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USIS Washington File

13 April 2000

Text: USTR Barshefsky West Point Speech on China Trade, Security

(Refusal to grant China NTR detrimental to U.S. security) (4650)
U.S. Trade Representative Charlene Barshefsky warned cadets at West
Point Military Academy April 12 that a refusal to grant China
permanent Normal Trade Relations (PNTR) status would have a serious,
detrimental impact on U.S. national security.
Barshefsky said if Congress shows a lack of support for China's
accession to the World Trade Organization (WTO) and votes against
PNTR, "we make a very dark statement about the future possibility of a
stable, mutually beneficial relationship with the world's largest
country."
She said such a statement would threaten work on getting Chinese
cooperation on issues of concern to the United States -- from
non-proliferation and arms control, to reducing tensions in Korea and
South Asia.
Furthermore, she said a negative vote on PNTR would complicate the
United States' relationship with other Asian nations, as well as
China.
"All of our Asian friends and allies would view rejection of PNTR as
an unnecessary rejection of stable and constructive relations with
their largest neighbor; and a turn away from the open, confident
vision we have held for the Pacific over the years," Barshefsky
predicted.
"Over the long term, and perhaps most important, China -- seeing no
economic reason for our decision -- would become more likely to read
hostile intent into our every move; and this in turn would raise the
prospect that our present disagreements and tensions will escalate
into a broader confrontation of great consequence for every Pacific
nation and for ourselves," she added.
Following is the text of Barshefsky's remarks, as prepared for
delivery:
(begin text)
TRADE AND AMERICAN NATIONAL SECURITY:
THE CASE OF CHINA'S WTO ACCESSION
The Olin Distinguished Lecture in National Security Issues
Ambassador Charlene Barshefsky
U.S. Trade Representative
United States Military Academy
West Point, New York
April 12, 2000
Good evening, everyone, and thank you, Colonel Jebb.
Let me also thank Superintendent Christman for inviting me to speak
with you; and to the Cadets here today, let me begin with my personal
appreciation for your choice of a career in the military. Our country,
with all its responsibilities, needs the world's most dedicated and
highly trained military more today than ever before. That is what
people like the Superintendent have built; and it is what you, as the
officer corps of the 21st century U.S. Army, will build for the next
generation. For that you have my gratitude, and that of each member of
our Administration.
This is an especially opportune moment for us to meet. This spring, as
Congress considers China's accession to the World Trade Organization
and permanent Normal Trade Relations, we face a decision which
illustrates, as clearly as any in the past fifty years, the links
between trade policy and national security. And this will be my topic
tonight.
ONE-WAY CONCESSIONS
In the most basic sense, of course, China's WTO membership and
permanent NTR are technical trade issues. In these terms they present
us with a clear choice:
Last November, after years of negotiation, we reached a bilateral
agreement with China on WTO accession. It secures comprehensive,
one-way concessions, opening China's markets for services, industrial
goods and agriculture. It strengthens our guarantees of fair trade,
and our ability to enforce Chinese trade commitments. By contrast, 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 retain its market access in
America. The only question 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 IMPLICATIONS
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
this choice also has much deeper implications.
As you leave West Point, some of you will join the 36,000 servicemen
and women in US Forces-Korea. Some will serve in Japan; some take part
in exercises like Team Spirit in South Korea or Cobra Gold in
Thailand; some help develop our Pacific strategies at the policy
offices in the Pentagon. In every one of these fields, the attitude of
China towards our country and our role in the Pacific will be of
central importance to our country and to you personally.
China is the world's largest country. Over the past decade, it was the
world's fastest-growing major economy. The future course of our
relationship will thus have great bearing on American security and
strategy in the 21st strategy. And today, as we all know, our
relationship with China today is free neither of deep-seated policy
disagreements nor moments of tension.
