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USIS Washington File

11 April 2000

Text: Barshefsky April 11 Call for China Permanent NTR Status

(Larger U.S. interests served by granting China NTR status) (3510)
The House of Representatives and the Senate must decide whether to
grant China permanent Normal Trade Relations (NTR) status, United
States Trade Representative Charlene Barshefsky said at the National
Women's Democratic Club April 11.
They will not be voting on whether China will join the World Trade
Organization (WTO), she told her Washington, D.C. audience.
But their vote will determine whether American businesses get to reap
the benefits of the trade deal between the United States and China
regarding the terms for China's accession to the WTO, she said.
While a strong economic argument can be made for granting China
permanent NTR status, Barshefsky said, there is an equally strong case
to be made from the perspective of the long-term national security
interest of the United States.
"We recognize how important a stable and peaceful relationship with
China is -- for the Chinese, for the world, and for America,"
Barshefsky said.
"Thus we see a fundamental responsibility to act upon shared interests
and mutual benefit," Barshefsky said.
"The future course of our relationship will have great bearing on
American security and strategy in the 21st strategy," Barshefsky said,
while conceding that "our relationship with China" is free neither of
"deep-seated policy disagreements nor moments of tension."
She noted that some commentators question whether the United States
should proceed with the trade agreement when "our differences over
human rights, security issues and other topics remain."
Barshefsky stressed that engagement with China was the way to bring
about reform in China.
"For reform and liberalization in China, to reject permanent NTR is to
turn our backs on nearly thirty years of work to support reform,
improve the legal system and offer hope for a better life to hundreds
of millions of Chinese," Barshefsky said.
"To pass it is to strengthen the hope that we can contribute in the
future to a China freer, more open to the world, and more responsive
to the rule of law than it is today," she said.
Following is the text of Barshefsky's remarks, as prepared for
delivery:
(begin text)
CHINA'S WTO ACCESSION
Ambassador Charlene Barshefsky, U.S. Trade Representative
National Women's Democratic Club
Washington, DC
April 11, 2000
Good morning, and thank you very much. I am pleased to be here with
you this morning, and for the opportunity the National Women's
Democratic Club has given us to speak and exchange views on one of
America's most important trade and foreign policy goals: China's
accession to the World Trade Organization and permanent Normal Trade
Relations.
ONE-WAY CONCESSIONS
In the most basic sense, of course, these are technical trade issues.
And as such, they present us with a fairly simple choice.
Last November, after years of negotiation, we reached a bilateral
agreement with China on WTO accession. It secures broad-ranging,
comprehensive, one-way concessions on China's part, opening China's
markets across the spectrum of services, industrial goods and
agriculture. This agreement strengthens our guarantees of fair trade,
and gives us far greater ability to enforce Chinese trade commitments.
By contrast, under the bill President Clinton sent to Congress last
week, we agree only to maintain the market access policies we already
apply to China, and have for over twenty years, by making China's
current Normal Trade Relations status permanent.
Permanent NTR is the only policy issue before Congress. Regardless of
our decision, China will enter the WTO and it will retain its market
access in America. The only question now is whether, by making NTR
permanent, we accept the benefits of the agreement we negotiated; or
on the contrary, by turning away from permanent NTR, give these
benefits to our trade competitors while American entrepreneurs,
farmers and factory workers are left behind.
DEEPER ISSUES
One might end a discussion of the WTO accession right there; from a
purely trade policy perspective, it would not be wrong to do so. But
we must also think about the wider implications of our decision.
China is the world's largest country, and over the past decade the
world's fastest-growing major economy. The future course of our
relationship will have great bearing on American security and strategy
in the 21st strategy; and our relationship with China today, as we all
know, is free neither of deep-seated policy disagreements nor moments
of tension.
These disagreements and points of tension often dominate the China
debate. Many ask why we should proceed with a trade agreement -- even
an entirely one-sided trade agreement -- while our differences over
human rights, security issues and other topics remain. And given the
gravity of our relationship, it is fair -- in fact necessary -- to
judge the WTO accession in their light. And we can begin by tracing
back to its origins the institution China now seeks to join.
AMERICA AND THE TRADING SYSTEM
Today's World Trade Organization has its roots in the General
Agreement on Trade and Tariffs, or GATT. And its creation in 1948
reflected the lessons President Truman and his Allied counterparts
drew from personal experience in Depression and war.
