THE CASE FOR PERMANENT NORMAL TRADE RELATIONS WITH CHINA

The Senate will soon consider H.R. 4444, the House-passed bill authorizing Permanent Normal Trade Relations (PNTR) with China. The Business Coalition for U.S.-China Trade, consisting of over 1,200 companies, trade associations and farm groups supporting PNTR, will issue a series of fact sheets dealing with many of the issues in this debate, including human rights, national security, U.S. jobs, enforcement, and other matters. Today, as the Senate returns from recess, we offer the summary case for PNTR.

Making China play by the rules of the global trading system is in America's national interest.
China's application to join the WTO opens a world of new opportunities to sell American goods, services, and farm products to the world's biggest and fastest-growing emerging market.
The terms and conditions for China's WTO membership, which were announced last November, represent the successful culmination of 13 years of WTO/GATT negotiations. These talks were led throughout by the United States, which insisted on a commercial, not a political, WTO deal. In a huge breakthrough for U.S. trade, China made across-the-board unilateral concessions to gain U.S. support for its admission to the WTO.
The China WTO agreement would tear down barriers to American products. It would create new opportunities for U.S. companies, workers, and farmers that will support high-wage U.S. jobs and extend the U.S. economic expansion into the new century. Key breakthroughs include:
- Agriculture -- Expanded market access for U.S. wheat, corn, soybeans, cotton, barley, and rice under new system of tariff rate quotas (TRQs). Elimination of non-science-based food safety measures that restrict entry of U.S. beef, pork, poultry, and wheat.
- Trading/Distribution -- Full trading rights for U.S. companies to import, export and distribute products directly to Chinese customers, including after-sales service and repair, without going through a Chinese middleman.
- Tariffs -- Chinese tariffs will be cut from the current overall average of 24.6% to 9.4% by 2005, including major reductions for U.S. farm products. China will join the WTO's Information Technology Agreement, so tariffs on U.S. computers, semiconductors, telecommunications, and other U.S. high-technology products will be cut to zero.
- Services -- Market access for U.S. telecommunications and financial services under WTO Basic Telecommunications and Financial Services Agreements. Chinese GATS commitments cover U.S. priorities, including Internet, audio-visual, banking, insurance, banking, and auto finance.
- Import Safeguards -- U.S. will continue to apply non-market economy (NME) antidumping methodologies for 15 years and special import remedies against NME market disruption for an additional 12 years.
- U.S. Jobs -- U.S. trade with China already supports over 200,000 export-related American jobs, as well as tens of thousands of jobs in U.S. retail, financial services, transportation, entertainment, marketing, consumers goods, and services firms. By addressing Chinese technology transfer, distribution, and export performance requirements, WTO accession will make it easier to ship American products, supporting U.S. production and jobs.
- U.S. Exports -- The Congressional Research Service, based on a Goldman-Sachs analysis, projects that a China WTO agreement would boost annual U.S. exports by between $12.7 to $13.9 billion by 2005. USDA estimates U.S. farm exports would grow by $2.2 billion annually.
To join the WTO, China must make all the concessions.
- The U.S. has everything to gain from Chinese WTO membership. Our market is already open.
- To meet WTO requirements, China must unilaterally open its markets, eliminate barriers to U.S. products, and implement far-reaching reforms to bring its trade and economic system into compliance with WTO rules.
For China, WTO membership means painful economic adjustments. It is not a gift to China, but a challenge to China. By unleashing international competition, WTO membership will accelerate market-oriented economic reforms, force a painful restructuring of state-owned enterprises, and further erode state-planning. The principal opponents of WTO inside the PRC are China's decrepit state-owned enterprises, and political hard-liners led by former Prime Minister Li Peng.
China is by far the world's biggest emerging market. Opening China's markets and making it play by global rules are vital to U.S. trade and global economic growth.
- According to the International Monetary Fund, China is already the world's 3rd- largest economy -- after the United States and Japan.
- USDA projects that 75% of future growth of U.S. farm exports will be to Asia and that China could account for over half. The American Farm Bureau calls China "the most important growth market for U.S. agriculture into the 21st century."