These are perhaps natural: we are great Pacific powers, and our
governments reflect vastly different political systems and values. But
to quote the classical Chinese poet Qu Yuan, writing in the 4th
century B.C., such a relationship poses profound questions for future
peace and stability across a vast section of the earth:
"Eagles do not flock like birds of lesser wing;
 thus it has been since ancient times.
 How is the round to fit with the square?
 How can different ways of life be reconciled?"
Such questions dominate our China debate today. As we consider them --
and as the Chinese watch our debates, and conduct their own -- many
ask why we would proceed even with an entirely one-sided agreement
while differences over human rights, security, and other topics
remain. It is fair - in fact necessary - to judge the WTO accession in
their light. And we can begin by tracing to its origins the
institution China seeks to join.
TRADE IN AMERICAN POSTWAR STRATEGY
Today's World Trade Organization has its roots in the foundation of
the General Agreement on Trade and Tariffs, or GATT, in 1948. This was
in turn one element in a larger response, conceived under Franklin
Roosevelt and developed into concrete policies and institutions under
President Truman, to the lessons of the Depression and the Second
World War:
- Collective security, reflected by the United Nations, NATO, the Rio
Treaty and our alliances with the Pacific democracies.
- Commitment to human rights, embodied by the Universal Declaration on
Human Rights and then a series of more recent Conventions.
- Open markets and economic stability, with the creation of the IMF
and World Bank on the one hand, and the GATT on the other.
The trade element drew directly on the personal experience of Truman
and his Allied colleagues. In the 1930s, they had seen their
predecessors fail to resist a cycle of protection and retaliation,
including the Smoot-Hawley Act in the United States and colonial
preference schemes in Europe. That failure had cut trade by 70% in
four years, deepening the Depression and contributing 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 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.
The work begun in 1948 has continued for 52 years; and the faith our
postwar leaders put in freedom, open markets and the rule of law has
been abundantly vindicated. In eight negotiating Rounds -- the most
recent of which updated and modernized the GATT to create today's
World Trade Organization in 1995 -- and as 112 new members joined the
23 GATT founders, we opened the closed markets of the Depression. We
cut tariffs by 90% on average; and joined this with work on non-tariff
barriers, agriculture, services, intellectual property, technical
standards and dispute settlement. Still more recently, we concluded
landmark agreements on information technology, basic
telecommunications, financial services and duty-free cyberspace; and
the work continues today, with the WTO's decision in February to open
negotiations on agriculture and services.
The result has been a fifty-year economic boom, in which the world
economy grew six-fold; per capita income nearly tripled; and hundreds
of millions of families escaped poverty. America, as the world's
largest exporter and importer, has benefited perhaps most of all; but
social progress worldwide has been broadly shared. Since the 1950s,
world life expectancy has grown by twenty years, infant mortality
dropped by two-thirds, and famine receded from all but the most remote
or misgoverned corners of the world.
Thus, together with our military commitments in Europe and Asia on one
hand, and growing respect for human rights and the rule of law on the
other, the work of trade policy has helped to make the world
substantially more prosperous, stable and peaceful; in other words, to
bring the Four Freedoms Roosevelt defined as America's wartime aims -
freedom of religion, freedom of expression, freedom from want, freedom
from fear - closer to realization.
U.S. ASIAN POLICIES TODAY
Our Asia policies today fully reflect the insights of postwar
strategy. As a Pacific nation, we have a vital interest in an open,
prosperous and stable region; and our economic policies join with our
security policies and support for human rights to help us secure that
interest. As Admiral Dennis Blair, the Commander-in-Chief of U.S.
Pacific Forces, puts it:
"Prosperity gives people within a country, and countries within a
region, greater stakes in each other's futures. Security, whether it
is the rule of law within a country or peace among countries, allows
national economies to grow."
- Our Pacific military presence, and our alliances with Japan, South
Korea, Thailand, the Philippines, Australia and New Zealand, remain
the region's strongest guarantees of peace and stability.
- Our advocacy of human rights, over the years, has helped reformers
bring democracy and stability to South Korea, Taiwan, Thailand, the
Philippines and now Indonesia.
