Another Gift to China?

Wall Street Journal, 07 July 1998

Bill Clinton certainly proved to be a grateful guest. First the President dangerously altered the
U.S. position on the relationship between mainland China and Taiwan by moving closer to China’s
position on unification. Then in another act of troublesome expediency, he moved toward
acceptance of China’s position on entry to the World Trade Organization. Maybe the Chinese will
invite him back for Christmas.

On the WTO, there is little disagreement in principle. Certainly, this huge country should
become
part of the world trading order. Partly through joint ventures with Western companies, Chinese
enterprises have become important exporters. As a nation China has racked up current-account
surpluses that have put nearly $150 billion in hard currency reserves in the government’s hands.
Also, China’s entry presumably would clear the way for Taiwan, which qualified for membership
years ago.

But the key question about China’s entry is: On whose terms?

China wants to enter the trade organization as an emerging economy, a status that would
allow a
longer grace period for lowering barriers to free trade and investment. Developing economies, for
example, have a whole decade to cut the value of their export subsidies by 24% and the volume of
subsidized exports by 14%. For developed economies the figures are 36% and 21%, and the time
frame is six years. The WTO, backed by the U.S., has so far refused to grant China such a
provision.

And for good reason. Emerging-economy status, itself of doubtful validity, is nonetheless
reserved
for countries of negligible economic impact. China’s economy is the world’s seventh largest,
bigger than Canada’s and Russia’s, with a GDP climbing toward the trillion-dollar level. Making
allowances for a country of this size discredits a trading system that has to be seen as fair and
impartial in applying international rules.

Bill Clinton is far too casual toward important legal principles. He seemed to accept China’s
position when, during his Shanghai radio call-in he conceded that “China is still an emerging
economy” that deserved a longer period of adjustment than richer countries. Then, to Chinese
claims that to lower barriers would threaten their economy at a critical juncture, the President
responded: “They have big chunks of unemployment for which they have to create big chunks of
employment …. They want to have a timing for WTO membership that will permit them to
continue to absorb into the work force people who are displaced from the state industries.”

Mr. Clinton wouldn’t say something like that if he actually believed in or understood how
markets
work. The truth is that if China entered the WTO under the stricter terms, its people would
benefit, not suffer. If big international investors were genuinely free to develop markets in China,
they would provide the Chinese with a wider range of products and services, and make new and
better jobs for that huge, willing labor pool. Instead, an American President defends
protectionism.

Before leaving Hong Kong, Mr. Clinton told a press conference he was going home with
“ideas”
on how to settle the deadlock over China’s entry to the world trading body. Perhaps by the time
Congress and the rest of the world are made privy to those ideas, we’ll find that his politicking in
China didn’t represent a significant change after all in the U.S. position. But on the past week’s
evidence, Mr. Clinton appears more than willing to bend the rules in key matters of substance. It’s
a lot to give away in return for the smiles that greeted him in Beijing.