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Congressional Testimony
February 16, 2000
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 5934 words
HEADLINE:
TESTIMONY February 16, 2000 MICHAEL R. BONSIGNORE CHIEF EXECUTIVE OFFICER
HONEYWELL HOUSE WAYS AND MEANS CHINA S WTO STATUS
BODY:
Michael R. Bonsignore On Behalf of The
U.S.-China Business Council and The Business Roundtable Testimony before the
House Ways & Means Committee On the U.S.-China Bilateral Trade Agreement and
the Accession of China to the WTO February 16, 2000 Good morning Chairman
Archer, Congressman Rangel, members of the Committee, my distinguished
colleagues on the panel, ladies and gentlemen. It is my pleasure and honor to
have this opportunity to testify before this committee to share my perspective
on the benefits of China's accession to the WTO and the recently concluded
bilateral agreement between the United States and China. I am Chief Executive
Officer of Honeywell, a global diversified manufacturing and technology company.
As you know, Honeywell and Allied Signal merged at the end of 1999 to form a
great new organization with almost $25 billion in revenue, 120,000 employees
worldwide and a presence in almost I 00 countries. I am extremely optimistic
about the future of this new enterprise - and very aware that much of our future
growth and business opportunities will come from markets outside the United
States - as it has in the past. Today, Honeywell's business in China is
approaching a half a billion dollars in revenue - a substantial portion of which
is direct exports from the United States. On virtually every Boeing aircraft
shipped to China, Honeywell's avionics, auxiliary power units, wheels and brakes
are on board. We ship industrial process control instruments and systems to help
modernize a wide range of Chinese industries - from pulp and paper to
petrochemicals. We ship energy efficient lighting controls and energy management
systems for Chinese buildings - hotels, offices, airports, schools and
hospitals. We export amorphous metals to help improve the efficiency of
transformers in China, and also specialty chemicals, polymers and electronic
materials to support a wide range of Chinese manufacturing needs. Finally, we
provide turbochargers for diesel and gas engines and truck air brake components
for the automotive market. We also have a wide range of business operations in
China . The growth rate we are experiencing in the numerous markets we serve in
China ranges between 10-25%. We are deeply committed to the China market and to
the local communities in which we operate. I am proud to be serving this year as
Chairman of the U. S.-China Business Council. As you know, the Council was
founded in 1973 and represents 250 leading American companies with business
interests in China. I am also a member of The Business Roundtable's Trade &
Investment Task Force. The Roundtable is an association of more than 200 CEOs of
U.S. corporations that together employ more than 1 0 million people. It is
dedicated to examining public policy issues that affect the economy and
developing positions that reflect sound economic and social principles. I would
like to address five points in my remarks to you today: (1) the commercial
benefits of this agreement are comprehensive; (2) the United States' consistent
policy of engagement with China is working and should continue; (3) U.S.
business is a catalyst for positive change in China; (4) enforcement is
essential; and (5) the United States must show leadership by taking concrete
steps with China to improve labor, human rights and environmental conditions. 1.
The Commercial Benefits of the WTO Deal Are Comprehensive Because the overall
commercial benefits have been amply addressed by Ambassador Barshefsky and no
doubt will be addressed by many other representatives from a wide range of the
American business and agricultural community, I will not go into them further
here. I have, however, attached to my written testimony a summary of the
benefits that Honeywell specifically anticipates from the implementation of this
agreement. I believe the benefits to Honeywell paint a picture of how
significant China's concessions are when you put them all together and see how
they work in the real-world. Engagement Works For more than two decades now,
U.S. Presidents from both parties (Nixon, Ford, Carter, Reagan, Bush, and
Clinton), who have widely divergent ideas on economic policy, foreign affairs,
and social goals, have consistently determined that the best way to increase
America's influence with China is through a policy of engagement. The four
Presidential front-runners now are no different: Bush, Bradley, Gore, and McCain
all support continuing our engagement with China by passing PNTR. Our
Presidents' support for engagement has been so consistent and bipartisan over
the years because it works. Engagement simply means building our economic and
political ties with China, bilaterally and multilaterally, so that we provide
constant pressure for China to be a constructive and responsible member of the -
international community. Strengthening our economic ties strengthens our voice
by giving China a vested interest in maintaining stable relations with us and
addressing our concerns. Engagement does not mean that we are ratifying all of
China's policies or giving China any special treatment. I hear those phrases
bandied about in the debate, and they couldn't be more wrong. This WTO deal
gives China no special treatment. It simply brings China into the international
trading system where China has to follow the same rules that everyone else
follows, instead of leaving China outside the system where China gets to make
its own rules. Do we have more work to do? Absolutely. However, PNTR is not a
ratification of China's troubling human rights record. We need to continue to
press China to move toward an open and democratic society that protects
individuals' freedom and that contributes to international peace and security.
