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President Clinton said he wants to renew China's Most Favored Nation trading status for another year. After a background report, Margaret Warner leads a discussion with Republican Frank Wolf, who has introduced legislation in the past to deny China MFN status, and Congressman Lee Hamilton, the ranking Democrat on the House International Relations Committee.

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JIM LEHRER: Now, the latest round in the politics of U.S. trade with China. Margaret Warner has that story.

CHARLAYNE HUNTER-GAULT: President Clinton said today he wants to renew China's Most Favored Nation trading status for another year. Congress has the power to overturn that decision and the annual question of Chinese trading status has been controversial ever since the Chinese government's 1989 assault on pro-democracy demonstrators in Tiananmen Square. The U.S. is China's largest export market. The U.S. trade deficit with China jumped 17 percent last year to 39 ½ billion dollars, a larger imbalance than with any country except Japan. President Clinton made his case for renewal to a group of young business leaders at the White House this afternoon.

PRESIDENT CLINTON: I have decided, as all my predecessors have since 1980, to extend Most Favored Nation status to China for the coming year. Every Republican and Democratic President since 1980 has made the same decision. This simply means that we extend to China the same normal trade treatment that virtually every other country on earth receives from the United States. We believe it's the best way to integrate China further into the family of nations and to secure our interest and our ideals. But as we have had controversies and differences with China over the years, this decision, itself, has become more controversial because there are those in both parties in the Congress who believe that if we hold our trade relationship hostage to China because of our differences on human rights or weapons technology or the future of Hong Kong we will have more influence since we buy about 30 percent of China's exports every year. Sometimes we buy even more. But I believe if we were to revoke normal trade status, it would cut off our contact with the Chinese people and undermine our influence with the Chinese government. This is a big issue this year because, as many of you know, under the agreement signed more than a decade ago between Great Britain and China Hong Kong is reverting to China shortly. I think it's interesting that Hong Kong, which has the world's most open trading system, has vociferously argued to the United States that we should extend Most Favored Nation status. Even those people in Hong Kong that have been most passionately identified with the cause of freedom and human rights and have been most in conflict with the Chinese have argued that we have to maintain an open trading relationship with them so that we can continue to work with them. I might also say that if we were to revoke their normal trading status, it would close one of the world's most rapidly growing emerging markets, one that already supports 170,000 American jobs and doubtless will support more in the years ahead.

MARGARET WARNER: Now, for more on this issue we have two members of Congress who've been at the forefront of the debate: Republican Frank Wolf, a member of the House Foreign Operations Subcommittee, has introduced legislation in the past to deny China MFN status, and Congressman Lee Hamilton is the ranking Democrat on the House International Relations Committee. Welcome, gentlemen, both of you.

Congressman Wolf, you disagree with the President. Why?

REP. FRANK WOLF, (R) Virginia: Well, there are Catholic priests that are bishops today, bishops that are in prison today. There are Protestant pastors that are in prison today. They've tortured and killed Buddhist monks and nuns. They have more gulags in China than they had in the Soviet Union. They've sold arms to Saddam Hussein that were used against American troops. There was foreign interference in our domestic elections, both trying to buy influence in Congress and in the administration. And I really take issue with what the President said. I don't believe President Reagan would have extended MFN to China. President Reagan signed the bill to take away MFN from Caiochesku because of the terrible things that the Caiochesku administration was doing, and President Reagan very strongly as opposed to granting MFN to the Soviet Union because they were persecuting those of the Jewish faith. So I think the President really has his facts wrong today. I can't prove it, but I don't believe Ronald Reagan would extend MFN to China.

MARGARET WARNER: Congressman Hamilton, that was quite a bill of particulars against China. Why do you think Most Favored Nation status should continue?

REP. LEE HAMILTON, (D) Indiana: Well, first of all, I agree very much with my friend, Frank Wolf here, that we need to put pressure on China to improve their human rights performance. It is not very good. I think if you revoke Most Favored Nation, what you will have is first of all a sharp deterioration in U.S.-China relations. After all, Most Favored Nation is kind of a lynchpin of our policy with--of engagement with China. That's a policy we have followed since the early 1970's by all presidents. And it has advanced our interests with China overall. We would certainly lose our ability to negotiate with China on a lot of areas where we have a common interest, including non-proliferation, North Korea, and many other areas. Moreover, I think the revocation of Most Favored Nation would hurt a lot of our friends. We would hurt our friends in Hong Kong. They want Most Favored Nation. We would hurt our friends in Taiwan. They want Most Favored Nation. We would certainly hurt the American consumer and the American business community. They favor Most Favored Nation. And in China, itself, we would hurt those people by revoking MFN, the very people we want to help most, the private sector in China, the entrepreneurs, the students. Not all dissidents agree that we should revoke Most Favored Nation, but many do, and Mr. Wei, the most famous one, believes we ought to revoke Most Favored Nation and that we ought to maintain Most Favored Nation. So I think you'd find a real sharp deterioration in our relations with China if we revoke Most Favored Nation, and we would hurt a lot of our friends.

