China trade vote hots up

China is on tenterhooks over vote

By regional analyst Kate Liang

The battle in the US Congress over whether to have permanent normal trading relations with China is being fought right to the bitter end.

Reputations are riding on the vote, scheduled for Wednesday.

President Clinton has made passing the legislation the top priority for his last year in office, while for China, it is the key to getting relations with the US on to a more friendly footing.

China: A market of more than one billion

But a minority of hawkish Republicans and Democrats, backed by labour unions worried about US jobs, may yet scupper the bill.

Up until now, Washington has gone through an annual ritual. It votes on whether to grant China "Most Favoured Nation" status - that is, to keep trade with China on a normal, non-protectionist footing.

The annual vote was justified by supporters who said it gave the US the chance to have some kind of leverage over China, particularly in the area of human rights.

This year though, President Clinton wants to make normal trade relations with China permanent.

WTO

In many ways, this is long overdue. On purely economic grounds, granting China permanent normal trade relations (or PNTR) makes sense for the US.

Granting PNTR is not a condition for China joining the World Trade Organisation, although it is widely seen as another step along the way.

Foreign companies are keen for more business

But if Washington keeps examining China's trade status each year, once in the WTO China would be entitled to reply in kind.

This means China could legitimately deny US companies the benefit of market opening concessions that Washington extracted from Beijing last year, precisely as a condition for WTO entry.

Human rights

Politically, too, granting PNTR would do wonders for getting US-China relations out of the deep freeze they have been in for the last two years.

Relations hit their lowest point for decades after the US bombing of the Chinese Embassy in Belgrade, and have only recently been creeping back to normal.

President Clinton: Winning support of pro-business Republicans

It is doubtful if the yearly review of China's trading status has had any measurable impact on China's conduct in the field of human rights, as supporters would like to claim.

Critics say it is little more than a symbolic gesture, which serves only to anger China on an annual basis.

Unions

Advocates of PNTR say not granting it would have two serious consequences.

It would undermine the reformers in Beijing, further heightening tensions with the West.

Companies like Boeing see China as a major market

And it would send a damaging signal that the US is withdrawing inwards, embracing protectionism rather than free trade.

So what's the problem? Labour unions, for one. They say granting PNTR will cost hundreds of thousands of US jobs as Chinese goods flood the market.

Bed fellows

This puts Democratic members of Congress, many of whom have traditionally supported the demands of labour, in a difficult position.

It has also made for some odd bedfellows. Congress is dominated by pro-business Republicans, most of whom support the bill despite the fact that it has been proposed by a Democratic president.

But a minority of Republicans, worried about the message granting PNTR sends to China on human rights, have sided with Democrats who say they will vote against the bill.

The battle lines are clearly drawn: between business and labour; between those in favour of globalisation and those worried about its consequences; between those who say engaging China is the way forward, and those who say threats are more effective than rewards.

And then there is President Clinton himself - in his final year of office and desperate to make his mark on the foreign policy scene.

Confidence

But despite extensive lobbying on both sides, it is still not clear if the Clinton administration has the 218 votes in hand it needs to get PNTR through.

In a contest that is so closely fought, it is likely that the result will depend on winning over individual Congressmen, with local politics - and the specific benefits which PNTR may bring to industries in their districts - a crucial factor.

The magic words, "a market of over a billion people", still carry a great deal of power.

On this basis, supporters of granting PNTR have grown more confident in recent days.

But no one is claiming victory yet, and the party with perhaps the deepest interest of all in the result - China itself - can only watch on the sidelines and wait.