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USIS Washington File

05 May 2000

Text: Senator Baucus Backs Permanent Normal Trade Relations for China

(PNTR key to U.S.-China relations, says Montana Senator) (2680)
The U.S. Congress should grant permanent Normal Trade Relations (NTR)
status to China, says Senator Max Baucus (Democrat from Montana).
"We now have the opportunity to bury the NTR debate on China forever,
and I look forward, hopefully sometime in June, to nailing the coffin
shut," Baucus said May 5 in a speech entitled "PNTR and the Future of
US-China Relations" at the Washington, D.C.-based American Enterprise
Institute.
The House of Representatives and the Senate are scheduled in late May
to vote on ending the application of Title IV of the Trade Act of 1974
to China.
Addressing the arguments of those who oppose granting permanent NTR
status to China, Baucus said the United States does not "lose leverage
over China by passing PNTR."
"A decade of efforts by Democrats and Republicans to use the annual
MFN (Most Favored Nation) debate to influence change in China has
demonstrated the futility of that endeavor," the Montana Democrat
said.
Furthermore, Baucus said, "PNTR is neither an appropriate, nor an
effective, vehicle to change China's abusive human rights practices."
The legislation to grant permanent NTR status to China "will pass,"
Baucus predicted.
"The votes may not be there today, but there will be a majority in the
House in three weeks. The Senate will then approve PNTR
overwhelmingly," he assured his audience.
Failure to pass PNTR, Baucus warned, "would poison our relationship
with China which, in turn, would have a serious impact on the
Taiwan-China situation."
Expanding on Taiwan, Baucus cautioned that although "the Taiwan
Security Enhancement Act won't see the light of day as a stand-alone
bill, its proponents are likely to use other vehicles to promote their
ends, including, perhaps, the PNTR bill."
Passage of what he termed "the more provocative elements of this
legislation" would "likely prompt a strong reaction from Beijing,"
Baucus said.
Following is the text of the Senator's speech:
(begin text)
Senator Max Baucus
"PNTR and the Future of US-China Relations"
American Enterprise Institute
Washington, D.C.
May 5, 2000
I would like to thank Chris DeMuth for the opportunity to speak at AEI
today. I wish that today's turn out was a comment about the astute
nature of my observations. I suspect, however, that it reflects the
fact that the future of the US-China relationship is so profoundly
important, that we all want to do everything we can to understand it
better. I know that I am interested in your comments and observations.
Theodore Roosevelt once went to a railroad station to meet his wife's
train. He was surprised to see the train speed past the platform
without stopping. His wife waved from the last car, tossing an
envelope out as she passed her husband. He opened it and found a note
that said "Dear Ted, This train doesn't stop here." Well, I hope the
words I leave with you with today are a little more useful than Mrs.
Roosevelt's message.
I've been active on the issue of MFN for China, most favored nation
status, since it first became a policy issue a decade ago. As you all
know, we now call it NTR, Normal Trade Relations. Every year through
the 1990s, I led the fight in Congress to extend NTR status to China
without conditions. Most years, this entailed a vote in the House with
enough activity on my side of the Capital to demonstrate that a
resolution of disapproval had no chance on the Senate floor. We lost
the vote in 1992, although we sustained the President's veto. Since
then, opposition to NTR has waned almost every year.
I have never believed that unilateral trade sanctions were an
effective way to change the behavior of a nation in non-trade areas.
Whether we look at Cuba, Iraq, Myanmar, North Korea, or China, history
has proven me correct. We now have the opportunity to bury the NTR
debate on China forever, and I look forward, hopefully sometime in
June, to nailing the coffin shut.
In the China world, people always refer to things like the "Three
No's" or the "Six Assurances." So, let me give you my "Six Assertions"
and my "Five Observations."
My "Six Assertions" are, I believe, pretty well accepted at this point
in the PNTR debate.
One. The bilateral WTO agreement signed last November provides
enormous potential economic benefit to the United States. China
commits to significant changes in its market, while we do not have to
change our trade laws, regulations, or practices.
Two. China will join the WTO whether or not the US grants PNTR to
China. If the United States fails to pass PNTR, our Japanese and
European competitors will reap the benefits of Chinese trade
liberalization, while American workers, farmers, manufacturers, and
service providers will miss out on many opportunities.
