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Lori Wallach
Global Trade
with Lori Wallach
Director, Public Citizen's Global Trade Watch

Thursday, May 18, 2000, 1 p.m. EDT

During the week of May 22, the United States Senate will decide whether to grant permanent normal trade relations (PNTR) to China. Public Citizen's Global Trade Watch has been one of the most outspoken groups against this measure and a vocal participant in the debate on globalization. Lori Wallach, Director of Global Trade Watch, will be online Thursday, May 18 at 1 p.m. EDT to discuss why she thinks PNTR for China is "neither merited nor necessary."

For nine years, Wallach has represented Global Trade Watch on issues of globalization and international commercial agreements before Congress, the courts, government agencies, and in the media. Wallach is author of Whose Trade Organization?: Corporate Globalization and the Erosion of Democracy and has published numerous trade analyses, editorials and chapters in several anthologies. She has served as a trade commentator on CNN, ABC, CNBC, CSPAN, and appears on such programs as All Things Considered and The NewsHour with Jim Lehrer. Wallach founded the Citizens Trade Campaign in 1993 and is a founding board member of the International Forum on Globalization.

Global Trade Watch was created in 1993 to promote government and corporate accountability in the area of international commercial agreements shaping the current version of globalization. Global Trade Watch is a division of Public Citizen, founded by Ralph Nader in 1972, as a nonprofit citizen research, lobbying and litigation group based in Washington D.C.

Below is today's transcript.

New York, NY: Why is PNTC more nor less "merited or necessary" that permanent trade with any other country? Please correct me if I'm wrong, but isn't the yearly renewal of trade with China something of a Cold War anachronism? If so, what is the objection to permanent trade relations with China in particular?

Lori Wallach: This big national debate about giving China Permanent Normal Trade Relations - that is what "PNTR" stands for by the way -- has everything to do with the FUTURE direction we take on what may be the most important issue of our time: globalization.

The debate about China trade status is only the most recent in a series of domestic and international fights about globalization. Remember NAFTA, WTO, the Multilateral Agreement on Investment (oh yah, you don't know about that one because the US press did not cover it despite it being on the front pages of press around the world - just think NAFTA on steroids) and of course the protests in Seattle and Washington, D.C.

Currently globalization is occurring under one version of rules put forth by a global commerce agency called the World Trade Organization (WTO). This version of the rules is not "free trade." In fact the famous philosophers of free trade -- like Adam Smith and David Ricard -- must be spinning in their graves to see to what global commerce terms their term "free trade" has been applied. For instance, the WTO has many restrictions on trade - such as providing a monopoly TRADE RESTRICTION on production and sale of medicine for 30 YEARS!!! to the pharmaceutical corporation that has a patent on a drug. And, some of what is called a "trade restriction" by WTO and is targeted for elimination is actually our domestic food safety and environmental laws.

The China debate is the latest installment in a long fight about getting these global commerce rules into balance. The goal is to eliminate the considerable downsides of the current rules while trying to distribute benefits broadly.

The overarching question at stake in this debate is: will the U.S. allow commerce to dominate all of our other values and goals.

Because China is such a HUGE player in the world trade scene - the U.S. has a $60 BILLION trade deficit with China - the China debate has becomes more high profile than other similar debates that did not become national news.

Arlington, VA: If congress passes this bill granting PNTR with China, how will this affect China's quest to join the WTO?

Lori Wallach: Glad you brought up the WTO

I just noted what that institution is in my previous answer.

So... now let me explain how WTO is linked to this China trade fight.

New countries get into the WTO whenever 2/3 of the current 137 WTO countries vote "yes" on the new nation's entry.

In the U.S., Congress has no role in this decision - only the White House. The Clinton Administration had told China it will support its entry into WTO (Actually, the Administration said yes before even negotiating on the terms of China's entry!)

BUT... under the US constitution, Congress has exclusive authority to decide about regulation of international commerce. That means, for instance, setting tariff rates and also setting bilateral trade terms between the US and other nations.

So... Congress must decide what trade terms the US gives China REGARDLESS OF WHETHER CHINA IS IN THE WTO OR NOT.

The difference is, if the US gives China Permanent Normal Trade Relations, the US gives up its bilateral relationship with China and turns it all over to the WTO.

