[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
ACCESSION OF CHINA TO THE WTO
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
MAY 3, 2000
__________
Serial 106-105
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
67-832 WASHINGTON : 2001
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of April 18, 2000, announcing the hearing............... 2
WITNESSES
U.S. Department of the Treasury, Hon. Lawrence H. Summers,
Secretary...................................................... 23
U.S. Department of Agriculture, Hon. Dan Glickman, Secretary..... 29
U.S. Department of Commerce, Hon. William M. Daley, Secretary.... 33
Office of the United States Trade Representative, Hon. Charlene
Barshefsky, United States Trade Representative................. 39
______
China Outreach Ministries, Inc., Reverend Daniel Baida Su........ 96
Columbia 300, Inc., Kyle J. Burns................................ 121
Dui Hua Foundation, John Kamm.................................... 99
Citigroup, Inc., and Ford Motor Corporation, New York, New York,
Hon. Robert E. Rubin........................................... 63
United Automobile, Aerospace, and Agricultural Implement Workers
of America, Alan Reuther....................................... 111
U.S.-Taiwan Business Forum, David N. Laux........................ 125
United States Commission on International Religious Freedom, Hon.
Elliott Abrams................................................. 88
Wolf, Hon. Frank R., a Representative in Congress from the State
of Virginia.................................................... 10
SUBMISSIONS FOR THE RECORD
California-Asia Business Council, Oakland, CA, statement......... 140
Direct Selling Association, statement............................ 141
Pacific Basin Economic Council, Gary Benanav, statement.......... 142
Transglobalnetwork.com, Mountain View, CA, R. Theodor Kusiolek,
statement...................................................... 143
United States-China Business Council, Robert A. Kapp, statement.. 145
Wei Jingsheng Foundation, New York, NY, Wei Jingsheng, statement. 152
ACCESSION OF CHINA TO THE WTO
----------
THURSDAY, MAY 3, 2000
House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m., in room
1100, Longworth House Office Building, Hon. Bill Archer
(Chairman of the Committee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
April 18, 2000
No. FC-21
Archer Announces Hearing on Accession
of China to the WTO
Congressman Bill Archer (R-TX), Chairman of the Committee on Ways
and Means, today announced that the Committee will hold a second
hearing on the bilateral trade agreement between the United States and
China and on the pending accession of China to the World Trade
Organization (WTO). The hearing will take place on Wednesday, May 3,
2000, in the main Committee hearing room, 1100 Longworth House Office
Building, beginning at 10:00 a.m.
Oral testimony at this hearing will be from both invited and public
witnesses. Invited witnesses will include the Honorable Robert E.
Rubin, Former Secretary of the Treasury, and the Honorable William M.
Daley, Secretary of Commerce. Also, any individual or organization not
scheduled for an oral appearance may submit a written statement for
consideration by the Committee or for inclusion in the printed record
of the hearing.
BACKGROUND:
China applied for accession to the General Agreement on Tariffs and
Trade (GATT) in July 1986, and work has proceeded in the China Working
Party since that time to negotiate the conditions upon which China will
enter the WTO.
Article XII of the Agreement Establishing the World Trade
Organization states that any State or separate customs territory may
accede to the WTO ``on terms to be agreed between it and the WTO.'' In
practice, any WTO applicant must negotiate terms for membership in the
WTO in the form of a Protocol of Accession. Through the operation of a
Working Party, the United States and other WTO members have an
opportunity to review the trade regimes of applicants to ensure that
they are capable of implementing WTO obligations. In parallel with the
Working Party's efforts, the United States and other interested member
governments conduct separate negotiations with the applicant. These
bilateral negotiations are aimed at achieving specific concessions and
commitments on tariff levels, agricultural market access, and trade in
services.
On November 15, 1999, Ambassador Barshefsky announced the
successful completion of bilateral talks on China's accession to the
World Trade Organization. The expansive market access agreement will
provide broad market openings for U.S. agriculture, manufactured
products and services, along with Chinese commitments to adopt WTO
rules relating to such issues as technology transfer and offsets,
subsidies, product safeguards, and State enterprises. In a separate
agreement signed in April 1999, China agreed to end sanitary and
phytosanitary bans on the importation of U.S. wheat, meat, and citrus
products.
The Agreement represents a crucial step in China's WTO accession
process. Other steps that remain ahead include the conclusion of
bilateral negotiations with a number of other WTO members, as well as
the multilateral negotiations on China's accession protocol. China then
must complete its domestic process for implementing the country's WTO
commitments.
Congressional approval of permanent normal trade relations (NTR) is
not necessary for China to accede to the WTO. However, in order for
American businesses, farmers, and workers to be guaranteed an
opportunity to benefit from the trade concessions and better compete in
China's markets, China's name must be removed from Title IV of the
Trade Act of 1974, the so-called Jackson-Vanik amendment, which
provides for an annual review of China's trade status based on freedom
of emigration.
Otherwise, the United States would be in violation of Article I of
the GATT, which requires the extension of ``unconditional'' most
favored nation (or NTR) status, and subject to trade sanctions. If the
United States does not remove the conditions imposed by Jackson-Vanik,
the United States would have to invoke the non-application clause of
the GATT, meaning that China would be able to withhold benefits of the
1999 bilateral agreement from the United States.
In response to progress achieved in China's WTO commitments
represented by the bilateral agreement with the United States,
President Clinton announced that he will work with other WTO member
countries to gain China's entry in the WTO as soon as possible. On
March 8, 2000 he transmitted to Congress a request for legislation to
terminate the application of Title IV of the Trade Act of 1974 to China
and to extend permanent Normal Trade Relations treatment to products
from China.
The first hearing on this topic took place on February 16, 2000,
and was announced in a Full Committee press release No. FC-16, dated
January 31, 2000.
FOCUS OF THE HEARING:
The focus of the hearing will be to examine: (1) the opportunities
and issues associated with the entry of China into the WTO; (2) the
potential benefits of the U.S.--China bilateral trade agreement for
U.S. firms, workers, farmers, ranchers, and other interested parties;
and (3) the current status of negotiations in Geneva for China to
accede to the WTO. The Committee would also welcome testimony on how
normalizing trade relations with China would affect other United States
objectives in China and the surrounding region, such as improved
respect for human rights, progress toward democratization, and enhanced
economic and regional security.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to
Traci Altman or Pete Davila at (202) 225-1721 no later than the close
of business, Wednesday, April 26, 2000. The telephone request should be
followed by a formal written request to A.L. Singleton, Chief of Staff,
Committee on Ways and Means, U.S. House of Representatives, 1102
Longworth House Office Building, Washington, D.C. 20515. The staff of
the Committee will notify by telephone those scheduled to appear as
soon as possible after the filing deadline. Any questions concerning a
scheduled appearance should be directed to the Committee on staff at
(202) 225-1721.
In view of the limited time available to hear witnesses, the
Committee may not be able to accommodate all requests to be heard.
Those persons and organizations not scheduled for an oral appearance
are encouraged to submit written statements for the record of the
hearing. All persons requesting to be heard, whether they are scheduled
for oral testimony or not, will be notified as soon as possible after
the filing deadline.
Witnesses scheduled to present oral testimony are required to
summarize briefly their written statements in no more than five
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full
written statement of each witness will be included in the printed
record, in accordance with House Rules.
In order to assure the most productive use of the limited amount of
time available to question witnesses, all witnesses scheduled to appear
before the Committee are required to submit 300 copies, along with an
IBM compatible 3.5-inch diskette in WordPerfect or MS Word format, of
their prepared statement for review by Members prior to the hearing.
Testimony should arrive at the Committee office, room 1102 Longworth
House Office Building, no later than Monday, May 1, 2000. Failure to do
so may result in the witness being denied the opportunity to testify in
person.
WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect or MS Word format, with their name, address,
and hearing date noted on a label, by the close of business, Wednesday,
May 10, 2000, to A.L. Singleton, Chief of Staff, Committee on Ways and
Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements
wish to have their statements distributed to the press and interested
public at the hearing, they may deliver 200 additional copies for this
purpose to the Committee office, room 1102 Longworth House Office
Building, by close of business the day before the hearing.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.
1. All statements and any accompanying exhibits for printing must
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or
MS Word format, typed in single space and may not exceed a total of 10
pages including attachments. Witnesses are advised that the Committee
will rely on electronic submissions for printing the official hearing
record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a
statement for the record of a public hearing, or submitting written
comments in response to a published request for comments by the
Committee, must include on his statement or submission a list of all
clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the
name, company, address, telephone and fax numbers where the witness or
the designated representative may be reached. This supplemental sheet
will not be included in the printed record.
The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
material submitted solely for distribution to the Members, the press,
and the public during the course of a public hearing may be submitted
in other forms.
Note: All Committee advisories and news releases are available on
the World Wide Web at ``http://waysandmeanshouse.gov''.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Chairman Archer. The Committee will come to order.
Good morning. The Committee today continues its review of
what international trade means in the everyday lives of
farmers, workers, and businesses of this country. Specifically,
we will further examine the bilateral agreement reached between
the U.S. and China last year, to make sure that it is good for
America.
Winning the China vote is not going to be easy, especially
since the House Minority Leader is against it and the House
Minority Whip is devoting enormous amounts of time and energy
working toward its defeat. In fact, I am at least as concerned
today as I was four weeks ago about our prospects for winning
this historic vote.
I am also concerned about the nature and composition of any
potential side agreements or parallel legislation being
discussed. I think we must work to find ways to address issues
and will be cooperative in that regard with the, I think, very
constructive efforts of Sandy Levin. We do need to be sure,
however, that whatever we do in that regard is not trade
restrictive and should apply to China only.
We also need to be sure that it will not attract other
provisions which will bog down the process, particularly in the
Senate. And we must be sure that whatever we do in that regard
does not threaten the existing base of support.
These are questions I hope to have answered today. The
importance of this issue to our country's future and the future
of free trade cannot be overstated. The fact that we will have
four Cabinet officials here today is testimony to that.
So I hope the President will again consider my request to
address the Nation on television on this critical issue. He has
done so on Haiti, Bosnia, Iraq and Kosovo. And I believe he is
inclined to do so. I know that the President is working very
hard to get the votes for us to win this issue. And surely when
the American people hear the importance of this, and hear it
from the President, I believe that it will help us greatly with
the American people.
And having said that, I yield to the chairman of the Trade
Subcommittee, Mr. Crane, for any comments he would like to
make, and then I will yield to Mr. Rangel, who will yield, I
assume, to Mr. Levin.
Mr. Crane. Thank you, Mr. Chairman.
It's heartening for me to experience the historic
bipartisan show of support we've seen for expanding trade
relations with China. The opportunity Congress has to impose an
enforceable system of fair trade rules on a nation of 1.2
billion people, as it emerges from the iron grip of communism
and state planning, is one that cannot be lost.
Chairman Archer and I are in agreement with the President
that the bill to approve permanent NTR status must be a simple
change to the Jackson-Vanik statute, rather than one which
attempts to make changes to our trade laws, or which brings in
other issues and complications. And I agree with the Chairman
on the criteria for evaluating any parallel legislation.
The bilateral trade deal with China sells itself in every
area. In one sector after another, there is no question United
States workers and businesses will be better off if Congress
passes the PNTR and puts these unilateral concessions in place.
In exchange for steep tariff reductions and whole scale reforms
of the Chinese trading system, the United States gives up
nothing, gives up nothing.
In a global economy, increasing trade with China is the
best way to keep our economy growing and help improve the
standard of living and human rights conditions in China. We
will not gain improvement in the respect for rule of law,
religious freedom, and democratic principles by rejecting this
agreement and surrendering our presence and influence in China.
American businesses, religious leaders and unions need to
remain engaged in China.
And I look forward to today's discussion and yield back the
balance of my time.
Chairman Archer. I now recognize Mr. Rangel for any
statement he might to make on behalf of the minority.
Mr. Rangel. Thank you, Mr. Chairman.
I think we all ought to take a deep breath as we see the
Republicans and Democrats finding some issue that we can work
with the President of the United States and hold up on the
hearings on the Gonzales matter and put impeachment behind us
and put the country as a priority, as it relates to our trade
policy.
I also find it difficult to understand how we can so easily
agree to engage with a billion communists in China and find it
so awkward even to talk about normal trade relationships with
Cuba, which is closer to our borders and certainly has the same
type of problems in terms of not moving toward democracy any
faster than the leadership would be in the People's Republic of
China.
Having said that, I agree with you that the Administration
has brought some very important and influential representatives
here, and I'm very anxious to hear from them. And I should note
that while Leader Gephardt has taken a position against
normalization of trade relations with China that he's made it
abundantly clear that is not a party position for the minority,
but an individual position.
And while you accurately pointed out that David Bonior also
opposes normalization at this point in time, that he too is not
acting as the whip of the Democratic minority, but is doing
that as an individual member. And that leads me to laud the
work that's being done by my friend and colleague, Sandy Levin,
who has constantly tried to bridge the gap in working with the
other side. And whether you call them side agreements or trade
restrictions, you know as I know that he's trying to put
together a coalition under very difficult political
circumstances that would allow a degree of unity to support the
President of the United States.
And so while it is very important, in my opinion, that
China does and will be entered into the world trade agreement,
I think it's important too that while we gain access to this
potentially lucrative market, that we also find some way to
enforce the commitments that China has made as it relates to
human rights or the protection of environment. These things are
important to Republicans, Democrats and Americans alike, and
Sandy Levin and a group of Democrats and Republicans are trying
very hard to reach some type of agreement that can produce the
votes that are necessary.
So I publicly thank Sandy Levin for what he's doing, not
just as the ranking Democrat on the Trade Committee, but as a
concerned American that would want to do what's in our interest
and the world's interest. And with your permission, Mr.
Chairman, I'd like to yield to Sandy Levin.
[The opening statement follows:]
Opening Statement of Hon. Charles B. Rangel, a Representative in
Congress from the State of New York
Mr. Chairman, we have a particularly distinguished list of
witnesses appearing before us today.
First, we seem to have most of the President's Cabinet here I'm not
sure who's left minding the store. Starting with the distinguished
Secretary of the Treasury we are always privileged to have him before
our Committee joined by the Secretary of Commerce, the Secretary of
Agriculture and the U.S. Trade Representative.
And, if that were not enough, we have the distinguished former
Secretary of the Treasury, Bob Rubin, following the Administration.
Finally, we have a number of important private sector witnesses.
In view of the impressive array of witnesses before us, I will keep
my opening comments short and then turn my remaining time over to
Congressman Levin, the Ranking Democrat on the Trade Subcommittee.
I think the facts before us today are relatively clear.
As we all know, last November, the Clinton Administration concluded
an historic bilateral accession agreement with China.
Based on my understanding of the agreement, it
would provide substantial new opportunities for U.S. farmers,
businesses, and workers assuming China lives up to its
obligations.
In addition, it contains important safeguards
under U.S. law including a special anti-surge provision to
prevent China's centrally-planned production from spilling over
into the U.S. market and gives affected U.S. industries fair
recourse in these circumstances.
Now, the views about the agreement are also clear.
Business wants access to a potentially lucrative
market - and I think overall we can agree that in the long run,
bringing China into the framework of world trading rules is a
very important objective. It can serve U.S. interests,
including the interests of U.S. workers and businesses, and
also strengthen the rule of law within China itself.
But there are many who have concerns.
Those concerns include whether China will live up
to its commitments, and if it does not, to make sure that we
have in the WTO dispute settlement process an effective means
to get enforcement.
Others are concerned that the agreement does not
address China's egregious labor practices, flagrant violations
of human rights, or contain protections for the environment.
Just as the potential benefits are real, so are these
concerns.
No one has done more than my colleague Sandy Levin to try
to address those concerns in an effective, consultative,
bipartisan way. I want to commend him for his often thankless
work on this important issue and turn over my remaining time to
him after one last comment.
I believe our policy U.S. policy needs to be consistent in
engaging countries that need to be brought into the mainstream
of the international system.
In that regard, I look forward to the day soon, I hope when
we can begin a serious and substantive discussion of the
importance and benefits of normalizing economic relations with
Cuba.
Mr. Levin. Thank you very much, Mr. Rangel and Mr.
Chairman.
China's integration into the world trading system presents
both opportunities and challenges. We need a policy that
recognizes to both sides of this equation, a policy that seeks
to take advantage of the opportunities and prepares fully for
the challenges.
According to a recent World Bank study, ``China's share in
world trade could more than triple to 10 percent, making it a
major engine of growth for world trade.'' China could become
the second largest trading nation in the world over the next 25
years. There is no doubt, trade change is underway and
tremendous change is underway in China. But while that change
is irreversible, its direction is not inevitable.
China is the world's largest state controlled economy where
markets, free markets and the rule of law are still in the
rudimentary stages of development. China has a tight one party
system with a record of gross human rights violations and the
absence of a free labor market.
During my trip to China in January, I asked everyone I met,
students, academics, entrepreneurs, intellectuals, artists, a
few questions to sense their basic feelings about China's
future. One person very poignantly said to me, I could never
have imagined 10 years ago we would be where we are today. I
cannot predict where we might be in another 10 years.
We, too, are not able to predict China's future. But as the
President said in the State of the Union address, we need, ``to
know we did everything we possibly could to maximize the chance
that China will choose the right future.''
Over the last three months, the picture has become clearer,
and our response much more critical. The U.S. cannot block
China's entry into the World Trade Organization. The U.S. also
cannot receive the full benefits of the agreement we ourselves
negotiated with the Chinese without granting PNTR. In my
judgment, we cannot simply say no.
At the same time, just increasing trade does not adequately
address the complex challenges presented by China. We cannot
rely on economic contact and exchange alone to automatically
lead to more democracy, greater freedom and greater enforcement
of core worker rights. We cannot expect potential economic
dislocations in our country to just eventually correct
themselves. We cannot simply say yes.
In my judgment, the only course is to actively shape
globalization. We cannot escape it, we cannot ignore it. We
must engage with China and we must confront it. We should
consider PNTR within a framework that has the following three
goals. One, maximized benefits to U.S. businesses and workers
and farmers from China's accession to WTO. Two, minimize the
potential downsides from growing and more intense competition,
and there will be, with a country where free markets and the
rule of law are still in early stages of development. And
three, and so importantly, keep the heat on China when it comes
to human rights and other dimensions of our relationship.
With respect to the first goal-maximizing the benefits of
China's WTO accession. I believe that strong monitoring and
enforcement are keys to success. In that spirit, the framework
includes several important provisions, the framework we've been
working on. It calls for increased resources to be allocated to
U.S. Government agencies assigned to monitor and enforce trade
agreement compliance by China and other foreign countries. It
provides for an annual review by USTR of China's compliance
with its WTO obligations. And it calls on the U.S.
administration, and this is so important, to press for an
annual review by the WTO itself.
It also establishes a congressional executive commission
which will have among its functions review of worker rights in
China. All of this is in addition to the enhanced enforcement
that will come from bringing China into a system that has as
its foundation closer ongoing scrutiny which must be increased,
as well as a strong dispute settlement mechanism.
With respect to the second goal, minimizing the potential
downside from growing and more intense competition from China,
the framework would put into U.S. law the strong anti-import
surge safeguard that was included in the U.S. China agreement.
Obtaining that safeguard, which had not been obtained as of
April 1999, was vital to reaching agreement in November. Now it
is time to seal that achievement, as we did in implementation
of the Uruguay Round provisions, by legislating the standards
and procedures to make the safeguard a useful tool for U.S.
businesses and workers.
With respect to the final goal, the third goal, keeping the
heat on China on human rights and other areas, the framework
includes a significant improvement over the current system of
reviewing China's issues for a day or two each week. The
proposal is, we create a congressional executive level
commission, modeled after the Helsinki Commission. In the last
quarter century, that commission made major strides in
improving human rights and cultivating democratic institutions
in the country of the former Soviet block.
I believe a similar commission for China could make equally
important strides. That commission will place an ongoing and
focused spotlight on China rather than the temporary and
diffused spotlight of an annual review. The proposals that have
been put forth constitute a hard headed and common sense
approach to bringing China into the world trading system. I
would be strongly urging their adoption even if the dynamics of
the PNTR vote were different than they are today. I would be
doing so, because I firmly believe that we must actively shape
globalization and not simply rely only, as important as it is,
on more open markets to bring about positive developments.
I have no illusions, in conclusion, that enacting the
framework that I've outlined will transform China overnight.
But it will help to reinforce the evolution of China's
economic, social and political institutions in a positive
direction. It will be a step by step activist approach. This
type of reinforcement is not only in China's interest, it is in
our vital economic and national security interest as well.
I look forward to the Administration's views today on these
proposals, as well as the continuing and continued discussions
as mentioned by others on both sides of the aisle about their
implementation in the context of a PNTR bill.
Mr. Chairman, thank you, and Mr. Thomas has asked if I
might yield to him for a few seconds.
Mr. Thomas. Thank the gentleman for yielding. And I want to
thank the gentleman for the language and our ability to look,
and my ability to look at it prior to your statement.
And the specificity is of a great help. I think
conceptually there are a number of areas that we can agree and
move forward on, perhaps in some areas on terminology or
structure, we can continue to work on it. But the willingness
of the gentleman to continue to flesh out and show the
specifics of his approach is appreciated. I think there is a
fertile ground for us to continue to work, and I thank the
gentleman for his statement.
Mr. Levin. Thank you, Mr. Chairman.
Chairman Archer. Without objection, all members may insert
written statements in the record at this point.
[This opening statement of Mr. Ramstad follows:]
OPENING STATEMENT OF THE HON. JIM RAMSTAD, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MINNESOTA
Mr. Chairman, thank you for calling this important hearing
on China's accession to the WTO.
We often talk about what China's accession to the WTO means
in relation to permanent normal trade relations (PNTR) for
China, but today, I would like to draw attention to what this
crucial step will mean to the Chinese citizens and why the
average Chinese citizen supports it.
On Monday, four Chinese citizens who work for an American
company in China, Honeywell, were in my office. They were asked
questions about the differences between working for U.S. firms
and the Chinese state-owned enterprises. The differences are
stark.
They explained how the working conditions at American firms
far exceeded those of the state enterprises. The U.S. firms are
not only utilizing U.S. labor and environmental standards at
their facilities, but they are also requiring companies with
which they do business--whether it is a Chinese or foreign
company--to also meet these high standards. It is U.S. firms,
not the Chinese government, that are pushing for better working
and environmental conditions!
A Chinese employee explained how important the housing
benefits are at American firms, which allow them to actually
own their own housing. Another mentioned how much more training
is provided at U.S. companies, and that salaries and benefits,
which are tied to merit, are helping to motivate workers in
ways never imagined at the government enterprises.
A Chinese employee who has worked at both the government
enterprises and American companies also explained that the
salaries are far better at the American firms. He said his
salary now is 1000 times higher than what he made when he first
started working at the government enterprise. His salary is
also almost 15 times the amount of a friend of his who does a
similar job at a government factory.
Better working conditions, better benefits and incentives
and better salaries--these greatly improve the lives of Chinese
citizens. That's why we must support bringing China into the
WTO and passing PNTR so we can promote continuance of these
positive opportunities and influences in China.
Thank you again, Mr. Chairman, for holding this hearing and
I look forward to hearing from our witnesses today.
Our first witness is one of our own colleagues, Congressman
Frank Wolf from Virginia. Frank, if you'd take a seat there at
the witness chair. We're happy to have you before the
Committee, and we'll be pleased to receive your testimony.
STATEMENT OF HON. FRANK R. WOLF, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF VIRGINIA
Mr. Wolf. I thank you, Mr. Chairman. I'll submit my full
statement and sum up. And I want to thank you and the members
of the Committee, for the opportunity to testify.
The Clinton Administration has a very poor record on human
rights around the world. In Africa, in Sudan, 2 million
Christians and animists have been killed and slavery is taking
place. In Sierra Leone, 90,000 people have been killed and
women are raped and arms are taken off. In Rwanda, they stood
by and did nothing. In Chechnya, during the bombing, innocent
people have died. In Indonesia, when Bishop Bella won the Nobel
Peace Prize in East Timor, the Administration stood by and did
nothing.
So it's not surprising to see its policy with regard to
China. In the Simon and Garfunkel song, The Boxer, it says, I
am just a poor boy, though my story's seldom told, I have
squandered my resistance for a pocket full of marbles, such are
promises, all lies and jests, still a man hears what he wants
to hear and disregards the rest.''
You've heard the Administration and you've heard about
trade. So I'd like to talk a little bit about the rest. In
China today, there are at least eight Catholic bishops that are
in jail and the number is actually higher. There are numerous
Protestant house church pastors that have been arrested and one
in the photo here is the bishop in jail still, and Pastor Li in
the photo here was arrested and has put in prison in China.
The Chinese have plundered Tibet. Three years ago I was in
Tibet. I went in through the back door, and saw what they have
done, destroying 3,000 to 4,000 monasteries. And every
monastery has public security police that run the monastery.
They have hundreds of monks and nuns in the Dropshe prison that
are being tortured. They have persecuted the Muslims in the
northwest portion of the country.
There are more slave labor camps in China today than there
were when Solzhenytsin wrote the book, Gulag Archipelago. The
People's Liberation Army kills people to sell organs for organ
transplantation. Many of the Tiananmen Square demonstrators are
still in prison. Chris Smith and I visited in Beijing Prison,
number one, we saw them working and many are still in prison
today.
Fifty-five years ago last month, Dietrich Bonhoeffer was
marched from his cell in the Flossenburg prison, taken to the
gallows because of speaking out for human rights. We now have
modern day Dietrich Bonhoeffers who serve in prison in China.
And this Administration and this Congress is doing nothing
about it.
There are forced abortions. This is a pro-life issue, a
women's issue. They have mass sterilizations as they go into
villages. Over 500 women a day commit suicide in China.
Militarily, they sell weapons to countries that are a direct
threat, not only to the security of the United States, but to
our men and women who wear the uniform. They have an espionage
program directed against the United States and private
companies.
I would urge the Committee to get the security briefing by
our intelligence people. Ask them how broad ranging is China's
intelligence operation in the U.S. Will giving PNTR to China
allow China greater access to sensitive technology? Is there
evidence that China has a program underway to attack U.S.
satellites in space? Does the intelligence community have any
written evidence that China is preparing to sink U.S. aircraft
carriers?
The human rights record in China today is worse than it has
been for years. Giving China MFN, or PNTR, will not change
them, just as giving it to Nazi Germany would not have changed
the leaders of Nazi Germany.
With that, Mr. Chairman, I would also, since I have 46
seconds, read you a letter from the Fleet Reserve Association
that represents 150,000 career military Marines and Coast
Guard. They say, the Fleet Reserve Association must do all that
it can to oppose any move that could possibly send those brave
men and women into harm's way without rhyme or reason, with the
possibility that the future will hang dark shadows over open
end trading with yet another unproven China. FRA is sensitive
to the harm that country may inflict upon our nation and joins
your colleagues in opposing PNTR.
Just within the past two weeks, China has made military
threats against Taiwan and threatened military actions against
the U.S. On this issue, Congress should respect the wisdom of
the American people. Now is not the time to grant PNTR to
China.
[The prepared statement follows:]
STATEMENT OF THE HON. FRANK R. WOLF, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF VIRGINIA
Mr. Chairman, thank you for the opportunity to testify
today.
Having visited prison labor camps in China in 1991 and
having visited Tibet a few years ago, I firmly believe that
much is at stake if the Congress abandons its annual review of
China trade. Much is at stake if the Congress ignores China's
continuing human rights violations. Much is at stake if the
Congress ignores the national security threat arising out of
Beijing.
China's human rights record is deplorable and it continues
to worsen. That's not just me saying that. The 1999 State
Department Human Rights report on China said, ``The
Government's poor human rights record deteriorated markedly
throughout the year, as the Government intensified efforts to
suppress dissent.''
On May 1, 2000, the United States Commission on
International Religious Freedom released its first report on
international religious freedom.
This is a timely report. Its language and recommendations
about whether the U.S. should give China Permanent Normal Trade
Relations (PNTR) are important in considering whether or not it
is appropriate at this point in time to give China PNTR.
The Commission ``. . .believes that Congress should not
approve PNTR for China until China makes substantial
improvements in respect for religious freedom. . .'' Right
smack in the middle of this debate on PNTR, the Chinese
government continues to arrest and imprison people because of
their faith.
It was 55 years ago Sunday, April 9, that Dietrich
Bonhoeffer was marched from his prison cell at the Flossenburg
concentration camp in Germany and was hung. Bonhoeffer was a
Protestant minister who opposed Hitler. He refused to keep
silent about the discrimination and persecution of the Jews. He
spoke out repeatedly and fearlessly until the Nazis executed
him.
Many Protestant house church leaders, pastors, Catholic
bishops, and priests in China are modern day Dietrich
Bonhoeffers. Dietrich Bonhoeffer suffered in prison for two
years--from April 1943 to his death almost exactly two years
later.
[GRAPHIC] [TIFF OMITTED] T7832.001
This is a photograph of Bishop Peter Joseph Fan Xue-Yan.
Bishop Fan died in a Chinese prison as a result of torture and
physical abuse carried out against him in prison. Bishop Fan
was imprisoned by the Chinese government in 1958 and held there
for 34 years because of his loyalty to the Pope. In April 1992,
security officers returned his frozen and broken body in a
plastic sack. The autopsy showed that he died as a result of
torture wounds suffered in prison.
[GRAPHIC] [TIFF OMITTED] T7832.002
Here is a picture of Protestant House church leader, Pastor
Li Dexian, getting arrested by Chinese authorities. Pastor Li
has been arrested over 13 times since last October and has been
persecuted by the Chinese government for the past 10 years. He
was beaten in 1995 by the police around the head and neck with
a Bible in an apparent attempt to break his windpipe, and then
beaten with an iron bar and jumped upon, causing him to vomit
blood and leaving him with broken ribs.
[GRAPHIC] [TIFF OMITTED] T7832.003
This picture here is of Catholic Bishop Zeng Jingmu. He has
spent almost 35 years in Chinese prisons since 1955. He was
released from jail in 1998 and is now under strict house
arrest. At this point in life, he is very sick and is over 80
years old.
[GRAPHIC] [TIFF OMITTED] T7832.004
This picture to above is of Catholic Bishop An Shuxin who
disappeared and then was discovered to be in prison. Bishop An
has been in and out of prison in China, because of his faith,
since 1982. Bishop An is currently in prison and was only
released for one hour to visit his invalid 90-year-old mother.
Bishop An's present location is unknown.
[GRAPHIC] [TIFF OMITTED] T7832.005
The Chinese regime continues to plunder and occupy Tibet.
Hundreds of Tibetan monks and nuns continue to be imprisoned
and brutally tortured. Monasteries and nunneries continue to be
destroyed. Those that remain open are under heavy surveillance
(see photo at above in Lhasa and look for the surveillance
cameras) by cadres of Chinese communist party officials. China
continues to coerce the Tibetan people to accept the Beijing-
appointed Panchen Lama instead of the young boy identified by
the Dalai Lama, Gendhun Choekyi Nyima. Chinese authorities
reportedly have detained the parents of the 14-year old
Buddhist leader, the Karmapa Lhama, who recently fled China to
India.
China continues to use prison/slave labor. There are more
gulag prisons in China today than in Russia when Alexander
Solzhenitzen wrote the Gulag Archipelago. Over 200 Tiananmen
square protestors are still in prison or forced labor prison
camps or are on medical parole; many have spent more than ten
years in prison because of their advocacy for democracy in
China.
[GRAPHIC] [TIFF OMITTED] T7832.006
This is a photograph of a Chinese prison labor camp I
visited in 1991 with Representative Chris Smith.
We visited Beijing Prison No. 1 and learned that at least
40 Tiananmen Square protestors were imprisoned there. We asked
to speak with them but our request was denied. Instead, we were
taken on a tour of the prison's textile and plastic shoe
manufacturing facility. I obtained socks manufactured in the
prison, some of which were provided to the U.S. Customs Service
for thread and dye analysis to determine if they are being
imported into the U.S.
The Peoples Liberation Army is responsible for trafficking
in human organs. People in need of organ transplants are
matched with prisoners serving sentences in Chinese prisons who
have their blood-type taken by the Chinese authorities. When a
match is made, prisoners are taken to a remote location where
the necessary medical personnel have been assembled, and
summarily executed. Their organs are then removed and quickly
transported to the waiting organ recipient.
he Chinese government carries out policies of forced
abortion and forced sterilization. The 1999 State Department
Human Rights Report on China says that some 56 percent of the
world's female suicides occur in China (about 500 per day),
most are of child bearing age. The fines for violating
government birth quotas are three times a couple's annual
salary.
A country that abuses its own citizens on a massive scale
cannot be trusted in its dealings with the U.S. Do Members
actually think that the same Chinese government that flattens
its own citizens with tanks--that kills frail 80 year-old
Catholic bishops--can be trusted?
Human rights isn't my only concern, though. I am also
opposed to giving China PNTR out of concern for national
security. Congress cannot ignore the national security threat
emanating from China. We hear the argument that PNTR will lead
to economic and political growth in China, but who in China
will benefit the most from increased foreign investment? Much
of the capital and revenue the Chinese would gain from PNTR
will go to help increase China's military build-up and to help
stabilize a repressive, authoritarian regime.
I'd suggest the money is going to go toward building more
jails and more prison labor camps, toward more weapons
purchases and toward funding more intelligence operations
against the U.S.
We know that this year, China has reportedly increased its
military budget by close to 13 percent.
In 1999, China's Defense Minister declared that war with
the U.S. ``is inevitable.'' It is estimated that China has over
a dozen nuclear ballistic missiles aimed at major U.S. cities
and is reportedly building three new types of long-range
missiles capable of striking the U.S.
Less than one year ago the Cox Committee found that China
has ``stolen'' classified information regarding the most
advanced U.S. thermonuclear weapons, giving them design
information ``on par with our own.'' The information included
classified information on every currently deployed warhead in
the U.S. ballistic missile arsenal.
China's official military newspaper threatened the U.S.
saying if the U.S. were to defend Taiwan, China would resort to
``long range'' missiles to inflict damage on America.
China has exported weapons of mass destruction and missiles
in violation of treaty commitments. The director of the CIA has
said that China remains a ``key supplier'' of these weapons to
Pakistan, Iran, and North Korea. Other reports indicate China
has passed on similar weapons and technology to Libya and
Syria. If one of these countries is involved in a conflict, it
is very possible that our men and women in uniform could be
called into harm's way. These weapons of mass destruction could
then be targeted against American troops.
Incidences of technology transfers from the U.S. to China
have been numerous.
A recent report issued by the CIA and the FBI stated that
China has stepped up military spying against the United States
while using political influence programs to manipulate U.S.
policy. This FBI/CIA report says that the U.S. military and
U.S. private corporations are the primary targets of Chinese
intelligence. This report also says that Chinese companies play
a significant role in China's pursuit and acquisition of secret
U.S. technology.
I am concerned that Members of Congress and the American
public do not know enough about the national security threat
that China poses to the U.S. I have been urging our colleagues
to obtain a briefing by the CIA on China. I've had the briefing
and what I learned has solidified even more my concern about
the U.S. yielding permanent trade status to China.
Members and the American public need to know the answers to
questions about the national security concerns regarding China
and PNTR.
Have U.S. exports over time contributed to China's
nuclear weapons development, missile delivery systems,
intelligence gathering, electronic warfare, power projection,
anti-submarine warfare, encryption capabilities, and low-
observable technology?
Will giving PNTR to China allow China greater
access to sensitive U.S. technology?
Have U.S. exports to China contributed to the
development of the Chinese military's command, control,
communication, computer, and intelligence capabilities?
Has China written that the U.S. is its main enemy?
I understand that China has a defense treaty with
North Korea and that this treaty might have secret
implications. If the event of 1950 were to happen again, what
would China do?
Does the intelligence community have any evidence
that China is preparing to sink U.S. aircraft carriers?
Is there evidence that China has a program
underway to attack U.S. satellites in space?
Is China continuing to export weapons of mass
destruction which could be used against American troops?
In closing, I am concerned that we in the U.S. have become
so enamored with China's prospective market, that we are on the
verge of ignoring history, of ignoring China's abysmal human
rights record, and of ignoring the threats China poses to U.S.
national security and to our men and women in uniform.
The U.S. should not give China PNTR until there is
significant improvement in China's human rights record and
until questions of national security have been adequately
addressed.
We must have a way to continue our annual review of trade
with China. If we sign off on permanent trade, we hand over any
influence we could have in promoting a China that respects its
citizens and that is a non-threatening member of the community
of nations.
The process of reviewing trade relations with China each
year is an opportunity for Congress to influence the behavior
of China on matters of national security and human rights.
Annual review of China's trade status is an appropriate foreign
policy tool and it is the right thing to do.
Chairman Archer. Thank you, Mr. Wolf. Without objection,
your entire printed statement will be included in the record.
Mr. Wolf. Thank you, Mr. Chairman.
Chairman Archer. Does any member wish to inquire? Mr.
Stark.
Mr. Stark. Frank, thank you for your testimony. I know this
is a matter of which you studied for many years.
Are you familiar with the United States Commission on
International Religious Freedom? And if you are, and the report
that they issued a couple of days ago? Could you summarize how
that commission came into being and who's on it and what their
report says?
Mr. Wolf. That is a bipartisan commission that was voted on
by every member of this House. And Rabbi Saperstein is the
chairman of the commission. And on a unanimous vote the other
day, and they voted in opposition for PNTR unless a series of
things have been done.
So this is the conclusion of the commission, voted on by
every member of this House and every Senator, they opposed
granting PNTR at this time.
Mr. Stark. Who is appointed to that commission?
Mr. Wolf. There are a series of people who are appointed to
the commission. It's chaired by Rabbi Saperstein. It has
Republicans and Democrats and people who are Muslim, people who
are Protestant, people who are Catholic, people who are Jewish,
and people who are broad based.
The members are Rabbi David Saperstein, the chairman, Dean
Michael K. Young, the vice chairman, from George Washington
University, the Honorable Elliott Abrams, Laila Al-Marayati,
M.D., the Honorable John R. Bolton, who served in the Reagan
Administration, and you know, Ronald Reagan never gave MFN to
the Soviet Union. The fact is, in 1987, he signed a bill to
take MFN away from Ceaucescu's remaining government.
Archbishop McCarrick from New Jersey, Nina Shea with
Freedom House, Justice Charles E. Smith, and the ex officio
member is Ambassador Robert Seiple.
Mr. Stark. It's my understanding that those members of the
commission were all appointed by various elected officials who
support giving most favored nation to China, is that correct?
Mr. Wolf. That's correct.
Mr. Stark. So the commission was created by us, and the
commissioners were appointed by people who the Administration's
position on PNTR, and they unanimously recommend to us that we
at least postpone granting it, is that the basis?
Mr. Wolf. That's correct.
Mr. Stark. Thank you, Mr. Chairman.
Mr. Doggett. Mr. Chairman?
Chairman Archer. The gentleman from California yielded to
the gentleman from Texas.
Mr. Doggett. I ask for my own time, if I might.
Chairman Archer. The gentleman is recognized.
Mr. Doggett. Thank you.
Frank, thank you very much for the leadership you've played
on this human rights issue. I serve on the Congressional caucus
on human rights with you, and I think it's very important to
focus attention on this issue. I believe that the effects of
this agreement have been greatly exaggerated by both the
advocates and the opponents of the agreement generally. But I
don't see how anyone can look at the human rights situation in
China and feel that it has improved in the last few years,
particularly within the last year.
I guess as someone who is firmly uncommitted on this vote
at the moment, I'd like to ask you, given the fact that there
has been deterioration in the situation with human rights in
China, how can we say that the process of annual renewal,
rather than giving China the permanent trading relationship we
enjoy with almost every other country in the world has a
potential to make it any better? Isn't it a pretty blunt
instrument to use to address the human rights problem?
Mr. Wolf. The failure has been the Administration's to
speak out. We used to have a bipartisan position on human
rights. Ronald Reagan gave the speech in 1983, if you recall,
where he took on the human rights issue. Chris Smith and I were
in Perm Camp 35 in 1989, and actually spoke to Sharansky's
cellmate. They told us that every time that Ronald Reagan and
the Congress spoke out on these issues that the people in the
Gulag, the people in the Perm, and talk to Nathan Sharanski,
and talk to Elena Bonner and talk to Sakharov, will tell you
that their life got better. Sharanski will tell you.
And the failure has been of this Administration from Rwanda
to Chechnya, to East Timor, they have done nothing. And
hopefully, whatever man wins the Presidential election, that
man will be hopefully a person who will speak out. So with this
annual review and with a president that will voice and speak
out and speak truth to the powerful, there is an opportunity
for the cells to open up.
Who would have thought in 1985 that we would have seen in
1991 the Berlin Wall to fall down. How did the men in the Perm
and the Gulag know of Ronald Reagan's speeches? And when in
1987, we took away MFN from Romania, the peasants knew of what
we had done. So the failure has been this Administration's
weakness on human rights and religious freedom.
Why has the Administration never spoken out with regard to
the Catholic bishops? The torture--here is a bishop born
December 29, died a martyr, ordained priest. His body, in 1992,
press reported that government officials had hesitantly
assigned the April 13 as stated death. His body was sent back
in a frozen body plastic sack. Chris Smith gave holy communion
to Bishop Shu, a Catholic bishop. Bishop Shu is still in jail
for giving Congressman Smith holy communion.
And the next Administration, whether it's Gore or Bush,
hopefully it will be. Bush, will speak out and there will be a
time that we can give them permanent MFN. I am a free trader. I
voted for NAFTA. I am an internationalist.
I supported the bombing in Kosovo. I was one of 33
Republican members on my side. I supported the troops being
sent to Bosnia. I have actually argued for more foreign aid in
certain areas than most people on my side of the aisle. This is
not only a trade issue, it's a religious freedom and a human
rights issue. So with an administration that speaks out, then
this annual review can make a tremendous difference.
Mr. Doggett. Why couldn't we achieve the same kind of
annual review through the separate human rights review
mechanism that Congressman Levin has been advancing?
Mr. Wolf. President Reagan never gave MFN to the Soviet
Union, he never gave it to any East Bloc nation, and actually
signed a bill to take it away from Romania. Sanctions on South
Africa brought about the end of apartheid. The inconsistency,
and one of the persons mentioned with regard to Cuba and China
and the church and apartheid, is unbelievable.
So I think you need, annual review. This is something the
Chinese understand. And when this vote takes place, the word
will go into the prison camps and the Gulag camps and the slave
labor camps that this Administration and this Congress either
granted PNTR, whereby they don't care, or they didn't grant it,
whereby there's hope, and hope springs eternal.
So I think to deny PNTR this year, bring a new
administration in, pass something that's decent and then maybe
at that time you can do it. But not now.
And workers' rights, one other thing, for those that are
interested in workers' rights, we saw 40 Tianamen Square
demonstrators in Beijing Prison number one working on socks
that were for export to the United States. And these are the
socks.
And in the socks that we picked up off the line in Beijing
Prison Number One, there are golfers on the side, and they
don't play golf. These socks were made by people who were in
Tiananmen Square, and they are now for export to the west.
Mr. Doggett. Thank you, Frank.
Chairman Archer. The gentleman's time has expired.
Mr. Matsui.
Mr. Matsui. Thank you, Mr. Chairman. I'll be brief.
Frank, I would just like to point out that President
Clinton is actually following decades of bipartisan foreign
policy with respect to China. I might just point out, I'm sure
you're aware of this, and I think everyone else is as well, but
it bears sometimes repeating that after Tiannamen, I believe it
was in June, about three months later, if you recall, Mr.
McFarland, Mr. Scowcroft and Mr. Eagleburger, Mr. Eagleburger
at that time was Secretary of State, Mr. Scocroft was National
Security Advisor. They did go to China and met with the
president premier of China and actually toasted them, if you
recall. Those were national photos throughout the world that
were represented.
So I'd just like to point out that was a bipartisan--
Mr. Wolf. That was a dark day. That was a dark day.
Mr. Matsui. If I may finish. A bipartisan support of
foreign policy. And secondly, I might point out that both
candidates running for president, and I understand those are
the only two, the Republican and Democrat, that really have a
chance of winning, not Mr. Buchanan, do favor PNTR.
And let me just ask this one question. I respect where
you're coming from and certainly I do admire, over the years,
your support and strong feelings for human rights. One concern
I have, however, the opponents of PNTR, besides opposing PNTR,
have not come up with a positive strategy on how we change
China's behavior. And you know, outside of perhaps declaring
war on China.
So perhaps somebody can give me a help and a hand as to
what approach we should be taking. Because those of us that
support this look for engagement. We think that engaging China
in some way might move in the direction of a more open society
and hopefully a society that one day will grant more freedoms
to its citizens. But by being negative, how does that actually
change China's behavior, and how does that make China a better
country in terms of part of the international community? It's
easy to say no. It's another thing to come up with a positive
strategy on how we change behavior.
Mr. Wolf. Well, I would say that Ronald Reagan had a
positive strategy that worked very, very well with the Soviet
Union and the East Bloc. And when you look at those who are
opposed, I hope you read the letter from the Catholic
Conference, Cardinal Bishop Law, with regard to this issue. The
Catholic Conference is a group that I know every member has
great respect for. They have consistently in this time opposed
granting MFN or PNTR.
I think it takes an administration, whether it be a Gore
administration or a Bush administration, and obviously I hope
it's a Bush administration, that will speak out the way that
Ronald Reagan did, the way that Jimmy Carter did. You talk
about bipartisanship, there was bipartisan. Ronald Reagan and
Jimmy Carter spoke out on this and did more to help with regard
to human rights than the administrations that followed
thereafter.
Mr. Matsui. Well, if I may just conclude, Mr. Chairman, one
of the concerns I have, and bear in mind that six months after
Ronald Reagan left office, and you know, I would imagine he did
influence China's behavior, Tiannamen Square did in fact occur.
So I think China's behavior was not necessarily influenced by
the rhetoric of President Reagan.
So obviously, that didn't work so well either. But I yield
back the balance of my time.
Chairman Archer. Mr. Kleczka.
Mr. Kleczka. Thank you, Mr. Chairman.
Mr. Chairman and members, I'm one of those who are
undecided as to whether or not to support PNTR, the permanent
trade status for China, or the annual. The Chairman of the
Committee starts out this hearing by blasting two Democrats who
happen to be opposed to granting permanent trade status. In a
unique feature of the hearing, the first person to testify is a
Republican who has the same view.
And I bring that up, Mr. Chairman, because I don't believe
what we're talking about today is a partisan issue. It's one
that goes above partisan politics. So for anyone here to
chastise one side or the other I don't think gets to the heart,
the purpose of the hearing, and that is to help those of us who
are undecided try to make a decision on it.
My colleague, Mr. Wolf from Virginia, starts off his
testimony by blasting the hell out of the Administration. Well,
I don't think that helps much on the vote on China, either.
Because I think we're here to talk about whether or not this
Congress should grant permanent trading status to China. We
know full well they're going to enter the World Trade
Organization with or without us.
So Mr. Wolf, the question I have of you, and you've heard
the same arguments and the same comments prior to you making up
your mind, is that now the United States has negotiated a trade
agreement with China. And if in fact we do not grant permanent
trading status, we will not be able to avail ourselves to the
benefits of that trade agreement.
How do you respond to individuals and groups that come to
you with that argument?
Mr. Wolf. I would respond this way. And let me just
stipulate, there are good and decent people on both sides of
the issue. And I was equally critical of the Bush
Administration for its policies with regard to China.
Secondly, I think you can give them temporary NTR and come
back next year with a new president and look at it again.
Thirdly, in answer to all the questions, I want to read this
thing. In 1973, this was from Chuck Colson, he said, President
Nixon sent me to Moscow to negotiate for the release--
Mr. Kleczka. No, no, no--
Mr. Wolf. This is the answer.
Mr. Kleczka. Frank, the question is, how do you respond to
groups when they say, here we've negotiated this very admirable
agreement with China, it's going to be pro-business, pro
whatever else, and if we don't give them permanent, we're not
going to avail ourselves to it. How do you respond to that?
Mr. Wolf. You can avail yourself with temporary. You can do
it on a year to year basis, and the next administration can
deal with this in a fresh way and speak out on behalf of human
rights. And behalf of the people in the church, the slave labor
camps and others.
Mr. Kleczka. So you're saying that if in fact we do at some
point this session grant only annual temporary trade status, we
can avail ourselves to all the benefits of the trade agreement?
Mr. Wolf. That's correct.
Mr. Kleczka. Okay, well, Ambassador Barshefksy was before
the Committee some months ago and indicated that was not
accurate.
Now, my question is one probably more of procedure, Frank.
If in fact on the 22nd the House does not vote in favor of
permanent trade status, at what point will we have another vote
before us to grant the temporary or the annual trade status?
Will that come normally in June or July?
Mr. Wolf. That would depend on the leadership of the
Congress to bring that up.
Mr. Kleczka. So there would be another proposal, another
resolution coming before the House to deal with that
specifically?
Mr. Wolf. I cannot speak for the leadership. That would be
the leadership, I would hope that would be the leadership
choice, to do that.
Mr. Kleczka. But we will have to take another vote at some
point.
Mr. Wolf. That's correct.
Mr. Kleczka. Okay, thank you very much, Mr. Chairman.
Chairman Archer. Mr. Thomas.
Mr. Thomas. Briefly, I want to thank the gentleman from
Virginia for his statement. But I also want to recognize our
former colleague from Florida, the former chairman of the trade
subcommittee, Sam Gibbons. Given his long, hard work--
[Applause.]
Mr. Thomas. While he's not here, he's here in spirit, and I
want to thank him.
Chairman Archer. I say to my friend from Wisconsin, in my
opening statement I did not take a partisan blast at anyone. In
fact, I heavily complimented the President for his activities
and cited that it is good for us to be working together. But
this will be a difficult issue. It is not going to be easy to
get the necessary votes to pass this.
And it is a matter of fact that the top two leaders in the
House on the minority side are opposed. And they are in a
leadership position.
Mr. Kleczka. Will the gentleman yield?
Chairman Archer. Congressman Wolf is expressing his own
views, which are very fervently held and very genuine, and a
man of great conscience. But he, every single one of the
Republican leaders in the House of Representatives is for
passing permanent NTR for China.
And it is not easy for my Democrat colleagues when their
two top leaders are opposed to it. That just happens to be a
fact. It's not a blast at anybody.
Mr. Kleczka. Well, but Mr. Chairman, would you yield on
that?
Chairman Archer. Thank you very much for your testimony.
Mr. Wolf. Thank you, Mr. Chairman. I thank the members very
much.
Chairman Archer. We always appreciate hearing from you.
Mr. Kleczka. Will the Chairman yield?
Chairman Archer. I'll be happy to yield.
Mr. Kleczka. Mr. Chairman, I don't intend to belabor the
point, but it seems quite odd that--
Chairman Archer. But the gentleman is belaboring the point.
Mr. Kleczka.--but I'm going to, because I think it's only
fair to do so. And state to the Chairman, to single out two
Democrats, regardless of their title, I think they're still
voting as individual members of Congress, representing their
district. And I ask the Chairman, how many Republicans are you
aware of who are not supporting this proposal? We just had the
lead witness today, a Republican, start out who is opposing.
How many Republicans are opposing this permanent trade status
with China?
Chairman Archer. This colloquy is not going to serve any
constructive purpose.
Mr. Kleczka. Well, the fact is there's probably 50 to 75
Republicans--
Chairman Archer. I simply want to reiterate that I did not
blast anyone in my opening statement. And we now need to get on
to what is really an historic event for this Committee, because
we have four Cabinet level officials who will be witnesses in
our next panel.
I don't recall any time when the Committee has had four
Cabinet level officials at one time before the Committee,
demonstrating the importance and the significance of this
issue. And the Chair heartily welcomes each of those officials.
And I see you're taking your seats at the witness table. We're
delighted to have all four of you. And I'm sure that is a
bipartisan welcome to all four of you this morning before the
Committee. [Laughter.]
Chairman Archer. So normally we have members of the
Committee who say, gee, let me introduce a witness. I don't
think any one of you needs an introduction to this Committee.
So let me say as a preface that Secretary Summers, I
understand, has got to leave here at 12:00 o'clock. And so I'm
going to recognize you one after another and then in the
questioning, hopefully the questioning can be devoted primarily
to you, Secretary Summers, if it relates to your areas of
interest, so that we can then have you excused at 12:00.
And I am sure that Charlie Rangel does want to make an
opening, welcoming statement.
Mr. Rangel. Mr. Chairman, I would like to yield my time to
you for you to continue to laud the Administration as you have
this morning. Thank you. [Laughter.]
Chairman Archer. Well, it is actually--
Mr. Kleczka. Mr. Chairman, reserving the right to object--
[Laughter.]
Chairman Archer. It actually is very heartening to the
Chair that there can be this bipartisan working together. It is
always a bigger comfort zone to get things done that are in the
best interests of this country. And so Secretary Summers, if
you will lead off, we'll be happy to receive your testimony.
STATEMENT OF HON. LAWRENCE H. SUMMERS, SECRETARY, U.S.
DEPARTMENT OF THE TREASURY
Secretary Summers. Thank you very much, Mr. Chairman,
Ranking Member Rangel, members of the Committee. We are all
glad to be here, and we all have longer statements for the
record.
I'm pleased to have a chance to testify on what I believe
is the most important vote that the Congress will take this
year, and that is quite likely the vote that the Congress will
take this year that has the greatest prospect of appearing for
good or ill in history books written 20 or 50 years from now.
Let me briefly outline why I believe that the passage of
PNTR is enormously in our national economic interest and then
conclude with some comments about the broad context. First, it
is in our national economic interest because of the commercial
benefits that it brings.
As my colleagues will outline, the PNTR agreement brings
about historic change and openness in China's market. To forego
that opportunity would be to inappropriately disadvantage
American producers. To forgo that opportunity at a time when
that opportunity may become open to all our major international
competitors would particularly be folly. At a time when it is a
matter of great economic importance that we promote our
exports, this type of market opening agreement is very much in
the national interest.
And unlike many of the trade agreements and trade issues
that we discuss, this agreement is a one way street, providing
for new opening of a foreign market to American products but
not providing for any further opening of the American market to
foreign products.
The second economic argument is that passage of PNTR this
supports the cause of market reform within China and creates a
rule-based economic framework within which future Chinese
reforms to take place. We've spoken with Chinese officials.
They've made it clear that they see an important benefit of
this agreement as being the framework that provides for the
transformation of their society.
Last year, the number of Chinese internet users quadrupled
from 2 million to 9 million. This year, it should more than
double to 20 million. As the President has said, consider how
much the internet has changed America, which is already an open
society, and then imagine how much it can change China.
By providing a framework for reform, by strengthening the
hand of those who are more committed to the market and to
openness, China's WTO Accession serves our interest in
influencing China's evolution.
Let me say finally, Mr. Chairman, that as important as PNTR
is, we recognize that it is but one piece of a much larger
global challenge. And that challenge is, as the President has
said, to make this global economy work, it has to work for
people, and it has to support our core values. This imperative
needs to continue to shape our overall international economic
policy and our overall policy towards China.
In this context, I want to highlight that the
Administration believes that the proposals being developed by
Congressman Levin, with others, are constructive and address
issues of major importance. We very much welcome and support
further dialogue on these proposals among Members on both sides
of the aisle.
For example, we agree that it is a priority for the United
States to press for improvement in China's human rights,
religious freedom, labor rights and the rule of law. Finding
alternatives to the annual NTR renewal process, such as a
commission, modeled in some ways on the Helsinki Commission, to
keep a spotlight on these issues, makes good policy sense.
We agree, as well, that it is essential to have a vigorous
program, both within our Government and within the WTO, to
monitor China's implementation of its WTO commitments and to
ensure that China lives up to them. This monitoring requires
adequate resources.
Finally, we agree that we must make clear the rules and
procedures this and future Administrations will employ to
implement the strong import-safeguard protections that Charlene
Barshefsky so ably negotiated. We could not, of course, accept
anything that would in any way condition PNTR. However, Mr.
Chairman, Members of the Committee, we are committed to working
with Congress to address these concerns and are receptive to
any and all ideas that make good policy sense and can garner
broad bipartisan support.
Thank you.
