May 15, 2000
PERMANENT NORMAL TRADE RELATIONS AND THE POTENTIAL FOR A MORE OPEN CHINA
THE WHITE HOUSE
Office of the Press Secretary
___________________________________________________________________________
______
For Immediate Release May 15, 2000
PERMANENT NORMAL TRADE RELATIONS
AND THE POTENTIAL FOR A MORE OPEN CHINA
Gene B. Sperling, Director
National Economic Council
Remarks before the Dallas Ambassadors Forum
Dallas, Texas
May 12, 2000
As Prepared for Delivery
In only two weeks, Congress will vote on what is probably the most
important foreign policy and economic issue our country will face this year
-- and perhaps in recent years: whether to grant China permanent Normal
Trade Relations (PNTR).
Those who oppose the legislation don?t dispute its benefits for the
American economy. Instead, they claim that PNTR will destabilize the
well-being of some of our workers by throwing them to the vagaries of the
global economy -- or that PNTR will send the wrong signal to China about
its poor human rights record.
We certainly disagree. Today, I would like to explain why we believe
that this agreement does not require a trade-off between growing our
economy through more trade and the cause of human rights in China or
helping our workers here at home. To the contrary, this deal is not only
right for our economy; it is also right for our workers and right for the
progress -- however slow -- of reform in China.
I. Economic Benefits of the Agreement
A number of opponents of this agreement speak about it as if it were a
free-trade deal in which both signatories agree to lower tariffs in the
hopes of boosting prosperity in both countries. We in the Administration
believe that such agreements -- when they incorporate sound labor and
environmental standards -- can be beneficial.
But whatever the merits of these types of agreements, these
considerations have no relevance in the debate about China-PNTR. That?s
because when it comes to market opening, the agreement we negotiated with
China is a one-way deal. The Chinese agree to lower their tariffs from an
average of 24.6 percent to an average of 9.4 percent overall. Our tariffs
stay the same. We agree merely to support China?s candidacy for WTO
membership and to make permanent the Normal Trade Relations for China that
we have passed each year for the past 20 years. So, I repeat, if we pass
PNTR, we do not open our market or lower our tariffs one bit. Our market
stays the same either way.
So the economic question about PNTR boils down to this: will we accept
China?s market-opening concessions or will we not?
If we choose to accept the benefits -- if Congress passes PNTR -- we
will choose economic growth for the country and also for Texas.
Here are a few examples of how Texas? leading sectors will benefit
under the agreement:
? Cotton: Texas is the country?s largest cotton producer; China is the
world?s largest cotton consumer. Under this agreement, China will more
than quadruple the amount of cotton it would allow to be imported, with
Texas a big winner.
? Beef: China currently imports very little beef; but demand in China
is expected to dramatically increase. Under this agreement, China will
lower its tariff by as much as 75% (45 percent to 12 percent) on beef and
has agreed to eliminate unscientific barriers that in the past have been
used to discriminate against Texas beef.
? Information Technology: Immediately upon its WTO accession, China will
eliminate all quotas on information technology and reduce duties from 13
percent to zero by 2005. (USDA) That?s good news to a state that is home
to companies such as Dell, Compaq, and Texas Instruments.
? Oil and Fuel:. Chinese tariffs on oil and fuel will drop by a third,
in this important Texas industry.
This agreement will open up exciting economic opportunities for Texans
and for all Americans. Let there be no mistake about it: passing PNTR will
provide a tremendous economic boost to the Lone Star State.
The economic merits of the deal become even more clear when we
consider what would happen if Congress rejects PNTR for China. Under that
scenario, our firms may have some residual rights in China from earlier
trade agreements. But we would lose virtually all market access we
negotiated in the most cutting edge service, telecom and internet areas and
we would lose distribution and enforcement rights contained in the November
agreement for all of our products -- from agriculture to machinery -- while
allowing our competitors in Japan and Europe to gain full access to these
benefits. Simply put, our Congress would be going out of its way to put
our companies at a competitive disadvantage by explicitly denying them the
access to the world?s largest new market that we would be granting to our
top foreign competitors, such as Japan and Europe.
Why on earth would our Congress specifically vote to allow a situation
where our competitors would get to deny our farmers, workers and companies
the right to compete on even terms with our foreign competitors in the
world?s fastest growing major market? That would be the closest thing to
unilateral economic disarmament that I have ever heard of.
II. The Agreement Bolsters Reform in China
However obvious the economic benefits of this agreement, I would feel
very differently about it if I believed it would set back the cause of
human rights in China.
But before I make the case that, in fact, this agreement will push
reform in China in the right direction, we should be clear about where the
Administration agrees and differs with opponents of PNTR.
The opponents argue that China?s poor record on human and labor rights
should disqualify it from WTO membership. We in the Administration share
their diagnosis of the problem, but reject their remedy. The question
before the Congress is not whether China?s record on human rights is
defensible (it is not). The question is whether passage of PNTR will make
positive change in China more or less likely.