Three. Some have argued that the PNTR vote is unnecessary because the
most favored nation clause in the 1979 bilateral US-China trade
agreement obliges China to give us whatever trade benefits it gives
the rest of the world. This is false. The General Accounting Office,
the Congressional Research Service, and Professor John Jackson have
all explained in detail how the 1979 agreement applies mainly to
tariffs, does not cover many of the critically important elements in
the US/China bilateral, and has no dispute settlement process attached
to it.
Four. The United States does not lose leverage over China by passing
PNTR. A decade of efforts by Democrats and Republicans to use the
annual MFN debate to influence change in China has demonstrated the
futility of that endeavor. Recently, Richard Perle testified on PNTR
before the Senate Finance Committee. He described the origins of the
annual MFN review when he and Senator Jackson from Washington State
conceived the process. They designed a law with a direct and simple
cause and effect. If the Soviet leadership let Jews emigrate, they
could trade with the United States. No emigration, no trade. Cost and
benefit; their choice. Perle said that MFN would have failed if
Senator Jackson had tried to use it to transform the Soviet political
system. Yet this is precisely what many opponents of PNTR are trying
to do with China. It hasn't worked, and it can't work.
Five. Passing PNTR will lead to Taiwan's early entry into the WTO.
Rejecting PNTR puts Taiwan's accession in jeopardy.
My sixth assertion. PNTR will pass. The votes may not be there today,
but there will be a majority in the House in three weeks. The Senate
will then approve PNTR overwhelmingly.
My five observations might be a bit more controversial.
One. The list of Chinese human rights abuses is long, and the abuses
are getting worse. The State Department's annual human rights report
demonstrates that. The United Nations Human Rights Commission refused
two weeks ago even to debate the US resolution about China's human
rights practices. That is unacceptable. The Administration should have
worked much harder to promote our view at the United Nations and lobby
our allies. But, PNTR is neither an appropriate, nor an effective,
vehicle to change China's abusive human rights practices.
Two. There is an utter and unacceptable lack of respect in China for
internationally recognized labor principles, including freedom of
association, the right to collective bargaining, prohibition on forced
or compulsory labor, and prohibition against child labor. These should
be addressed aggressively by the United States, but not as part of
PNTR. We in the United States need to figure out how to reconcile
trade issues and labor issues in our domestic trade policy process and
internationally. We are still a long way from achieving that goal.
Three. We must address the concern of many American workers that China
threatens their jobs. They worry that increased imports from China
would displace American production which will lead to the loss of
jobs. They also worry that American corporations will manufacture in
China and sell those goods in third countries, rather than exporting
to those third countries from America. Their objections about China
represent a subset of the worries many have about the impact of
globalization on their lives. We cannot ignore these concerns.
Four. China may soon become the world's number one polluter of the
environment. As in the area of trade and labor, we need to build a way
to reconcile trade and the environment domestically and
internationally. But rejecting PNTR is not the way to deal with
Chinese environmental problems. Besides, we don't place environmental
requirements on other countries when they join the WTO.
And my fifth and final observation. Economic growth leads to the
development of a large and strong middle class - in any country.
Eventually, they make demands on political leaders for greater
participation, accountability, and openness. It takes time. Eighty
years ago, the Kuomintang, the KMT, was created by the same Soviet
advisors who created the Chinese Communist Party. Fifty years ago, the
KMT massacred Taiwanese citizens. Twenty years ago, the KMT still
ruled Taiwan under martial law. Yet they just held their second truly
democratic election. If we look at Korea, a quarter of a century ago
the Korean government tried to murder the dissident Kim Dae Jung. Now,
President Kim Dae Jung is worried about being turned out of office in
the next democratic election. The Philippines in 1986, Thailand in
1990, Indonesia in 1999, also showed us the power of the development
of the middle class. I don't accept that there is something
fundamentally unique about China that makes a similar type of change
impossible.
Let me talk a moment about Chinese behavior once it joins the WTO. We
should not expect to see changes overnight. Those people fighting to
maintain their vested interests in the status quo will not disappear.
The reformers will be strengthened, but they will still be under
constant attack. The WTO, and the United States, need to help China
develop the infrastructure and the institutions necessary to implement
its WTO commitments. We also must rigorously monitor Chinese
compliance and take all measures we can to enforce their commitments
to us and to the WTO. I introduced the China WTO Compliance Act as one
way to deal with implementation problems that will arise in China. It
outlines a program that includes monitoring compliance, takes
enforcement action, and helps with the development of needed domestic
institutions to honor these commitments. China is not the only country
with these problems. Lack of compliance is pervasive among our trading
partners. Concluding an agreement often leads to little change in a
market. This cannot continue. One of my priorities in the coming years
will be to deal with this festering and costly problem in China and
elsewhere.