[The prepared statement follows:]
STATEMENT OF THE HON. LAWRENCE H. SUMMERS, SECRETARY, U.S. DEPARTMENT
OF THE TREASURY
Chairman Archer, Ranking Member Rangel, and Members of the
Committee, I thank you for the opportunity to testify today on
what I believe to be the most important issue that Congress
will face this year: the decision to grant China permanent
Normal Trade Relations, or PNTR.
Last fall, the United States signed a bilateral agreement
with China to bring it into the World Trade Organization, on
strong terms that will open its markets to American exports.
After China completes its agreements with other countries, and
completes the multilateral part of the negotiation, it will
join the WTO. But for us to enjoy the full benefits of the
market opening that we negotiated, we must first grant China
the same permanent normal trading status that we have already
granted to every other country with which we share the benefits
of the WTO.
The legislation presently before Congress enables the
United States to grant PNTR to China once it has completed its
accession, provided that it is on terms at least as good as
those in our 1999 bilateral agreement. In fact, the terms can
only get better, as we benefit from all further concessions
China makes to other countries.
I will discuss in a few moments the concrete commercial
advantages for the United States of passing this bill. I
believe they are enormous. Moreover, the agreement with China
is a one-way street. China opens its markets to an
unprecedented degree, while in return the United States simply
maintains its current market access policies.
It is also important to keep in mind what granting PNTR to
China is not:
This vote is not about whether China will enter
the WTO: it will become a member either way.
It is not about whether Chinese producers will
have access to our market: they will continue to be able to
sell their goods in the United States whether or not Congress
passes PNTR.
It is not about whether we approve or disapprove
of China's human rights record: we will continue to pursue
improvements at the United Nations Human Rights Commission and
other fora, either way.
It is not about China's policies toward the
environment: we will continue to work with China to improve its
capacity to protect China's environment and national resources,
either way.
It is not about China's policies toward Taiwan or
other strategic issues that concern us: we will continue to
press for peaceful resolution of differences between the PRC
and Taiwan, and to urge China to respect global norms of
conduct in nuclear nonproliferation and other areas, either
way.
It is difficult to discern any disadvantage to the United
States in passing this legislation. We will continue to press
our full agenda with China regardless of how Congress votes.
And China will open its markets to other members of the WTO
when it joins the system, regardless of how Congress votes.
There are, however, three crucial advantages to the United
States in passing this bill, which I would like to focus on
today:
First, there are the direct and commercial
benefits of the market opening agreement that we concluded last
fall.
Second, there are the economic and broader
benefits to the United States of promoting economic and social
change in China.
Third, there is the ultimate enhancement of
America's national security interests that comes from
integrating China more closely with the community of nations.
I. The Commercial Benefits to the United States of Granting
PNTR
First, the economic and commercial benefits of granting
PNTR are significant and all on the side of US businesses and
workers. By passing PNTR, we will be agreeing to continue to
grant China the same access to our markets that its producers
currently enjoy. What we will get in return--as a result of the
agreement we concluded last fall--is unprecedented new access
to what could ultimately become the largest market in the
world.
I might note that it is evidence of the compelling nature
of these benefits that economists reflecting the full diversity
of academic opinion have been united in their support for the
Administration's approach. On April 25, 138 economists,
including 13 Nobel Laureates, released a joint letter to the
American people strongly supporting China's accession to the
WTO on the terms that we negotiated last fall. It has sometimes
been remarked that asking five economists a question will
generate ten different answers. On this issue there has been
only one answer: that welcoming China into the global economic
system is right for the American economy and for the global
economy.
The scope of this new access is impressive, with reductions
in tariff and non-tariff barriers on industrial and
agricultural goods and the elimination or reduction of barriers
to American service providers:
Chinese tariffs on industrial and agricultural
goods will fall by 50 percent or more in the space of five
years, along with sharp cuts in non-tariff barriers to U.S.
exports. For example:
--Industrial tariffs on U.S. products will fall from an
average of approximately 25 percent in 1997 to 9.4 percent in
2005.
--In the automobile sector, tariffs will fall from 80-100
percent to 25 percent by mid-2006, with the largest cuts in the
first years after WTO accession. Quotas on autos will be phased
out. And American auto companies will be allowed to provide
auto financing for the first time.
--Tariffs on the broad range of agricultural goods will
fall by roughly one half, with larger cuts for US priority
goods. The role of state trading companies will be
progressively reduced, allowing for more market-based trade.
This improved access is expected to result in an increase of $2
billion a year in our agricultural exports to China by 2005,
according to USDA estimates. In addition, China has committed
to eliminate agricultural export subsidies, which displace
American exports to third country markets, and to reduce
domestic agricultural subsidies, which also distort trade.
--China will participate fully in the Information
Technology Agreement (ITA), eliminating all tariffs by 2005 on
computers, semi-conductors and other high-tech products--
markets in which the U.S. is highly competitive.
--China will also eliminate or sharply reduce a wide range
of crucial non-tariff barriers. For example, American exporters
will be able to import directly into China themselves,
distribute within China, and offer after-sale service in ways
they never could before. With these rights, U.S. firms and
farmers will be better able to sell American-made products
directly to Chinese consumers.
China would phase out restrictions in a broad
range of services, including in financial services and other
key sectors where the United States is more competitive.
--China has agreed to liberalize international trading
rights, and wholesale and retail distribution services
throughout China in three years for most products. Instead of
having to produce in China or import and sell through a state-
sponsored middleman, American businesses will win the right to
distribute goods directly--goods that are made here at home.
--In banking, China has accepted full market access for
branches and subsidiaries of foreign institutions, to be phased
in progressively over five years.
--In insurance, the Chinese market will also be
progressively opened over five years, with the elimination of
limits on the number of licenses for foreign firms and the
geographic scope of operations for foreign firms. In non-life
insurance, wholly foreign owned subsidiaries would be allowed
two years after accession.
--In telecommunications, China has agreed to allow direct
foreign investment for the first time. It will also participate
in the Basic Telecommunications Agreement, accepting pro-
competition principles such as an independent regulatory
authority and interconnection rights.
--The Chinese market for a wide range of computer, internet
and software services will be opened to American companies,
either through joint ventures or direct service. The opening of
the information technology and telecommunications sectors comes
at the same time as the powerful revolution in information and
communications technology is just beginning in China. American
high technology exports to China grew 500 percent between 1990
and 1998 alone.
In addition to this new access to China's markets, we will
benefit from unprecedented special safeguards and protections
to defend American workers and farmers from import surges,
unfair pricing, and abusive investment practices. No agreement
on WTO accession has ever contained stronger measures.
Notably:
A``China-specific'' safeguard that allows us to
take measures focused directly on China in case of an import
surge that threatens a particular industry. This protection,
which remains in effect for 12 years after accession, provides
stronger and more targeted relief than our current Section 201
law.
Strong anti-dumping protections. The agreement
includes a provision recognizing that the U.S. may employ
special methods, designed for non-market economies, to
counteract dumping by Chinese exporters for 15 years after its
accession.
Requirements that China eliminate barriers to U.S.
companies that cost American jobs. For the first time,
Americans will have the means, accepted under the WTO rules, to
combat such measures as forced technology transfer, mandated
offsets, local content requirements and other practices
intended to drain jobs and technology away from the U.S.
Moreover, combined with Chinese commitments to open up trading
and distribution rights, these protections will allow American
companies to export products made at home by American workers
to China, rather than being forced to set up factories in China
or go through Chinese government-approved middlemen in order to
sell products there.
We are already preparing for the most intensive enforcement
and compliance effort ever mounted for a single trade
agreement. The President has requested an additional $22
million for new enforcement and compliance efforts, which will
focus in large part on China. The Administration's aggressive
monitoring and enforcement efforts will include the private
sector, other WTO partners, and Congress. For the first time,
China's compliance will be subject to multilateral enforcement
under the WTO dispute settlement mechanism, which will force
China to comply with WTO rulings or be subject to trade
sanctions.
II. America's Stake in Promoting Successful Market Reform in
China
There are also crucial indirect advantages for the United
States in China's WTO membership in that it will both support
the cause of market reform within China -and provide an
effective rule-based framework for future Chinese reforms to
take place.
China has come a long way since the beginnings of market
reforms a little over 20 years ago. Its economy has grown by
more than 350 percent in real terms. It has risen to being the
10th largest trading nation. And the number of Chinese with
access to a television has risen one hundred-fold, to one
billion.
This transformation has brought enormous benefits for the
Chinese people. But it has also unleashed new forces for change
in the Chinese economy and society more broadly, forces that
the authorities fear they will ultimately be unable to control.
As a result, there are powerful voices within China today in
favor of halting, or even reversing, the process of economic
reforms -and all that reform implies.
By supporting China's decision to sign this agreement and enter
the WTO:
We can strengthen the hand of those who favor the
reform path, and make it more difficult for China to turn back
the clock.
We can also support the establishment of a rules-
based framework for continued economic reform in China that can
support faster growth in productivity and wages in China -and
thus higher demand for our products in the future -and provide
a catalyst for broader changes that will help to promote core
American interests and values. As competition and integration
proceed, China will need to become more market-based; more
protective of personal and commercial freedoms, and more open
to the free flow of information and ideas.
The potential economic and broader benefits of supporting
the forces of Chinese reform are evident when we consider the
impact on China's growing technology sector. By the end of this
year, some analysts predict that China will become the world's
second largest market in both telecommunications and personal
computers. Last year the number of Chinese Internet users
quadrupled, from 2 million to 9 million. And this year, it
should more than double, to 20 million.
No amount of censorship or monitoring can completely
control this explosion of information. WTO membership will not
only open Chinese markets, but will also provide China's people
with an unprecedented opening to the outside world. As the
President has said: consider how much the Internet has changed
America, which is already an open society, then imagine how
much it could change China.
Already, in the wake of the agreement last fall, there are
clear signs of renewed commitment to reform at the highest
levels of the Chinese leadership, a commitment that is
expressly linked to the need to prepare the economy for tougher
competition from the outside world.
The government has stepped up efforts to promote
the development of private firms, the most dynamic sector of
China's economy, by eliminating heavy deposit requirements and
other regulations which discriminate against them and allowing
them to list themselves on the stock market for the first time.
People's Bank of China Governor Dai has pledged to
intensify efforts to clean up bad loans within the banking
sector and to enhance competition among banks by permitting
more flexible interest rates. A regulatory overhaul is underway
to level the playing field between foreign and domestic firms
in line with WTO commitments.
As the Wall Street Journal reported, even parts of
the economy that the Chinese consider strategically important
are being opened up to the private sector, with individual
investors already dominating the Chinese Internet industry and
being allowed take ownership stakes in domestic banks for the
first time.
We recognize that the kind of changes that we seek to
support in China will not happen overnight. In the meantime,
the United States will remain continuously vigilant on human
rights abuses in China, and we will continue to express
forcefully our disapproval when such abuses occur. The
Administration already engages the Chinese on this issue
through bilateral channels, monitors the situation continuously
and issues annual reports.
We are, however, convinced that we will have much more
positive influence over China's behavior if we are actively
engaged with China, rather than trying to isolate it. And I
might note that a large number of prominent activists in this
area have the same view. For example:
Martin Lee, the leader of the Democracy Party of
Hong Kong, has said: ``the participation of China in the WTO
would not only have economic and political benefits, but would
also serve to bolster those who understand that the country
must embrace the rule of law.''
Dai Qing, a Chinese environmentalist and former
prisoner in China, wrote recently that she believed that:
``permanent normal trade status, with its implications of
openness and fairness, is among the most powerful means of
promoting freedom in China.''
A Chinese dissident, Ren Wanding, a leader of the
1978 Democracy Wall Movement, sees Chinese entry into the WTO
as 'a new beginning.'''
III. The Broader National Interest In Supporting Greater
Integration of China
Finally, a policy of welcoming China into the community of
nations--rather than being a voice that keeps China out, even
when it commits to live by the rules--is a policy that supports
our deepest national security interests and values.
Ever since the rise of Assyria and Sparta, emerging
economic strength and major changes in the economic balance of
power have raised the specter of war and conquest. In this
century alone we have seen two World Wars that followed closely
on the emergence of major new economic powers. And the pace of
economic change in China over the past 20 years -and indeed
through much of Asia--is literally unprecedented in history,
with standards of living for hundreds of millions of people
quadrupling or more in a single generation.
This has so far been achieved with the minimum of conflict,
despite the pervasive rivalries between the peoples of Asian
nations, is a reflection of the progress that has been made
across the region toward openness and integration. And it
speaks to the success of postwar international institutions in
helping to cement that progress. But if the next quarter
century in Asia is to be as successful as the last, it will be
crucial that China use its emerging power in a constructive
way, that it fits into the global economic system, and that it
continues to maintain economic growth and stability.
As President Clinton has said, if we have learned anything
in the last few years, it is that rapidly changing, insecure
nations can pose as a great a challenge to the United States as
strong and confident ones. Our long-term strategy must be to
encourage the right kind of success in China: to help it grow
into a strong, prosperous and open society; to come together
not fall apart; and to become part of institutions that promote
our deepest values and interests and can build mutual trust.
And we have a much greater chance of having a positive
influence if we welcome it into the broader global system.
By learning to ``play by the rules,'' both internationally
and domestically, China will strengthen the rule of law, which
will enable it to become a more reliable partner and a fairer
society. It can even lay the groundwork for protection of core
values in China, such as human rights, religious freedom,
workers' rights and environmental protection.
We believe that in a 21st century global economy, China
will increasingly have to recognize that, to maintain stability
and growth at home, it must meet, rather than stifle, the
growing demands of its people for openness and accountability.
We must not seek to cut China off from the economic and broader
forces that are most likely to change it in the right
direction.
This is not a policy based on mutual affection. As I said
at the beginning, we can and will continue to express our
differences with China both forthrightly and consistently.
Simply bringing China into the WTO does not guarantee that its
government will take a responsible, constructive course. But it
will lead the authorities to confront that choice sooner, and
it will make stronger and more visible the imperative to make
the right choice.
IV. Concluding Remarks
Mr. Chairman, I have emphasized today three key reasons:
the commercial benefits to the US of this agreement; America's
deep economic and broader interest in China's continuing
evolution; and our deep national interest in a more stable and
peaceful global system. This is why we believe granting China
PNTR to be enormously in America's core interests.
As important as PNTR is, we recognize that it is but one
piece in a much larger mosaic as we consider the kind of China
we would like to see -and the kind of global economic system
that we want to create. The President has called it ``the
challenge of the millennial generation...to create a world
trading system, attuned both to the pace and scope of a new
global economy and to the enduring values which give direction
and meaning to our lives.'' If we want this new global economy
to work, we have to make sure it works for people. And we have
to make sure it works to support our deep values.
This imperative will continue to guide our international
economic policy more broadly--in areas ranging from our support
for international efforts to address environmental problems, to
support for core labor standards. And it can and must continue
to guide our broader policy toward China in the months and
years ahead.
In this context, let me say that the Administration
believes that the proposals being developed by Congressman
Levin with others are constructive, address issues of major
importance, and we welcome further dialogue on these proposals
among Members on both sides of the aisle.
For example:
We agree that it is a priority for the United
States to press for improvement of China's human rights,
religious freedoms, labor rights and the rule of law. Finding
alternatives to the annual NTR renewal process, such as a
Commission, to keep a spotlight on these issues makes sense.
We agree as well that it is important to have a
vigorous program, both within the USG and within the WTO, to
monitor China's implementation of its WTO commitments and to
ensure China lives up to them. And we must have adequate
resources to accomplish this.
Finally, we agree that we must make clear the
rules and procedures this and future Administrations will
employ to implement the strong import safeguard protections we
negotiated.
The Administration could not, of course, accept anything
that would in any way condition PNTR. However, we are committed
to working with Congress to address these concerns, and are
receptive to ideas that make good substantive sense and can
garner broad bipartisan support.
Mr. Chairman, granting PNTR to China represents but one of
the aspect of the relationship with China that we will be
pursuing in the years ahead -and one piece of the global
economic system we would like to build. It will, however, be an
exceptionally important piece--one that is fundamentally
supportive of our broader long-term economic and broader
national interests.
Indeed, with due respect to all the other issues we work
on, I believe this is the only vote that Congress will take
this year that is likely to appear in a prominent way in
history books 25 or 50 years from now. I look forward to
working with this Committee and the House as we work toward the
best result on this crucial issue. Thank you.
Chairman Archer. Thank you, Secretary Summers.
Our next witness is Secretary Dan Glickman. We're happy to
have you, one of our former colleagues who has gone on to
bigger and better things, we're happy to have you before the
Ways and Means Committee.
Welcome, and you may proceed.
STATEMENT OF HON. DAN GLICKMAN, SECRETARY, U.S. DEPARTMENT OF
AGRICULTURE
Secretary Glickman. Thank you, Mr. Chairman, Mr. Rangel,
Mr. Crane. It's an honor for me to be here.
I'm going to try to be brief. I have a formal statement
which talks about the extraordinary benefits to American
agriculture, perhaps the most export sensitive part of the
American economy in the size and scope of the benefits of
agriculture to this PNTR vote.
But I'd like to just briefly talk, as you know, the
President sent a mission to China last week, which he asked me
to lead. Four of your colleagues went with me, Congressman
Walden of Oregon, Congressman Dicks of Washington, Congressman
Meeks of New York, Congressman Hinojosa of Texas, and Governor
Shaffer of North Dakota. It was a bipartisan meeting.
And what I wanted to do is give you the texture of three or
four things that we did. Some involved agriculture and some
didn't. One was a discussion with several dozen Chinese
workers, all the way from Armstrong Tile to Aetna to Motorola
to high tech, low tech, medium tech, talking about their
opportunities working for American companies, their wages,
their benefits, their access to the internet as a result of
their working for American companies, and the impact of their
employment on co-workers working in non-American companies,
other Chinese companies, that was absolutely dramatic.
I mean, I would have never dreamed that we would see
Chinese workers working for American companies with a lot of
the same benefits that American workers have, and with the
opportunity to dramatically further expand in the rest of the
world. Talk about a way to impress American values into China.
These people were very, very impressed and involved and imbued
with a lot of the work ethic and values that our workers have.
And they will spread throughout the country. That was a
dramatic thing that we did.
We went to a soybean crushing facility. China, if their
incomes continue to improve, their eating patterns will
dramatically change. They will upgrade. They will eat a lot
more meat, they will use a lot more cooking oils that we use,
they will eat a lot more citrus. And we saw the potential for
just a dramatic increase in value added and bulk commodity
agricultural exports.
We toured a major supermarket, kind of like a hyper mart, a
Wal-Mart. There we saw California grapes, pistachios, oranges
of high quality that were extremely popular, that had just come
in, I believe, from both California and Florida. Washington
apples, Alaskan seafood, frozen vegetables, U.S. hazelnuts,
Oregon hazelnuts and the like. And the fact is that the quality
was outstanding.
And it's also again an example of American values coming in
with those agricultural products. The Chinese people really
like what we are selling them. And as long as we keep the
quality up, there will be a dramatic potential market there.
And the final thing I thought I would just discuss with you
is our meeting with Bishop Chen in Shanghai. And I know
Congressman Wolf talked about human rights issues. But Bishop
Chen is the Catholic bishop of Shanghai. He was in jail for 27
years, from 1955 or 1956, 1954, until 1982 when he was
released. He was jailed for allegedly being a spy for the
Vatican.
And in fact, he told us that he was probably saved during
the cultural revolution because he was in jail. They didn't
bother with him, since he was already incarcerated.
Some of you may have been to the cathedral there in
Shanghai. They give mass to about 5,000 people every Sunday.
And his views were that while human and religious rights had
not reached the levels that he'd like them, that if in fact we
turn this deal down, it would have a dramatic negative impact
on human and religious rights in China, not a positive impact.
It would have a negative impact.
And it was a profound experience, and I realize that you
can't necessarily extrapolate his views to every human rights
issue and religious rights issue in China, but that was an
extremely significant thing.
The other side is, we went to the Shanghai stock exchange
right before then. I don't know if any of you have been there.
About 500 companies are traded in this modern stock exchange,
which is computerized. On the wall in the back was a modern
Reuters communication system on which was listed on the board
every major stock exchange in the world and what was happening
at that moment in time, with Chinese workers managing that
effort.
It turned out that the CEO of that stock exchange happened
to spend time at the University of Kansas. So it was of
personal interest to me to see that there.
But the whole trip, and you ought to talk to Congressman
Meeks and Hinojosa and Dicks and Walden to get their
experiences. I know all of you have been to China, but the
whole trip convinced me that while there is no miracle in terms
of the future of U.S. agricultural trade or trade generally,
that this country has a lot more to be gained by going ahead
with this agreement than by rejecting it.
Thank you.
[The prepared statement follows:]
STATEMENT OF THE HON. DAN GLICKMAN, SECRETARY, U.S. DEPARTMENT OF
AGRICULTURE
Mr. Chairman, members of the Committee, it is a pleasure to
appear before you to discuss permanent Normal Trade Relations
(PNTR) for China.
Congressional approval of permanent Normal Trade
Relationship (PNTR) status for China is the Administration's
top priority this year. PNTR status is necessary to ensure that
U.S. agriculture has access to a market that accounts for one-
fifth of the world's population.
America's farmers have a major stake in the debate over
PNTR status for China. The granting of PNTR status, together
with China's accession to the World Trade Organization (WTO),
will provide economic benefits. That is indisputable. We have
everything to gain and a great deal to lose by refusing to
grant PNTR status to China.
We estimate that the U.S.--China WTO accession agreement
could add an estimated $1.6 billion annually to U.S.
agricultural exports of bulk commodities such as grains,
oilseeds and products, and cotton by 2005. U.S. export gains
could approach $2 billion as the Chinese reduce their tariffs
on high value-added products, such as poultry, pork, beef,
citrus and other fruits, vegetables, tree nuts, and forest and
fish products.
China has committed to eliminate export subsidies, cap and
reduce domestic support measures, eliminate scientifically
unjustified sanitary and phytosanitary barriers, provide strong
provisions against unfair trade and import surges, and adhere
to the rule of international law (i.e., the dispute settlement
system of the WTO, which, overall, has benefitted the United
States).
Tariffs on our priority products like meat and dairy will
drop, on average, from 31 to 14 percent, by 2004.
Tariff-rate quotas (TRQs) and other elements of the U.S.--
China agreement should provide U.S. agriculture with the
opportunity to capture a considerable share of the Chinese
market. American farmers and ranchers, with their superior
products and competitive prices, will benefit even more from
the TRQs if China develops into a market-based economy as we
hope.
I know many people are concerned about China's overwhelming
overall trade advantage with the United States, which reached
nearly $69 billion last year--second only to our trade deficit
with Japan at $73.9 billion. That's because current Chinese
policies shield its economy from world market forces and
restrain competition. This agreement will go a long way toward
correcting that imbalance. It provides a comprehensive approach
to dealing with China's trade policies that put U.S. exports at
such a disadvantage.
The agreement also specifically addresses the issue of
protecting U.S. agricultural and non-agricultural products from
import surges from China. This is a facet of the agreement that
I believe is a very important point. The product-specific
safeguard provision sets up a special mechanism to address
increased imports that cause or threaten to cause market
disruption to a U.S. industry.
This mechanism, which is in addition to other WTO safeguard
provisions, differs from traditional safeguard measures. It
permits the United States to address imports solely from China,
rather than from the whole world, that are a significant cause
of material injury and to adopt measures such as import
restrictions to deal with those import issues. In addition, the
United States will be able to apply restraints unilaterally
based on legal standards that differ from those in the WTO
safeguards agreement. This could permit action in more cases.
The product-specific safeguard will remain in force for 12
years after China joins the WTO.
I think President Clinton summed it up best when he said in
both his State of the Union address and when he introduced his
proposed legislation at the John Hopkins School for Advanced
International Studies, ``Our markets are already open to China;
this agreement will open China's markets to us.''
PNTR for China is not just a vote on our China trade
policy. By and large, our trade laws should be used as
intended--to challenge and roll back trade barriers in China
and elsewhere. It also ensures the U.S. engagement in a wide
range of economic and social issues in China such as promoting
human rights, freedom of religion, and the democratization
process.
We can best reconcile those differences and influence their
behavior by engaging them, by bringing them into a rules-based
global community, not by isolating them. In addition, removing
these barriers allows China to have access to quality U.S.
products such as better quality cotton or soybeans with higher
content oil. China wants the quality of U.S. products and the
reliability of supply. For all these reasons, that is why
approving PNTR status for China is so important for our
national interests, and especially for American farmers. This
is a historic opportunity because what it can achieve in
opening Chinese society goes far beyond the economic
underpinnings of improved trade with China. In granting PNTR
status, we are not abandoning the principles we as a nation
have always valued; instead, we provide tangible economic
benefits to the American people.
I believe that China's WTO accession agreement with the
United States is a bold statement that China intends to be a
responsible player on the world stage. The Chinese have shown
they understand that they must commit to longstanding
principles governing world trade--transparency, fair trade
practices, peaceful settlement of disputes and, most
importantly, the rule of law.
The agreement is strong evidence of China's willingness to
move beyond the stagnant, protectionist policies of the past
and embrace economic and trade principles that will have a
ripple effect on their economic, social and political
institutions.
In fact, changes in Chinese agricultural policies are a
good indication that China is beginning to see the advantages
of stronger ties to the global economy. Over the past 50 years,
China has struggled to increase its grain production to meet
the needs of its growing population. But now China's leaders
are pointing out that China might be able to raise farm incomes
by diverting resources away from areas where it does not have a
comparative advantage--like grain production -and into areas
that would take advantage of the large Chinese labor pool--like
horticultural products.
Chinese policy makers are now saying that China could live
with a self--sufficiency rate of 95 percent rather than 100
percent. That 5 percent may not sound like much, but if China
imported just 5 percent of its grain needs, that would equal 20
million tons of grain a year--making China the world's second
largest market for imported grain after Japan.
I would like to leave you with one final thought. China can
still accede to the WTO without Congressional approval of
permanent NTR status (accession is independent of the U.S.
process and is reached by consensus of the 136 WTO members). If
Congress were not to approve permanent NTR status for China,
then the only winners would be our competitors such as the
European Union and Australia. They are aggressively pursuing
new trade deals and would welcome the chance to pick up
business that would otherwise go to U.S. farmers and ranchers.
Rest assured, once our competitors are in those markets, they
will be very difficult to displace--and the United States is
not likely to regain substantial market share for a long time.
Mr. Chairman, that completes my statement. I would be happy
to answer any questions.
[Attachments are being retained in the committee files.]
Chairman Archer. Thank you, Secretary Glickman.
Our next witness is a gentleman that I've enjoyed working
with very closely on this issue over the last months, Secretary
of Commerce William Daley. We're happy to have you before our
Committee, and we'll be pleased to receive your testimony.
STATEMENT OF HON. WILLIAM M. DALEY, SECRETARY, U.S. DEPARTMENT
OF COMMERCE
Secretary Daley. Thank you very much, Mr. Chairman and
Congressman Rangel, and members of the Committee. It is a
pleasure to join my colleagues and come once again before the
Ways and Means Committee.
We have spent a tremendous amount of time over the last
number of months on the Hill talking to members. And many are
convinced of the economic positive results of this deal with
China.
But a question which we have all heard over and over again
is how do we know that China will comply with this agreement?
Their track record frankly has been mixed.
However, in my opinion, things are changing dramatically.
The Chinese have told all of us countless times that they want
the benefits of open markets. And after 14 years of
negotiations, they do want to join the WTO and follow the
rules. Obviously, deeds, not words, matter to all of us. China
is in the process of changing its rules and laws, and
retraining state bureaucrats and managers, and all of this is
very positive.
But there are no guarantees. So today I'm announcing a five
point Commerce Department plan that will be very aggressive at
making sure China lives up to this deal. It takes effect
immediately and will not require additional resources to start.
And it dovetails with the very helpful enforcement proposals
which Congressman Levin has put forward and other members are
working with.
First, we're putting in place a new rapid response team on
China. It includes a dozen compliance and trade specialists. It
will be headed by a deputy assistant secretary for China who is
focused on compliance. This will be the highest level Commerce
official ever put in charge of enforcing a trade agreement with
a single country.
Next week, I'm sending a senior Commerce official to
Beijing to determine the needs and priorities of the U.S.
business community and report back immediately. By next year, I
want to triple resources for compliance, increase the size of
our team and permanently station compliance experts in China. I
want to do the same in Japan and South Korea as part of a
broader effort to beef up enforcement worldwide.
Obviously, we need Congress' help. The President has
requested $22 million for these measures in his budget for next
year.
The second point of our plan explains where the name rapid
response team comes from. We're putting in place tight
deadlines for investigating market access and commercial
problems. Our goal is to resolve conflicts quickly before they
turn into formal trade disputes, and to cut through
bureaucratic red tape. But as Ambassador Barshefsky will tell
you, we will not hesitate for a minute to go to the WTO if
that's what it takes to fix a problem.
Third, we will keep a careful eye on U.S.--China trade
flows. We will have a special program watching for surges in
imports, much like our monitoring program for steel imports
which has been very effective. We'll chart export growth in key
sectors to ensure China is opening its markets as it has agreed
to. And we'll have special programs for anti-dumping and anti-
subsidy rule violations.
Fourth, we want to help China help itself. We will share
our experiences in putting WTO legislation into effect and give
technical assistance which China has requested of us. Meetings
on this began this summer. Last month when I attended the Joint
Commission on Commerce and Trade in Beijing, we agreed to a
comparative law dialogue, to help the Chinese conform their
laws to the WTO.
Fifth and finally, we must be more proactive on the export
side. I want American businesses, especially first time
exporters, to understand U.S. legal rights and China's
commitments under the WTO. In our country, we're planning to
hold a number of training sessions for small and medium size
companies, and will be using our 100 trade centers around our
country and our 5 offices in China to find export
opportunities.
In the past, Commerce has created programs to handle unique
situations. We did it for Eastern Europe after the fall of the
Berlin Wall. And it was popular with the business community and
was very successful.
Our five point plan is good government, just as businesses
are hiring and expanding so they are ready one day to export,
we in Government must also be ready.
Let me highlight another issue of great concern to us and
to many of the members before us. And that is, the impact of
trade on workers and communities. President Clinton is
requesting a substantial budget increase to help them succeed
in this global economy. The package includes a community
economic adjustment initiative, which is modeled on the Defense
Department's program to help communities slated for military
base closures. This program, based at Commerce's EDA, would
coordinate Administration-wide responses for regions suffering
from sudden and severe economic distress.
The package would also reform and expand the Labor
Department's trade adjustment assistance program. And it would
greatly expand the President's new markets initiative by
providing investment initiatives to spur economic activity in
distressed urban and rural areas.
Mr. Chairman, we need programs like these if we are to
build confidence amongst the American people about trade and
about globalization. I did a number of trade education events
around the country last year. And you can see, people are
sincerely worried as each of you have heard from your
constituents, worried about the effects of globalization. We
saw it in Seattle in December, and we saw it in Washington last
month.
Government needs to step up to the plate by helping all
Americans deal with the effects of globalization, because it is
here to stay. And as we know, the world economy has been good
for us as a Nation. We are the biggest trading Nation on earth.
Our economy is the strongest, and our goal and the reason to
pass the PNTR is to keep our Nation strong.
Thank you very much, Mr. Chairman.
[The prepared statement follows:]
STATEMENT OF THE HON. WILLIAM M. DALEY, SECRETARY, U.S. DEPARTMENT OF
COMMERCE
Mr. Chairman, Congressman Rangel, members of the Committee,
thank you for the opportunity to testify today on the benefits
to America of China's accession to the World Trade Organization
(WTO). It is my pleasure to appear here today with my
colleagues, Treasury Secretary Lawrence Summers, Agriculture
Secretary Glickman, and United States Trade Representative
Ambassador Charlene Barshefsky to discuss this important
initiative. Secretary Summers's testimony discusses the
economic benefits of this agreement to the United States, and
Ambassador Barshefsky's testimony places WTO accession and the
grant of Permanent Normal Trade Relations into the broader
trade perspective as well as outlining the details of the
November U.S.--China accession agreement itself. Secretary
Glickman will discuss the benefits of China's WTO accession for
American farmers. I will focus in my testimony on our efforts
to ensure that China provides us the market access that we have
negotiated.
I recently returned from a trip to Beijing where I co-
chaired the 13th Session of the U.S.--China Joint Commission on
Commerce and Trade (JCCT). The JCCT is a government-to-
government forum developed to promote U.S.--China commercial
cooperation. We met to discuss China's ongoing reform efforts
and ways to enhance China's transition to a rules-based global
trading system. Obviously a lot of the discussion centered on
China's pending application to join the WTO and on our process
for deciding whether to grant Permanent Normal Trade Relations
(PNTR).
This was my third visit to China during my tenure as
Secretary of Commerce. Much has changed even in the few years
that I have been traveling there. The signs of a nascent
transition to a market-based economy are evident everywhere in
increased private ownership of businesses, and more freedom for
the Chinese to choose their own places of employment. Over
twenty years of domestic reforms have enabled China to lift
more than 200 million people out of absolute poverty. Wireless
communications has put cell phones in the hands of 40 million
Chinese (only a fraction of the potential market) and given
them access to a world of ideas and influences.
But many problems exist. High unemployment, inefficient
state-run enterprises and corruption continue to plague the
Chinese economy. As a result, economic growth has slowed.
The Chinese leadership has recognized the need to open its
market to global competition in order to be able to build a
modern, successful economy. One of the best indicators of the
commitment of the Chinese leadership to a more open economy is
its desire to take on the challenges and obligations of WTO
membership. I am here today to discuss with you how supporting
PNTR status for China can move China toward a more open
economy.
Last November, after 13 years of negotiations, the United
States and China reached a bilateral agreement on the terms and
conditions of China's entry into the WTO. China made
significant and far-reaching market access and trade
concessions that will benefit American exporters and import
sensitive industries across a broad range of industrial goods,
services and agriculture. It contains strong enforcement
mechanisms and strong protections against unfair trade.
American exporters stand to benefit immediately upon China's
accession to the WTO. China has agreed to begin opening its
markets in virtually every sector immediately upon accession.
The phase-in of further concessions will be limited to five
years in almost all cases, and in many cases only one to three
years.
In contrast to China's historic set of commitments, with
this agreement we have only one obligation, and that is to
maintain the market access policies we already apply to China
by granting it Permanent Normal Trade Relations status. We are
appearing here today to seek your support for the President's
legislative proposal to grant China PNTR.
I won't spend my time in this testimony discussing the
details of this historic agreement. However, attached to my
testimony is a written summary of the terms of the agreement.
Also, over 45 industry specific fact sheets, 50 state-specific
reports, and other detailed information are available on our
Web site at www.chinapntr.gov.
There is no doubt that this agreement is a great
opportunity for American businesses, workers and farmers. It
will provide unprecedented access to a largely untapped market
of over one billion consumers. The benefits for the U.S. are
widespread, including significant opportunities for small and
medium size businesses. SMEs are responsible for a growing
share of U.S. exports to China.
Recently 47 Governors sent a letter to Senators and Members
of the House expressing how important they believe passage of
China PNTR is to maintaining the economic growth and prosperity
of families in their states and territories. These Governors
know this is a good economic deal for America. They do not want
America to be left behind.
Yet this agreement goes beyond economics. As President
Clinton has said, this represents the most significant
opportunity that the United States has had to create positive
change in China since President Nixon's visit there in the
early 1970s. As a world leader we have an obligation to foster
further reform in China. Encouraging China to join the rules-
based world trading system gives it a greater stake in the
stability and prosperity of its regional neighbors and the rest
of the world. It will create a better, more stable, safer
world.
Safeguards, Compliance and Enforcement
In addition to unprecedented access to the vast Chinese
market, we negotiated additional terms to ensure that we gain
the full benefits of our agreement and that China lives up to
its commitments. China has agreed to a number of provisions
that go to the core of the closed Chinese economy and that will
result in real and effective market access. These special
provisions address issues raised by the high degree of
government involvement in the Chinese economy and by industrial
policy measures, such as local content, offsets, export
performance, and forced technology transfer requirements. These
provisions were sought to address the legitimate concerns
raised by industries and Members of Congress, Democratic and
Republican alike.
The agreed provisions include special protections to guard
against import surges from China. China has agreed to a 12-year
product-specific safeguard provision which ensures that the
United States can take effective action in case of increased
exports from China which cause market disruption in the United
States. This applies to all industries, permits us to act on a
lower showing of injury to domestic industry than under
existing safeguard law and allows us to act specifically
against imports from China. This safeguard provision is in
addition to existing safeguard actions authorized under Section
201.
We have also ensured that American firms and workers will
have strong protection against unfair trade practices,
including dumping. China has agreed to guarantee our right to
continue using our current methodology (treating China as a
non-market economy) in antidumping cases for fifteen years
after China's accession to the WTO.
We also have retained the right to use the full range of
existing United States trade laws, including Special 301
(intellectual property rights protection), Section 301 (unfair
trade practices), and, of course, our antidumping laws. It also
is important to emphasize that nothing in this agreement
undermines our ability to continue to block imports of goods
made with prison labor, to maintain our export control
policies, or to withdraw trade benefits, including NTR itself,
in case of a national security emergency.
The agreement will also require China to reform a number of
internal policies which force foreign companies to locate
operations in China and give up valuable intellectual property
rights as conditions of doing business. The agreement will
eliminate unfair practices such as mandated offsets, local
content and various investment performance requirements. China
will take on the obligations of the WTO Agreement on Trade-
Related Investment Measures. This will make it easier for U.S.
companies to export to China from home rather than forcing
companies to set up in China in order to sell their products
there. Forced technology transfers will also be eliminated as a
condition of investment, better enabling U.S. companies to
protect their investment in R&D. China has agreed to stop
enforcement of such practices in existing contracts immediately
upon accession.
The agreement contains additional effective enforcement
tools to ensure China meets its obligations. For the first
time, China's trade commitments will be enforceable through
binding WTO dispute settlement, subjecting its actions to
impartial review, and ultimately sanctions if necessary. The
multilateral nature of the WTO also strengthens our enforcement
capabilities. And the significance for China is great--its
economic decisions will be subject to multilateral trade
review, which will provide us additional leverage in resolving
future trade disagreements with China.
Our bilateral agreement with China is highly specific with
clear timetables for implementation and firm end dates for full
compliance. When copies of the agreement were handed out to
Members of Congress, some members commented that the text
looked more like a spread sheet with its defined tariff rates,
dates certain and concrete obligations. This was intentional
and reflects past experience with trying to enforce trade
agreements with China. The specificity of China's commitments
in this bilateral agreement will strengthen our ability to
monitor and demand compliance.
The Administration intends to vigorously monitor and
aggressively enforce the terms of this agreement. Our
commitment to do so is reflected in the President's budget
request for a $22 million increase in new compliance and
enforcement resources for Commerce, USTR, USDA and the State
Department.
In addition, today, I am announcing a five-point plan for
monitoring China's compliance with its commitments and making
sure that we get the full benefits of the WTO from our
bilateral agreements. This is Commerce's part of an interagency
effort to ensure China's compliance with the WTO. Most elements
of Commerce's plan will be put in place immediately.
Rapid Response Compliance Team. I am creating a Deputy
Assistant Secretary for China focusing on compliance. This will
be the highest level Commerce official we have devoted to a
single country's compliance with a trade agreement. Working
with the DAS will be a rapid response team of at least 12
compliance and trade specialists in Washington and China, most
of whom are already on the payroll. I am sending a senior
compliance officer to China next week to assess the needs and
priorities of the business community. In the medium term, I
want to station compliance officers permanently in China. This
is part of the President's $22 million Trade Compliance
Initiative in the 2001 budget request. These officers will be
exclusively devoted to compliance matters, not trade promotion
and not economic analysis. The State Department also plans to
place additional compliance officers in China, and is currently
developing a specialized training course to equip new officers
from all agencies with a deeper understanding of our
international agreements to ensure compliance.
Prompt addressing of market access problems. I am putting
in place tight deadlines for investigating market access and
commercial problems in China. Within strict deadlines, the
rapid response team will engage appropriate officials in China
to address the problem. If resolution is not reached within 90
days, we will work with other agencies to determine if further
action is required. The goal of this procedure will be to
encourage resolution of issues without resorting to WTO dispute
settlement. To make this procedure more user-friendly, I will
launch a China compliance website. It will contain a detailed
description of China's accession commitments in all sectors,
the relevant ministries and key individuals responsible for
implementing the commitments, and most significantly, changes
in China's laws and regulations to implement the new
commitments as they are promulgated.
Statistical monitoring of Chinese trade flows and special
trade law enforcement program. I am putting together a special
team to monitor both imports from China and exports to China in
critical sectors. This will be modeled on the import surge
monitoring program we established for steel, which has been so
effective in helping to combat last year's steel crisis. The
data collected will help to implement the China-specific
safeguard that we negotiated. In addition, the data collected
will be useful in vigorously enforcing our other trade laws. As
I mentioned earlier in my testimony, we have maintained our
ability to apply our non-market economy methodology to China
for 15 years. To ensure strict enforcement, I am creating a
China-specific dumping anticircumvention program. In addition,
I am creating a China-specific subsidies enforcement team to
ensure that China abides by its subsidy commitments.
Comparative law dialogue and technical assistance. I know
many of you are concerned about China bringing its laws into
conformity with the WTO. We share your concerns. So when I was
in China last month, I obtained agreement to set up a
comparative law dialogue. We will keep a close watch as China
amends its laws and regulations, share our experience with
implementing WTO rules, and provide technical assistance and
advice. We will begin meetings in June. These efforts will be
closely coordinated with the Department of State's China Rule
of Law Initiative which stems from the Presidential agreement
with China to expand cooperation for addressing rule of law
issues throughout the Chinese legal system.
China-specific WTO training and export promotion program.
Finally, we are setting up an unprecedented WTO training and
trade promotion strategy to ensure that our exporters take
advantage of all the opportunities presented by China's new
commitments. This will include a trade opportunities service
similar to what we did for Eastern Europe after the fall of the
Berlin wall and for the Middle East after the Gulf War. We will
use our nation-wide network of export assistance centers and
video conferencing to conduct seminars for small and medium
companies on doing business in China and promoting export
opportunities. We are establishing a China market information
website and will assign a China expert to our trade information
center hotline. We will provide U.S. businesses with training
about U.S. rights under the WTO agreement.
Community Economic Adjustment Initiative
In addition to compliance, let me highlight another
Administration effort that addresses a concern of many Members:
the impact of trade on U.S. workers and communities. President
Clinton has requested in the FY2001 budget a substantial
increase to help U.S. workers and communities succeed in the
global economy. The package includes a Community Economic
Adjustment Initiative modeled on the Department of Defense's
program to help communities slated for military base closures.
This program, based at Commerce's Economic Development
Administration, would coordinate Administration-wide responses
for regions adversely affected by trade or other problems.
The package would also consolidate and reform the
Department of Labor's two trade adjustment assistance programs
for workers who lose their jobs due to imports or shifts in
production, capturing the best features of each. It also would
greatly expand the President's New Market Initiative by
providing investment incentives to spur economic activity in
distressed urban and rural areas.
A More Open China
The President has made clear that supporting China's
accession into the WTO does not mean a tacit endorsement of
China's human rights policies. We will continue to denounce
China's persecution of its citizens for their political or
religious beliefs. Last month, Secretary of State Albright
demonstrated this commitment when she personally presented a
resolution condemning China's human rights record to the United
Nations' Human Rights Commission in Geneva. We will not
hesitate to use our authority to sanction China under the
International Religious Freedom Act as we did last year. We
will also continue to pursue our foreign policy goals with
China in a number of important areas such as non-proliferation
and global climate change. We remain committed to a peaceful
resolution of issues between China and Taiwan.
It is significant that many of those most supportive of a
more open, democratic China support its membership in the WTO.
The newly elected leader of Taiwan, Chen Shui-bian, supports
normalizing trade relations between the United States and
China. Martin Lee, the leader of Hong Kong's Democracy Party,
recently said ``The participation of China in the WTO would not
only have economic and political benefits, but it would serve
to bolster those in China who understand that the country must
embrace the rule of law.'' A longtime Chinese dissident leader,
Ren Wanding, declared in support of the China's WTO membership
``Before the sky was black, now it is light. This can be a new
beginning.''
By seeking to join the WTO, China has undertaken to deepen
its market reforms and open its economy to the rest of the
world. It has agreed to adhere to international trade rules and
subject its actions to WTO dispute settlement. It's clear that
this has not been an easy choice for its leaders. They
understand that opening their borders to foreign goods,
services and investors opens the door wide to new ideas and
ideals they can not control. They have made the decision to
take this risk. We should encourage China to choose the path of
reform and involvement with the rest of the world. Bringing
China into the WTO will make a significant difference.
The possibility of positive change is illustrated by the
great potential of the telecommunications market in China. Some
analysts predict that China will become the world's second
largest personal computer market by the end of this year and
the third largest semiconductor market by 2001. It is already
the world's fasted growing telecommunications market. In 1999
alone, the number of Chinese Internet users quadrupled, jumping
from 2 million at the beginning of the year to 9 million.
Growth predictions put Internet users at over 20 million by the
end of 2000. Not only will this technology explosion benefit
U.S. information technology industry, which is the best and
most competitive in the world, but it will also give the
Chinese people unfettered access to outside influences and
ideas through satellites and the Internet. This cannot help but
promote greater economic and political reform in China.
Of course, the trade agreement with China will not, by
itself, resolve serious human rights issues in China. At the
same time, I believe that WTO membership will bring fundamental
changes to China that will advance our goals in this area.
The Vote on PNTR
A few months ago when the President asked me to lead the
Administration's efforts to seek Congressional approval of
PNTR, I discovered that there was a lot of misunderstanding
about what the vote on PNTR means. Let me explain. Normal trade
relations, formerly called most-favored-nation or MFN
treatment, is the same trading status we extend to the rest of
the world, with very few exceptions. The legislation would
remove China from the annual NTR renewal process under Jackson-
Vanik, under which we have extended NTR to China since 1980.
PNTR is required to meet our obligation to treat all WTO
members the same. WTO members are required to grant each other
``any advantage, favor, privilege or immunity'' provided to
other countries ``immediately and unconditionally.'' The United
States currently extends PNTR to all countries with whom we
share and enjoy the benefits of the WTO, without the condition
of annual review. Not surprisingly, China seeks identical
treatment upon its accession--and WTO rules require it to be
provided.
It is worth emphasizing that this will not be a vote on
whether China will join the WTO. Once China completes its
accession negotiations with other countries, its application to
join the WTO will move forward, with or without PNTR. However,
Congress' upcoming vote on PNTR will determine whether the
United States will enjoy the economic benefits created by
China's WTO membership. A vote against PNTR will mean ceding
our share of this newly opened market to our economic
competitors in Europe, Asia and elsewhere. As President Clinton
has stated, ``We must understand the consequences of saying no.
If we don't sell our products to China, someone else will step
into the breach, and we will spend the next 20 years wondering
why in the wide world we handed over the benefits we negotiated
to other people.''
The vote on PNTR also will not affect whether the Chinese
will have access to the American market and consumers. They
already do. The United States has the most open market in the
world. A vote for PNTR will give us access to the previously
closed Chinese market and level the playing field in a dramatic
way.
When President Nixon first went to China, more people saw
the pictures and heard his words than on any occasion in the
history of the world. During that visit he paraphrased Abraham
Lincoln, saying ``what we say here would not be long
remembered. What we do here can change the world.'' Thirty
years later, we now face another history-making foreign policy
choice, identified by President Clinton as his top remaining
foreign policy goal. After all the speeches, after all the
arguments, after all the voices on both sides of the debate,
what we say is not as important as what we do. And on this
occasion we should act to promote further reform and the rule
of law in China and to integrate China into the world economy.
It is in our economic, strategic and national security
interests to do so.
I appreciate the thoughtfulness and consideration Members
have brought to the debate. I am optimistic that once all the
pros and cons have been weighed the Congress will vote its
support for PNTR.
Thank you, Mr. Chairman, that concludes my statement. I
will now be happy to answer any questions you may have.
[Attachment is being retained in the Committee files.]
Chairman Archer. Thank you, Secretary Daley.
Our last witness in this panel is a lady that has done
yeoman work in negotiating trade agreements in behalf of this
country, and one of the truly outstanding USTRs in the history
of the country. We welcome you to the Committee, Ms.
Barshefsky, and we'll be pleased to receive your testimony.
STATEMENT OF HON. CHARLENE BARSHEFSKY, AMBASSADOR, UNITED
STATES TRADE REPRESENTATIVE
Ambassador Barshefsky. Thank you very much, Mr. Chairman.
May I first begin on a slightly different topic, and that
is the African Growth and Opportunity Act. I want, Mr.
Chairman, in particular, to recognize Mr. Rangel, Mr. Crane,
Mr. McDermott, Mr. Jefferson, and you for all of your hard work
and the work of your staffs in trying to bring together this
very historic piece of legislation.
I think we're almost at the finish line, and I simply
wanted to reiterate the Administration's strong support of your
collective efforts to move this legislation forward, and our
hope that it will come to the Floor of the House of
Representatives, if not this week, then next. And I simply
wanted to thank you on behalf of the Administration for the
extraordinary effort that collectively all of you and the
Committee have put into this legislation.
It's a great pleasure to be here to speak about China. In
my previous appearance before the Committee in February, we
discussed a number of the specific commitments included in our
bilateral WTO agreement with China. My written statement
reviews them in detail. For the present, let me simply say that
from the perspective of trade and economic policy, the choice
before this Committee and before the Congress is absolutely
straightforward.
This agreement with China will open China's markets, a
market that will be the largest single market in the world, to
the full range of American exports of industrial goods, farm
products and services, to a degree unprecedented in the modern
era. It will strengthen our guarantees of fair trade. It will
give us great ability to enforce China's trade commitments, and
it will facilitate Taiwan's entry into the WTO, as Taiwan's new
leadership has noted, in its support both for China's WTO
membership and normalized trade relations between China and the
United States.
By contrast, as China enters the WTO, we make no changes
whatsoever in our market access policies, not a single tariff
line. We make no changes in our trade laws. We make no changes
in our laws governing the export of sensitive technology. We
agree only, only to maintain the market access policies we
already apply to China and have in every year, year in, year
out, for over 20 years, by making China's current normal trade
relations status permanent.
This is the only policy issue before the Congress.
Regardless of the Congressional debate, China will enter the
WTO. Regardless of the debate, China will continue to export to
the United States, just as it does today. The only question
raised by permanent NTR is whether we will receive the benefits
of China's accession to the WTO, whether we will receive the
benefits of the agreement we negotiated, or will we have opened
the Chinese market for the rest of the world's producers, while
our farmers and our workers and our ranchers are left behind?
That is the issue that is squarely presented by the
question of permanent normal tarde relations for China. And I
would submit that on that basis, the economic choice is
absolutely clear.
But there are two questions I believe that arise and that
should be addressed. First off, as Secretary Daley has
indicated, how do we help ensure that China will comply fully
with its obligations and second, what do WTO accession and PNTR
imply for our larger relationship with China and the concerns
we now have with that relationship?
Let me take compliance first. Trade commitments with any
country require full implementation to be meaningful. This
Administration has pursued well over 100 trade enforcement
actions in the past 7 years. In the case of China, we've gained
substantial experience, given our enforcement actions on
intellectual property rights, on textiles, on agriculture and
in other areas. We've brought these lessons of compliance to
the current debate. And let me outline for you seven areas.
First, with respect to compliance and enforcement, we have
the WTO dispute settlement mechanism itself. In no previous
international accord, and let me repeat that, in no previous
international accord, has China ever agreed to subject its
governmental decisions to impartial review, judgment and
sanctions if necessary.
Second, our continued right to use the full range of U.S.
trade laws, anti-dumping laws, Section 301, special 301 and so
on. Third, substantial new leverage through a 12 year product
specific safeguard mechanism which enables us to address market
disrupting import surges from China. This is a remedy that
exists for no other country in the world. It is a remedy that
does not currently exist in U.S. trade law.
Fourth, guarantees of our right to continue to use a
special non-market economy dumping methodology for 15 years to
ensure fair trade from China. Fifth, the multilateral nature of
the WTO itself, including in Geneva the development of a
multilateral review mechanism to monitor China's implementation
of its commitments, diminishing the ability of China to play
one trading partner off another and identifying compliance
problems early.
Sixth, experience shows that agreements with China are
implemented and enforced most satisfactorily when obligations
are concrete, specific, time bound and open to monitoring. The
bilateral agreement we negotiated contains remarkably specific
commitments in every area without exception, clear timelines
for implementation and firm end dates for full compliance.
Finally, enforcement as in any agreement depends on U.S.
commitment. We're already preparing for the effort through
President Clinton's request for new enforcement and compliance
resources at USTR, Commerce, USDA and other agencies with
enforcement responsibility. This includes resources for the
largest monitoring and enforcement effort ever devoted to a
trade agreement, covering the full range of China's obligations
in the WTO, including anti-dumping and anti-import surge.
The Administration will monitor China's compliance on three
fronts. First, on the ground in China, where State, Commerce,
Agriculture and other agencies will seek to resolve U.S.
business complaints and prevent compliance problems before they
arise.
Second, here in Washington, where special inter-agency
teams of government experts will be created to examine China's
implementation of each of the 20 WTO agreements to which it
will accede, as well as commitments unique to China, with
respect to anti-import surge and anti-dumping.
And third, compliance efforts at the WTO itself, where we
will join 135 other nations in the multilateral review
mechanism specially designed for China.
USTR will add additional resources for this effort. The
President's budget request would almost double the number of
USTR staff devoted to China. In addition, as I said, a special
interagency structure will be created in order to ensure that
every aspect of Chinese compliance is monitored. We will be
working with the business community and with Congress in this
very large effort.
This agreement and permanent normal trade relations for
China will have extraordinary significance for our trade
interests. But its full importance is only clear when we
consider WTO accession as part of a larger relationship with
China, a relationship fundamental to prospects for peace and
security in Asia, and worldwide in the coming decades.
We have substantial differences with China on issues
related to human rights and religious freedom, on a number of
security issues and on other matters. In these areas, we have
and we will continue aggressively to assert our interests and
our values.
But we have also found and acted upon areas of shared
interest and benefit where possible. The Asian financial
crisis, peace on the Korean peninsula, and now with WTO
accession and PNTR, in our shared interest in a more open and
reformed Chinese economy, which more fully reflects the rule of
law.
Moreover, we are doing this through a series of one way
concessions made by China. Were we to retreat, were we to
reject this historic series of one way concessions made by
China, we would be making a very dark statement indeed about
the future possibility of a stable, mutually beneficial
relationship with the world's largest economy.
That outcome would threaten every single interest we have
in China, from our work on non-proliferation and arms control
to reducing tensions in Korea and South Asia and across the
Taiwan Strait. It would complicate for the foreseeable future
our Pacific alliances, as our Asian friends and allies would
view rejection of PNTR as an unnecessary rejection of stable
and constructive relations in their neighborhood, with their
largest neighbor, and to turn away from the open, confident
vision we have held for the Pacific for many, many years.
Over the long term and perhaps most important, China,
seeing no rational economic reason for our decision, would
become more likely to read hostile intention into our every
move. This could raise the prospect that our present
disagreements and tensions will only escalate. That is the
ultimate and most significant point at stake in the coming
debate.
To deny PNTR would be to severely damage American trade
interests. It would be to set back the cause of reform and
economic reformers in China. It would be to risk without cause
a fundamental deterioration in the U.S. relationship with
China.
We must have the vision and the confidence to make the
right choice here. WTO accession, PNTR for China offers us a
remarkable opportunity, indeed, a historic opportunity, as many
members have recognized, to not only advance our own trade
interests, that frankly is the least of it. But to strengthen,
as a number of activists for human rights and democracy have
said, prospects for long term reform within China and
ultimately to help build a relationship with China that
strengthens the guarantees of peace and security for the world.
That is the opportunity that is before the Committee as the
PNTR debate begins in earnest. And it is why the
Administration, my Cabinet colleagues and I are absolutely
committed to achieving permanent normal trade relations status
for China on the basis of this historic agreement.
Thank you, Mr. Chairman.
