The Magazine

LET'S NOT MAKE A DEAL

Sep 13, 1999, Vol. 4, No. 48 • By GREG MASTEL
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THIS WEEK, THE PRESIDENTS OF CHINA and the United States are poised to strike a historic and probably irreversible agreement paving the way for China to join the World Trade Organization. Unfortunately, although China's membership in the WTO would allow some in both countries to declare victory, the agreement as now formulated is unlikely to serve the long-term interests of the United States.


China has sought membership in the World Trade Organization for well over a decade, but in the last few months the usually staid negotiations have had more twists and turns than a soap opera. In April, on his visit to the United States, China's premier, Zhu Rongji, offered some impressive concessions. President Clinton correctly delayed a decision; much remained to be negotiated, and he wanted time to analyze the package carefully and consult with Congress.


Normally, such a decision by Washington would have ended the immediate issue, but in a strange turn of events, some major American companies engaged in a lobbying campaign coordinated with Premier Zhu to win support for China's WTO ambitions. Surprisingly, the Clinton administration seemed to give in to this lobbying campaign and issued repeated joint statements with Zhu before his departure from U.S. soil to the effect that the deal would be wrapped up quickly.


In an even stranger turn of events, however, on May 7, NATO forces accidentally bombed the Chinese embassy in Belgrade, killing three Chinese citizens. Looking to deflect public attention from the upcoming ten-year anniversary of the Tiananmen Square massacre, Chinese leaders loosed their propaganda machine. The one-sided coverage of the embassy bombing whipped up a frenzy that Chinese leaders were willing to tolerate as long as it deflected attention from their own much larger, intentional killing of Chinese citizens a decade earlier.


At the same time, China suspended all negotiations on WTO membership, which were already troubled because Chinese negotiators seemed to be backing away from earlier promises. Some Chinese leaders suggested that the United States should lower its demands for WTO membership in the wake of the bombing. The U.S. business community and some in the Clinton administration began nearly begging China to move forward with its WTO application.


All these developments -- not to mention the fact that China has lately been threatening to take military action against Taiwan, a democratic power and valued American ally -- make it particularly odd that the United States is contemplating rewarding China with WTO membership. Even in the best of times, however, the rush to reach an accord on WTO membership would be ill advised. It might be possible to fashion a WTO accession agreement that would promote U.S. interests, but the incomplete offer made by Premier Zhu was not by itself such an agreement. Negotiations were incomplete on matters such as access of U.S. telecommunications and financial services companies to the Chinese market and the all-important issue of enforcement; and other major WTO members, including the European Union, had not wrapped up their talks with China.


Beyond that, China has a truly awful record of keeping the promises it makes in trade agreements. For years, it routinely violated bilateral agreements with the United States on protection of intellectual property and market access for U.S. exports. Nevertheless, with at least tacit administration encouragement, several groups began reporting economic "projections" that U.S. exports to China would rise by billions of dollars a year if China joined the WTO. (Last week, the International Trade Commission more realistically predicted an increase in the U.S. trade deficit.) These estimates conveniently overlooked the problem of enforcement of past agreements, even though it had been acknowledged by the administration.


The administration also was undeterred by the fact that letting China into the WTO would amount to a major concession from the United States. The United States would give up the one lever that has forced China to make some grudging progress on trade and other issues as well: the threat of unilateral sanctions. If China were a WTO member, Washington could not impose such sanctions.


In theory, scrutiny by the World Trade Organization itself would replace the threat of unilateral sanctions. The possibility of multilateral pressure on China to move away from its mercantilist policies is promising in concept, but it is not at all clear how successful the WTO would be at disciplining China. Beijing has proven adept at playing international politics to divide its critics and frustrate efforts to isolate it or challenge its policies. For example, it has adroitly employed a combination of developing-country rhetoric and economic threats to block criticism of its human rights policies at the United Nations.


Further, the WTO is a rule-based institution, much like a U.S. court. China, however, is not a rule-based society, and policy is often made without a transparent paper trail. It may prove difficult even to establish the existence of objectionable Chinese trade policies before a WTO dispute-settlement panel, much less win a ruling against them.


Conceivably, a WTO accession agreement that included very tough oversight measures would actually improve the prospects for American trade with China. But Beijing has strongly opposed such provisions, and a Clinton administration that sees China's WTO accession as part of its "legacy" seems unlikely to press the matter.


In 1992, candidate Clinton attacked President Bush for kowtowing to the Chinese. Perhaps swayed by eagerness for a foreign policy success, as well as by the lobbying of some U.S. companies, the Clinton administration has pursued policies nearly identical to those of the Bush administration. Indeed, it has repeated Bush's mistakes. President Clinton and his team have allowed engagement to blind them to the dark side of the Beijing regime and obscure America's interest in relation to China. With a largely unenforceable trade agreement at the core of their strategy, they seem willing to accept on faith the promises of China's leaders to fulfill hundreds of complex trade commitments.


Foreign policy mavens are fond of blasting Congress and elections for distorting U.S. foreign policy. In this instance, however, Congress and the upcoming elections provide the best chance to reverse a flawed foreign policy. Congress, to which the Constitution assigns responsibility for international trade, could ignore the blandishments of China's apologists and demand that any WTO agreement be truly enforceable -- even if that means slowing the bandwagon for China's membership.


In addition, Vice President Al Gore or the leading Republican contender for the presidential nomination, George W. Bush, could decide to distinguish himself from his political predecessors and propose a more realistic policy toward China. A powerful statement from Bush in particular on this topic would probably give the administration and Congress pause.


If President Clinton and President Jiang announce a deal this week, future historians will wonder at the logic that led Washington to accede to China's wish for WTO membership even as Beijing threatened possibly imminent military action against Taiwan. But even if China makes no military move, the United States is striking a deal likely to be celebrated for mere months and regretted for decades.




Greg Mastel is director of the Global Economic Policy Project (GEPP) at the New America Foundation.