And WTO rules FORBID countries to link trade with human rights, child labor bans, environmental conditions. Which means the US would lose its current authority to link trade with China to China imrpoving its terrible human rights record. China sends 42% of it total exports to one country - the United States. This gives us enormous leverage to say: hey, we will give you the same access to our market as any other country - BUT you need to allow people to practice their religions freely, meet with others, set up unions and associations, have free speech... etc.

Fleetwood, PA: I am concerned about the future of the United States because George Bush's rationale for supporting trade with Communist China manifests an undeveloped notion of history with no consideration for U.S workers and big labor leadership which represents the rank and file continues to support Al Gore who supports George Bush's position on trade with China. Since labor union leadership continues to support Al Gore, despite Al Gore's sellout to China, how serious of a problem is this China deal to the average U.S non-executive worker. I am further concerned that the media is playing a shill to what amounts to a class warfare argument between the U.S. non-executive worker and the U.S. Wall Street Executive. Certainly, I would like cheaper goods, but not at the expense of U.S. workers walking the unemployment line because a U.S worker cannot work for $1.25 or less per hour as the Chinese worker does. When the U.S. consumer pays for unemployment, what has the U.S consumer gained.

Lori Wallach: This question is more a comment and it makes clear why 79% of Americans oppose PNTR for China - according to a recent Harris poll.

Annapolis, Md.: thanks for taking my question.

Your book's title implies that global trade could erode democracy. Democracy where? . . .and also, could you explain how it will erode democracy.


Lori Wallach: My book reviews the actual five year performance of the WTO. We all get to hear many grandiose promises about how globalization or proposals like giving China PNTR will be great for us. So, I decided to get done with the hypotheticals and actually track what happened under WTO. What I found was...

well, why give away the scariest thing since the latest Stephen King novel - please buy my book! (www.tradewatch.org)

But seriously, what I found is that the WTO - which combines 900 pages of rules on everything from food safety to whether we can ban asbestos anymore - has been strongly enforced by a built in tribunal system in Geneva. We found that every single time one WTO country complained that another WTO country's food safety, health or environmental law violated trade rules, the WTO tribunal agreed and ordered the countries to get rid of those laws. In the US, we weakened our Clean Air Act regulations having to do with gasoline clenthiness after WTO ruled against them and demanded we do so.

But who elected these guys? WHO said they could double guess our government scientists who spent years coming up with our Clean Air Act regs? WHO said they can second-guess our Congress, which said that clean air in our most polluted cities was a priority.

That is why we say it erodes democracy - these decisions are being shifted away from those who must live with the results. Meaning, when something does not work - we have no way to change it. You think it is a pain to call city hall when you streetlights are burned out. Well, imagine trying to track down and make accountable someone in some international bureaucracy to get what you want.

Washington, D.C.: We give China MFN tariff treatment every year so our market is open to Chinese goods. PNTR is about opening the Chinese market to U.S. goods (trade law experts uniformly dismiss the notion that we don't have to pass PNTR to get the benefits of the WTO agreement). What possible benefit will accrue to American workers by voting down PNTR? Our market will remain open to their goods, why shouldn't we open their market to our goods? Since China will join the WTO regardless of PNTR, if we don't pass PNTR, American companies could easily relocate to foreign countries to get access to China's market.

Lori Wallach: First, let's dispense with the myth that China will be a huge new market for U.S. goods: the Chinese dictatorship jails or shoots workers who try to organize for a living wage. Average wages are 25 cents an hour and some US shoe makers pay as little as 13 cents an hour. What exactly do you think people in China making the annual income (per World Bank) of less than $850 per year can buy of U.S. goods? The fact is that even in areas in which the U.S. has been a leader in design or development of a good, the actual goods are being made in China at these slave wages.

Perhaps you have seen one of those Motorola pro-China-PNTR ads? About selling cell phones to 1.3 million Chinese. Well first, Motorola leaves out one vital detail: they just announced a $2 BILLION inve3stment to build a plant in China to make Motorola cell phones. Obviously, those phones will be much cheaper made than paying even minimum wager to someone in the US - or for that matter to someone in Mexico. And, given the limited capacity of China's population to afford such phones, they will be shipped back into the US for sale.