[The prepared statement follows:]
STATEMENT OF THE HON. CHARLENE BARSHEFSKY, UNITED STATES TRADE
REPRESENTATIVE
Mr. Chairman, Congressman Rangel, Members of the Committee:
The House's vote on extension of permanent Normal Trade
Relations to China, as China enters the World Trade
Organization, will be one of the most important trade and
foreign policy decisions the United States has made in many
years. I thank you for this opportunity to join with Secretary
Summers and Secretary Daley, in testifying on its significance
for the United States.
Introduction: One-Way Concessions
In a sense, this decision presents us with a simple choice.
Last November, after years of negotiation, we reached a
bilateral agreement with China on WTO accession which 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, through specific and detailed commitments on
tariffs, quotas, trading rights, distribution, sanitary and
phytosanitary measures, the full range of services industries
and other issues.
--Strengthen our guarantees of fair trade, with specific
provisions to address dumping into the U.S. market, import
surges, technology transfer as a condition of investment and
other practices intended to draw jobs and research to China,
textile trade and other issues.
--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 agree only to maintain the market access
policies we already apply to China, and have for over twenty
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 on the contrary, by turning away from permanent NTR,
we enable our competitors in Asia, Latin America, Canada and
Europe to take advantage of these benefits while American
entrepreneurs, farmers and factory workers are left behind.
I. China's WTO Accession in Historic Context
From the perspective of trade policy, therefore, this is a
relatively simple decision. But China's WTO accession also has
deeper implications.
China is the world's most populous country; over the past
decade, it was the world's fastest-growing major economy. Our
relationship thus affects all of America's foreign policy and
security goals in Asia today, and its future course will be one
of the major issues for Americans throughout the next decades.
And the WTO accession, together with permanent NTR, will have a
substantial impact on the future of China and our relationship
with China.
When we look at our relationship with China today, we see a
number of serious differences. In these cases, we have and will
continue to assert our values and interests with candor and
firmness--as we have recently done at the UN Human Rights
Commission in Geneva. At the same time, however, we also see a
responsibility to develop a stable, mutually beneficial
relationship in which we and China act upon areas of shared
benefit and mutual interest. China's WTO accession, together
with permanent NTR, is an example of just such shared interest
and benefit.
--By opening the Chinese economy to U.S. goods, services
and agricultural products, the WTO accession and PNTR will
create significant new opportunities for American businesses,
farmers and working people; and it will help to reform and
improve a deeply imbalanced existing trade relationship.
--By helping to open and liberalize China's economy, WTO
accession will create new economic freedoms for Chinese
citizens and promote the rule of law in many fields now
dominated by state power and control. A number of leading
Chinese and Hong Kong advocates of democracy thus endorse WTO
membership not only for its economic value, but as a foundation
for broader future reforms.
--And by integrating China more firmly into the Pacific and
world economies, WTO accession will give China a greater stake
in regional stability and prosperity. Together with our
military presence in the Asia-Pacific and our alliances with
Japan, South Korea and other Pacific democracies, it will thus
be a factor in favor of long-term regional peace.
America and the Trading System
Let me now turn to a detailed review of our bilateral
agreement on WTO accession, beginning with the historic context
in which we should view this event.
The World Trade Organization has its roots in the General
Agreement on Trade and Tariffs, or GATT. Its creation in 1948
reflected the personal experience of President Truman and his
European counterparts in Depression and War. They had seen the
Smoot-Hawley Act in America and similar protectionist policies
overseas deepen the Depression and contribute to the political
upheavals of the 1930s. Fifteen years later, they believed that
by reopening world markets they could promote growth and raise
living standards; and that, in tandem with a strong and
confident security policy, as open markets gave nations greater
stakes in stability and prosperity beyond their borders, a
fragile peace would strengthen.
The work they began has now continued for over fifty years,
and the faith they placed in open markets and the rule of law
has been abundantly vindicated. Through eight Rounds of
negotiations, and as 113 new members joined the 23 founders of
the GATT, we abandoned the closed markets of the Depression era
and helped to foster a fifty-year economic boom. America, as
the world's largest importer and exporter, benefits perhaps
most of all: the efficiency of our industries and the high
living standards of our families reflect both the gains we
receive from open markets abroad, and the benefits of our own
open-market policies at home.
But the development of the trading system has had equally
important effects worldwide. As it has developed over the past
fifty years, the world economy has grown six-fold; per capita
income nearly tripled; and hundreds of millions of families
escaped from poverty. And perhaps the best testimony to this
success is that many of the new applicants to join the WTO are
nations which are abandoning the postwar experiment in
communist central planning.
China from Revolution to Reform
This brings me to China.
With the Communist revolution, China set out upon a very
different road. After 1949, it shut doors it had once opened to
the world. Among its new leaders' first steps were to expel
foreign businesses from China and bar direct economic contact
between Chinese citizens and the outside world. Inside China
were similar policies: destruction of private internal trading
networks linking Chinese cities and villages, abolition of
private property and land ownership, and of course suppression
of the right to object to these policies.
In essence, one cannot separate postwar China's deepening
isolation from the outside world from its steadily increasing
internal repression and diminishing space for individual life
and freedom. Likewise, China's economic isolation had severe
consequences for regional peace and stability: Asia's largest
nation had little stake in prosperity and stability--in fact,
saw advantage in warfare and revolution--beyond its borders.
Every Pacific nation felt the consequences not only in
economics and trade but in peace and security.
China's domestic reforms since 1978 have helped to undo
this isolation, integrating China into the Pacific regional
economy as they opened opportunities for Chinese at home. The
results have been profoundly positive: as China's people
regained the right to farm their own land, open businesses and
choose their own places of employment, they have found new
opportunities both to raise their living standards and
determine their own futures. At the same time, China has moved
gradually from a revolutionary role in the region to a
willingness to play a positive and stabilizing role on issues
as various as the maintenance of peace on the Korean peninsula
and the Asian financial crisis.
And as China has opened its economy to the world, it has
become a more integrated, responsible member of the Pacific
community. To choose a specific example, in 1997, South Korea
and the ASEAN states were the market for $22.3 billion worth of
Chinese semiconductors, video CD players, rice, apparel and
other goods. Setting Hong Kong aside, that is one dollar in six
of China's exports to the world. These countries were also the
source of $6 billion in foreign direct investment in China,
meaning (again with Hong Kong excepted) a seventh of the FDI
China received that year.
This has implications not only for China's economy, but to
our own vital interest in a peaceful and stable region--because
1997 was, of course, the year of the financial crisis. A
generation ago, China might have seen the event as a
revolutionary opportunity. In 1997 its reaction was entirely
different: the crisis was a threat to the export markets that
support Chinese factories and farm income, and to the Asian
investment that creates jobs and growth.
The constructive and stabilizing policies China adopted,
through currency stability and contribution to IMF-led recovery
programs, thus reflected basic self-interest. But in historic
context, they enabled us to deal with the crisis primarily as
an economic and humanitarian disaster, rather than a security
crisis. And they are thus evidence of a change in China's view
of its own regional interests and role whose importance for our
national security cannot be overstated.
The Role of U.S. Trade Policy
A bipartisan U.S. trade policy over the past thirty years
has contributed to these positive trends.
Broadly speaking, our goals have been to support Chinese
domestic economic reform, integrate China into the Pacific
regional economy, through a variety of means including
commercially meaningful agreements that open opportunities for
Americas. This has extended from the lifting of the trade
embargo in 1972, to our Bilateral Commercial Agreement in 1980,
more specific agreements in the 1980s; and then a series of
recent and highly focused agreements including:
--Intellectual Property--In the early 1990's, China's
failure to protect intellectual property rights was one of the
most problematic aspects in our trading relationship. Piracy of
films, software, CDs, and other intellectual property-based
products cost our industry hundreds of millions of dollars and
led to trade confrontations with China, including invocation of
sanctions on two occasions. The United States ultimately
negotiated agreements in 1995, and then won further commitments
in 1996 that led China to close over 70 pirate production
facilities; cease the export of pirated products and
significantly improve enforcement--the principal focus of the
agreements.
--Textiles--Likewise, textile transshipment and market
access barriers have historically been a problem in our textile
trade relationship with China. While problems remain, two
separate agreements, in 1994 and 1997, combined with sustained
enforcement efforts by the U.S. Customs Service and the
Administration, as well as imposition of triple charge
penalties, have helped to mitigate these problems. The 1997
agreement, in fact, committed China for the first time to
significantly reduce its textile import restrictions.
--Agriculture--Most recently, our Agreement on Agricultural
Cooperation in April of 1999 lifted long-standing bans on
exports of American citrus, meats and Pacific Northwest wheat,
imposed due to China's unscientific sanitary and phytosanitary
measures. As in the cases of intellectual property and
textiles, we continue to hold frequent consultations with the
Chinese authorities charged with implementing the agreement,
and have seen very significant results in the first shipments
of Pacific Northwest wheat, California and Florida citrus, and
U.S. meats to China.
Taken as a whole, this work has helped to open the Chinese
economy; created a series of new opportunities for Americans;
and given the Chinese public a much broader array of contacts
with the outside world than at any time since the late 1940s.
But the work is only partly done.
China's trade barriers remain very high; a number of
policies dating from the 1950s are still unchanged; and China's
integration with the world economy remains insecure. Likewise,
China's neighbors remain blocked from an economy which--like
Japan's--could be an engine of growth. One index of this is our
substantial trade deficit with China. Another is that since we
extended Normal Trade Relations (formerly MFN status) to China
in 1980, our exports to China have grown by only $10 billion, a
figure significantly less than our total growth to most other
major trading partners in Europe, North America and East Asia.
II. China's WTO Accession, PNTR, and U.S. Trade Interests
The WTO accession agreement therefore builds upon thirty
years of work, to reach a detailed, specific and enforceable
series of commitments covering the range of American trade
priorities in China. As China has looked to WTO accession to
create jobs and foster sustainable growth through economic
reform, we have won commercially meaningful and enforceable
commitments that help Americans on the farm and on the job
export to China by addressing the many layers of trade barriers
and policies which limit access; strengthen guarantees of fair
trade; and give us additional tools for enforcement and
compliance.
Thus, in all respects, this bilateral agreement meets the
high standards President Clinton set years ago. Let me now
offer an overview of the agreement, and then turn to its
specific features.
Overview
First, our bilateral agreement is comprehensive. It will
reduce Chinese trade barriers across the range of goods,
services and agricultural products; eliminate or sharply reduce
restrictions on freedom to import and distribute goods within
China; address industrial policies intended to draw jobs and
technology to China; and strengthen our guarantees of fair
trade practices. All these reflect the ideas, advice and
guidance we have received over years of negotiations from
Members of the Committee and Congress as a whole.
Second, it is fully enforceable. China's commitments in all
areas are specific and include timetables and final dates for
full implementation. These commitments are enforceable through
our trade laws, WTO dispute settlement and other special
mechanisms including periodic multilateral review of China's
implementation and compliance. These will, of course, require
vigilance and constant commitment to enforcement by the United
States as well as by China's other trading partners in the WTO.
We are committed to vigorous monitoring and enforcement, and
are already preparing for this through a number of different
means: for example, the President's budget this year requests a
tripling of the Commerce Department's budget for China trade
enforcement, and an additional full-time China officer at USTR.
And third, its results will be rapid. On accession to the
WTO, China will begin opening its market from day one in
virtually every sector. The phase-in of further concessions
will be limited to five years in almost all cases, and in many
cases one to three years.
I will now turn to a review of the details in each major
sector.
Industry
In industrial goods, China will cut tariffs from an average
of 24.6% in 1997 to 9.4% by 2005 and bind them at these new,
lower levels. It will eliminate quotas and other numerical
restrictions. And it will allow American firms to import and
distribute their products freely in China. This is essential,
as American companies, farmers and workers need the ability to
import, export and distribute goods in China to compete
effectively--rights currently denied but which will be
permitted under the agreement, allowing our businesses to
export to China from here at home, and to have their own
distribution networks in China, rather than being forced to set
up factories there to sell products through Chinese partners.
Some highlights include:
Trading Rights--China will grant American companies, over a
three-year phase-in period, rights to import and export most
products without Chinese middlemen. Currently, the right to
engage in trade (importing and exporting) is strictly limited;
only companies that receive specific authorization or who
import goods to be used in production have such rights. This
limits not only the ability of U.S. companies to do business in
China, but in particular has limited U.S. exports.
Fertilizer--As an addendum to our November 1999 bilateral
agreement, we have reached an agreement with China that will
effectively provide market access for U.S. fertilizer. The
agreement sets up a TRQ system for importation of fertilizer
products of priority interest to the United States that is
similar to the system we negotiated for agricultural products.
Distribution--As in the case of trading rights, the right
to distribute products is critical to our ability to export
successfully to China. After accession, China will allow
American firms to market, wholesale, retail, repair and
transport their products--whether produced in China or
imported. At present, China generally prohibits companies from
distributing imported products or providing related
distribution services such as repair and maintenance services.
China will permit enterprises to engage in the full range of
distribution services over a three-year phase-in period for
almost all products.
Tariffs--China will make substantial tariff cuts on
accession with further cuts phased in, two thirds of which will
be completed in three years and almost all of which will be
completed within five years. On U.S. priority industrial items,
tariffs will drop on average to 7.1%--a figure comparable to
those of most major U.S. trading partners. As in agriculture,
China will bind tariffs at these low levels. Some specific
examples include:
Information Technology Agreement--China will participate in
the Information Technology Agreement (ITA), eliminating all
tariffs on such information technology products as
semiconductors, telecommunications equipment, computer and
computer equipment and other items by 2003 in most cases and
2005 in a few others.
Autos--China will reduce tariffs on autos from rates of
80%-100% today to 25% in 2006, and on auto parts to an average
of 10% from an average of over 23%.
Wood and Paper Products--China will reduce high tariffs on
wood and paper to levels generally about 5% and 7.5%
respectively. As noted below, China will also implement any
sectoral APEC Accelerated Tariff Liberalization initiative
adopted by the WTO in this sector.
Chemicals--China will commit to the vast bulk of chemical
harmonizations, reducing tariffs from present rates between
10%-35% to an average rate of 6.9%. These reductions include
reductions on all priority U.S. chemical exports.
Furniture--China will reduce its current average tariff
rate of 22% to 0% on all furniture items covered by the Uruguay
Round sectoral initiative, by 2005.
Accelerated Tariff Liberalization--China has agreed to
implement the Accelerated Tariff Liberalization initiative of
APEC now under consideration in the WTO, when consensus is
achieved. This would eliminate tariffs on forest products,
environmental goods and services, energy and energy equipment,
fish, toys, gems and jewelry, medical equipment and scientific
instruments, and also includes chemical harmonization.
Non-Tariff Barriers--China will eliminate quotas and other
quantitative restrictions upon accession for top U.S.
priorities, including certain fertilizers and fiber-optic
cable.
Agriculture
In agriculture, China will make substantial reductions in
tariffs both on accession to the WTO and over time. It will
adopt tariff-rate quotas that provide significant market access
for bulk commodities of special importance to American farmers.
It will agree to apply science-based sanitary and phytosanitary
standards including in grains, meats and fruits. And it will
eliminate export subsidies. Notable achievements here include:
Tariffs--China's agricultural tariffs will fall from 31% to
14% for our priority items. All cuts occur over a maximum of
four years, and will be bound at the applied levels. To cite a
few examples:
Current Under the
Level Agreement
Beef........................................ 45% 12%
Pork........................................ 20% 12%
Poultry..................................... 20% 10%
Citrus...................................... 40% 12%
Grapes...................................... 40% 13%
Apples...................................... 30% 10%
Cheese...................................... 50% 12%
Crayfish.................................... 30% 15%
Lobster..................................... 30% 15%
Wine........................................ 65% 20%
Beer........................................ 70% 0%
TRQs--China will liberalize its purchase of key bulk
agricultural commodities like wheat, corn, rice, cotton and
soybean oil, through tariff-rate quotas--that is, application
of very low tariffs (1% for bulk commodities) on a set volume
of commodities. We include in this portion of the agreement
provisions to maximize the likelihood that these TRQs are
filled. In particular, a portion of each TRQ is reserved for
importation through private traders, and TRQs which have not
been filled by a set date will be redistributed to other end-
users with an interest in importing on a first-come, first-
served basis. Some salient examples include:
1998 Total Private
Imports Initial TRQ 2004 TRQ Share
Cotton.................................................. 200,000 mt 743,000 mt 894,000 mt 67%
Wheat................................................... 2,000,000 mt 7,300,000 mt 9,636,000 mt 10%
Corn.................................................... 250,000 mt 4,500,000 mt 7,200,000 mt 25%, grows
to 40%
Rice total.............................................. 250,000 mt 2,660,000 mt 5,320,000 mt
short/med grain......................................... ............ 1,330,000 mt 2,660,000 mt 50%
long grain.............................................. ............ 1,330,000 mt 2,660,000 mt 10%
Export Subsidies--China will eliminate agricultural export
subsidies. This is an important achievement in its own right,
and a step toward our goal of totally eliminating export
subsidies worldwide.
Domestic Support--China has committed to cap and reduce
trade-distorting domestic subsidies. China also committed to
provide greater transparency to make its domestic support
measures more predictable.
Sanitary & Phytosanitary Standards--China will agree to
apply sanitary and phytosanitary standards based on science.
Among other things, this will give us additional means of
enforcing the Agreement on Agricultural Cooperation and its
commitment to lift longstanding bans on American meats, citrus
fruit and Pacific Northwest wheat.
Services
In services, China will open markets across the spectrum of
distribution services, financial services, telecommunications
including the Internet, professional, business and computer
services, motion pictures, environmental services, and other
industries.
Grandfathering--China will protect the existing activities
and market access of all service providers operating in China
at the time of accession.
Distribution--As noted above, China now generally prohibits
firms from distributing products other than those they make in
China, or from controlling their own distribution networks.
Under the Agreement, China has agreed to liberalize wholesaling
and retailing services for most products, including imported
goods, throughout China within three years. This will remove
all restrictions on wholesaling, retailing, maintenance and
repair, marketing, customer service and transportation, along
with restrictions on auxiliary services including trucking and
air express delivery, air courier, rental and leasing, storage
and warehousing, advertising and others. This is of immense
importance in its own right and as a step that will enable our
exporters to do business more easily in China.
Insurance--Currently only two U.S. insurers are operating
in China's market. With WTO accession, China agrees to award
licenses solely on the basis of prudential criteria, with no
economic-needs test or quantitative limits on the number of
licenses issued; progressively eliminate geographic limitations
within three years, and permit internal branching consistent
with the elimination of these restrictions; over five years
expand the scope of activities for foreign insurers to include
group, health and pension lines of insurance. For non-life
insurance, branch and joint-ventures at 51 percent equity share
are permitted on accession, and wholly-owned subsidiary
permitted within two years from date of accession. For life
insurance, joint ventures are permitted with the partner of
choice at 50 percent equity share upon accession.
Banking--Currently foreign banks are not permitted to do
local currency business with Chinese clients, and only a few
can engage in local currency business with their foreign
clients. China also imposes severe geographic restrictions on
the establishment of foreign banks. With this agreement, China
commits to full market access in five years for U.S. banks.
China will allow internal branching and provide national
treatment for all newly permitted activities. It will also
allow auto financing on accession, and allow local currency
business with Chinese enterprises starting two years after
accession, and allow local currency business with Chinese
individuals from five years after accession. Both geographic
and customer restrictions will be removed in five years.
Securities--China will permit minority foreign owned joint
ventures to engage in fund management on the same terms as
Chinese firms. Minority joint ventures will be allowed to
underwrite domestic equity issues and underwrite and trade
other securities (debt and equity). As the scope of business
expands for Chinese firms, foreign joint venture securities
companies will enjoy the same expansion in scope of business.
China has also agreed to hold regular consultations with the
U.S. Treasury Department under the auspices of our Joint
Economic Commission with China. The purpose of this is to
exchange information and assist the development of China's
financial and capital market.
Telecommunications--China now prohibits foreign investment
in telecommunications. With WTO accession, it will join the
Basic Telecommunications Agreement, implementing regulatory
principles including interconnection rights and regulatory
rules. It will end geographic restrictions for paging and
value-added services such as the Internet within two years,
mobile and cellular within five years, and domestic wireline
and closed user groups in six. It will also end its ban on
foreign direct investment in telecommunications services,
allowing 49% foreign investment in all services and 50% foreign
ownership for value-added and paging services in two years.
Audiovisual--China does not now allow foreign participation
in distribution of sound recordings. Under the agreement, China
will allow 49% foreign equity for the distribution of video and
sound recordings, majority ownership in three years for
construction and ownership and operation of cinemas. China has
also agreed to allow the importation of 20 films per year on a
revenue-sharing basis.
Travel and Tourism--U.S. travel agencies will now be able
to provide a full range of services for Americans in China,
such as access to government resorts and major tourist centers.
Other--Also covered is a broad range of other services--
architecture, engineering, accounting, legal, computer and
business services, environmental services, franchising, express
delivery and many more. In each, China has made specific,
enforceable commitments that open markets and offer competitive
American industries important new opportunities.
Protocol Issues
Finally, our bilateral agreement deals, appropriately, with
the special and unusual characteristics of the Chinese economy.
These include the high degree of state participation in the
Chinese economy; a series of industrial policy measures
intended to draw jobs and technology from the U.S. and other
trading partners to China, such as local content, offset and
export performance requirements as well as forced technology
transfer; and special measures to address import surges from
China and unfair export practices like dumping.
Altogether, no agreement on WTO accession has ever
contained stronger measures to strengthen guarantees of fair
trade and to address practices that distort trade and
investment. China's major commitments in this regard include:
Import Surge Protection--China has agreed to a twelve-year
product-specific safeguard provision, which ensures that the
U.S. can take effective action in case of increased imports
from China which cause market disruption in the United States.
This provision applies to all industries, permits us to act
based on lower showing of injury, and act specifically against
imports from China.
Non-Market Economy Dumping Methodology--China's WTO entry
will guarantee our right to continue using our current ``non-
market economy'' methodology in anti-dumping cases for fifteen
years after China's accession to the WTO.
Subsidies--Likewise, when we apply our countervailing duty
law to China, we will be able to take the special
characteristics of China's economy into account. Specifically,
where government benefits are provided to an industry sector
and state-owned enterprises are the predominant recipients or
receive a disproportionate share of those benefits, the United
States could take action under our unfair trade laws. The
agreement also establishes that the U.S. can determine whether
government benefits, such as equity infusions or soft loans,
have been provided to an industry using market-based criteria
rather than Chinese government benchmarks.
Investment Reforms--China will reform a large number of
policies intended to draw jobs and technology away from China's
trading partners. It will, for example, implement the WTO's
Agreement on Trade-Related Investment Measures agreement on
accession; eliminate mandated offsets, local content and export
performance requirements and refuse to enforce contracts
containing these requirements; and not condition investment
licenses on performance requirements of any kind. All of this
will make it significantly easier for Americans to export to
China from home, rather than seeing companies forced to set up
in China in order to sell products there.
Technology Transfer--China will abolish requirements for
technology transfer for U.S. companies to export or invest in
China. This will better protect our competitiveness and the
results of U.S. research and development.
State-Owned and State-Invested Companies--China commits
that state-owned companies and state-invested enterprises will
make purchases and sales solely on commercial terms, specify
that purchases by these companies for commercial and non-
governmental purposes are not government procurements and thus
are not subject to any special or different rules that could
undercut basic WTO commitments, and provide U.S. firms the
opportunity to compete for sales and purchases on non-
discriminatory terms and conditions.
Textiles--Under our agreement, quotas will remain in effect
for Chinese textiles as for those of other WTO members until
2005. From then until January of 2009, we will have a special
safeguard enabling us to address market-disrupting import
surges from China in the textile sector. This is in addition to
the broader product-specific safeguard noted above.
Compliance and Enforcement
Of course, trade commitments require full implementation
and enforcement to be meaningful in practice. Our previous
successes in improving intellectual property rights and
enforcing textile commitments demonstrate how crucial constant
oversight, monitoring, and strict enforcement are in the case
of China, and our trading partners in general. And with China's
WTO membership, we will gain a number of advantages in
enforcement we do not now enjoy.
First is the WTO dispute mechanism itself. In no previous
agreement has China agreed to subject its decisions to
impartial review, judgment and ultimately imposition of
sanctions if necessary.
Second, of course, is our continued right to use the full
range of American trade laws, including Section 301, Special
301, and our countervailing duty and anti-dumping laws.
Third, we gain substantial new leverage by creating the
product-specific safeguard, as well as guaranteeing our right
to use non-market economy antidumping methodologies. These
features of the accession will significantly strengthen our
ability to ensure fair trading practices.
Fourth, and very significant, we strengthen our enforcement
capabilities through the multilateral nature of the WTO. The
accession, to begin with, will create a multilateral review
mechanism to monitor all of China's implementation closely. And
as these commitments come into effect, China will be subject to
enforcement by all 136 WTO members, significantly diminishing
China's ability to play its trading partners off against one
another. In all previous disputes over Chinese compliance with
agreements, notably those over intellectual property, the
United States had to act alone. With China in the WTO, we will
be able to work with 135 other members, many of whom will be
concerned about the same issues we raise and all of whom will
have the legal right to enforce China's commitments.
Fifth, the specificity of China's commitments in this
bilateral agreement will help us ensure that China complies.
Experience shows that agreements with China are implemented and
enforced most satisfactorily when obligations are concrete,
specific, and open to monitoring. Our bilateral agreement
therefore includes highly specific commitments in all areas,
clear time-tables for implementation, and firm end-dates for
full compliance. These allow us carefully to monitor China's
compliance and present clear evidence of failure to comply.
Finally, however, enforcement (as in any agreement) depends
on U.S. commitment. We will relentlessly monitor and enforce
China's compliance with its Protocol of Accession and all of
the WTO agreements. We are already preparing for an increased
monitoring and enforcement effort through President Clinton's
request for $22 million in new enforcement and compliance
resources for USTR, the Commerce Department, USDA, and the
State Department. The President has requested resources for the
largest monitoring and enforcement effort for any agreement
ever, covering China's obligations in the WTO and strong
enforcement of our trade laws.
The additional resources sought for the Office of the U.S.
Trade Representative in the FY 2001 budget would create new
positions in four areas of expertise--legal, economic,
geographic, and sectoral--to be devoted to negotiating,
monitoring, and enforcing trade agreements; and would almost
double the number of USTR staff dedicated to China trade
compliance. President Clinton's initiative also would triple
resources at the Department of Commerce dedicated to China--
including administration of our antidumping and countervailing
duty laws.
The Administration will be monitoring China's compliance on
three fronts: (1) on-the-ground in China, where State, Commerce
and Agriculture officers will seek to resolve U.S. business
complaints and prevent compliance problems before they arise;
(2) here in Washington, where special interagency teams of
government experts will be created to examine China's
implementation of each of the 20 WTO agreements as well as WTO
commitments unique to China; and (3) at the WTO in Geneva,
where the United States will join 135 other WTO members in the
multilateral review mechanism designed especially for China.
USTR will create a special interagency structure that
coordinates these initiatives to ensure that China fully
complies with the commitments it has made. This will bring
together our government's experts on both China and the subject
matter of each of the 20 WTO agreements, to regularly and
vigorously monitor China's compliance with all of the WTO
agreements. These interagency teams will monitor everything
from China's implementation of its tariff-rate quota
commitments to the grant of insurance licenses and trading
rights. Where they find non-compliance, we will use all the
tools available to us--under our trade laws, the WTO dispute
settlement mechanism, the various WTO committees, and the
special WTO transitional review mechanism--to ensure
implementation. In addition, we will create two new interagency
committees to oversee two unique features of this historic
agreement: one dedicated to U.S. participation in the
multilateral review mechanism, and one to implement the
product-specific safeguard mechanism to address import surges.
These interagency groups will base their work on
information gathered from the American Embassy in Beijing, the
Foreign Agricultural Service and Foreign Commercial Service;
advice received from the business community, the agricultural
community, trade associations, organized labor, and other non-
governmental organizations; and information received from the
public, including information received in response to requests
for comment, via agency Web sites, and the Department of
Commerce's domestic district office network.
The Administration will continue to work with Congress and
American workers, farmers, and businesses to ensure effective
monitoring and quick responses to non-compliance. At the same
time, we will seek to prevent or reduce problems by working
with the Chinese, including through technical assistance where
appropriate, to ensure they fully understand their new
obligations. WTO rules will require real and meaningful changes
in China's application of trade rules and policies, and
consultation and training will help head off problems before
they arise.
Permanent Normal Trade Relations
By contrast to this comprehensive set of Chinese
commitments, the U.S. commitment is merely to continue our
present policies. Thus, the United States:
--Makes no changes in our current market access policies.
--Preserves our right to withdraw market access for China
in the event of a national security emergency.
--Requires no changes in our laws controlling the export of
sensitive technology.
--Amends none of our trade laws.
Our sole obligation is to grant China permanent NTR. This
is, in terms of our policy toward China, no real change. NTR is
simply the tariff status we have given China since our
Bilateral Commercial Agreement and normalization of diplomatic
relations in 1979; which Congress has reviewed every year
since, and found to be in our fundamental national interest.
Under the legislation President Clinton sent to Congress on
March 8th, permanent NTR would only be available to China when
the President certifies that China has entered the WTO on the
basis of the commitments we reached in our bilateral agreement.
Thus permanent NTR represents little real change in
practice. But the legislative grant of permanent NTR is
critical, as without permanent NTR we risk losing the full
benefits of the agreement we negotiated, including broad market
access, special import protections, and rights to enforce
China's commitments through WTO dispute settlement. All WTO
members, including ourselves, pledge to give one another
permanent NTR to enjoy the benefits available in one another's
markets. To refuse to grant permanent NTR, therefore, would
enable our trade competitors throughout the world to reap these
benefits; but American farmers and businesses would be left
behind.
Taiwan's WTO Accession
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.
III. WTO Accession, PNTR, and Broader U.S. Interests
Let me now turn from the specific trade policy changes
China's WTO accession and PNTR will make, to their implications
for issues separate from trade, but central to the broader US--
China relationship.
U.S. trade policy, ever since the Second World War, has
been one element in a larger response, conceived under Franklin
Roosevelt and developed into concrete policies and institutions
under President Truman, to the lessons of the Depression and
the Second World War. These included 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; and the fostering
of open markets and economic stability, with the creation of
the IMF and World Bank on the one hand, and the GATT on the
other.
Each element in this set of policies and institutions, over
the years, has had its own intrinsic benefit, but also helped
to support and strengthen the others. And this will also be
true with China's WTO accession and permanent NTR.
Human Rights and the Rule of Law
With respect to reform within China, WTO accession
represents a potentially profound and historic shift, building
upon but going much further than China's domestic reforms to
date.
China's domestic reforms have reversed the most damaging
policies of the Cultural Revolution and Great Leap Forward. WTO
accession will accelerate and deepen this process, altering
policies which date to the earliest years of the communist era.
As it enters the WTO, China will:
--Permit foreigners and all Chinese businesses to import
most goods into China;
--Reduce, and in some cases remove entirely, state control
over internal distribution of goods and the provision of
services;
--Enable foreign businesses to participate in information
industries such as telecommunications including the Internet;
and
--Subject its decisions in all areas covered by the WTO to
enforcement, including through formal dispute settlement when
necessary.
These commitments are a remarkable victory for economic
reformers in China. They will give China's people more access
to information, and weaken the ability of hardliners in
government to isolate China's public from outside influences
and ideas. More deeply, they reflect a judgment that
prosperity, security and international respect will not come
from the static nationalism, state power and state control over
the economy China adopted after the war, but that China's own
interests are best served by the advancing economic freedom,
engagement with the world, and ultimately development of the
rule of law inherent in the initiative President Truman began
in 1948 with the founding of the GATT.
The WTO accession, therefore, has potential beyond
economics and trade: as a means to advance the rule of law in
China, and a precedent for willingness to accept international
standards of behavior in other fields. That is why many Hong
Kong and Chinese activists for democracy and human rights--
Martin Lee, the leader of Hong Kong's Democratic Party who
visited Washington this week to restate his support for PNTR;
Bao Tong, the reformer jailed for seven years after Tiananmen
Square, whose appeal to the UN Human Rights Commission last
month drew worldwide sympathy--support PNTR and see WTO
accession as China's most important step toward reform in
twenty years. And it is why our support for WTO accession rests
on a broader long-term commitment to human rights and freedoms,
as well as new opportunities and strengthened guarantees of
fairness for Americans.
WTO Accession and American National Security
Perhaps still more important, the PNTR decision is a test
of our ability to develop the type of stable, mutually
beneficial relationship with China that will be critical to
peace and stability in the Pacific region in the years to come.
Our relationship with China remains marked by substantial
disagreements. When we disagree with China, to quote Theodore
Roosevelt, speaking about the Open Door Policy to China in the
first years of the 20th century:
``We must insist firmly on our rights; and China must
beware of persisting in a course of conduct to which we cannot
honorably submit. But we in our turn must recognize our duties
exactly as we insist upon our rights.''
In this spirit, we recognize how important a stable and
peaceful relationship with China is--for the Chinese, for the
world, and for America--and how fundamental is our
responsibility to act upon areas of shared interest and
benefit. We saw this responsibility clearly in the Asian
financial crisis. We see it in the environmental problems of
the Asia-Pacific; and for nearly three decades, we have seen it
in trade.
Neither this WTO accession agreement, nor any trade
agreement will ever solve all our differences. However, the WTO
accession, together with PNTR, will address a number of them;
and moreover, it will do so through a set of one-way
concessions by China. I believe that 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 today--from non-
proliferation and arms control, to reducing tensions in Korea
and South Asia. It would complicate for the foreseeable future
our existing Pacific alliances, as all of our Asian friends and
allies would view rejection of PNTR as an unnecessary rejection
of stable and constructive relations with their largest
neighbor; and a turn away from the open, confident vision we
have held for the Pacific over the years.
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 for every Pacific nation and for ourselves.
Conclusion
That is the ultimate and most significant point at stake in
Congress' decision next month. To reject PNTR would be to
severely damage American trade interests; to set back the cause
of reform in China; and to risk, without cause, a fundamental
deterioration in our relationship with the world's largest
country.
But if we have the wisdom and confidence to make the right
choice, the WTO accession and PNTR offer us 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. And
WTO accession, together with permanent Normal Trade Relations,
will be the most significant step in this process in many
years.
That is the opportunity before us. These are the stakes in
this debate. And that is why this Administration--together with
every living former Secretary of State; 47 State and
Territorial Governors; all former U.S. Trade Representatives
and Secretaries of Commerce, Agriculture, and the Treasury; and
four former Presidents of both parties--is committed to
permanent NTR on the basis of this historic agreement.
Thank you very much.
Chairman Archer. My compliments to each of you for
outstanding presentations. And I think each of you complemented
the others in your presentation.
Ms. Barshefsky, I think you did an outstanding job in
negotiating this agreement with China. Outstanding. The
accomplishments, the concessions that you were able to obtain
far exceeded what anyone would have expected when you began the
negotiations. And I understand that even recently, you have
added an additional item, even beyond what was agreed to, which
will help us to have entry for our fertilizer products. Is that
correct?
Ambassador Barshefsky. Yes, that is, Mr. Chairman.
Chairman Archer. And I just think it's an outstanding piece
of work. We cannot say often enough what you said, and which
the American people I don't think fully understand. Number one,
China will enter the WTO without any vote of the Congress of
the United States. There is no provision in the law for the
Congress to vote to keep China out of the WTO. That is not an
issue here.
Many still seem to believe that is the case. And
unfortunately, some of the print media even stated earlier on
that we would vote on it. We will not. And that needs to be
understood.
Number two, as you adequately pointed out, we gave up
nothing in these negotiations. This was not like NAFTA, where
we gave up things to get something. We gave up nothing as far
as entry of goods and services into the United States.
But if we do not approve permanent normal trading relations
with China under the rules of the WTO, the rest of the world
will get the benefit of the marvelous concessions that you were
able to negotiate and we will not. How can that possibly help
the United States of America?
China is a country of approaching 1.3 billion people. They
will not be ignored in the global market place. The rest of the
world will be involved with China. We must decide whether we
are going to also be involved. And I think that's exceedingly
important.
We can stipulate to the fact that the human rights policies
of China do not measure up to the standards that we wish. We
can agree with my colleague, Frank Wolf, that yes, they should
be improved. But how does severing our relations with China
help us in that regard? No one has ever answered that. Those
who oppose permanent NTR for China never answer the question,
will we be better off, or will we be better off if we continue
to have economic involvement with China and benefit from all of
the things that Secretary Glickman mentioned that he saw in his
trip over to China.
And it is clear to me that we will be better off in
achieving those goals if we have trading relations with China.
And then furthermore, what has not been mentioned in your
testimony but needs to be said, we in my opinion need to build
better bridges of cooperation with this massive country. It is
in our very best interests.
And the gentleman who played a major role in negotiating
with you on this agreement, Zho Rongji, will likely be deposed
if we vote down this agreement. And he is one of the reformers,
one of the people that wants to push China in the direction
that we would like to see China to go. It will play into the
hands of the hard liners in China, which certainly is not in
the best interests of achieving the goals of those who are
striving to get better human rights policies in China. And this
just needs to be said over and over and over again.
Secretary Summers, as an outstanding economist, which I
think anybody graduating from Harvard is considered to be, in
your opinion, what would be the effect on the U.S.'s current
prosperity and future competitiveness of our firms and workers
in the world markets if Congress were to deny permanent NTR to
China? What impact would that have?
Secretary Summers. Mr. Chairman, I think you've stated the
core of the case extremely well in the statement that you made.
We would be a less prosperous country, with more risk of an end
to our expansion, if we were not support the open trade policy
in its next step, which is China's participation in the WTO.
First, we would be less prosperous because of the export
opportunities that we would lose at a time of substantial
current account deficit--opportunities we would lose by putting
U.S. producers at a major competitive disadvantage relative to
producers from other countries in one of the world's largest
and most rapidly growing markets.
Second, we would be less prosperous due to our reduced
capacity to address surges of product from China through
multilateral mechanisms. And third, we would be less properous
because of what denying PNTR to China would represent for the
broad project of supporting open markets around the world,
which in my judgment has been so central to our economic
success over the last seven years.
Open markets have been the safety valve in our high
pressure economy that has enabled us to attain 4 percent
unemployment with price stability and rapid real wage growth.
Signs that we were moving away from an open market strategy
would affect the credibility of our policy broadly and in my
judgment, would adversely affect the prospects for stable
growth in the future.
Chairman Archer. Thank you. Each of you has managed large
aspects of the U.S. relations with China. In your opinion, has
the annual renewal of NTR with China, a process that has been
pursued by the Congress for the last 10 years, increased or
decreased the leverage of the U.S. with respect to changing the
Chinese behavior?
Secretary Glickman. In the case of agriculture, I don't
think it's been a positive impact. That is, it's not allowed us
to establish long term rules of engagement, which agriculture
needs in order to build markets.
Secretary Daley. I would just add, I think, Mr. Chairman,
if you look at the debate year after year after year, now 20
years, the margin of it passing seems to grow. And the debate
seems to be diminished around it. So any leverage seems to be
inconsequential, and that is why it's so important to get to a
permanent status, so that those markets are open. Having an
annual process has not opened that market to the degree that we
have wanted, and obviously nowhere near the degree the
opportunities presented by the deal that Ambassador Barshefsky
negotiated.
Ambassador Barshefsky. If I might say, Mr. Chairman, I
agree with what's been said. I think there are two reasons
annual NTR has not been leverage. First, it's in our interest
that China get annual NTR, and that immediately removes its use
as leverage to force China or any other country to do anything
that would otherwise not want to do.
To put it another way, it is not in our interest to sever
the economic relationship with China. It's not in our interest
to make an enemy of China. It's not in our interest were we to
deny NTR for China, to destroy the economy of Hong Kong, which
is exactly what would happen. It's not in our interest to
isolate China. It's not in our interest to give a helping hand
to the hard liners in China.
It is certainly not in our interest to see an increase in
tension in the Taiwan Strait because of our lack of engagement
with China. NTR has been in our interest to give to China, so
its use as leverage is by definition severely limited if not
zero.
Second, I believe annual NTR has not been leveraged with
China because it doesn't really accomplish, I believe, what
needs to be accomplished to see effective and sustained reform
in China. Effective and sustained reform in China depends upon
the Chinese. And it depends upon the creation in China of a
critical mass of economic reform and reformers in China.
Certainly buttressed by outside forces, but neither we nor any
other country can do it for China.
Annual NTR has been provided to China every year for over
20 years without China having to do a thing. It has never
catalyzed that development within China of a large body of
internal reform, because they get it for free.
Under this agreement and PNTR, the situation is entirely
reversed. China must reform. It must open its market. It must
begin to develop a rule of law. It must do these things in
order to gain PNTR from the United States. And the cementing of
a reformist element in China, which is what WTO accession will
do, a cementing of a reformist element in China will provide
far greater leverage than an annual process that has always
been a foregone conclusion.
Chairman Archer. Thank you. Mr. Summers?
Secretary Summers. Very briefly, Mr. Chairman, I think the
annual renewal process has had a reach that has exceeded its
grasp. While it has sought to pursue important objectives, it
has not been effective in meeting them. Indeed, it has been
very poorly positioned. The Annual Renewal Process It has been
just certain enough that it has afforded the United States very
little leverage to advance our agenda, and just uncertain
enough to exert a significant chill on trade activity and to
serve as an intermittent irritant in the relationship between
the United States and China.
I believe the new course that this agreement would chart,
based on pre-negotiated long-term commitments with China, based
on the prospect of legitimate multilateral enforcement
mechanisms, and based on reinforced approaches such as the
Helsinki-Commission-type model that we discussed to further our
non-trade interests, affords much the best prospect for
achieving the objectives of the annual renewal process.
I think it is very important to emphasize that the
difficulties with the annual renewal process have, if you like,
been tactical rather than strategic. It has been directed at
appropriate objectives, but it has not been the best way to
achieve those objectives. And it has sought those objectives
with significant collateral costs.
Chairman Archer. Thank you very much.
Mr. Rangel.
Mr. Rangel. Thank you.
I invite this panel just to come to make our Chairman feel
so good in seeing you on other issues that will be coming
before the Committee. Ambassador Barshefsky, I really think he
likes you. [Laughter.]
Mr. Rangel. Which causes me to take another look at this
whole thing. [Laughter.]
Mr. Rangel. Could you tell me, I was very impressed,
Secretary Glickman, with the economic gains that we can make in
agriculture, in poultry and meats and all those other things.
Have you got similar numbers as to what we could do if we were
trading with Cuba in terms of rice and beans? Do you keep these
figures at all?
Secretary Glickman. The answer is no.
Mr. Rangel. You don't.
Secretary Glickman. No. We are aware of--
Mr. Rangel. Don't we have some bill in the Senate where
they said they wanted to sell chickens and grain and somehow we
got some money for them and they dropped the bill? How did that
work?
Secretary Glickman. I'm not sure.
Mr. Rangel. Were you familiar with the legislation?
Secretary Glickman. Generally familiar with the
legislation. I am aware that the Cuban market has been entered
into quite aggressively by a lot of our trading competitors,
including the Canadians and the Europeans. And I'm sure that
our Foreign Agriculture Service does keep some general
statistics on their production.
Mr. Rangel. Could you get that for me?
Secretary Glickman. Yes, I'd be glad to.
Mr. Rangel. The people in Louisiana and Arkansas, they just
beat at my door in terms of the rice that could go over there,
bean people and all that.
Secretary Glickman. Sure.
Mr. Rangel. I am very impressed with my Chairman and all of
you that this engagement, if we want to move these countries
toward democracy, you just can't stand outside and yell at them
and not engage and not work with them. And that democracy and
certainly trade policy should be a showcase to show that we're
right, we don't just wave the constitution, we show that it
works.
Why does this argument not work with Cuba? I mean, why
can't we beat down Castro and Communism and their failure to
move toward democracy by showing them how the free open
marketplace works, and engage them? There are a few communists,
too, you know, it's not just 1.3 billion.
Secretary Daley. I think, Congressman, that as a principle,
you're absolutely right. Obviously, there have been
intermediate acts that have caused the Congress and presidents
in the past to go a different course. I think as a principle,
we all four would strongly believe that opening markets and
opening countries, especially communist countries, will bring
about reform and change.
But there have been certain actions by the Cuban government
that have caused the Congress to react, and other
administrations to act, that have blocked that principle from
being implemented.
Mr. Rangel. So all of you would agree that the principles
of engagement do far more in moving a country toward democratic
principles than isolating them? As a general principle, this
should apply to Cuba. And if it was not for, lack of a better
word, political reasons, these same principles would apply
here.
You said acts of Congress, and we acted politically. So.
[Laughter.]
Secretary Daley. We are required to follow the law. We
follow the Burton law. And the fact of the matter is, the
actions taken that moved Congress to pass that were rather
serious actions.
Mr. Rangel. Yes, but by doing this, we have not moved Cuba
toward democracy any further. So it hasn't helped us. We're
just, you know, it hasn't helped at all. You're obeying the
law, but it hasn't helped us move Cuba toward democracy at all
by isolating them.
Secretary Daley. I think we would agree that Cuba has not
moved toward democracy.
Mr. Rangel. Okay. Let's talk about, I agree that this
annual voting and not making permanent normal trade
relationship with China, I don't see what positive thing comes
out of this. If we're not happy with them, we still are going
to vote for trade, and reviewing it annually, I don't see where
that gets us any closer to the objectives that we all want in
terms of having, moving toward a standard that we can
appreciate as it deals with human rights.
But I think we all agree that the timing of this and the
Congress, everyone was always concerned not only just with the
legislative calendar, but with the political calendar as well.
And I don't think we would be honest if we didn't recognize
that the closer this gets to the election, the more difficult
it is to get an accurate count.
Now, if one were to assume that the Chinese could get into
the World Trade Organization without us, and would, and if they
would further assume that Ambassador Barshefsky has reached an
agreement that both sides believe is beneficial to the United
States as well as the People's Republic of China, if we did not
make it permanent, which it does not dramatically do, so they
why do we assume that Congress would not make it permanent? And
why do we assume that if we don't do it now, that we can't do
it in April of next year? What do we lose? What happens? China
walks away from the WTO?
Ambassador Barshefsky. Mr. Chairman, I can't imagine a
worse result than the Congress denying PNTR, either by voting
it down or by having the Administration withdraw its bill on
the promise that it would vote at some other time. China--
Mr. Rangel. I'm not saying withdraw it. There was a time we
thought that we had to wait until Chinese completed their
negotiation with the European Union. And now we understand that
even though they have not done it, it's not important, that
we're going to do what we have to do.
But suppose we just didn't do anything? Suppose it just
didn't come in time? Suppose you didn't have the votes? What
would happen? What's the downside?
Ambassador Barshefsky. Well, as you point out, China will
join the WTO this year. It would be legally required under
international rules to give the benefits of the concessions to
all countries that provided PNTR. We are the only country in
the world, in the world, that does not now already provide
China with PNTR.
Mr. Rangel. We're the only country that denies normal
relationship with Cuba. That doesn't bother us. Why would China
retaliate if they believed that they entered into a great
agreement with you, and we all agree that it was a good
agreement for us, what would they gain by saying that they're
going to make us pay politically, for what we've done
politically to them? Because I would agree with you that it
would be an affront to the dignity of the People's Republic of
China.
But what would they benefit by denying us access to their
market when they've got a good agreement, when they do have
approval by the Congress of trade relationship? What we have
not done, in the hypothetical, would be, not to make it
permanent.
Ambassador Barshefsky. Why on earth would China in effect
reward the United States by giving it the benefits of the deal
to which the U.S. would not be legally entitled on the basis
that we did not give them permanent NTR?
Mr. Rangel. Why would we call it a reward? This is a trade
agreement. And even though we have access to their markets, why
would they, who really consider themselves a developing
country, why would they just say politically, you have denied
us permanent tarde relationship, and so therefore, your
countries will not have access to our market? Would that be the
wise political thing for them to do, when a Congress is going
to be around next year?
Ambassador Barshefsky. I believe that is absolutely the
likeliest outcome.
Mr. Rangel. And what damage do you think would happen? I
mean, if this would happen, then American businesses, the sky
would fall, and then they would come back next year and say, we
would have to do this immediately. It would be an international
crisis to allow China to go into the U.N. where we didn't
normalize trade relationship. And if this is the end of your
deal? I mean, if it's not done in May, it's not going to be
done at all?
Secretary Summers. Can I add something? I think there are
three reasons why it's important to approve PNTR for China. One
is, I think we are taking a risk of a very difficult situation
that would put U.S. producers at a competitive disadvantage in
China. Nobody can say with certainty what would happen. But
we're taking an unnecessary risk by not doing it quickly.
Second, we're taking a risk with respect to other
countries' capacity and willingness to negotiate with the
United States in the future. If we demonstrate to them that
agreements that are reached by the Executive Branch, that are
seen very widely as very strong and good agreements, take
periods of several years to win approval and to go into
effect--
Mr. Rangel. You mean like Fast Track.
Secretary Summers. And third, if we do not move ahead, we
are taking a risk, in my judgment of calling into question the
American commitment to an open global trading system. I believe
that over time that, too, would have very serious consequences
for the global economy.
I think that because this is an actual agreement that has
been negotiated at the highest level with officials of a major
country who in many ways have staked their careers on it, we're
looking at a very different kind of situation than the
situation with Fast Track.
Secretary Daley. Congressman, could I just add, just to
reiterate what Secretary Summers said, I do strongly believe
our business community would be seriously disadvantaged. The
opportunities presented for their competitors from Europe and
other parts of the world would be enormous. Their credibility
would be in question.
And obviously, there would be no guarantee over the next
year when their competitors would be moving in very
aggressively into that market that Congress would be passing it
next year. So I think it would add a certain uncertainty into
their opportunities that would be enormous and would be
probably a long term negative for them.
Mr. Rangel. Thank you, Mr. Chairman.
Chairman Archer. Mr. Crane.
Mr. Crane. Thank you, Mr. Chairman. I'll be brief. I want
to first of all congratulate the Energizer Bunny, having
watched her perform in Singapore, negotiating the information
technology agreement, which was like 24 hours a day of hard
work. And then watching her performance with Zhu Rongji when he
was over here. And again, the endless negotiations and the very
significant progress made.
Then her similar type of labor out in Seattle. We cannot
pay you tribute enough, Madam Ambassador. You do a superb job
and we're very proud of you.
One quick question, and that is an update on Europe's
bilateral negotiations with China. What is the status of that?
Ambassador Barshefsky. The Europeans and Chinese will re-
engage May 15. And I would expect, if they don't conclude, at a
minimum they'll make very substantial progress at that meeting.
Mr. Crane. And then for all of you folks out there, what is
your projection as to when the private sector in mainland China
will overcome, in terms of the total business volume, overcome
the state sector? What would be your projections? I mean,
assuming that we get permanent NTR and we move down a positive
path?
Secretary Summers. Both trend lines are working in the
right direction for that, Mr. Crane. The private sector's going
up and frankly the public sector enterprises are having a lot
of trouble. I think there are a variety of questions and
definitions. But I would expect it to happen some time within
the coming decade.
Secretary Glickman. I would just mention that the Chinese
have agreed to eliminate the state trading enterprises when the
Canadians have not, when in some cases the Australians have
not, when in some cases the Europeans have not. So we have
``democratic'' countries out there, free market economies, that
are going to be behind the Chinese effort. Of course, we have
to make sure that they're properly enforced.
Mr. Crane. Bill?
Secretary Daley. I would just, I don't think we could
estimate. But I had the pleasure when I was in Beijing last
month of meeting with a number of the heads of the state owned
companies. They are number one obviously very concerned about
the competition that is coming after they enter the WTO. And
they are very committed to making the sort of changes, but
cautious, because they know the changes that they need to do,
whether it's a power, energy company that has a million
employees, but isn't going to be very competitive when other
companies come in.
I believe they are committed, I believe this process that
we're moving forward with will definitely move this much faster
than if they weren't to enter the WTO or we were not to grant
them PNTR.
Mr. Crane. And Charlene, do you have an estimate?
Ambassador Barshefsky. No, I think it's been covered.
Mr. Crane. Do you agree with them?
Ambassador Barshefsky. Yes.
Mr. Crane. Well, I commend all of you. Keep the faith,
fight the good fight, and we shall prevail. And thank you.
I yield back the balance of my time, Mr. Chairman.
Chairman Archer. We are going to have to break for this
vote within five minutes. And the Chair would inquire as to
whether any of you can come back after, and we'll also break
for lunch and will not return until 1:30. Is it possible for
any of you to come back at 1:30? If not, we will understand.
[Witnesses reply in the negative.]
Chairman Archer. All right, well, we'll try to use the next
five minutes as productively as possible. Ms. Johnson.
Mrs. Johnson. Thank you. Very briefly, so other people will
have a chance, I'd like you to describe, Ambassador Barshefsky,
more specifically the benefits of the surge protection that
you've negotiated. It is my understanding that NAFTA doesn't
have this surge protection, that the old GATT agreements, the
WTO, that we have never had the ability that this agreement is
going to give us to just manage big changes in imports.
And since it's those big, sudden rises in imports that have
cost jobs and imposed hardship on American communities, I'd
like you to describe more specifically the surge protection
provisions of your agreement.
Ambassador Barshefsky. You're quite right in pointing out
that such a provision doesn't exist in any other agreement with
respect to any other country. Nor does it exist in U.S. trade
law.
This is a provision designed to ensure that if imports from
China surge into the U.S. and cause market disruption in the
U.S., we can for a period between two and three years,
depending on the type of action, move to curb or restrict
imports in that product sector.
Mrs. Johnson. Now, this is similar to the way the voluntary
restraint agreements worked--
Ambassador Barshefsky. It is, indeed.
Mrs. Johnson.--in the 1980s, to allow the machine tool
industry to get back on its feet.
Ambassador Barshefsky. Correct. It is quite similar in
intent. It will be somewhat different procedurally in
implementation. But it is quite similar in intent and in
design.
Mrs. Johnson. I would also like to point out that had we
had this protection, the American bearing industry would be
much stronger today than it is, because it would have had a
more sensitive tool--
Ambassador Barshefsky. That's exactly right.
Mrs. Johnson.--as opposed to the anti-dumping laws, to deal
with the import of bearings from China.
Ambassador Barshefsky. And had this been in effect during
the recent steel upsurge in the fourth quarter of 1997 and
during 1998, including from China, our steel industry would
have been much better positioned.
Mrs. Johnson. Thank you.
Chairman Archer. The Chair regrets that our time has run
out.
Mr. Cardin. Mr. Chairman, could I just inquire? I wanted to
get onto the record something similar to this as it relates to
Section 201, the point that Mrs. Johnson raised. If I could
just at least put it on the record, I'd be glad to have the
answer in writing.
But it seems to me that the additional protections that are
in there in regards to China, as you point out, would have
helped us in China's deal, would have done nothing as regards
Venezuela or South Korea or Brazil. My question I guess is, is
there anything in the WTO that prevents us from using this
standard in our trade laws in regard to dumped steel or dumped
products in the United States? Could we modify our law to do
this, and therefore we would have had the protections that you
so well negotiated for China in regard to these other
countries?
Ambassador Barshefsky. No. Under WTO rules, import surge
mechanisms can't be country specific. And under WTO rules, the
standard of proof is different from this anti-surge mechanism.
Mr. Cardin. You misunderstood my question. My question is,
couldn't we amend our laws generally in this area? I don't mean
country specific.
Ambassador Barshefsky. Congress can do anything it wishes.
Mr. Cardin. The point is, you said that if this was in
effect when the steel was imported into the United States--
Ambassador Barshefsky. From China.
Mr. Cardin.--we would have been protected. But there was
more than just China involved in the surge of steel in the
United States last year. We had steel coming in from Brazil,
Venezuela, from South Korea that the Administration determined
was inappropriate.
Chairman Archer. Because we do not have adequate time to
make this vote, the Chair reluctantly has to terminate this
session this morning, and would suggest that members who have
questions continue their colloquies personally with either the
USTR or any of the other departments that are involved. And I'm
very sorry, but we're going to miss this vote if we do not
recess the Committee now.
And the Committee will be recessed until 1:30. Thank you
very, very much.
[Recess.]
[A question by submitted by Mr. Sam Johnson, and Secretary
Daley's response follow:]
Q. Do you have a view on the wisdom of U.S. companies
continuing to invest in Chinese infrastructure projects given
the recent experience of Panda Energy?
