To hear the Clinton administration tell it, the economic benefits of U.S.-China trade were on vivid display in Beijing's Great Hall of the People on Tuesday, when Vice President Gore and Chinese Premier Li Peng toasted the signing of $2.4 billion in Chinese contracts for Boeing Co. and General Motors Corp.
Deals such as Boeing's and GM's offer a potent retort to complaints about the administration's alleged coziness with China's leadership, according to Gore spokeswoman Ginny Terzano, who told reporters in Beijing: "If the administration is doing the work to benefit people across the country in a positive way -- in their pocketbooks -- there should be less criticism."
Yet the transactions, especially GM's, highlight aspects of the U.S.-China economic relationship that trouble many analysts, who observe that China's economy hardly operates by textbook free-market rules.
At a time when China's fabled market of 1.2 billion people is growing at an explosive rate, creating an economy leaping past Japan's in sheer size, companies such as Boeing and GM find themselves obliged to offer far-reaching concessions to China's state planners -- often valuable technology and investments -- to gain access to those potential consumers.
In GM's case, for example, the company pulled out all the stops to beat several competing automakers for the right to join a Chinese state enterprise in building a major car manufacturing facility in Shanghai, which will make 100,000 Buick sedans a year.
Although GM emphasized that it will export $1.6 billion in U.S.-made parts to the plant over the next five years, it agreed that the factory will buy most of its parts locally after that. To seal the pact, GM also pledged a significant transfer of technology, including the establishment of five institutes to train Chinese automotive engineers.
While such deals may clearly be in the interests of individual corporations such as GM, the benefit to the overall U.S. economy and U.S. workers is open to question, according to economists and other experts, even ones who generally favor expanding trade links between the two countries.
By bowing to Chinese demands to build factories and help boost China's manufacturing prowess, U.S. firms may be shipping jobs overseas that would otherwise stay at home if China allowed the free sale of foreign goods. Worse, they may be assisting in the creation of formidable competitors.
"GM feels it has to be in China, and the only way it can be there is to manufacture in China, so it cuts this kind of deal, which at least offers some export content in terms of parts," said a former Clinton administration economic policymaker.
"But on the other hand," the former official continued, "the Chinese have this national automobile policy based on getting foreign companies to transfer technology, and it's clearly their intention to export cars someday. So you've got to be in their big market, but you're also dancing with the devil, in the sense that you may be helping them eventually compete with you."
The problem of Chinese bureaucrats driving hard bargains on tech transfer is by no means new, but it is "intensifying," according to Kenneth DeWoskin, a University of Michigan professor who advises foreign corporations on the issue for Coopers & Lybrand LLP's China consulting business.
"In the first place, Chinese negotiators are much more savvy about what they're getting, and in many ways they're in a stronger position to negotiate more significant technology contributions," DeWoskin said. "Moreover, their industry has advanced to the point where in many cases, more advanced technology is at stake."
Defenders of deals like GM's point out that China is pursuing a time-honored tradition in its insistence on technology and investments as a price of market entry.
"The Chinese are following a pattern that is indistinguishable from the ones followed by virtually all other countries, be it Japan, Singapore or Israel," said the top international executive of a major aerospace firm."
Moreover, by winning access to the China market, GM is providing itself with the most effective protection against the emergence of a China-based competitor, argued the company's chief economist, Mustafa Mohatarem.
"We were competing with auto manufacturers from Japan and South Korea as well as Europe," Mohatarem said. "If we had not obtained this contract, a company from one of those countries or regions would have received it. I think you'd be hard pressed to argue that that would be better for the long-term U.S. interest." He added that as part of the deal, GM is getting some potentially valuable rights to establish a vehicle-distribution network in China.
Boeing has offered similar arguments in defense of its arrangements to manufacture tail sections in China, which have angered its unions. (The Boeing contract that Gore toasted on Tuesday, for the sale of five 777 jets, did not involve any new manufacturing concessions by the company.)
But many economists contend that U.S. negotiators ought to put a high priority on reducing China's penchant for tech-transfer deals as a condition for China's entry into the World Trade Organization. "It's true tech-transfer problems aren't different in kind in China than they are in other countries, but the Chinese have two things going for them that other countries don't," said Greg Mastel, author of a forthcoming book on the Chinese economy. "First, they have enormous leverage, because U.S. companies are so anxious to get into the market. And second, the government holds huge control in the marketplace." CAPTION: Vice President Gore, Premier Li Peng in Beijing, where they toasted new U.S.-China contracts. CAPTION: New cars in Shanghai are part of China's deal with a German carmaker, and part of the reason General Motors agreed to China's terms for its own contract.