I would like to turn to Taiwan and the trilateral relationship with
the United States.
I believe we are entering a period of significant danger in the Taiwan
Strait. This is one of the three most volatile places in Asia, the
other two, of course, being the Korean Peninsula and the
India-Pakistan border.
First, the Presidential inauguration of Chen Shui-bian will occur in
17 days. Chen is under enormous pressure from China to accept the one
China thesis with Taiwan as part of China. He is also under enormous
pressure within Taiwan, from members of his party and others, to push
the envelope much farther regarding Taiwan's so-called "international
space". Beijing is testing Chen Shui-bian, big time. Will China hold
military exercises to intimidate Chen in the next two weeks? We all
hope not, but we can't foreclose that possibility.
Second, although the Taiwan Security Enhancement Act won't see the
light of day as a stand-alone bill, its proponents are likely to use
other vehicles to promote their ends, including, perhaps, the PNTR
bill. Passage of the more provocative elements of this legislation
would likely prompt a strong reaction from Beijing.
Third, although I said that the House will pass PNTR, the only
certainty in the world of policy and politics is that there will be
surprises. Failure to pass PNTR would poison our relationship with
China which, in turn, would have a serious impact on the Taiwan-China
situation.
Let me return to the Taiwan Security Enhancement Act for a moment. As
I just said, I think this bill is dead as a stand-alone measure. But
the underlying issues remain with us.
Taiwan's security requires a modern and sophisticated defense system.
The United States recognized this when we normalized relations with
the PRC. We committed to ensure the security of Taiwan. The Taiwan
Relations Act, the continuing sale of critical, defensive military
systems, and the dispatch in 1996 of two carrier battle groups - all
should demonstrate that America's political, security, and moral
commitment to the people of Taiwan is strong and enduring.
But the true bedrock of Taiwan's security and stability does not lie
in sophisticated military hardware or the acquisition of a specific
weapons package. Indeed, Taiwan's overall prospects for developing as
a robust democracy and a thriving market economy over the long-term
flows from its own democratic form of government, growing economic,
cultural, and political contacts with the mainland, and the abiding
commitment by the United States to the peaceful resolution of the
Taiwan question. Taiwan and the PRC must come to terms with each
other. Taiwan will not be cowed by Beijing's threats or the mainland's
military modernization. And China will never be able to achieve its
goals through force, or the threat of force.
Earlier this week, Bill Perry and Brent Scowcroft argued in the pages
of the Washington Post about the danger of an arms race across the
Taiwan Strait that could then very easily spread through much of Asia.
The issue is not only that we must be very careful about the weapons
we allow Taiwan to purchase. The issue is also very much that China is
irresponsibly and provocatively building up its forces, especially its
missile forces, near Taiwan.
I agree with many that, over the long term, the current framework
defined by the Taiwan Relations Act and the three communiques is not
sustainable. Two free and democratic elections in Taiwan, including
this year's election that turned out the party in power, have
transformed the underpinnings of the one-China policy, although we
don't know how this transformation will unfold. A democratic Taiwan
establishes a new baseline to define the meaning of "one-China."
Change, however, must be the product of discussion and joint
agreement, not something imposed by one side on the other. Everyone
must proceed with great care and with great caution. Sustainable
change cannot occur in the heat of the moment. And, to be frank, six
months before a U.S. presidential election is not the time to be
debating such an important and fundamental change in the trilateral
relationship.
Let me conclude with a few remarks about what will happen after both
China and Taiwan accede to the WTO. They will participate together,
along with all other WTO members, in meetings ranging from detailed
technical sessions to Ministerials. There will be countless
opportunities for interaction. Under the WTO's most-favored-nation
rule, they will have to provide each other the same benefits that they
grant to other members. Taiwan's current policy limiting direct
transportation, communication, and investment with the mainland will
come under serious scrutiny, with many elements likely violating WTO
rules. Both will be able to use the WTO dispute settlement mechanism
against the other. And WTO-induced liberalization, in both Taiwan and
the PRC, will increase and deepen ties between them in trade,
investment, technology, transportation, information, communications,
and travel.
Presumably, either could take reservations, such as a national
security exception, against the other in certain areas. That is a
decision still to be made. But, no matter what, membership in the WTO
is going to deepen significantly the economic ties between Taiwan and
the PRC.
Thank you.   I would be happy to take your questions.
(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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