A. Staff from the Departments of Commerce and State in
Beijing and Washington, D.C. are very familiar with the Panda
Energy International power plant project in Hebei Province, and
have provided strong support on Panda's behalf. We have made
representations at the central and provincial levels, which
helped Panda secure a higher electricity tariff rate than
presently enjoyed by many Chinese domestic firms. We also are
working diligently to help Panda executives secure a long
sought after meeting with senior officials of the Chinese
Embassy in Washington. While an appointment has not been
confirmed (the Deputy Chief of Mission (DCM) is on home leave
until mid-June), Embassy officials seemed certain the DCM would
meet with Panda upon his return.
In light of Panda Energy's decision to split its investment
into multiple joint ventures that fell below the threshold
required for central government approvals, we believe the most
effective representations are with provincial officials and
will continue to seek resolution through appropriate Hebei
authorities. We have contacted Commercial Service staff in
Beijing and urged them to redouble their efforts with
provincial authorities to see that the Tangshan Panda power
plant issues are resolved. In addition, we have strongly urged
Panda to initiate immediate legal proceedings open to them
under applicable Chinese industrial and electrical law.
Chairman Archer. Our next panel will be the former
Secretary of the Treasury, the Honorable Robert Rubin, who has
now left the Government to go on to other pastures, which I
hope are greener. And we're delighted to have you back on this
very, very important issue of what we do with trade with China.
And I'm sure that we will benefit from your experiences while
you were Secretary of the Treasury, and by your experiences
since you've left the Secretary of the Treasury.
And welcome to the Committee. You're no stranger to this
Committee room, you've been here many times. And so you should
be very comfortable, and we're delighted to have you today, and
we welcome your testimony, and you may proceed. Without
objection, your entire written statement will be included in
the record, and you can tell us verbally whatever you wish.
STATEMENT OF HON. ROBERT E. RUBIN, SENIOR OFFICER, CITIGROUP,
INC., NEW YORK, NEW YORK, AND MEMBER, BOARD OF DIRECTORS, FORD
MOTOR CORPORATION (FORMER SECRETARY, U.S. DEPARTMENT OF THE
TREASURY)
Mr. Rubin. Mr. Chairman, thank you. I thought for a moment
you were going to say I could deliver my entire written
statement, which would run about an hour or so and I'm sure
would be very interesting. [Laughter.]
In any event, thank you very much, and I am delighted to be
here, Mr. Chairman. As you said, I've been here many times
before. But I think probably never on an issue that struck me
as important as I think this issue is. I particularly welcome
the opportunity to be here, because I do think that this
question is of central importance to our economy.
Let me acknowledge at the outset, Mr. Chairman, that I am
an officer of CitiGroup, Inc., and also on the board of the
Ford Motor Company, both of which I would guess would benefit,
as I think the whole American economy will benefit, from China
accession to WTO. But the views that I express are totally and
solely my own personal opinions and not on behalf of anybody
else.
I think, Mr. Chairman, that trade liberalization has been
central to our economic growth over the past seven years. And I
do believe that approval of permanent normal trade relations is
an enormously important, and I would say critical, next step
for Congress to take to keep our country on a successful
economic course. And I believe the decision to reject PNTR
could be a major reversal for our country's economic future.
And that again is why I was very pleased to be asked to come
and speak to you today.
Most specifically, I believe that you all should support
WTO accession for four reasons. First, as you know, this
agreement vastly expands our access to Chinese markets. They're
already large. They'll be the largest markets in the world some
time in the first half of the next century, I would guess.
Secondly, support for this agreement could be critical in
providing momentum for continued movement forward on trade
liberalization, and is a particularly important time to move
forward in this area, since there is debate around the world
whether trade liberalization should move forward or backward.
Thirdly, this approach offers the best prospect for
advancing the broad range of American policy aims with respect
to China, human rights, the labor rights, environmental
standards, national security. And finally, I spent a fair bit
of time in China, Mr. Chairman. I don't think there's any
question that the forces for reform and the figures in the
political system in China who are advocating reform would be
very much reinforced by passage of PNTR and that conversely,
the failure to pass PNTR would be a substantial setback to
these forces of reform.
Since 1994, about 20 percent of American growth has been
linked to the export sector. Exports now support about 12
million jobs. Average pay is about 20 percent above national
average. The number of small businesses involved in the export
industry has increased by about 100 percent over the last five
years.
Moreover, Mr. Chairman, the other side of the trade
equation, imports, contribute very substantially to our
economic well-being, although it's not politically popular to
say that. Imports lower consumer prices, they increase
competition, they increase efficiency, increase
competitiveness. And in my opinion, our open markets have been
very centrally important in the good economic conditions of the
past recent years.
Having said that, I do believe that as we proceed with
trade liberalization, and as we keep our own markets open, we
also have to have programs to deal with those who are
dislocated or adversely affected by trade. And I know that's a
subject that's been considered in this Committee.
What we should not do is to opt for protectionism or other
impediments to change, which would reduce economic progress
and, which would reduce the overall economic well-being of the
American people, and could even lead to stagnation.
As to access to the Chinese market, imports from China will
continue to come into this country without regard to what you
do on PNTR. What's at stake here is our ability to export to
China. And this agreement, as you know, greatly reduces tariffs
and even more importantly in my judgment, increases non-tariff
barriers to American exports. Every single market access
concession in this agreement was made by China. None were made
by the United States.
A vote against this bill would also be a vote, in effect,
to reduce the interactions of Americans with Chinese through
the medium of trade and in my view would be a vote to reduce
the flow of practices, of our ideas and our ideals in Chinese
society, and therefore, would cut against promotion of human
rights, environmental rights and of labor rights. I know that
Congressman Levin has made some proposals with respect to
parallel legislation not tied to PNTR. And I think those
certainly are worthy of very serious consideration by this
Committee.
Finally, Mr. Chairman, I said a moment ago, have known
leadership in China, and I think that those who advocate reform
would be severely, or could be at least severely undermined in
their efforts if our country were to turn its back on China by
rejecting PNTR.
In my view, to conclude, this is a vote on a question that
is central to our country's economic future. We have benefitted
enormously from trade liberalization of the past 20 years. We
will benefit enormously if this trade liberalization continues
and we will be adversely affected, and I think also very
substantially, if the global trading system fails to move
forward or even worse, move backwards.
I believe that for years to come, the future of our
economy, and to a very large extent, of the global economy,
will be affected by what you do here in Congress in the next
few weeks. If we do the right thing, the United States will
exercise its leadership role in a way that's good for our
economy, that is good for China, and it is good with respect to
further our national security interests and democratic ideals
in China and throughout the world. And that conversely, a
setback could have severe negative implications for our
economy, the Chinese people and all our interests and concerns
with respect to China.
Mr. Chairman, I thank you.
[The prepared statement follows:]
Statement of the Hon. Robert E. Rubin, Senior Officer, Citigroup, Inc.,
New York, New York, and Member, Board of Directors, Ford Motor
Corporation (former Secretary, U.S. Department of the Treasury)
Good morning Mr. Chairman, Congressman Rangel, Subcommittee
Chairman Crane, Congressman Levin and members of the Committee,
and thank you for inviting me to be here today. This is the
first time I have come back to Capitol Hill to testify since I
left my position as Secretary of the Treasury, and I chose this
opportunity because of my belief that the question before you
is of central importance to the future of the U.S. economy.
At the outset, Mr. Chairman, I want to acknowledge that I
serve as a senior officer of the Citigroup, Inc., and a member
of the Board of Directors of the Ford Motor Corporation, both
of which, I suspect, will benefit from China's accession to the
World Trade Organization (WTO). I also want to make it clear
that my testimony today is on my own behalf, and not on behalf
of any other organization or entity with which I may be
affiliated. These are my own personal views.
I am here today because I believe that trade liberalization
and economic engagement have been central to America's economic
growth over the past seven years, and that approval of
Permanent Normal Trade Relations (PNTR) is the next major step
the Congress should take to keep our country on this successful
economic course. Our embrace of technological change and trade
liberalization have made the U.S. the most competitive, dynamic
economy in the world: supporting PNTR status for China is the
best way to continue on that path. By contrast, a decision by
Congress to reject PNTR could have substantial adverse impact
on our nation's economic prospects in the years and decades
ahead, and would reverse trade liberalization and the exercise
of American leadership on international economic issues, which
have contributed so much to our strong job growth, rising
wages, and increased prosperity.
As I will explain in more detail today, I believe that it
is in America's interest to support China's accession to the
WTO for four reasons. First, this agreement vastly expands our
access to China's market, which will soon be the largest
economy in the world. Second, support for this agreement would
signal continued U.S. commitment to trade liberalization that
has been an indispensable element of our nation's success in
this era of technological change and globalization. It is
especially important--at a time of increasing debate in our
nation and around the world about the course of global trade
liberalization--for us to take this bold step forward.
Third, this approach offers the best prospect for advancing
other U.S. policy aims toward China, such as promoting human
rights, labor rights, and environmental standards. Finally,
this approach will reinforce the forces of economic reform in
China and thereby increase the likelihood that that nation will
move toward a market-based economy in the years to come.
To summarize, support for China's membership in the WTO is
the right thing for America, the right thing for our economy -
and, I should add, the right thing for us to do as the nation
that has done the most to shape -and benefits the most from--a
global trading system. Let me explain why I believe this to be
so.
I. Global Trade And Open Markets Have Played A Central Role In
U.S. Economic Expansion.
Today we are experiencing a time of tremendous strength in
the U.S. economy. Unemployment is near a 30-year low at 4.1
percent and has remained under 6 percent for the last six
years. The economy has generated more than 22 million new jobs
over the last nine years, and inflation has plunged to near-
record lows.
I was proud to serve in various capacities in the Clinton-
Gore administration during most of this period. Beginning in
1993, we advanced a comprehensive economic strategy which had
three key parts: (1) maintaining fiscal discipline, which has
reversed decades of deficits, to create the first federal
budget surplus in a generation; (2) making critical investments
in the American people, in the strategic areas of education,
training, research and development, among others, and; (3) the
subject I am here to discuss today--expanding trade, with a
focus on opening foreign markets for American goods and
services.
The third part of this strategy has its roots in policies
adopted five decades ago, when the leaders of this country--
reeling from the wounds of the Great Depression and World War
II--came to realize that we could no longer isolate ourselves
from global trade if we hoped to enjoy long-term peace and
prosperity. Beginning with the General Agreement on Tariffs and
Trade (GATT) and more recently, the World Trade Organization
(WTO), they began to tear down the protectionist barriers of
the first half century and turn America into a leader of the
movement for free and fair trade throughout the world. Since
taking these bold steps, we have learned as a nation that
opening up the world's markets for goods and services is a key
element of our continued productivity and prosperity. As we
watched the average tariff on industrial products in developed
countries drop precipitously during that time--from 40 percent
to under 4 percent--we have also experienced an unparalleled
economic boom, thanks in large part to the growth of global
trade.
When I tell you that increased trade over the last several
years has been critical to our nation's most recent economic
success, I risk belaboring the obvious. But the centrality of
trade to America's prosperity cannot be overstated. Over the
last five years, the volume of U.S. exports has grown by 40
percent, due, in large part, to lower foreign trade barriers,
and since 1994, approximately one-fifth of U.S. economic growth
has been linked to the dynamic export sector.
The most obvious effect of increased trade on the U.S.
economy is that exports create more and higher-wage jobs for
Americans. Jobs supported by American exports grew by 1.4
million between 1994 and 1998, with U.S. exports of goods and
services now estimated to support 12 million domestic jobs. And
when I say 12 million jobs, I am talking, by and large, about
12 million higher-wage, higher-skilled jobs. Export-related
jobs are concentrated in high-wage, high skill fields and help
raise living standards for American families. Workers in jobs
directly supported by goods exports receive wages that are 20
percent higher than the national average.
Exports also support one of the key elements of America's
economy: small business. In 1997 (the most recent year for
which such data is available), almost 210,000 U.S. companies
exported goods, nearly double the 1992 total of 113,000. And
ninety-seven percent of these companies were small or medium--
sized.
A less widely recognized but equally important fact is that
imports also contribute greatly to our well-being as a nation.
It may not be politically popular to say this, but imports lead
to lower consumer prices, greater productivity through
increased competition, lower interest rates, and higher
standards of living. According to a calculation based on
leading econometric models, if increased imports had not been
available to American consumers, U.S. inflation could have been
one percentage point higher -and interest rates two percentage
points higher--over the past three years. Thus, the benefits of
increased imports are as real as the benefits of increased
exports -and without those benefits, we would not have enjoyed
the outstanding economic conditions of the past seven years.
It is interesting to compare what has happened recently
here in the U.S., with what we have seen in other
industrialized nations with less open systems. U.S. tariffs are
among the world's lowest, averaging only 2.8 percent, and the
United States is the world's leading trader, accounting for
about 14 percent of world exports and 16 percent of imports.
While our economy has prospered--fueled in part by the most
open market among the world's major economies--other countries
that are far less open have seen their economies stagnate:
Our nation, with relatively open markets, has seen
unemployment drop to 4.1%, while European nations, with
considerably less open markets, have suffered unemployment
rates more than twice as high.
In the last six years, the U.S. economy has grown
at an average annual rate of just under 4 percent; at the same
time, the economies in less open countries like Germany and
Japan have grown much more slowly--at an average of 1.7 percent
and 1.1 percent respectively.
In addition, the U.S. has, for the past several
years, been rated ``Number One'' on the World Competitiveness
Scoreboard, ahead of France, Germany and Japan.
Trade expansion, like the growth of technology, benefits
the vast majority of Americans, but unavoidably has adverse
impacts on others. Trade liberalization can increase
dislocation, and prompts anxiety even among those who are doing
well. The Clinton-Gore administration has advocated combining
trade liberalization with an active domestic agenda--including
education, training, and expanded health care coverage--a
program that is designed to meet the real problems and
anxieties created by trade liberalization that is, on balance,
so beneficial. The objective of this combined agenda is both to
better equip our people to prosper in a rapidly changing global
economy, and to increase their confidence in their ability to
do so.
Of course, what has been done thus far in this respect--
record increases in training, a doubling of the federal
education budget, passage of the Kennedy--Kassebaum
legislation--is just a start, albeit an impressive one. Among
the additional proposals the administration has offered is the
creation of a new office that would craft and coordinate
responses and recovery efforts for regions adversely affected
by trade or economic distress, and a substantial increase to
expand trade adjustment assistance for workers who lose their
jobs due to imports and shifts in production.
Most fundamentally, it would be a mistake to address the
disruptions that trade causes by building protectionist walls
around ourselves at the expense of America's future and the
expense of countless working families who will see their
paychecks cut if open trade is constrained. Moreover, while we
have a responsibility as a nation to address concerns about job
dislocation, responsible policy-makers must take care not to
exaggerate its causes or effects. In fact, most of the
dislocation we have experienced in recent years has been
totally unrelated to any trade agreements. Between 1995 and
1997 (latest data), for example, three-quarters of displaced
workers in the U.S. were in jobs that are not import sensitive.
In the end, the economic results yielded by the trade
policies of the past seven years speak for themselves. Many of
you sat in this room and listened to doomsday predictions of
what would happen to American jobs if you voted for NAFTA.
Since passage of NAFTA, however, the unemployment rate has
fallen by 1.4 percent and is now hovering at a 30-year-low, and
our economy has created 16 million more jobs. Inflation-
adjusted median household income has increased by approximately
11.5 percent, reversing substantial declines in the previous
four years. In the end, the dire predictions of NAFTA
opponents--made during the debate over the agreement--never
materialized. Instead, the years since NAFTA was approved have
been years of unprecedented prosperity for our nation.
II. The China WTO Accession Agreement Holds Great Economic
Promise For The U.S. And For American Workers.
Later this month, you will have the opportunity to vote on
legislation granting China PNTR status and thereby ensure that
the U.S. can reap the benefits of China's WTO accession. This
is the next step we must take as a nation to reap the benefits
of open markets and sustain our economic strength into the 21st
century. The WTO agreement follows in the tradition of this
Administration's prior trade agreements by advancing the cause
of global trade while providing safeguards against unfair and
illegal trade practices. And like prior trade agreements, it
holds great promise for our economic future.
The potential benefits of the U.S.--China agreement to
American companies and workers cannot be overstated. China is
the largest nation in the world -and its economy is expected to
maintain the strongest growth in Asia over the next several
years with per capita GDP growth of 7 percent or more a year.
Chinese imports will continue to come to America with or
without PNTR legislation: what is at stake here is our ability
to export to China, and how quickly that promising economic
opportunity can be realized.
Already, China is America's fourth largest trading partner.
Despite the existence of significant Chinese barriers to trade,
U.S. exports to China totaled $13.1 billion in 1999, making
China the 12th largest market for U.S. goods. The China--U.S.
agreement will slash tariffs and eliminate other non-tariff
barriers that have strangled the efforts of American companies
to expand their presence in China. All told, China's WTO
accession is expected to nearly double U.S. exports to China
over the next five years, increasing those exports by $13
billion.
The PNTR bill has been painted by some opponents as harmful
economic legislation that will threaten American jobs. But
these characterizations could not be farther from the truth. If
I were to summarize all of my testimony into one sentence, this
would be it: The WTO agreement offers our country an incredible
opportunity because every single market access concession was
made by China--not by the United States -and therefore, the
U.S. economy, U.S. jobs, and U.S. businesses will all benefit
from this agreement, hands down. Ambassador Barshefsky's
talented team of negotiators is truly to be commended for this
achievement.
Under the bilateral WTO agreement between the U.S. and
China, China will be required to throw open the doors to its
lucrative agricultural and high-tech markets. Chinese tariffs
in numerous industrial sectors will fall precipitously, and
many non-tariff barriers to U.S. investment in China will also
be eliminated. Countless U.S. industries stand to benefit from
this agreement, and the U.S. economy is protected from the
dangers of market disruption under strict anti-dumping and
surge-protection controls, based on China's being a non-market
economy.
What did the U.S. give up exchange? Virtually nothing. The
U.S. will be required to make no market access concessions
whatsoever. We are only required to maintain the same market
access policies we are currently applying to China. It is a
remarkable agreement.
Put another way: those individuals who have expressed
concerns about our ``trade imbalance'' with China--a concern
that I believe is somewhat misplaced--should be rallying
support for the China WTO Accession Agreement, not opposing it.
Nothing in this agreement will increase Chinese imports into
our already open U.S. markets--but much in it will help expand
our exports to China's highly tariffed, highly regulated
economy. Imports from China will continue, with or without
Chinese entry into WTO; but passage of this agreement offers
the best hope of increasing U.S. exports to China.
In the interest of time, I will list only a few highlights
of the WTO agreement that illustrate its vast promise to U.S.
businesses. First and foremost, China has agreed to reduce
tariff and non-tariff barriers on trade in agriculture,
industrial goods and services. Under the agreement:
China will cut agricultural tariffs in half by
2004, with even deeper cuts on U.S. priority products such as
beef and pork.
Industrial tariffs will similarly fall--from an
average of 24.6 percent in 1997, to an average of 9.4 percent
by 2005.
China will eliminate import duties on high
technology goods by 2005 and allow foreign investment in the
Chinese Internet sector.
China will offer new market access and enact fair
regulatory standards in the area of financial services and will
open up the insurance and auto financing markets to U.S.
companies.
China will grant full trading rights to U.S.
companies to import and export without going through a local
trading company, so that American companies can distribute and
service their own products in China, and own and manage their
own distribution and service networks and warehouses.
China will stop requiring U.S. companies to
transfer their technology in order to export and invest in
China, a concession that will protect U.S. competitiveness by
preserving our valuable research and development.
As I noted earlier, among the many U.S. industries that
stand to reap huge benefits from this agreement is the
agriculture industry. China is home to one-fifth of the world's
population, and USDA has estimated that over the next several
years, the demand for food will outpace increases in
production, causing China to expand agricultural imports.
According to USDA, China will consume approximately 26 percent
of the value of bulk agricultural commodities and meats by
2003. This agreement will create a level playing field so that
American farmers and ranchers--who are the most efficient and
competitive in the world--can capitalize on this demand and
sell their products in the world's largest agricultural market.
On U.S. priority agricultural products, tariffs will drop from
an average of 31 percent to 14 percent by January 2004, with
sharper drops for beef (45 percent to 12 percent), cheese (50
percent to 12 percent), apples (30 percent to 10 percent), and
wine and beer. China will also liberalize its purchases of bulk
agricultural commodities such as U.S. corn, cotton, wheat,
rice, barley, and soybeans. And for the first time, U.S.
producers will also be able to export and distribute
agricultural products directly inside China without going
through Chinese middlemen.
What does this all mean in dollars and cents? The U.S.
Department of Agriculture has estimated that the value of these
concessions to American farmers will reach $2 billion a year by
2005.
Another vital sector of the U.S. economy that stands to
gain significant new market share in China is the automobile
industry. Right now, a combination of sky-high trade barriers
and prohibitive industrial policies has made it virtually
impossible to export cars to China. Typically, the U.S. exports
400-600 cars a year to China, many of them used--far less than
a typical retail car dealership sells in one year. Under the
accession agreement, tariffs on automobiles will plummet by 75
percent--from today's rates of 80-100 percent to 25 percent in
2006, and tariffs on automobile parts will also be reduced
significantly--from an average of more than 23 percent to 10
percent. In addition, China will be forbidden from exacting
discriminatory value-added taxes and will be required to raise
its prohibitive quota on automobile imports to $6 billion and
then eliminate it altogether within five years. China has also
agreed to open up services that are essential to automobile
sales, by allowing U.S. companies to provide financing, set up
dealerships, advertise their products, provide repair and
maintenance and import parts.
In addition to addressing the tariff and non-tariff
barriers that have thwarted American companies trying to do
business in China, the U.S. negotiators were also mindful of
legitimate concerns expressed by members of Congress and others
that any agreement with China must include strong market
disruption and enforcement provisions. As a result, this
agreement contains the strongest measures included in any WTO
agreement to date, to prevent China and Chinese companies from
acting in ways that could distort trade or undermine the U.S.
economy.
First, China has agreed to a 12-year country specific
safeguard mechanism that will allow the U.S. to limit imports
on an emergency basis if they threaten to disrupt the U.S.
economy. This surge control mechanism applies across-the-board
to all industries and will provide more effective relief than
is currently available under U.S. law.
Second, China has agreed that current U.S. practice under
antidumping laws with respect to non-market economy countries
will continue to apply to Chinese imports for 15 years after
China's accession. That means we will continue to use the same
methodology to determine whether imports from China are being
dumped, and Chinese industries will continue to have the burden
of proving that market economy conditions prevail in their
industry in order to avoid application of the non-market
economy methodology.
In addition to these China-specific provisions, WTO
accession is itself a better means for enforcing China's trade
commitments, because China's promises will now be enforceable
through the WTO dispute settlement process. China has never
before agreed to subject its decisions to impartial review, and
this will be the first time China will face the threat of
sanctions if it does not follow the terms of a trade agreement.
If China loses a dispute before the WTO, it will have to change
its practice, provide compensation, or lose out on
opportunities in the U.S. market. We have already seen how
effective this process can be. The United States has a strong
track record in WTO dispute settlement and has won, or
otherwise successfully resolved, most of the complaints it has
initiated.
Finally, WTO accession does not mean that the U.S.
government would turn a blind eye to any illegal Chinese trade
practices. To the contrary, the U.S. plans to monitor and
enforce China's compliance with the WTO agreement vigilantly
and to ensure that American companies get the fair deal that
China has promised to give them in this agreement. President
Clinton has already asked Congress for new enforcement and
compliance resources for USTR, the Commerce Department, USDA
and the State Department, and the Administration has announced
plans to increase by 75 percent the number of USTR staff
devoted to monitoring and enforcing China's trade commitments.
All of the concessions I have just outlined hold great
promise for America's companies, but only if Congress takes the
final necessary steps and grants China PNTR status. China has
already stated that it plans to accept these terms as part of
its effort to join the WTO regardless of whether the U.S. holds
up its end of the bargain. And that means a vote against PNTR
will leave American workers and businesses behind while our
competitors in Asia, Latin America, Canada and Europe reap the
benefits of U.S. efforts to open the Chinese market to foreign
companies and products.
III. This Agreement Is Our Best Chance To Help Forge Political
And Social Change In China.
Opponents of the PNTR legislation have raised concerns that
a vote in favor of PNTR would effectively endorse China's poor
record in the areas of human rights and environmental and labor
standards. The important thing to recognize, however, is that a
vote against this bill is not a vote for more human rights, a
better environment and better labor standards in China. It is
simply a vote to isolate the Chinese economy and its citizens
from America's democratic influences and to eliminate the
chance that increased interactions with Americans through trade
will expand the flow of free ideas -and our ideals--in China.
PNTR opponents are right to say that this vote is not only
about the future of our economic relationship with China but is
also about the future direction that China will take
politically and socially. But they are wrong when they ignore
the higher probability that China will move in a constructive
direction if it is included in the global community, rather
than if it is isolated from the global economic and trading
systems.
By helping to open and liberalize China's economy, WTO
accession will promote economic freedom and the rule of law in
many sectors of the Chinese economy that are now dominated by
state power and control. Compliance with WTO provisions will
require reform in many areas of the Chinese economy and will
require China to implement new laws and procedures that comply
with WTO rules. In addition, increased foreign participation in
China's telecommunications and Internet sectors will give the
Chinese people more access to information and weaken the
government's ability to isolate its citizens from democratic
influences. In fact, several leading Chinese and Hong Kong
advocates of democracy, including Martin Lee, the leader of
Hong Kong's Democratic party and Ren Wan Ding, a dissident who
spent many years in Chinese prisons, have endorsed China's WTO
membership as a foundation for broader reforms in the future.
I continue to believe that the most effective means for
furthering the U.S. view on reform in China is increasing that
nation's engagement with the international community. Exposure
to the outside world will bring the Chinese people increased
openness, social mobility and personal liberties. Over time,
increased trade relations, people-to-people contacts through
trade and over the Internet, and travel will be the most
effective ways to loosen China's rigid authoritarian
structures. WTO accession will bring all of these opportunities
to the Chinese people and will offer additional opportunities
for liberalization by opening up China's telecommunications and
Internet sectors to foreign investment and involvement.
Engagement with China through increased trade does not mean
endorsement of China's political practices. So strong are U.S.
convictions on this issue that earlier this year, Secretary
Albright traveled to Geneva specifically to lobby for United
Nations condemnation of China's human rights violations.
Although Secretary Albright's efforts were ultimately
unsuccessful, the Administration plans to continue pressing
America's human rights agenda at the U.N. and in other forums,
in an ongoing effort to bring the Chinese people an open and
democratic society that protects their freedom and religious
liberty.
The point is this: saying ``no'' to PNTR will not bring
freedom to the Chinese people. What it will do is limit their
exposure to our democratic principles and beliefs by reducing
the influence of American companies on Chinese society and
slowing down Chinese access to liberalizing influences such as
increased telecommunications and Internet access.
A ``no'' vote on PNTR has also been urged by some
environmental groups, on the ground that increasing our trade
with China will somehow endorse that country's poor
environmental practices. Once again, this argument contradicts
common sense. Passage of PNTR is not only a chance to open
China's markets to U.S. exports but also to facilitate
cooperation with China on environmental issues. After the U.S.,
China is the world's largest energy consumer and largest
emitter of greenhouse gases. While China has already begun to
take steps to combat environmental degradation, much more needs
to be done. This agreement offers another opportunity to
promote bilateral environmental engagement with China.
We have already begun to see that more interaction with
Western economies does have the potential to heighten
environmental concerns. U.S. companies have begun introducing
environmental technologies and industrial systems that minimize
waste, control emissions and enhance safety. And not
surprisingly, the majority of the Chinese cities that have met
national air quality standards to date are the coastal cities
that opened up to foreign trade and investment in the 1980s.
The WTO agreement will provide additional opportunities for
environmental protection and cleaner economic development in
China by promoting the export of environmentally friendly goods
and services to China. Passing this bill will therefore give us
one more tool for trying to influence China's behavior on
international environmental issues.
Finally, the PNTR bill is also our best chance to improve
labor standards for Chinese workers. China's WTO accession will
further open China to U.S. labor values and practices, by
increasing the presence of U.S. companies that are committed to
progressive labor management practices and protecting the
safety of their workers. In addition, the U.S. intends to
continue pressing China to respect internationally recognized
labor rights. The U.S. and China have been engaged in a
bilateral labor dialogue since 1998, and through that dialogue,
the U.S. has placed a priority on the implementation of
internationally recognized labor standards, and an end to the
detention, arrest and imprisonment of persons for labor-related
activities that are protected by the International Labor
Organization.
Lest we take any step that could be interpreted as even a
tacit approval of China's human rights and labor policies, I
believe it makes sense for this Committee and Congress to
consider other measures to respond to these concerns.
Congressman Levin has proposed, for example, the creation of a
Congressional/Executive Branch commission that would report
annually on China's record in the areas of human rights,
religious freedom and labor practices, and on the overall
U.S.--China relationship. The Commission would then make
recommendations to Congress on whether U.S. policies toward
China should be changed in response to China's record in these
areas.
While these proposals, or others like them, may help
maintain pressure on the Chinese government to comply with
basic human rights and environmental standards, I want to
emphasize that with or without such a package, the PNTR bill
does not change this country's basic policies toward the
Chinese government. Instead, it will simply eliminate the
annual NTR process in Congress, which has never been an
effective leverage point for spurring democratic reforms.
Congress has voted to extend normal trade relations with China
every year since 1980, and there is no indication that Congress
intends suddenly to change course and use that process to raise
tariffs on Chinese products. That means passage of PNTR will
only send China the same message we have sent for twenty years,
while the WTO agreement will send a strong positive message, by
speeding up the process of economic reform and strengthening
the rule of law in China.
I have heard some PNTR opponents acknowledge as much--that
is, that the current annual NTR vote has yielded little in the
way of leverage in the relationship with China -and that
perhaps Congress should try a different response, such as
voting down NTR status for China, and raising tariff and trade
barriers against Chinese imports. Such a drastic action would
give the annual NTR vote added meaning, no doubt. But the
meaning that would be created would be the launching of
dangerous new global trade disputes, with serious consequences
for the U.S. economy, our jobs, and the world's economic
future. If it is not sensible, from my perspective, to see the
U.S. to fail to move forward toward further trade
liberalization--as I have argued today--then it certainly does
not make sense, in my view, to see us move back toward the days
of Smoot-Hawley.
As a nation that was founded on basic principles of
individual liberty and religious freedom, we have strong
concerns about China's human rights abuses and the government's
oppression of political and religious dissidents. And I agree
with critics of PNTR when they say that we have an obligation
not to endorse -or even worse, promote--the suppression of
democratic principles and personal liberties in China. Where I
differ with them, however, is in their belief that passing this
bill would be a human rights setback. Do you really think that
China's government will suddenly become more liberal if we
attempt to deny its citizens access to the Internet and
interaction with foreign companies and governments? Along with
this Administration and every other Democratic and Republican
administration over the last three decades, I believe that the
answer is ``no.''
Turning our backs on the Chinese market for U.S. goods and
services would be, to use a popular expression, biting our nose
to spite our face. Not only would American companies lose out
on a hugely profitable market for American goods and services,
but we would also lose the opportunity to bring change to China
through the gradual influence of economic and political
engagement.
IV. As The World Leader On Global Trade Issues, America Has The
Opportunity and Responsibility To Shape A Global System Of
Freer Trade.
During the next few weeks, you will be barraged by numerous
contradictory arguments about what is in America's best
interests. I urge you to consider this vote as--not just
another vote on another trade measure--but a vote on a question
that is central to America's economic future. It is that
important.
Over the last twenty years, we have experienced an
electrifying pace of global liberalization in trade. Through a
series of bilateral and multilateral agreements, we have seen
tariffs and other protectionist walls crumble in Europe, North
America and Asia. These changes have brought economic benefits
to our nation and to numerous other nations around the world.
But more work remains to be done. The PNTR bill is your
opportunity to cast a vote for the single most important item
on the U.S. and global trade agenda. A setback could have
severe negative implications not only for the U.S. economy and
the Chinese people, but to all our interests and concerns with
respect to China.
The outstanding performance of the U.S. economy over the
past few years is a testament to, and a product of, our
approach to dealing with the dynamic factors of technological
change and globalization. While recognizing that these forces
of change have costs, we have embraced the benefits of these
changes and sought to put in place policies that help maximize
these benefits and minimize the adverse consequences. We have
opened our markets, increased investment in educating our
people, balanced our budget, pursued new trade agreements
around the world -and reaped an unprecedented economic
prosperity.
Our challenge--our opportunity--is to decide what is the
next step. The global trade system, which has played such a
large part in U.S. prosperity, is the product, in large part,
of U.S. leadership. Will we continue to offer that leadership
now -and continue to reap the rewards of that leadership--or
will we reverse direction with the consequent result that trade
liberalization will slow or even move backwards? Will we build
on our record of success--of increased growth, employment,
wages, and prosperity -or will we abandon that role? For years
to come, that future of our economy, and to a great extent, the
world economy, will be very much affected by what you, here in
the Congress, do in the next few weeks.
Turning our back on -or trying to turn back--the progress
in this global trading system would be bad for countless
nations, not the least of which is our own. The other developed
market economy countries are looking to the United States to
continue to advance policies that contribute to economic
strength and prosperity, at a time of great technological
change. The developing and emerging market economies are
looking to us to help build a path on which they can succeed.
And no nation stands to profit and prosper more than the United
States if our leadership in these matters meets the needs,
hopes, and aspirations of our global trading partners.
By passing PNTR legislation, the Congress can claim credit
for opening Chinese markets to U.S. goods, providing exciting
opportunities for American businesses and creating more high-
wage jobs that will carry our economic expansion far into the
21st century. And at the same time, you will be opening Chinese
society to America's democratic ideals, and helping influence
that country's future as we sow the seeds of freedom for
China's 1.2 billion citizens.
At the end of the day, all of us, together, face a simple
but stark choice: We can take a step forward toward engagement
of our global partners and the open trade in commerce and
ideas, or we can retreat to the failed isolationism that
characterized our nation's trade policies in the first half of
the 20th century. If we do the right thing and take a step
forward, the U.S. will have exercised its leadership role in a
way that is good for the American economy, that furthers our
national security interests and that promotes our fundamental
democratic ideals throughout the world.
Chairman Archer. Thank you, Mr. Secretary.
Could we just for a moment discuss between us, what are the
arguments on the other side that say no, we shouldn't do this?
Mr. Rubin. My impression, Mr. Chairman, but you would know
better than I, is that they break probably in a broad sense
into two pieces. One is a trade related piece, focusing on the
very large trade deficit we have with China. And I guess my
answer to that would be that there's nothing in this agreement
that's going to increase imports into the United States, number
one.
Number two, I think that the imports that we have, that
imports have contributed very--the openness of our markets and
imports have contributed very substantially to our economic
well-being. I think had we had not had open markets, I think we
would have had substantially less attractive economic
conditions over the past seven years than we've had with these
open markets. And the WTO accession agreement gives us the
opportunity now to export much more readily to China. So it
should on balance, I think, contribute to reducing the trade
deficit.
And the other is the argument that we are in some fashion
or another endorsing China's human rights or labor rights or
environmental protection policies. And it seems to me that's
just wrong. In many other ways, the Congress and the
Administration have acted to further our views on these
subjects. And I don't think there's any lack of clarify about
how the United States feels on these issues. I think the only
real question, practical question, is, does WTO accession
further our concerns and interests with respect to human rights
and labor rights, or is it detrimental? In my opinion it
clearly, for the reasons I said, furthers our interests.
Chairman Archer. Well, you make, I think, two very good
points. Number one, the trade deficit with China is a matter of
some concern. I'm sure it is to you and it is to me. But if we
do not pass this permanent trade relations with China, it can
only increase and not decrease. Whereas if we do pass it, we
get the benefit of the concessions the Chinese have made for
entry into their market, which will give us the opportunity to
export more and the opportunity to reduce what otherwise would
be the trade deficit. That just seems so logical to me.
And as far as the human rights situation, two sides can
disagree. It doesn't mean that either side is less concerned
about the human rights situation. But from a logical
standpoint, I don't see any way that slamming the door on trade
relations with China is going to increase our leverage or our
ability to help move them in whatever way we can to better
human rights.
While at the same time, recognizing what I think Jesse
Ventura was very, very accurate about when he testified before
this Committee about a month ago, and he said, in the end, only
the Chinese internally will be able to move their human rights
standards in the right direction. And I think there's a lot of
truth in that.
So I thank you for analyzing those arguments with me and
it's nice to have agreement between the two of us.
Mr. Rubin. Thank you, Mr. Chairman.
Chairman Archer. Mr. Rangel.
Mr. Rangel. Welcome, my friend.
Continuing this line of questioning, slamming the door on
China to me doesn't promote any progress in the area of human
rights or moving toward democracy. I just don't understand why
slamming the door on Cuba, we think that it would. And you
know, it's the same people here, the same Administration. And I
can't use the word hypocrisy, but I wish I could find one
that's more appropriate.
You're dealing with communists, you're dealing with people
who have no respect for human rights. And you're saying,
opening the doors, engaging it, makes it easier for us to move
democracy further. Why not Cuba? Why not put a package together
and say, all communist countries, we want to bring it to its
knees and we can't do it through disengagement, and standing
outside and screaming at them.
So we're going to allow the free market system to work its
will and bring them to their knees and respect democracy. What
the heck's the difference? Florida? [Laughter.]
Mr. Rubin. Well, I'm only a private citizen, Mr. Rangel. So
I--
Mr. Rangel. That's where we get the most honest answers.
Mr. Rubin. Oh, I see. Okay, well, I thought I'd avoid it
that way. Let me try another way. [Laughter.]
Mr. Rubin. I think, Mr. Rangel, the argument that you make
is a powerful argument. Having said that, you know, we've had a
policy for I guess six or seven administrations consistently in
the other direction. As I say, I think your arguments have a
lot of power, but I don't carry a brief one way or the other on
Cuba. The concern I have at the moment is China.
But I will say that you arguments have a lot of power to
them.
Mr. Rangel. Well, I guess that means that there are
political reasons why we can't deal with Cuba, and that's that.
Now, let me ask you this. Worst case scenario, we don't
take up this bill for reasons that are not partisan. But
there's a commitment that there will be a bipartisan effort to
pass it in April or May. And assuming the Chinese won't accept
this because they would be indignant, you know, that once again
they've been rebuffed by the imperialists.
But what happens to us? Do they then say, well, since you
didn't make permanent the trade relationship, that you don't
have access to our markets? And then the Europeans and others
just go in and in a few months they cut us out of the greatest
agreement that we could possibly have negotiated?
I'm just trying to find, it wasn't too long ago that we
were not certain that we were going to take up this bill. And
then when they said we were going to take it up, we said, well,
it all depends on what China does with the European Union. And
then the last word, well, the longer it takes the closer it
gets to election, the more difficult it is to pass it.
All of these were not diplomatic or economic reasons. They
were all political reasons.
Now, if those things had happened and we didn't pass the
bill, and you were there now trying to repair the damages, what
damage could possibly be done if the scenario was that it would
pass early next year?
Mr. Rubin. I guess what strikes me, Mr. Rangel, is that
there are at least two risks. There may be more that don't
occur to me. One of them is that if the EU works out their
arrangements with China in the meanwhile, and if China then
accedes to the WTO, what China could do is accede and in
effect, I have forgotten the technical term, but their
accession would not apply to the United States.
So that Europe and Japan and others would all have access
to China's markets on the more favorable terms and the WTO
agreement. And we would not have access to those more favorable
terms, in which case, as the Chairman said before, our trade
deficit would increase and we would not get the benefit of--we
would actually become less competitive in China than we are
today.
I think an even worse other possibility, since I think
China accession to WTO is very, very important, exceedingly
important to this country, is that time is not your friend in
any of these situations. And if you delay something six months,
anything can happen. You can have changes, political conditions
in this country, in that country. There's no telling what might
happen.
And I think it would be a true, a great misfortune if China
was not brought into WTO and brought closer to the global
community in that way. And I don't think it's a risk that we
should take.
Mr. Rangel. Well, it may not be a risk that we should take.
Some members might be risking their seats, which they may have
some priority in terms of how they look at this whole picture.
But what I don't understand is how we give so much leeway
to these communist rascals in saying that if we don't do it
their way, it's the highway. In other words, we're saying this.
If we insult them by not making permanent our trade
relationship, then will they get even with us by cutting a
better deal with the Europeans. One and two, even though I know
that when it comes to human rights and workers' rights,
everyone says, look in your own back yard, and we're doing
pretty good.
The Chinese never seem to give up anything. I mean, they
don't even talk about doing better. It's always on our side
that we have to engage them, and then automatically they would
do--they don't even admit there's a problem there.
It would seem to me that if for whatever reason this was
not passed that we would be dealing with at least people who
are friendly and would not try to deliberately cut us out of a
hard, worked-out agreement that we would benefit from. But just
because this political, cantankerous Congress did not agree
with our tremendously insighted leadership, the President of
the United States, that they would just penalize all of us and
say, we're not going to let you take advantage of our markets,
but Spain and the Soviets and the rest of them can come right
in.
What kind of people are we dealing with anyway?
Mr. Rubin. Well, I'll give you my view, Mr. Rangel. The
rest of the world is prepared to have China accede to the WTO.
I guess if I were on their side of this and I saw that the only
people in the world that were not prepared to do it were the
Americans, I guess I would have a little bit of a feeling that
if I wanted to disallow their participation, the benefits of
WTO, that was an appropriate thing to do. But I can't speak for
the Chinese. I have no idea how they'd react.
I guess I always come back to the same thing. We have an
agreement that overwhelmingly, in fact really totally, for
practical purposes, totally in our favor. And why take a risk,
and I think maybe even a substantial risk, that we won't get
the benefits of that if we don't move forward this year?
Mr. Rangel. If we don't do it this year, we can just forget
about it for next year.
Mr. Rubin. No, I'm just saying if we don't do it this year,
conditions may change here, they may change there. They may
accede to WTO and disallow our getting the benefit. And it
seems to me a set of risks that doesn't have, a set of risks
for which there is no reason on our part.
Mr. Rangel. You know, you and the President read from the
same script. But I was among those that supported this great
1994 budget that President Clinton had that brought us this
prosperity, when we didn't have one Republican supporting him.
And we lost 54 seats. Now, I know in history they'll be heroes
and martyrs.
But it just seems to me that you just can't discount it and
just say, well, I don't see where we can even consider doing
this next year. I thought that after you left the
Administration and became a private citizen that you'd be more
sensitive to these things. [Laughter.]
Mr. Rubin. I guess I carried my insensitivity to the
private life.
Mr. Rangel. Thank you very much. We appreciate the
contribution you've made.
Mr. Rubin. Thank you, Mr. Rangel.
Chairman Archer. Mr. Crane.
Mr. Crane. Thank you, Mr. Chairman. And Mr. Secretary, I'm
going to read a quote here to you and then ask you a question
as to the origin, the source of the quote. ``Democracy,
including rights for workers, is an evolutionary process.
Isolation and containment will not promote improved rights for
a people. Rather, working together and from within a society
will over time promote improved conditions. The U.S.--China WTO
agreement will speed up the evolutionary process in China.
American labor should support it, because it is in our interest
and in the interest of Chinese workers, too.''
Any idea who--
Mr. Rubin. I don't know who the footnote is, but I would
say, Mr. Crane, that there is nothing in there that I would
disagree with.
Mr. Crane. Absolutely. Well, the source of that is Leonard
Woodcock, former president of the United Auto Workers for about
seven or eight years. And Leonard Woodcock is one of the most
fervent supporters of advancing permanent normal trade
relations with China, and ironically, he was the ambassador
over there that participated in China's accession, I mean
getting what we then called most favored nation status and has
been normal trade relations in modern times.
So I commend him. He raises a question, a legitimate
question as to why some of his colleagues in the labor movement
are opposed to this, and he points out that it is a win-win
proposition and it's something that not only economically is
beneficial for us, but it advances other values that we
cherish, too, including free enterprise and democratic
institutions.
So I hope that we can get his message disseminated more
fully, and I commend you for your comments, too.
Mr. Rubin. Thank you, Mr. Crane.
Mr. Crane. I yield back the balance of my time.
Chairman Archer. Mr. McCrery.
Mr. McCrery. Thank you, Mr. Chairman.
Welcome again, Secretary Rubin.
Mr. Rubin. Thank you.
Mr. McCrery. Mr. Chairman, I don't really have any
questions for the Secretary. But I do want to give him a chance
to respond to a statement that I'll make. I had hoped to ask
Trade Representative Barshefsky to clarify a point that
Representative Wolf made in his testimony earlier today.
Representative Wolf said that, or at least I heard him say, and
I think this is what he said, that if we turn down permanent
NTR for China this year that was no bar to implementing the
trade agreement that Trade Representative Barshefsky had
negotiated with China, that we could do just an annual renewal
of NTR, and that would serve juste as well.
I did not think that was the case. And so after the earlier
panel had concluded, I went down and spoke with Ms. Barshefsky.
And she said no, that is absolutely not the case, that they
have had the legal eagles at GAO, Treasury Department, and
other places, look at the agreement and in fact, it is
contingent upon United States' granting permanent NTR to China.
So I just wanted to get that cleared up. And Mr. Secretary,
maybe you are familiar with that issue and you could expound
upon that.
Mr. Rubin. Yes, what you said is correct. I think it's a
technical issue, and let me tell you what the answer is. You
can check it, but I think this is right. That the WTO agreement
itself, not the U.S.--China agreement, but the basic documents
of the WTO require that the trade, that the trade conditions,
or the trade provisions not be conditioned on anything, that
there be no conditionality to trade concessions. And if our
agreement with China is conditioned on an annual NTR, then that
would be a violation of that non-conditionality provision in
the basic documents of the WTO. I think that's the technical
response to your point, I believe. But you can check that.
Mr. McCrery. But the effect is that if we do not pass
permanent NTR then--
Mr. Rubin. We are not in compliance.
Mr. McCrery.--the agreement that Ms. Barshefsky negotiated
is null and void, it has no effect.
Mr. Rubin. It would not be unconditional, and therefore we
would not have effectively acceded to China's accession, and we
would not, and if they chose to, then we would not get the
benefits of their accession to WTO. That is correct.
Mr. McCrery. And therefore, this one-side agreement in our
favor would not come to pass, and the very people, and I think
Mr. Crane did is a service by reading the statement from Mr.
Woodcock, it's beyond me, and I've talked with my UAW guys from
Shreveport, and I do not understand their point of view.
When we're going to ratify basically an agreement with
China that lowers the tariffs on automobiles, significantly,
which gives us greater opportunity to export automobiles to
China, which could preserve jobs here in the United States, I
just don't understand their point of view. To me, this is a
very one-sided agreement in our favor. It gives us an
opportunity to build jobs here in the United States.
And organized labor ought to be jumping up and down for us
to ratify this and get on with having a more normal trade
relationship with China that is more open on China's side.
Mr. Rubin. I believe if you check, you'll find that we
export something like 600 or 700 cars a year to China
currently. And this is going to reduce, I think, tariffs by 75
or 80 percent, which presumably would make a very substantial
difference in our ability to compete, I would think.
Mr. McCrery. Absolutely.
Thank you, Mr. Chairman.
Chairman Archer. Mr. Levin.
Mr. Levin. Thank you very much, and welcome, Mr. Former
Secretary. [Laughter.]
Mr. Levin. It's so good to see you again.
If I could follow up on what Mr. McCrery asked regarding
this agreement, I think it's true that in terms of the
concessions, it's one-sided. Because our tariffs are so low,
for example, and their tariffs would be reduced, though not all
the way. I might mention, though, for example, in the
automotive sector, I believe it's an accurate statement that
the tariffs for China would become lower than the tariffs for
any other Asian nation except Japan.
There are higher tariffs within the WTO scheme and would be
allocated or stipulated as to the China's market. But with your
background in investment, and your present involvement, I think
you would acknowledge that one aspect of this, one result of
this agreement is that it may well make investment in China
more attractive, more secure just because in part, hopefully
the rule of law would be more effectively evolved, grown,
within China.
So the concern of some, and I think it's a legitimate
concern, is that as investment becomes more secure, competition
will grow with the United States. That would be one of the
results.
And I think you were in on the discussions within the White
House more than a year ago, not to pry into those, which were
between all of you, but as I understand it, one of the issues
that was discussed then was the anti-surge provision, which is
a response to the likelihood that investment would be more
secure in China and therefore it is feasible and perhaps
probable that there would evolve within China the development
of, for example, industrial manufacturing capacity, which could
over time compete with the U.S. and could involve imports from
China into the United States with their different structure.
And as I understand it, as I said, it was for that reason
that there was a strong insistence within the Administration,
surely on the part of some that there be placed into the
negotiations with China an insistence on an anti-surge
provision. So I would appreciate your comments on that, as much
as you can reflect within the limits of the confidential nature
of discussions within the White House. If you could just
elaborate on that, your feelings about investment, the anti-
surge provision, etc.
Mr. Rubin. Let me if I may just do it in the opposite
direction of the points you raised. I think it is very
important that there be a strong anti-surge provision, and
there is, in the WTO agreement. Because China is a non-market
economy. And the problem we faced was that instead of market
forces determining what flowed in the United States, in a non-
market economy, you could have directed sales into this country
at non-economic prices and things of that sort.
And this WTO agreement has an extraordinarily good
provision, as you know, on surge protection. My recollection is
it's 15 years.
Mr. Levin. Twelve years. And also--
Mr. Rubin. I apologize, 12 years.
Mr. Levin.--the non-market economy provision for anti-
dumping that I think you're also--
Mr. Rubin. And they're both based on precisely what you
just said, that this is a non-market economy. So that's the
surge protection.
I think the other is a separate, independent point. I think
I probably have a somewhat different viewpoint. I think the
greater security would rest with greater investment. I actually
think it's good for this country. Generally speaking, where we
invest more we also, our exports follow our investments. Where
we invest, we then tend to import from, more from the United
States than would companies owned by companies in other
countries doing the same thing.
And secondly, if China becomes more competitive with us and
has higher standards of living and a larger GDP and all the
rest, there would be a better market for us. And that's sort of
what's happened around the developing world. I think one reason
we have had such high growth and low inflation and low
unemployment and everything else is that developing countries
have become much better markets for us, and it's fed the
system. And we import the things that we can buy most cheaply
elsewhere, and we export the things we produce most
advantageously here. And I think it's been to our benefit.
Mr. Levin. Thank you.
Chairman Archer. Mrs. Johnson.
Mrs. Johnson. Welcome, Mr. Secretary. It's a pleasure to
have you before us.
I don't know how familiar you are with the surge provisions
in the agreement. But they have impressed me as being a much
needed tool to manage the flows, the change in flows in economy
as they open up. And particularly the impact that those change
flows can have on specific communities.
Do you have any comment on those surge provisions and
whether or not they'll require legislation to implement them?
Mr. Rubin. I guess my view would be as follows. I think
that having surge provisions in this agreement was exceedingly
important for the reasons we were just discussing. This is a
non-market economy, and that creates a whole different
situation. So that's that.
I guess on the question of surge provisions more generally,
I totally agree on the effects of the surge provisions of the
WTO agreement. I think it's a very important protection because
of the non-market economy aspect of China. I guess we're
dealing with market economies. And my view is, and I think not
a very popular view, since I believe that imports are good for
this country, and I think that we benefit as we import, I think
that it is useful to have surge provisions that deal with
extreme conditions. But I am inclined to think that, I would
limit them to extreme conditions.
Mrs. Johnson. Thank you.
Chairman Archer. Mr. English.
Mr. English. Thank you, Mr. Chairman.
Welcome back, Mr. Secretary. And I very much appreciate the
opportunity to raise with you a number of the issues that I've
come across as I've discussed this issue in my district. As you
know, I have a district which is oriented toward manufacturing,
very heavily, has a substantial domestic steel industry and a
lot of local people have had questions about this bilateral
agreement.
Can you put something to rest for us right here? Is there
anything in this bilateral agreement that provides any
additional incentive to take jobs offshore?
Mr. Rubin. I think that the overwhelming effect of this
agreement will be to increase jobs in the United States.
Because barriers in China are coming down so very
substantially. It seems to me that creates the likelihood of
substantially increased exports from the United States to
China. And some people have estimated it will double over the
next five years to $26 billion or something like that.
There's nothing in the agreement that I can think of that
should result in jobs moving offshore. Not as far as I can
think.
Mr. English. In other words, any incentive for jobs to move
offshore already exist in our policy, and this isn't changing
any aspect of that. What we have instead is a one-sided set of
concessions from China that provide opportunities for us to
export into their market. Is that not your understanding?
Mr. Rubin. I think that is exactly correct. And if there is
anything that would cause a job to move abroad, and I don't
think there is anything, but even if there is, it would be
overwhelmed in magnitude by the effects that you've just cited.
Mr. English. Mr. Secretary, will these market access
concessions still be available to U.S. companies and through
them, to U.S. workers, if Congress fails to enact permanent
NTR? I've heard arguments from some opponents of permanent NTR
that suggest that we're going to get all of these goodies
anyway, so why bother to respond. What is your understanding of
the 1979 treaty versus the concessions that are included in
this package?
Mr. Rubin. I think it's an important question. I think the
simple answer to your question is, no, we would not get the
benefits. And I break it into two pieces.
On all the non-tariff benefits of this agreement, and I
think they are very, very important, I'm on the board of Ford
Motor Company, and the notion of being able to have your own
export and import capabilities, to be able to service cars and
things like that, that's a big, big deal. None of that was in
the 1979 agreement. So you only get that with WTO accession.
And the same thing is true with respect to services.
On tariff reductions, which were in the 1979 agreement, we
might or might get them without this WTO accession. But there
is a very strong argument that since we are a member of the
WTO, if China joins and we don't accede, then they can disallow
our getting the benefits under the WTO agreement, and that
would trump the 1979 agreement. That's a legal uncertainty, it
would have to be determined.
But even if the tariff reductions were to be received, the
benefits with respect to services, imports, exports, exports,
distribution repair and all that sort of thing would not be
available to American companies.
Mr. English. So at very best, if we do not follow through
on this agreement, we will get at best only the tariff side of
the arrangements, which is probably a minority of the benefits?
Mr. Rubin. Well, we certainly at best only get that. And
that's an uncertainty.
Mr. English. It's problematic.
Mr. Rubin. Yes. It's an uncertainty that I don't know the
answer to. Nobody knows the answer to.
Mr. English. In your view, will this bilateral agreement be
enforceable? After all, I'm hearing a lot of complaints about
China's adherence to our agreements over the years. I know
while you were Secretary of the Treasury, we had to confront
them on a number of occasions on things like the TRIPS
agreement.
Are you confident that this bilateral agreement will be
enforceable with the mechanisms put into place?
Mr. Rubin. Well, I guess, Mr. English, my answer to that
would be that one can never tell what would happen. But you
have now a multilateral, objective enforcement mechanism in the
WTO. And if China does not live up to their agreements, then we
have the right to impose sanctions.
So while I can't be, nobody can assure you they'll do what
they should do, but I think people can assure you there is now
a way to impose effective sanctions if they don't. This is the
first time China trade law has been subject to that kind of
enforcement mechanism.
Mr. English. Thank you, Mr. Secretary. As always, your
testimony is succinct and powerful and persuasive. And I
appreciate your time today.
Mr. Rubin. Thank you, Mr. English.
Chairman Archer. Mr. Kleczka.
Mr. Kleczka. Thank you, Mr. Chairman.
Mr. Rubin, my questions might be somewhat rhetorical to
you, because they were geared for Ambassador Barshefsky, but
she could not return after our lunch break. And in response to
some of her statements. So at will, respond to the ones you're
capable of or you want to, and then I guess as the Chairman
suggested, I'll probably have to drop her a line, or meet again
with her in the office.
But it's been repeated here many times this morning and now
early this afternoon that the Chinese gave nothing. It was all
one-sided. We got everything. Well, that type of dialogue and
conversation is good for our rec room when the boys and our
ladies are sitting around, you know, rehashing how we did. But
to say those things in public makes me wonder what the Chinese
are saying.
