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.