One of the failures they had seen in the 1930s was the inability of
global leaders to resist a cycle of protection and retaliation,
including the Smoot-Hawley Act in the United States and colonial
preference schemes in Europe, which had deepened the Depression and
contributed to the political upheavals of the era. Eighteen years
later, they believed that by reopening world markets they could
restore economic health and raise living standards; and that, in
tandem with a strong and confident security policy, as open markets
gave nations greater stakes in stability and prosperity beyond their
borders, a fragile peace would strengthen.
Thus the GATT was one in a series of related policies and institutions
that have served us well for nearly six decades: collective security,
reflected by the United Nations, NATO and our Pacific alliances;
commitment to human rights, embodied by the Universal Declaration on
Human Rights and then a series of more recent Conventions; economic
stability and open markets, with the IMF and World Bank on the one
hand, and the GATT on the other.
Our Asia policies today continue to reflect these principles.
-- Our military presence in the Pacific, and alliances with Japan,
South Korea, and other Pacific democracies, remain the strongest
guarantees of a peaceful and stable region.
-- Our advocacy of human rights, over the years, has helped reformers
bring democracy to South Korea, Taiwan, Thailand, the Philippines and
most recently Indonesia.
-- Our support for IMF recovery programs in Southeast Asia, South
Korea and Russia during the financial crisis, and our own commitment
to an open market policy, helped guarantee these countries the
resources and access to foreign markets necessary for rapid recovery,
reducing the international tensions that accompany economic crisis.
-- And our trade policy -- under the Clinton Administration, creation
of a regional framework for open trade through APEC; nearly 100
specific market-opening agreements including 38 with Japan, 13 with
South Korea; 20 with the ASEAN states; and 17 with China; and work
toward normalization of trade relations with Cambodia, Laos and
Vietnam -- is helping to build create a more open region with greater
prospects for sustainable growth.
Stepping back for a moment, half a century of experience fully
vindicates the vision set out fifty years ago. Since the 1950s, global
trade has grown fifteen-fold. World economic production has grown
six-fold, and per capita income nearly tripled. And social progress
reflects these trends: since the 1950s, world life expectancy has
grown by twenty years, infant mortality has dropped by two-thirds, and
famine receded from all but the most remote or misgoverned comers of
the world. And -- as Truman and his colleagues predicted -- in tandem
with a strong and confident security policy and growing respect for
human rights, the world has become substantially more prosperous,
stable and peaceful.
CHINA FROM REVOLUTION TO REFORM
China, of course, took a very different road after the war.
With the Communist revolution in 1949, it shut doors it had once
tentatively opened to the world. Among its new leaders' first steps
were to expel foreign businesses from China, and to bar direct
economic contact between Chinese private citizens and the outside
world. Inside China were similar policies -- destruction of private
internal trading networks linking Chinese cities and villages,
abolition of private property and land ownership, and of course
suppression of any right to object to these policies. And all this had
international effects as well: Asia's largest nation had little stake
in prosperity and stability -- in fact, saw advantage in warfare and
revolution -- beyond its borders.
In essence, the commitment of our postwar leaders to collective
security, open markets and human rights made up a coherent vision of a
peaceful and open world. And China's rejection of these concepts in
the Maoist era made up an equally coherent and consistent policy. Its
economic isolation in the 1950s and 1960s can be separated neither
from its diminishing space for individual life and freedom at home,
nor its revolutionary role in the Pacific region.
China's domestic reforms since the 1970s have helped undo this
isolation, integrating China into the Pacific regional economy as they
opened opportunities for Chinese at home. And while the immediate
goals of our China trade policy -- from the lifting of the trade
embargo in 1972, to our Commercial Agreement and grant of Normal Trade
Relations in 1979, to more recent agreements on intellectual property,
textiles and agriculture -- have always been concrete and specific
American trade interests, trade policy has also helped to support
reform and bring China more fully into the world and regional
economies.
U.S. TRADE POLICY AND THE WTO ACCESSION
To choose a specific example, our intellectual property initiatives
since the early 1990s have been based first and foremost on our
commitment to fight theft through piracy of some of our most valuable
products. In this it has been a success: it has helped us to nearly
eliminate Chinese manufacturing and export of pirate CDs and sound
recordings, with the closure of more than 70 pirate plants.