On Beijing television tonight, we're going to get some of
the clips from some of the cameras who are here, and they're
going to say, good, I'm glad to we got nothing from them. You
know, so something's wrong with that picture. And we're all
familiar with negotiations, be it labor negotiations, or for
yourself, trade negotiations. There's always give and take.
But for the Ambassador to come before us today and say,
these folks got nothing and we got everything, I just don't
believe it.
Mr. Rubin. Well, I'll tell you what I think the Chinese got
out of this, and I think it's enormously important to China,
though I think it's in our interest as well. What I'm about to
tell you, you know. But what you had over the last several
years in China is an effort to reform a system that has been
government run based on these state-owned enterprises, and it
is an enormously difficult thing to accomplish. I think what
this will do is put tremendous additional pressure on the state
owned enterprises to restructure and become competitive. And
that is a tremendous benefit.
Mr. Kleczka. Well, for the reformers, so then China got
something. But that's not for those who still don't agree with
the agreement that we negotiated.
Mr. Rubin. Well, China got something. But what they got was
not at a cost to us.
Mr. Kleczka. Right. But there's got to be something else
here. We've had some dialogue between yourself and Mr. Levin
about the investment that now can be made in China in a more
safe manner, in a more attractive manner. I would assume that's
a plus for China. You know, there might be some investment
today, but the threat of nationalization of that investment is
probably pretty high.
So under this agreement, American companies and American
capital can go down to China and there is going to be some
guarantee or a better feeling that not only is that investment
going to be attractive but also profitable. So would that be a
fair analysis?
Mr. Rubin. I think the correct statement on the balance of
gains and losses on this is that with respect to trade
concessions, that they were 100 percent on China's part and
zero percent on our part. It is--I think that's true.
Mr. Kleczka. It was a broader statement in my estimation,
but maybe I'm wrong.
Mr. Rubin. Oh, I don't know what the statement was. But I'm
just saying, that is true.
Mr. Kleczka. It's one-sided, they gave nothing. Now, that's
pretty broad.
Mr. Rubin. Well, they give us the opportunity to invest in
their country on a more secure basis. I think it's good for us
and good for them.
Mr. Kleczka. Okay, but that's good for them. And it's good
for the investors faced with a market economy, or lack of a
market economy, but wage rates much, much below the United
States. So if I were making widgets, and now I could pour $50
million into China to open up a widget shop, and instead of
paying a minimum wage to American workers, I can now pay 13
cents a wage, that's a pretty big concession for me.
Mr. Rubin. It is, and indeed--
Mr. Kleczka. And for the Chinese to employ some of the 1.2
billion people.
Mr. Rubin. It is, indeed. I think the one caveat to my
answer to Mr. English was that to the extent that caused an
increase in investment in the United States, that may cause--
I'm sorry, in China--that may cause some job movement to China.
But I think that would be vastly overwhelmed by the job
creation here that came as a consequence of the enormous
reduction in trade barriers in China, which would increase
imports from the United States to China. That's why I answered
the question the way that I did.
Mr. Kleczka. See, but on this very same train of thought,
we were told the same thing about free trade with Mexico. And
over the years, we've seen that trade deficit just balloon and
balloon. Companies like Master Lock in Milwaukee closing up to
move the entire operation to Mexico.
And so you can see where some of us, and when people bring
the NAFTA thing up to me, I say, we're not talking NAFTA, I try
to get them off of it. But as I sit back and have my cup of
coffee in the morning, I say, oh, boy, it sure sounds something
like that.
Mr. Rubin. Could I suggest another answer on NAFTA, because
I think it's the truth?
Mr. Kleczka. Please.
Mr. Rubin. Had it not been for NAFTA, my view is at least,
had it not been for NAFTA, I think what probably would have
happened when the Mexican peso crisis hit, because that's after
what caused the trade deficit, is I think there was a very
strong temptation in Mexico to do what they did in the early
1980s, which is increase tariffs. I think in that case they
increased them to 100 percent or something. I don't remember
exactly, but increased them vastly.
Our exports would have gone down far more. The trade
deficit would have gone up much more, and the job loss in the
United States would have been much greater. I think NAFTA
actually was enormously in the interest of American workers as
things took--even more in the context of the peso crisis than
it would have been otherwise.
Mr. Kleczka. Mr. Chairman, if I could ask one more
question, then I won't naturally come back on the second round.
Now, if in fact the Congress would not be supportive of
permanent trade status, but would vote for annual trade status,
would it be still possible if the Chinese agreed to honor the
agreements that they made with our negotiators?
Mr. Rubin. Well, they can have--
Mr. Kleczka. They'd have no responsibility or mandate to do
so. But if they thought some of the things in this agreement,
and I don't think it's all one-sided, are pro-China, if they
said, well, they're going to do us on an annual basis, we're
going to give them all the rights and benefits of the agreement
and next year, hopefully they'll make it permanent, they won't
have to lobby the Congress or whatever the rationale is.
Could they on their own motion do that?
Mr. Rubin. Well, they can do whatever they want under their
own laws with respect to tariffs on American exports. But I
think the problem, and you can double check me with the USTR,
but I think you'll find that the problem is that they're not
obligated under WTO.
Mr. Kleczka. And I think we agree with that.
Mr. Rubin. And that's the trouble.
Mr. Kleczka. But if they wanted to, for whatever reason.
Mr. Rubin. Yes, but see, if they want to, and then they
decide, and then they decide to violate whatever agreement they
have with us--
Mr. Kleczka. Tough. We have very little leg to stand on,
because they're doing it voluntarily.
Mr. Rubin. Because they're doing it voluntarily. But if
they do it on WTO, then we have sanctions. You've got it
exactly.
Mr. Kleczka. Oh. So that might be the case. Thank you, Mr.
Chairman.
Mr. Rubin. You have it exactly right.
Mr. Kleczka. Thanks for your latitude, Mr. Chairman.
Chairman Archer. If I might just jump in briefly, because
it's a good question, what's in it for the Chinese. Clearly,
the bilateral negotiations that we have had with the Chinese
are totally one-sided. We gave up nothing. I mean, that's a
reality. We gave up no tariffs, we gave up no quotas, we gave
up no existing barriers to imports coming into the United
States.
They made enormous concessions that in some instances,
their tariffs were as high as 65 percent, reducing them to 10,
11, 12 percent. And eliminating or expanding quotas, they gave
up an enormous amount of access to their country.
But even though this was bilaterally negotiated, that
bilateral negotiation is superseded by the ultimate protocol
for entry into the WTO. And whatever the concessions are that
China gave in our bilateral negotiations actually have got to
be worked together with whatever other concessions they
negotiated with other nations and ultimately, the WTO panel
will determine what the concessions are for entry into the WTO
and we're out of it. We're completely out of it.
The advantage to China is that they want to be in the WTO.
And our bilateral negotiations with them, which became a
framework for the consideration of the WTO panel for accession
are a part of what will ultimately benefit them, in their view,
because they want to be in the world trading order, they want
to be respected as a member of the world trading order. They
want to be members of the WTO. That is the benefit they get.
And they believe that is worth a great deal to them. They
have wanted to get into the WTO for quite a long number of
years, and now they're about to achieve that. And there are
innumerable, I think, benefits, and Secretary Rubin can correct
me if I'm wrong, innumerable benefits that they believe will
accrue to them just by being a member of the WTO.
And I thank you for indulging me to just make that comment.
Next on the list is Mr. Houghton.
Mr. Houghton. No questions, thank you.
Chairman Archer. Mr. Portman.
Mr. Portman. Thank you, Mr. Chairman.
I think that's an excellent point, that there are some
benefits that may be more intangible, but similar to the
benefits that Secretary Rubin mentioned are also in our
interest. For us to have the ability to retaliate against China
certainly is better than the situation we're in now. We're
still going to have some enforcement problems, as we've seen
with the Europeans and those countries that are closer to us in
many respects. But at least we have them in a rule based
organization.
And the other point I'd like to make in response to Sandy's
comment, Mr. Levin's comment, and also Mr. Kleczka's comment,
is that if we don't engage with China, and this is a point that
Chairman Archer made earlier in the dialogue with Ambassador
Barshefsky, other countries will. And when you get to the
investment issue, I look at my own district and products that
we make that perhaps could be shifted over to China. And Mr.
Levin talked about China being more competitive as a result of
this.
The Japanese, the Europeans and others will have the
ability, if we don't move forward with NTR, to establish those
same investments over there. And China will get what it wants.
It will get the investment. It just won't get it from us. And
it will make China, in that low wage rate you talked about, Mr.
Kleczka, all the more competitive.
But we won't be getting any benefit from it. So I think
there are some answers to some of the concerns that have been
raised by the UAW folks in my district and others, as to the
investment issue, that go to the fact that we live in a global
economy where we're not going to be able to control what other
countries will do. Our lack of engagement doesn't mean that
China won't get the investment and the exports that they won't.
They will. It just won't be U.S. companies.
And of course, if we aren't engaging, we don't get the
benefits that we'd otherwise get, which is our economic
benefits, which Secretary Rubin, you spelled out very well in
your testimony. And then all the other benefits that are
related to leverage on China, whether it's human rights or
regional security issues or other matters.
And I do see this as a seminal issue and one where we can
really use the benefit of your knowledge and experience, Mr.
Secretary. I'm delighted that you were willing to come here
today and spend some of your time with us, even though you have
moved to greener pastures. And much greener, as Mr. Rangel
says. [Laughter.]
Mr. Rubin. Well, maybe you'll give me stock options.
Mr. Portman. Can I ask you a couple of questions? One is,
and this is really a congressional question, I'll state a
rhetorical question, I suppose. This whole notion of PNTR, and
this is in response in part to Mr. Rangel's colloquy earlier
with your successor and other Cabinet members, PNTR I think is
a misnomer, just as MFN was. It's not P, it's just until the
United States changes its mind based on China's behavior.
And we will always have the ability, it's my understanding
we will always have the ability as a Congress to exercise our
discretion to determine that China has either conducted itself
inappropriately in trade matters or in other matters including
human rights matters, and revoke the normal trading relations
that we engage with in China. We have the ability to vote on
that any time, any year, one member as I understand it, under
the WTO rules, would have the responsibility of raising that
issue.
But so long as one member does, the P in PNTR is just, as
compared to the annual review. And this is not an undemocratic
process with an undemocratic result. I just wanted to make that
clear and make sure that you, Mr. Secretary, would agree with
that.
The second question I have, and it's really based on your
background in international negotiations and your dealing with
the leadership in China, is what do you think would happen if
we were to pull the vote this year?
Mr. Rubin. If you were not to vote this year?
Mr. Portman. If we just throw up our hands and say, we just
can't deal with this issue.
Mr. Rubin. Oh, I think it has a number, at least in my
view, has a number of ramifications, Mr. Portman. I think all
of them are exceedingly negative.
One thing, I think that there is a realistic possibility
that China would go ahead, get access to the WTO and just
exclude us from all the benefits. And as you very correctly
pointed out, everyone else will take advantage of benefits and
we'll soon be shut out, which is highly disadvantageous to us.
I think the other thing is that you do have these competing
forces within China over the question whether to reform or not
to reform, whether to move forward or not to move forward. And
I think that there would at least be a possibility of a
terrible undermining of the reformist voices in China, which is
exactly the opposite of what we should want to accomplish.
And more broadly, I think that in respect to all of our
interests, we have a real opportunity to do something that is
of enormous importance. I think in many ways, this is probably
about as important as anything that I was exposed to in the six
and a half years I was in the Government. And I think it would
be a terrible, terrible mistake for us not to move forward and
take advantage of this.
Mr. Portman. Not more important than the IRS oversight
board, I hope.
Mr. Rubin. It has its pluses and minuses. [Laughter.]
Mr. Portman. Well, seriously, Mr. Secretary, that's a very
powerful statement. And I appreciate again your willingness to
engage yourself on this issue.
Thank you, Mr. Chairman.
Chairman Archer. Mr. Doggett.
Mr. Doggett. Thank you, Mr. Chairman.
Mr. Secretary, thank you. I generally share your
perspective on the value of trade to our economy. But I do have
some other concerns about the operation of the World Trade
Organization and this agreement in particular.
As you know, the President has made comments at Davos, at
Seattle and at other places about the importance of greater
openness and transparency in the operation of the World Trade
Organization. Now that you're very much in the private sector,
does the opening up of the decision making process of the World
Trade Organization stand to benefit the business community here
in the United States and around the world?
Mr. Rubin. I think the Davos speech was a terrific speech
on trade. It was very thoughtful and balanced, at least in my
view.
I think that transparency would benefit business. I think
it would benefit everybody, because I think any time you have a
more open process, as long as it doesn't become inefficient,
ineffective, I think you're going to get better results.
So my answer to your question is yes.
Mr. Doggett. I know that there are so many multinationals,
CitiBank, others, that are interested in seeing this China
agreement approved this year. Is the business community taking
any leadership role around the world in trying to encourage the
WTO to open up its processes?
Mr. Rubin. You know, that's an interesting question. I
don't know the answer to that, but it's not a bad idea. Because
I think that your basic point is the correct point. I think
that would be in the interests of progress on trade and in the
interest of American business.
I don't know the answer but I think it's something that
should be considered.
Mr. Doggett. And I know at least in her written testimony,
Ambassador Barshefsky has emphasized the fact that China would
be, for the first time, subject to the WTO dispute resolution
process. But to the extent that's all done secretly, it doesn't
provide quite the assurance that we would have if we knew it
were being done openly.
Mr. Rubin. I think you've got an interesting point. It's
enormously in the American interest that we have open
processes. I think it really is enormously in our interest. I
think that's something we can pursue. It's a good idea.
Mr. Doggett. Last November, the President also issued an
executive order, as you're probably familiar, to require
environmental reviews with reference to our trade agreements.
Mr. Rubin. Yes.
Mr. Doggett. What role should we have relative to the
environment in our trade relationships, whether it's China or
beyond?
Mr. Rubin. My view is that we have a tremendous self-
interest in all countries, but the issue comes most to the fore
in developing countries, in having strong environmental
protection regimes. Because the problems, you know better than
I do, the problems that develop in these countries don't only
affect those countries. Unfortunately, they affect us as well.
So when a rainforest gets ripped down, it affects the
atmosphere, the environment, it affects us. So I think that we
should be pursuing environmental protection around the world.
Whether or not trade agreements are an effective or appropriate
mechanism for doing that is a separate question. But I think we
have a tremendously strong self-interest in good environmental
protection elsewhere.
Mr. Doggett. Should environment be a factor at all in trade
policy?
Mr. Rubin. I guess that my--I don't know the answer to
that. I think that's a legitimate question and I think we'll
have to work our way through it. I'm not sure I have a view on
that.
Mr. Doggett. Thank you very much.
Chairman Archer. Secretary Rubin, thank you very much. It's
a pleasure to have you back here. I hope you will return again
in the near future.
Mr. Rubin. Mr. Chairman, thank you. It's very nice to be
with you and with Mr. Rangel and everybody else. Thank you.
Chairman Archer. If our next panel will come to the witness
table. The Honorable Elliott Abrams, Reverend Daniel Baida Su,
John Kamm, Alan Reuther, Kyle Burns and David Laux.
Welcome, gentlemen. And in accordance with the rules of the
Committee, your entire printed statements, without objection,
will be inserted into the record. And the Chair would encourage
you to limit your verbal presentations to five minutes, if at
all possible. And we're happy to have all of you with us. And
Mr. Abrams, if you'd be good enough to start off.
Let me also ask each of the witnesses to identify yourself
for the record before you present your testimony.
Mr. Abrams.
STATEMENT OF HON. ELLIOTT ABRAMS, MEMBER, UNITED STATES
COMMISSION ON INTERNATIONAL RELIGIOUS FREEDOM (FORMER ASSISTANT
SECRETARY, INTERNATIONAL ORGANIZATION AFFAIRS, FORMER ASSISTANT
SECRETARY, HUMAN RIGHTS AND HUMANITARIAN AFFAIRS, AND FORMER
ASSISTANT SECRETARY, INTER-AMERICAN AFFAIRS, U.S. DEPARTMENT OF
STATE)
Mr. Abrams. Thank you, Mr. Chairman.
I'm Elliott Abrams and I'm here on behalf of the United
States Commission on International Religious Freedom, of which
I have the honor to be a member.
Let me begin by thanking you for the invitation to testify.
And I would like to submit the full statement, including the
Commission's recommendations, for the record. The Commission,
as you know, was established by Congress in 1998 in the
International Religious Freedom Act, which charged us with the
responsibility of advising the President, Secretary of State
and Congress on matters involving international religious
freedom. Just two days ago, we issued our first annual report.
The Commission has nine voting members who come from both
parties and several religions. And several of us are strong
free traders. Yet the vote was a unanimous 9-0 in our report,
asking Congress not to grant permanent NTR for China at this
moment. Let me read the reasoning that was stated in our
report.
The Commission believes that in many countries, including
some of China's neighbors, free trade has been the basis for
rapid economic growth, which in turn has been central to the
development of a more open society and political system. This
belief has been a major factor for the annual decision by
presidents and congressional majorities of both parties to
grant MFN to China over the past two decades.
However, given the sharp deterioration in freedom of
religion in China during the last year, the Commission believes
that an unconditional grant of PNTR at this moment maybe taken
as a signal of American indifference to religious freedom. The
Government of China attaches great symbolic importance to steps
such as the grant of PNTR, and presents them to the Chinese
people as proof of international acceptance and approval.
A grant of PNTR at this juncture could be seen by Chinese
people struggling for religious freedom as an abandonment of
their cause at a moment of great difficulty. We therefore
believe that Congress should grant PNTR to China only after
China makes substantial improvements for freedom of religion.
Now, what led us to this unanimous conclusion? Freedom of
religion in China is under attack. The situation today is worse
than it has been since the cultural revolution. The underlying
conditions are very bad. Persecution of Catholics loyal to the
Pope and of Protestant groups operating outside of government
supervision, the so-called house churches, persecution of
Muslims in Xinjiang, all intensified. Churches and religious
schools throughout the country were destroyed over the last
year. Worshipers continue to be detained, beaten, jailed.
Efforts to tighten control over Chinese Catholics were
increased. Bishop Yan Weiping was detained in May 1999 while
performing mass and was found dead on the street shortly after
being released from detention. A number of Catholic bishops
remain under detention. Scores of Protestant house church
leaders and worshipers have been detained.
I think you're all familiar with the situation in Tibet.
Within the last year, about 1,000 monks and nuns were expelled
from their monasteries. And you're all familiar with the
situation of Falun Gong.
So we concluded that the passage of PNTR at this juncture
would send a powerful message to Beijing that we don't much
care about all of this, unless some additional things are done
first. We believe China should be asked to make some
substantial steps toward improving respect for freedom of
religion, measured in ways like the start of a serious
bilateral dialogue with us on freedom of religion.
They have signed the international covenant on civil and
political rights, two years ago, but never ratified it, and
could be asked to ratify it. We should be getting access, the
international community should, to religious leaders under
detention. They should be responding to requests for
information. Things like this are not extreme proposals.
We've also asked for some steps by the U.S. Government
first, before you vote. That you undertake intensive and
continuing monitoring of human rights in China. That we
continue to press in the U.N. Human Rights Commission each
year. That you invite the Dalai Lama, a symbol of religious
freedom and non-violence, to speak to a joint session.
That we lead a campaign to seek the release of China's
religious leaders imprisoned or under house arrest. That the
United States oppose the holding of the Olympic Games in China
while these kinds of religious freedom conditions are extent
there.
My time is running out, Mr. Chairman, so I would just say
one final thought. This vote is not a surprise. The government
of China has known it was coming for a long time, as we all
have. Yet during this very year when you're voting, they have
unleashed a vast campaign of religious repression. What were
they thinking, that we didn't care, that none of us cared? That
Congress would pay no attention to this? That no matter how
many bishops they put in jail, no matter how many churches they
bulldozed, there would be no effect on us?
It appears that is what they thought. And we call upon you
to prove that they were wrong, and to insist first on progress
with respect to religious freedom. We think if the vote is put
off until there is some sign of progress that you will be
sending a message of strength and principle that will have
enormous and beneficial impact on China.
And we thank you again, Mr. Chairman, for this opportunity
to testify on behalf of the Commission.
[The prepared statement follows:]
STATEMENT OF THE HON. ELLIOTT ABRAMS, MEMBER, UNITED STATES COMMISSION
ON INTERNATIONAL RELIGIOUS FREEDOM (FORMER ASSISTANT SECRETARY,
INTERNATIONAL ORGANIZATION AFFAIRS, FORMER ASSISTANT SECRETARY, HUMAN
RIGHTS AND HUMANITARIAN AFFAIRS, AND FORMER ASSISTANT SECRETARY, INTER-
AMERICAN AFFAIRS, U.S. DEPARTMENT OF STATE)
Mr. Chairman and Members of the Committee:
On behalf of the United States Commission on International
Religious Freedom, of which I have the honor to be a member, I
wish to thank the Committee for this invitation to testify
about the granting of permanent normal trade relations to
China.
The Commission, established by Congress in the
International Religious Freedom Act of 1998, is charged with
the responsibility of advising the President, the Congress, and
the Secretary of State on matters involving international
religious freedom. Just two days ago we issued our first annual
report. The Commission has nine voting members who come from
both political parties and several religions--and several of us
are strong free traders. Yet we were unanimous in our Report in
asking Congress not to grant PNTR to China at this moment. Our
reasoning is stated in our Report:
The Commission believes that in many countries, including
some of China's neighbors, free trade has been the basis for
rapid economic growth, which in turn has been central to the
development of a more open society and political system. This
belief has been a major factor for the annual decision, by
presidents and congressional majorities of both parties, to
grant ``most favored nation'' (MFN) trade relations with China
each year over the past two decades. Moreover, a grant of PNTR
and Chinese membership in the World Trade Organization may, by
locking China into a network of international obligations, help
advance the rule of law there in the economic sector at first,
but then more broadly over time.
Nevertheless, given the sharp deterioration in freedom of
religion in China during the last year, the Commission believes
that an unconditional grant of PNTR at this moment may be taken
as a signal of American indifference to religious freedom. The
government of China attaches great symbolic importance to steps
such as the grant of PNTR, and presents them to the Chinese
people as proof of international acceptance and approval. A
grant of PNTR at this juncture could be seen by Chinese people
struggling for religious freedom as an abandonment of their
cause at a moment of great difficulty. The Commission believes
that Congress should not approve PNTR for China until China
makes substantial improvements in respect for religious
freedom.. . .''
What happened in China to lead us to this unanimous
conclusion? The very limited religious freedom Chinese enjoyed
in the past is under attack. The situation is worse than at any
time since the Cultural Revolution.
The underlying conditions are clear. They have been
reported by the State Department and by many human rights
organizations in detail, and are summarized in the Staff
Memorandum for the Chairman that accompanies our own annual
report and is posted on the Commission's web site,
www.uscirf.gov.
Here are some highlights:
Religious freedom is denied to the people of
China, and the right to educate one's children in one's
religion is denied. In January, Premier Zhu Rongji and others
gave speeches stressing the importance of controlling all forms
of religious activity.
Using the ``anti-cult'' provisions of the Criminal
Code, thousands of Chinese in Falun Gong and other groups were
beaten and arrested this past year because the Chinese regime
found their spiritual and religious activity to be a political
threat. Some have received long prison terms. Millions of
religious books have been burned. It is worth adding that this
crackdown clearly violates China's promises to respect
internationally-guaranteed rights to freedom of religion.
The regime continues to forbid freedom of religion
in Tibet, and continues its suppression of Tibetan Buddhism and
its punishment of any expression of religious loyalty to the
Dalai Lama. This past year, another key religious figure, the
Karmapa Lama, fled into exile. Over 1,000 monks and nuns were
expelled from their monasteries in 1999, and over 11,000 have
been expelled since 1996. Monks and nuns who resist re-
education are still being jailed and tortured, and last year
three monks in their twenties died from injuries suffered in
prison.
Persecution of Catholics loyal to the Pope, and of
Protestant groups operating outside government supervision, the
so-called ``house churches,'' and of Muslims in Xinjiang, was
intensified. Churches and religious schools established without
prior approval were destroyed. In 1999 and this year,
worshipers continued to be detained, beaten, jailed, and fined.
Efforts to tighten control over Chinese Catholics were
increased, and many Catholic clergy loyal to the Vatican have
been detained in recent months. Bishop Yan Weiping was detained
in May 1999 while performing mass and was found dead on a
street shortly after being released from detention. A number of
Catholic bishops remain under detention. In January 2000 the
government had the official Catholic church ordain five new
bishops without the approval of the Vatican or local dioceses;
two of them replaced bishops detained by the government in
1999. Scores of Protestant ``house church'' leaders have been
detained.
The Commission concluded that passage of PNTR at this
juncture would send a powerful message to the government of
Beijing that we don't much care about all of this--and perhaps
as tragically, send the same message to millions of Chinese
believers struggling to practice their religion.
We therefore believe that the U.S. Congress should not
approve Permanent Normal Trade Relations for China until China
makes substantial improvements in respect for religious
freedom, as measured by the following standards:
establishment of a serious dialogue with the
United States on religious freedom concerns;
ratification by China of the International
Covenant on Civil and Political Rights, which it signed in 1998
but has never ratified;
access to religious leaders, including those under
detention, for international human rights organizations, by the
Commission itself, and respected international human rights
organizations;
detailed responses by the Chinese government to
inquiries about individuals known to be imprisoned for reasons
of religion or belief;
and the release from prison of all persons
incarcerated for religious reasons.
We also ask the following of our own government:
that you in Congress hold annual hearings on human
rights in China;
that the United States continue to press
resolutions about human rights in China each year in the UN
Human Rights Commission, and do it seriously and at the highest
level;
that you invite the Dalai Lama, an international
symbol of religious freedom and non-violence, to address a
joint session;
that the US help lead a campaign to seek the
release of Chinese religious leaders imprisoned or under house
arrest;
that the United States raise the profile of
conditions for Uighur Muslims in Xinjiang, in diplomatic
discussions and in Uighur language radio broadcasting;
and finally that until significant progress has
been made in religious freedom and human rights in China, the
United States should use its influence to ensure that China not
be selected as the site for the Olympic Games.
The full text of the Commission's recommendations on China
in its May 1, 2000 Report follows this statement.
Mr. Chairman, the state of religious freedom in China is
poor and is deteriorating. To repeat our unanimous conclusion,
``Given the sharp deterioration in freedom of religion in
China during the last year, the Commission believes that an
unconditional grant of PNTR at this moment may be taken as a
signal of American indifference to religious freedom.. . .A
grant of PNTR at this juncture could be seen by Chinese people
struggling for religious freedom as an abandonment of their
cause at a moment of great difficulty. The Commission therefore
believes that Congress should not approve PNTR for China until
China makes substantial improvements in respect for religious
freedom.. . .''
Mr. Chairman, on my own behalf and on behalf of all the
members of the U.S. Commission on International Religious
Freedom, I thank you for this opportunity to appear here today.
The following is the China section of the Recommendations
of the United States Commission on International Religious
Freedom in its May 1, 2000 Annual Report
B. The People's Republic of China
1. Background on China
The government of China and the Communist Party of China
(CPC) discriminate, harass, incarcerate, and torture people on
the basis of their religion and beliefs. Chinese law
criminalizes collective religious activity by members of
religious groups that are not registered with the state. It
registers only those groups that submit to membership in one of
the government-controlled associations affiliated with the five
officially recognized religions. Members of registered
religious groups can only engage in a limited range of what the
state deems ``normal'' religious activities.
The religious and belief communities that resist
registration or that have been denied permission to register,
including Catholics loyal to the Pope and Protestants who
worship in ``house churches,'' have no legal standing in China.
Adherents are often harassed, detained, and fined. Meetings are
broken up, unauthorized buildings are destroyed, and leaders
are arrested and frequently imprisoned.
Over the past several years, Chinese officials have been
employing increasingly strict laws and regulations as
instruments to harass religious groups and maintain control
over religious activities. Officials responsible for enforcing
the strict laws continue to be guided by CPC policy directives
on religion. Furthermore, the Chinese legal system does not
protect human rights from state interference, nor does it
provide effective remedies for those who claim that their
rights have been violated. Thus, this Commission finds that
even though the Chinese government modified its means of state
control by moving to a system of regulation of religion
according to law, it has not improved the conditions of
religious freedom in China.
The right to freedom of religious belief is explicitly
denied to the 60 million members of the CPC, and the 3 million
members of the Chinese military, and to hundreds of millions of
minors under the age of 18, whose education the government
monopolizes.
The new ``anti-cult'' provision of the Criminal Code is
being used to impose long prison sentences on leaders of the
Falun Gong and Zhong Gong spiritual movements as well as
Protestant house church leaders.
Chinese authorities exercise tight control over Tibetan
Buddhist monasteries, select and train important religious
figures, and wage an invasive ideological campaign both in
religious institutions and now among the Tibetan people
generally.
Chinese authorities similarly exercise tight control over
the Uighur Muslims in Xinjiang in northwest China. There are
credible reports of thousands of arbitrary arrests, the
widespread use of torture, and extra-judicial executions.
This Commission concludes that the practices of the Chinese
government and the CPC with respect to freedom of religion and
belief violate the standards of the Universal Declaration of
Human Rights and the International Covenant on Civil and
Political Rights (ICCPR). Each of these international
instruments prohibits discrimination on the basis of religion
or belief, and the Universal Declaration and the ICCPR protect
the right to hold and to manifest beliefs. The government of
China, however, imposes undue restrictions on the manifestation
of beliefs and bans several beliefs altogether.
2. Commission Recommendations on China
In light of the preceding description of the situation in
China, the Commission makes the following recommendations:
Recommendation 2.1: Permanent Normal Trade Relations (PNTR) with China
As of May 1, 2000, the date on which the Commission is
releasing this report, China has applied for entrance into the
World Trade Organization (WTO), a multilateral organization
including the United States and other industrialized countries.
As a part of the admission process, the WTO established a
``Working Party on the Accession of China,'' a task force that
oversees the consideration of China's application to join the
WTO. The Working Party is responsible for drafting a Protocol
for the accession of China and for monitoring a series of
bilateral market-access agreement negotiations between China
and 37 members of the WTO (including the United States and the
European Union). Although conclusion of these bilateral
agreements is not strictly necessary for obtaining WTO
membership, such agreements establish the terms of the trade
relations, on a bilateral basis, between China and the WTO
members with whom it enters into the bilateral agreements.
China and the United States signed a bilateral accession
agreement in 1999, although China is not bound by the agreement
unless the United States grants China PNTR status. As of April
28, the European Union and several other members, unlike the
United States, have not concluded their bilateral discussions
with China. After China agrees to an accession Protocol with
the Working Party, China will likely receive a sufficient
number of votes from WTO members to permit it to join. The U.S.
Congress currently is scheduled to vote on the question of
whether to grant PNTR status to China within the next few weeks
(currently scheduled for the week of May 22).
The Commission believes that in many countries, including
some of China's neighbors, free trade has been the basis for
rapid economic growth, which in turn has been central to the
development of a more open society and political system. This
belief is the basis for the annual decision, by presidents and
congressional majorities of both parties, to grant ``most
favored nation'' (MFN) trade relations with China each year
over the past two decades. Moreover, a grant of PNTR and
Chinese membership in the World Trade Organization may, by
locking China into a network of international obligations, help
advance the rule of law there in the economic sector at first,
but then more broadly over time.
Nevertheless, given the sharp deterioration in freedom of
religion in China during the last year, the Commission believes
that an unconditional grant of PNTR at this moment may be taken
as a signal of American indifference to religious freedom. The
government of China attaches great symbolic importance to steps
such as the grant of PNTR, and presents them to the Chinese
people as proof of international acceptance and approval. A
grant of PNTR at this juncture could be seen by Chinese people
struggling for religious freedom as an abandonment of their
cause at a moment of great difficulty. The Commission therefore
believes that Congress should not approve PNTR for China until
China makes substantial improvements in respect for religious
freedom, as measured by the following standards:
2.1. The U.S. Congress should grant Permanent Normal Trade
Relations status to China only after China makes substantial
improvements in respect for freedom of religion, as measured by
the following standards;
2.1.a. China agrees to establish a high-level and ongoing
dialogue with the U.S. government on religious-freedom issues.
China's policy on treatment of religious exercise and
religious groups is dictated by the Chinese Communist Party
through its United Front Work Department (UFWD). This policy is
implemented by the national and local offices of the Religious
Affairs Bureau (RAB).
Since May of 1999, no dialogue on religious freedom or
other human rights has taken place between the United States
and any level of the Chinese government. The RAB has refused to
meet with U.S. embassy personnel or even to receive official
communications. Obviously, this closed door policy in Beijing
is not conducive to bilateral communication or improvement in
religious freedom for the Chinese people.
The Commission recommends that the first condition for
granting PNTR be the reestablishment of direct, ongoing, and
constructive dialogue between high-level United States and
Chinese officials on freedom of religion and belief. The
dialogue should include officials within the UFWD.
In addition to official dialogue between governments on
religious-liberty issues, the U.S. government should press
Beijing to allow contacts, official and unofficial, between and
among various religious groups in China and their counterparts
in the United States. This communication can only increase
understanding in both countries of the similarities and
differences in conditions for religious liberty in each
country.
2.1.b. China must agree to ratify the International Covenant on
Civil and Political Rights.
China is the only member of the UN Security Council that
has not ratified the ICCPR. In anticipation of President
Clinton's trip to China in 1997, China signed the ICCPR in
1998. Ratification of the ICCPR would demonstrate to the world
and the people of China that the government takes seriously its
role as a member of the international community.
2.1.c. China must agree to permit unhindered access to
religious leaders, including those imprisoned, detained or
under house arrest, by the U.S. Commission on International
Religious Freedom and respected international human rights
organizations.
2.1.d. China must provide a detailed response to inquiries
regarding a number of persons who are imprisoned, detained, or
under house arrest for reasons of religion or belief, or whose
whereabouts are not known but who were last seen in the custody
of Chinese authorities. The Department of State, after
consultation with human rights and religious groups, should
compile a detailed list of such prisoners of conscience and
make specific inquiries to the Chinese government.
China has detained thousands of religious practitioners,
many in the ``reeducation through labor'' (laojiao) system.
Using its laws against ``cults,'' the government recently
prosecuted scores of religious leaders and gave them prison
sentences as long as 18 years. At least seven Roman Catholic
bishops who have refused to join the relevant governmental
association have been arrested and remain imprisoned or have
not been seen in public since. In 1997, a delegation to China
of three American clerics (including now-Commissioner
Archbishop Theodore McCarrick), asked to meet with several
leaders (such as James Su Zhimin, Bishop of Hebei), but Chinese
authorities refused to permit it.
Shen Yiping and Zheng Suqian were imprisoned for their
leadership of large Protestant ``house churches'' in 1999.
Thousands of practitioners of Falun Gong have been detained and
more than 300 have been sentenced, including one leader to 18
years. Within the Tibetan Buddhist community, the Dalai Lama's
choice for the Panchen Lama--a child named Gendun Choekyi
Nyima--has not been seen since 1995, and numerous monks and
nuns remain in prison in Lhasa.
2.1.e. China must release from prison all persons incarcerated
for religious reasons.
Needless to say, the Commission believes that all prisoners
incarcerated for reasons of religion or belief should be
released immediately. The very least the government of China
should be required to do before PNTR is granted is to free
those who are minors and those whose health is poor.
Recommendation 2.2: Steps the U.S. Congress Should Take Before Granting
PNTR
Before granting PNTR to China:
2.2.a. The U.S. Congress should announce that it will hold
annual hearings on human rights in China.
The Commission believes that congressional monitoring of
human rights conditions in China should be intensive and
continuous. If normal trade relations are to be permanent, so
should congressional monitoring of human rights conditions in
China be permanent. Toward this end, the Commission urges
Congress to hold annual hearings for monitoring Chinese human
rights performance. Congress should announce this initiative
before PNTR is granted, while the issue is still visible and
while both proponents and opponents of PNTR are espousing the
importance of monitoring and leveraging improvements in human
rights in China. The full Senate Committee on Foreign Relations
and House Committee on International Relations should plan
regular, in-depth hearings (to be held at least annually).
2.2.b. Congress should invite the Dalai Lama to address a Joint
Session of Congress.
The Dalai Lama is an international symbol of religious
freedom and non-violence. A congressional invitation to address
a joint session would honor him and the cause of religious
freedom at a moment when that cause is under attack in China.
Such an invitation would demonstrate continuing Congressional
concern and a firm resolve never to abandon freedom of religion
as a central human right. The Commission therefore urges that
Congress issue the invitation as soon as possible.
Recommendation 2.3: UN Human Rights Commission Resolution on China
The Commission believes that China should be censured annually by
the UN Commission on Human Rights (UNCHR) as long as the government's
treatment of religious communities falls dramatically short of the
standards of the UN Declaration on Human Rights and the ICCPR.
Since 1990, the United States has sponsored a resolution on China
in the UNCHR every year except 1998. The UNCHR has voted to take no
action on those resolutions every year except in 1995. On only two
occasions, in 1995 and 2000 (the only two years that the UNCHR came
close to debating the United States' resolution on China) did the
Administration make an early and concerted effort to push for the
resolution. China, on the other hand, lobbies UNCHR member countries
year-round, dispensing aid and favors in return for commitments that
the members will support a ``no action'' motion each year at the UNCHR.
2.3. Until religious freedom significantly improves in China, the U.S.
government, led by the personal efforts of the President of the United
States, should initiate a resolution to censure China at the annual
meeting of the UN Commission on Human Rights and should support a
sustained campaign to convince other governments at the highest levels
to support it.
The U.S. government should decide by October of each year--six
months before the UNCHR vote in April--whether a resolution condemning
China's human rights performance is warranted. If so, the
Administration should coordinate all appropriate agencies in a
sustained campaign to enlist the support of UNCHR member countries.
Even with a six-month lead time, a U.S. resolution will likely
continue to fail in Geneva unless the President makes its adoption a
high priority of the Administration. At the 2000 meeting of the UNCHR,
the Secretary of State and the Assistant Secretary for Democracy, Human
Rights and Labor pressed hard for passage of the resolution, but the
unsuccessful result shows that presidential involvement is clearly
needed. The Commission urges the President personally to solicit
support for the resolution from the governmental leaders of UNCHR
member countries. Indeed, this year the Commission urged the President
to increase his involvement in the final days leading up to the vote.
The importance that the United States places on passage of the
resolution would not be lost if the President were to address the UNCHR
in Geneva. The success or failure of this referendum on China's
standing in the international community is likely to depend on whether
the President makes liberal use of the ``bully pulpit'' and effective
diplomacy at every opportunity.
Recommendation 2.4: International Campaign for Prisoner Release
As discussed above, the PRC government routinely arrests and
incarcerates religious practitioners of unofficial churches or illegal
``sects'' in ``reeducation through labor'' camps for up to three years,
and imprisons religious leaders for long sentences. The current victims
include Roman Catholic Bishop Su Zhimin, and a number of other bishops
and priests, Falun Gong leaders, House Church leaders, Gendun Choekyi
Nyima (the Panchen Lama designated by the Dalai Lama), and members of
the Muslim Uighur community who have been imprisoned for their
religious belief, association or practice.
Multilateral overtures to the Chinese government comprise the most
promising means of liberating some of these individuals.
2.4. The United States should lead a multilateral campaign to seek the
release of Chinese religious leaders imprisoned or under house arrest.
All diplomatic means should be used to effect the release of those
Chinese religious leaders who are imprisoned, who have not been seen in
public since their detention, or who are under house arrest.
The means employed should be the full range of diplomatic tools--
from private demarches to UN Security Council resolutions to
presidential statements. Every meeting of U.S. embassy personnel with
the Chinese government should include prominent mention of our
government's profound concern for the welfare of these religious
leaders and a request that they be released.
Recommendation 2.5: Measures to Enhance Freedom of Uighur Muslims
The residents of Xinjiang province are the only Chinese who
are subject to capital punishment for political crimes. That
apparently is intended to suppress the separatist movement of
the Uighur people in that province, a movement that sometimes
apparently involves violence. But one reported result of the
government's heavy-handed policy toward Xinjiang is the
limitation of religious exercise by nonviolent Uighur Muslims.
Because the Chinese government vigorously suppresses the
flow of information from Xinjiang, and because the Uighur
people are not well-known and lack a large international
constituency (in contrast to the Tibetan Buddhists), the
Commission recommends that the U.S. government enhance their
visibility, in the hope of relieving their religious exercise
of current strictures.
2.5. The U.S. government should raise the profile of conditions
in Xinjiang by addressing religious-freedom and human rights
concerns in bilateral talks, by increasing the number of
educational exchange opportunities available to Uighurs, and by
increasing radio broadcasts in the Uighur language into
Xinjiang.
The Commission recommends that the State Department raise
the status of Xinjiang toward the same level presently enjoyed
by Tibet. The religious freedom of Uighur Muslims in that
province should be made a priority agenda item in discussions
with the Chinese government. American diplomats should also
raise the plight of the Uighurs on a bilateral basis with other
countries, particularly Islamic governments, and urge them to
pursue the issue in their own discussions with Beijing.
In addition, the Commission recommends that the U.S.
government increase the number of educational and cultural
exchange opportunities available to Uighurs.
The Commission further recommends that the U.S. government
devote more attention and resources to documentation of the
situation in Xinjiang.
Finally, the Commission believes that religious freedom
would be promoted in Xinjiang by increasing the flow of
information via radio in the Uighur language, through, for
example, Radio Free Asia.
Recommendation 2.6: China's Hosting of Olympic Events
2.6. The U.S. government should use its diplomatic influence
with other governments to ensure that China is not selected as
a site for the International Olympic Games until it has made
significant and sustained improvement in religious freedom and
human rights.
[Attachment is being retained in the Committee files.]
Chairman Archer. Thank you, Mr. Abrams.
Our next witness is Reverend Su. Welcome and after you
identify yourself, you may proceed.
STATEMENT OF REVEREND DANIEL BAIDA SU, SPECIAL ASSISTANT TO THE
PRESIDENT, CHINA OUTREACH MINISTRIES, INC., FAIRFAX, VIRGINIA
Reverend Su. Thank you, Mr. Chairman and members of the
Committee, for the opportunity to testify here regarding the
PNTR to China. My name is Daniel Su, and I represent China
Outreach Ministries, based in Fairfax, Virginia. We are
committed to reaching out to graduate students from China.
There are about 50,000 of them right here in the United States.
Last Saturday, when the White House called me to ask for my
view on the issue, I commended the President on his vision to
integrate China into the world community. Despite my honest
disagreement with the President on many issues, I do strongly
agree with him that granting PNTR to China is the right thing
to do for both the American and the Chinese people.
Aside from the obvious economic benefits for both
countries, I believe that there are other compelling reasons to
support China's PNTR and WTO membership. First, as a clergyman
concerned about religious freedom and human rights, I am
particularly excited that a WTO agreement would initiate a
dynamic process of change in China with far-reaching
consequences. It would greatly contribute to creating a
conducive environment for promoting international norms, the
rule of law and individual rights and freedom.
The WTO agreement obligates China to play by the rules. In
the process, China will need to strengthen its legal
institutions, train more legal professionals, and educate its
people about the concepts of rights, law and international
norms. This process in itself is a breakthrough with important
philosophical implications for China as a nation.
When a Chinese realizes that he has certain rights as a
businessman the government should not violate, then more likely
he will also realize that he has other rights as a human being.
In following the WTO norms, Beijing government is openly
acknowledging the authority and legitimacy of the international
norms, rather than accusing the United States of interfering
with China's internal affairs.
If China learns to abide by the WTO rules, then you will
more likely learn to abide by other international norms in the
universal declaration of human rights.
Second, the WTO agreement will accelerate China's economic
reform, especially its privatization process. It will set more
people free from government intrusion into their lives, and
enable them to live as freer men and women. It will speed up
the free flow of information and expose the Chinese people to
more ideas and values which could be potentially revolutionary.
In its last annual report on human rights, the State
Department takes note of the increasing personal freedoms in
China. Some China trade critics are quick to argue that
increasing freedoms is not intended by Beijing government, and
therefore, it shouldn't get a credit. I cannot agree more.
Their argument proves exactly the point, the need to do more
trade with China. It proves the dynamics of the free market in
creating freedoms, even freedoms unintended by the government.
How can the same critics stand in the name of human rights,
use the same argument against free trade with China? Why kill
the process that already is creating freedoms for people we say
we care about?
Finally, to grant PNTR to China is to strengthen the
reformists there. Reformists in China have fought hard to
commit Beijing to a WTO agreement. China's current reform has
its limits and has reached a critical stage where it's
confronted with daunting changes such as massive unemployment
and native unrest. Besides there are strong forces in China
trying to derail the reform process.
To grant PNTR to China and to bring it into WTO is to
provide a cover and momentum the reformers need to jump start
their reform and to bring it to a complete success. To deny
China's PNTR is to abandon China's reformers in this critical
battle. To do that is to unwittingly play into the hands of the
Hunan communists. That would be a major setback for China's
reform and is bad news for America.
Despite my arguments for granting PNTR to China, I want to
acknowledge that PNTR is not a magic weapon that will somehow
bring China to democracy. There are no such magic weapons, and
it will likely take a long process for China to be democratic.
However, in considering the PNTR vote, these are some of the
good questions to ask. If we grant PNTR to China, does that
help it get on the right track toward a rule of law and
improvements of human rights? Will the Chinese and American
people be better off as a result? Will it help China play a
more responsible role in the international community? I believe
the answer is yes.
I share the deep frustrations you all feel about China's
human rights situation. I personally have friends in China who
are in prison now for human rights reasons. Religious people
and political dissidents still find their basic rights limited
and violated in various ways. With or without PNTR for China,
we should always continue to work hard to address these
concerns. But it is counterproductive to deny China's PNTR
because of its poor human rights record. That would be like
denying food to a child because he is too weak and skinny.
I myself feel the urge to want to seize every conceivable
opportunity to send China a message. It would make me feel
good, but what good does it accomplish for people in China?
When we send a message, we also need to ask, at what cost? Is
it worth it if it causes a major setback in China's reform
process? Is it worth it if it costs us this strategic
opportunity to move China in the right direction?
I don't believe it is. Especially when we know there are
other existing channels to send a message that's not
counterproductive. And we can always create new, effective
channels.
Which direction do we want China to go? That's what's at
stake in this PNTR vote. There are no guarantees that China
will go the direction we desire. But it's my conviction that
granting PNTR to China and its WTO membership gives us the best
hope that China may become a more humane and responsible
country.
I am hopeful and my prayers are with you as you consider
this very important vote. Thank you very much.
[The prepared statement follows:]
Statement of Reverend Daniel Baida Su, Special Assistant to the
President, China Outreach Ministries, Inc., Fairfax, Virginia
Mr. Chairman and members of the Committee, thank you for
the opportunity to testify today regarding granting Permanent
Normal Trade Relations (PNTR) to China.
Please allow me to briefly introduce myself first. I was
born and raised in China. Despite my Buddhist family
background, I chose to become a Christian in China's house
church movement, which Beijing government still considers
illegal and is therefore subjected to various degree of
suppression and even persecution. Currently I work for China
Outreach Ministries, an evangelical Christian organization
headquartered in Fairfax, Virginia. Our organization is
committed to reaching out to the 50,000 Mainland Chinese
graduate students, scholars and their families currently on US
campuses.
Regarding PNTR for China, when the White House called me
last Saturday to ask for my view on the issue, I commended the
President for his vision and leadership in trying to integrate
China into the world community through PNTR and the WTO
agreement. Even though I cannot honestly say I share his views
in all issues, I strongly agree with him that granting PNTR to
China is the right thing to do for both the American and
Chinese people. Aside from the obvious economic benefits for
both countries, I believe there are other compelling reasons to
support China's PNTR and accession to the WTO.
First, as a clergyman concerned about religious freedom and
other human rights issues in China, I am particularly excited
that the WTO agreement will initiate a dynamic process of
change in China with far reaching consequences. It will greatly
contribute to creating a conducive environment for promoting
international norms, the rule of law and individual rights and
freedom.
The WTO agreement obligates China to play by the rules. In
the process, China will need to strengthen its legal
institutions, train more legal professionals, learn to follow
international legal procedures, and educate its people about
the concept of rights, law and international norms. This
process alone is a breakthrough with important philosophical
implications for China as a nation. When a Chinese realizes
that he has rights as an investor that government should not
violate, then more likely he will also realize that he has
other rights as a human being. In going through this process
Beijing government is openly acknowledging the authority and
legitimacy of international norms rather than accusing the
United States for ``interfering with China's internal
affairs.'' If China learns to abide by the WTO rules, then it
will more likely learn to abide by other international norms
such as the ``UN Declaration of Human Rights.'' This will be a
major step forward toward the rule of law.
Second, the WTO agreement will accelerate China's economic
reform, especially its privatization process, giving more
freedoms to the people. It will set more people free from
government intrusion into their lives and enable them to live
as freer men and women. It will speed up the free flow of
information and expose the Chinese people to more ideas and
values, which could be potentially revolutionary.
In its last annual report, the State Department takes note
of the increase in personal freedoms in China on one hand and
deterioration in human rights on the other. Some China trade
critics are quick to argue that the increase in personal
freedoms are not intended by Beijing government. I cannot agree
more, for that exactly proves the amazing dynamics of the free
market--its power to create results even unintended by
government. However, when the same critics in the name of
freedom use the same argument against trade with China, then I
cannot disagree more! Why kill the market process that's
creating more freedoms for the people we say we care about?
Finally, to grant PNTR to China is to strengthen the
progressive reformers in China, for China's reformers have
worked hard to bring Beijing to the WTO agreement. China's
current economic reform has its limit and has reached a
critical stage. Among many daunting challenges China is facing
are massive unemployment and labor unrest. There are strong
forces in China trying to derail the reform process. To grant
PNTR to China and to bring it into WTO is to provide the cover
and momentum the reformers need to bring their reform to a
successful completion. To deny China's PNTR is to abandon
China's reformers in this critical battle and unwittingly play
into the hands of the hard-line communists. That would be a
major setback for China's reform efforts.
Despite my arguments for granting PNTR to China, I want to
acknowledge that PNTR is not the magic weapon that will somehow
bring democracy to China. There are no such magic weapons, and
it will likely take a long process for China to become truly
democratic.
However, in considering the PNTR vote, among the relevant
questions to ask are: If we grant PNTR to China, does that help
it get on the right track toward the rule of law and
improvement of human rights? Will the Chinese and American
people be better off as a result? Will it help China play a
more responsible role in the international community? I believe
the answer is a resounding yes.
I understand that there are frustrations about China's
human rights record. Unregistered Christians, other religious
minorities, and political dissidents still find their basic
rights deprived or even violated in different ways. With or
without PNTR for China, we should continue to work hard to
address these concerns. But to deny PNTR to China because it
has poor human rights record is like denying food to a child
because he is too skinny. That would be counterproductive.
Which direction would we encourage China to go? That's
what's at stake in this PNTR vote. There is no guarantee that
China will go the direction we desire, but it's my conviction
that granting PNTR to China and its membership into the WTO
gives us the best hope that China will move toward greater
openness, rule of law, respect for human rights and other
international norms. Thank you.
Chairman Archer. Thank you, Reverend Su.
Mr. Kamm, we'd be pleased to receive your testimony.
STATEMENT OF JOHN KAMM, EXECUTIVE DIRECTOR, DUI HUA FOUNDATION,
SAN FRANCISCO, CALIFORNIA
Mr. Kamm. Mr. Chairman, Mr. Rangel, distinguished members
of the Committee. My name is John Kamm. I'm the Executive
Director of The Dui Hua Foundation, a San Francisco-based non-
profit organization that seeks to narrow differences between
the United States and China in the area of human rights. I also
direct the Program in Human Rights Diplomacy at Stanford
University.
An important part of my foundation's unofficial dialogue
with the Chinese government is the Prisoner Information
Project, a unique program with China's Ministry of Justice
through which we keep track of detainees convicted of national
security offenses by Chinese courts. I have been doing this
work for 10 years, since I first came before this committee:
uncovering names of prisoners, assembling them into lists,
submitting the lists to the Chinese government, urging detailed
responses and circulating the information.
My foundation, with grant support from Smith Richardson
Foundation and the International Republican Institute, is
carrying out the first comprehensive survey of Chinese
publications to uncover the names of political and religious
prisoners. We have thus far found more than 500 names of
prisoners unknown outside China. And I have already asked the
Chinese government already to account for more than 100 of
them. I will travel to Beijing later this month as part of this
effort.
We urge greater leniency and encourage transparency, a
quality of governance that will be promoted by China's
accession to the WTO.
Let me tell you about one of the cases I'm working on. A
young worker by the name of Liu Baiqiang was serving a sentence
for robbery. He condemned the killings of June 4th, 1989 from
his cell, and for this he was resentenced to a term of 17
years. That was in 1989.
In 1994, his case came to light. I began asking the Chinese
government questions about him. The following year, he received
his first sentence reduction. In 1996, he received another.
Then in 1999, Amnesty International spotlighted his case. He
received another sentence reduction.
In the five years before his case was known, he received no
sentence reductions. In the five years after his case became
known, he received three reductions. In my statement, I cite
many other examples of leniency extended to prisoners whose
situations are brought to light. As many as half of such
prisoners are released prior to the completion of their
sentences. Far too long for exercising one's right to speech
and association. But far shorter than it used to be.
China has become more responsive to the concerns of the
international community. It hasn't moved fast enough to respect
human rights, and new problems surface every day. But the
Chinese government no longer dismisses all expressions of
concern as interference in its internal affairs. And it
regularly releases prisoners and takes other steps to improve
its image or secure its diplomatic goals. Making concessions in
the area of human rights arises from the country's effort to
become a part of the world community and to take its place in
the community of nations. China's acceptance of international
standards will gain impetus with its joining the WTO and by
Congress granting China permanent normal trade relations.
Some worry that by granting China PNTR, the United States
will lose leverage. The annual renewal debate, however, no
longer provides us with leverage. I cannot think of a single
human rights gesture in the last six years that the Chinese
government has made to obtain annual renewal. I go into this
further in my statement, but I do believe that the debate has
become counterproductive to the goals it once sought to
promote.
This doesn't mean we have no leverage. China is a poor but
proud country, and it will always want something. China has
applied to host the 2008 Olympic Games, and the decision on who
will host them will be made next summer. Next year, the United
States will have a new president. And the Chinese government
will want to make friends with whoever that is. We need to take
full advantage of these opportunities.
As China joins the world community, there will be many
opportunities to prod its government to improve its human
rights record. Do we have the tools to exploit these
opportunities? We have some, and we can fashion others. I go
into some ideas for human rights initiatives in my statement
and I will be happy to discuss those further.
China's accession to the WTO, and this Congress' granting
of PNTR in that context, will ultimately be good for human
rights in China. And legislation granting PNTR should be voted
on as a clean bill.
Milan Kundera once wrote that the struggle of man against
power is the struggle of memory against forgetting. The work of
remembering China's forgotten prisoners has been made possible
by the opening of channels of communication between the United
States and China. And the success or failure of this work
depends on the overall development of relations between the two
countries.
I urge you to pass legislation granting China PNTR,
allowing American companies and workers and their counterparts
in China to enjoy the benefits of a more open and responsible
China. Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement of John Kamm, Executive Director, Dui Hua Foundation, San
Francisco, California
Ten years ago, I was Chairman of the American Chamber of
Commerce in Hong Kong, and Vice President of a large
multinational corporation producing and trading chemicals in
the Far East. That year -1990--was the first year of the
national debate over whether or not to renew China's most-
favored-nation (MFN) trade status, something we now refer to as
``normal trade relations (NTR).'' I came to Washington and
testified before this committee and before the House Foreign
Affairs Committee in favor of renewing MFN. The record will
show that I was among the first witnesses to come before
Congress to argue against revoking China's tariff status. I
haven't changed my position: I still believe that one of the
worst things this country could do regarding human rights in
China would be to terminate or curtail trade relations.