Bringing China into the WTO is a positive step in this direction. It opens up
China's economy and society to the world, wider than ever before. And it binds
China more firmly into the international community and the rule of law.
Opponents of PNTR would hold us back from realizing this future. Let us take a
moment to examine what a future without PNTR would look like. It's a picture
without the United States in it. While the rest of the world is engaging in
deeper economic ties with China through the WTO, the United States would be on
the sidelines. Europe and Japan would be increasing their investments in China,
increasing exports to China, and also increasing their imports from China. Now
when human rights or other issues come up, which diplomats will China see first?
Ours because we demand it? Or Europe's because they have new economic contacts,
new investments, and new projects in China. This isn't a matter of buying
influence; it's a matter of building the relationships to get things done.
Relationships are important everywhere, but especially in Asia. China is a proud
country. Isolating them and threatening them into following our point of view is
not an effective strategy to influence them. Obviously we're no weakling, and
China knows that well. But if we want to have influence, we've got to be at the
table. PNTR helps puts us there. M. U.S. Business is a Catalyst for Positive
Change in China The commercial interests U.S. companies hold in China are well
known. As I just stated, I believe the benefits of the WTO deal to U.S. business
interests are increasingly well documented. What is perhaps not as well known or
understood are the non-commercial benefits that accrue both to the U.S. and
China through the engagement of U.S. business in China. I'd like to take a few
moments to share with you something of the "untold story" of U.S. business in
China. The fact is that when U.S. companies export to and establish operations
in China, they bring not only their products and services, but also their
operating standards, their best business practices, their corporate values and
their guiding principles. In so doing, U.S. companies act as a catalyst for
positive change in China. Through the dissemination of a broad range of
practices, U.S. companies set a positive example of corporate citizenship and
contribute to the evolution of norms within Chinese society. Indeed, many of
these practices are increasingly being adopted by domestic enterprises in China.
Did you know that U.S. companies are helping to lead the way for improved
environmental, health and safety conditions in China by engaging in
government-to- government initiatives, providing direct support to environmental
NGOs, establishing U.S.-based internal company standards and practices, and
introducing environmental technologies and industrial systems that minimize
waste, control emissions, and enhance safety? Did you know that literally tens
of thousands of Chinese citizens visit the United States each year as the U.S.
parent company brings them over for a wide range of technical, managerial,
financial, environmental, health and safety training and education? For many
Chinese visitors these trips are not only their first visit to the United
States, but their first time out of China. Extensive training and education is
also provided by U.S. companies in China. Did you know that U.S. companies -
through the voluntary contributions of U.S. employees and through their
foundations - have provided millions of dollars to support flood relief and aid
victims in China? Did you know that we build schools and health clinics, and
that our own Chinese employees volunteer in these efforts? Did you know that we
provide home ownership assistance programs to our employees and their families,
offer scholarships, donate equipment and computers for training, teach classes
at Universities, support rule of law initiatives and grassroots electoral reform
programs, bring western arts and entertainment, and sponsor Little League teams
in the communities in which we operate? Did you realize that in undertaking all
of these activities, on our volition, we are complementing many of the policy
aims that Congress and the Administration share toward China? We are, in fact,
the major U.S. non-governmental organization effecting concrete change in China.
These examples and more have been documented by a number of U.S. companies in a
report that is being released to Congress today. This report, entitled
"Corporate Social Responsibility in China: Practices by U.S. Companies, " was
compiled and published under the leadership of The Business Roundtable. I
commend it you as tangible evidence that U.S. companies do more than sell goods
in China. In supporting commercial engagement with China - by securing the
benefits of the WTO deal through the extension of PNTR to China - Congress
supports the ability of U.S. business to make a positive difference in China.
