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(05/23/00 - Prestowitz) The China Trade Vote: A Deal Even Trade Hawks Can Love

The China Trade Vote: A Deal Even Trade Hawks Can Love
By Clyde Prestowitz
1,024 words
23 May 2000
The Wall Street Journal
A26
English
(Copyright (c) 2000, Dow Jones & Company, Inc.)


Tomorrow, Congress will decide whether to grant Permanent Normal Trade Relations (PNTR) to China in conjunction with China's bid to join the World Trade Organization. As a former U.S. trade negotiator, I have often been critical of U.S. trade deals that gave too much and got too little. But in the case of China, careful review can lead to only one conclusion: It is time for Congress to do the U.S. a favor by voting for PNTR.

To appreciate why, it is important to understand two things. First, Congress won't be voting on China's accession to the WTO. That decision is not for the U.S. to make. Entry is up to the WTO's member nations, each of which has been conducting individual negotiations with China on the terms of its membership. The U.S. concluded its deal with China several months ago; China cleared its final hurdle last week when it reached an accord with the European Union.

Second, Congress will not be deciding whether to grant normal trade relations to China. The U.S. has been granting that status for nearly 20 years. The issue now is whether to make these trade relations permanent.

The vote is all the more important in light of China's imminent WTO membership. WTO rules require members to extend normal trade relations to each other permanently. Consequently, if the U.S. doesn't extend PNTR it will be in violation of WTO rules; China, for its part, won't be obligated to grant the U.S. the improved treatment it will be extending to all other WTO members.

This is where Congress can do us a great favor. The rules governing trade between China and the U.S. have been extremely unequal over the past 20 years. Our yearly renewal of normal trade relations means China has enjoyed the same low tariffs, minimal quotas and easy market access that Britain, Japan, Germany and other major U.S. trading partners enjoy. U.S. enterprises, in contrast, have suffered high tariffs, heavy-handed regulation and extensive restrictions in China. In short, the U.S. has been giving more than it has been getting, and Congress has repeatedly blessed the arrangement.

Last fall, as part of its efforts to join the WTO, China agreed to new trade rules with the U.S. Usually skeptical of such deals, I have concluded that this is the best trade deal I have ever seen. The U.S. would give up nothing. We would continue to treat China's trade the way we always have -- no better, no worse. But the Chinese would grant concession after concession -- reducing tariffs, removing onerous regulations, opening distribution channels, and accepting binding dispute-settlement procedures. We would be nuts not to take this deal, particularly given that China will be granting these concessions to all other members of the WTO upon its accession.

Opponents of PNTR argue that annual reviews of normal trade relations are needed to pressure China on human rights, the environment and labor conditions. This is a fallacious argument, for three reasons.

First, there is no evidence that the annual reviews have had any impact on China's human rights, labor or environmental policies. Last year the State Department reported a worsening of human-rights conditions in China, even as we were reviewing trade relations. The Chinese make it a point of honor not to be swayed by the annual reviews.

Second, the opponents blindly disregard the very rationale for granting PNTR. By opening up trade with China, we can promote economic development and interdependence that will undermine authoritarian measures and lead to greater economic and political freedom. Such a process can only work over time, which negates the argument for annual threats to suspend trade relations.

Finally, China has become so important to the performance of the U.S. economy that everyone (especially the Chinese) knows it is unlikely we will actually suspend trade relations. This has made the whole exercise a charade. Worse, it has rendered U.S. companies vulnerable to reverse leverage. The Chinese use the annual reviews to pressure U.S. companies for extra technology transfers and other concessions, on the grounds that supplies from the U.S. may be interrupted by dint of congressional action.

Beyond all this, there is a final, most important reason to grant China PNTR. For 30 years the U.S. has worked to bring China more fully into the community of nations, and to promote both economic development and a more liberal society. The policy has been working. Anyone who saw China in the early 1980s and compares it with today must be amazed. Bicycles and drab Mao suits have morphed into traffic jams and bright fashions; the freedom and the range of individual choices available to the average person has expanded exponentially. After years of estrangement, China is asking to join the international community. To turn it down at the very moment it is moving in the direction we have desired would be a tragic and historic mistake.

It is true that China is far from the democratic society we would like to see. Those who voice concern over the lack of human rights in China are justified in doing so. But we shouldn't treat China differently than we have other countries in similar circumstances. Over the past 50 years, both Korea and Taiwan were governed by authoritarian regimes that received U.S. support despite their disregard for human rights and democracy. Kim Dae Jung, the current president of Korea, was tortured by one such regime. U.S. policy was to engage in behind-the-scenes promotion of liberalization through economic development, education of students in the U.S., and fuller membership in multinational organizations.

Today, Korea and Taiwan not only have vibrant economies, but vibrant democratic governments. It can work in China, too, if Congress just seizes this opportunity.

---

Mr. Prestowitz, a trade negotiator during the Reagan administration, is president of the Economic Strategy Institute, a Washington-based think tank.

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