- The World Bank estimates China needs to invest over $750 billion in new infrastructure in the next decade, including power generation, transportation, environmental, and telecommunications systems.
Compliance: WTO membership ensures China's integration into the global trading system will take place under a system of internationally-agreed rules, backed up by WTO dispute settlement procedures, and WTO-authorized sanctions in the event of non-compliance.
Chinese accession would clear the way for Taiwan to join the WTO as a "separate customs territory." In the WTO, there is an understanding that China and Taiwan will be admitted as a "package". For Taiwan, WTO membership would be a major diplomatic breakthrough. President Chen Shui-bian of Taiwan strongly supports China's entry to the WTO and the granting of Permanent Normal Trade Relations.
To reap the benefits of China's unprecedented market-opening, the United States must extend Permanent Normal Trade Relations (PNTR) -- the same non-discriminatory tariff treatment we provide to 133 other WTO members.
- Otherwise, China would be entitled to withhold key WTO concessions from U.S. goods, services, and farm products. More importantly, the U.S. would lose the right to challenge Chinese violations under WTO dispute settlement procedures, making our rights unenforceable.
- Annual NTR is not sufficient to ensure that the U.S. can fully benefit from China's entry to the WTO. The Congressional Research Service and the General Accounting Office, along with noted GATT scholar Professor John Jackson of Georgetown University, have all stated that absent PNTR, U.S. firms and workers at a "substantial competitive disadvantage".
We aren't giving up anything. The United States already grants PNTR to 133 WTO members. Because China has received NTR on an annual basis since 1980, U.S. tariffs would remain exactly the same, while China's are reduced or eliminated in the WTO.
Failure to approve PNTR would be a gift to our competitors -- Europe and Japan - who would reap all the rewards of U.S. negotiating success while U.S. workers and companies sit on the sidelines.
U.S.-China engagement works.
- For a quarter-century, U.S. engagement with China has advanced U.S. trade and security and supported long-term progress on human rights.
- Engagement has been U.S. policy under Presidents Nixon, Ford, Carter, Reagan, Bush, and Clinton. Its durability reflects bipartisan support from Republicans and Democrats alike, and the serious damage to U.S. trade and security interests that would ensue from trying to isolate China.
- Under engagement, China has joined the major multilateral arms control regimes, helped contain the North Korean nuclear crisis, acquiesced in U.S. efforts to win the Persian Gulf War, and worked to head off a destructive nuclear arms race between India and Pakistan.
U.S. trade supports progress on human rights and the rule of law.
- As Martin Lee, the leader of Hong Kong's Democratic Party, stated: "[T]he participation of China in the WTO would not only have economic benefits, but would also serve to bolster those in China who understand that the country must embrace the rule of law."
- Numerous human rights activists in China support WTO entry and PNTR. Leaders such as Bao Tong, Dai Qing, the Dalai Lama, and the founding provincial committee of the China Democracy Party (CDP) have stated their support for PNTR, believing it will help open China to the outside world and enhance prospects for political reform.
- China's historic opening to foreign trade is changing China. U.S. trade supports economic freedom, higher living standards, access to information, and the rule of law.
- Trade is much more than just the sale of goods and services; it is an exchange of ideas, beliefs, and values that changes and enriches all who participate. Open trade and free markets are liberalizing forces that -- once unleashed by WTO -- no government can control or repress.
Failure to approve PNTR would be an enormous setback for Chinese reformers and entrepreneurs, who have driven positive economic and political change for over two decades. Defeat on PNTR would strengthen the hand of hard-line political conservatives who oppose economic reform and political liberalization.
H.R. 4444, the House-passed Permanent Normal Trade Relations (PNTR) bill, strikes the right balance between trade expansion, human rights, import safeguards, and other issues. We urge that the Senate approve H.R. 4444 without further amendments.

Business Coalition for U.S.-China Trade • 1211 Connecticut Avenue, NW Suite 801 • Washington, DC 20036 Phone (202) 659-5147 • Fax (202) 659-1347 • http://www.business4chinatrade.org/

Last Updated: 6-Sept-00