Today the debate is not about whether to revoke China's
NTR. It's about whether or not to grant China permanent NTR in
the context of an agreement over China's entry into the World
Trade Organization (WTO) negotiated by the United States Trade
Representative and signed in Beijing last November. After 10
years of renewing MFN and NTR year after year, no one--not even
the leader of the AFL-CIO who recently said that we should keep
China ``on probation''--believes that Congress will revoke
China's NTR. The debate is now between perpetual NTR and
permanent NTR; regardless of the outcome of this debate, China
will enjoy exactly the same access to the US market as it
enjoys today. Its tariffs will not change whether or not
Congress votes to give China permanent NTR. I believe the time
has come to grant China permanent NTR (hereafter PNTR) not only
because China's accession to the WTO and the granting of PNTR
will yield human rights benefits for the Chinese people,
especially those who are pursuing legal and political reform,
but also because it will clearly benefit the people of the
United States as well.
When I employed human rights arguments to make the case for
MFN 10 years ago, my credentials were challenged. I was a
business leader, what did I know of human rights? I felt the
challenge was valid, so I publicly and deliberately made a
commitment to this chamber to use my relationships in and
knowledge of China to lobby the Chinese government on behalf of
prisoners of conscience. That commitment has been honored. My
work is my testimony. In 10 years I have made more than 50
trips to Beijing to raise the cases of individuals believed to
have been detained for the non-violent expression of their
political and religious beliefs. I have worked on hundreds of
cases with a dozen different Chinese ministries and provincial
governments.
In 1995, I established the Prisoner Information Project, a
unique program with China's Ministry of Justice for keeping
track of Chinese prisoners. Last year I established a
foundation whose principal task is to uncover the names of
hitherto unknown prisoners and put them on lists that are then
submitted to the Chinese government with requests for
information on their present status. With the support of Smith
Richardson Foundation and the International Republican
Institute, the Dui Hua Foundation has already uncovered more
than 500 names of detainees previously unknown to foreign
governments and non-governmental organizations. The Chinese
government has begun responding to these new lists of names,
and is continuing the responses to the old lists.
Annual Renewal of NTR and the Question of Leverage
The Chinese government is willing to make concessions to
win PNTR, but it is no longer willing to make concessions to
obtain annual renewal, or what might be called perpetual NTR.
China's leaders stopped making concessions to win annual
renewal when they concluded that China wouldn't lose MFN and
its successor, NTR. Instead of making concessions in the run-up
to annual renewal, the Chinese government is more inclined to
strike hard at its domestic opponents. This trend began in the
summer of 1992, when the Beijing Intermediate People's Court
tried and convicted Bao Tong, the highest-ranking Communist
Party official accused of June 4 related offenses, and then
publicized his conviction, hours before the House voted on MFN.
With a few exceptions since then (notably the 1993 release of
Xu Wenli, who is now back in prison, and the 1994 releases of
Wang Juntao and Chen Ziming), Beijing has used the occasion of
the debate and vote on annual renewal to demonstrate to its
people that it is not afraid of the United States, that it will
not make concessions to keep what it already has. It figures
that Congress won't revoke what most Americans who have studied
the question see as non-discriminatory tariffs that form the
basis of a normal trade relationship.
Some feel that the United States will lose leverage if we
grant China PNTR. What leverage? I challenge those who think
the annual debate helps dissidents in China to name one
prisoner who has been released from prison or one other human
rights concession that has been made during the last six years
to obtain annual renewal. The game has changed. Prisoners will
be released, lists answered, covenants signed, dialogues held
and rights delegations hosted for other purposes: to influence
an Olympics games bid, to ensure a pleasant visit by a state
leader to a foreign country, to ward off resolutions at United
Nations meetings and yes, to obtain PNTR, but not to obtain
annual renewal. They already have NTR in perpetuity, and
they're not going to lose it, so why make concessions for it?
I for one don't have a problem using China's desire to gain
something it doesn't have to win concessions in the area of
human rights. China, after all, wants so many things. The list
is inexhaustible, and changes from day to day. Most of all
China wants the respect of the international community. It
wants to be seen as a great power, a country with a proud and
ancient civilization that seeks to assume its rightful place in
the community of nations. It increasingly recognizes that, to
accomplish this, it needs to abide by international standards,
whether those standards apply to trade, arms control or human
rights. For this reason I have long felt that the highest
priority of our human rights diplomacy must be to convince
China to ratify the two international human rights covenants
that, together with the Universal Declaration on Human Rights,
make up the international bill of rights. Ratification entails
periodic reporting, and more importantly, the onerous task of
defending one's record before the international community. I
would trade the State Department's sponsorship of a resolution
criticizing China at the annual meeting of the United Nations
Human Rights Commission, an effort that has failed time and
time again, in exchange for China's firm commitment to ratify,
by a date certain, the International Covenant on Civil and
Political Rights, and to file its first comprehensive report as
a state party before the deadline set forth in that document.
Are there things that the United States government could be
doing that it is not presently doing to encourage greater
respect for human rights in China? The answer is yes, and I
will shortly put forward some suggestions. Before doing so, I
want to make a few points.
No program initiated by the United States government can,
in and of itself, bring greater respect for human rights,
democracy and rule of law to China. Achieving those goals is
the responsibility of the people of China, to be achieved by
means and through sacrifices they deem most appropriate and
according to the timetable they think most realistic. The
United States can help, but we can determine neither the course
nor the timing of change in China. We can help by promoting
transparency and accountability, a strengthened legal system
that safeguards due process, and humanitarian treatment for
those in prison who seek change through non-violent advocacy.
And we can trade with and invest in their companies, bringing
with us those core American values for which we as a people are
respected around the world.
Following from this and from what I said earlier about the
absence of leverage arising from the debate on annual renewal,
support for PNTR should not be made conditional on the
identification and enactment of new tools to promote respect
for human rights in China. Members should judge PNTR on its own
merits or lack thereof. Is granting China PNTR good for the
United States? Will China's accession to the WTO be good for
the people of China and will it bring about a China better
integrated into the world community? To decide these questions
other than by examining them on their own merits is to engage
in a dangerous game of self-deception, to falsely entertain the
notion that we are giving up something whose worth is proven in
exchange for something whose value is not known.
Legislation granting China PNTR should be unencumbered by
extraneous conditions and side agreements that might or might
not pass the other chamber of Congress. Congress has been
debating the issue of China's trade status for more than ten
years. The time has come for an up or down vote. If members
want to consider new tools to prod China in the directions we
want it to move, let those tools be judged on their own, cooly
and in the fullness of time, just as both sides have had ample
time to examine the question of MFN and NTR.
New Initiatives on Human Rights
Let me now turn to some initiatives that the United States
can undertake, initiatives that do not necessarily involve
trade sanctions and that are not directly related to PNTR but
whose success is made more likely by the passage of PNTR.
I come well prepared for this part of my testimony. I've
been coming up with ideas for new human rights initiatives for
much of the last ten years. In fact, four years ago I
circulated a list of ten possible initiatives to members of
Congress and the administration. I am attaching a copy of that
list, typographical errors and all, to today's statement to
this committee (see Attachment One).
Many of you will notice ideas with which you've become
familiar. In fact, several of the initiatives have found their
way into legislation and been enacted into law, including the
establishment and maintenance of a prisoner information
registry and the increase in the number of human rights
monitors in American diplomatic missions in China. Radio Free
Asia (RFA) is up and running. The President has gone to China
and lobbied the government to release the old
counterrevolutionaries, a proposal I know to be popular with
reformers in the country. At least five members of Congress, in
separate bills over the past six years, have suggested the
creation of commission modeled on the Commission on Security
and Cooperation in Europe.\1\. Although the President has
apparently abandoned the code of business principles for
companies operating in China, a detailed code of conduct has
been drafted and agreed to by non-governmental organizations
and companies doing business in China (see Attachment Two).
---------------------------------------------------------------------------
\1\ The idea of a China human rights commission modeled on the CSCE
was first proposed by former Congressman Lee Hamilton in his May 1994
``US--China Policy Act.'' The commission was to be called ``The
Commission on Law and Society in the People's Republic of China'' and
it was to monitor the development of China's legal system, the
emergence of civil society and the development of institutions that
provide humane and effective government. The Senate did not take up
consideration of the act. The following year, former Congressman Jim
Lightfoot (R-Iowa) managed to insert report language into the House
version of the foreign operations appropriations bill directing the
Secretary of State to examine the feasibility of developing a
``Commission on Human Rights in the Pacific'' whose functions and
methods of operation would be modeled on the congressionally
established Commission on Security and Cooperation in Europe. There is
no evidence that the State Department undertook the feasibility study.
Senator Joseph Lieberman (D-Connecticut), in his ``US--China
Relations Act of 1997,'' directed the President to appoint a 12-member
Human Relations Commission made up of individuals from the executive
branch, the legislative branch and the private sector. The commission
would assess the status of human rights and worker rights in China, and
in the event that the commission assesses that progress is not being
made, make recommendations to strengthen policies towards China. To
help assess the status of rights in China, the commission would
establish a prisoner information registry.
In the same year, Senator Spencer Abraham (R-Michigan), in his
China Policy Act of 1997, called for the President and the Secretary of
State to initiate negotiations with the governments of China and other
countries in Asia to establish a commission that would be modeled on
the Commission on Security and Cooperation in Europe. In January 1999,
Senator Tim Hutchinson (R-Arkansas) inserted virtually identical
language into the Senate version of Defense Appropriations Bill, but
the language was stripped out of the final conference bill.
---------------------------------------------------------------------------
Common to all of these initiatives is the idea that the
United States should take steps to encourage transparency in
China's legal system, something that the process of WTO
accession will help immeasurably. Before making things more
transparent in the area of the legal and penal systems, we need
to invest in the people and resources to insure effective
monitoring, to get at the truth in as much detail as possible.
We can then go about acting on and publicizing the truth
through such means as diplomatic demarches, Congressional
hearings, the annual reports on human rights in China and
programs broadcast on VOA and RFA.
The 1999 State Department Authorization Bill
Last November, Congress passed and President Clinton signed
into law the Consolidated Appropriations Act. This massive
piece of legislation included the State Department
Authorization Bill, two sections of which are relevant to
today's deliberations: Section 872, which provides $2.2 million
for additional personnel at our diplomatic missions in China to
monitor human rights, and Section 873, which calls on the
Secretary of State to establish and maintain a registry to
``provide information on all political prisoners, prisoners of
conscience and prisoners of faith in the People's Republic of
China.''
Six months have passed since these ideas were translated
into law, but I regret to say that little has been done either
to enhance monitoring by our missions or to establish the
registry. Members might ask themselves why we should consider
coming up with new initiatives to address human rights concerns
if those that are enacted into law are ignored by the executive
branch. It shouldn't be necessary for me to give reasons why
greater monitoring and better accounting are desirable, but,
given the lack of follow-up, I'm compelled to do so.
Insofar as monitoring by our diplomats is concerned, the
number of personnel currently tracking human rights
developments in China is woefully inadequate for the tasks
expected of them. The State Department's country report on
human rights in China has grown in length and detail year by
year, and its contents and conclusions are employed extensively
by Congress in practically every discussion of policy toward
China. In addition to the country report, diplomats with human
rights responsibilities are largely responsible for compiling
and analysing the information that goes into the religious
freedom report and the report on Hong Kong. They are so
burdened with report writing that they cannot undertake such
tasks as attending meetings with Chinese officials in charge of
policies affecting religion and freedom of information,
collecting materials on laws and regulations affecting human
rights, searching out local legal journals and newspapers that
provide the raw material for discovering new names and cases,
and meeting with dissidents and their families. If the day
comes when China allows international observers at its trials--
another goal of our human rights diplomacy in China--we won't
have the people in the field to attend them unless Section 872
is implemented.
The country report on human rights is a valuable document,
but it can be improved and made more valuable. It is especially
important to draw distinctions about human rights conditions in
different parts of the country, and by doing so to encourage
``human rights competition'' among provinces and
municipalities. Based on the work I do in China, I am certain
that local leaders are aware of the importance of cultivating a
more open and humane image. I know of specific prisoner
releases and other positive developments that have taken place
because of concerns over a locality's image abroad. Identifying
those parts of China that are the most tolerant and the most
open will also help American businesses decide where to invest.
As for the mundane and often denigrated task of compiling
and presenting prisoner lists, let me make it clear that I
think this enterprise is the single most important activity
American officials, politicians, activists and business leaders
can undertake to promote respect for human rights in China.\2\
Why? Doing so demonstrates in the clearest terms America's
respect for the integrity and dignity of the individual.
Showing concern for lowly and obscure prisoners, not just the
``big names'' who for the most part have already been released,
tells the Chinese government a lot about our priorities. Most
important, as I said above, it is the Chinese people who will
ultimately win greater respect for human rights, rule of law
and democratic processes. Surely this great enterprise is
impeded and delayed if those who are most willing to champion
change are locked away in prison. Raising the names of those
imprisoned for the non-violent advocacy of their political and
religious beliefs hastens the day of their release and return
to their local communities to work for change.
---------------------------------------------------------------------------
\2\ The State Department's attitude towards submitting prisoner
lists to China has been ambivalent. In 1998, it declined to endorse the
proposal to establish a prisoner information registry (see testimony of
Assistant Secretary of State Stanley O. Roth before the Senate Foreign
Relations Committee, Subcommittee on Asia and the Pacific, June 8,
1998).
Prisoner lists were submitted to Chinese officials by former
Secretary of State James Baker in May 1991 and by Assistant Secretary
of State John Shattuck in October 1993. In June 1994, shortly after
President Clinton's decision to de-link MFN renewal from human rights
imposed the previous year, I was told by a senior official attached to
the American Embassy in Beijing that the State Department was ``getting
out of the prisoner list business,'' but in January 1995, John Shattuck
presented a list to his Chinese counterparts on the occasion of the US-
China bilateral dialogue on human rights. The 1995 list had 25 names on
it, compared to more than 200 names on the 1993 list.
Shortly after the 1995 bilateral dialogue, Beijing suspended future
official dialogues on human rights, citing the State Department's
sponsorship of a resolution criticizing China at the meeting of the
United Nations Human Rights Commission in Geneva.
In 1998 the United States did not put forward a resolution in
Geneva, and in January 1999 another round of bilateral human rights
talks were held. A brief list of ``illustrative cases'' was presented.
Soon after the meeting, the State Department decided to once again
sponsor a China resolution in Geneva. In May, the bombing of the
Chinese Embassy in Belgrade occurred, and Beijing once again suspended
the official dialogue. The Chinese government is not presently
accepting lists of prisoners or demarches on prisoners prepared by the
State Department or the American Embassy in Beijing, but a Chinese
spokesman, at a news conference in Beijing on April 20, indicated a
willingness to resume the official dialogue on human rights if the
United States takes ``certain steps.''
When submitted, lists prepared by American officials and political
leaders are often flawed: names are misspelled, Chinese characters are
not provided, individuals who have committed acts of political violence
are mixed in with those convicted of non-violent expression, and those
who've already been released are listed with those still in prison. The
lists sometimes contain phrases like ``political prisoners'' or
statements like ``believed to have been tortured'' that make it
difficult for Chinese officials to accept much less respond. In
compiling lists, the State Department and other agencies, as well as
members of Congress, tend to rely on recommendations from one or two
non-governmental human rights organizations (NGOs). No NGO has produced
a comprehensive listing of Chinese political and religious prisoners in
almost five years, and NGO databases are badly in need of updating and
rationalization. Virtually no independent research to uncover the names
of Chinese prisoners in primary sources has been undertaken by the US
government, nor have resources readily available to the State
Department, like field reports from consulates, photographs of court
notices or even transcripts of interviews with individuals seeking
political asylum, been surveyed to identify new cases and names.
When an official Chinese response or some other document containing
information on prisoners is obtained by one agency of government it is
usually not shared with others. There is currently no central
repository of information. Communication of information on Chinese
prisoners is particularly bad between and among members of Congress and
the administration. The US government has not sought information on
Chinese prisoners obtained by other governments through their dialogues
with China.
---------------------------------------------------------------------------
This is not conjecture on my part. Prisoner intervention
works--not always, and not as quickly as we'd like--but the
evidence is clear that prisoners about whom the international
community expresses concern are more likely to secure early
release and better treatment than those who are forgotten or
unknown. Let me share with you results from two efforts to
engage the Chinese government in a dialogue on its prisoners.
The Complaints Procedure of the ILO's Committee on Freedom of
Association
The International Labor Organization (ILO), a body to which
China and the United States belong, has submitted, through its
Committee on Freedom of Association, inquiries into the
situations of jailed Chinese labor leaders to the Chinese
government. The lists of these prisoners are drawn up by the
International Confederation of Free Trade Unions (ICFTU), of
which the AFL-CIO is an active member, and the lists are
presented as part of complaints alleging violations of the
freedom of association by the Chinese government. Six formal
complaints covering scores of prisoners have been made since
1990.
I recently visited ILO headquarters in Geneva as part of a
study, supported by a grant from Smith Richardson Foundation,
of the prisoner accounting efforts of governments and non-
governmental organizations. I was told that, by virtue of its
membership in the ILO, China is obligated to respond to
complaints made by the ICFTU and submitted through the Freedom
of Association Committee. In the opinion of the ILO's senior
officers, the Chinese government has made a good faith effort
to provide information on the prisoners named in the
complaints. I was provided with a complete set of the
complaints and the Chinese responses.
In example after example, the Chinese government has
reduced the sentences of important labor leaders about whom the
ICFTU has filed complaints and such groups as Amnesty
International have expressed concern. Let me cite a few of the
most striking examples: Chen Gang and Guo Yunqiao, leaders of
the Worker's Autonomous Federations of Hunan Province, were
sentenced to death for their involvement in the June 1989
disturbances. Their death sentences have been commuted and they
are serving out 11 year and 13-year sentences, respectively.
Peng Shi and Liu Zhihua of the same province were sentenced to
life; they are now serving out 10 and 11-year sentences,
respectively. Mao Yuejin, another worker's leader from Hunan,
was sentenced to 15 years' imprisonment in 1989. He has been
released. Tang Yuanjuan and Li Wei of Changchun were released
early by court orders that overturned their original sentences
of 20 and 13 years, respectively. Labor leaders Li Wenming and
Guo Baosheng of Guangdong Province were convicted of subversion
by a court in Guangdong Province, a crime that carries a
minimum of 10 years' imprisonment. Prompt intervention by the
international community, led by the ICFTU and the AFL-CIO,
resulted in sentences of three-and-a-half years with credit for
time served. Both have been released.
To show that the benefits of intervention are not
necessarily restricted to those specifically named in
complaints and inquiries, consider the example of Mu Wenbin.
This hitherto unknown prisoner was tried at the same time and
by the same court as Li Wenming and Guo Baosheng. He too was
convicted of subversion, but the court exercised its discretion
and sentenced him to five years. I have been advised that Mu
will be released next month.
The experience of the ILO reinforces the belief that, if
China can be persuaded to ratify the international human rights
covenants, it will honor its reporting obligations, permitting
a degree of international scrutiny well beyond what is
currently possible.
The Prisoner Information Project
Other evidence of the efficacy of intervention can be
obtained from an examination of the results of my foundation's
Prisoner Information Project. (For a complete account of this
effort see ``The Prisoner Information Project: A Status
Report,'' testimony before the Subcommittee on Asia and the
Pacific of the Committee on International Relations of the
House of Representatives, April 30, 1998.)
In 1995, China's Ministry of Justice agreed to accept from
me four lists of 25 names of Chinese citizens believed to have
been imprisoned for the non-violent expression of their
political and religious beliefs, and to make a good faith
effort to provide information, in a standardized format, on
their situations. Shortly after providing information on the
first list of names, the ministry suspended the project in
response to the State Department's decision to grant Lee Teng-
hui, then president of Taiwan, a visa to come to the United
States. I continued to submit lists of names, however, and by
the end of the year the ministry had in its possession three
lists totaling 75 names.
The ministry refused to provide the promised information
until the eve of President Jiang Zemin's state visit to the
United States in October 1997. In the interim between the
submission of lists in 1995 and the resumption of the project
in 1997, I and friends in Congress, including Congressman
Phillip Crane of this committee, pressed the Chinese government
to live up to its commitment, resubmitting the ``List of 75''
over and over again. Within the Chinese government, those 75
people became some of the best-known prisoners in the country.
To date, the Ministry of Justice has provided information
on a total of 47 names on the ``List of 75.'' (In April 1999,
China's cooperation with the project was suspended for a second
time on account of the State Department's sponsorship of the
China resolution at the UN Human Rights Commission meeting. The
ministry resumed providing information six weeks ago in
conjunction with congressional hearings on PNTR.) Subtracting
people for whom no records have been found (it is likely that
these individuals did not serve sentences in prisons), those
sentenced to reeducation camps (all of whom have been released)
and those who had already been released at the time I filed the
inquiry, we are left with 31 names of prisoners who the
Ministry of Justice has confirmed were serving prison terms at
the time inquiries were filed in 1995.
I am attaching a table that summarizes what has happened to
these 31 prisoners (see Attachment Three). To date, at least
17, have benefited from early release or reduction of sentence.
They include well-known and little known prisoners, and they
hail from all parts of China.
More evidence that intervention on behalf of prisoners is
effective comes from Guangdong, China's most open and
progressive province. I have maintained a dialogue on prisoners
with local authorities in the province for several years. Since
1995, I have filed inquiries on a quarterly basis on all
individuals known or suspected to be in prison. Of 12 people
known by me to be in prison during the five-year period that
ended in December 1999, all but three have had their sentences
reduced or had sentences imposed that were below the minimum
sentence prescribed by law. Six of these nine prisoners have
been released and another is due for release next month (see
Attachment Four).
In most instances where the Chinese government has reduced
a prisoner's sentence or released a prisoner on parole in the
last five years, the outside world has found out months if not
years after the event. Prior to 1995, the State Council
Information Office promptly advised me, by fax, when releases
were made. As pointed out above, the Chinese government no
longer makes human rights concessions to win annual renewal of
normal trade relations. Beijing's refusal to publicize what
outsiders would consider good news demonstrates its
unwillingness to give so much as the impression that
concessions are being made.
A Congressional-Executive Branch China Commission
As noted above, a number of members of Congress have made
proposals to establish a Congressional-executive branch
commission modeled on the Commission on Security and
Cooperation in Europe. The commission would monitor
developments in China in the areas of human rights, trade and
national security, report on these developments and make
recommendations on how to best address problems. Congressman
Levin is said to be working on such a proposal. As a long-time
supporter of the concept of such a commission, I am eager to
learn more about the Congressman's proposal, a proposal which
should be examined on its own merits and, as argued above, not
as a bill tied to PNTR.
Let me here suggest a job for the commission: It should act
as the repository of letters from members of Congress to the
Chinese government about prisoners, and letters sent in reply
by the Chinese government. At present, Senators and
Representatives frequently write letters to the Chinese Embassy
expressing concern for and requesting information on Chinese
prisoners. Often, these letters are answered, and important
information is provided--even hints as to how one might lobby
for early release. Even though Beijing has suspended the
official dialogue with the United States on human rights, it
has not stopped responding to members' letters on prisoners. I
have seen one letter from the Chinese Ambassador concerning two
imprisoned house church preachers that was written less than
two weeks after the tragic bombing of China's Belgrade embassy.
I have read others that discuss Tibetan prisoners who rank
among China's most sensitive cases.
The Prisoner Information Registry
The registry called for in Section 873 of last year's State
Department Authorization Bill will draw on many sources as it
builds and maintains a comprehensive database. There will be
unofficial sources, chiefly information obtained from non-
governmental organizations like Human Rights in China, Human
Rights Watch Asia, Amnesty International, the Tibet Information
Network and the Information Center on Human Rights and
Democracy in China. Each of these NGOs maintains its own
databases, and each has its own strengths from which the State
Department might benefit.
There will be official sources of information, consisting
of oral and written replies by the Chinese government to
prisoner lists submitted by foreign governments and United
Nations bodies \3\ , by individuals acting in semi-official
capacities like the three religious leaders who visited China
in early 1998, and by such groups as The Dui Hua Foundation.
Special attention should be paid to the collection of police
and court documents, especially detention notices, arrest
warrants, bills of prosecution, and verdicts handed down by
courts.
---------------------------------------------------------------------------
\3\ The Chinese government is currently engaged in official
dialogues on human rights with the European Union, Canada, Australia,
the United Kingdom, France, Norway and Sweden. As an integral part of
these dialogues, China accepts lists of prisoners and provides
information on them. China appears reluctant, however, to respond to
lists submitted by countries with whom it does not have a dialogue. The
German Chancellor submitted a list of imprisoned journalists to Chinese
officials during his November 1999 visit to China, but, six months
later, no response had yet been given.
Chinese Premier Zhu Rongji, on two occasions during his visit to
the United States in April 1999, quipped that foreign leaders do not
think that a visit to China is complete unless they're able to hand
over a list of Chinese prisoners.
In 1990, the Chinese representative to the United Nations Human
Rights Commission declared that ``China has consistently sent factual
replies and information, including those concerning the 'June 4th
incident,' in a responsible manner, to the relevant UN bodies.'' It has
indeed provided information on its detainees to the mechanisms of the
United Nations Commission on Human Rights, including the Working Group
on Arbitrary Detention (which visited China in October 1997), the
Working Group on Enforced or Involuntary Disappearances, the Special
Rapporteur on Extrajudicial, Summary or Arbitrary Execution, the
Special Rapporteur on Religious Intolerance (who visited China in
November 1994) and the Special Rapporteur on Torture, who is
negotiating with the Chinese government on a possible visit to the
country. As noted in the statement, the Chinese government has provided
a considerable amount of information to the International Labor Office,
a UN-affiliated organization
---------------------------------------------------------------------------
Accounts of political cases can be found in officially
authorized newspapers, legal journals, yearbooks, collections
of cases, provincial records, and county gazetteers. The Dui
Hua Foundation, with grants from Smith Richardson Foundation
and the International Republican Institute, is conducting the
first-ever comprehensive search of such publications held in
libraries in Hong Kong. In the space of seven months of
research that began in September 1999, 320 cases involving 785
detainees were uncovered, of whom two-thirds are not documented
in foreign governmental or non-governmental databases. To date,
three collections of cases covering 135 detainees have been
published by the foundation, and these compendia form the basis
of prisoner lists being submitted to the Chinese government. (I
have brought copies of these collections with me today.)
Compiling and submitting a prisoner list based on information
released in China's own officially approved publications has
obvious implications for the promotion of transparency.
The State Department's prisoner information registry will
be a valuable tool for the conduct of American human rights
diplomacy in China. It will enable delegations from Congress to
bring with them lists tailor-made for their itinerary and for
the government ministries that they will meet. Similarly, the
registry can be used to construct lists to be presented to
visiting Chinese officials. It will aid in the process of
identifying and differentiating conditions in different
provinces, enriching our human rights reports and encouraging
human rights competition. It will aid those American scholars
undertaking rule of law programs in China to identify cases
that can serve as precedent (e.g., where speech is dissident
but ruled protected,\4\ and where their Chinese counterparts
might have erred in the application of Chinese and
international law (e.g., where individuals are convicted by
retroactive application of supplementary regulations.\5\ The
registry will also be useful to international humanitarian
organizations seeking access to Chinese security detainees, and
the knowledge contained therein will help push forward the
President's suggestion to the Chinese government to review the
sentences of people still serving sentences for
counterrevolution, a crime struck from China's criminal
statutes in October 1997.\6\
---------------------------------------------------------------------------
\4\ An example of dissident but protected speech is that of Guo
Yaotang, who in April 1990 painted anti-government slogans on his
father's grave. His father had been executed for political offenses in
1950. Guo was arrested and charged with counterrevolutionary incitement
and propaganda, but the Henan courts decided that his slogans were not
aimed at overthrowing the government. They ruled that the slogans
reflected grief and dissatisfaction with the way his father's case had
been handled, and were written during traditional activities to show
respect for ancestors.
\5\ A case worth raising is that of Wu Shishen, a Chinese
journalist detained in October 1992 for the crime of illegally
providing state secrets to foreigners. Wu was convicted in August 1993
and sentenced to life imprisonment under supplementary regulations
promulgated in April 1993, more than six months after the commission of
the offense. The conviction is not only unsafe under Chinese law, but
violates Article 15 paragraph one of the International Covenant on
Civil and Political Rights.
\6\ The Chinese government's position on the proposal for a general
review of the sentences of counterrevolutionaries, conveyed to me in a
letter from the Ministry of Justice dated April 17, 1998, is that while
a general review is not possible under Chinese law, individuals
convicted of counterrevolution can have their sentences reviewed ``on a
case by case basis.''
---------------------------------------------------------------------------
The business community in China can help collect
information on cases for inclusion in the registry. I have
written elsewhere of the monitoring role that companies can
play.\7\ Encouraging companies to be more proactive in
promoting respect for human rights in China has been an on-
again, off-again initiative of the administration. In 1994, a
voluntary code of principles for businesses in China was
promised, but it took two years for it to see the light of day.
An award was created to honor companies that uphold these
principles, but it has been granted only once--to my company,
in June 1997. I'm told that even the website devoted to the
award has been dismantled. Companies should be given
incentives, including material incentives, to promote respect
for human rights in the workplace and in the business
environment as a whole. If businesses can lobby for lower
taxes, they can and should lobby for freedoms of association,
expression and belief. They are acting in their own self-
interest when they do so.
---------------------------------------------------------------------------
\7\ See ``The Role of Business in Promoting Respect for Human
Rights,'' statement of John Kamm to ``The OSCE at Twenty: Its Relevance
to Other Regions,'' a seminar presented by the Commission on Security
and Cooperation in Europe, Washington D.C., November 13-14, 1995.
---------------------------------------------------------------------------
This testimony has touched on several initiatives that can
be implemented in the area of human rights. We can increase the
number of our diplomats doing rights work, and elevate rights
concerns on the agenda of all high-level meetings. Our human
rights reporting can be expanded and improved by implementing
Sections 872 and 873 of last year's State Department
Authorization Bill. It is vital that the State Department
establish the prisoner information registry without further
delay. A CSCE-style commission can be formed to provide a
sharper focus and more resources to address human rights
violations, and the business community can be encouraged to
become more proactive in promoting human rights. New
initiatives should be considered on their own merits, and not
as ways of ``selling'' PNTR.
That said, for initiatives in the area of human rights to
produce results, the United States must remain engaged with
China, and for that to happen, we need to make a success of the
bilateral agreement on China's accession to the WTO. I urge you
to pass legislation granting China PNTR.
John Kammm
[Attachments 1 & 2 are being retained in the Committee
files.]
Attachment Three
Table 1: Status of Prisoners Asked About in 1995
------------------------------------------------------------------------
Summary:
Original Current Status
No. Name Sentence and Date Released and Sentence
Date of Sentence Reductions (SR)
Completion on Record
------------------------------------------------------------------------
1) Bai Weiji 10 years; May Feb. 1999 Released early;
2002 SR -3 years
and 3 months
------------------------------------------------------------------------
2) Chen Gang Life in prison;* .............. Due for release
changed to 18 Nov. 2007; SR
years in 1992 3 years.
------------------------------------------------------------------------
3) Chen 13 years; Oct. May 1994 and Released twice
Ziming 2002 Nov. 1996 on medical
parole
------------------------------------------------------------------------
4) Gao Yu 6 years; Oct. Feb. 1999 Released on
1999 parole
------------------------------------------------------------------------
5) Han Gang 12 years; July .............. Due for release
2001 July 2001
------------------------------------------------------------------------
6) Hao Fuyuan 10 years; June July 1996 Released on
1999 parole
------------------------------------------------------------------------
7) Hu Liping 10 years; April .............. Due for release
2000 April 2000
------------------------------------------------------------------------
8) Jampa 13 years; Oct. Oct. 1999 Released early;
Ngodrop 2002 SR -3 years
------------------------------------------------------------------------
9) Li Junmin Death with 2- .............. Due for release
year reprieve, in Dec. 2011
changed to 17
yrs. in 1994
------------------------------------------------------------------------
10) Li Wei 13 years, July 1997 Released early
changed to 8 due to verdict
years in 1997 being
overturned in
1997
------------------------------------------------------------------------
11) Meng 10 years; June April 1997 Released on
Qingqin 1999 parole
------------------------------------------------------------------------
12) Phuntsog 9 years; 8 years .............. Due for release
Nyidron added in 1993 in October
2007**
------------------------------------------------------------------------
13) Ren 7 years; June June 1996 Released at end
Wanding 1996 of term
------------------------------------------------------------------------
14) Shi Xuezhi Life, commuted .............. Due for release
to 16 yrs. in in April 2009
1993
------------------------------------------------------------------------
15) Sun Liyong 7 years; April April 1998 Released at end
1998 of term
------------------------------------------------------------------------
16) Sun 12 years; June Feb. 1999 Released on
Weibang 2002 parole
------------------------------------------------------------------------
17) Sun 18 years; Sept. .............. Due for release
Xiongying 2009 Sept. 2009
------------------------------------------------------------------------
18) Tang 20 years, .............. In 1997 July
Yuanjun changed to 8 1997 Released
yrs. early due to
verdict being
overturned in
1997
------------------------------------------------------------------------
19) Ulaan 5 years; July July 1996 Released at end
Shovo 1996 of term
------------------------------------------------------------------------
20) Wei 13 years; June .............. Due for release
Shouzhong 2002 June 2002
------------------------------------------------------------------------
21) Xi Yang 12 years; Sept. Jan. 1997 Released on
2005 parole
------------------------------------------------------------------------
22) Xu Baiquan 8 years; June June 1997 Released at end
1997 of term
------------------------------------------------------------------------
23) Yang 10 years; May .............. Due for release
Tongyan 2000 May 2000
------------------------------------------------------------------------
24) Yu Zhenbin 12 years; June June 1997 Released early;
2001 SR-4 years
------------------------------------------------------------------------
25) Zhang 13 years; June .............. Due for release
Jingsheng 2002 June 2000; SR
2 years
------------------------------------------------------------------------
26) Zhang 15 years; June Feb. 1998 Released on
Xiaoxu 2004 parole; SR -4
years
------------------------------------------------------------------------
27) Zhang 12 years; May .............. Due for release
Yunsu 2004 Nov. 2002; SR
18 months
------------------------------------------------------------------------
28) Zhao Lei 6 years; April Oct. 1997 Released early;
1999 SR -18 months
------------------------------------------------------------------------
29) Zheng 15 years; June .............. Due for release
Quanli 2004 June 2001; SR
3 years
------------------------------------------------------------------------
30) Zhou 15 years; Aug. .............. Due for release
Guokui 2001 Aug. 2001
------------------------------------------------------------------------
31) Zhu 7 years; July July 1996 Released at end
Xiangzhon 1996 of term
g
------------------------------------------------------------------------
*The ILO has been advised that the original sentence was death with a
two year reprieve.
** The Chinese Ambassador has informed two members of Congress that she
has been released. This report is awaiting confirmation.
Attachment Four
Table 2: Prisoners in Guangdong Province Asked About from 1995 to 1999
------------------------------------------------------------------------
Summary: Current
Original Status and
No. Name Sentence and Date of Sentence
Date of Sentence Release Reductions (SR)
Completion on Record
------------------------------------------------------------------------
1) Chen Meng 12 years; March ............. Due for release
2007 March 2007
------------------------------------------------------------------------
2) Chen 10 years; July Nov. 1995 Released on
Zhixiang 1999 parole; SR -2
years
------------------------------------------------------------------------
3) Guo 3 years; Dec. Dec. 1997 Released at end
Baosheng* 1997 of term
------------------------------------------------------------------------
4) Li Jueming 18 years; Oct. ............. Due for release
2007 June 2005; SR -
2 years
------------------------------------------------------------------------
5) Li 3.5 years; Nov. Nov. 1997 Released at end
Wenming* 1997 of term
------------------------------------------------------------------------
6) Liu 17 years; June ............. Due for release
Baiqiang 2006 June 2002; SR -
4 years
------------------------------------------------------------------------
7) Mu Wenbin* 5 years; Oct. ............. Due for release
2000 June 2000; SR -
4 months
------------------------------------------------------------------------
8) Qin Death, changed Aug. 1999 Released early;
Hanbiao to life SR -6 years, 8
imprisonment. months
then reduced to
20 years; May
2003
------------------------------------------------------------------------
9) Tang Tao 6 years; Feb. ............. Due for release
2001 Feb. 2001
------------------------------------------------------------------------
10) Wu Jidong 10 years; June Aug. 1995 Released early;
1999 SR -3 years, 8
months
------------------------------------------------------------------------
11) Zhang Yi 13 years; June May 1998 Released early;
2002 SR -3 years, 5
months
------------------------------------------------------------------------
12) Zheng 14 years, Feb. 1997 Released at end
Qiuwu changed to 13 of term
years; Feb.
1997
------------------------------------------------------------------------
* Guo Baosheng, Li Wenming and Mu Wenbin were convicted of attempting to
overthrow the government, an offense carrying a minimum sentence of
ten years imprisonment. The court invoked Article 59 Paragraph Two of
the 1979 Criminal Code to impose lighter sentences, and gave credit
for time already served in detention.
Chairman Archer. Thank you, Mr. Kamm.
Mr. Reuther, welcome. You may proceed.
STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL
UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT
WORKERS OF AMERICA (UAW)
Mr. Reuther. Thank you, Mr. Chairman, Mr. Rangel. My name
is Alan Reuther. I am the Legislative Director for the UAW.
In my oral remarks today, I would like to focus on the
proposals which have been advanced by Representative Levin,
some of which have now been picked up by the Administration and
I believe also by the Chairman, to mitigate some of the
fundamental problems in the WTO accession agreement.
The UAW flatly rejects this misguided effort. Attached to
my testimony is a letter signed by 12 unions, including the
UAW, which rejects the Levin proposals and emphasizes that they
cannot provide any justification for granting PNTR to China. We
agree with Democratic leader Dick Gephardt who concluded that
there are no measures available or under consideration that can
effectively counteract the deficiencies of the WTO accession
agreement.
Representative Levin has proposed the creation of a joint
congressional-executive commission on China to conduct an
annual review of China's worker and human rights practices.
This would simply create a toothless commission that could only
monitor and report on abuses in China. In our judgment, this
would be a poor substitute for the current annual congressional
review of China's NTR trade status, which contains the only
real leverage the United States possesses-that is, the threat
of restrictions on access to the U.S. market.
Representative Levin has also proposed that the U.S. should
pursue the establishment of a working group on labor within the
WTO. However, the U.S. is already required by statute to do
this. Unfortunately, the prospects for establishing this
working group will be undermined if China joins the WTO, since
Chinese officials are adamantly opposed to it. Representative
Levin's proposal does not require China to change its position
as a condition for joining the WTO. Thus, this proposal is
simply a diversion from the real problem, which is China's
position on this issue.
Representative Levin has further proposed that a special
task force should be created to investigate violations of the
U.S. law prohibiting the importation of products made by forced
or prison labor. However, the U.S. and China have already
signed an agreement designed to ensure that China does not
export prison-made goods to the United States. Of course, China
has violated this agreement. But there's nothing in the WTO
rules to stop the U.S. from enforcing its law now by
restricting these imports from China. What is needed now is
concrete action by the U.S. government, not another toothless
task force.
Representative Levin has suggested that the procedures for
invoking the product specific safeguard provision in the WTO
accession agreement should be incorporated into legislation.
But the problem here is that this provision is entirely
discretionary. The Chinese government can voluntarily take
actions to limit exports, or the U.S. government can exercise
its discretion to limit imports from China. But the decision in
both cases is up to the governments, not the injured domestic
workers and firms. Putting this provision into legislation
cannot remedy the fundamental problem that there is no
assurance that any action will be taken to stop a surge of
imports that could jeopardize the jobs of thousands of American
workers.
Representative Levin has further proposed that the U.S.
government should issue annual reports on enforcement of
China's WTO commitments. But the U.S. government already
produces an annual review of compliance by other nations with
their international tarde obligations, the National Trade
Estimates Report on Foreign Trade Barriers. Unfortunately, the
U.S. government has failed to take concrete actions to respond
to the wide range of Chinese violations cited in these reports.
Representative Levin's proposal unfortunately does not provide
any new tools or leverage to encourage greater Chinese
compliance.
Lastly, Representative Levin has also proposed that the WTO
should conduct an annual review of China's compliance with its
obligations through its trade policy review mechanism. But with
no mandatory process for changing China's policies, this would
simply represent another toothless report.
In conclusion, the UAW submits that the lengthy list of
proposals by Representative Levin is inconsequential. Many of
these proposals simply reflect policies that are already being
pursued or implemented by the U.S. Government. Other proposals
simply involve toothless monitoring or reporting requirements.
None of the proposals contain meaningful enforcement mechanisms
to ensure that concrete steps are taken to stop import surges
that threaten the jobs of American workers to address Chinese
abuses of worker and human rights, or to ensure compliance by
China with its international obligations. Thus, there is
nothing in this set of proposals that would fix the basic
problems in the WTO accession agreement and justify the
elimination of the current annual Congressional review of
China's NTR trade status. Thank you.
[The prepared statement follows:]
Statement of Alan Reuther, Legislative Director, International Union,
United Automobile, Aerospace and Agricultural Implement Workers of
America (UAW)
Mr. Chairman, my name is Alan Reuther. I am the Legislative
Director for the International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America (UAW).
Accompanying me today is Steve Beckman, the Assistant Director
of the UAW's Governmental and International Affairs Department.
The UAW represents 1.3 million active and retired workers in
the automotive, aerospace, and agricultural implement
industries, as well as public sector and other employees. We
appreciate the opportunity to testify on the U.S.--China
bilateral agreement providing for the accession of China to the
World Trade Organization (WTO) and the granting of permanent
normal trade relations (PNTR) to China.
The UAW believes the U.S.--China bilateral WTO accession
agreement is fatally flawed. In particular, we believe this
agreement is deficient because it:
fails to effectively eliminate China's
discriminatory automotive and aerospace industrial policies
that are jeopardizing the jobs of American workers, or to
guarantee that American workers will be protected against
surges of imports from China in these and other sectors;
fails to require China to recognize fundamental
worker and human rights; and
fails to provide adequate mechanisms to enforce
China's various trade commitments.
Because we believe the WTO accession agreement is
fundamentally flawed, the UAW strongly opposes the granting of
permanent normal trade relations (PNTR) to China. In our
judgment, it would be a profound mistake for Congress to grant
a ``blank check'' to China by ending the annual Congressional
review of their trade status. This would eliminate our
country's leverage to encourage China to eliminate its
discriminatory trade policies, to recognize worker and human
rights, and to abide by the commercial and agricultural
commitments which it has made.
The UAW testified before this Committee's Trade
Subcommittee on China's possible accession to the World Trade
Organization (WTO) in 1996, indicating the issues that we
believed needed to be addressed in the WTO accession
negotiations--China's discriminatory auto and aerospace
industrial policies, the necessity of import surge protections
for American workers, worker rights protections for Chinese
workers, and continuation of annual NTR reviews by Congress.
Since then we have testified many other times, informed
Administration officials of our views and, as you know, sent
many letters to Congress on this issue. The UAW has been
consistent in its attention to this issue and in its standard
for evaluating the U.S.--China trading relationship.
In our testimony today, we will set forth the reasons why
the U.S.--China bilateral WTO accession agreement that was
negotiated in November, 1999 is deficient. We will then explain
why the parallel legislation proposed by Representative Levin
fails to fix the fundamental problems with the WTO accession
agreement. Lastly, this testimony explains why it is now in the
best interests of the United States for Congress to reject
PNTR, and instead to continue the annual Congressional reviews
of China's trade and other policies.
Threat to American Jobs
The UAW believes the WTO accession agreement fails to take
sufficient steps to protect American workers employed in
various manufacturing industries. In particular, we are
distressed that the accession agreement does not effectively
eliminate China's discriminatory automotive and aerospace
policies that are threatening the jobs of UAW members and other
American workers. Equally troublesome is the fact that the
accession agreement fails to contain adequate protections
against huge surges of imports from China that could threaten
the jobs of thousands of American workers.
The provisions of the WTO accession agreement that cover
automotive products have the same appearance as many other
``market opening'' agreements that the U.S. government has
reached with other countries with closed markets. In each
instance, when such an agreement has been negotiated, the U.S.
automotive trade deficit has worsened rather than improved.
This has been the case for numerous agreements reached with
Japan, for the North American Free Trade Agreement's coverage
of Mexico and for the recent agreements with Korea.
Unfortunately, the UAW believes the provisions in the WTO
accession agreement will produce the same result. Despite
reductions in tariffs and liberalization of quotas, China's
market will remain effectively closed, limiting the increase in
U.S. exports of vehicles and parts to that market. At the same
time, the assurance of open access to the U.S. market will
encourage an even faster pace of investment in China by U.S.
assemblers and parts producers. As a result, U.S. imports from
China, especially of auto parts, will soar. We have already
seen the U.S. automotive trade balance with China shift from a
surplus of $0.5 billion in 1993 to a deficit of $1.0 billion
last year.
China has accomplished this turnaround in automotive trade
with the U.S. by forcing companies that want to sell in China
to produce there and to use locally made parts and materials.
General Motors, Ford and DaimlerChrysler all have assembly
plants in China, as do many other multinational vehicle
assemblers. Because of local content requirements and the
attraction of low wages and the absence of worker rights
protections, U.S.--based auto parts producers and their foreign
competitors have also established production facilities in
China. Parts producers, under considerable pressure from
assemblers to lower their costs, are particularly prone to
shifting production to China, where wages are a tiny fraction
of U.S. levels. These companies are already in China and they
have an interest in making their Chinese plants as profitable
as possible by expanding production. We believe that will lead
to significant exports to the U.S., displacing production here
and the jobs of thousands of American autoworkers.
Our experience with the 1992 U.S.--China Memorandum of
Understanding (MOU) simply reinforces our concerns about the
impact of the WTO accession agreement. In the 1992 MOU China
agreed not to adopt import substitution industrial policies.
But in 1994 China created an auto industrial policy and made it
a ``pillar industry'' for China's economic development. The
Administration has recognized that this policy, with its
import-restricting, export-promoting measures, is a violation
of the 1992 MOU. But to date no action has been taken to remedy
China's blatant violation of this agreement, and to require
China to dismantle its discriminatory auto industrial policy.
Because China has this history of violating the 1992 MOU and
numerous other trade agreements, there is every reason to
believe that China will violate the WTO accession agreement as
well. Since the multinational companies with production
facilities in China have already achieved high levels of local
content in their products, we believe it is unlikely they will
complain about future violations. Instead, they are more likely
to relish the benefits of less competition for their Chinese-
made products. The net result is that we will be faced with a
continuing commitment to auto industry expansion in China that
will cause a major surge of auto parts into the U.S.,
undermining the jobs of thousands of American workers.
The situation in the aerospace industry presents similar
dangers for American workers. China has given preferential
treatment in aircraft orders to companies that transfer
production to China. These ``offset'' deals have shifted
significant production to China in recent years, at the expense
of American workers' jobs. Even worse, the companies have
succumbed to Chinese pressure to transfer advanced aerospace
technologies to China in return for market access. In this way,
sensitive technologies, with defense as well as civilian uses,
have been transferred and new competitors for U.S. companies
have been created.
The WTO accession agreement contains a provision committing
the Chinese government not to require technology transfers,
offsets or local content requirements as a condition for
investment or sales. We believe there are loopholes in this
provision that will allow the Chinese government to continue to
insist on these kinds of deals for companies that want to do
business in China. In addition, the provision applies only to
government actions, not to private agreements. Many Chinese
state-owned enterprises have been privatized, so arrangements
involving these firms and U.S. companies would not be affected
by the technology transfer provision in the WTO accession
agreement. However, in China's government-controlled economy,
these firms are still effectively under the influence and
control of government officials. Thus, there are a number of
mechanisms available to various levels of government in China
to influence the behavior of nominally private firms, rendering
the WTO accession agreement's technology transfer provision
irrelevant.
Proponents of the WTO accession agreement and PNTR have
tried to allay concerns about possible surges of imports from
China by pointing to the product-specific safeguard provision
in the accession agreement. This provision has been described
as an improvement over Section 201 of U.S. trade law, which
normally covers such import surges. However, this conveniently
overlooks the fact that the ability of the product-specific
safeguard provision to protect American workers against import
surges is entirely up to the discretion of the U.S. and Chinese
governments. This provision allows China to agree to voluntary
export restraints and the U.S. to adopt import restrictions
that apply only to China. The key word is ``allows.'' The UAW
submits that, realistically, there is little chance this
product-specific safeguard provision would ever be invoked.
Given China's history of violating trade agreements and its
aggressive pursuit of auto and aerospace industrial policies
that limit imports and promote exports, we believe it is
unlikely the Chinese government would ever agree to voluntary
limits on their exports. At the same time, in light of the U.S.
government's history of failing to take action against
discriminatory trade policies by China and other countries, or
to initiate safeguard measures in response to import surges, we
also believe it is unlikely our government would invoke the
product-specific safeguard provision.
During the negotiations leading up to the WTO accession
agreement, the UAW urged the Administration to seek protections
against import surges that would automatically be triggered
whenever their was a significant increase in imports from China
in various manufacturing industries. Unfortunately, the
product-specific safeguard provision that was ultimately
included in the WTO accession agreement does not provide such
automatic protection. As a result, we believe this provision
does not provide meaningful protection for American workers
whose jobs would be threatened by import surges from China.
Silence on Worker and Human Rights
The UAW is distressed by the total silence of the WTO
accession agreement on issues relating to worker and human
rights. We are particularly troubled by the fact that U.S.
negotiators did not even raise these issues with China.
The UAW has made clear for years that we would oppose any
accession agreement that fails to ensure China's prior
compliance with internationally recognized worker rights
protections, the ability of workers to enforce compliance
through domestic laws and regulations and China's support for
including worker rights in the WTO through the creation of a
WTO working group on this subject. Unfortunately, the WTO
accession agreement that was negotiated last November contains
none of these essential points.
The existence of massive abuses of workers' rights in China
has been well documented. The U.S. State Department's annual
Country Reports on Human Rights and Practices has made clear
that the worker rights situation in China has been
deteriorating. Child labor, prison labor, repression of
independent unions, the lengthy imprisonment of independent
union activists are all too common occurrences in China. In our
judgment, trade and investment that takes place under these
conditions cannot be considered ``fair.'' The fact that many
American companies have invested in China to take advantage of
these conditions, and that the massive U.S. trade deficit with
China is fed by these injustices, makes the exclusion of worker
rights issues from the WTO accession agreement all the more
abhorrent.
The UAW welcomes the Administration's support for
incorporating worker rights into the WTO rules by creating a
working group on these issues. But the sad truth is that
China's accession to the WTO will almost certainly prevent the
WTO from taking this small step so long as China continues to
oppose the incorporation of worker rights into the WTO rules.
That is why it is so shocking that U.S. negotiators failed to
raise these issues, and therefore failed to get a commitment
from China in the accession agreement to support the
establishment of a WTO working group on worker rights. This
effectively dooms any prospect for making progress on worker
rights issues through the WTO.
The WTO rules contain protections for the rights of owners
of capital, ensuring that broad rights for multinational
corporations are enforced by governments. But as long as the
WTO rules fail to contain protections for the rights of workers
that are at least as strong, workers throughout the world will
be justified in seeing the WTO as a body that just advances the
interests of corporations and economic elites, not the well
being of working men and women.
Under these conditions, the UAW believes Congress should
reject PNTR for China and insist on a continuation of our
annual reviews of China's human and worker rights practices.
This is the only way for the United States to maintain some
leverage to encourage China to curb its abuses of worker and
human rights, and ultimately to support the inclusion of these
issues in the WTO rules.
Enforcement of China's Trade Commitments
China has a long history of violating its trade
commitments. In particular, China has violated previous
bilateral agreements on prison labor, intellectual property
rights, textiles, and market access, thereby undermining the
potential benefits of those agreements for the United States.
In addition to this bad track record, the statements of many
Chinese government officials in recent months also contribute
to our skepticism regarding China's compliance with the new
commercial and agricultural commitments which it has made in
the WTO accession agreement. Specifically, Chinese officials
have indicated that the agreements on tariff reductions, quota
increases and liberalized foreign ownership are no more than
words on paper. They describe what is possible, but will not
necessarily determine what will happen. If the past is any
guide, there will be far less effective market opening in China
than proponents of PNTR expect.
When violations of China's WTO commitments do, indeed, take
place, we believe that the bilateral dispute settlement process
now in place is preferable to the WTO process that would apply
if the U.S. were to establish a WTO relationship with China by
approving PNTR. The WTO dispute resolution procedures, which
have been in place since 1995, have been slow to produce final
decisions and cumbersome in their operations. Because of the
limited scope of the WTO's rules, which are biased in favor of
more trade and less government regulations for worker, consumer
and environmental protections, several of its decisions have
challenged legitimate U.S. laws and regulations. It has also
become clear that the ways in which China and other countries
with structural and non-market barriers discriminate against
foreign products and services cannot be successfully challenged
in the WTO. As a result, the WTO puts open, rules-based
countries like the U.S. at a disadvantage.
Being bound by the WTO process would also prevent the
effective use of U.S. trade laws like Section 301 to address
unfair Chinese practices that are not directly covered by WTO
rules. Even though U.S. cases on such issues, including worker
rights and toleration of restrictive business practices, could
be filed and pursued, the WTO rules would not allow the U.S. to
raise tariffs or limit access to the U.S. market. Thus, under
the WTO rules these Section 301 cases could no longer provide
any meaningful remedy against the unfair Chinese practices.
In contrast, if Congress rejects PNTR the United States
would be able to maintain the bilateral enforcement tools that
are now in place, including Section 301. The UAW submits that
there are numerous advantages to this approach. This would
allow the United States to make effective use of all of our
existing trade laws to respond to discriminatory practices by
China. This would also allow the U.S. to respond to violations
of bilateral trade agreements in place with China that are not
part of our WTO commitments. Significantly, we would not have
to worry about obtaining WTO approval for any U.S. actions.
The main benefit of maintaining the current dispute
settlement process, though, would be the continuing leverage of
the annual Congressional review of China's NTR trade status.
This annual review raises the threat that the U.S. could
significantly limit access to its market if China continues to
blatantly violate its trade commitments, or in response to a
major deterioration in human or worker rights or other actions
by China. The only way for the U.S. to keep its leverage on
these issues intact and continue to pressure the Chinese
government to make meaningful improvements in these areas is
for Congress to reject PNTR for China at this time, and to
insist on a continuation of the annual NTR reviews.
Proponents of PNTR have claimed that U.S. business and
farmers will lose the benefits of China's market opening
commitments to other countries unless Congress eliminates the
annual NTR reviews. We believe they are simply wrong. The
bilateral trade agreement negotiated in 1979 and implemented in
1980 sets the framework for the overall U.S.--China trading
relationship. It provides broad Most Favored Nation (MFN, the
trade status now referred to as NTR in the U.S.) treatment for
U.S. products and firms in China, assuring access comparable to
that afforded to other countries.
The 1979 agreement covers tariffs, distribution in China,
and the treatment of firms operating in China. It is much more
expansive than the proponents of PNTR have acknowledged. We
believe this agreement addresses substantially all of the areas
included in China's WTO commitments and will prevent China from
withholding the benefits of any market opening from U.S
businesses and farmers.
In addition, the high level of Chinese exports to the U.S.
(which exceed U.S. exports to China by a seven to one ratio)
makes it unlikely that the Chinese government would
discriminate against U.S. businesses and farmers by denying
them trade benefits accorded to other nations. In our judgment,
China will not risk jeopardizing its nearly $70 billion trade
surplus with the U.S. by violating the 1979 agreement and
discriminating against U.S. interests. Under the 1979
agreement, access to the U.S. market for China must be
equivalent to the access afforded other countries, so
discriminatory treatment by China would violate the agreement
and invite retaliation by the United States.
The Proposals Advanced By Representative Levin Do Not Fix The
Fundamental Flaws in the WTO Accession Agreement
Recognizing that there are serious problems in the WTO
accession agreement, a number of Representatives have suggested
that these issues should be addressed through parallel
legislation. In particular, Representative Levin has presented
a number of proposals along these lines.
The UAW and the rest of the labor movement flatly reject
this misguided effort to craft a unilateral U.S. ``side
agreement'' to mitigate some of the fundamental problems in the
WTO accession agreement. Attached to this testimony is a letter
dated February 29th signed by twelve unions, including the UAW,
which rejects the Levin proposals and emphasizes that these
proposals cannot provide any justification for granting PNTR to
China. We agree with Democratic Leader Dick Gephardt who
stated, when announcing his opposition to PNTR, that there are
no measures available or under consideration that can
effectively counteract the deficiencies of the WTO accession
agreement.
