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USIS Washington File

16 May 2000

Text: Barshefsky May 16 on China PNTR to Bretton Woods Committee

(PNTR, WTO accession will strengthen China's stake in peace) (3020)
One day before markups in the Senate and House of Representatives of
legislation that would give China permanent Normal Trade Relations
(NTR) status, U.S. Trade Representative Charlene Barshefsky continued
seeking support for a "yes" vote on that issue.
Accession to the World Trade Organization (WTO), together with
permanent Normal Trade Relations, will be "the most significant step"
in strengthening China's stake in peace and prosperity in the
Asia-Pacific region, Barshefsky said in a May 16 speech to the Bretton
Woods Committee in Washington, D.C.
Barshefsky, who negotiated the terms for U.S. support of China's
accession to the WTO last year, said the trade deal supports the
economic and national security interests of the United States.
Further, Barshefsky said, granting permanent NTR status to China would
allow American businesses to reap the benefits of market openings in
China provided for in the trade deal without requiring the United
States to change any of the market access policies it currently
applies to China.
Those economic gains, national security interests, and China's own
reform and development are the goals the Clinton Administration hopes
to gain by the granting of permanent NTR status to China, Barshefsky
said.
"These are the stakes as the Congressional debate begins," she said.
"This is why the Administration is committed to permanent NTR on the
basis of this historic agreement, and why it is so important that we
succeed."
Following is the text of Barshefsky's remarks:
(begin text)
CHINA'S WTO ACCESSION IN AMERICAN POSTWAR STRATEGY
Ambassador Charlene Barshefsky
U.S. Trade Representative
Bretton Woods Committee
Washington, DC
May 16, 2000
Thank you very much. Let me thank Jim Orr and Bill Frenzel very
sincerely for this chance to speak with you on one of the most
important American trade and foreign policy decisions in many years:
China's accession to the World Trade Organization and permanent Normal
Trade Relations status.
It is especially appropriate to discuss this with the Bretton Woods
Committee -- because China's WTO accession and PNTR, while in its most
basic sense trade and economic issues, also bring us appreciably
closer to completion of the vision inherent in the Bretton Woods
Conference.
ONE-WAY CONCESSIONS
As trade policy, the choice before Congress next week is actually
quite simple. Our agreement on WTO accession secures broad-ranging,
comprehensive, one-way trade concessions on China's part. These
concessions:
-- Open China's markets to American exports of industrial goods,
services and agriculture to a degree unprecedented in the modern era.
-- Strengthen our guarantees of fair trade.
-- Give us far greater ability to enforce China's trade commitments.
-- And facilitate the WTO accession of Taiwan, which has made an
equally valuable set of market access commitments.
By contrast, we change no market access policies -- not a single
tariff line. We amend none of our trade laws. We change none of our
laws controlling the export of sensitive technology. We agree only to
maintain the market access policies we already apply to China, and
have for over 20 years, by making China's current Normal Trade
Relations status permanent.
This is the only policy issue before Congress. Regardless of our
decision, China will enter the WTO. Regardless of our decision, it
will continue to sell in the American market. The only question
Congress will decide is whether we accept the benefits of China's
accession and the agreement we negotiated; or whether by turning away
from permanent NTR, we enable our competitors to get them while
Americans are left behind.
PRINCIPLES OF TRADE POLICY
From the strict perspective of American economic self-interest, there
is little reason to say more. But China's accession also has
implications for many of the broader goals at the foundation of modern
trade policy; which were also the goals of the Bretton Woods
Conference itself.
Franklin Roosevelt, requesting Congressional passage of the Bretton
Woods proposals in 1945, wrote that as the Second World War approached
its end:
The point in history at which we stand is full of promise and danger.
The world will either move toward unity and widely shared prosperity,
or it will move apart... We have a chance, we citizens of the United
States, to use our influence in favor of a more united and cooperating
world. Whether we do so will determine, as far as it is in our power,
the kind of lives our grandchildren will live.
We are familiar with the response. With creation of the IMF and the
World Bank in 1945 -- and over a few years afterward, ending with the
ratification of the NATO Treaty in 1949 -- Americans established
policies and institutions of postwar internationalism that have served
us for decades:
-- 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 foundation of the General
Agreement on Tariffs and Trade, or GATT, on the other.
ACCOMPLISHMENTS OF THE TRADING SYSTEM
Our generation, as the grandchildren and great-grandchildren of whom
Roosevelt spoke, has had the full benefit of this extraordinary
accomplishment.
