April 16, 1999
MARGARET WARNER: Now, mixed signals on the future of U.S.-China trade. After more than a week in the united states, Chinese Premier Zhu Rongji was in Canada today, where he'll be until returning to Beijing at the beginning of next week. Phil Ponce looks at the accomplishments and fallout from his trip.
PHIL PONCE: Chinese Premier Zhu Rongji came to Washington amid much fanfare during his nine-day U.S. visit. Premier Zhu, known for his efforts to reform the Chinese economy, made stops at six American cities, including Chicago, where he opened trading on the Mercantile Exchange. His meeting last Thursday with President Clinton in Washington took place against a backdrop of continued allegations of Chinese spying and human rights abuses, whether Taiwan will remain autonomous, and Beijing's opposition to NATO strikes in Yugoslavia. But for Premier Zhu, the main issue was trade, specifically China's efforts to join the World Trade Organization, the WTO. China needs the endorsement of the U.S. to do so. The WTO has 134 member nations. Although it was created only four years ago, the organization is the successor to the trade body known as GATT, the General Agreement on Tariffs and Trade, created in 1948. Organization members agree to limit trade barriers in a wide range of goods and services. Reports suggested the two sides were close to an agreement that would effectively bring China into the WTO. But the deal never came.
PRESIDENT CLINTON: We have made significant progress toward bringing China into the World Trade Organization on fair commercial terms, although we are not quite there yet.
PHIL PONCE: In an interview with the "NewsHour" last Friday, the premier said U.S. politics was to blame.
ZHU RONGJI, Premier, People's Republic of China: (speaking through interpreter) The discussions for China's entry into the WTO and our bilateral trade negotiations have been proceeding along to the point where we are very, very close to reaching an agreement, on the verge of signing an agreement. But because of the current political atmosphere, my understanding is that President Clinton feels that this would not be an opportune time to finalize such an agreement.
PHIL PONCE: In the days that followed, Premier Zhu continued a very public campaign for a WTO. Deal, including a trip to the NASDAQ market site and meetings with American business executives. In his final U.S. speech at MIT he emphasized that China is not the one walking away from the table.
ZHU RONGJI: (speaking through interpreter) In negotiations on China's accession into the WTO, China has made very major concessions. I believe that such concessions are good for the Chinese people to participate in international economic cooperation and also good for enhancing the competitiveness, or promote the market competition in China and also the development of China's national economy. And they are more good for the WTO because without China's participation, the WTO will not be representative enough. And I think such concessions are all the more in the U.S. interest.
PHIL PONCE: Zhu said President Clinton has called him and asked him to reconvene negotiations. Premier Zhu agreed, and trade officials will meet again in Beijing later this month. For analysis of the Premier's trip and U.S.-China relations, we turn to Robert Kapp, president of the U.S.-China Business Council, which represents more than 300 American companies; Ya Sheng Huang, professor at Harvard Business School, his research focuses on foreign investment in China; and Congressman Sherrod Brown, Democrat of Ohio. He's on the House panel that oversees U.S.-Asia pacific relations. Welcome everybody. Professor Huang, why is it that China wants into the World Trade Organization so badly? What is in it for China?
YASHENG HUANG, Harvard Business Council: China has been trying to join the WTO since 1986. See this has been a 13-year effort. So this didn't happen yesterday. What's unique this time is that China, for the first time, is willing to give major concessions to the United States in order to qualify for the membership in the WTO. One of the reasons for the drive into the WTO, a more eager drive into the WTO at this time is because Chinese economy is experiencing difficulties and the Chinese government realizes that the export is suffering, FDI is slowing down and these are the major drivers of the Chinese economy.
PHIL PONCE: I'm sorry. You said some initials there. The FTI?
PHIL PONCE: So, Professor, you're saying that China wants to expand its own markets and also wants investors to come in; they want to give -- the country wants to give investors a stable and as you call it transparent system that allows foreign investors to do business?
YASHENG HUANG: Yes, that's one motivation. And the other motivation is that Premier Zhu Rongji realizes that almost the only way to make Chinese firms competitive is to introduce market competition. And Chinese firms now compete with each other but at a very low level of competition because they are not competing with the best of the corporations. If you open your own market, then you compete with these very powerful, very capable companies and competition is one way to make Chinese firms become more competitive in the future.
PHIL PONCE: And Congressman, we heard the Premier say in the introductory bees that the deal was killed by politics. Is that so?
REP. SHERROD BROWN, (D) Ohio: The deal was killed by Chinese Communist Party behavior over the last ten years. Every time we try to work with the Chinese, there is one more example of how they violate every accepted international norm -- shooting missiles at the Straits of Taiwan. Selling nuclear Hispanic ring technology to Pakistan; smuggling AK-47's in the United States illegally; forced abortions, child labor, slave labor and ultimately a trade deficit with the United States, a surplus on their part, a deficit with us. We sell only about $12 billion of our goods to China because they've closed their market. We buy about $75 billion worth of goods from China. So the President can claim and Charlene Barshefsky can claim and Premier Zhu, for that matter, can claim that they've made a good agreement but they've promised lots of things in the past. I don't think we look at what they promised. We look at their behavior in the last year. Let's see if they can stop doing the kinds of things and sticking their thumb in the eye of world opinion and world international accepted norms for a period of six months or a year before we so enthusiastically let them into this World Trade Organization.
PHIL PONCE: Mr. Kapp, how about that?