That is what PNTR is really all about: guaranteeing unlimited, unconditional access INTO the US for goods made in China under horrific condition (often by US companies.)

As for your other item: I am not sure where you have gotten your information, but in fact many trade experts have written about how the US DOES NOT have to pass PNTR to obtain the trade benefits China must make if it enters the WTO. For instance, I suggest you read the excellent - though very long and scholarly - memorandum to Congress vy Columbia University Law School Professor Barenberg.

The US and China now must give each other the best treatment they give any other nation in trade terms under a 1979 Trade Treaty. The US gives China its best deal - which is the tariff rates and other terms required by the WTO (of which the US is a member.) China gives the US its best deal - but China's current best deal has higher tariffs and other restriction. When China enters WTO - which is unrelated in timing to the PNTR vote in Congress- its new "best treatment" also becomes the WTO terms. The US gets these new, better terms under the 1979 agreement.

The only question remaining is how the US can enforce these trade terms. China has a VERY consistent record of violating its past trade and other international agreements. In fact, many Members of Congress from districts who grow crops or manufacture goods here and seek to export to China oppose PNTR because they worry about losing powerful US trade law enforcement tools that would be banned if the US passed PNTR. In the past, it has been the threat of sanctions under these US laws that has pressured China to follow it trade rules (and also to free political prisoners, by the way)

The basic deal here is this: The US is China's number one export market. The US takes 42% of all of China's exports explaining why we have such a big trade deficit with China.) We have enormous leverage because of our role as China's major export market.

Costa Mesa, CA: I admire your tenacity and find your analyses of trade issues rather refreshing. How would you respond that the consequences of not passing PNTR are worse (for both the US and China) than the consequences of passing it? Even if we receive full bilateral benefits of China in the WTO under the 1979 Agreement , not passing PNTR destabilizes the Chinese govt., and more importantly, puts the Chinese people in a far more precarious position.

Lori Wallach: Over a year ago, when the China PNTR debate was just starting, I was honored to be invited to a meeting with Wei Jinsheng. Like most people, I only knew Wei as the famous Chinese dissident who had finally been sprung after 18 years in Chinese prisons and work camps where he had been sent for writing an essay about the need for democracy, free speech and a free market. I knew that Wei was working with the thousands of other Chinese dissidents in exile in the US and Europe. (The US State Dept reports that after 6 years of engagement policy with China - meaning not linking trade and human rights like we sued to before the Clinton Admin ended this practice in 1994) human rights conditions in Chin had gotten much worse and EVERY human rights, free speech, religious freedom and labor advocate was in jail or in exile)

Wei made a compelling case about why not passing PNTR would help those fighting for human rights in China: most simply, the current regime relies on one thing for its legitimacy: continuing economic growth and providing jobs. This growth and these jobs are based on exports. The US takes 42% of China's total exports. As much as the current regime may hate being pressured to improve human rights conditions, its own survival is based on ensuring continued access to the US market. Wei argued that only the US making as a condition of that access allowing free labor unions, allowing the free speech and information exchange that is necessary for a free market to work, etc would get this regime to move - because its own self interest in remaining in power would be at risk much more immediately from losing access to the US market than from allowing reforms...

As for China's people: what worries many is the combination of China entering the WTO - whereby 15 million peasant farmers will be forced off their land in the short term per Chinese govt data - and the repressiveness of the government. Desperate, hungry WTO unemployed will find their protests and demands met with "a gun or the gulag" as Wei says.

Dallas,Tx: What happens if a country refuses to abide by WTO rulings?

Lori Wallach: This is a really important question and it goes to why so many Representatives from district that grow or make things they want to ship to China oppose PNTR (as compared to Representatives who support companies who want to send investment and production to China and need a guaranteed, unlimited right to ship the goods back here for sale)

Under WTO rules, a country is told by a WTO dispute enforcement tribunal that it must change a law that tribunal has ruled breaks WTO rules.

Countries that refuse to do so face trade sanction from the winning country.

But here is the catch: unlike the US trade law which allow motivationally large sanctions, at WTO the level of pressure that can be applied against the country breaking the rules is et at the WTO and is limited to the actual damages suffered by the winning country as calculated by the WTO.

