Copyright 2000 Federal News Service, Inc.
Federal News Service
February 23, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 2463 words
HEADLINE:
PREPARED TESTIMONY OF STEVE VAN ANDEL
BEFORE THE
SENATE COMMITTEE ON FINANCE
SUBJECT - THE
U.S.-CHINA BILATERAL AGREEMENT AND WORLD TRADE ORGANIZATION MEMBERSHIP FOR CHINA
BODY:
Thank you, Mr. Chairman, for the
opportunity to testify today before this Committee on the critical issue of US
trade relations with China. I am Steve Van Andel, Chairman of Amway Corporation,
a Michigan-based company known for its quality products and use of the direct
selling system that encourages people around the world to succeed by owning
their own businesses. Amway has proudly maintained a partnership with its
distributors that has enabled the company to grow from a tiny operation in the
basement of my father's home into a multinational enterprise with operations in
80 countries and territories.
I also represent the US Chamber of
Commerce, where I serve as a member of the Board of Directors and have a direct
role in shaping the Chamber's international policy positions. The US Chamber is
the world's largest business federation, representing more than three million
businesses and organizations of every size, sector and region. The US Chamber
has long advocated unconditional and permanent normal trade
relations (PNTR) for China. Annual NTR extensions continue to generate
uncertainty in the bilateral relationship that has undermined the ability of
American business to compete against companies from Europe, Japan and elsewhere.
PNTR will help anchor our relationship with China, which has weathered some
storms in the last few years. The unprecedented market-opening concessions made
by China as part of the US-China agreement on its accession to the World Trade
Organization (WTO) makes the case for PNTR even more compelling. Unless we grant
China PNTR once it becomes a WTO member, American businesses, workers and
farmers will not receive the benefits of the agreement -- but our foreign
competitors will.
Expanding Public Awareness
The US Chamber has
launched a nationwide grassroots initiative aimed at increasing public
understanding of the benefits to the United States of expanded trade with China.
The Chamber's initiative -- known as TradeRoots China -- uses the federation of
state and local chambers of commerce as well as coalitions of small and
medium-sized member companies to explain the benefits of the US-China WTO
agreement to communities across the country. Other goals of TradeRoots China
include:
- Identifying and mobilizing community leaders as
pro-China-trade advocates in key congressional districts;
- Partnering
with the governor of each state to communicate the local benefits of China
trade;
- Sharing China trade success stories through local media, using
a vigorous communications campaign; and
- Serving as a one-stop
information resource on US-China trade from everything from state and local
trade statistics to success stories.
The US Chamber believes there will
be a groundswell of support for this landmark agreement once the public has had
a chance to review the details. Although the Administration has taken steps to
make many details of the agreement available, we hope that the full text will be
released soon. This agreement will sell itself.
WTO Agreement Opens
Chinese Markets, Safeguards US Markets
China has some of the most
restrictive trade barriers in the world. American companies must overcome high
tariff walls, quantitative restrictions, and arbitrary standards and regulations
in order to enter the Chinese market. Moreover, most US companies lack trading
rights in China and must use a Chinese middleman to import their products. Once
inside, there are severe restrictions on the distribution, wholesaling and
retailing of US products. After-sales service is also strictly curtailed, making
it difficult for American firms to establish relationships with their customers.
Despite these barriers, American companies export $18 billion
in goods and services each year. Our success stems from the quality of our
goods, efficiency of our operations and productivity of our workers.
In
stark contrast to the Chinese market, the US market is wide open to imports. US
families benefit from increased choices and price competition brought about by
Chinese imports. Many US industries also have improved their competitiveness by
procuring material from China. The openness of the US market and the
restrictions imposed on US exporters means that in 1998 China ran a merchandise
trade surplus of $57 billion with the United States -- second
only to that of Japan.
