Washington Mulls China Trade Ties In Light of Rights, Piracy Allegations

The Clinton administration is walking a fine line as it seeks to manage trade relations with China: how to be tough enough to satisfy American critics of Beijing without closing off lucrative opportunities for US companies.

How it balances these competing imperatives will have major implications for jobs at home and for other countries where human rights, arms control, and US trade interests are in conflict.

"China is a big rogue state that can do us major harm economically and militarily," says Alan Tonelson at the US Business and Industrial Council, an association of small and mid-sized firms that favors revoking China's most-favored-nation (MFN) trade status. "How we handle China is going to influence how we handle other economic and security challenges over the next presidential cycle."

Despite strong opposition in Congress, President Clinton is expected to call this month for unconditional renewal of MFN, which gives China the same low, nondiscriminatory tariffs enjoyed by most other US trading partners.

After some apparent hesitation, Senate majority leader Bob Dole (R) of Kansas is expected to follow suit by announcing his support for extending MFN in a foreign policy address today in Washington. Mr. Dole, who represents a state that relies on overseas grain markets, has been a consistent supporter of free trade, including MFN status for China.

But his decision puts him on Clinton's side on yet another major foreign policy issue, as when he grudgingly backed the president's decision last year to send US troops to Bosnia. And, as with Bosnia, it puts Dole at odds with many of his own party's conservatives, some of whom have announced plans to lobby against MFN for China.

"If you're looking at foreign policy and trade policy, what really distinguishes Bob Dole from Bill Clinton except a few minor tactical questions?" Mr. Tonelson asks.

China has antagonized the US by, among other things, selling nuclear technology to Pakistan, shipping missiles to Iran, threatening Taiwan, and violating human rights at home and in Tibet.

At issue in the MFN debate is how best to moderate such behavior. Critics say by depriving China of its biggest market for manufactured goods, the revocation of MFN would give the US greater leverage to force changes in Chinese policy. US officials say reducing trade ties would diminish US leverage.

Even as it supports MFN extension, the Clinton administration is on the verge of imposing punitive sanctions on China for its failure to crack down on businesses that pirate US intellectual property, including computer software, compact discs, and videos.

Under an agreement signed last year, China has until May 15 to demonstrate that it is taking reasonable steps to put an end to widespread violations of US copyrights and trademarks that are costing US companies billions in lost sales.

The administration is also weighing sanctions on China for what it says are illegal sales of nuclear-weapons material to Pakistan. Clinton has until June 3 to inform Congress of his intention to extend MFN for another year. Congress will have until Sept. 3 to approve or disapprove.

US exports to China totalled $12 billion in 1995, accounting for some 200,000 US jobs. But US imports the same year totaled nearly $46 billion, for a $34 billion trade deficit that is partly attributed to unfair Chinese trade practices.

Experts differ over whether Chinese imports - including inexpensive shoes, apparel, and toys that the US might or might not otherwise manufacture itself - are replacing US jobs.

More to the point, critics say, is the inconsistency in US policy that penalizes other regimes for human rights violations while ignoring China's.

MFN defenders say that over the long run foreign investment has had a liberalizing effect in China. Beyond that, they cite the huge economic losses that could result if US companies are forced to the sidelines as European and Japanese companies cash in on the growing trade and investment opportunities in an economy that could become the world's largest in the 21st century.

"I don't think America would want to be on the outside of that market looking in," says Calman Cohen, president of the Business Coalition for US-China Trade, a consortium of 800 American companies, trade associations, farm organizations, and consumer groups lobbying for MFN renewal.

Administration officials also note that revoking MFN could alienate China politically, jeopardizing Beijing's cooperation in the UN, where it holds one of five permanent seats on the Security Council, and its support for US efforts to ease tensions on the Korean peninsula.

"These are the kinds of things you potentially sacrifice if you say to the Chinese we have no interest in cooperating," the US official says.

"In the present context, approving MFN tells China that it can challenge the US across the spectrum of issues with near impunity," rejoins a Washington-based foreign-policy expert.