So... right now, in several cases the US won over Europe at the WTO, Europe said: those WTO rulings are just bad policy, we won't change the laws. So, the US was permitted to put up sanctions - but only after tow years and only as much as the WTO said was allowed. And now several years later, Europe just "pays" those sanctions and keeps the laws the WTO ruled against.

Now, if Europe does that (although Europe has implemented other WTO ruling) imagine how well the WTO will work in China, where there is no notion of the rule of law...

Washington, DC: Ms. Wallach,

I'm very concerned about human rights in China, including religious freedoms, child labor and worker rights. Will the Levin proposal adequately address these kinds of human rights issues?

Lori Wallach: Great question! There are 100 Chinese dissident from as far away as Europe up at Congress right now dropping hundreds of little trojan horses on the desks of the Members of Congress who are considering this useless figleaf.

So here is the situation: human rights, religious, Chinese dissident, pro-democracy groups all oppose PNTR because it would require the US to:
1. End the practice of annually reviewing China's human rights record before determining if the US wanted to give China another year of favored trade status.
2. Take away the right to link access to the lucrative US market to China making improvements on human rights - or nuclear proliferation, or religious freedom.

And, 79% of the American public opposes PNTR UNYTIL China improves in these areas.

So... many Members of Congress were lining up to say "no": to PNTR. Right now there are equal numbers for and against, even though there is a HUGE corporate coalition (Caterpillar, Motorola, Cargill, Boeing -- all the big companies who have major operation IN China...)is pouring millions and millions into TV ads, and "astroturf" fake grassroots efforts and plane loads of lobbyists.

So, the PNTR supporters decided they had to try to provide some "cover" for Members of Congress so that when the corporations piled on them and DEMANDED that they support PNTR, the Members of Congress would not have to go home -- with 79% oft he public opposed to the deal - and be labeled as a human rights sell out.

To say that the proposal they came up with is toothless is a complement to the relevance of the proposal - gumless even would be generous. The ineffectiveness of the Levin proposal has been highlighted in widely distributed letters to Levin about his "useless" proposals by leading Chinese dissidents, including Wei Jingsheng.

At the same time that Levin's proposal is being derided as weaker than NAFTA's feeble side agreements, the human rights and religious freedom issues are rising. Last week a presidentially-appointed religious freedom commission called on Congress to oppose PNTR given China's growing repression. The U.S. Catholic Conference, Methodists and other religious and human rights groups also oppose PNTR as do the exiled Chinese dissidents representing China's human rights and labor movements.

The most basic problem with Levin's proposal is that it fails to provide a replacement for the trade- related enforcement capacity and leverage Congress would lose if it ends its annual vote on China's trade terms. A 1994 Administration decision to delink human rights and trade shelved the trade leverage tool, but it worked in the past (ask the Chinese dissidents now exiled in the U.S. about how trade pressure improved conditions for them) and has enormous potential given China now sends 42% of its exports to the U.S.

In contrast, Levin's plan would duplicate existing measures which have failed to improve China's trade or human rights conduct. Representatives who were seeking meaningful "parallel" measures to cover these issues and Taiwan saber rattling ended their efforts after determining that GOP leaders and the Administration opposed any proposals with teeth. Democratic Leader Richard Gephardt announced PNTR opposition after months of negotiations convinced him that no effective parallel bill was possible.

The Clinton Administration and GOP leaders oppose measures that use trade leverage on China, such as by linking human rights or national security with trade benefits. On March 30, 2000, Pres. Clinton's economic advisor Gene Sperling announced that the Administration would oppose any parallel China legislation connecting human rights or national security to trade. This position reverses the President's promise that future trade pacts would have enforceable human rights, environmental and labor terms.

Given these Administration and GOP constraints, the only enforcement schemes Levin considers are a "shoot-ourselves-in-the-foot" proposal to cut off Export-Import Bank funding from U.S. companies seeking to export to China and the addition of China-specific language to existing, ineffective terms in U.S. law which call on U.S. World Bank and IMF reps to oppose certain proposals. Some PNTR supporters also argue that U.N. sanctions could be used. Yet again this year and for the seventh year in a row, China has blocked U.S. efforts to get a UN resolution on China's human rights violations out of committee.