But our intellectual property work also means something more. To
develop an intellectual property policy is to draft and publish laws;
to train lawyers and officials; to improve and ensure access to
judicial procedures; ultimately, to create due process of law. The
same can be said of our work on textiles, or industrial market access,
or most recently the agricultural agreement of 1999, which has led to
our first shipments of Pacific Northwest wheat, Florida grapefruit and
California oranges to China in the modem era.
In this context, the bilateral agreement we reached with China on WTO
accession last November takes on its full significance. It is
comprehensive, opening China's market to our farm products,
manufactured goods and services; and addressing the array of unfair
trade practices in the Chinese market. And let me now give you a look
at the details.
-- In industry, China will cut tariffs from an average of 24.6% in
1997 to 9.4% by 2005. China will eliminate all quotas and
discriminatory taxes. And of critical importance, in virtually all
products it will allow both foreign and Chinese businesses to market,
distribute and service their products; and import the parts and
products they choose.
China's markets will open for the full range of services industries:
distribution, telecommunications, financial services, insurance,
professional, business and computer services, motion pictures,
environmental services, accounting law, architecture, construction,
travel and tourism, and others. In fields such as telecom and
distribution, China will open to foreign participation for the first
time since the 1940s.
-- In agriculture, on U.S. priority products tariffs drop from an
average of 31% to 14% by 2004. China will also expand access for bulk
agricultural products; end import bans; cap and reduce
trade-distorting domestic supports; eliminate export subsidies; and
base sanitary and phytosanitary standards on science.
-- And American firms and workers will receive greater security
against unfair trade practices, import surges, and investment
practices intended to draw jobs and technology to China. The agreement
addresses state enterprise policies, forced technology transfer, local
content, offsets and export performance requirements. It provides, for
a 12-year period, a special anti-import surge remedy to discipline
market-disrupting import surges from China. And it strengthens our
antidumping laws by guaranteeing our right to use a special non-market
economy methodology to address dumping for 15 years.
All these commitments are fully enforceable, through our trade laws,
through WTO dispute settlement, periodic multilateral review of
China's adherence; multilateral pressure from all 135 members of the
WTO; increased monitoring by the U.S., with the President's request
for tripling of funds for China compliance and enforcement in his
Fiscal Year 2001 budget, and other mechanisms such as the special
anti-dumping and anti-import surge remedies.
Finally, China's entry will facilitate the entry of Taiwan into the
WTO, as Taiwan's new leadership has noted in its formal support for
China's membership and normalized trade with the U.S. Taiwan's
accession will have substantial direct trade benefits for the U.S., as
Taiwan is already a larger export market for us than is China. And the
opening of both these economies, while we have no guarantees, may
ultimately play some part in easing the tensions in the Strait.
PERMANENT NORMAL TRADE RELATIONS
China will be a WTO member very soon. The only question, ironically,
is whether we will receive the benefits. And that brings me to
permanent Normal Trade Relations, or NTR.
By contrast to China's historic set of commitments, we do very little.
As China joins the WTO, we make no changes whatsoever in our market
access policies; in a national security emergency, in fact, we can
withdraw market access China now has. We change none of our laws
controlling the export of sensitive technology, and amend none of our
trade laws.
But we have one obligation: we must grant China permanent NTR or risk
losing the full benefits of the agreement we negotiated. This includes
broad market access, special import protections, and rights to enforce
China's commitments through WTO dispute settlement. In terms of our
China policy, this is no real change. NTR is simply the tariff status
we give virtually all our trading partners; which we have given China
since the Carter Administration; and which every Administration and
every Congress over the intervening 20 years has reviewed and found,
even at the periods of greatest strain in our relationship, to be in
our fundamental national interest.
But the legislative grant of permanent NTR is critical. All WTO
members, including ourselves, pledge to give one another permanent NTR
to enjoy the full benefits available in one another's markets. If
Congress were to refuse to grant permanent NTR, our Asian, Latin
American, Canadian and European competitors will reap these benefits
but American farmers and factory workers, as well as service
providers, would be left behind.
WTO ACCESSION AND BROADER ISSUES
That is reason enough for our commitment to secure permanent NTR. But
the costs of U.S. retreat at this most critical moment would go well
beyond our export and trade interests.
As I noted earlier, it is not only fair but necessary to judge the WTO
accession in light of its implications for reform in China and Pacific
security; and when we look beyond the precise commitments China has
made to their deeper meaning, we see that these American goals would
be fundamentally threatened by a retreat from this historic agreement.