MARGARET WARNER: Let's pursue this, the human rights trade linkage, a little more. Congressman Wolf, is it your belief that if trade were made contingent on human rights performance that that would be effective in improving their performance? You just--just disconnect--

REP. FRANK WOLF: No. Absolutely. Sheranski personally told me that he believes that he got out of Perm Camp 35--

MARGARET WARNER: You're talking about Nathan Sheranski, who--

REP. FRANK WOLF: Nathan Sheranski who was released because of the battle over MFN. Secondly--and I have great respect for my friend--but let me just say Ronald Reagan met many times with Gorbachev and Brezhnev and had very successful summits and moved the Soviets, but never, never gave them MFN. Thirdly, when we denied MFN to Romania and Ciaochesku in 1987, many of the people in Romania told me they were heartened to know that the United States Congress stood with the Romanian people. They heard it on Radio Free Europe. If we were to deny MFN to China, we would really encourage the dissidents. We would encourage--if you're a Catholic priest or a bishop in jail today and America gave MFN, Most Favored Nation trading status to the country that had imprisoned you and perhaps killed one of your colleagues, how would you feel, but, if on the other hand, we denied it, that would send a shot of adrenalin, whereby they would know that the United States Government, known for freedom around the world--because, if you recall, in Tiananmen Square, the people built the Statue of Liberty. They quoted the words of Jefferson: 'We hold these truths to be self-evident that all men and women are endowed by their Creator, by God, with life, liberty, and the pursuit of happiness." It is fundamentally an economic issue, but even more so is to the moral issue, and I think America is opposed to granting MFN. The latest polls show the American people--

MARGARET WARNER: All right.

REP. FRANK WOLF: --67 to 21. The question is, I think the American Congress ought to be where the American people are.

MARGARET WARNER: All right. Now, Congressman Hamilton, the President has argued, as you just did, for engagement on human rights, but is there evidence that that has been effective?

REP. LEE HAMILTON: Oh, I think there's a lot of evidence that the policy of engagement has been effective. First of all, it's been followed by all of our Presidents since the early 1970's. Most Favored Nation has been favored by our Presidents. I think I disagree with Frank on that point with regard to President Reagan. Secondly, I think the policy of engagement has brought a lot of benefits to the United States. It has certainly brought benefits in the economic area, in the non-proliferation area, and I think that Mr. Wolf only states half the equation with regard to human rights in China. It is true that China's human rights performance falls far short of what we'd like it to be. He's right about that, and he's to be commended for pressing it. But it's also true that if you take the long view of China and you look back over the past 15 or 20 years, the ordinary Chinese today, man or woman, has more choices, has more diversity, has more freedom, and China, in many respects, is moving in the right direction on human rights, moving too slowly, not fast enough for sure, plenty of problems with the political dissidents, but moving overall in the right direction. And I think we have to see China as an evolving country moving towards a rule of law. We don't know if they're going to make it. But we certainly think that the policy of engagement makes it much more likely than if you break off relations, break off any dialogue and move towards a policy of containment. If you want to make China an enemy, then you will have an enemy in China. We want to encourage China to come into the international community. And we're going to have some rough patches along the way.

MARGARET WARNER: Congressman Wolf, turn if you would--

REP. FRANK WOLF: We're now breaking diplomatic relations with China. We never broke diplomatic relations with the Soviet Union. And secondly, I would just have to say there's a new book out by Nina Shea called In the Lion's Den that points out that religious persecution is greater today in China than it has been through the 70's. And there are more gulags in China today than there were in the 70's. They have an organ program where they shoot prisoners and take their organs and sell them for $50,000. Try to tell a Catholic priest or bishop in China in jail today that things are better today than they were. They're actually worse.

MARGARET WARNER: All right. Congressman, let me ask you also just briefly to address the economic argument. You heard the President say that a lot of American jobs depended on it; there's an emerging market. What about just that argument?

REP. FRANK WOLF: That argument is not valid. We have lost jobs. There's a $40 billion trade imbalance, meaning China sells us $40 billion more than we sell them. Boeing is shipping jobs across the sea. We have lost so many jobs to China. Most of the Christmas tree lights that you bought this year, if you bought Christmas tree lights, were made in China. The running shoes are made in China. In Beijing, Windows 95 was available earlier in China than it was here on the streets of Washington because the AFL-CIO, the Catholic Church, the evangelical community, and the mainstream of America all oppose it because we have lost jobs.

MARGARET WARNER: Congressman Hamilton, does the large trade deficit dim your enthusiasm at all on the economic score?

REP. LEE HAMILTON: Oh, I think overall we have benefitted greatly from our economic relations with China. And, look, the entire American business community that I know of at least supports MFN for China, and we have benefitted immensely from our trade with China, and most corporations or many corporations today identify China as a huge market force if we get a level playing field with regard to the trade rules, but I also want to say that I don't think the moral argument here is at all with Frank here. If you look at the association that--the coalition that represents the Christian communities in China, over a hundred of them, they recognize that revoking MFN would be a negative so far as religious freedom is concerned. And many of the Christian groups support MFN--not all of them--support MFN for China.

MARGARET WARNER: All right. I'm terribly sorry, Congressman. We have to leave it there, but thank you both very much.

REP. LEE HAMILTON: Thank you.

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