senator noted: ``In the next five years, China will spend $4.3 billion on computers, $18 billion on oil and gas machinery, and $29 billion on telecommunications. Over a longer period, there is a $40 billion market in aerospace and $90 billion in power generation. If we lock ourselves out now, we get no second chance.''

Yet on Capitol Hill, memories of the Chinese leaders' bloody 1989 crackdown on the democracy movement in Tiananmen Square are still vivid. And recently, as if thumbing its nose at Clinton and Congress, China arrested several well-known dissidents, according to news reports from Beijing.

Many Americans are also skeptical of the promises of trade with China. The $40.3 billion in trade between the US and China last year was mostly one way - the US buying $31.5 billion in goods from China, but China buying only $8.8 billion from the US.

Rep. Nancy Pelosi (D) of California, a China critic, says she has several concerns about an unqualified renewal of MFN.

First, many Americans don't accept the argument that trade equals jobs. ``It ain't necessarily so,'' Representative Pelosi observes. Although proponents of China trade trumpet the growing commerce between the two nations, the American people haven't seen many new jobs, she says.

Americans also worry that US companies are eager to transfer technology and entire factories to China in hopes of exploiting that nation's bargain-priced labor force, she says.

Pelosi notes that even in the aerospace industry, a vital job producer in California, workers feel threatened as they see US production know-how and technology being moved to China. Of the $8.8 billion in sales to China last year, Pelosi says that $1.7 billion consisted of US factories being exported (along with the jobs) to China.

Pelosi adds a third concern: China's support for weapons proliferation. Even in the US, China plays a role in growing violence with sales here of 2 million AK-47 assault-style rifles. Chinese guns are ``flooding into our streets,'' Pelosi says.

Clinton's China decision remains uncertain, but analysts say any prospect that the president will slam the door on that nation has rapidly faded.

One possible option getting attention in Congress: a partial withdrawal on MFN privileges for goods made by the Chinese Army, or by government-owned firms.