How do you Play Cards with China?

Washington Sen. Slade Gorton received headline attention recently when he announced that he would not oppose extension of “Most Favored Nation” (MFN) trading status for China this year. He thereby helped avoid an embarrassing vote in the Senate at a time when Boeing has major Chinese contracts pending and Microsoft has just reached a new agreement on intellectual property rights.
Less noticed, however, was the angry nature of the criticism Gorton heaped on the Chinese and their apologists here in the United States. Throwing down a marker on trade complaints, the Republican senior senator declared that unless significantly fairer treatment of American companies takes place in the next year, he will “lead the fight” against awarding China MFN status next year. Coming from a representative of the nation’s most trade dependent state, the pledge is considered reckless swagger by some observers and political courage by others. Regardless, Gorton, when aroused by a large principle, is a resourceful legislative foe.

Meanwhile, Gorton’s Democratic colleague, Sen. Patty Murray, is heading in what seems to be the opposite direction, arguing at a recent conference of the Washington Council for International Trade that the US should make MFN status permanent for all nations with whom we have relations (which is all but the likes of Iraq, Cuba and North Korea). This, she believes would avoid the annual pain and embarrassment of the MFN debate. Many China-hands in business and academia agree.

It seems unlikely that under present circumstances either option will prevail, however. On one hand, America is too entangled with the China trade and too smitten with the future of an economy growing by 9% a year to lift anchor and sail away. Before long, there will be a wholesale turnover in Chinese leadership as the aged Long Marchers finally retire or die, so US traders are reluctant to surrender their position now to the Japanese and Europeans. Slade Gorton is articulate as well as indignant in his cataloguing of Chinese trade perfidies, but the very businesses he might be expected to have on his side–software, wheat and fruit growers, for example–are unwilling to sign up against MFN.

On the other hand, Sen. Murray’s dream of a permanent MFN will make a easy target for political opponents of the present annual endorsement. This year the human rights and consumer groups who normally get involved in the MFN fight decided to stand aside, but they certainly would not do so if a permanent grant was being considered. Until China-US trade and other relations are substantially improved, MFN will be retained as a handy weapon.

Better relations are by no means impossible, of course. Whoever wins the Presidency in November will want to organize a US/China summit, and maybe Bill Clinton will attempt one before then, if some attractive agreement can be sculpted. In recent weeks, the Chinese reversed the hostile rhetoric of the late winter and promised yet again to crack down on factories that pirate software and other intellectual property. There are pledges also to stop trading missile technology with Pakistan and there even are soothing words from Beijing about the future of Hong Kong, which China will absorb in one year.

But there also are trouble signs ahead. American officials, including even such critics as Sen. Gorton, agree that trade issues should be separated from human rights and military issues. But, as a practical matter, China’s human rights abuses in Tibet, the military pressures on Taiwan, government-directed abortions, prison labor camps, secret shipments of guns into the US, and threats to democracy in Hong Kong all play as discordant background music that cannot be ignored and could disrupt the trade dance.

Hong Kong is an especially tense subject, since the Chinese takeover next July will occur just after MFN arrives once again before Congress. If the new Chinese authorities end up arresting Hong Kong’s elected political leaders, censoring the press and exposing the economy to the corruption that too often characterizes the Chinese version of “free markets,” the resulting turmoil will not be ignored by either public or official opinion in the West. The chairman of the Hong Kong Democratic Party, Martin Lee, in a whirlwind North American tour two months ago (60 speeches in 13 days) was an effective proponent of MFN for China as well as a critic of Chinese threats against Hong Kong. Lee in jail, however, would be a powerful symbol against an attempt to adopt MFN, let alone make it permanent.

This confusion on the horizon of 1997 actually makes Sen. Gorton’s Cassandra-like warnings potentially very useful. Forgoing sentimentality, he demands that Americans look with realism at the trade picture, not as it might be, but as experience has shown it.

“Five years ago our trade deficit with China,” he reports, “was $12.7 billion. Now it is $33.8 billion….Will we never learn?…What has the ‘engagement’ of the past five years accomplished to cause us to parrot today the very arguments that have so signally failed in the past?”

Will his fellow members of Congress and the Clinton Administration simply ignore this warning? Perhaps. But if they do so, the present opposition to China, which is found only in minorities of the two political parties, some human rights groups and a fraction of the business community, will grow. Under that pressure, our relations with China may muddle through, as they have, but they will not flourish. Already the US is less evident in investment in China than are our western trade rivals and Japan.

The constructive alternative is for Congress and the White House to use the months ahead to examine and update the full range of trade and foreign policy tools–other than denying MFN–that can be used to influence China. Expanding current agreements on intellectual property offers one example. Finding ways to get China to adhere to international trade standards as a price for admission to the World Trade Organization (WTO) is another. Yet another is helping the Chinese to see that their current rapid economic growth cannot be sustained much longer without large private investment from the west, and that such loans absolutely require a more predictable legal system.

In time, it may indeed become possible to abandon the demeaning annual MFN drill. Meanwhile, the challenge of China policy fairly cries out for more consultation and creative diplomacy in the councils of the West. The year ahead is crucial to that purpose.

Bruce Chapman

Cofounder and Chairman of the Board of Discovery Institute
Bruce Chapman has had a long career in American politics and public policy at the city, state, national, and international levels. Elected to the Seattle City Council and as Washington State's Secretary of State, he also served in several leadership posts in the Reagan administration, including ambassador. In 1991, he founded the public policy think tank Discovery Institute, where he currently serves as Chairman of the Board and director of the Chapman Center on Citizen Leadership.