- Our support for IMF recovery programs in Southeast Asia, South Korea
and Russia during the financial crisis, and our own commitment to open
markets at home, helped guarantee these countries the resources and
access to foreign markets necessary for rapid recovery, reducing the
international tensions that can accompany economic suffering.
- And our trade policy is building a broadly more open region: a
framework of open trade through the Asia-Pacific Economic Cooperation
forum; market-opening and deregulation in Japan; reform and
liberalization in ASEAN and South Korea; work toward normalized
economic relations with Vietnam, Laos and Cambodia; and the economic
opening and integration of China.
CHINA FROM REVOLUTION TO REFORM
China has found economic integration in its own interest; but it has
come to this point by a very different road.
With the Communist revolution in 1949, China shut the 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. The rule of law
vanished: between 1949 and 1957, the number of lawyers in China shrank
by 70%; and in 1957, with the opening of the so-called "Anti-Rightist
Campaign," most remaining law offices were closed, lawyers arrested or
sent to the countryside, and the Ministry of Justice itself abolished.
And 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, our postwar commitment 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. Reform has reversed the most
damaging policies of the Great Leap Forward and Cultural Revolution
era, abolishing rural communes and enabling private business to revive
in villages and cities. A number of earlier policies, notably bans on
foreign investment and private export trade, have been substantially
relaxed although not abandoned entirely.
American trade policy over 30 years has complemented these policies,
both to create trade opportunities for Americans and to support reform
in China. This has been bipartisan and consistent, from the end of the
trade embargo in 1972 under President Nixon, to our Bilateral
Commercial Agreement and grant of Normal Trade Relations (then MFN
status) in 1979 under President Carter; the renewal of NTR ever since;
our support for China's APEC membership; and our most recent
agreements on market access, intellectual property, textiles and
agriculture.
RESULTS TO DATE
Taken together, the results have been profoundly positive.
In an economic sense, domestic reform and opening to the world have
helped 200 million Chinese men and women escape from poverty. This is
an economic benefit for us as well, as demonstrated by our $10 billion
in export growth since the Commercial Agreement. But China's economic
opening has helped to foster advances that go beyond material gain.
Within China, much of the political system remains repressive and
authoritarian. This is detailed in comprehensive form by the State
Department's Human Rights Report: it is why this month we are
sponsoring a resolution in the UN Human Rights Commission condemning
China's human rights record, and why we have sanctioned China as a
"country of particular concern" under the International Religious
Freedom Act.
But it is also fair to note that as reform has proceeded, respect for
a number of basic rights and liberties cited in the Universal
Declaration has grown. Examples include property rights, with farmers
able to work their own land, entrepreneurs to start businesses, and
families to pass on their property to their children; openness to
information, with Chinese citizens able to listen to foreign radio and
TV and more recently to visit foreign web-sites; and some aspects of
freedom of association, as Chinese meet and exchange ideas with
foreigners or people from Hong Kong and Taiwan.
And as China has opened its economy to the world, it has become a more
integrated, responsible member of the Pacific community - and let me
give you a very specific example. In 1997, South Korea and the ASEAN
states were the market for $22.3 billion worth of Chinese
semiconductors, video CD players, rice, apparel and other goods.
Setting Hong Kong aside, that is one dollar in six of China's exports
to the world. These countries were also the source of $6 billion in
foreign direct investment in China, meaning a seventh of all the FDI
China received that year. And this has implications not only for
China's economy, but to our own vital interest in a peaceful and
stable region - because 1997 was, of course, the year of the financial
crisis.
A generation ago, China might have seen the event as a revolutionary
opportunity. In 1997 its reaction was entirely different: the crisis
was a threat to the export markets that support Chinese factories and
farm income, and to the Asian investment that creates jobs and growth.