In rejecting the proposals put forward by Representative
Levin, the UAW is not ignoring international economic reality
or falling into isolationism. We simply believe that expanded
international trade and investment must improve living
standards for working people, in the U.S. and abroad. If a
proposed agreement, instead, reinforces pressures to depress
workers' incomes and diminishes their rights, then that
agreement should be rejected and a different path should be
taken. The UAW opposes the WTO accession agreement and the
granting of PNTR to China because it fails to meet this simple
test. Unfortunately, proposals for ``side agreements'' like
those advanced by Representative Levin do not address in any
meaningful way the fundamental deficiencies in the WTO or the
U.S.--China bilateral accession agreement.
In his testimony before this Committee in February,
Representative Levin proposed the creation of a joint
congressional-executive commission on China, to conduct an
annual review of China's violations of human rights, labor
rights and WTO commitments. The commission would produce
recommendations for actions that the U.S. government could
take. But these actions would have to be WTO-consistent and not
violate any other U.S. international obligations.
The problem with this proposal is that it substitutes an
annual review that can only ``recommend'' certain limited
actions for the annual Congressional review we now have, which
has the authority to revoke China's NTR trade status. Since the
recommendations under Representative Levin's proposal could
only encompass actions that the U.S. can take under existing
authority, the proposed congressional-executive commission adds
no new authority and provides no new leverage to change China's
behavior in these critical areas of concern. Instead, by
eliminating the current annual Congressional review of China's
NTR trade status, this proposal would eliminate the only real
leverage which the United States possesses--that is, the threat
of restrictions on access to the U.S. market. In our judgment,
it would be a profound mistake for Congress to give up this
leverage for a toothless commission that can only monitor and
report on worker and human rights in China. This can only lead
to a further deterioration of conditions in China.
In the area of human rights, the State Department's annual
report already provides a wealth of documentation of Chinese
abuses. Creating a new staff and budget for a new commission
would be unlikely to produce any startlingly new evidence. The
same is true for worker rights violations. The State Department
report documents these abuses, and the International Labor
Organization also has resources for this purpose. If the
problem in these areas was a lack of attention and information,
creating a commission might make some sense. Unfortunately,
that has not been the problem. The real problem has always been
the absence of resolve to take effective actions to pressure
China to change its practices on worker and human rights.
Establishing a new congressional-executive commission to
monitor and report on Chinese abuses will not help at all with
this problem. What we need are more concrete tools to pressure
China on these issues, and a Congress or Administration that
are prepared to use these tools. Eliminating the tool we now
have--the annual Congressional review of China's NTR trade
status--can only represent a step backwards, no matter how many
grand commissions are created to monitor and report on the
situation in China.
Representative Levin has also proposed that the U.S. should
be committed to pursuing the establishment of a working group
on labor within the WTO. However, the U.S. is already required
by statute to pursue this objective. It will make no
contribution to the advancement of worker rights within the WTO
or in China to restate this position.
The sad fact is that government officials in China have
already stated that, as a WTO member, China will oppose the
creation of a working group on labor. Other WTO member
countries that are opposed to the working group have made it
clear that they welcome China's joining the WTO, so that the
forces against the worker rights initiative will be
strengthened. The missing element in this equation is not the
position of the U.S. government, it is the position of China's
government. If Representative Levin's proposal required that
China must support the working group on labor, as a condition
for their accession to the WTO, we would welcome this proposal.
But looking only at the position of the U.S. government is
simply a diversion from the real problem.
Representative Levin has further proposed that a special
task force should be created to investigate violations of the
U.S. prohibition on imports of products made by forced or
prison labor. This proposal is ironic for several reasons. The
U.S. and China have already signed an agreement in which China
said it would provide the information necessary for the U.S. to
ensure that China was not exporting prison-made goods to the
United States. China has violated this agreement, as it has
violated virtually every agreement it has signed with the
United States. Prohibitions on imports of prison-made goods are
among the few import restrictions allowed by the WTO, and its
predecessor, the General Agreement on Tariffs and Trade (GATT).
There is no impediment to the U.S. forcefully enforcing its
law, at the expense of imports from China. Allegations of
Chinese exports made by forced and prison labor have been made,
and verified, for years. We heartily support the enforcement of
U.S. law in this area. But this should hardly require the
creation of a special task force. What is really needed, once
again, is resolve by the U.S. government to use the tools
currently at our disposal to take concrete actions against
these serious abuses.
To enhance enforcement of China's commitments in the WTO
accession agreement, Representative Levin has proposed putting
procedures for invoking the product-specific safeguard
provision into legislation. He has also proposed strengthening
Section 201 of U.S. trade law, which is designed to address
this problem, as well as provisions of Section 301, which
covers unfair foreign trade practices. This proposal also
includes adding resources for monitoring and enforcing China's
WTO obligations, including an annual report on China's
performance.
In our judgment, none of these proposals is meaningful. The
product-specific safeguard provision in the WTO accession
agreement needs much more than putting its procedures into
legislation to make it effective. As described earlier, this
``provision'' is entirely discretionary. The Chinese government
can voluntarily take actions to limit exports, or the U.S.
government can exercise its discretion to limit imports from
China. The decision in both cases is up to the government, not
the injured domestic workers and firms. Putting this provision
into legislation cannot remedy the fundamental problem that
there is no assurance that any action will be taken to stop a
surge of imports that could jeopardize the jobs of thousands of
American workers. And it cannot make this provision more
effective in preventing import surges in the first place (by
eliminating China's determination to maintain its auto and
aerospace industrial policies), or speed up the process for
obtaining relief from injurious imports. Thus, this proposal is
too little, too late and still too discretionary.
It has been widely known for many years that Section 201 is
in need of revision. Unfortunately, Representative Levin's
insistence that any changes must be WTO-consistent puts a tight
rein on what could be adopted. Reducing the difficulty of
meeting the domestic injury test is one change that the UAW has
long supported and continues to support. We welcome
Representative Levin's support for such a change, but it will
not be enough to make utilization of Section 201 much more
appealing to American workers losing their jobs to increased
imports. When American steelworkers were experiencing such job
losses, the Administration refused to exercise its authority to
self-initiate a Section 201 case. If the Administration refused
to act then, there is little likelihood that it would initiate
a case under the revised standard. And businesses and workers
that are adversely impacted by imports would still be unlikely
to receive effective relief, even under the revised standard.
The proposal to strengthen Section 301 of U.S. trade law is
rather curious. It is now generally agreed that the teeth in
Section 301 were removed by the Uruguay Round commitment to
retaliate against unfair foreign trade practices only when
authorized to do so by the WTO. Effectively, all Section 301
cases are referred to the WTO for dispute resolution and the
U.S. is stuck with the decision by the WTO dispute resolution
panel. Section 301 is just the funnel for transmitting certain
U.S. cases to the WTO. Accordingly, strengthening Section 301
by expanding its definition of what kinds of foreign practices
are ``unfair'' would provide little solace under the WTO
system. Even if the U.S. were to determine that certain foreign
trade practices were ``unfair'' under this expanded definition,
we could not retaliate against these practices in ways that
conflict with NTR treatment of the country and general WTO
obligations. This limits the benefit of any Section 301 case to
remedies that are not subject to WTO discipline. But those
remedies are shrinking as WTO jurisdiction expands. As a
result, it will be hard to identify any gains from
``improvements'' to Section 301.
Representative Levin has also proposed that the U.S.
government should issue annual reports on the enforcement of
China's WTO commitments. This simply covers the same ground as
the congressional-executive commission described above. More
importantly, it is important to note that the U.S. government
already produces an annual review of how other nations have
complied with their international trade obligations, the
National Trade Estimates Report on Foreign Trade Barriers. In
recent years the section of this book covering China has been
quite large, describing the wide range of violations by China
of its obligations to the United States. Finding the violations
has not been the problem. The problem has always been the
failure of the U.S. government to take concrete actions to
eliminate the violations Representative Levin is suggesting no
new leverage or tools to achieve that goal. Instead, by
granting PNTR we would eliminate the leverage we now have
through the annual NTR review.
Representative Levin has also proposed that the WTO should
conduct another annual review of China's compliance with its
obligations, through its Trade Policy Review Mechanism (TPRM).
As Representative Levin notes, China's size, the nature of its
economy and the limited rule of law warrant frequent reviews.
However, even if the WTO were to agree to this unprecedented
schedule (the most frequent reviews are now every two years for
a small number of countries, including the U.S.), the results
of the TPRM process are not binding on anyone. We would, again,
have a source of information on China's failure to fulfill its
WTO obligations. But with no mandatory process for changing
China's policies, this would simply represent another toothless
report.
Representative Levin has also suggested the need for
certain institutional reforms of the WTO itself, including
increased transparency through public release of documents,
opening up the meetings of the dispute settlement panels, and
accepting amicus briefs in the dispute settlement process. The
UAW shares Representative Levin's commitment to these
objectives. Indeed, the U.S. government has already endorsed
these changes in the WTO and is pressing for their acceptance.
These changes are desirable in their own right. But even if
adopted, they are unlikely to have any effect on China's
behavior in the WTO.
In the end, the lengthy list of proposals made by
Representative Levin is inconsequential. Many of these
proposals simply reflect policies that are already being
pursued or implemented by the U.S. government. Thus, these
proposals are simply duplicative window dressing, and do not
represent any improvement over the current state of affairs. In
addition, many of the proposals simply involve toothless
monitoring or reporting requirements. None of the proposals
contain meaningful enforcement mechanisms to ensure that
concrete steps are taken to stop import surges that threaten
the jobs of American workers, to address Chinese abuses of
worker and human rights, or to ensure compliance by China with
its international obligations. Thus, there is nothing in this
set of proposals that would fix the basic problems in the WTO
accession agreement and justify the elimination of the current
annual Congressional review of China's NTR trade status.
The United States Has Nothing to Gain, and Much to Lose By Granting
PNTR to China At This Time
In light of the serious deficiencies in the U.S.--China WTO
accession agreement, and the failure of the parallel
legislation proposed by Representative Levin to address these
deficiencies in any meaningful way, the UAW submits that it is
in our national interest to reject PNTR at this time, and to
retain the current annual Congressional review of China's trade
status. Simply stated, our nation has nothing to gain, and much
to lose by granting PNTR to China at this time.
If Congress rejects PNTR for China:
China is still obligated under the 1979 agreement
with the U.S. to give our businesses and farmers all of the
tariff reductions and other trade benefits that it accords to
other nations.
The U.S. can still use its bilateral enforcement
tools, like section 301 and super 301, to take action against
discriminatory Chinese practices. These enforcement tools are
superior to the cumbersome dispute resolution procedures under
the WTO.
Most importantly, Congress and the United States
will retain the leverage of the annual NTR reviews to pressure
China to honor the commercial and agricultural commitments
which it has made, to make progress on worker and human rights,
and to prevent import surges that would jeopardize the jobs of
thousands of Americans.
In contrast, if Congress grants PNTR to China:
We will lose the ability to use our bilateral
enforcement mechanisms. Instead, we will be at the mercy of the
WTO dispute resolution procedures, which take far too long and
which don't apply to the many ways a non-market economy like
China can discriminate against products and services made in
the U.S.
We will lose any ability to use the leverage of
access to the U.S. market to pressure China to honor its
commercial and agricultural commitments, to encourage China to
make progress on worker and human rights, or to stop import
surges that threaten American jobs.
Once we have granted PNTR to China, Congress
cannot repeal this trade status without subjecting the U.S. to
sanctions under the WTO. Thus, Congress and the U.S. will be
left without any effective recourse if China continues its past
practices of failing to honor its trade commitments and
repressing basic worker and human rights.
For all of these reasons, the UAW believes it makes no
sense to give China a blank check by granting it PNTR at this
time.
Mr. Chairman, Members of Congress face a very important
choice on the China PNTR issue. We firmly believe that the WTO
accession agreement negotiated with China is deficient in many
important ways. Under its terms, the absence of balance in the
international trading system will be reinforced rather than
corrected. As a large, rapidly growing economy, China will have
significant influence in the WTO and the direction that it
takes. Unless worker rights and environmental protections are
incorporated into the rules of this trading system, trade and
international economic integration will continue to contribute
to growing economic inequality, within and among nations,
downward pressure on workers' incomes and reduced social and
environmental standards.
The majority of Americans believe the trading system must
do more to promote social justice and equitable economic
development. UAW members, their families and their communities
are insisting on this. Granting permanent normal trade
relations to China and accepting the fatally flawed WTO
accession agreement would be a giant step in the wrong
direction. It would eliminate the single most significant
leverage we have to move China toward fair treatment and
democratic rights for its citizens--namely, the current annual
Congressional review of China's NTR trade status.
We urge you as strongly as possible to oppose PNTR, thereby
leaving the door open to a more balanced, beneficial U.S.
trading relationship with China and to an international trading
system that can address the concerns of workers for a fair,
safe and healthy world.
Thank you.
February 29, 2000
Dear Representative:
During a recent hearing by the Ways and Means Committee on the
China WTO trade deal, Representative Sander Levin presented a five
point proposal dealing with human rights, import surges, and
enforcement of China's commitments. The unions listed below believe
this Levin proposal fails to provide any effective improvement on these
key issues. Accordingly, we do not believe the Levin proposal provides
any justification for granting permanent NTR trade status to China.
In our judgment, the Levin proposal is nothing more than fig leaf.
It has absolutely no teeth, and thus would not lead to any concrete
progress relating to human rights, import surges, or enforcement of
China's commitments
Worker and Human Rights
The Levin proposal calls for the establishment of a special U.S.
congressional-executive commission that would monitor and report on
China's record relating to worker and human rights. But this commission
would have absolutely no power or leverage to influence China's actions
in these areas. Unlike the current annual review of NTR trade status,
the monitoring and annual reports of this commission would not be
linked to any trade status or sanctions. Thus, this amounts to nothing
more than a meaningless reporting requirement that China could ignore
without fear of any adverse consequences.
The Levin proposal also calls for the U.S. to pursue the
establishment of a working group on labor within the WTO. But this is
nothing more than a restatement of the existing policy of the Clinton
Administration. While the UAW and the rest of the labor movement have
supported the establishing of a WTO working group on labor, the sad
reality is that China's accession to the WTO completely undermines any
realistic possibility of obtaining this objective in the foreseeable
future.
Import Surges
The Levin proposal calls for the enactment of legislation spelling
out the procedures for invoking the anti-import surge provision in the
U.S.--China bilateral accession agreement--the so-called ``product
specific safeguard'' provision. Unfortunately, this anti-import surge
provision is completely voluntary on China's part, and completely
discretionary on the part of the United States. There is absolutely no
guarantee that it would ever be invoked, by either China or the U.S.,
to halt any surge of imports in textiles, auto parts, steel, aerospace,
electronic or other products. Even if the legislation proposed by
Representative Levin allowed Congress to invoke the anti-import surge
provision, past history suggests that there is little likelihood that
this would ever happen.
The Levin proposal also calls for the strengthening of the general
anti-import surge provision in section 201 of U.S. trade law. Although
the UAW would welcome this change, it still would not guarantee
American workers protection against import surges from China. The
unfortunate truth is that section 201 has seldom been invoked to
protect American workers from import surges in the past.
Enforcement of China's Commitments
The Levin proposal calls for the WTO's Trade Policy Review
Mechanism (TPRM) to conduct an annual review of China's compliance with
its WTO commitments. Again, this would simply lead to the issuance of
another meaningless report, with absolutely no teeth to address any
violations by China of its commercial or agricultural commitments. This
proposal does not contain any new enforcement tools or sanctions. The
existing WTO enforcement mechanisms are notoriously slow and
cumbersome, and do not apply to the myriad ways that non-market
economies like China can discriminate against imports of products and
services from the U.S. and other countries.
For all of the foregoing reasons, the unions listed below believe
that the proposal set forth by Representative Levin would not lead to
any significant improvement in the areas of worker and human rights,
import surges, or enforcement of China's commitments. Accordingly, we
strongly oppose any attempt to use this proposal as a justification for
granting permanent NTR trade status to China. In our judgment, the only
way to retain meaningful oversight and leverage by Congress on these
key issues is to reject permanent NTR trade status for China.
Sincerely,
American Federation of Government Employees (AFGE)
American Federation of Teachers (AFT)
American Federation of State, County and Municipal
Employees (AFSCME)
Int'l. Brotherhood of Boilermakers, Iron Shipbuilders,
Blacksmiths, Forgers and Helpers (IBB)
International Brotherhood of Teamsters (IBT)
Paper, Allied-Industrial, Chemical & Energy Workers
International Union (PACE)
Service Employees International Union (SEIU)
Transport Workers Union of America (TWU)
Union of Needletrades, Industrial and Textile Employees
(UNITE)
United Automobile, Aerospace & Agricultural Implement
Workers Of America (UAW)
United Mine Workers (UMW)
United Steelworkers of America (USWA)
Chairman Archer. Thank you, Mr. Reuther.
Mr. Burns, welcome, and you may proceed.
STATEMENT OF KYLE J. BURNS, DIRECTOR, INTERNATIONAL SALES,
COLUMBIA 300, INC., SAN ANTONIO, TEXAS
Mr. Burns. Thank you. Good afternoon, Chairman Archer and
members of the Committee. It is my privilege to testify this
afternoon regarding the benefits of China's accession to the
World Trade Organization and the necessity of granting
permanent normal trade relations status to China.
My name is Kyle Burns, and I'm the Director of
International Sales at Columbia 300, Inc. Columbia manufactures
high-performance, mid-performance and entry level bowling balls
in San Antonio, Texas. We are an active member of the Texas
International Trade Alliance, which is affiliated with the
Business Roundtable's grass-roots trade education program
called goTRADE. The Texas International Trade Alliance is a
coalition of local small, medium and large companies, academics
and other officials that promote the benefits of international
trade to Texas communities. Columbia and the Texas
International Trade Alliance strongly support China's accession
to the World Trade Organization and PNTR.
I would like to talk to you today about how China's
accession to the WTO will benefit Texas, and more specifically
how China's accession will benefit a small Texas company like
Columbia.
The Chinese market is very important to Texas. Direct
exports from Texas to China totaled almost $1 billion in 1998.
If you add indirect exports through Hong Kong, Texas exports to
China totaled $1.2 billion. These exports were broadly
diversified with almost every major product category
registering exports to China in 1998. And these exports are
increasing rapidly. Many key Texas export categories more than
doubled their sales to China from 1993 to 1998.
Small and medium size companies in Texas are responsible
for a growing share of exports to China. In 1997, small and
medium size companies accounted for an astounding 71 percent of
the 672 companies that exported merchandise from Texas to
China. China's accession to the WTO offers Texas companies,
employees and farmers the best opportunity to increase their
exports to China even further. China's WTO commitments address
the principal market access barriers to Texas products and will
increase market access beginning on the first day of China's
membership in the WTO.
The new opportunities created by this new market access
will lead to economic growth in Texas and an improved standard
of living for Texas families. It is therefore certainly in
Texas' best interest to bring China into the global trading
system.
China's accession to the WTO will also benefit my company
tremendously. Columbia was founded in 1960 and now employs
approximately 200 people. Our modern complex of offices,
factory and warehouse space in San Antonio houses the most
technologically advanced plant in the bowling industry. And we
dedicate millions of dollars to research and development so
that we can bring innovative ideas and technology to the sport
of bowling.
Although many people view bowling as a uniquely American
sport, Columbia has been exporting bowling balls around the
world for more than 35 years. We ship bowling balls and
accessories from San Antonio to more than 50 countries, in
Latin America, Europe, the Middle East, South Africa and Asia.
These markets are extremely important for our business.
International customers account for 20 percent of our total
sales, and the Asian market is the most important, accounting
for 80 percent of our international sales.
The Chinese market is particularly important for Columbia.
We began exporting bowling balls indirectly to China through
Hong Kong approximately seven years ago. We began exporting
directly to China approximately four years ago. Our main
markets are in the major metropolitan areas along the east
coast of China. Recently, China has accounted for as much as 7
percent of our international sales and promises the greatest
growth potential for our products. China's accession to the WTO
will help Columbia realize its growth potential.
Under the U.S.--China WTO agreement, China has agreed to
eliminate its tariffs on all bowling equipment. The tariff
reductions will commence upon accession and be fully
implemented by January 1st, 2005. The U.S.--China WTO agreement
also alleviates a whole host of current restrictions on doing
business in China. For example, China currently imposes severe
restrictions on trading rights, the right to import and export,
and distribution rights, the right to provide wholesaling,
retailing, maintenance and transportation services.
Foreign companies have no right to distribute products
other than those they make in China. They cannot own or manage
distribution networks, wholesaling outlets or warehouses. Under
the WTO agreement, China will for the first time grant U.S.
companies like Columbia the right to import without Chinese
middlemen. It will also permit full rights to distribution. We
will therefore have the freedom to establish our own networks
to distribute our products in China. And the application of WTO
dispute settlement proceedings and other enforcement mechanisms
will ensure that China meets its commitments.
In addition, China's accession to the WTO will spur
economic growth and boost demand for our products in China.
Since China began introducing market reforms in 1978, it has
been growing at the highest rate of any major economy. This
economic growth has helped to lift millions of Chinese citizens
out of poverty, doubling or even tripling real incomes.
Bringing China into the WTO will accelerate China's economic
growth and raise disposal incomes even further, thereby
increasing wherewithal for ordinary Chinese citizens to
purchase our products.
As a direct result of China's accession to the WTO, we
expect a 20 percent increase in our sales to China in the short
term. In the long term, our sales to China easily could surpass
our current worldwide sales. The increased sales will greatly
benefit our employees. Their jobs depend on opening new market
in China and other countries as the demand for bowling products
in the United States diminishes.
The increased sales will also indirectly benefit employees
in many other Texas companies. Employees at our urethane
supplier in Dallas and our boxing supplier in San Antonio,
among others, depend upon our success for their jobs. Our
increased sales to China, after its accession to the WTO,
therefore will provide benefits to a whole chain of Texas
companies and their employees.
In order for Columbia and other Texans to realize the
benefits discussed above, Congress must grant PNTR to China.
Without PNTR, China could join the WTO and extend those
benefits to Columbia's foreign competitors in Japan and South
Korea but justifiably withhold them from the United States.
Please do not let that happen. We cannot afford to lose the
Chinese market to our foreign competitors.
On behalf of Columbia 300, therefore, I urge you to support
PNTR for China. Thank you.
[The prepared statement follows:]
Statement of Kyle J. Burns, Director, International Sales, Columbia
300, Inc., San Antonio, Texas
Good morning Chairman Archer and members of the Committee.
It is my privilege to testify this morning regarding the
benefits of China's accession to the World Trade Organization
(WTO) and the necessity of granting permanent Normal Trade
Relations (PNTR) status to China.
My name is Kyle Burns, and I am the Director of
International Sales at Columbia 300, Inc. Columbia manufactures
high-performance, mid-performance, and entry-level bowling
balls in San Antonio, Texas. We are an active member of the
Texas International Trade Alliance, which is affiliated with
The Business Roundtable's grass-roots trade education program
called goTRADE. The Texas International Trade Alliance is a
coalition of local small, medium, and large companies,
academics, and other officials that promote the benefits of
international trade to Texas communities. Columbia and the
Texas International Trade Alliance strongly support China's
accession to the WTO and PNTR.
I would like to talk to you today about how China's
accession to the WTO will benefit Texas, and more specifically
about how China's accession will benefit a small Texas company
like Columbia.
I. China's Accession to the WTO Will Benefit Texas
Tremendously.
The Chinese market is very important to Texas. Direct
exports from Texas to China totaled almost $1 billion in 1998.
If you add indirect exports through Hong Kong, Texas exports to
China totaled $1.2 billion. These exports were broadly
diversified, with almost every major product category
registering exports to China in 1998. And these exports are
increasing rapidly--many key Texas export categories more than
doubled their sales to China from 1993 to 1998.
Small and medium-sized companies in Texas are responsible
for a growing share of exports to China. In 1997, small and
medium-sized companies accounted for an astounding 71 percent
of the 672 companies that exported merchandise from Texas to
China.
China's accession to the WTO offers Texas companies,
employees, and farmers the best opportunity to increase their
exports to China even further. China's WTO commitments address
the principal market access barriers to Texas products and will
increase market access beginning on the first day of China's
membership in the WTO. The new opportunities created by this
new market access will lead to economic growth in Texas and an
improved standard of living for Texas families. It is therefore
certainly in Texas's interest to bring China into the global
trading system.
II. China's Accession to the WTO Will Also Benefit My Company
Tremendously.
Columbia was founded in 1960 and now employs approximately
200 people. Our modern complex of offices, factory, and
warehouse space in San Antonio houses the most technologically
advanced plant in the bowling industry, and we dedicate
millions of dollars to research and development so that we can
bring innovative ideas and technology to the sport of bowling.
Although many people view bowling as a uniquely American
sport, Columbia has been exporting bowling balls around the
world for more than thirty-five years. We ship bowling balls
and accessories from San Antonio to more than fifty countries
in Latin America, Europe, the Middle East, South Africa, and
Asia. These markets are extremely important for our business--
international customers account for twenty percent of our total
sales. And the Asian market is the most important, accounting
for eighty percent of our international sales.
The Chinese market is particularly important for Columbia.
We began exporting bowling balls indirectly to China through
Hong Kong approximately seven years ago, and we began exporting
directly to China approximately four years ago. Our main
markets are in the major metropolitan areas along the east
coast of China. Recently, China has accounted for as much as
seven percent of our international sales, and it promises the
greatest growth potential for our products.
China's accession to the WTO will help Columbia realize
this growth potential. Under the U.S. China--WTO Agreement,
China has agreed to eliminate its tariffs on all bowling
equipment. The tariff reductions will commence upon accession
and will be fully implemented by January 1, 2005.
The U.S.--China WTO Agreement also alleviates a whole host
of current restrictions on doing business in China. For
example, China currently imposes severe restrictions on trading
rights (the right to import and export) and distribution rights
(the right to provide wholesaling, retailing, maintenance, and
transportation services). Foreign companies have no right to
distribute products other than those they make in China, and
they cannot own or manage distribution networks, wholesaling
outlets, or warehouses. Under the WTO Agreement, China will for
the first time grant U.S. companies like Columbia the right to
import without Chinese middle-men, and it will also permit full
rights of distribution. We will therefore have the freedom to
establish our own networks to distribute our products in China.
And the application of WTO dispute settlement proceedings and
other enforcement mechanisms will ensure that China meets its
commitments.
In addition, China's accession to the WTO will spur
economic growth and boost demand for our products in China.
Since China began introducing market reforms in 1978, it has
been growing at the highest rate of any major economy. This
economic growth has helped to lift millions of Chinese citizens
out of poverty, doubling or even tripling real incomes.
Bringing China into the WTO will accelerate China's economic
growth and raise disposable incomes even further, thereby
increasing the wherewithal for ordinary Chinese citizens to
purchase our products.
As a direct result of China's accession to the WTO, we
expect a twenty percent increase in our sales to China in the
short-term. In the long-term, our sales to China easily could
surpass our current worldwide sales. The increased sales will
greatly benefit our employees. Their jobs depend upon opening
new markets in China and other countries as the demand for
bowling products in the United States diminishes. The increased
sales will also indirectly benefit employees at many other
Texas companies. Employees at our urethane supplier in Dallas
and at our boxing supplier in San Antonio, among others, depend
upon our success for their jobs. Our increased sales to China
after its accession to the WTO therefore will provide benefits
to a whole chain of Texas companies and their employees.
Conclusion
In order for Columbia and other Texans to realize the
benefits discussed above, Congress must grant PNTR to China.
Without PNTR, China could join the WTO and extend those
benefits to Columbia's foreign competitors in Japan and South
Korea but justifiably withhold them from the United States.
Please do not let that happen. We cannot afford to lose the
Chinese market to our foreign competitors. On behalf of
Columbia 300, I therefore urge you to support PNTR for China.
Thank you.
Chairman Archer. Thank you, Mr. Burns.
Mr. Laux, welcome, it's good to see you again. We'll be
pleased to receive your testimony.
STATEMENT OF DAVID N. LAUX, PRESIDENT, U.S.-TAIWAN BUSINESS
FORUM, ARLINGTON, VIRGINIA
Mr. Laux. Thank you, Mr. Chairman, Congressman Rangel,
distinguished members of the Committee. Thank you for including
me in this panel of distinguished speakers today.
I am David Laux, the President of the U.S.-Taiwan Business
Forum, and until one month ago, for almost 10 years, I was
president of the U.S.-ROC-Taiwan Business Council, made up of
some 200 U.S. companies and organizations doing business with
Taiwan.
Prior to that, I was for almost four years the Chairman of
the American Institute in Taiwan, the Instrumentality, which is
effect our substitute for an embassy in dealing with the
economic, cultural and other relations with the people of
Taiwan. And I had a stint for almost five years on the
International Security Council staff as director of Asian
affairs, and really, my 49 years of working life, I've spent
most of it working on improving U.S. relations with the Chinese
people, both on the mainland and in Taiwan.
I want to speak for just a moment on the importance of
Taiwan to the United States. Because the essential thrust I
want to make here is that granting PNTR to China is good for
Taiwan and our relationship with Taiwan. And it's going to help
increase business with both Taiwan and the United States. And I
don't think this is well known, but it is going to, in my view,
result in a small explosion of the cross-Strait trade going on
between Taiwan and China. And that in itself is going to help
to ameliorate some of the tensions in the straits.
Taiwan, has the world's third largest foreign exchange
reserves after Japan and the People's Republic of China,
totaling $113 billion at the end of March. And something close
to 70 percent of that is invested in U.S. dollar instruments.
Taiwan is the world's second largest creditor nation after
Japan, because they have virtually no foreign debt as opposed
to China, which has a substantial foreign debt.
Their trade with us was $54.3 billion last year, making it
our seventh largest partner behind Canada, Japan, Mexico,
China, Germany and Great Britain. And ahead of countries like
South Korea, France, Singapore and Italy. Taiwan bought one and
a half times as much from us last year as China did. In earlier
years, it was even greater. And the $20 billion or so per year
that they have bought the last three years, let me put that in
perspective. That is half as much as all of South and Central
America, not counting Mexico, buys from the United States. It's
twice as much as all of Africa, and it's five to seven times as
much as either India or Russia buys from us. Not bad for 22
million people living in a country a little over the size of
Maryland.
Taiwan applied for membership in the GATT, WTO's
predecessor organization, in 1990, became an observer in 1992.
They have now completed, a little more than a year ago, all of
the arrangements with us and their multilateral negotiations.
And they are in effect in a holding pattern waiting to get into
WTO. And while the U.S. Government's position is that Taiwan's
accession is not linked to that of the People's Republic of
China, the current reality is that the WTO working party,
because of the positions of some of its members who are close
to the People's Republic, is not going to reach a consensus
agreement approving Taiwan's entry until China is ready, too.
The Administration's objective-shared, I think, by
virtually all members of WTO, is that both China and Taiwan
accede to the WTO this year. The point I want to make is that
we have with Taiwan, just as we do in the agreement with the
People's Republic, agreements that are substantial concessions
to the United States. But they don't go into effect until
Taiwan gets into the WTO.
So I think it's imperative that the U.S. take a strong
position in trying to get Taiwan in, at the same time, not with
a five minute coffee break or taking it up a day later. And I'm
a little bit disturbed by the wording--what is otherwise
brilliant testimony by Charlene Barshefsky, the U.S. Trade
Representative--where on page 15 she says, ``China's entry will
facilitate Taiwan's entry into the WTO.'' To me, that smacks of
maybe it isn't going to happen at the same time, and there
might be a substantial interval afterwards. I think the U.S.
position should be strongly that they get in at the same time.
I'm going to skip, in the interests of time, the benefits
as I see them of PNTR for China, and mention Taiwan's trade
across the Strait. Taiwan's annual trade with China is now over
$25 billion. And Taiwan has invested something like $45 billion
into about 40,000 enterprises in the United States, in the
mainland. Permanent NTR for China benefits those Taiwan-owned
companies in the mainland, and denying PNTR would therefore
hurt Taiwan.
When Taiwan and China are both in the WTO, there's going to
be an expansion of trade across the Straits. And many U.S.
companies have an interest in this. For instance, some of the
automobile manufacturers in the United States want to
manufacture parts in China that will be sent to Taiwan and put
together there.
Now, I'm running out of time, so I want to just sum up
here. PNTR and WTO entry for these two important partners works
toward the opening up and reform of the system in China. And
it's likely to change China in a positive way more than just
bringing the benefits of greater trade to the Chinese people.
In short, it's going to help move them towards democracy.
This is what happened in Taiwan; it's what's going to happen in
China.
Now, I'm getting a little long in the tooth, and at 72, I
wonder what I'm going to do with the rest of my life. I have
eight children and fifteen grandchildren, and I spend a lot of
time thinking about what's right. I think what is right for the
United States in this instance is not to use the continuing
annual review of Normal Trade Relation status as a tool to bash
China with every year in attempting to get concessions in other
areas, such as human rights, religious rights and so forth. I
think there are other instrumentalities we could use for that,
and we should not use NTR at the cost that it would be for the
U.S. companies that would not receive the substantial benefits
negotiated by the Administration if we deny PNTR and continue
to have annual review.
So to sum up, in my view, PNTR is good not only for U.S.
companies dealing with China, it's good for assisting U.S.
companies dealing with Taiwan. It's good for Taiwan. We should
move to see that both countries get into the WTO together.
And my last sentence I guess would be, looking at the list
of people that Charlene Barshefsky ended her testimony with,
that are in favor of this--every living former Secretary of
State, 47 Governors of States and territories, all present and
former U.S. trade representatives, Secretaries of Commerce,
Agriculture, Treasury and four former Presidents, what else is
there to say.
Thank you.
[The prepared statement follows:]
STATEMENT OF DAVID N. LAUX, PRESIDENT, US-TAIWAN BUSINESS FORUM,
ARLINGTON, VA
Mr. Chairman, and distinguished Members of the Committee:
Thank you for inviting me here today to present views on
Permanent Normal Trade Relations (PNTR)for the People's
Republic of China and accession to the World Trade Organization
(WTO) for China and Taiwan.
Background/credentials. First, a word about my background
and credentials. Most of my working life over the past 49 years
has been spent in some way trying to improve U.S. relations
with the Chinese people--on both sides of the Taiwan Strait.
For 4 and \1/2\ years (1982-1986) in the Reagan Administration
I was Director of Asian Affairs on the National Security
Council staff dealing primarily with China and Taiwan; for 3
and \1/2\ years (1987-1990) I was Chairman and Managing
Director of the American Institute in Taiwan--the organization
which is, in effect, our substitute for an Embassy in
conducting the U.S. unofficial, ``commercial, cultural and
other relations'' with Taiwan. On April 1 of this year I
stepped down as President of the US-ROC (Taiwan) Business
Council after 9 and \1/2\ years to devote my full time to the
position of President of the US--Taiwan Business Forum, a 501-
c-3 foundation, dedicated to economic research, business
educational exchanges, and educational seminars focused on
developing new business opportunities and strengthening U.S.
economic and business relations with Taiwan, and through
American participation in cross-Strait trade, with China.
Purpose. I believe the purpose of my testimony is to show
that the granting of PNTR to China and the accession of China
to WTO will be beneficial for the people of Taiwan and will
help promote U.S. trade and business with both China and
Taiwan.
Economic Importance of Taiwan. I want to begin with a brief
description of the economic importance of Taiwan because, while
many are aware of their reputation as an ``economic miracle''
and one of the economic ``Tigers'' of Asia, not many know the
spectacular statistics behind this achievement. The Republic of
China on Taiwan has the world's third largest foreign exchange
reserves after Japan and the People's Republic of China. They
totaled $113 billion at the end of March, and something close
to 70% of this is invested in U.S. dollar instruments.
Moreover, Taiwan is the world's second largest ``creditor
nation'' after Japan because they have virtually no foreign
debt.
Taiwan's two-way trade with the U.S. was $54.3 billion in
1999, making Taiwan the U.S.'s seventh largest trading partner
behind Canada, Japan, Mexico, China, Germany and Great Britain,
and ahead of countries like South Korea, France, Singapore and
Italy. Taiwan is the U.S.'s eighth largest foreign market and
second largest in Asia after Japan. Taiwan bought one and a
half times as much from the U.S. in 1999 as did China. In
earlier years the difference was even greater. In 1997, 1998
and 1999, Taiwan purchased $20.4, $18.2 and $19.1 billion
respectively of U.S. goods. Let me put this in perspective; it
is enormously important. It is half as much as all of South and
Central America (not counting Mexico) buys from the U.S., twice
as much as all of Africa, and five to six times as much as
either India or Russia buys from the U.S.--not bad for 22
million people in an area one and a half times the size of
Maryland.
Taiwan is the world's 18th largest economy, the world's
14th largest trader, and 12th largest exporter. Taiwan is the
world's 7th largest foreign investor and is the largest or
second largest foreign investor in Vietnam, Thailand, Malaysia,
the Philippines and China. Taiwan's economy survived the Asian
financial crisis better than almost any other, and recovered
quickly from the devastating earthquake of September 1999 to
achieve a growth rate of 5.4% in 1999. The economy is
accelerating, and the latest forecast is for 6.5% growth this
year. In short, Taiwan is one of the major economic, financial,
and trading powers in the world today, and it should be in the
WTO.
WTO for Taiwan; WTO for China; and PNTR for China.
1. WTO for Taiwan. In 1990 Taiwan applied for membership in
the GATT, WTO's predecessor organization, and became an
observer in 1992. Since then, it has negotiated with the GATT
and the members of the successor WTO ``working party''
established to consider Taiwan's application. Taiwan will enter
as a ``developed'' economy, which means meeting more rigorous
and demanding requirements than those for a ``developing ``
economy. As of this date, Taiwan has completed all bilateral
agreements with its major trading partners, and all substantive
work on the multilateral negotiations, which is the completion
of the working party report and protocol. Taiwan needs to have
a final meeting with the working party to get their agreement
to forward the report to the full WTO Council. While the U.S.
government's position is that Taiwan's accession is not linked
to that of the People's Republic of China, the current reality
is that the WTO working party, because of the positions of some
of its members, is not going to reach a ``consensus'' agreement
approving Taiwan's entry until China is ready too. The
Administration's objective, shared I think by virtually all
members of the WTO, is that both China and Taiwan accede to the
WTO this year.
The US-ROC (Taiwan) Business Council has been on record
favoring Taiwan's entry into the WTO since the bilateral
agreement was signed between the U.S. and Taiwan (through the
American Institute in Taiwan and the Taipei Economic and
Cultural Representative's Office) on February 20, 1998. The
agreements provide important reductions in tariffs and
increased U.S. access for U.S. companies to Taiwan's
automobile, medical equipment, financial services,
telecommunications, beef, pork and other markets--but these
terms do not go into effect until Taiwan is a member of WTO. In
short, from a practical point of view, the sooner China is in
WTO, the sooner U.S. companies obtain these new advantages, not
only the ones negotiated with China, but those negotiated with
Taiwan.
The sooner this happens, the sooner the U.S. can make a
significant impact on reducing the $16 billion trade deficit
with Taiwan and the $ 68 billion trade deficit with China.
Common sense would dictate that Taiwan should enter the WTO
now, because it has met the requirements, but if that is not
possible, then everything should be done to ensure that Taiwan
and China are admitted at the same time--without a ``coffee
break,'' or any other pause between the entry of China and the
entry of Taiwan.
The WTO is not a political organization. It is a framework
of rights and obligations among economies which have, through
negotiations, undertaken mutual economic commitments. For
decades, the various economies in GATT, WTO's predecessor
organization, were legally known as contracting parties, rather
than as member governments. Taiwan's application is as ``The
Separate Customs Territory of Taiwan, Penghu, Kinmen, and
Matsu,'' not as ``Taiwan'' or the ``Republic of China.''
If ever there was an ideal candidate for membership in the
WTO, it has to be Taiwan. Few economies are more committed to,
and dependent upon, trade for their economic well being. Yet,
after a decade of attempting to qualify for membership in the
GATT and its successor, the WTO, Taiwan,--despite the fact that
it is one of the most active participants in world trade--still
sits on the sidelines. WTO membership is important to Taiwan
and Taiwan could make significant contributions to the WTO. For
Taiwan, its WTO membership will be its most significant
participation in an international organization.
2. WTO and PNTR for China. The US-ROC (Taiwan) Business
Council has been on record since 1996 in favor of Most Favored
Nation trading status for China and for the past two years in
favor of China's entry into the WTO. On January 26 of this year
the Council put out a press release recommending Permanent
Normal Trade Relations for China. The reasons are simple. Most
of the US Council's member companies do business with China, as
well as with Taiwan, and they believe that permanent NTR for
China is good for both China and Taiwan, and is also good for
U.S. business relations with both the People's Republic of
China and the Republic of China on Taiwan.
As I understand it, the substantial benefits in terms of
lower tariffs and increased access to China's markets that were
negotiated over 13 years between the U.S. and China in the
agreement signed on November 15, 1999, would be seriously
limited if the U.S. does not grant PNTR to China. The U.S.
would still get the tariff reductions negotiated, but not the
market access improvements which were the more significant part
of the package. The excellent study done by Gary Clyde Hufbauer
and Daniel H. Rosen of the Institute for International
Economics in April, 2000, goes into this aspect in some detail.
Taiwan's Trade with and Investment in China. Taiwan's
annual trade with China is now over $25 billion and Taiwan
companies and individuals have now invested a total of $40 to
$45 billion in China in over 40,000 enterprises. Many of these
companies manufacture goods for export to the United States.
Permanent NTR for China benefits these Taiwan-owned companies,
and denying PNTR to China would hurt Taiwan.
Taiwan's View of Normal Trade Relations and WTO for China.
Taiwan has been in favor of normal trade relations for China
since at least early 1996. On May 7, 1996, the Wall Street
Journal published a letter entitled ``MFN for China is also
good for Taiwan'' written by Jeffrey Koo, Chairman and CEO of
Chinatrust Commercial Bank, and then Chairman of the Chinese
National Association of Industry and Commerce and also then
Chairman of the ROC-USA Business Council, the Taiwan
counterpart organization to the US-ROC (Taiwan) Business
Council. That letter certainly had the tacit endorsement of the
ROC government. Since then, officials of the ROC government in
Taiwan have been increasingly open in their support of MFN and
normal trade relations status for China and for China's entry
into the WTO. Both President Lee Teng-hui and President-elect
Chen Shui-bian are on record in favor of the People's Republic
of China's entry into the WTO. Taiwan sees this as an important
step in bringing the PRC into the community of nations and
getting them to play by the rules of the game, rather than
being kept outside. With respect to the current U.S. debate
over ``Permanent'' Normal Trade Relations for China, Taiwan's
officials have remained silent, viewing it as a domestic U.S.
issue and a bilateral issue between the U.S. and China on which
they should not comment. President-elect Chen Shui-bian has
said he would like to see trade relations between the U.S. and
the PRC ``normalized,'' but he did not use the word PNTR or
permanent normal trade relations. Privately, however, many of
the officials I have talked to have expressed the hope that the
U.S. will grant PNTR to China because they see it as an
important gesture in maintaining and increasing U.S. influence
with the PRC.
Why the U.S. Should Grant PNTR to China.
1. The U.S. will gain the full benefits of the substantial
agreements it negotiated with China, in the agreement signed
November 15, 1999.
2. It would be a psychological boost that might speed the
entry of both China and Taiwan into the WTO.
3. The sooner both are in, the sooner the U.S. will benefit
from the agreements that it has negotiated with parties.
4. Once both China and Taiwan are in the WTO, there will be
an expansion of trade across the Taiwan Strait. Taiwan now has
a long list of items which it prohibits from being imported
from China. Although this list has been shortened over the
years, it is still substantial. It is my understanding that
Taiwan could continue to exclude these items from import after
both are in the WTO through a little used special exclusion
provision which one WTO member can exercise against another,
but my private soundings in Taiwan lead me to believe that this
almost certainly will not be done because of the adverse
psychological impact this would have on the already tense and
delicate cross-Strait relations. On the contrary, I would
expect Taiwan to abolish this list as a gesture of good will.
If this happens, some important benefits will accrue to the
U.S. Some U.S. manufacturers are interested in manufacturing
parts or components in China and shipping them to Taiwan for
assembly into larger components or finished products. In short,
a jump in cross-Strait trade after the entry of China and
Taiwan into WTO is going to provide new business opportunities
to U.S. companies.
5. The increase in economic and business interaction across
the Taiwan Strait will contribute to a lowering of tensions. It
will create larger constituencies on both sides with a vested
interest in peaceful relations and a continuing expansion of
economic, financial and other ties.
6. Some confidence-building in the economic aspects of the
cross-Strait relationship could help spill over to more
confidence in any political talks.
7. Finally, all of this works toward the opening up and
reform of the Chinese system. Nothing is likely to change China
in a positive way more than bringing the benefits of greater
trade to the Chinese people It will bring them foreign goods
more cheaply and it will provide jobs and more prosperity to
China's workers. It will accelerate the development of a market
economy and spur the needed reforms of China's antiquated state
enterprises and its weak banking system. The opening of the
country and growth in trade and prosperity will also lead to
expansion of interest in, and more open communication with, the
rest of the world. In short, it will help move the PRC toward
democracy. This is what happened in Taiwan.
Notable Endorsements of PNTR for China by Others.
There have been some strong cases made for the granting of
PNTR to China by others, notably: the April Study by the
Institute for International Economics, cited earlier; a GAO
study along similar lines; an OP-ED article in the April
20,2000 Los Angeles Times by Dai Qing, a Chinese
environmentalist and human rights activist in Beijing; and the
testimony of the Honorable Frank Carlucci, Chairman of the US-
ROC (Taiwan) Business Council (and also Chairman of The Carlyle
Group, and Nortel Networks), to the Senate Foreign Relations
Committee on April 6.
Conversely, Denying PNTR to China will do the following:
1. It will not prevent China's entry into the WTO.
2. It would seriously limit the large gains won at the
negotiating table contained in the November 15 agreement. The
U.S. would not get the market access aspects of that package
and this would put U.S. firms at a serious disadvantage in
competing with European and Japanese firms in China.
3. It would not be helpful to Taiwan. It could hurt Taiwan
and could delay China's and Taiwan's entry into the WTO. U.S.
interests would suffer with both parties.
4. It would do further damage to our already troubled
relationship with China.
Conclusion.
Over the past 50 years, continuous trade liberalization has
enabled world trade to grow much faster than national
production, pulling all economies into sustained, higher
growth. The principal way in which trade liberalization has
been achieved is through
negotiations within the multilateral trading system--
especially the General Agreement on Tariffs and Trade (GATT),
and its successor organization, the World Trade Organization
(WTO). This expanded trade has helped boost prosperity around
the world. However, nearly two billion still remain outside the
WTO, including the 22 million people of Taiwan and the 1.2
billion of the People's Republic of China. One way to remedy
that is to get Taiwan and China into the WTO as soon as
possible. PNTR for China will help that process.
Let me conclude by quoting part of the final paragraph of
Jeffrey Koo's letter to the Wall Street Journal of May 7, 1996,
favoring MFN for China, which I mentioned earlier.
``No country has a larger interest than Taiwan in seeing
prosperity take hold on the mainland. For prosperity will help
push mainland China into becoming a responsible member of the
international community, abiding by international laws,
including protection of human rights.. . .That's a long-term
outcome that would benefit everyone--Taiwan, the U.S., the
Asian-Pacific region, and most of all the Chinese people on the
mainland.''
Thank you for inviting me to appear before you. I will be
happy to try to answer any questions.
Chairman Archer. Thank you, Mr. Laux.
Earlier today we heard an impassioned plea from our
colleague, Frank Wolf, who is genuinely and sensitively
interested in both human rights and religious rights in China.
And he exhorted us to turn down permanent normal trading
relations with China because of their violation of both human
and religious rights.
And yet today, Reverend Su, you are here, and Mr. Kamm is
here, both directly and vitally involved in these two issues,
religious and human rights. And you are encouraging us to pass
permanent NTR for China. And you are genuinely interested, as
our friend Frank Wolf is genuine interested, in advancing the
cause of religious and human rights in China, and as is Elliott
Abrams.
I don't understand. And yet as I read your bio, Reverend
Su, you were born in China, raised in China. You converted to
Christianity while in China, within the in-house church, which
has been repressed, which has been persecuted in the ways that
our colleague Frank Wolf has mentioned occurred, in the way
that Elliott Abrams has mentioned, as a reason not to approve
permanent NTR.
And yet you as a human embodiment of what has occurred over
there, say we should. Why is that? I listened very carefully to
your testimony, but I just, I don't correlate how people who
are as genuinely interested in pursuing this as I am personally
can disagree.
Reverend Su. Well, I think there's an issue where, you
know, good people can genuinely disagree over something that we
all feel passionately about. Like I say in my testimony, I also
feel the urge to want to send China message through every
conceivable means. But I also want to be realistic enough and
ask, aside from making me feel good, what good does it
accomplish for people there that we try to help. So when I
begin to ask the realistic questions, I find myself coming down
a little bit.
So in our efforts to try to send any message, we need to
ask, what do we cause in the process. It might cost us much
more than whatever we try to accomplish. So I really appreciate
the passions and the support of many people who feel very
strongly about the human rights issue and religious freedom
issue in China. But I would just like to encourage us all to
look at the whole picture and put ourselves in the shoes of
those people in China who are going to be affected by this
vote.
With this vote, will it be better off for them, or will it
make it even worse for them. So that will be the perspective I
think we all should take a look at this issue. Thank you.
Chairman Archer. Mr. Kamm, I have not heard of your work
before today. I am very impressed with what you're doing and
very touched by it. Do you believe that if we turn down
permanent NTR for China that it will improve your capability to
do your work and to help those who have been imprisoned to get
lighter sentences? Will you be in a better position if we turn
down permanent NTR, or will that in some way deteriorate your
position?
Mr. Kamm. Well, Mr. Chairman, I can't answer entirely that
hypothetical question. But in my opinion, my work would be
hindered. As I make the case in both my written statement and
my oral testimony, I do think that we have certain channels of
communication. And on one point, I would say that Congressman
Frank Wolf, who I have a great deal of admiration for--
Chairman Archer. As I do.
Mr. Kamm.--we don't agree on the means of achieving greater
respect for human rights in China. But we do, I think, agree on
one thing. And that's the importance of speaking out at every
opportunity. When Members of Congress go to China, I don't know
if the four members who accompanied Secretary Glickman brought
with them lists of religious people in prison, labor leaders in
prison. I don't know if they did that or not. If they didn't,
they missed an opportunity.
I've been doing this for 10 years. I believe I've
intervened on behalf of more than 500 prisoners. I've come up
with an additional 500 names through this project, and I'll be
going to Beijing in a few days to specifically talk about those
prisoners.
If the relationship between the United States were to
worsen, certainly my work would be affected. In the past, it
has been affected. My program has been suspended in the past
because of breakdowns in the relationship.
Chairman Archer. Mr. Abrams, you've heard the comments of
the two gentlemen to your left there. And I'm curious, how is
it going to help to accomplish the desired goals, which I think
all of us agree are desirable goals, on a bipartisan basis? How
will it help us if we do not approve permanent trade relations
with China?
Mr. Abrams. Mr. Chairman, our fear is that if Congress and
the Executive Branch do nothing more than approve PNTR, the
message that might get sent to the government in Beijing is, in
reaction to this year of increased religious repression, we
have nothing to say and we don't want anything, we don't want
to do anything.
So the Commission did not propose that PNTR be junked. What
the Commission recommended was that before PNTR be approved,
certain steps be taken. Certain steps be at least begun, so as
to ensure in part that the right message is being sent.
For example, Mr. Kamm in his written testimony mentions
that there is money appropriated by Congress to have the State
Department help identify prisoners. Never been spent. That's
the kind of thing the Administration can do on its own. We've
mentioned a few other steps for the U.S. Government to take
that we think in conjunction with the vote would make it much
clearer that Congress and the Executive Branch are not
indifferent, that they are doing what has been proposed here,
speak out, speak out simultaneously. Don't just do the vote and
remain silent on human rights.
Chairman Archer. Well, that may have an appeal in its own
way. But as I understood your testimony, you said that we
should not take this vote up until we have achieved certain
things in China.
Mr. Abrams. Our list--that's correct, but--
Chairman Archer. And that's far different than what you
just said.
Mr. Abrams. No, I think it isn't, because I think if you
look at the list, these are things that can begin to happen
awfully fast. For example, the ones that we're proposing for
the U.S. Government could actually happen almost instantly. I
mean, the Levin proposal is that kind of thing. That is, for
monitoring Chinese human rights. An invitation to the Dalai
Lama, I guess the Speaker could issue this afternoon.
For the Chinese, we asked for substantial improvement. Take
the example of the international covenant on civil and
political rights. We're aware that the Chinese government may
not be able to vote it instantly. But they could make a
commitment to do so, and they could do that tomorrow morning.
So what we're asking for is at least commitments to move in
the right direction on the part of the Chinese. And on the part
of the United States, there are some things that we think could
be done really before the vote is taken, even on the schedule
you have now.
Chairman Archer. Well, you, to use a word that's been used
frequently by both the President and the Vice President and has
been used by witnesses today, you are suggesting a very risky
approach, which could prolong these deliberations for an
interminable period of time. If the conditions that must be
complied with by the Chinese, now it's a different thing when
you say what our Government could do.
But if you are talking about certain actions by the Chinese
or results in China, we could be here for years. And in the
meantime, China will be in the WTO. We cannot vote to stop
that. China will enter the WTO. That is the realism of where we
are today. They not only can, they will enter the WTO, likely
before the end of this year. And nothing that we say or do here
will change that.
And then, what leverage do we have?
Mr. Abrams. Mr. Chairman, several of the people who
testified today, and I think you yourself noted that the
original schedule was to vote after the Europeans had resolved
their disputes with China, which would give an additional
window in time.
But the Commission's view was that to go ahead with the WTO
vote, after this kind of deterioration in the situation in
China, without taking any steps, without asking the Chinese for
any steps, would in fact be undercutting many of the things
we're trying to achieve. Because many of the people here
testified that the purpose is to move China toward respect for
law, toward international covenants on law and respect for
rights. And the Commission felt that if you vote that way
without asking for anything from China, the wrong message will
very much be sent.
Chairman Archer. Well, but we have asked for a great deal
in the rule of law, and establishing a transparent rule of law.
And the Chinese have committed to that in order to enter the
WTO. That is already a part of the agreement.
But the opponents of permanent NTR for China, including
many labor unions, say, well, delay it, delay it. What they
really want to do is stop it. And delay with the ultimate goal
of stopping it will not prevent China from entering the WTO.
And as you heard, Mr. Kamm and Mr. Su, will reduce our ability
to intercede and to do the things that we are doing, perhaps
not to the degree and not the success that you would like. But
far, far better than the China I saw when I first went there in
1985.
And to look at only perfection and ignore the course that
our engagement with China has already brought about, and what
Reverend Su says will occur in the future in his opinion of
continued improvement, is a very risky thing to do. In seeking
some ultimate goal, which we all would like to have, if we
regress, we retrogress in our capabilities, it will have been a
pyrrhic victory.
Mr. Abrams. Mr. Chairman, our view was, or is, that it
isn't going to work in terms of human rights progress if we
think of this as a machine that we turn on. That is to say, we
vote WTO, China enters the WTO, we stand back for 25 years and
wait for human rights to develop. It won't work that way.
It will work if along with the WTO entry, we figure out
better, more workable ways of bringing pressure for human
rights improvements. And that's what we've tried to do in the
Commission, to think up some things that the United States
could do right now, and that the Chinese could at least agree
to do, even if they couldn't carry it out in a short time, that
would begin to move us and to move China down the road to real
engagement on human rights.
Chairman Archer. If we today attempt to go to the Chinese
and reopen the negotiations on WTO, which is exactly what you
are suggesting that we do, because you are saying that we now
go to them and we say, well, the deal that we negotiated is not
the full deal, there's another pre-condition that you have got
to agree to now, then we have in effect undermined the entire
negotiated deal. Because it is not just some parallel track. It
is a pre-conditioned linkage that becomes a part of the
negotiated deal. That is not realistic.