ROBERT KAPP, U.S.-China Business Council: Well, Phil, I think the main thing to remember is that we told the Chinese steadfastly for the last dozen years that we would not do a political deal with them. There were a lot of suspicions that the administration would do a political deal, lower the bar and so forth. But the list of Chinese agreements and so-called commitments that the U.S. Trade Representative released on the day that Premier Zhu was in Washington was really a breathtaking list of American achievements in gaining Chinese commitments to open markets at a level that even the most optimistic American business people had not expected.
PHIL PONCE: Give an example of the kinds of concessions that the Chinese were -- put on the table?
ROBERT KAPP: The first thing the Chinese did was agreed to three so-called side agreements, which they have now signed and which are now in effect, which at a stroke opened the Chinese market to three agricultural markets, which have been prohibited before -- wheat from the Pacific Northwest; fruit, which was kept out because of contamination and the meat process that the Chinese said if unless we inspect your plants, we won't let your meat products into this country. Those are now off the table and they've opened the market. But beyond that, the Chinese have gone through a series of commitments to radically lower tariffs on American industrial exports to lower tariffs on agricultural exports, to permit American companies to move their own products inside China, something known as distribution rights. The list is very long, indeed. It covers telecommunications, financial services, banking, insurance and the American business sectors that have been the real drivers of the hard-line American position all this time, with a few exceptions yet to be worked out are very pleased with what the Chinese apparently have agreed to give us. The trouble is we don't get it until the deal is done and they enter the WTO.
PHIL PONCE: Congressman Brown, how about that, the concessions the least bit persuasive?
REP. SHERROD BROWN: Communist leaders like to quote V I Lennon when
said - repeatedly used to say in the early days of the Bolshevik Revolution
that promises are like pie crust. They're made to be broken. We haven't
seen anything from the Chinese, other than more promises. They promised
they wouldn't steal CD-ROM technology. They promised they wouldn't steal
nuclear secrets. They promised they would quit shooting missiles into
the Straits of Taiwan. They've promised and promised. We should see
six months or a year of actual carrying out some of the things. They
promised - they've still continued to close their markets to us. Of
course, American business loves these deals. I, in my seven years in
Congress, have never seen the level and the enthusiasm of lobbying of
American corporations for Most-Favored-Nation status for China. All
the major CEO's visit every office on Capitol Hill to the point that
one major Chinese dissident said to a group of us on Capitol Hill, that
the American business community serves as a vanguard of the Chinese
Communist Revolution in Congress. I mean it's this group of people.
Of course, they want this advantage, because China is not a billion
consumers potentially for American business. China is a billion workers
for American businesses to set up in China and sell back to the United
States. That's the problem with Chinese trade today.
YASHENG HUANG: Let me get to the point that the congressman made about the Chinese trade deficit with the United States. One of the mechanisms to get down, to reduce the trade deficit is to incorporate China into WTO, so China can open up its market so U.S. companies can sell its goods to the Chinese consumers directly. Secondly, lots of exports coming from China are produced by companies that are joint ventured with foreign companies going into China that have invested in China. Motorola, an American company, for example, accounts for anything between 15 to 25 percent of the Chinese electronic exports coming into the United States.
PHIL PONCE: Well, Professor, since you raised that theme, let's stick with it and get Mr. Kapp. What is it in it for American companies? Is it simply the access to 1.2 billion consumers?
ROBERT KAPP: Well, that's a pretty good chunk of it, Phil. This is a market opening on a scale not hitherto seen. China is not yet a country with a $20,000 per capita income. It's growing very rapidly and the American companies are beginning now to put the numbers to the implications of these concessions made by the Chinese.
PHIL PONCE: How about Congressman Brown's point, though, can the Chinese be trusted to keep their word?
ROBERT KAPP: Well, you know, one way is to say let them into the WTO and we'll not give them the normal trade - the normal tariff treatment that we have to give them if we're going to get the benefits out of all of this. We'll just let them in and we'll not treat them like WTO members ourselves; we'll give them a year or two to test their behavior. The trouble with that is that we get nothing in the way of benefits from it for our workers and our producers, and our exporters of agricultural products. In the meantime, the rest of the world, if China enters the WTO, is taking advantage of the opportunities for market access for their products. So, I think the main point about WTO is that it is a system of rules to prevent the state of nature and the law of the jungle in trade. And what they have is a universally subscribed to set of behaviors that China is now subscribing to, to a degree we've never seen before, and they also have dispute resolution. It's not perfect, but the WTO has worked very hard to create a system whereby if one country has a problem with another country's trade behavior, you take them to court, so to speak, in the WTO, and instead of having a bilateral trade war, you have an adjudication in a multilateral multinational frame work that is the way to pursue these trade grievances. And we will have trade grievances with China, no question about it.
PHIL PONCE: And very quickly, Congressman Brown, how about the argument that the WTO would provide -- would encourage further integration of China into the rule of law?
REP. SHERROD BROWN: There's no evidence for that. China -- if China is ever going to act appropriately in terms of human rights, in terms of stopping forced abortions and child labor and AK-47's and selling and stealing nuclear technology, if they are ever going to act right, you would think it would be in order for them to convince us to let them into -- encourage them to come into the World Trade Organization. If they act like this now when they, in a sense, are courting the United States, and courting other nations, how are they going to act once they get what they want, which is World Trade Organization membership? These rules don't have the kind of force of law to deal with the Chinese the way that people that are supporters of this claim. And we're not going to see a major change in Chinese behavior. Let them prove they will begin to abide by some international norms of standard accepted behavior. And then let them in the World Trade Organization. Make them show us something before we give them this huge, huge break.
PHIL PONCE: And, gentlemen, I'm afraid that's all the time we have. Professor Huang, I apologize for not getting back to you but we're out of time. Thank you.