The constructive and stabilizing policies China adopted through
currency stability and contribution to IMF-led recovery programs, thus
reflected basic self-interest. But in historic context, they enabled
us to deal with the crisis primarily as an economic and humanitarian
disaster, rather than a security crisis. And they are thus evidence of
a change in China's role and views whose importance for American
national security cannot be overstated.
PRESENT TRADE BARRIERS AND ECONOMIC CHALLENGES
But as much as China has changed, reform remains incomplete.
Some policy legacies of the 1950s remain in force: bans on foreign
participation in the information industries; control over economic
contact with foreigners; and restrictions on the ability of both
foreign and Chinese businesses to distribute their products and trade
with one another. Others are only partly reformed - foreign companies
may now invest in China, but lose the right to import the parts they
choose and market their products as they see fit. Beyond this, China's
trade barriers remain high, and are joined by newer industrial
policies requiring investors to transfer technology, purchase parts
only from Chinese sources, and so forth, which work together to block
imports and force investment, employment and technology into China.
Thus our $10 billion in export growth since 1980, while substantial,
is far less than our export growth to Europe, Japan, South Korea, the
ASEAN nations, Canada, Mexico, Taiwan or the Caribbean Basin over the
same period. And China's external and internal trade barriers not only
block American exports but - as China's senior leaders realize - have
led to corruption and economic inefficiencies which threaten China's
own prospects for sustainable growth, job creation and technological
progress.
THE WTO ACCESSION
And that brings us to the WTO. The agreement we reached last November
on the terms of China's accession is the capstone on thirty years of
work, helping both countries through commitments covering the range of
industrial goods, services, farm products and unfair trade practices;
and addressing all major barriers to American exports. Under its
terms:
- China will cut industrial tariffs from an average of 24.6% in 1997
to 9.4% by 2005. It 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 to import the parts and products they
choose.
- In agriculture, on U.S. priority products China will cut tariffs
from an average of 31% to 14% by 2004. China will expand access for
grains and other bulk agricultural products, through tariff-rate
quotas that offer dramatic new opportunities in these sectors. It will
end import bans, cap and reduce trade-distorting domestic supports,
eliminate export subsidies, and base border inspections on science.
- In services, China's markets will open for distribution,
telecommunications, banking, insurance, securities, professional,
business and computer services, management consulting, motion
pictures, environmental services, accounting, law, architecture,
construction, travel and tourism, and other industries.
- And the agreement gives American firms and workers stronger
protection against import surges and unfair trade practices. It
addresses state enterprise policies, prohibits forced technology
transfer as a condition of investment, and eliminates local content,
offsets and export performance requirements. It provides, for 12
years, a special product-specific safeguard to address
market-disrupting import surges from China. And it guarantees 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;
WTO dispute settlement; periodic multilateral review of China's
adherence and multilateral pressure from all 135 WTO members;
increased monitoring by the U.S., with the President's request for
increased funding for China compliance and enforcement in his FY 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 US, 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 tensions in the Taiwan Strait.
PERMANENT NORMAL TRADE RELATIONS
What is the next step? By contrast to China's historic set of
commitments, our sole obligation is to grant China permanent NTR. If
we fail to do so, we risk losing the full benefits of the agreement we
negotiated, including broad market access, special import protections,
and rights to enforce China's commitments through WTO dispute
settlement.
This, in terms of our policy toward China, is no real change. NTR is
simply the tariff status we have given China since the Carter
Administration; and which every Administration and Congress in the
following 20 years has reviewed and found, even at the periods of
greatest strain in our relationship, to be in our fundamental national
interest.
Thus permanent NTR represents no essential change. 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,
workers and businesses would be left behind.
WTO ACCESSION AND CHINESE REFORM
And the costs of U.S. retreat at this most critical moment would go
well beyond exports and trade.
Just as our role in the foundation of the GATT was closely linked with
the Universal Declaration on Human Rights and our postwar alliances --
and just as China's economic isolation in the early years of the Cold
War contributed to domestic repression and international upheaval --
China's WTO accession today is part of an American policy in which
trade, human rights and security act upon and support one another. As
even the brief review I have given indicates, China's commitments go
well beyond 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 all fields covered by the WTO to
impartial dispute settlement when necessary.