We believe it will make positive change more likely. We base that
belief not on a simple-minded faith that increased trade automatically
engenders democracy or more respect for human rights. We base it on the
conviction that increased engagement, openness to ideas, and movement to
new market forces will promote economic freedom and strengthen reformers
trying to move policy there in the right direction.
As in any country, politics in China features groups who favor change
and those who resist. Whatever problems we have with the current Chinese
leadership, these leaders are clearly engaged in a daring attempt to change
China?s command-and-control system into a modern, market economy. And they
are taking significant political risks to make it happen.
Who is the opposition? The entrenched managers of China?s state-owned
industries, old-guard communists determined to preserve one-party rule, and
the hardest-line elements in the People?s Liberation Army who feel their
position -- and military budgets -- would be bolstered by tension with the
United States, tension with China?s neighbors, and tension with Taiwan.
Why would Congress wish to hand a major victory to these opponents of
reform and a stinging defeat to its champions? That?s exactly what
Congress would do if it rejects PNTR.
And I?ll never understand why some opponents of China-PNTR, people
like Pat Buchanan -- who have spent an entire career denouncing communism
-- now turn their backs on those in China working to move it from a
command-and-control economy to one more based on markets and free
enterprise.
This deal will help reform by helping the reformers. But it will also
help by creating a number of social and economic conditions that favor
reform.
First, consider the flow of information and how that can undermine an
authoritarian regime. Right now only 12 percent of Chinese have phones;
less than 1 percent have Internet access. But passage of PNTR coupled with
Chinese accession to the WTO will help change this situation dramatically
by allowing our world-beating telecomm firms to compete in the Chinese
market. This will not only create jobs in the USA; it will also make the
tools of communication cheaper, better, more reliable, and more widely
available to the Chinese people. Because of this agreement, individual
Chinese citizens, with a few clicks of a mouse, will be able to communicate
with each other and with the outside world in a volume that nobody would
have believed possible a few years ago.
There is no question that some in China?s leadership are nervous about
this new-found freedom and have sought new regulations seeking to restrict
the flow of information on the Internet. Good luck. How can the
hard-liners hope to stuff the information genie back in the bottle when
hundreds of millions of Chinese citizens will be using the web?
"Liberty," in the words of Chief Justice Earl Warren, "is the most
contagious force in the world." So is free expression.
Second, the agreement will also promote reform in China by freeing up
the movement of goods and delivery of services. Currently, anybody who
does business in China will describe distribution as, at best, an enormous
headache. Until now, Beijing has severely limited rights to import and
export, to distribute goods once inside the tariff walls, and service those
goods once they are sold. That the right to engage in ordinary commerce is
a privilege granted by the Chinese government to an exclusive few has
helped no one.
China?s WTO commitments turn these scarcely allotted privileges into
rights that will be widely available to both Chinese and foreign
businesses. China has agreed that within 3 years, all individuals and
entities in China will be able to import most products into any part of
China, and that foreign firms will be able to establish, own and operate
their own distribution and related services.
The impact of these changes goes far beyond economic efficiency. As
the weight of the bureaucracy on everyday transactions lightens, more and
more Chinese will come into direct and daily contact with each other and
with foreign firms. In the process, they will learn new skills and develop
broader horizons. Indeed, it is precisely in the regions of China where
foreign enterprises are clustered that entrepreneurial attitudes among
Chinese are most pronounced.
Third, consider access to capital. Capital not only feeds economic
growth, but also makes possible personal independence. As in other areas
of economic life, this WTO agreement ? by injecting competition into
China?s capital markets -- promises to enhance private initiative in China
at the expense of state power.
By some estimates, 80 percent of bank lending in China goes to
inefficient state-owned enterprises, which produce just one-third of GDP.
It is not surprising that the line of bad debts in China is a mile long--
25-40 percent of GDP by most estimates. WTO accession promises to scale
back Chinese government control in banking and finance by letting foreign
banks play a more significant role. An increased foreign presence will
help bring modern banking practices to China. Domestic banks will be
forced by competitive pressure to develop a more advanced "culture of
credit."
But again, more is at stake than a growing market of 1.2 billion
people for our banks. The new rules required under this agreement will
help break the one-party state?s monopoly on capital flows. Private
citizens and entrepreneurs will find themselves less dependent on the
arbitrary largesse of the state when they wish to turn their
entrepreneurial ideas into economic reality.
Fourth, the agreement will also strengthen the rule of law in China --
that indispensable building block of a healthy polity, economic confidence,
and civil society. Currently, economic activity in China is often hampered
by vague, unwritten, or unpublished rules that maximize the arbitrary power
of Party officials. To obtain even the simplest permit in China, a
petitioner needs "connections." You can imagine the scope this systems
allows for petty despotism, cronyism, and outright corruption. WTO
membership will reduce these abuses. For in order to join, China must
publish its commercial rules and regulations in full, making it easier for
our firms to do business without official harassment and for Chinese
citizens to advance based on what they know, not whom they know.
