U.S. China Relations: Cold Enough For You?

A political chill could make the U.S.-China talks rough going

President Clinton and Chinese Premier Zhu Rongji will have plenty to talk about when Zhu arrives for a state visit on Apr. 8--if the two nations are still on speaking terms.

Just three weeks before the summit, U.S.-Sino relations have turned positively frosty. Americans see alarming headlines suggesting Beijing stole nuclear warhead secrets. Republicans are accusing the Clinton Administration of taking a dangerously lax attitude toward China. GOP Presidential candidates are calling for top foreign policy aides to resign. Democratic Senator Ernest F. Hollings of South Carolina has joined Jesse Helms (R-N.C.) in proposing a Congressional vote on China's entry into the World Trade Organization. And by the end of March, a bipartisan panel headed by Representative Christopher Cox (R-Calif.) is expected to report that the U.S. failed to protect high-tech secrets from Chinese poaching.

FRIENDLY FACE. For its part, Beijing is apoplectic about Washington's talk of deploying an Asian missile defense shield that would extend to Taiwan. There's testiness about U.S. hectoring over human-rights abuses and irritation that WTO talks have taken so long. And China's export-driven economy--which last year produced a $57 billion trade deficit with the U.S.--is slowing. Exports fell 11% in the first two months of the year. The U.S. hopes to prevent a devaluation, but Beijing may see it as the only option to keeping its export machine running.

Sound like the forecast for a new Ice Age in U.S.-China relations? Truth is, the deteriorating climate may be only temporary. Much of the hardening of U.S. attitudes toward Beijing is driven by election-minded Republicans anxious to pounce on any Administration weakness. Business has unleashed an army of lobbyists to head off export curbs aimed at Beijing. And China seems determined to make headway on WTO talks. With exports shrinking and analysts predicting 1999 growth could fall to 5% from last year's 7.8%, China's reliance on the U.S. market is greater than ever.

Even if the GOP succeeds in freezing Clinton's China initiatives for the rest of his term, on Jan. 20, 2001, China can most likely count on a friendly face in the White House: Vice-President Al Gore or Texas Governor George W. Bush, a Republican with solid internationalist leanings. Even the Los Alamos espionage case is likely to blow over. "We've been through too many cycles in the relationship to get heated up over this," says James R. Lilley, a former U.S. ambassador to China who is often a harsh China critic.

Still, the U.S.-China relationship will be tough to manage. Last year, Congress adopted a measure that slows satellite sales to China by forcing the White House to hand over review from the pro-trade Commerce Dept. to the State Dept. And Clinton, prompted by charges of technology theft, nixed the sale by Hughes Electronics Corp. of a $450 million satellite to Beijing.

The annual effort to renew China's most-favored-nation trading status could also provide a forum for a heated debate on China policy. With the latest flaps, "it's not going to be any easier," says House Majority Leader Richard K. Armey (R-Tex.), a staunch free-trader. In the end, however, Congress is likely to go along because enough probusiness Republicans want commercial ties.

One of the most contentious issues will unfold when Congress takes up renewal of the Export Administration Act. China-phobes will seek further curbs, even though industry complains that controls are already too tight. For example, three-year-old rules for exports to countries such as China require a government O.K. even for low-end business computers. Thanks to technology leaps, more than 90% of U.S. computer makers' sales to China will now require pre-approval, says a study by the U.S. Information Technology Office in Beijing. "We are going to be in a situation where our shipments are delayed," warns Jim Jarrett, head of Intel Corp. China.

Even Administration critics don't want to hobble the likes of Intel, IBM, and Unisys, the kind of companies that sell billions of dollars worth of goods to China--and provide American jobs. Cox fears that tighter controls will crimp U.S. exports without doing much for national security. "The lion's share of stuff should be fast-tracked," he says.

CRITICAL CUSHION. What's more, few members of Congress want to foreclose the best hope for keeping China's economy growing. Beijing says $146 billion in foreign reserves and a $44 billion trade surplus will allow it to cushion its currency, but doubts abound. The worry is that economic troubles will continue to hurt China's exports. That will further pressure its ailing industries and raise unemployment, now around 10%. The U.S. fears Beijing will feel forced to devalue later this year--sparking new crises in Asia.

There could be progress--at least of the symbolic sort--on China's plea for a WTO deal. It tops the summit agenda, and because it now looks like one of the least contentious issues, it could give Zhu and Clinton a safe topic of conversation. Zhu, a policy wonk and skilled negotiator, is now spearheading China's WTO effort. He has streamlined the negotiating process by cutting bureaucrats out of the loop and making the chief Chinese negotiator, Long Yongtu, answer to him, says one American business observer in Beijing. But a big gap remains between the two sides. The best hope is that the summiteers can agree on "timetables" for China's entry rather than the concrete steps Beijing needs to take to join.

Still, even that would be progress, given the current climate in Washington. If both sides filter out the bombast, the dark cloud hanging over the relationship may pass.

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