By tearing down thousands of Chinese trade
barriers, the US-China WTO agreement helps level the playing field between our
two countries and gives US companies an opportunity to increase their share of
the Chinese market. Unfettered by import restrictions, bureaucratic regulations
and other burdensome requirements, US exports to China will likely rise and
contribute to a drop in the trade imbalance.
US exporters will not be
the sole beneficiaries of the US-China WTO agreement. There is a cascade effect.
More business for US exporters means more business for their vendors and
suppliers. Thus, even companies with no international sales will be able to
attribute some increase in business to the agreement by virtue of their supplier
relationship with companies that sell to China.
Because of the
comprehensive nature of the agreement, I only have enough time to highlight a
few of the many outstanding benefits from the agreement. - Distribution. China
restricts the ability of US companies to distribute their goods within the
country. Under the agreement, China has agreed to permit US firms to distribute
their goods freely -- whether made in China or imported. US companies will also
be permitted to engage in retail, wholesale and direct sales, an important
concession from the point of view of Amway distributors. They will also have the
ability to market their products and provide customer service.
- Trading
rights. China will also phase out its requirement that US firms use a Chinese
middleman to import and export their products, which has limited US exports.
- Tariffs. Industrial tariffs on US products will fall from an average
of 25 percent to 9.4 percent by 2005, making US products more competitive within
the Chinese market. For US priority industrial items, these cuts will be even
deeper.
- Agriculture. China's agricultural tariffs will be cut in half
by 2004. There will be even deeper cuts on US priority products like beef and
pork. In addition, barriers to US corn, cotton, wheat, flee, barley, soybeans
and other commodities will be eliminated.
Importantly, these concessions
are fully enforceable. The agreement provides for specific phase-out periods for
full implementation of China's commitments. If Beijing fails to adhere to the
terms of the agreement, the United States will have access to its trade remedy
laws and the WTO dispute settlement mechanism.
In fact, the
agreement contains provisions to protect the US market while China's economy
undergoes the restructuring needed to implement the terms of WTO accession.
Product-specific safeguards will remain in place for 12 years with respect to
China to protect US producers against import surges. Additional protection will
be granted for textiles through 2009. US antidumping and countervailing duty
laws will continue to apply "non-market economy" methodology -- which takes into
account the high level of state participation in the Chinese economy -- for 15
years after China's accession. In addition, China will abolish requirements that
US firms transfer technology as a condition for exporting or investing.
The agreement's market-opening provisions are one-sided. In exchange for
these concessions, the United States is not required to open its markets wider
to Chinese imports. These concessions are the price of admission China must pay
to become a WTO member. With the exception of the annual NTR renewal process,
the United States in effect already treats China as if it were a WTO member. We
must end the annual NTR renewal process and grant China PNTR in order to insure
that we receive the benefits of this landmark agreement.
China PNTR
Insures US Receives Benefits of US-China WTO Agreement
Once it becomes a
WTO member, China will have the right to demand PNTR status from the United
States. It is in our interest to grant it. If Congress does not grant PNTR,
China's government will not be bound to honor its market-opening commitments to
the United States. In this case, American businesses will be forced to stand by
helplessly as our competitors in Europe, Japan and elsewhere benefit from
China's market-access commitments. A vote against China PNTR thus is not a vote
against China. It is a vote against American businesses, workers and farmers.
Beyond meeting our obligations under the WTO, providing China PNTR has
other benefits. It allows US companies like Amway to develop relationships
within China without the threat of having NTR revoked. Withdrawing China's NTR
status would certainly lead to retaliation by the Chinese against the most
prevalent US presence in China -- American business interests.
Some
critics argue that by granting China PNTR, the Congress will lose leverage over
China. They claim that the annual NTR debate is a useful way to prod China into
improving its record on human rights and religious tolerance. History does not
support this. The living conditions and freedoms of the average Chinese citizen
have improved faster during the last 25 years of US-China engagement than during
the prior 25 years when no relations existed. Furthermore, withholding PNTR
would isolate Chinese officials such as Prime Minister Zhu Rongji who argue for
liberalization and an improved relationship with the United States.