As even the brief review I have given indicates, China's commitments
go well beyond sharp reductions of trade barriers at the border. China
will:
-- For the first time since the 1940s, permit foreign and Chinese
businesses to import and export freely from China.
-- Reduce, and in some cases remove entirely, state control over
internal distribution of goods and the provision of services.
-- Enable, again for the first time since the 1940s, foreign
businesses to participate in information industries such as
telecommunications, including the Internet.
-- And subject government decisions in 21 fields covered by the WTO to
impartial dispute settlement when necessary.
These commitments alter policies dating to the earliest years of the
communist era. They are a remarkable victory for economic reformers in
China, giving China's people more access to information, and weakening
the ability of hardliners to isolate China's public from outside
influences and ideas. Altogether, they reflect a judgment -- still not
universally shared within the Chinese government -- that prosperity,
security and international respect will come not from the static
nationalism, state power and state control China adopted after the
war; but rather economic opening to and engagement with the world, and
ultimately development of the rule of law. This is why some of the
leading advocates of democracy and human rights in China -- Bao Tong,
jailed for seven years after Tiananmen Square; Ren Wanding, one of the
founders of China's modern human rights movement; Martin Lee, the
leader of Hong Kong's Democratic Party -- see this agreement as
China's most important step toward reform in twenty years.
And internationally the WTO accession will deepen and speed a process
that has been of enormous importance to Pacific peace and security.
Over thirty years, as China has reformed its economy and opened to the
world, its stake in the region's stability and prosperity has grown.
Economic reform has thus helped move it's government away from the
revolutionary foreign policy of the 1950s and 1960s, and towards a
positive and constructive role in maintaining peace on the Korean
Peninsula, in the Asian financial crisis, and on the U.N. Security
Council.
We should never, of course, imagine that a trade agreement will cure
all our disagreements. When we disagree with China we must act with
candor and firm assertion of our interests and values -- as we have
done repeatedly with respect to Taiwan; as we have done in sanctioning
China as a country of special concern under the International
Religious Freedom Act; and as will do next week at the U.N. Human
Rights Commission, when we push for a resolution critical of China's
record on human rights.
But this is only part of our approach. As Theodore Roosevelt said of
his Open Door Policy to China in the first years of the 20" century:
"We must insist firmly on our rights; and China must beware of
persisting in a course of conduct to which we cannot honorably submit.
But we in our turn must recognize our duties exactly as we insist upon
our rights."
In this spirit, we recognize how important a stable and peaceful
relationship with China is -- for the Chinese, for the world, and for
America. And thus we see a fundamental responsibility to act upon
shared interests and mutual benefit. We have done so in the Asian
financial crisis; in the maintenance of peace on the Korean peninsula;
and, for over a quarter century, in trade.
Each step since the lifting of the trade embargo has rested upon
concrete American interests; helped to promote reform arid the rule of
law within China; and integrate China in the Pacific economy. Thus,
each step has strengthened China's stake in prosperity and stability
throughout Asia. Together with our network of Pacific alliances and
military commitments, in tandem with our advocacy of human rights, and
in the best tradition of postwar American leadership, trade policy has
helped to strengthen guarantees of peace and security for us and for
the world. And China's WTO accession, together with permanent Normal
Trade Relations, will be the most significant step in this process for
many years.
CONCLUSION
That makes the choice before Congress very clear.
In economic terms, to reject PNTR would be foolish; to pass it is to
open a set of new opportunities and guarantees of fairness in China
trade unmatched in the modem era.
For reform and liberalization in China, to reject permanent NTR is to
turn our backs on nearly thirty years of work to support reform,
improve the legal system and offer hope for a better life to hundreds
of millions of Chinese; to pass it is to strengthen the hope that we
can contribute in the future to a China freer, more open to the world,
and more responsive to the rule of law than it is today.
And for our fundamental national security interest, to reject PNTR
would be reckless: if we turn down a comprehensive set of one-way
concessions, we make a very dark statement about the future
possibility of a stable, mutually beneficial relationship with the
world's largest country. And to pass it is to strengthen the chance of
building a peaceful, stable Pacific in the years to come.
That is the opportunity before us. These are the stakes as Congress
prepares to vote. And that is why it is so important that we succeed.
Thank you very much.
(end text)
(Distributed by the Office of International Information Programs, U.S.
Department of State - usinfo.state.gov)



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