The annual process of extending “most-favored-nation” (MFN) trade status to communist China was to have a new twist this year. Beijing’s friends in Washington were pushing for an end to this embarrassing review of Beijing’s brutal behavior by granting MFN to China on a permanent basis. The move was to be attempted before China takes formal control of Hong Kong on July 1. To wait could derail the effort if China follows through on its announced plans to rescind a variety of the former British colony’s freedoms.
Representative Doug Bereuter (RNE), chairman of the International Relations Subcommittee on Asia and the Pacific, introduced a bill to repeal the Jackson-Vanik Act that sets up the waiver procedure by which the President can restore MFN status to “nonmarket economies.” Any such waiver is now subject to a vote of disapproval by Congress. Bereuter wants to eliminate the oversight role of Congress, placing the question of trade terms entirely in the hands of the President. Further, Bereuter would lessen the sanctions that could be applied, limiting them to only modest tariff hikes. Revoking or suspending MFN would no longer be an option. With the start of President Clinton’s second term, the China Lobby exuded confidence.
Suddenly, the drive to expand the concessions already given to Beijing on a unilateral, unconditional basis was stalled by a series of revelations concerning China’s military, political, and espionage activities. Now, China’s apologists are fighting to prevent any change in the policy of “routine” annual renewals of MFN. If they can wait out the current storm of controversy and make it through the summer unscathed, they’ll be able to resume their “long march” of appeasement toward Beijing by year’s end.
The China Lobby will continue to follow the line set out during last year’s debate, when Bereuter argued that even discussing China’s behavior was dangerous, for it
can push China to unnecessarily become an enemy or adversary. That would undoubtedly prove to be one of the truly momentous tragedies in American and world history. The financial consequences of a cold war with China are staggering and the costs of an eventual overt conflict with the PRC are unimaginably tragic for the two countries and mankind.
It is apparently better to appease Beijing with soothing words, infinite patience, and large infusions of cash. Some of this cash has been recycled to support Chinese political and espionage operations, which have flourished in the permissive atmosphere created by appeasement. Hundreds of Chinese companies, many owned by the People’s Liberation Army, serve as fronts for agents seeking commercial ties with American businessmen to gain access to technology, capital, and the political process. Last summer, the FBI warned members of Congress—and tried to warn the White House—of Chinese attempts to influence the 1996 elections. The cash-obsessed Clinton reelection campaign, however, ignored the tip and adopted the same stance of studied ignorance of Chinese intent regarding illegal contributions to the Democratic Party as it has regarding Beijing’s aggressive trade and military policies.
China’s apologists have advanced the argument that “most-favored-nation” is a misleading term because it implies China is getting some special treatment. In point of law, all countries are entitled to MFN unless specifically denied. Therefore, MFN should be considered the “normal” trading status and be given to China as a “normal” government and a “normal” member of the world community.
The problem with this is that China is not “normal” and has not been considered so in American trade policy since 1951. From slave labor camps to the proliferation of ballistic missiles and weapons of mass destruction to military actions in the Taiwan Straits, China’s behavior is more on a par with Cuba or North Korea, countries which do not currently enjoy MFN status. MFN was denied to the Soviet Union and Warsaw Pact members, when their policies conflicted with those of America.
Trade is not an isolated facet of international relations. Many in the business community would like to have government officials think otherwise, leaving corporations free to pursue their self-interest without regard for any larger consequences of their actions. Trade, however, cannot be so isolated, especially when it involves industrial investment, the transfer of advanced technology, and the providing of other resources that undergird the political and military strength of nations. This has been well known for centuries; as Louis XIV’s Finance Minister Jean-Baptiste Colbert put it, “Trade is the basis of finance and finance is the sinew of war.”
There is no better current example of this maxim than China. Not only is trade and investment helping to build up that country’s infrastructure and industrial base, it is pulling back to the mainland the loyalty of the “overseas” Chinese entrepreneurs who control so much of Asia’s commerce and capital—and who hold influence with so many of the region’s governments. Having once fled communism, they now find the mix of state-capitalism and renewed nationalism based on a shared cultural identity very appealing. The efforts by the Riady family in Indonesia to shape President Clinton’s policies favorably toward China brought to public notice a trend that has worried trade and foreign policy analysts for over a decade.