These commitments are a remarkable victory for economic reformers in
China. They alter policies dating to the earliest years of the
communist era. They give China's people more access to information,
and weaken the ability of hardliners to isolate the public from
outside influences and ideas. Altogether, they reflect a judgment --
still not universally shared in 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 the economic opening to and engagement with the
world and ultimately development of the rule of law inherent in the
initiative President Truman began in 1948.
The WTO accession, therefore, has potential beyond economics and
trade. It can serve as a foundation for the rule of law; and as
precedent for willingness to accept international standards of
behavior in other fields. That is why many Hong Kong and Chinese
activists for democracy and human rights - Bao Tong, jailed for seven
years after Tiananmen Square; Martin Lee, the leader of Hong Kong's
Democratic Party; Ren Wanding, a dissident who has spent years of his
life in prison - see WTO accession as China's most important reform in
twenty years. It is why rejection of PNTR would be a blow to reform in
China; and why support for WTO accession rests on a broader long-term
commitment to human rights and freedoms, as well as new opportunities
and strengthened guarantees of fairness for Americans.
WTO ACCESSION AND AMERICAN NATIONAL SECURITY
And it is why WTO accession forms part of the answer to the profound
question posed by Qu Yuan 2300 years ago, with respect to the ways in
which our very different countries can find the accommodations
necessary to peace and stability.
Our relationship with China remains marked by substantial
disagreements. And when we disagree with China we must act with candor
and firm assertion of our interests and values - as we have done when
necessary with respect to Taiwan; as we are doing at the UN Human
Rights Commission today. 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 20th 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 how fundamental is our responsibility to act upon areas
of shared interest and benefit. We saw this responsibility clearly in
the Asian financial crisis. We see it in the maintenance of peace on
the Korean Peninsula, where some of today's Cadets will serve in a
year or two; in the environmental problems of the Asia-Pacific; and
for nearly three decades, we have seen it in trade.
Each step we have taken since the lifting of the trade embargo has
rested on concrete American interests; helped to promote reform in
China; and sped the integration of China into the Pacific economy. And
in this context, the WTO accession takes on its full meaning.
No trade agreement will ever solve all our disagreements, but this
will address many of them; and 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.
Such a statement would threaten our work on all the specific issues in
our China policy agenda today -- from non-proliferation and arms
control, to reducing tensions in Korea and South Asia.
It would complicate for the foreseeable future our existing Pacific
alliances, as all of our Asian friends and allies would view rejection
of PNTR as an unnecessary rejection of stable and constructive
relations with their largest neighbor; and a turn away from the open,
confident vision we have held for the Pacific over the years.
Over the long term, and perhaps most important, China -- seeing no
economic reason for our decision -- would become more likely to read
hostile intent into our every move; and this in turn would raise the
prospect that our present disagreements and tensions will escalate
into a broader confrontation of great consequence for every Pacific
nation and for ourselves.
CONCLUSION
But if we have the wisdom and confidence to make the right choice,
before us is a remarkable opportunity.
Over three decades, trade policy has strengthened China's stake in
prosperity and stability throughout Asia. Together with our Pacific
alliances and military commitments; in tandem with our advocacy of
human rights; and in the best tradition of postwar American
leadership; it has helped us build a relationship with the world's
largest nation which strengthens guarantees of peace and security for
us and for the world. And WTO accession, together with permanent
Normal Trade Relations, will be the most significant step in this
process in many years.
That is the opportunity before us. These are the stakes as the
Congressional debate begins. This is why the Administration is
committed to permanent NTR on the basis of this historic agreement,
and why we are so committed to success.
And this is where, with gratitude to Superintendent Christman for his
invitation and to each of you for your time this evening, I will close
this lecture.
Thank you very much.
(end text)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)



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