Enforcement Is Essential It is clear from the debate underway here in Washington
that there is a substantial amount of concern regarding China's willingness to
live up to its obligations under the WTO. Many assert that China's record on
trade accords is mixed. That's true. We will need to be vigilant. As Ambassador
Barshefsky has outlined in her remarks, monitoring, compliance and dispute
settlement mechanisms are a built-in advantage of the WTO system. In order to
ensure compliance by China with its commitments, it is important to understand
the extent of those commitments. I would tell you that the breadth of
commitments that China has made in the WTO package is impressive. They represent
the conviction of Chinese leadership that their future prosperity lies in moving
to full- scale economic liberalization and engagement in multilateral
institutions - not in the outmoded and unsuccessful model of isolationism, and a
command and control economy populated by state-owned enterprises. But the
reforms and institutional changes implicit in changing China's economic model
and system are formidable. The Chinese government is acutely conscious of these
challenges - and of the cost that will be born in terms of unemployment,
dislocations, failed enterprises, and the trial and error of institution and
capacity building that accompanies the transformation from a central, planned
economy to a transparent, market based economy. For example, the national
treatment provisions of the WTO accession package mean that China will have to
revamp its national, provincial, and local regulatory structure to treat U.S.
and other foreign participants in its markets no differently than Chinese
companies. Doing so will require greater transparency in drafting, promulgating
and implementing administrative rules governing virtually every sector of the
economy. The Chinese government has already begun a process of administrative
law reform, with support from U.S. legal and academic institutions and experts,
but this process inevitably will need to accelerate. There are two ways to deal
with these implementation challenges. First, when necessary there should be no
hesitation by the U.S. government to invoke the WTO dispute settlement process.
Second, we also need to realize that there are many opportunities to facilitate
and improve China's compliance before trade disputes erupt. The greater the
ability of China to comply quickly and effectively, the lower the risk that we
end up in a situation where full blown trade disputes emerge. In this regard, I
strongly believe that part of our strategy in optimizing the benefits of China's
accession to the WTO and ensuring that the system works, should be to provide
technical and other assistance to China to help it reach, and to accelerate, the
vigorous compliance that we expect. The United States Must Show Leadership By
Taking Concrete Steps with China to Improve Labor, Human Rights, and
Environmental Conditions We know that some of you are concerned that passing
PNTR will be bad for labor, the environment and human rights. These are
important issues. And PNTR will not adversely affect our ability to be a
positive influence on China in these areas. While trade is no quick fix to
China's problems, it encourages China to move in the right direction. At its
core, bringing China into the WTO increases China's ties with the international
community. That is the best chance for bringing change to China: it exposes
China to international standards and the rule of law, and it links China's
prosperity to the international system. We can't dictate policy to China; it's a
sovereign country like us, and we don't respond well to other countries
dictating how we cope with some of our problems. But through trade, we can
expand the Chinese people's access to new information and increase their
exposure to cultures from around the world. Over time, these indirect efforts
have an impact. The bottom line is that by building closer economic ties with
China, the United States increases its leverage with China, and that helps us
address these concerns. Isolating China doesn't get us any closer to meeting
these concerns. It is also important for the Congress to recognize that China
has been taking constructive steps. On labor, China's 1995 National Labor Law
implemented a 40-hour workweek. That law also permits workers to bargain
collectively. On the environment, China issued its first environmental
protection law in 1979. Today, China's State Environmental Protection Agency has
ministerial status, just as our EPA has cabinet status. In addition, over the
last two decades, China has significantly lowered its energy intensity, which is
its total energy consumption divided by GDP. China's energy intensity has
dropped by over 55%, while U.S. energy intensity fell by only 25% during the
same period. We need to encourage them, and provide assistance where we can, to
keep them moving in a positive direction. Finally, we all need to be creative in
identifying and capitalizing on opportunities to provide tools to help China
meet its obligations and improve its labor, human rights, and environmental
conditions. As this Committee is well aware, the economic, social and political
transformation that has been underway in Eastern Europe and the former Soviet
Union since the collapse of the Berlin Wall continues to be an arduous journey
for most of the countries involved. The relative success of these efforts, to
date, is a function of multiple factors - including the United States'
leadership in supporting those efforts. As you know, the Congress established a
number of constructive programs to support democratic and market-reform
initiatives as these regions began their transformation process. In November
1989, just weeks after the Berlin Wall fell, the U.S. Congress in a bold act of
recognition of the daunting challenge facing the former Soviet satellite
countries, passed the SEED Act - Support of Eastern European Democracy. In 1992,
shortly after the dissolution of the Soviet Union, Congress passed the Freedom
Support Act. These initiatives were aimed at helping these countries meet the
wrenching adjustment challenges ahead of them. Since 1990 the United States has
spent approximately $15 billion on this effort. Much of the funding in these
programs went to support fiscal, financial, regulatory and legal reforms as well
as to provide training and technical assistance. These programs demonstrated
U.S. leadership and commitment to democracy by providing concrete support to
accelerate the economic, social and political transition in these countries.