To look at the trade element of the postwar policy structure, since
the foundation of the GATT in 1948, we have completed eight
negotiating Rounds, and 113 new members have joined the 23 GATT
founders. The agenda has broadened from tariffs -- which have dropped
by 90% on average -- to non-tariff barriers, dispute settlement,
agriculture, services, telecommunications, intellectual property,
information technology, financial services and electronic commerce. It
continues today, with the WTO's decision in February to open
negotiations on agriculture and services, and our work to broaden
these talks into a new Round.
When we step back for a moment, we see the enormous benefits the work
has brought:
-- Growth and Rising Living Standards: The opening of world markets
has helped to spark what is in effect a fifty-year boom: since 1950,
trade has expanded fifteen-fold; world economic production grown
six-fold; and per capita income nearly tripled. And the result has
been historically unprecedented social progress: 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.
-- Economic Security: In the Asian financial crisis, with 40% of the
world in recession, the respect WTO members had for their commitments
kept open the markets necessary for affected nations to recover. Thus
the system of mutual benefit and rule of law represented by the WTO
helped prevent a cycle of protection and retaliation like that of the
1930s; and ultimately to avert the political strife that can erupt in
economic crisis.
-- Peace and Stability: And the trading system has helped us address
political challenges fundamental to world peace and stability. It
helped reintegrate Germany and Japan in the 1950s, and then the
nations emerging from colonial rule in the 1960s and 1970s. It has now
taken up a task of equal gravity, as after the Cold War, nearly 30
nations breaking with communist planning -- Albania, Croatia and
Bulgaria; the Baltics, Ukraine, Russia, Georgia, and Armenia; the
Kyrgyz Republic and Mongolia -- seek WTO membership to reform their
economies and integrate with the world.
CHINESE REFORM AND U.S. TRADE POLICY
With this we come to China. The world's largest nation, for many
years, was one of the great rents in the structure of shared
responsibility and mutual benefit represented by the Bretton Woods
institutions and the GATT.
When our modern relationship began, China's economy was almost
entirely divorced from the outside world. After the Communist
revolution in 1949, it had expelled foreign businesses and banned
direct economic contact between Chinese citizens and the outside
world. At home it offered virtually no space for private farming or
business; externally, it conducted what trade it felt necessary
through a few Ministries. Such policies impoverished China and
contributed to the revolutionary role it adopted in Asia: isolated
from Pacific markets, it had little stake in a peaceful and stable
region, and every Pacific nation felt the consequences.
In the intervening years, American trade policy has worked to end this
isolation. Our policies have advanced specific American trade
interests; but they also have pushed forward a strategic vision. By
opening China's markets, and helping to give China access to world
markets, we have sought to promote reform and economic liberalization
within China; ensure that this nation of 1.2 billion plays its proper
role as a market and a source of economic growth for its Asian
neighbors; ultimately, to help it find a different and healthier role
in the Pacific.
This is a strategy consistent with China's own reforms. At home, since
the 1970s, China has reversed the most damaging policies of the Great
Leap Forward and Cultural Revolution era, abolishing rural communes
and reviving private business in villages and cities. Externally,
reform has begun to open China to the world, substantially relaxing
although not abandoning entirely bans on foreign investment and
private export trade.
American trade policy has worked with reform at every step. This has
been consistent and bipartisan, from the lifting of the trade embargo
in 1972, to our Bilateral Commercial Agreement and grant of Normal
Trade Relations (then MFN status) in 1979; renewal of NTR every year
since; most recently, detailed agreements on intellectual property,
textiles and agriculture. Each rested on concrete American trade
interests; each also helped advance reform in China, and integrate
China into the Pacific and world economies.
To choose a case in point, our work on intellectual property rights
since the early 1990s rests on our commitment to fight theft through
piracy of our most creative industries; with more than 70 pirate
manufacturing facilities closed, it has helped us to nearly eliminate
China's manufacturing and export of pirate CDs and CD-ROMs. But it
means more than this: 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 where it did not exist before. The same is true, more
recently, with our work with the Chinese Ministry of Agriculture to
develop modern sanitary and phytosanitary procedures.
These are two examples of a much broader process of economic reform,
opening to the world, and adoption of internationally accepted trade
principles which have served China, its neighbors and ourselves well.
In China, they have helped 200 million Chinese men and women escape
from poverty. For us, they have sparked $10 billion in export growth
since our Commercial Agreement. And their advantages go beyond
material gain.