More pointedly, commerce is providing Beijing with the hard currency needed to buy military hardware, to license technology, and to hire scientific talent. The United States ran a $39.5 billion trade deficit with China in 1996, buying five times as much from China as it sold to China. Despite the policy of “engagement” and a parade of American businessmen trekking to China, American exports were static at a mere $11.8 billion. This amounted to barely two percent of our total exports. Americans export much more to their natural allies, such as Japan, South Korea, Taiwan, and Singapore. The China market remains the illusion it has been for a century—but an illusion Beijing manipulates very well to entice American business support for an appeasement policy.
Russia has been the main source for arms. As Princeton’s Kent Calder has observed, “with Russia holding the greatest military yard sale in history, the Chinese, flush with hard currency from their soaring, multibillion-dollar transpacific trade surpluses, stocked up.” Last November, China and Russia agreed that future weapons purchases would be paid for with hard currency rather than by barter as in the past. This makes China a much more attractive market and “strategic partner” for Moscow. The dollars then get passed on again with more dangerous security implications. Radio Moscow has commented that “with money earned from the sale of Russian military equipment to China, Russia will be able to fund the development for itself of the most up-to-date types of armaments.”
But Russia is not the only country lusting after China’s cash reserves. France, Italy, and Israel, among others, have been contributing to China’s military expansion. Geopolitically, the European states have little to fear from China to offset the lure of its money. It is the United States that is facing the tiger—but it is also the United States that is feeding it.
Liberal critics of Clinton’s “engagement” policy want to link trade with human rights. But their moralistic hectoring of China will not force change. There is little outsiders can do to change the internal order of a major authoritarian power like China, whose ruling elite is determined to retain power. This also applies to the alleged “progressive” influence of Western corporations in China. Businessmen are unlikely to lead a revolution against a regime with which they are making money. They are more likely to defend it. An example appeared in Aviation Week & Space Technology on July 1, 1996, just after last year’s vote on MFN by the House of Representatives. A four-page advertisement placed by the China Business Congress, a group of American firms promoting ties with Beijing, made the following astonishing statement: “China continues to operate a socialist command model, but unlike the old Soviet model, this one works.” So much for reform!
The real reason for suspending MFN is to deny China resources which the current regime cannot be trusted to use in a proper manner. There is no sense in helping a country whose ambitions are generating fear in the region. The aim of sanctions is not mainly to pressure China to reform, but to hobble China until it has reformed into a government that can be trusted.
Today’s policy is much like that of England’s appeasement of Nazi Germany, which also had a strong economic component. Then, as now, the appeasers wanted not only trade but other ways to stimulate the German economy and expand its industry. In this view, promoted by the Economic Section of the Foreign Office, England could become valuable to Hitler as an export market and should even endure a trade deficit if it would improve relations. As Frank Ashton-Gwatkin, head of the Economic Section put it: “I myself believe . . . that this nearly mortal complaint [Nazism] will yield to the radio-active treatment of increased world trade.”
The U.S. State Department echoed this same hope during last year’s MFN debate when it said of President Clinton, “His vision is clear: U.S. interests are best served by a secure, stable, open and prosperous China.” Last March, a deal personally brokered by Clinton gave Beijing’s state-owned China Ocean Shipping Company a ten-year lease for 145 acres of the U.S. Navy base at Long Beach, California, which is being closed due to budget cuts. This intersection of an expanding China and a downsizing America was explained by Defense Department spokesman Kenneth Bacon as follows: “We have a policy of engagement with China. And the central part of that policy is expanding commercial relations with China. That’s what would be done here.”
Winston Churchill denounced this approach in his first speech to mention Hitler on July 11, 1932. He warned of Germany’s growing economic capabilities “with her factories equipped to the very latest point of science by British and American money.” England’s appeasement policy was partially the result of its inability to confront Germany from a position of strength. Arms control agreements and fiscally conservative administrations had stunted London’s military capabilities. Hitler was tempted to strike whenever he saw a window of opportunity.
Today, the strategic situation is different. The United States has unquestioned military superiority over China and should seek to insure that the gap never closes (indeed, it should be widened further by the deployment of a national missile defense system). This is not said to incite a military confrontation with China; just the opposite. Beijing knows it cannot directly challenge Washington—yet. The United States is still in a position to act with confidence. The problem is a lack of leaders willing to use America’s current advantage in economic and military strength to fortify its preeminence in Asia. This failure may well cost future Americans a horrific toll in blood and treasure.
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