What my colleague and friend Sander Levin, who was here a
minute ago, is trying to do, is realistic and would move in the
direction that you're talking about. And yes, we should find
every means that we can to continue to help to move China in
the right direction. But as I listened to Reverend Su, and I
listened to Mr. Kamm, I must say, I think their approach is far
more realistic and does not risk retrogression, which would be
the worst possible thing that we could do.
But that's just my opinion. I mean, this is a difference of
opinion between people who want to reach the same desired goal.
Mr. Abrams. Just one more comment, Mr. Chairman. With
respect to the things that we've suggested the U.S. can do,
like Mr. Levin's suggestion, those are things that could happen
very, very fast. On the Chinese side, our hope would be that,
you know, the Administration can go to the Chinese government
and say, look, we're 20 votes short. You could really help us
out if you could think of doing X or Y or Z, or promising to do
X or Y or Z. And that might push us over the top and we'll all
benefit.
We are not, in the Commission, trying to kill this treaty.
Others may be. We are not. We are trying to figure out ways
that the United States can make clear our commitment to
progress in human rights in China while the treaty is under
consideration.
Chairman Archer. Thank you very much.
Mrs. Johnson.
Mrs. Johnson. Thank you.
Mr. Abrams, I am disappointed in your testimony. I think
you're being very shortsighted. I think the effect of your
testimony is to give ammunition to those who would kill the
treaty.
And I think you're failing to recognize what an enormous
advancement this negotiated agreement is over anything we have
ever had. It has highly specific commitments in all areas,
clear time tables for implementation and firm end dates for
full compliance. This means you can hold parties accountable to
this agreement.
If you can hold China accountable for passing intellectual
property protection, intellectual property to get that law in a
society that doesn't honor individual ownership of concrete
property, this is going to have, I think as Reverend Su
understands, very systemic, profound effects.
And this is not a one shot agreement. This agreement puts
in place processes and a far more intense United States
oversight of U.S.--Chinese relations than frankly we have ever
had before in economic or human rights areas.
But I really need to devote the little time I have to Mr.
Reuther's testimony. Because I'm sorry, Mr. Reuther, my
colleagues will tell you I'm very frank and I'm not always very
nice. And I can't actually think of any way to describe your
testimony except dishonest.
And this is why. You say it fails to implement China's
discriminatory automotive and aerospace industrial policies.
Now, I have a lot of aerospace and a lot of auto parts in my
district. And if there's anything I care about and have a track
record on, it's basic manufacturing.
Yet for you to say that about an agreement that drafts,
now, remember, China now imports about 600 American cars,
that's fewer cars than an ordinary American dealership sells in
a single year in America. This agreement will drop tariffs 75
percent. From on average, 80 to 100 percent down to 25 percent.
Tariffs on parts from 23 to 10 percent. True, it doesn't
eliminate. But those are drops of enormous proportions.
But listen to the other things it does. Over five years, it
will eliminate quotas. It will allow auto companies to set up
sales and service organizations. Now, what's going to happen to
the UAW auto jobs in America when European auto manufacturers
can not only sell into the Chinese market, but can set up
maintenance, car repair, all the services that are so important
when you make a decision about buying a car?
Do you think under those circumstances Chinese are going to
buy American cars or European cars? I can tell you what I'd buy
if I were a Chinese consumer. I would buy a car that could be
repaired in my home town by the manufacturer who made it.
So what you're doing is endangering the jobs of UAW auto
workers five years down the road, ten years down the road. In
aerospace, it not only reduces tariffs from an average 14.7
percent to 8 percent, but listen to what else it does. And it
also eliminates quotas and licensing requirements. But local
content, they agree to eliminate local content requirements and
not to enforce provisions in existing contracts that impose
those requirements. We are currently in the process of losing
jobs in Connecticut because of such requirements.
In technology transfer, they will not condition import or
investment approvals on technology transfer or on conducting
research and development in China. They will provide better
intellectual property protection for technology. I mean, these
things really do matter. And if our competitors are able to be
in that market without these constraints, and we're not, it
will not cost us jobs this year or next.
But those competitors will be far more profitable in the
end than we are. Because China will begin to buy in these areas
and get great quantities over the next five or ten years. If
you're more profitable than I am, you finally have the money
for the research and development for the next round of
products, for the more sophisticated cars and--
Mr. Kleczka. Would the gentlelady from Connecticut yield?
Mrs. Johnson. Not just--no, let me finish.
Mr. Kleczka. Well, I do wish you would afford Mr. Reuther
some time to respond after that tongue lashing.
Mrs. Johnson. I appreciate that. That's the problem with
the short times we get. But his testimony, not recognizing the
remarkable benefits that this agreement is going to give, and
then you go on to say it doesn't provide adequate mechanisms to
enforce China's various trade commitments. And yet it's the
very first agreement ever to provide product specific
safeguards, to provide surge protection, to provide--
Mr. Reuther. Congresswoman, would you permit me to respond?
Mrs. Johnson. I am going to give you a chance to respond,
Mr. Reuther. But I am absolutely, I want to be sure to get on
the record the depth of my concerns. And I hope that the
Chairman will indulge me in a couple of minutes for you to
respond.
Yes, you may respond.
Mr. Reuther. Congresswoman, the arguments you have made are
the exact same arguments that were made on behalf of NAFTA.
When NAFTA was being debated, we were being told, oh, the U.S.
market's open, but the Mexican market is closed. NAFTA is going
to get rid of the Mexican tariffs, the Mexican restrictions.
This will be great for the U.S. auto industry.
Well, the sad truth is, since NAFTA went into effect, the
automotive trade deficit between the United States and Mexico
has increased from about $3.5 billion to almost $20 billion.
It's been a disaster for the United States and for American
workers.
The same thing is going to happen with China, again. The
International Trade Commission looked at the China trade deal
and their opinion was, it's going to lead to an increase in our
automotive trade deficit with China. It's not going to help
things, it's going to make them worse.
You referred to the technology transfer provisions and
aerospace. The problem there is there's a huge loophole. It
doesn't apply to the private firms. They're going to be
continuing, the private firms in China will be continuing to
say to our companies, if you want to do business here, you have
to transfer technology. The accession agreement does nothing to
get rid of that.
On autos, it does nothing to get rid of China having
designated the automotive sector as a pillar industry expressly
designed to beef up their exports and cut off imports. The
bottom line is the net effect of this deal is going to be a
green light to all of the big auto companies, especially the
parts producers, to shift production to China, to use it as a
platform to export back here. We're going to see thousands of
American jobs being lost as a result.
Mrs. Johnson. Well, I think that first of all, I don't
think you're correct. But I'll have to check on it, because it
is not in the detail. And I think if it were only to the state
owned sector and not to the private sector, that would
certainly be noted.
But given this kind of opportunity to export and service
and distribute, we are far better positioned to sell our parts
to producers over there than they're positioned to sell their
parts to us, because their parts are not of a quality, unless
we are involved.
But for you to say, pin your testimony on the word
eliminate, without acknowledging the tremendous reductions in
tariffs, the eliminations of quotas, the distribution rights,
the service rights, the ability to set up a whole American
distribution industry--
Mr. Reuther. All of that was done under NAFTA, and yet the
bottom line is, we've had a disaster in terms of the automotive
industry.
Mrs. Johnson. But NAFTA was a different matter. NAFTA had,
we gave some things and they gave some things. In this case, we
have an open market, and all we're doing is getting their
market open. Furthermore, they are a much bigger market with a
much bigger demand. And you know as well as I know that right
after NAFTA was passed, the Mexican market collapsed due to the
collapse of its banks.
I will yield to--let's see, I need to recognize Mr.
Kleczka.
Mr. Kleczka. Do we know how much time is left on the vote
on the Floor? I don't want to miss that vote.
Mrs. Johnson [Presiding]. Ten minutes.
Mr. Kleczka. Is the Committee going to continue to meet
during the vote or recess? Are there three votes after this?
Maybe we should just recess and come back, Madam Chair. Would
that be nice.
Mrs. Johnson. Well, we need to conclude before we go. And
Mr. McCrery would like to inquire.
Mr. Kleczka. Mr. Doggett, are you going to inquire? Okay,
that's 20 minutes, we've got 10 minutes left on the vote.
Something doesn't add. But I'll take my five minutes.
Mrs. Johnson. Two and a half minutes each.
Mr. Kleczka. Mr. Chairman, in questioning, when Chairman
Archer was here, he seemed to indicate that there are those who
just want to scrap the current negotiated deal and reopen it. I
think, Mr. Abrams, in questioning to you, that was one of the
things he mentioned.
However, the people that I talk to have not espoused
scrapping the deal. But what they're saying to me, and maybe
you can respond to this, and anyone else on the panel, what
they're saying to me is, all right, this is something brand
new. China's coming into WTO, they're going to be a full member
with 135 other countries worldwide. Because of the problems
we've had with that country, let's go a little slower than just
throwing open the door and giving them permanent status.
No one has come to me and said, Jerry, I want you to vote
to scrap the entire deal. But what I'm hearing is, do like you
do currently, Congress, give them annual review. Now, is that
what you're asking us at this Committee hearing today? Or are
you saying scrap the deal, start from scratch?
Mr. Abrams. We are certainly not saying scrap the deal.
We're saying, there are some human rights, religious freedom
measures that our Government should take first before you vote
this, and that we should ask the Chinese to do at least.
Mr. Kleczka. And now, Mr. Reuther.
Mr. Reuther. Go back and get an effective protection
against import surges that isn't conditioned on voluntary
action by the Chinese government or totally discretionary
action by ours. Give some assurance to American workers that
there won't be a surge of imports that's going to wipe out
their jobs.
Mr. Kleczka. And what's going to happen if we do call the
annual review and there's no movement? What do we do the next
time the review period comes forward?
Mr. Reuther. We think that because China has such a stake
in access to the U.S. market that if our Government takes a
strong position we can bring about change in both the area of
import surges and improvement in worker and human rights.
Mr. Kleczka. Mr. Kamm, did you want to respond?
Mr. Kamm. I would only point out, of course, that we have
for 10 years, had the annual renewal debate since Tiannamen
Square.
Mr. Kleczka. Have we seen any improvement?
Mr. Kamm. I would say during the period of time that they
thought they might lose MFN, in the early 1990s, we did see
some concessions. But post-1994, we have seen no concessions.
Mr. Kleczka. So you're saying, give them permanent because
they're not going to change anyway? Sort of like we say in my
district, don't kid a kidder, give them permanent?
Mr. Kamm. In a sense, I think they've got perpetual NTR
now, and the debate is whether you give the permanent or
perpetual. Perpetual is what they get every year, they expect
it, they're not willing to make concessions to keep it. And I
really do think what Secretary Rubin, basically my
understanding of what he said is, if in fact we go forward and
continue to renew annually, the principal impact of voting down
PNTR will be to signal the government of China that this
country has chosen a particular course for future relations.
Mr. Kleczka. It might also give them the message that we
want to keep the pressure on to make sure environmental
concerns, religious concerns, labor concerns are on the top of
the majority or on the top of their priorities in that country.
Mrs. Johnson. Thank you, Mr. Kleczka. Mr. McCrery.
Mr. Kleczka. In wrapping up, Madam Chair, if I--
Mrs. Johnson. Mr. Kleczka, you really have to let Mr.
McCrery go on so we can get Mr. Doggett, please.
Mr. McCrery.
Mr. McCrery. I'll be brief, I hope. Mr. Reuther, I've
talked with your local UAW folks down in Shreveport about this.
I think they are genuinely concerned, as you are, about the
effects of this trade agreement, as you are about NAFTA. I will
concede that on the issue of rights of workers in China, that
as Reverend Su says, good people can disagree on the facts
about the effect one way or another that this agreement would
have on human rights over the long term. I don't think either
of us will have convinced the other that we're right or we're
wrong on that issue.
But on the issue of jobs in the United States, and I hear
what you're saying, but gosh, it just seems like the tremendous
weight of testimony and evidence that we have heard is contrary
to what you have asserted. And let's take the NAFTA question.
In the last five or six years, what has happened to the
population of automobile workers here in the United States? My
understanding is that it's grown, not shrunk. Is that correct?
Mr. Reuther. The number of people employed in the auto
industry has been holding constant. And the reason for that is
that we've had record sales of about 17 million. As everyone
knows, sooner or later there's going to be a downturn in sales.
Then the question becomes, where do they close the production
facilities, here or in Mexico or China? We think the answer is
pretty clear. Already the major auto companies are telling
their suppliers, put your new facilities in Mexico. And now
with this deal, they're going to be saying, put them in China.
Mr. McCrery. But the fact is that we have not lost, since
NAFTA has gone into effect, we have not lost any auto workers.
Mr. Reuther. With 17 million in auto sales, we should have
seen an enormous increase in auto employment in the United
States. And we have not.
Mr. McCrery. That begs the question, though. The fact is,
we have not lost any jobs because of NAFTA. You state that we
have a larger trade deficit with Mexico and that's true. But
again, that avoids the central question of jobs. Trade, as you
well know, is not a zero sum game. And yes, the deficit can
grow. But that could mean that we have grown and they have
grown more. And that's in fact what has happened.
So the same thing is going to happen with China. And that's
what all the experts have told us, except for the UAW and some
other union folks. And I'm really trying to understand your
genuine concerns here. But give me something other than the
trade deficit with Mexico.
Mr. Reuther. Mr. Congressman, with all due respect, I don't
see how you can sit there and say that if our automotive defict
with Mexico has grown from $3.5 billion to almost $20 billion
that this doesn't translate into the loss of thousands of jobs
that we should have had here in the United States.
Mr. McCrery. It doesn't necessarily.
Chairman Archer. Mr. Doggett--I'd like Mr. Doggett to be
able to get his concerns on the record.
Mr. Doggett. Mr. Abrams, do you share Mr. Reuther's
analysis of the Levin proposal, or do you think it provides any
valid alternative to address the concerns that you've raised?
Mr. Abrams. I think it does address the kind of concerns
that we've raised. We're looking for some kind of mechanism for
constant monitoring, and it does address that.
Mr. Doggett. And Mr. Reuther, you've heard and seen
repeated frequently the comments of Mr. Woodcock. Is that
basically just a difference of opinion?
Mr. Reuther. Mr. Woodcock retired 23 years ago from the
UAW. He's 87 years old now. During the last 23 years, he's
devoted his life completely to China, first as ambassador, then
as a private citizen. He's been an advocate for China
throughout that period, even after Tiannamen Square.
Mr. Doggett. I'd like to ask more, but given that the
time's up, I understand your point and thank you very much.
Thank you for your testimony, all of you.
Mrs. Johnson. I thank the panel for their testimony very
much. Very interesting morning. The hearing is concluded.
[Whereupon, at 2:15 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of California-Asia Business Council, Oakland, CA
Position of California-Asia Business Council on the subject
of PNTR for China
California-Asia Business Council (formerly California-
Southeast Asia Business Council) is a non-profit business
organization with some 90 members from throughout the state.
Our member companies include some of Californias largest
engineering and construction companies, major resource and
electronics firms, as well as numerous small and medium-sized
enterprises. A common thread among our members is their
involvement in Asia, either through project participation,
direct investment, trade, or financial linkages. Most of our
members have significant business relations with the People's
Republic of China, and look to growth in their China business
as key to their growth strategies.
Therefore, California-Asia Business Council strongly
supports
--China's accession to the World Trade Organization and
--the waiver of China's ineligibility for Normal Trade
Relations (NTR).
We believe that improved conditions for commerce brought
about by China's accession to the WTO and by the granting of
Permanent NTR to China will benefit both California and China.
For example, in 1998, California's exports to the PRC
totaled $2.5 billion, which was 2.5% of total California
exports. California's 1998 exports to the PRC increased by 9.2%
over 1997, whereas California's 1998 exports to the world
decreased by 4% in comparison with 1997. California/China two-
way trade translates into thousands of jobs and competitive
consumer prices. The reductions in tariffs that will result
from China's admission to WTO plus new domestic distribution
rights throughout China will help American exporters and
manufacturers.
Additionally, our council believes that the alterations in
business practices that China is undertaking in order to be
eligible for WTO accession will bring welcome improvements to
China's regulatory infrastructure that will make it easier to
sell goods and services to China, and that the WTO will provide
a multilateral forum to resolve disputes and achieve
compliance.
We also believe that accession to WTO will be beneficial to
China's economic development, which is good not only for the
Chinese people, but for California businesses that take part in
the robust growth of this country of 1.2 billion people.
Statement of Neil H. Offen, President, Direct Selling Association
Mr. Chairman and Members of the Committee:
The Direct Selling Association (DSA) thanks you for the
opportunity to present testimony to the Committee today. DSA
supports the expeditious approval of Permanent Normal Trade
Relations (PNTR) for China. The Direct Selling Association
(``DSA'') is a national trade association representing
approximately 200 companies that sell their products and
services by personal presentation and demonstration, primarily
in the home. Our association members include some of the
nation's most well known commercial names, such as Amway, Avon,
Tupperware, Mary Kay, and Shaklee. The direct selling industry
attracts individuals who seek job flexibility, with low startup
costs and minimal work experience. Direct sellers typically
sell to their neighbors, relatives and friends. Many direct
sellers participate merely because they like a particular
product and want to obtain discounts.
While we refer to ``direct selling'' as an industry, in
reality it is more accurately described as a method of consumer
product and service distribution. In 1998, United States direct
sales were almost $24 billion through 9.7 million independent
salespeople. Estimated global retail sales for 1999 are in
excess of $81 billion. The industry operates in more than 130
countries and provides income opportunities to more than 33
million salespeople. Most salespeople are women (approximately
80%) and most work part-time and not year-round. On average,
some 90,000 individuals are joining our industry's firms in the
United States every week. Direct selling is a facet of the
United States--China World Trade Organization (WTO) Accession
Agreement (the Agreement) that may have escaped your attention
and may shed some new light on the current debate.
Direct selling companies provide income opportunities and
training that are otherwise unavailable in China. Chinese
direct sellers are taught how to run a business and manage
people. Avon began doing business in China in 1981. Amway, Mary
Kay, Sunrider and Tupperware soon followed reaching over 2
million distributors in 1997 and almost $1 billion in sales.
Unfortunately, the Chinese government banned direct selling in
1998 requiring existing direct selling companies to modify
their business models in order to secure new licenses and
prohibiting the entry of new direct selling companies into the
Chinese market. Four U.S. companies were re-licensed under the
new regulations.
Having to operate under vastly different circumstances has
undoubtedly made business quite difficult for American direct
selling companies. In fact, the companies operate differently
in China than they do in any other country.
The consummation of the Agreement last November
resuscitates the direct selling industry in China. The United
States Government went to bat for our direct sellers and hit a
home run. The Chinese agreed to re-open their markets to direct
selling, granting full market access by 2003. Equally
important, China's entry into the World Trade Organization will
subject it to a rules-based dispute resolution process, which
would afford American companies the opportunity to challenge
adverse Chinese governmental actions in a fair and impartial
forum. Moreover, the Agreement permits American companies to
import American products for sale in the Chinese market. This
concession will preserve and, perhaps, encourage the creation
of American jobs. There is no stronger argument that resonates
with the American public. However, the United States and its
direct sellers receive none of these benefits if the Congress
does not approve PNTR for China.
There are approximately 23,000 individual direct sellers in
each Congressional district. The Agreement would allow any one
that wanted to develop a marketing network in China the
opportunity to do so, if the particular company permits
development in this manner. Thus, approval of PNTR might
provide an opportunity for one or more of your constituents to
do business in China.
To summarize, Mr. Chairman, if Congress approves PNTR for
China, direct selling benefits in the following ways:
the Agreement lifts the 1998 Chinese ban on direct
selling--no later than 2003, U.S. companies will have full
access to the Chinese market -1.2 billion consumers;
Amway, Avon, Mary Kay, NuSkin, Sunrider and
Tupperware, who are already in China, could revert back to
traditional direct selling;
companies that were ``frozen'' out of the market
because of the ban would have a green light to enter China;
all direct selling companies will be able to
export to the Chinese market rather than be required to
manufacture in China as is now the case;
American companies would have legal recourse
through the WTO dispute settlement procedures;
for the first time ever, many American
distributors could establish their own sales organizations in
China--U.S. distributors benefit through ``cross-border
sponsoring,'' earning income on the sale of products by the
sales representatives they have recruited in China;
If Congress does not approve PNTR for China, direct selling
loses in the following ways:
a market of 1.2 billion consumers remains closed;
the direct selling ban remains in effect;
direct sellers must continue as retailers or enter
the market through retailing only;
some U.S. companies are ``frozen'' out of the
market; and
American distributors are denied the opportunity
to enter the Chinese market.
We hope that the Committee will carefully consider this
information as it debates PNTR for China. We respectfully urge
the Committee to approve PNTR for China and to recommend to the
full House that Congress approve PNTR for China. Thank you, Mr.
Chairman for the opportunity to submit this testimony.
Statement of Gary Benanav*, Chairman, Pacific Basin Economic Council
As the House prepares to vote on extending permanent
``normal trade relations'' status to China, members of this
Committee and this body are confronted with an issue that is at
once elegantly simple and extremely complex.
Simple, because we are talking about making permanent a
``normal'' status that China has already had for two decades.
Simple, too, because the benefits inherent in China's
commitments in joining the WTO are so profoundly in America's
economic interests. And at the same time, this question is
deeply complicated, because China is itself incredibly complex,
and so are the feelings that we Americans have about that
country.
For those of us who support PNTR--and the U.S. Committee of
the Pacific Basin Economic Council does support it,
vigorously--the merits of a ``yes'' vote are absolutely
compelling. Nonetheless, we appreciate the challenges with
which many Members of this body will be confronted later this
month. We also agree with many of the goals expressed by many
of the opponents of PNTR. However, we believe those goals can
be achieved more effectively and more quickly by granting China
PNTR status, bringing it into the WTO and integrating its
economy more deeply with the global economy.
Much as been said and written about this issue. My aim is
to provide the Committee with a perspective on why China's
integration into global economic institutions is so important
to a region--the Pacific Basin--in which the United States has
so much at stake, economically and geo-strategically.
PBEC is a multilateral business organization supporting
economic growth in the Asia Pacific region through economic
cooperation and trade and investment liberalization. The PBEC
US Member Committee includes American companies with aggregate
sales of over one trillion dollars, and employing more than one
million people.
In my capacity as chairman of PBEC/US, I am in regular
contact with business leaders from all over the Pacific Rim. We
work together to create business-led initiatives that link the
region's economies together in dynamic and productive ways. Our
meetings involve substantive dialogues about the challenges,
opportunities, and trends facing our region. I can assure the
Committee that no issue is considered more critical by PBEC
members than ensuring China's stable economic evolution and its
integration into regional and global economic institutions.
PBEC's members approach the question of China's WTO
membership from a variety of angles.
First, of course, businesses throughout the region are
intensely interested in expanded access to China's vast
marketplace for goods, services and agricultural products.
Continued growth and reform in China, coupled with the sluggish
pace of growth in Japan, make access to the China market
increasingly important for business in the region. PBEC
members, in the United States and around the region, recognize
that China has committed to a truly stunning series of steps to
open its market to foreign goods, services, and investment. The
bilateral WTO accession package negotiated by U.S. Trade
Representative Barshefsky and her team is remarkable for the
depth and breadth of market access improvements it contains.
Because China's final WTO accession package will be based on
the best market access offer for any particular product or
sector, PBEC members are also closely monitoring China's
negotiations with the European Union and other trading
partners.
In the product sector with which I am most familiar--life
insurance--the commitment contained in China's accession
agreements will mark a profound shift in the ability of
American life insurers to establish businesses and sell
policies throughout China. China's WTO membership will mean
that companies like New York Life International can operate in
a more certain and less restricted environment. The
comprehensive scope of China's WTO commitments means that
similar benefits will apply to PBEC members in virtually every
economic sector, including telecommunications, food and
agriculture, aerospace, and many others.
Beyond the clear market access benefits, the regional
business interests represented within PBEC also view China's
WTO membership and PNTR as a boost for economic and political
stability in the Asia Pacific region. The annual Congressional
debate over NTR renewal, and the possibility that this status
could be revoked, have been a constant source of concern to
businesses in Hong Kong, Taiwan, and other Asia Pacific
countries whose trade is increasingly intertwined with that of
China.
More broadly, business people in Asia have regarded the
annual NTR debate as a sign of basic instability in relations
between the United States and China. I cannot stress enough how
much attention business people throughout the region devote to
the dynamics of U.S.--China relations. It's important to
understand that, when relations are rocky between two of the
region's strategic powerhouses, ripple effects--in financial
markets, trade, and other aspects of economic life--are felt
throughout the region.
No one in the region expects that differences between the
United States and China would--or even should--disappear
altogether as a result of China's WTO membership and approval
of PNTR. Nonetheless, these steps would be seen as a positive
sign of new stability in U.S.--China relations. And that would
be a very good thing indeed for American economic interests
throughout the Pacific Basin. A more stable U.S.--Sino
relationship, combined with more economic contacts and
transactions between companies and people on both sides of the
Pacific, will actually increase America's ability to influence
China positively on non-economic issues and policies where our
two countries differ.
Very much related to this issue of stability is the
potential for China's WTO membership to facilitate the
integration of this giant economy into global economic systems
and institutions. As a growing economic power in Asia, China is
an increasingly important player in regional trade and
investment flows. By the same token, China represents growing
economic and competitive challenges for businesses around the
region.
All of us in the Asia Pacific business community have a
huge stake in encouraging China to be a cooperative,
constructive, and fully integrated player in the region's
economic affairs. Nothing is more critical to that objective
than China's membership in the World Trade Organization. WTO
membership will, by definition, bring China into a framework of
rules, and procedures for enforcing those rules.
Business leaders in the Pacific Basin recognize that even
when China is in the WTO, there will continue to be bilateral
trade conflicts between China and the U.S. and others,
including small economies in the region. The WTO, through its
dispute resolution processes, provides workable mechanisms for
addressing specific trade tensions. Moreover, the WTO's
multilateral system of dispute resolution strengthens the
position of small countries in the region that might be
unwilling to confront China on a strictly bilateral basis.
In closing, PBEC members in the United States and around
the region are keenly aware of the importance and implications
of Congress' consideration of China's WTO accession in general,
and the PNTR issue in particular. We appreciate this
Committee's thoughtful leadership on an issue whose
implications will be felt so broadly around our increasingly
integrated region.
*Mr. Benanav is Chairman and Chief Executive Officer of New
York Life International.
Statement of R. Theodor Kasiolek, President and CEO, Trans Global
Network
As you know, I have been working hard to facilitate the
peaceful transition from defense production within the U.S.,
the Former Soviet Union, and the PRC to peaceful commercial
endeavors. As President of TGN Associates International, I have
been active in promoting global e-commerce and have been
involved in several technology related ventures such as the
High Technology City, Digital Town Halls, and fixed GEO space
platforms for long distance learning and telemedicine.
I have had the opportunity to work in building three
Taiwanese start-ups in the Silicon Valley, attended MonteJade,
and was a member of the Asian American Manufacturing
Association. I have also worked with the PRC in developing
investment opportunities in the area of Internet related
technology infrastructures. I will be joining my team in
Beijing next week to discuss developing a manufacturing
facility for high-speed cable modems.
As an adjunct Professor at Hayward State University, I
asked my students what they thought about China being approved
as a member of the World Trade Organization and also asked my
close friends from the Asian American Community. This is my
opinion at this time.
The United States can not ignore the PRC because of the
Internet which was incubated here in the Silicon Valley. The
future of China's telecommunication is on the rise, but their
government controls the Internet access. Internet is changing
the way all people think and react as a global community. In
1998, the PRC had 23 million Internet subscribers of which 4%
were wireless and this grew to 30 million in 1999 in which 12%
were wireless. The Global Internet is no longer a vision but it
is a reality. We cannot ignore the power of the Internet for
promoting economic growth, as we as the trustees of Democracy
can not ignore the political issues such as human rights and
the war threats made by the PRC against Taiwan, but we must
separate these two elements. Politics and Economics just do not
mix. Politically it took the United States over 200 years to
evolve into its present state. The PRC(Peoples Republic of
China) and the FSU(Former Soviet Union) are both struggling to
understand democracy. We must all stand for a clear
understanding on this one point; namely, the use of military
force to take Taiwan is utterly unacceptable in a Global
Internet-eCommerce based economy. However, we must understand
that the PRC is reaching out economically for assistance and if
the United States does not reach out and grasp their hands of
friendships; then truly Europe or Japan will. Can we continue
to ignore 25% of the Global population? As in the case of
President Johnson's ``Great Society,'' we as a Great Power can
not demand political correctness at the price of economic
growth that will solidify this Nation's welfare for the next
200 years. As we should have gained wisdom from the Vietnam
War, the United States can not continue to play the role as the
Police Power for the entire planet. I was in Vietnam with the
United States Air Force, and had first hand experiences of what
the effort created. Force never works for any Nation. Economic
Development does.
I have met with several delegations from the PRC that I
introduced to the City Government of Palo Alto, California-the
home of Stanford University and Hewlett-Packard. I watched as
the Mayor of Tangshan eagerly asked about how the local
Governments worked in the United States. The delegation had
never seen a free and open exchange of ideas in the City
Council Chambers. These business and government leaders from
the PRC sat in the Chamber and were truly listening and
motivated by the experience. From my perspective, the PRC is
twenty years behind our Political and Economic System. However,
we must filter out the political from the economic realities,
while at the same time maintaining that as a member of the WTO,
the PRC can no longer being doing business as usual in
threatening war against its global partners.
The WTO already has 135 countries who have been admitted.
The WTO is promoting trade among its members through the use of
the Internet. The benefits of using the Internet for improving
efficiency for both government purchasers and suppliers is too
powerful to ignore. The WTO's Internet procurement process has
already resulted in competitive pricing and spirit.
This is the age of an Internet global market economy that
must include the Peoples Republic of China, but accession must
be conditional. Membership must be on a trial basis and can be
withdrawn if the conditions are violated. This transition
period should be 12 to 24 months and will allow Taiwan and the
PRC to begin to work together. Taiwan has the state of the art
in chipset technology, aircraft technology, and computer
technology. Taiwan can be like an older brother who lifts up
his younger brother to mentor and to improve the knowledge of
the younger sibling. We cannot expect this to happen overnight.
Some memories, as we have seen in the Balkans, do not fade away
with the advent of a new generation. By promoting economic
advancement and accession into the WTO, the political wounds
will heal. The PRC is quickly becoming the Hub of the New
Internet Economy in the Pacific Rim. Already U.S. companies
have heavily invested in the PRC; namely, Motorola,
Lucent,Compaq, Cisco, 3COM, Hewlett Packard, Qualcom, Citibank,
Federal Express, and Sybase.
In conclusion, I would recommend the PRC's conditional
accession to the WTO, but it should be made provisional in
light of the Political and Economic challenges that the PRC is
struggling with. The United States should be the key partner in
assisting the development of the Internet infrastructure from a
Governmental political assistance level, but the day to day
economics should be left to the business community. We should
not ignore Taiwan, our partner for over 50 years, but we should
not reject the opportunity to recommend the PRC to be part of
World Trade Organization's Global Economic promise that can
only benefit the people of the Fourth Wave Economy.
Statement of Robert A. Kapp, President, United States--China Business
Council
Mr. Chairman, members of the Committee:
The Ways and Means Committee continues its important
service to the Congress and the public by this latest in an
extensive series of Committee hearings exploring all aspects of
the Congress's upcoming decision on ``PNTR''--i.e., the
extension to the People's Republic of China of full WTO-member
treatment upon China's accession to the World Trade
Organization. Congress's approval of PNTR will bring home to
American farmers, workers, companies, exporters, and consumers
the equal opportunity to develop beneficial economic activities
with China on the basis of the massive list of Chinese
commitments to open its markets and abide by world trading
standards that US negotiators won at the negotiating table
after thirteen years last fall. Denial of PNTR would mean that
all other WTO members, including the tough European and Asian
competitors we face in China, would receive those opportunities
to operate on new and more favorable terms in China, while the
United States denied itself those opportunities. I am confident
that the House will recognize the fundamental importance of
this most essential issue in the PNTR debate, and approve PNTR
solidly on these fundamental merits.
The United States has, with the November 15 US--China
Agreement on WTO accession, done more to bring about a far-
reaching shift in China's management of its own economy, in the
direction of openness and reliance on the market, than any
other US gesture or ``message'' has done since the
establishment of diplomatic relations in 1979. With the
approval of PNTR, the United States will place itself firmly on
the side of market-driven reforms within China and on the side
of China's enhanced commitment to abiding by the world's
standards of behavior, on pain of multilateral sanction under
WTO. For this reason as well, I am confident that the House
will solidly support PNTR.
Opposition to PNTR has, in fact, not centered on the
economic content of the US--China Agreement, whose signing last
November made good once and for all on the long-standing U.S.
pledge to accept nothing short of a ``commercially viable
agreement.'' It is worth noting, in fact, that many of those
who now oppose PNTR were claiming as recently as last spring
that US negotiators were prepared to ``cut a political deal,''
selling out American economic interests, for other non-economic
or crudely political reasons. Now, with a splendid commercial
agreement in hand, PNTR's opponents have launched a furious
campaign to turn America's back on the nation's own economic
victory.
This Committee, and a long list of witnesses over several
hearings, has explored in detail the terms of the US--China
Agreement on WTO Accession, and I will not do so here.
I wish, instead, to place into the record a number of
statements that Members of Congress should read for themselves
as they consider their individual votes on the PNTR question.
I. The views of Dai Qing.
Dai Qing, a courageous and outspoken Chinese
environmentalist, investigative journalist, and political
critic, is winner of the 1993 Goldman Environment Award and the
1992 Golden Pen for Freedom Given by the Paris-based
International Federation of Newspaper Publishers. She was
imprisoned in China for ten months in 1989 and 1990. Dai is
best known in the United States for her eloquent campaign
against the mammoth Three Gorges Dam Project on the Yangtze
River in China. Recently, from Beijing, Ms. Dai wrote the
following brief article, which appeared as an Op-Ed essay in
the Los Angeles Times of April 20.
Dai Qing's article is extremely important, for the following
reasons:
1. It was written in Beijing, and provides the up-to-the-
minute, first-hand perspective of a world-renowned independent
thinker who has suffered politically for expressing herself
boldly;
2. It takes clear exception to the approach to the PNTR
issue by American labor organizations and the prominent Chinese
political exile Wei Jingsheng;
3. It is unsparing of the failings, as Dai perceives them,
of the Chinese regime in both the human rights and the
environmental arena.
Los Angeles Times, April 20, 2000
OP-ED Article
Thursday, April 20, 2000
Keep the Doors to China Wide Open
Solidifying trade status would keep pressure on Beijing to
improve on rights and the environment.
By DAI QING
BEIJING--I have heard on the news that two of the groups I
admire most in the United States--the AFL-CIO and the Sierra
Club--are against granting permanent normal trade relations
status with China. They both organized large-scale activities,
including mass demonstrations, to make their statements to
American policymakers and to the public.
As a Chinese environmentalist and human rights activist, I
disagree with their position, although I am fully sympathetic
with their causes.
It is public knowledge that China is among the worst
violators of labor rights and basic environmental standards.
Walking on almost any street in almost any city, one can easily
spot such violations: unemployed workers selling their old
stuff, hoping to put some food on their family dinner tables;
migrant workers sleeping under bridges and in construction
sites, willing to take any job for a roof over their heads;
water resources highly polluted by industrial waste;
suffocating industrial pollution. Most government officials at
all levels are so corrupt that they have become part of the
pollution.
The disagreement between me, together with many of my
fellow human rights activists and environmentalists in China,
and our counterparts in the U.S. is not over the principles of
environmental protection and labor rights. Rather, the
disagreement is with the means of improving human rights,
including labor rights, implementing environmental protection
and promoting democracy and freedom.
I believe that permanent normal trade status, with its
implication of openness and fairness, is among the most
powerful means of promoting freedom in China.
Wei Jingsheng, a prominent dissident now residing in the
U.S., argues that in order to improve human rights conditions
in China, the international community must constantly put
pressure on the Chinese government. Wei is absolutely right
about the international pressure, but he is wrong when he
suggests that annual renewal of normal trade relations should
be taken as an opportunity to provide such pressure.
How does international pressure work in promoting human
rights and environmental protection in China? I would like to
argue that such pressure works only when doors are kept open,
when pressure presents positive solutions and, above all, when
engagement is involved.
After the communist takeover in 1949, China was cut off
from the rest of the world until it began to open up in the
late 1970s. Millions of people starved to death or were
persecuted, executed or otherwise deprived of the most basic
human rights. International pressure either did not exist or
did not work because the outside world had little information
about what was happening. China had no need to respond to the
international community.
Starting in 1978, the open-door policy completely changed
the way China responded to the world. Today, permanent normal
trade relations is a powerful means to keep China's doors as
open as possible.
International pressure works better by providing positive
solutions. Poverty promotes ignorance and negligence among the
public to environmental issues and human rights abuses. With
prevalent poverty in today's China, the government runs a
successful propaganda campaign that argues that the right of
economic survival overrides other human rights. The Chinese
people are looking for positive support from the international
community, especially the industrialized world. Permanent
normal trade relations would send the Chinese people a powerful
and positive message: The most powerful industrialized nation
today will work with the Chinese people to build a new world
order. This would put enormous pressure on both the government
and the general public to meet the international standard not
only on trade, but also on other issues, including human rights
and environmental protection.
International pressure works best when engagement is
implemented. An American congressman once made the point that
because China was not a normal state, it made no sense to treat
it normally. Yet if the international community does not treat
China normally, China will remain abnormal.
Wei compares the annual renewal of trade status to the
periodic renewal of a driver's license, which keeps China
anxious to a certain level. This is exactly the most
destructive way of thinking. The U.S. should never take the
role of traffic police in world trade because China, or any
nation, should not be subject to the naked authority of another
nation. Instead, the U.S. should engage China in the process of
becoming a full member of the international community.
Permanent normal trade status would be an important part of the
engagement plan.
(End)
II. Letter on PRC Labor Standards by US Experts on China's
Economy and Society.
The following letter by twelve American research scholars
whose work has illuminated the complex realities of China's
changing economic and social environment speaks, in its brevity
and simplicity, to basic truths about China that the overheated
rhetoric and doomsday claims of PNTR's organized opponents
intentionally overlook. Members of the Committee and of the
Congress can learn much from this statement.
PNTR, WTO and Chinese Labor Standards
An Open Letter From American Academic Specialists on China's Economy
and Society
China's workers need higher labor standards, but opposing
Permanent Normal Trade Relations for China is not going to
help. To the contrary, China's participation in the WTO and the
implementation of full WTO-member relations between the United
States and China through the passage of Permanent Normal Trade
Relations (PNTR) offer greater, more dependable prospects for
progress on this long-term challenge.
Normal trade relations in the context of China's membership
in the World Trade Organization (WTO) are an important way for
China to raise the standard of living of its people. WTO
membership will also contribute to the development of a law
based system in economic relations.
China's low wages and often poor working conditions are
mostly the result of China's poverty. Child labor similarly is
more the product of families so poor that the small extra
income these children bring in is important to family survival.
China's failure to regularly and vigorously enforce its
existing laws against child labor and poor labor standards
reflects a system of law that is only slowly being
reestablished after decades of neglect.
With China on the brink of entry into the WTO, what is
needed is an energetic effort to help China enforce its own
laws and to strengthen its legal system in general. Efforts of
this sort have been underway for some time through bilateral
and multilateral public and private bodies and have already
born modest fruit.
Attempts to enforce labor laws by means of trade sanctions
are by contrast a weak and blunt instrument for enforcing
China's labor standards. Opposing PNTR and WTO membership for
China would undermine the very forces that are contributing to
rising standards for Chinese labor and enforcement of its
existing labor laws. Denial of normal trading relations and
resort to sanctions are also easily prey to abuse by special
interests desirous of disguising their true protectionist
purpose.
Whoever may benefit from a sanctions approach to trade with
China, it will certainly not be Chinese workers or their
children.
March 30, 2000
Signers (Listed Alphabetically):
Loren Brandt
Professor of Economics
University of Toronto
Author, ``Redistribution in a Decentralizing Economy:
Growth and Inflation in China,'' Journal of Political Economy,
April 2000; `` Markets, Human Capital and Income Inequality in
China,'' forthcoming.
Thomas R. Gottschang
Associate Professor and Chair
Department of Economics, College of the Holy Cross
Research Associate, Fairbank Center for East Asian
Research, Harvard University
Editor: Du Runsheng, Reform and Development in Rural China
(New York: St. Martin's Press, 1995); Co-author:
``Institutional Change in Transitional Economies: The Case of
Accounting in China,'' Comparative Economic Studies (Winter
1998).
Doug Guthrie
Associate Professor of Sociology
New York University Author, Dragon in a Three-Piece Suit: The
Emergence of Capitalism in China (Princeton, 1999); ``The
Evidence is Clear: Foreign Investment Spurs Workplace Reform in
China'' (Chronicle of Higher Education, March 2000).
Gary H. Jefferson Carl
Marks Professor of International Trade and Finance
Graduate School of International Economics and Finance
Brandeis University
Co-editor, Enterprise Reform in China: Ownership,
Transition, and Performance, 1999.
Lawrence J. Lau
Kwoh-Ting Li Professor of Economic Development
Department of Economics
Stanford University
Co-author, ``China's Foreign Economic Relations,'' China
Review 1997; ``The China-United States Bilateral Trade Balance:
How Big Is It Really?,'' Pacific Economic Review, Vol. 3, No.
1, February 1998; ``New Estimates of the United States-China
Bilateral Balances,'', March, 1999.
Barry Naughton
Professor
Graduate School of International Relations & Pacific
Studies, University of California, San Diego
Author: Growing Out of the Plan: Chinese Economic Reform,
1978-1993 (Cambridge University Press, 1995); The China Circle:
Economics and Technology in the PRC, Taiwan, and Hong Kong
(Brookings Institution Press, 1997).
Dwight Perkins
H.H. Burbank Professor of Political Economy
Harvard University
Author, ``How China's Economic Transformation Shapes Its
Future,'' in Ezra Vogel, editor, Living With China: U.S.--China
Relations in the Twenty-First Century, WW Norton, 1997; China:
Asia's Next Economic Giant, (Henry M. Jackson Lectures)
University of Washington Press, 1986, 1989.
Thomas G. Rawski
Professor of Economics and History
University of Pittsburgh
Author, Economic Growth and Employment in China. N.Y.:
Oxford University Press (for the World Bank), 1979; ``China:
Prospects for Full Employment.'' Employment and Training
Papers, no. 47. International Labour Office, Geneva. 1999.
Bruce L. Reynolds
Professor of Economics
Union College
Author, Chinese Economic Reform: How Far, How Fast?
(Harcourt,1988); ``China's Integration into World Capital
Markets'' (forthcoming); Editor, China Economic Review, Cornell
University
Scott Rozelle
Associate Professor
Department of Agricultural and Resource Economics,
University of California, Davis Chair, Committee of
Professional Relations with the People's Republic of China,
American Agricultural Economics Association
Co-author, ``China's Food Economy to the 21st Century:
Supply, Demand, and Trade,'' Economic Development and Cultural
Change, July 1999; Co-author, ``How China Will NOT Starve the
World,'' Choice, First Quarter 1996; Co-author,
``Liberalization and Rural Market Integration in China,''
American Journal of Agricultural Economics (May 1997).
Ezra F. Vogel
Henry Ford II Professor of Social Sciences
Harvard University
Author: One Step Ahead in China: Guangdong Under Reform
(1989); Editor, Living With China: U.S.--China Relations in the
Twenty-First Century (1997)
Martin King Whyte
Professor of Sociology and International Affairs
The George Washington University
Author, ``The Changing Role of Workers,'' in The Paradox of
China's Post-Mao Reforms, ed. R. MacFarquhar and M. Goldman
(1999); ``Human Rights Trends and Coercive Family Planning in
the People's Republic of China,'' Issues and Studies, August,
1998.
III. Statement by the American ``Creative Industry''
associations.
The signers of this document are the very U.S. associations
that led the battle with China over intellectual property
protection in 1995 and 1996. While PNTR's critics point to
continuing imperfections in China's intellectual property
regime (as evidence that China does not abide by agreements)
and demand that the US walk away from WTO-based trade relations
with China, those whose interests are most directly affected
call for the US to achieve WTO-based relations with the PRC,
and they tell us why:
February 23, 2000
An Open Letter In Support of China PNTR From America's Creative
Industries
America's creative industries strongly support
Congressional approval of Permanent Normal Trade Relations
(PNTR) for China.
We are writing in response to suggestions that China's
alleged failure to live up to its commitments under the 1995
U.S.--China Intellectual Property Rights Agreement should
disqualify it from membership in the World Trade Organization
and from the benefits of full WTO membership treatment,
embodied in PNTR.
In the 1990s, America's copyright industries took the lead
in pressing the case against China's serious violations of U.S.
intellectual property rights; in particular, the massive export
of pirate and counterfeit optical media and other pirated
products throughout the world. Widespread abuse of intellectual
property rights was causing billions of dollars in losses each
year to American creative industries and to the U.S. economy.
Working with the U.S. Government, we spared no effort to bring
about the 1995 bilateral intellectual property rights
agreement, and to ensure that China abided by those
commitments, which resulted in the 1996 China enforcement
``Action Plan.''
Having worked so hard in the last decade to force the issue
of intellectual property rights protection upon a reluctant
China, why do we stand united in support of PNTR for China
today?
Because we are convinced from our own experience
that inclusion of China within the framework of multilateral
rules and obligations embodied in the WTO is the single best
instrument we have to ensure continuing improvement in China's
protection of intellectual property;
Because we know, first hand, that multilateral
enforcement through the WTO offers a far more promising method
of ensuring continued progress in China's intellectual property
environment than does the threat of unilateral retaliation
against China;
Because China committed in the WTO negotiating
process to bring its copyright (and other IPR sectors') regime
into compliance with its substantive and enforcement
obligations under the WTO Agreement on Trade-Related
Intellectual Property Rights (TRIPS), and to do so immediately
upon accession. We believe China has commenced its efforts to
meet this commitment.
While piracy remains very high within the domestic
Chinese market, China met its principal commitment under the
1996 Action Plan--to stem the flow of exports that were
disrupting other developed markets on a global basis;
Because the US copyright sector, so critical to
America's economic strength today, will cede to our global
competitors the massive opportunities America has won at the
negotiating table if the United States does not establish full
WTO member treatment for China in the form of PNTR.
In spite of real progress on intellectual property
protection since the 1996 agreement, problems in China remain,
as they do in many countries with which the U.S. trades.
Chinese companies themselves, an increasing number of which
likewise depend upon intellectual property protection, are
recognizing the importance of Chinese adherence to
international standards of protection, as embodied in the TRIPS
Agreement. This trend will only accelerate through PNTR and
Chinese accession to the WTO. Looking ahead, America's ability
to address China within the framework of the WTO is a vital
tool for the preservation of our economic rights and the
advancement of our national interests.
We are encouraged by the concern expressed about China's
record on IPR enforcement and submit that the best way to drive
improvements in Chinese performance is to approve PNTR, and to
hold regular hearings to ensure that China is meeting its
various obligations, including, in particular, the enforcement
obligations that it will undertake pursuant to the TRIPS
Agreement by which it will become bound.
The companies and associations most vigorous in insisting
on improvement of China's intellectual property rights regime
over the past decade are united in support of PNTR in the year
2000. We do not accept the suggestion that China's intellectual
property track record since the signing of the 1996 bilateral
agreement constitutes a justification for Congressional
rejection of PNTR in the year 2000. Indeed, we believe that
PNTR and the entry of China into the WTO will serve to advance
the cause of intellectual property protection in China, a
matter of considerable importance to America's creative
workforce.
We strongly urge Congress to support China PNTR in 2000.
Sincerely,
Robert Holleyman, II
President and CEO
Business Software Alliance
Kathy Morgan
Chairman
AFMA
Hilary Rosen
President and CEO
Recording Industry Association of America
Patricia Schroeder
President and CEO
Association of American Publishers
Ken Wasch
President
Software and Information Industry Association
Douglas Lowenstein
President
Interactive Digital Software Association
Edward Murphy
President and CEO
National Music Publishers' Association
Eric Smith
President
International Intellectual Property Alliance
Jack Valenti
President and CEO
Motion Picture Association of America
I. A letter from China.
The US--China Business Council recently urged member
companies to invite their Chinese employees to write, in their
own words, to the Council around the general questions of
working for a US firm in China and the differences in their
lives before and since joining their American company. We have
received many letters. They are informative, sometimes very
moving, and above all very encouraging. I offer members of the
committee just two here, but will be happy to make many more
letters available upon request to interested Members.
(1st letter)
I've been working in a US multinational for more than 4
years. Like many of my peers and friends, I share a same
feeling that we have benefited so much in terms of living
standards, career, personal capability and common beliefs and
many more from its unique culture. We would gain more if we're
more open up and receptive to the outside world.
The most striking thing about the experience of working for
a US multinational is that you would has an ever broad and new
prospective to approach problems and look at things around.
A key attitude shift took place when I entered, for it is
where I realized the efficiency and effectiveness of a modern
corporate system; where human resources and personal
performance and initiatives are considered the most valuable
assets; where mutual and equal respect and smooth communication
is prevailing; where you will never be overlooked or judged
simply by your title or position.
No exception would there be that staff of a multinational
would be impressed with the ample learning and self-challenging
opportunities. It is no exaggeration to say a multinational
company is a social university for personal maturity and
aptitude growth, so to speak. Being exposed to a vastly
adequate working resources and competent human talents keeps
you being constantly motivated to enhance, learn and surpass.
What is equally amazing is the harmony of different
cultures. No matter what your skin color is, white, black or
yellow, you would see friendship and hospitality overwhelming.
Despite the vast difference of belief and cultures, staff in
channel and contribute all their talents and efforts towards a
unanimous goal of building business success and contribute to
our kernel value --to be the most preferred supplier and most
innovative enterprise.
We may well believe this world would definitely be a better
one through more communication and cooperation. People from
every corner of the world could enjoy the sun light of peace,
respect, and friendship as much as we have here within, a US
multinational.
Jason Wei
(2nd letter)
To Whom may be concern:
Hello! My name is Valerie Tang. I am an employee of a US
based company in Shanghai. As a native Chinese, I am very
concerned with the US Congress vote for the PNTR towards China.
Here I just want to tell you how many things have changed in my
life due to Chinese open door policy and working experience in
US company.
I was born in Xi'an. In 1992 I was assigned a job in a
local radio factory in Shanghai after graduated from college.
At that time, the factory's management was backward, the job
was poorly paid, tedious and not intersting. My life was not
easy. After trying several different jobs, finally I began to
work for Shanghai Representative Office in 1998.
The company provides me with comfort working environment.
It also gives me exposure to professional HR /human resource/
practices. Meanwhile, it allows me to have access to foreign
media including: magazines, newspapers and particularly
Internet to get different perspecives of information. All this
gives me a broader view and more balanced judgment of the
outside world. Thanks to this I reached a deeper understanding
of the mechanism of western democracies.
Now, I have a sweet home, a meaningful career and a
competitive professional profile. I enjoy the orchestras from
Cleveland or Philadelphia on weekend. A simply Chinese lady
like me could not realize any of these without the opening door
policy as well as the US companies' investment in China.
Dear Sir/Madam, my life is becoming better and better. My
friends, my family and many people around me hope they have the
same opportunity as I do. Considering the mutual benefits of
both American and Chinese people, I sincerely wish you vote in
favor of PNTR towards China. Thank you!
Valerie Tang
II. A word about ``Leverage.''
Mr. Chairman, one by one, the claims of the forces arrayed
against PNTR in this endless campaign have dribbled away. The
distracting argument that our 1979 bilateral trade agreement
with China would bring the U.S. all the benefits that we won
last November after 13 years of negotiations when China joins
the WTO, even if Congress refused to approve full WTO-member
treatment for China, has been discredited not only by the
scholarly community but by the GAO and the Congressional
Research Service. Flamboyant claims of 600,000, then 800,000,
and now exactly 817,000 jobs to be lost if PNTR passes (i.e.,
if Congress ensures the same tariffs on Chinese imports in the
future that it has maintained annually for the past twenty
years) do not stand serious scrutiny, as the recent Institute
of International Economics Paper (April 2000) by Dr. Gary
Hufbauer makes clear.
What is left is the ``leverage'' argument, i.e., that the
United States can't afford to establish full WTO-member
relations with China when the PRC enters the WTO, and thus open
the doors to equal economic opportunities for Americans in
China, because we would somehow lose ``leverage'' over China's
domestic behavior if we passed PNTR.
To be blunt, the ``leverage'' issue is an issue of
convenience. Because it can never be conclusively shown to
exist, it can live forever in some minds, and it can be used
forever to pursue certain policy goals or agendas.
It reminds me of the notion that if you stare at the sky
long enough you will see flying horses. If you don't see them,
it only means you haven't stared at the sky long enough. Keep
staring.
Let me put it simply: If China after twenty years of annual
MFN/NTR review is as terrible a place, as full of iniquity and
as offensive to our sensibilities as PNTR's organized opponents
say it is, why would anyone in his right mind consign China to
more of the very same American treatment that has in his view
so totally failed to force China to change its behavior in the
first place?
In fact, there is more ``leverage'' in this WTO package
than the United States has ever achieved with China before.
China's agreement to open its economy to unprecedented levels
of foreign participation; to abide by WTO prescriptions that
strike to the heart of the way its economy will function and
the way its regime will deal with its own citizens; to
eliminate discriminatory conduct and develop transparency of
procedure; to axe such offensive habits as the requirement that
foreign companies transfer technology in order to do business
in China or that they export their products from China--this
commitment, backed by WTO provisions for dispute resolution and
multilaterally-imposed sanctions represents a degree of real
``leverage'' far more significant than the mythical power with
which some PNTR opponents endow the current annual renewal
exercise.
Mr. Chairman, thanks to the work of this Committee, any
Member of the House who wishes can have abundant access to the
facts and the forceful arguments that the Committee's witnesses
from government and private life have presented on the PNTR
question. I appreciate the opportunity to offer the above
ideas, and introduce their authors, to you, the Committee, and
the House.
Thank you.
Statement of Wei Jingsheng, Wei Jingshen Foundation, New York, NY
The basic principles are simple.
1. The U.S. should recognize that after the fall of the
Soviet Union, Communist China is democracy's most formidable
adversary.
2. The remaining tyrannies in the world have no problems
understanding that democracy is their enemy. Yet, the U.S. is
unwilling to see tyranny clearly, and therefore fails in its
leadership to build an effective coalition to contest
democracy's greatest enemy. In contrast, Communist China has
been very effective in splintering the Western democracies, and
dividing American society.
3. If the United States will not fight the world's largest
tyranny politically, then inevitably, it will have to fight it
economically, and eventually, militarily. Therefore, the only
way to preserve peace and freedom begins by comprehending
democracy's greatest enemy, and countering it effectively.
Framing the debate on WTO and PNTR as ``keeping the door
open'' is misleading. The truth is that the door to China is
already half-open. The Chinese people are still deprived of
information, but they have learned enough to know that they
lack the rights other people enjoy. They have seen the vast
differences between democratic societies and tyrannical
societies. If this were not so, the enormous uprising in
hundreds of Chinese cities known as the 1989 Tiananmen movement
would never have happened. The truth is that the door to China
remains half-closed, for the Chinese Communist government is
afraid that the people will receive even more information. If
we give China PNTR now, it will legitimize this half-open and
half-closed status as the way things are and should be. If
Communist China were to be certified as ``normal'' in its
currently abnormal state, why would the government make further
reforms?
At this point, what the Chinese people need most is help
from foreign friends in pressuring the Chinese government to
provide better protection of human rights and the environment.
Many say such ``open pressure'' does not work. This claim is
fraudulent. South Africa, Taiwan, South Korea, and the former
USSR are but a few examples of what open pressures can achieve.
If we were to dissipate the pressure inherent within WTO and
PNTR, then both the US and China, and other WTO countries will
not have the free market they desire, but a ``chaotic market,''
from which few, beside the Chinese Communist tyranny, would
reap any benefits.
For interviews, contact: 202 547-7833, or fax: 202 543-4443