While China remains an authoritarian and repressive country, reform
has strengthened personal freedom and begun to develop the rule of
law. It has also made China a more integrated, responsible member of
the Pacific community. To note an example, when the Asian financial
crisis began, South Korea and the ASEAN were (setting Hong Kong aside)
the source of a seventh of China's foreign direct investment, and the
market for a sixth of its exports. Thus, while in 1967 these nations
were China's ideological rivals, in 1997 they were customers who
support Chinese factories and farm incomes, and the investors who
create Chinese jobs. This is the backdrop to China's policy in the
crisis; and thus also to the fact that the crisis remained an economic
and humanitarian disaster rather than a security crisis. It
demonstrates, in modern times, the enduring insight of the Bretton
Woods leaders on the support an open world economy can give to peace.
REFORM INCOMPLETE
But the work is not yet done. As the economist and reform advocate Cao
Siyuan has put it, China has opened the door; but only to reach out
and cautiously shake hands.
To look back again on the financial crisis, while China's policy was
constructive, important and valuable, its neighbors did not have the
opportunity to use China as a market which could spur recovery. ASEAN
and Korean exports to China ? already low ? actually dropped between
1997 and 1998. Or to use another index, closer to home, our $10
billion in export growth to China since 1980, while substantial, is
far less than our export growth to almost any other major trading
partner over the same period.
This reflects the fact that reform is incomplete. Some policy legacies
of the revolutionary era remain in force today, and others are only
partly reformed. Beyond these are more typical trade barriers: high
tariffs, largely secret quotas, and industrial policies that require
investors to transfer technology, purchase parts only from Chinese
sources, and so forth. More generally, the country suffers from poorly
developed market institutions and the lack of a reliable rule of law.
These are barriers to American products, but problems for China as
well. As China's senior leaders realize -- lead to corruption and
economic inefficiencies which block China's own prospects for
sustainable growth, job creation and technological progress.
THE WTO ACCESSION
Against this background, the WTO accession assumes its full economic
significance. Our bilateral agreement address each barrier to American
goods, services and farm products, and all the major unfair trade
practices. As it does so, it will help China build an economy
prosperous and open to the world, to its own benefit and that of its
Asian neighbors.
Each commitment is specific, detailed, and fully enforceable --
through our own trade laws, WTO dispute settlement, periodic
multilateral review of China's adherence, multilateral pressure from
all 136 WTO members, and other mechanisms such as the special
anti-dumping rules and anti-import surge remedies. We are already
preparing, with the President's most recent budget request, for the
largest enforcement effort ever devoted to a trade agreement.
Finally, China's entry will facilitate Taiwan's entry into the WTO.
This will have substantial trade benefits, as Taiwan is already a
larger export market for us than China. And the opening of both
economies, while we have no guarantees, may ultimately play some part
in easing the tensions in the Strait. It should thus be no surprise
that Taiwan's new leadership supports both China's WTO membership and
normalized trade between China and the United States.
WTO ACCESSION AND BROADER INTERESTS
In economic terms, then, to reject PNTR would be foolish. To enter the
WTO, China makes one-way concessions; if we do not grant permanent
NTR, others will take advantage of them at our expense. And just as
the economic merits of the foundation of the GATT system ago were
simply one element in the much larger vision Roosevelt and Truman
built between the conclusion of the Bretton Woods Conference and the
ratification of the NATO treaty, so today the economic consequence of
rejecting PNTR would be the least of the damage.
We have concerns and responsibilities towards human rights and the
rule of law in China. Here, many Chinese dissidents and Hong Kong
democratic leaders -- Bao Tong, jailed for seven years after Tiananmen
Square; Ren Wanding, a founder of China's modern human rights
movement; environmentalist Dai Qing; Martin Lee, leader of the Hong
Kong Democratic Party -- believe WTO accession and PNTR are the most
significant steps toward reform and the rule of law in China in twenty
years. To reject permanent NTR is to ignore their views and 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. And it is to give up the hope of contributing 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 we have a fundamental national security interest in a peaceful,
stable, mutually beneficial relationship with China. And in this
sense, to reject PNTR would be reckless.
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. It would complicate for the foreseeable
future our Pacific alliances, as all our Asian friends and allies
would view rejection of PNTR as unprovoked rejection of stable and
constructive relations with their largest neighbor. 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.
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.
WTO accession, together with permanent Normal Trade Relations, will be
the most significant step in this process -- and thus in the broader
process which began at the Bretton Woods Conference -- in many years.
That is the opportunity. 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 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. Web site: http://usinfo.state.gov)



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