1) Executive and Legislative Branch Commission on China's Human Rights
This new Commission would prepare a report on China's human rights conduct. Yet, the U.S. State Department already brings considerable resources to bear to conduct an extensive, well-respected annual human rights review of China which it publishes. More importantly, the newly proposed Commission would have no ability to take action when China's human rights conduct continues to deteriorate. This represents a major step backward from Congress' current authority.

Currently under the annual Jackson-Vanik review and NTR vote process, Congress determines the terms of China's access to the U.S. market each year. This role means Congress has the capacity to threaten, and if necessary enact, trade pressure, such as an increase in tariff levels. Proponents of PNTR say the annual review policy has not improved China's human rights conduct. Yet, they fail to mention that they broke the tool that they now declare does not work. Under pressure from business interests, the Clinton Administration gutted the effectiveness of the trade tool by delinking human rights considerations from China's right to favorable terms of U.S. market access. Every year since "delinkage," trade has expanded and China's human rights conduct has worsened, a fact which debunks the myth that more free trade promotes more freedom.

In the past, threats of trade sanctions have been the only effective means to obtain changes in China's conduct. For instance, in 1996 China finally implemented intellectual property terms it had agreed with the US in 1995 after the U.S. began implementing millions in tariffs sanctions against Chinese goods.

However, if the U.S. has a full WTO relationship with China, the U.S. may only use WTO dispute resolution to enforce China's commitments. And, the U.S. would be forbidden from using trade pressure to enforce human rights or environmental treaties. Unlike the speedy U.S. trade enforcement mechanisms, such as Section 301 of the trade law, WTO dispute resolution takes two years minimally and can be only initiated by the Administration, not Congress. While U.S. enforcement mechanisms permit motivationally large sanctions, WTO sanctions are based on actual damages with the amount determined by the WTO. Enforcement of such WTO rulings relies on respect for the rule of law, a notion that is missing in China.

As a result of these WTO constraints on enforcement, Rep. Levin is left with no effective enforcement tools. Thus, his proposal is to "punish" China by cutting off Export-Import Bank funding from U.S. companies seeking to export to China. The other proposal is to create pressure by having U.S. World Bank and IMF representatives vote against China's interests. Yet, similar provisions on IMF and World Bank voice and vote already in existence have proved totally useless. (E.g. these institutions do not make decisions by voting.)

2) Amendments to US trade law to reiterate Chinese commitments on surge protection and dumping that will be part of China's binding WTO accession terms.
First, these Chinese commitments will apply whether or not they were memorialized in U.S. law, as they will be part of China's legally binding WTO accession terms. Second, these provisions only cover instances of Chinese products flooding the U.S. market, but they do nothing to ensure access of U.S. goods into the Chinese market - the more troubling problem with past U.S.-China trade.

3) WTO Review of China's Compliance and a U.S. WTO Compliance Review
These elements of the Levin proposal are already covered by existing WTO rules and U.S. laws and policy, making their inclusion in the China package more meaningless feel-good filler. The WTO already would be required to review China's compliance under the WTO's Trade Policy Review Mechanism (TPRM). Indeed WTO countries are required to provide regular data to the WTO's TPRM so that continual monitoring of compliance is possible, as well as regular TPRM reports on each WTO Member's conduct under the WTO rules. The U.S. annual review of China's conduct Levin calls for is already done and would continue to be required as part of the National Trade Estimates Report published annually by USTR.

Boston, MA: Hi Lori,

Haven't read your book, but am reading some prerevolution history & it occurs to me that concern over the WTO is pretty similar to things we've seen before.

But if we're China's biggest market, shouldn't we be their 800-pound gorilla? Why are we so gutless with them? They threaten Taiwan (Intel suggests they're always empty threats), we do nothing; they threaten to nuke Los Angeles & we do nothing; we're too gutless to even comment on Tibet or Tiananmen Square -- after 10 years of this I have to wonder what's going on. Is it that we're supporting a communist government there in hopes of avoiding total anarchy, civil war, etc?

Any ideas?

Lori Wallach: Any ideas you ask? How about you run for Congress or recruit someone else to do so with your logical thinking on this matter. Seems sort of obvious to me too, but I'm only a trade lawyer!


washingtonpost.com: Thanks again to Lori Wallach for joining us and answering all of these questions.

© Copyright 2000 The Washington Post Company


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