Now, Congress has the opportunity to demonstrate its commitment to China's
economic, social and political transformation - by enacting permanent
normal trade relations for China. To further complement this
achievement, Congress should also consider whether there are comparable
initiatives that would build on the progress made in opening China up through
trade. For example, there is the so-called "rule of law initiative" on which the
presidents of the United States and China symbolically embarked during the
November 1997 and June 1998 summit meetings. As I'm sure you would agree,
U.S.-China cooperation in the field of law is a valid, legitimate building block
both of closer U.S.- China relations, and of a better world. Right now there is
no significant U.S. funding to support this effort. The business community is
mindful of doing its part in this regard. As just one example, the U.S.-China
Business Council in 1998 invited its member companies to make voluntary
contributions to a new entity, the U.S.-China Legal Cooperation Fund. The
Council's companies have contributed approximately $400,000 to the Fund, and we
have since made 10 private-sector grants to worthy applicants from both the
United States and China in the broad field of legal cooperation. The United
States also has a high level U.S.-China Forum on Sustainable Development that
has an ambitious array of working groups which address a range of issues related
to energy, environment, commercial cooperation, climate change and other topics,
and that meet on a regular basis to talk about China's challenges. Yet, we do
not extend the U.S.- Asia Environmental Partnership Program to China. I believe
that these types of initiatives, which provide technical and other practical
assistance to China, are much more effective vehicles for making progress than
denying PNTR to China. Conclusion As you consider whether to support PNTR,
consider who it is we want to strengthen in China. The old-guard that opposes
the WTO and wants to slow down economic reform? Or the reformers, who have
staked their reputations on bringing China into the WTO? Failure to pass PNTR
doesn't send the "strong message" that U.S. opponents of PNTR would have you
believe. It doesn't tell China that the United States is getting tough on human
rights, non- proliferation or other issues. Just the opposite. It says the
United States isn't a player; we don't want to be at the table. And we don't
stand by the agreement we made in November. The bottom line is that turning down
PNTR doesn't move us one inch closer to better human rights, environmental
standards, or any other goals. It moves us a mile in the other direction. And it
hurts our reputation worldwide' We should not be reverting to isolationism at a
time when it is more important than ever to show leadership to the world. I
understand that at times it may seem easier to leave things as they are and just
renew China's NTR annually, even at the price of passing up China's historic
trade concessions. But I urge you to focus on one question: Is America better
off under this deal or not? The answer is a resounding yes - we are better off.
This agreement doesn't get us to the finish line, but it does move us farther
along in the right direction. Yes, we're going to have challenges, and we're
going to have to be vigilant to hold China to the agreement. And we're going to
have to raise our voice against the Chinese policies we oppose. In closing, let
me say that the WTO deal can be evaluated on its economic merits alone and be
judged a true win-win. But let me also underscore that clearly the WTO deal is
not about economics alone. It's about expanding the ability of business to do
good, while doing well in China. It's about strengthening a pillar of the
bilateral relationship that in turn adds much needed stability to the foundation
of this strategically important relationship. It's about seizing an important
opportunity to work with China on a shared objective of accelerating and
managing the transformation of China's economic system - with all the attendant
social and political implications. I thank you again, Mr. Chairman, for this
opportunity to testify on an issue of great importance to us all. And I urge the
Committee to take this broad view of the importance of the WTO deal - and lend
its full and immediate support to securing PNTR for China this year.
LOAD-DATE: February 18, 2000 
