[asia-apec 1584] LA Times on China/trade

[APEC Monitoring Group]

LA Times 19.9.00
NEWS ANALYSIS
Senate Poised to Pass China Trade Measure
 Commerce: Approval would ease the country's entry into the WTO, a move seen
globally with both eagerness and anxiety.

By JONATHAN PETERSON, Times Staff Writer


     WASHINGTON--The Senate's expected vote today to normalize trade
relations with China will echo through the world economy for years,
unleashing fierce new competition for many countries and confronting global
rule-makers with a trader that has been notoriously aloof to the rule of
law.
     Specifically, the vote would pave the way for China to join the World
Trade Organization, the Geneva-based entity that is the closest thing to a
referee for the global economy. China's membership is expected within
months, concluding its 13-year quest to enter the club.
     Yet China would be a WTO member like no other. It is a first-tier
trading power that often lines up with the world's have-nots on key policy
matters. Although it has grown dramatically outside the formal international
economic system, it would have to struggle to work within it. Beyond that,
China's economy remains fraught with risks for the outsiders who envision
riches in its historic market opening.
     "There's been a lot of optimistic rhetoric" about the benefits of China
joining the world's trading system, said Greg Mastel, director of the global
economic policy project at the New America Foundation, a Washington think
tank. "The reality is that for at least five or 10 years, it's going to be a
rocky ride."
     Until now, much of the U.S. debate has centered on how China would be
changed by deeper engagement with the United States and the rest of the
world. Less discussed, however, has been how deeper Chinese engagement will
affect an already disorderly global economy and the ongoing struggle to
discipline it.
     China has operated carefully in the United Nations and other global
bodies, where it has sought the image of a responsible, major power, experts
point out. Still, some of these same analysts and scholars suggest that
China's impact on the WTO could be significant:
     * China represents an influential new voice for the emerging world in a
trading system that already is polarized between rich and poor. China is
certain to oppose the U.S. goal of including workplace standards in trade
deals, and to approach calls for new environmental controls with great
wariness.
     * At the same time, China will pose a growing competitive threat to the
very emerging nations that it sometimes speaks for. To cite a major example,
it will compete fiercely with poor countries in Asia, Latin America and
Africa to sell apparel and other textile products to the United States.
     * As Beijing slashes formal barriers to foreign investment, corporate
America is preparing to set up new manufacturing and services in China,
fueling future controversies over lost U.S. jobs in a flap reminiscent of
the North American Free Trade Agreement. "I would expect that debate to be
replayed," said Rob Scott, a trade specialist at the Economic Policy
Institute, a think tank that has been critical of global trade accords.
     A working group in Geneva is trying to iron out the final technical
terms for China's entry into the 138-member WTO, where its interests may
conflict with the United States' in key ways.
     U.S. officials, for example, have pushed hard to protect intellectual
property from Third World theft--a concern of pharmaceutical, entertainment,
software and other industries. The United States also has tried to derail a
WTO debate on its own sanctions against dumping, the unloading of exports at
below the cost of production, typically by emerging countries. In addition,
the White House has wanted the WTO to consider how workplace issues, such as
pay and safety, could be part of future trade deals.
     Officially or unofficially, China has been on the other side of all
these matters. For all that, however, some China specialists say that
Beijing's long-awaited membership remains a wild card for the conflict-fille
d WTO, where its positions may prove hard to predict.
     As the world's seventh-largest economy and--including Hong Kong--the
world's fourth-largest exporter, China's economic fortunes are more tied up
with the affluent West than with emerging countries, said Minxen Pei, a
China specialist at the Carnegie Endowment for International Peace. "China
will always have its own national interest as its primary concern," he said.
     China's record of making few waves in such international entities as
the United Nations and World Bank adds to the case that it may be a moderate
citizen of the WTO: "They're not system-busters. They don't want to tear
apart global institutions," said Margaret M. Pearson, a political scientist
at the University of Maryland. "But they will fight very hard for their core
interests. They can be expected to be very, very active in the WTO."
     As an official member of the global trade system, China will be
required to abandon such pervasive practices as demanding that foreign firms
doing business there use local supplies, materials or distributors. Yet
internal Chinese tensions cast doubt on whether its leaders can reliably
deliver on their new pledges.
     For example, China's promise to open its economy to more foreign
competition threatens massive job cuts in its bloated public sector, said
Gary C. Hufbauer, a senior fellow at the Institute for International
Economics--cuts that could unleash a huge political backlash. But if China
flouts the international rules, many nations will be tempted to follow its
example, analysts say.
     Indeed, while many argue that bringing China into the global framework
will strengthen democratic reforms there, "In some ways the reverse is
equally true," maintained Daniel A. Seligman, director of the Sierra Club's
Responsible Trade Campaign. "Bringing China into the WTO weakens the rule of
law globally."
     Business lobbyists long have touted China as a marketplace of
breathtaking potential. This message has fueled hopes that 1.2 billion
Chinese will soon be using more goods made in the United States, perhaps
even narrowing the U.S. trade deficit with Beijing that last year hit $68.7
billion, according to U.S. government figures.
     But just what the emerging business ties will mean for American workers
remains a matter of dispute. A study by the conservative U.S. Business and
Industry Council concluded that American firms view the coming era more as
an opportunity to expand production inside China than to export American
products over there. Such strategies appear likely to spark complaints that
U.S. business is shifting production to China, and that such investments are
opportunities that might otherwise have benefited American workers.
     "If you look at the companies' Web sites, and you examine the
statements of their executives, there's almost no talk of ramping up U.S.
exports from the U.S. to China," said Alan Tonelson, a research fellow who
authored the report. "What they talk about a great deal is ramping up
production in China--to service the Chinese market, the U.S. market and
global markets."
     Other analysts say the truth is more ambiguous. As American firms set
up shop and expand in China, they also may rely on parts and supplies from
home, which would lead to some increases in their imports from the United
States, said Joseph P. Quinlan, senior international economist with the
Morgan Stanley Dean Witter investment firm in New York. Efforts by U.S.
firms to capture overseas markets, strengthening their global
competitiveness in the process, are often applauded by economists. "It's
really a complex picture," Quinlan said.
     Ultimately, it may be other nations that are hit hardest by the
competitive pressures from China, as Beijing scrambles to earn foreign
currency and fuel desperately needed economic growth by exporting products
that are also made in other emerging nations.
     On textiles and apparel, for example, many countries had hoped for
years of breathing room before they had to compete with China in selling to
the U.S. market. But U.S. officials last year agreed to eliminate barriers
to Chinese textiles and apparel at the same time it does so for other
countries.
     "China is not so much a threat to the United States as it is to
Thailand, to some of the Central American countries, to Central Europe,"
said Quinlan. "There's no doubt about it."