Friday, February 11, 2000

Juliana Gruenwald

High-tech Industry Gears Up For China Debate

The high-tech industry is emerging as a key player in efforts to lobby Congress for passage of permanent normal trade relations status for China, positioning itself alongside traditional business groups such as the U.S. Chamber of Commerce http://www.uschamber.org/frame/frame/frame.html. Courted for the past few years by leaders in both parties, the high-tech industry finds itself in an enviable position in Washington as the darling of both Republicans and Democrats. Given its increasing influence and credibility in Washington, many lawmakers and industry representatives say the high-tech industry's push could make the difference in the debate over permanent normal trade relations (PNTR) for China. The industry "has been extremely successful" in obtaining passage of its legislative priorities, said Rep. James Moran, D-VA, who represents a district in northern Virginia with a number of high-tech companies. The industry "could make the critical difference on PNTR." High-tech interests have long supported the annual extension of PNTR, formally known as Most Favored Nation status. But the industry plans to take a more high profile role in this year's debate over making the beneficial trade status permanent for China. U.S. High-Tech Industry gains? The Clinton administration and business interests say PNTR is necessary for the United States to enjoy the benefits from the bilateral deal China negotiated for its entrance into the World Trade Organization (WTO). Supporters argue that the United States has nothing to lose and everything to gain from the deal U.S. trade officials cut with the Chinese in November on its admission on into the WTO. Some of the concessions the Chinese have agreed to include: Adoption of the Information Technology Agreement calling for the staged elimination of tariffs on most information technology products and other agreements including the Agreement on Trade Related Aspects of Intellectual Property, which, among other things, is aimed at combating software piracy; Permitting foreign investment in China's telecommunications services market-up to 49 percent in all services; Eliminating trade and distributions right restrictions; Allowing the United States to maintain strong anti-dumping protections; and Committing to buy products based on their commercial considerations, which will provide U.S. companies with more opportunity to compete to sell their products to the Chinese government. High-tech companies also are anxious to have better access to China's population of 1.2 billion people, most of whom do not have personal computers, cell phones or Internet access, a benefit enjoyed by other U.S. industries. The U.S. high-tech industry is already one of the biggest exporters to China, with its products making up $3 billion of the $14 billion worth of exports in 1998, according to the American Electronics Association http://www.aeanet.org/aeanet/ (AEA), which compiled information from the Commerce Department. "China is currently the sixth largest computer market and the fourth largest computer chip market ... and it's heading toward number two after the United States very soon," said Michael Maibach, Intel's vice president of government affairs. "So for our industry, this is a big part of our future success and job growth in this country." Still, despite the benefits U.S. industry expects to see, the drive for PNTR is expected to draw fierce opposition from organized labor, environmental groups and others. Critics say that the bilateral agreement between the United States and China did not address China's record on human and worker rights. They also argue that China has a bad record of abiding by other trade deals it has made. By granting PNTR, the United States will give up the opportunity to pressure China to address such concerns through Congress's annual vote on whether to block NTR, critics say. "If Congress gives up its right to an annual review of China's human rights record and trade compliance, the pressure to reform will be off the Chinese Government," said AFL-CIO President John Sweeney in written testimony for a hearing this week before a House Ways and Means Committee's trade panel on the U.S. trade agenda at the WTO. "It is absolutely essential that Congress take a firm and principled position against permanent NTR, so that we can begin to build a global economy that lives up to its potential and to our expectations." Public Citizen's Global Trade Watch http://www.citizen.org/pctrade/tradehome.html and other opponents argue that there is no WTO rule that requires countries to provide PNTR. The WTO only stipulates that countries extend normal trade relations status unconditionally to other WTO members, the group says. Periodic renewals of China's NTR status "is not a violation of the unconditionally clause," said Global Trade Watch spokesman Patrick Woodall. But supporters of PNTR argue that the economic benefits China will see through the trade deal, such as open access to U.S. goods and technology, will force change in China. They also say that WTO rules will offer a mechanism to challenge China if it fails to live up to the agreements it has signed. "Why would you enter into any trade agreement if you got hung up on that?" said B. Timothy Bennett, AEA's senior vice president of international issues. If China joins the WTO "and we grant PNTR, you have access to the WTO's dispute settlement process." Bennett and others disagree with their critics and argue that an annual renewal of NTR would be considered a condition on China in the WTO regulatory framework. He added that China already has indicated that it expects PNTR in exchange for extending the trade concessions it has made as part of its WTO admission to the United States. "I don't think it would be desirable," Commerce Undersecretary for International Trade David Aaron said earlier this month, commenting on whether annual NTR would be satisfactory. "The deal is if they open up, they get PNTR like everyone else." Going Into Battle While the disparate aspects of the high-tech industry may find itself at odds at times on some issues, it is united in support of PNTR, industry officials say. "We're trying to indicate that this is a key vote" for high tech, said Business Software Alliance http://www.bsa.org/ President Robert Holleyman. The industry has formed two coalitions to lobby Congress on the issue: the U.S. High-Tech Industry Coalition on China http://www.aeanet.org/aeanet/International/painjg0050et_coalitionwtopaper.htm, which was established a few years ago and is made up of nearly a dozen trade associations, and the Internet Coalition for China PNTR, led by America Online. Congressional lawmakers and industry representatives acknowledge the increasing influence high tech has achieved in Washington. Both have said they believe the industry can help persuade enough members, particularly Democrats who may be under pressure to oppose PNTR by organized labor and other opponents, to vote with the industry. Moran said he and other members of the New Democrat Coalition http://www.house.gov/dooley/ndc.html, a group of moderate, business-friendly Democrats, have been urging the Clinton administration to have the president appear with high-tech icons such as AOL CEO Steve Case or Microsoft Chairman Bill Gates for a public endorsement of PNTR. "We capture a lot of imagination in the minds of Congress," said Information Technology Industry Council President Rhett Dawson. "One thing I'm fairly certain of is that high tech will move some votes. We're confident of that. That's why were so politically active." Rep. Robert Matsui, D-CA, who is helping to lead the administration's lobbying effort in support of PNTR, said the high-tech industry "can play a significant role if they can garner their forces and work as a block." But, he added, "for this to work, they need to make it the top priority, not one of six." High-tech leaders also recognize that their bipartisan support may open up some Democratic doors that might be closed to broader business groups that may be viewed by some Democrats as being too closely aligned with the GOP, according to various sources. "They have the best chance of any industry group" of helping to attract more Democrats to the PNTR cause, said Rep. Bill Thomas, R-CA, a senior member of the House Ways and Means Committee, which has primary jurisdiction over trade issues. Bill Morley, the U.S. Chamber of Commerce's director of congressional and public affairs, said that while the high-tech industry is hardly the "only engine pulling the process forward. They are a fundamental component of the (business) coalition." Industry lobbyists have begun meeting with lawmakers to discuss why PNTR is so important to the high-tech industry. Holleyman, Dawson and other association chiefs who belong to the high-tech coalition, met with House GOP leaders last week. They said they hope to meet with other congressional leaders as well. "Republicans want to see more Democrats on the legislation," said Ken Wasch, president of the Software & Information Industry Association http://www.siia.net/, following the meeting with House Speaker Dennis Hastert, R-IL, and other Republican leaders. "We accept the leadership's challenge and will get as many Democrats as possible" to reach the 218 votes needed to pass PNTR. PNTR supporters say they are hopeful lawmakers will vote on the issue by the end of spring. If not, some worry that the issue could become politicized if Congress has yet to take up the matter before this year's political conventions. It needs to happen before mid-year, "or it becomes a toxic vote," Moran said.