Last week, after 13 years of negotiation, U.S. Trade Representative Charlene Barshefsky and National Economic Council Director Gene Sperling announced that the United States and China had reached an accord on terms for China's entry into the World Trade Organization (WTO).
Our negotiating team deserves accolades for retrieving a breathtaking offer by China that President Clinton--unwilling to do battle with our Congress--rejected during Premier Zhu Rongji's April visit.
Last week's agreement, like the April offer, is extraordinary in its breadth and scope. If it is implemented, it will transform the way U.S. farmers and firms can do business in China and help to reform the Chinese economy. We cannot allow it to slip through our grasp again. But if we are to secure its benefits, Congress must repeal the 1979 Jackson-Vanik amendment, a relic of the Cold War, and grant China, like our other trading partners, normal trade relations on a permanent basis--instead of annually, as it does now. The reasons for doing so are compelling.
Economically, our entrepreneurs have the prospect of gaining expanded access to China's market for sectors such as autos, industrial equipment, consumer goods and farm products. In the agreement China commits over the next five years to slash tariffs and dismantle quantitative restrictions on both industrial and agricultural products. China also agrees to open a broad range of services, including telecommunications, insurance, banking, securities and professional services--and to permit foreigners to engage in wholesaling, retailing, repair and maintenance, and transportation. This will create new opportunities for our service providers.
On commercial grounds alone, this agreement is a home run. But by supporting the economic reform that has been launched in China, its contribution to U.S. strategic interests is even more remarkable. Chinese reformers--led by Zhu Rongji--have publicly recognized that they must get government out of commerce and force their companies to compete. China's banks are being destroyed by the over-leverage of these enterprises, whose debts substantially exceed the assets of the banks that finance them.
This will not be an easy transformation. Enterprise restructuring is expected to remove more than 20 million workers from factory payrolls at the same time that 10 million new workers are entering the work force each year. To generate this many new jobs is an awesome task, made much more difficult by the fact that it is taking place when Asia has not fully recovered from the devastating effects of its financial crisis.
As a nation, we want China's reform to succeed. Our interests are best served by a steadily growing China that contributes to stability in Asia and growth worldwide.
Membership in the WTO could help China move forward with its reforms by giving foreigners confidence that the changes taking place will be permanent, thus encouraging investment needed to create the jobs critical to social stability.
In spite of the economic and strategic rationale, some have expressed opposition to having China join the WTO on the ground that we cannot be sure that China will implement its market-opening commitments. We can take some comfort in the fact that China did adhere to the letter of its 1992 market-opening agreement with us, which was phased in over four years. And if there is a problem, the WTO gives us mechanisms for enforcement plus international pressure to support implementation--in addition to bilateral negotiations on which we now rely. It makes no sense to reject this agreement because there may be future lapses. Without it, we are worse off.
Others simply do not want to do business with China because of an aversion to its policies. As a nation, we are legitimately concerned about a number of issues involving China including its sale of weapons, its threats toward Taiwan and its treatment of dissidents--leaving aside our lack of access to it markets.
But limiting our interaction is the wrong approach. We cannot safely ignore the world's largest nation, which shares borders with 14 other countries, is home to 20 percent of the world's people, constitutes the 10th largest trading nation and is one of only five nations with a permanent vote on the U.N. Security Council. However difficult, we must engage China.
China has changed dramatically for the better since it began its reforms in 1978, and our continuing dialogue has helped stimulate that change. Trade has advanced its economic liberalization. A majority of Chinese no longer work for the state. Today, 20 million Chinese work in joint ventures that have introduced Western values. With economic liberalization has come increased political participation. Today, about 300 million Chinese vote in village elections.
The argument is not that WTO membership will transform China into a democracy. But requiring greater openness and broader interaction will improve the outlook for continued positive change. That is why the agreement between the United States and China has been endorsed by such advocates for reform as Human Rights Watch, Hong Kong activist Martin Lee and Chinese dissident Ren Wanding.
Congress should join those favoring reform by granting permanent normal trade relations to China. In so doing it enormously advances U.S. interests.
The writer, the U.S. trade representative from 1989 to 1993, is chairman and CEO of Hills & Co., which advises U.S. companies on their trade and investment interests abroad.