Why China Is No Place For Clinton To Save FaceRudi Dornbusch
Continuing most-favored-nation status for China is critically important for America's security, its commercial interests, and the spread of its political ideals. By June 3, President Clinton must determine on what terms China will have access to the U.S. market. If human rights performance in China is found wanting, MFN will go. If that happens, the duties levied on imports from China would rise steeply, making them much less competitive in the U.S. The average tariff on the top 20 imports would rise from 7.2% to 46.4%. On toys, for example, the rate would move from 6.8% to 70%. Such tariffs would make it easy for U.S. trading partners that do enjoy MFN status to outsell China in the U.S.
Using trade policy to push through even cosmetic changes in China's reprehensible human rights record has failed. At the risk of stiff penalties, China has refused to allow the U.S. to meddle in its internal affairs. Chinese leaders are keenly aware of America's extraordinary commercial interest in their domestic market. But they are taking a calculated risk: Clinton and his advisers can live without the Chinese better than China can live without trade access to the U.S.
Loss of the U.S. market would be a major disruption of the Chinese miracle, though not the end of it. But Clinton is intensely vulnerable on the issue because the American business community is looking to China as a vast and promising market over the next two decades--much more so than Mexico, which was much in vogue last year, or for that matter the whole of Latin America. The prospect of selling aircraft, power stations, communications systems, franchises, and more is highly enticing.
NO KOWTOWING. The debate in the Clinton Administration has already shifted--MFN yes, but not without strings. The bright new idea is to grant MFN status for the private sector but to target public-sector enterprises with selective sanctions to enforce workers' rights and human rights more generally. But the Administration has already lost the MFN showdown, so why force another fight? The prime reason is to save face for the President, who in the campaign promised not to kowtow to dictatorships.
With so little foreign-policy credibility left, and with so little chance to budge China's leadership, MFN seems a particularly unpromising place to make a stand: Lower hurdles might present better opportunities. The prospect of sanctions will stiffen Beijing's back, not break it. U.S. companies will watch China's orders going to Japan and Europe, where national leaders shirk political crusades in favor of jobs and profits.
One should not take it as gospel that an embargo on Chinese goods will force progress on human rights and democracy. Such tactics have never worked. In Cuba, investment from Spain, Mexico, and Canada is undercutting the effectiveness of U.S. sanctions. But there is a striking case in the other direction in Mexico. There, economic interaction is fostering the opening of Mexican society. The active engagement of U.S. business in the context of the North American Free Trade Agreement has pushed the Mexican political process rapidly and broadly toward democracy.
EVERYDAY DECENCY. Trade opening and modernization were the keys to an irresistible political and social maturation of Mexico. This would not have happened without the active involvement of U.S. business and government. The opening of Mexico has influenced the handling of the Chiapas conflict, the investigation of the assassination of Donaldo Colosio, and the provisions for clean and internationally monitored elections. The opening makes people take a more informed view of the standards by which they demand to be treated. In Mexico today, the middle class wants democracy and due process with such urgency and vehemence that the party bosses are eyeing the large undecided vote with apprehension.
When former President Carter was helping sell NAFTA, he urged the U.S. to move toward closer trade ties with Mexico to promote democracy there. The same argument can be made for China: With active trade and investment, China will become more outward-looking--and its political regime more at odds with the world. In the people's business dealings and in their jobs at multinational companies, they will be treated by world standards. They will quite naturally start to expect the same in the political sphere.
In everyday dealings with China, corporations must help spread a culture that is respectful of workers' rights. Such contacts will provide opportunities to show disapproval of the human rights violations of the day. The President himself should consider visiting China to demonstrate U.S. commitment to a stable and open China.
Napoleon once said: "Don't wake China, or else the world will tremble." China has awakened and must now be reckoned with. The best way to engage China is by actively interchanging goods, services, ideas, and ideals. Attempts to bend China's will by trade denial are doomed to fail: They will isolate the U.S., not China.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.