In the last week of May, the Clinton administration successfully pressed Congress into granting China permanent normal trade relations (PNTR) status as part of a recently negotiated trade pact. With that vote—the result of an unholy alliance between the GOP and the White House—American legislators have given up their annual review of Peking’s conduct, surrendering all congressional leverage over China policy. At a time when the balance of foreign policy decisionmaking has already shifted too far in favor of the executive branch, the Republican-controlled Congress has voted itself into inconsequence on an issue that is important to this country’s interests.
PNTR status for China was neither merited nor necessary. It is against the U.S. national interest. The members of Congress who supported PNTR were effectively siding with corporate special interests against American workers and consumers. The White House, Peking, and Wall Street were allied against ordinary Americans for several reasons: The Clintonites’ motives will become fully known only when the next campaign fundraising scandal hits the headlines; the Chinese government wanted PNTR as a means of unconditional, unlimited, and permanent access for Chinese-made goods into the U.S. market; and American-based multinational corporations wanted PNTR because it would facilitate relocating production to China and exporting products back to the United States.
The damage to American interests will come from cheap labor, almost nonexistent environmental controls, and low taxes, which make China an ideal relocation site. Big corporations love the fact that independent trade unions are illegal in China, and that manufacturing wages average 20 cents per hour and go as low as 13 cents per hour. Their real interest is not in selling things in China, because only a narrow stratum of its political and business elite has meaningful spending power by Western standards. But PNTR ensures that these U.S. multinationals have unconditional, permanent access to the American market, to sell to us goods still “Made in the U.S.A.”
In the aftermath of the PNTR’s passage, the websites of American multinational corporations verily gushed about turning the People’s Republic into a low-wage production base. Procter-Gamble, Motorola, and Westinghouse state openly on their sites that they plan to substitute Chinese parts for the American-made ones they currently send to China to put into finished goods. The predictable result will be a loss of high-wage American manufacturing jobs. Companies such as General Electric, Kodak, Dow Chemical, and Ingersoll-Rand have indicated that they will supply the U.S. domestic market with exports from their Chinese factories.
Supporters of China’s WTO and PNTR agenda typically assert that the jobs lost to trade with China are low-skill, low-wage positions, while expanding exports to China will create high-wage U.S. jobs. But China is moving beyond labor-intensive goods. Between 1992 and 1999, high-tech products more than tripled as a share of China’s exports to the United States, to 14.5 percent; they rose more than 32 percent last year alone. In contrast, American high-tech products rose only from 34.5 percent to 35.9 percent of our total exports to China, and they fell 18 percent in absolute terms in 1999. Now, thanks to PNTR and planned investments by Cisco, 3Com, Lucent, Microsoft, United Technologies, Motorola, and Texas Instruments, American and world markets will be flooded with high-tech Chinese goods: broadband routers, telecommunications switches, semiconductors, servers, software, and aerospace engine parts.
Wall Street’s attack on America’s manufacturing base is accompanied by a similar disregard for our national security. China is able to gather our dual-use military research-and-development secrets almost at will. Lockheed Martin stands accused by the State Department of 30 violations of the Arms Export Control Act and International Traffic in Arms Regulations for selling advanced-missile technology to the People’s Republic. U.S. defense corporations McDonnell Douglas (Boeing), Lockheed Martin, Loral Space (Lockheed), and Hughes Electronics (General Motors) are either under indictment, awaiting indictment, or under current investigation by the Justice Department for illegally passing rocket and satellite technology to China.
In the run-up to the vote. President Clinton insisted that PNTR “creates a win-win result for both countries.” He argued that exports to China “now support hundreds of thousands of American jobs” and that “these figures can grow substantially with the new access to the Chinese market the WTO agreement creates.” In fact, U.S. multinationals have turned from net exporters to China to net exporters to the United States, a gap that will only widen and contribute to the growing U.S. trade deficit. Already the trade deficit with China is some $70 billion. In 1999, the United States imported approximately $81 billion in goods from China and exported $13 billion—a six-to-one ratio of imports to exports that represents the most unbalanced relationship in the history of U.S. trade.
PNTR was not even necessary for the attainment of Mr. Clinton’s stated objectives. Even without granting it, U.S. exporters still would have obtained the potential trade benefits of China’s entry into the WTO under the 1979 U.S.-China Agreement. Thus, claims by the administration that U.S. exports would not have qualified for significant tariff cuts after China’s WTO entry, or that U.S. businesses would still face domestic content or performance requirements, are simply not true.
The United States had nothing to lose by maintaining the annual review and taking a “trust but verify” approach to trade with China. But now, the United States stands to lose plenty: its trade enforcement tools and the leverage of the annual congressional review of China’s behavior. PNTR should not have been withheld on the grounds of “human rights” violations: That would necessitate curtailing trade with all oil producing nations in the Middle East, among others. It should have been opposed, however, on the grounds of protecting the U.S. national interest, preserving what remains of the American industrial base, and reducing American trade deficits. But the GOP, the Clinton-Gore White House, and Wall Street are not motivated by such old-fashioned concerns.