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Don't Let This Weird Bunch Dictate America's China Policy


Economic Viewpoint

DON'T LET THIS WEIRD BUNCH DICTATE AMERICA'S CHINA POLICY

Once again, the President has sent to Capitol Hill for annual renewal the most-favored-nation (MFN) trade status for China. Congress has 60 days to respond, and this time around, there is a grave risk that it actually might not endorse the measure. Some interest groups seek its outright defeat, while others are under pressure to vote against it and leave the President with the burden of reversing the vote with a veto. This outlook is deeply troublesome. MFN for China is not just about trade. It involves relations with the predominant world power of the next century.

MFN is part of a broader U.S. strategy to bring China into the world trading system and make it abide by international rules as a member of the World Trade Organization. MFN treatment does not mean a privileged position for China. It signifies that China gets the same access to U.S. markets as any other country. Without MFN, China would face high tariffs and quotas and be uncompetitive. That is exactly what opponents of MFN for China seek, either for leverage on particular issues or to get rid of a competitor. Proponents of MFN, of course, are unabashedly interested in the trade benefits they expect to derive. But many recognize the special role China will play in world affairs and the need for the U.S. to forge a partnership with it.

COMMON FRONT. The denial of MFN is sought by a most peculiar assortment of forces: the far right, represented by Gary Bauer's Family Research Council, which claims an interest in religious freedom in China; Pat Buchanan, a trade protectionist; House Minority Leader Richard A. Gephardt (D-Mo.), who believes he can win the Presidency on a protectionist platform; the AFL-CIO; and such human-rights advocates as Representative Nancy Pelosi (D-Calif.). In this new style of politics, a coalition of special agendas may come together even when, in any other context, they could not possibly coexist for 10 minutes. Unfortunately for the issue at hand, the cohesion, power, and determination of these forces may suffice to defeat China's MFN status.

China is the third-largest market in the world, after those of the U.S. and Japan--and is growing rapidly. Europe wants only to accommodate China and win contracts for planes and other products. Without a common front among industrialized nations, China will merely play one against the other. Any attempt to leverage trade policy to change China's ways on human rights is useless. Losing MFN, of course, also involves high stakes for China.

Denial of MFN would force China to radically reconsider how it views both its relations with the U.S. and its place in world trade. U.S. protective trade strategies in the 1920s helped drive Japan into the hands of military nationalists. U.S. denial of MFN for China will do exactly the same at this critical juncture for that country. The succession issue is alive, and though we may not quite like any of the protagonists, internationalist Jiang Zemin is a far better option than Li Peng, the conservative (in the communist sense) nationalist. If we pull the rug from under Jiang's opening to the U.S., his approach will be discredited. Where China would move then is anyone's guess. We cannot take for granted that the military and hard-liners will continue to focus on running the many businesses they operate rather than on a more nationalistic agenda, e.g., expelling the U.S. from Asia and squashing the emerging grassroots political liberalization that is under way at the village level.

The MFN issue more broadly concerns America's ability to provide leadership in a changing world. Countries that are emerging from closed economic and political systems and turning to free markets need to be integrated into a global system of opportunities and rules. That applies as much to China as to Russia, India, and Brazil. With so many newcomers to the world economy--2 billion to 3 billion people--the issue of leadership is even more important. If the U.S. turns its back on China, Asian neighbors will come under pressure. China is big and nearby, the U.S. distant and lacking both purpose and direction. The choice is obvious--the U.S. will be the loser throughout Asia both in economic and security terms.

The White House has been irresponsible in letting the issue get to this point. For four years, it has failed to articulate and implement a coherent China policy. Now, with fund-raising scandals looming, it risks letting a weird anti-China coalition dictate critical foreign-policy decisions. More is at stake than exports: Fringe agendas are at odds with America's overarching goals in the world--peace and prosperity. Where is the leadership?BY RUDI DORNBUSCH


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