Let's make a deal

Just because China and the United States have been negotiating a bilateral trade agreement since 1986 does not mean most people necessarily understand why. With container ships plying the Pacific-full to the brim as they arrive in West Coast ports, half-packed on the way back-what's to negotiate? Americans want and have an abundance of cheaply made Chinese products. China, on the other hand, has kept the balance-of-trade lead by restricting U.S. imports, controlling its own labor force, and still managing to buy most of what it needs-computers, nuclear technology, and other Americana-whenever it wants.

Both sides of the Pacific have envisioned big gains, however, from expanding trade. Fortune 500 companies, ever in search of greater profit margins, see China, with its 1.5 billion purchasers and its millions of low-wage earners, as the next commercial frontier. Smaller companies, as well as educational institutions and non-profit organizations, see coattails in the Fortune 500s that will give them entry to China's own cultural institutions, and greater political freedoms for the Chinese themselves.

For China, the agreement has always been a predicate for entry to the World Trade Organization. China has sought WTO membership ever since the world body was formed in 1995, largely because it would bring both political and market clout overseas. Under WTO accession rules, any WTO member can request "bilaterals" with a proposed member, meaning the proposed member must negotiate a one-on-one trade agreement with the member country before joining. Member countries can effectively block a non-member's entry until bilateral trade differences are resolved. With the U.S. bilateral now in its pocket, China has only two bilaterals remaining to be settled-with the European Union and Canada. They were awaiting the outcome of U.S.-China negotiations.

The signing of the pact came in Beijing Nov. 15, following six days of talks between U.S. Trade Representative Charlene Barshefsky and her Chinese counterparts. Ms. Barshefsky delayed her departure by three days in order to reach the agreement ahead of a WTO meeting, set to begin in Seattle Nov. 30.

Chiefly, the agreement requires China to drop trade barriers. It will lower government restrictions on key industries, telecommunications, entertainment, and agriculture, which kept foreign investors out.

By doing so, the U.S. government estimates that the pact will increase China's gross domestic product by 4 percent.

Will easing trade barriers end trade wars? That is harder to say. Just a week ago, China slapped new restrictions on American packing material, apparently for spite. One year ago, the U.S. government began requiring wooden crates and pallets from China to be heat-treated. It was an attempt to prevent the spread of the Asian wood-boring beetle, a Chinese-born pest that has been devouring trees in Central Park and along streets of New York City. In retaliation, Chinese officials announced last month [Nov. 1] that pinewood packing materials from the United States must also be heat treated, to ward off an infestation of pinewood nematodes in China. That American pest was discovered in China nearly 20 years ago, but was never regulated because it showed little sign of spreading.

Critics of free trade with China say the latest agreement may hold less than meets the eye. They say China may look toward exercising the loopholes in the pact more than its provisions. China's questionable adherence to the International Covenant on Civil and Political Rights, which it signed in October 1998, is a case in point. After signing the human-rights agreement with much fanfare, China attached exceptions to key provisions, such as the guarantee to the right of free expression. And it has failed to produce in key areas, as in allowing International Red Cross workers access to political prisoners.

Just as important as how well the new agreement works will be how it sells. Reaction from leadership on Capitol Hill was cautious. Lawmakers do not have to vote directly on the agreement, but they are required to grant China guaranteed access to U.S. markets. This, in effect, ends the annual review of China's trade status, which has been a platform for voicing disapproval with its political policies for both human-rights groups and labor unions.

Public support is no more assured. A Reuters poll conducted just ahead of the final negotiations found that 67 percent of Americans opposed expanding trade with China, until it improves both human rights and religious liberties. Public distrust of China, according to the poll, stems from allegations that China stole U.S. nuclear secrets and from Beijing's crackdown on the outlawed Falun Gong spiritual movement. Respondents also indicated doubts about China's long-term commitment to the pact, and to reducing the trade deficit.

Even critics of China's policy toward religious groups believe the trade agreement can be a stepping stone to greater freedom. "It can be very beneficial with groups who want to work with the church in China," said Brent Fulton, director of the China Studies Center at Wheaton College and editor of China Watch. "It will lead to more international exchanges of all kinds, and generally it will provide for a more open atmosphere," he said. Mr. Fulton also believes that more business freedom in China will lead to less centralized control, which will help independent churches.

Daniel Griswold, an economist with the Cato Institute in Washington, D.C., agrees. "I don't believe there is anything in the agreement specifically about cultural exchanges. But there is strong reason to believe that China's entry into WTO will increase those types of activities," he said.

According to Mr. Griswold, there is "solid evidence" that China's economy will grow as a result of the agreement, and that more of its moribund state-run industries will be forced to close.

Proponents of the agreement also say it will lead to greater respect for the rule of law. "Right now, China can change most of its rules however it wants to; if they are members of the WTO, they agree to certain obligations," said Mr. Griswold. WTO stipulations include transparency in business transactions and a requirement to open certain parts of the Chinese bureaucracy to public recordkeeping, as other WTO members do.

But changes will not be overnight, Mr. Griswold told WORLD.

Citing evidence that the typical Chinese standard of living has quadrupled, he said, "If you like the trend of the last 20 years, the WTO agreement will move them along and accelerate that process."

But not everyone has that view of history. Opponents of the agreement call it a "sweetheart deal" that promises economic benefit for China without providing a way to promote political freedom.

"People are still arguing the same thing," said Steven Mosher, president of the Population Research Institute and author of a forthcoming book called Hegemon: China's Plan to Dominate Asia and the World. "They say the freedom to invest and trade would open up not only China's economy but Chinese society and political institutions. It has not happened. And we have given that argument a 20-year trial."

Mr. Mosher called Beijing's present approach to governing "market Leninism." He said, "Unless we move forward to attach conditions to trade with China, and realize that China is our principal adversary in the world, we will not see progress. The only thing standing between us and open confrontation with China is democratization."

If trade is a lever to change China, it lacks torque from U.S. lawmakers. With outstanding congressional investigations into key controversies with China-security breaches, Chinese theft of U.S. military technology, and campaign financing-the House of Representatives voted to continue normal trade relations with China this year by its highest margin ever, 264-166. Figures released by the Commerce Department last week show the U.S. deficit with China has widened to $6.9 billion, the worst imbalance America has ever recorded with any country. And so the cargo ships ride high back to China.