But beyond the specific provisions that will encourage economic
freedom, I believe employment in American firms will expose Chinese to
foreign ideas, new ways of thinking and new practices -- all of which will
build momentum for reform. But a simple employment relationship with
Chinese workers is not enough. It is incumbent upon American employers to
go further, to start creating in each of their firms today the building
blocks of a more open China tomorrow.
That means nothing more than honoring the principles of their own
organization, the American Chamber in China, which declares: "[t]he
American approach to doing business and to corporate responsibility can and
does foster positive change in China -- We empower our employees to take
initiative and give them a voice on how to do things. They in turn convey
these values to their families and associates. We introduce high standards
of worker health and safety as well as environmental protection."
Intel, a manufacturer of semiconductors, is an American firm striving
to realize these principles. Each of Intel?s 1,000 Chinese employees
receives a home computer and the company is in the process of providing
each with home Internet access. Moreover, Intel?s operations in China are
managed under the same environmental, health, safety and labor policies the
company applies to its U.S. operations -- all of which are higher than
Chinese norms. Average base pay and health benefits are far more generous
than those provided by Chinese competitors.
The more American companies bring not only our capital but also our
values to Chinese soil, the more we can become a partner in unleashing
positive change there.
These changes are already benefiting more and more Chinese -- and
making them hungry for more. Listen to the words of Bing Ho -- written in
English, I might add -- an employee in the Shanghai office of Cargill
Investments :
"In 1997, I was recruited by Cargill --and I could finally work in
Shanghai -- the city which I dream to locate in -- I, a common girl
with no power and money, could hardly imagine all these things could
be done several years ago. Now I have an apartment --a promising
career and studying for MBA degree --Many of the Chinese people are
longing for knowledge, techniques, and culture from western countries,
especially U.S. We want our country to be more open, more advanced,
we want to improve our lives and at the same time there will be mutual
benefits for both our countries."
Bing Ho?s story provides hope. But employment in American firms by
itself can?t ensure reform in China. And PNTR by itself cannot compel
Beijing to respect the human rights of its people. Improvements will
result from the internal changes sweeping China and external validation for
China?s human rights activists. That?s why we sanctioned China under the
International Religious Freedom Act last year, and why last month we again
sponsored a resolution in the UN Human Rights Commission condemning China?s
human rights violations.
The majority of human rights and democracy activists support this
two-pronged approach of engagement and pressure. Says Dai Qing, a
prominent Chinese environmentalist and independent political thinker: "How
does international pressure work in promoting human rights and
environmental protection in China? I would like to argue that such
pressure works only when doors are kept open, when pressure presents
positive solutions and, above all, when engagement is involved --- All of
the fights -- for a better environment, labor rights and human rights
--these fights we will fight in China tomorrow. But first we must break
the monopoly of the state. To do that, we need a freer market and the
competition mandated by the WTO."
Democracy activist Bao Tong agrees: "Entry into the WTO will
definitely promote China?s economic reforms-- and over the long term will
help develop the legal system and moves toward democracy." Martin Lee,
courageous leader of the Democratic Party of Hong Kong, also stresses the
link between WTO accession and rule of law: "The participation of China in
the WTO would not only have economic and political benefits, but would
serve to bolster those in China who understand that the country must
embrace the rule of law."
We must keep the faith with these heroes of democracy by passing
China-PNTR and continuing to keep the pressure on Beijing to respect human
rights.
That?s why the Administration is pleased that in the past few days a
bipartisan group in Congress, led by Rep. Sander Levin and Rep. Doug
Bereuter, is seeking to design a Helsinki-style commission that aims to
provide an effective mechanism to press for improvement of China's human
rights, religious freedoms, labor rights and the rule of law, without
sacrificing the benefits that come from increased trade and commercial
engagement.
III. Conclusion
As the President has said, we do not know what path China will take.
All we can do is make the decisions most likely to push China in the
direction of economic and political reform. It is hard to see how
empowering communist hard-liners, slowing economic transition, and keeping
American companies out of China will increase respect for human rights or
lead to a more open society. It is possible, however, to see a better
future for China if it opens its economy and reaches out to the world --
and to see how greater openness will make China into a better neighbor.
In the words of Li Ke, former Chinese editor of the democratic journal
Fangfa: "For so many years of China?s reform and opening, areas couldn?t be
opened and remained state monopolies. But if the economic monopolies can
be broken, controls in other areas can have breakthroughs as well. These
breakthroughs won?t necessarily happen soon. But in the final analysis, in
the minds of ordinary people, it will show that breakthroughs that were
impossible in the past are indeed possible."
Thank you.
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