The
current policy of engagement has also allowed US companies to set up operations
in China that establish benchmarks for corporate practice in such areas as
personnel management, corporate citizenship, fairness and equal opportunity.
Many US Chamber members have made their commitments to ethical business
practices explicit through a corporate statement of principles. US investment
also has contributed to China's economic growth and the emergence of a middle
class that will press for new liberties.
Finally, I would like to point
out that granting China PNTR does not deny any Member of Congress the ability to
express his or her concerns about China at any time. If China seriously
threatened American interests in the region, I am confident that Congress would
take swift action unimpeded by PNTR.
Amway's Experience in China
I just returned this week from China, where I met with local Amway
distributors and Chinese leaders and with key officials of the People's
government.
Permit me to recount for you our experience in China, as
doing so will provide a vivid example of improvements in the rule of law and the
commercial environment for foreign companies that have already been made in
China. Amway is one of the largest direct selling companies in the world. We
manufacture more than 400 home and personal care products as well as the
Nutrilite line of vitamins and food supplements. Amway only sells products
through a network of independent contractors who own and operate their own
businesses.
We initiated operations in China as Amway (China) Company,
Ltd. - or ACCL - in 1995, and soon developed strong business growth and
acceptance within the Chinese public. Amway has invested US
$100 million in China, making us one of the largest US
investors in China. Our plant was the first chemical facility in China to be
given ISO 9000 certification. By providing business opportunities to Chinese
citizens, Amway is helping to meet the country's employment and income needs
while training people in basic business skills. ACCL consolidated sales reached
USS 178 million in 1997 with over half-a- million Chinese distributors.
As Amway began to succeed in China, others tried to emulate our
operations and direct selling companies began to proliferate. Although most of
these were legitimate operations, several con-artists established operations
that included "pyramid" schemes and inventory- loading scams. In April 1998,
responding to demands from Chinese citizens who had lost large sums of money in
what is called chuan xiao - literally "chain selling" - the Chinese government
announced a ban on all forms of direct selling in China.
We were forced
to cease operations for two full months. During that time we worked to explain
the nature of our business and how it could contribute to economic development
in China. Finally, we were permitted to reopen in a manner that restricts our
growth potential. We have resumed operations and last year had revenues of just
under $60 million.
Although this was a difficult
challenge, we came away from it with greater respect for and a better
understanding of the Chinese government. The government demonstrated that it
would respond to the demands of both its citizens and foreign investors.
Notwithstanding the sudden imposition of the ban, the process demonstrated a
commitment on the part of Chinese officials to the rule of law.
Under
the new agreement, our operations would be protected from sudden change through
government decrees. Moreover, the Chinese government has agreed to develop
regulations for our industry that are to be based on international standards.
This will permit us to resume the use of a dynamic sales method that we believe
will enable us to grow for the benefit of all concerned. With the agreement, we
hope to exceed our previous sales numbers and that a very significant portion of
the sales will come from US products.
Let me stress that point. We
cannot prosper unless China prospers. We believe that a market economy will
stimulate economic progress in China and that with that progress Amway will soon
be exporting significant volumes of product from our facilities in Michigan and
California. Thus, this is a win-win agreement. It is good for China and for us
-- our company, our employees and our country.
Conclusion
The US
Chamber believes that we have an historic opportunity to secure broader and more
consistent access to China's markets. The US Chamber hopes that Congress will
not wait long after this hearing to begin the debate on China PNTR. China must
still complete their WTO negotiations with the European Union, India and Mexico.
However, we should not delay our consideration. The US-China WTO agreement
contains most of the major components that will be in China's final access
protocol. Any additional market-opening measures negotiated by these other
countries must be extended to the United States as well. Thus, the final terms
of China's accession to the WTO can only be improved over the already impressive
US-China agreement.
Thank you, Mr. Chairman. I would be happy to respond
to any questions.
END
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February 24, 2000 
