China Trade Status Renewed by Bush : Diplomacy: President calls it ‘difficult decision,’ in U.S. interest. Critics say Beijing’s human rights record doesn’t merit extending most-favored-nation treatment.

President Bush announced Thursday that he is extending China’s most-favored-nation trade benefits without conditions. He said that acting otherwise would hurt American business, workers and consumers, and he saluted China’s “modest steps” to ease human rights restrictions.

With critics complaining that China’s human rights record since the Beijing massacre of pro-democracy demonstrators last June has done little to justify renewal of the low-tariff trade benefits, Bush declared:

“This was a difficult decision, weighing our impulse to lash out in outrage that we all feel, against a sober assessment of our nation’s long-term interests.”

While the President’s decision had been anticipated, it set off a round of criticism from Republicans and Democrats. A resolution that would counter the President’s move and take away the special status immediately was introduced in the Senate.

Senate Majority Leader George J. Mitchell (D-Me.) said that he would “aggressively and vigorously” try to block Bush’s action.

“I think he faces some very severe problems here,” added House Speaker Thomas S. Foley (D-Wash.). As of Thursday, Foley said, Bush lacked the votes needed to sustain a veto of the resolution in the House.

Coming just one week before the start of his Washington summit conference with Soviet President Mikhail S. Gorbachev, Bush’s decision on China contrasts sharply with his reluctance to grant similar trade benefits to the Soviet Union.

The President wants to defer a decision on most-favored-nation status for Moscow until the Soviet Parliament approves legislation guaranteeing emigration rights. A vote on such a measure had been scheduled in Moscow for next Thursday but has been postponed.

At a White House news conference, Bush also made clear that unresolved questions about the simmering independence movements in the Soviet Union’s three Baltic republics--Lithuania, Latvia and Estonia--are causing “certain tensions in the U.S.-Soviet relationship.”

“I can’t tell you I am encouraged about where it stands right now,” Bush said.

But citing the perceived urgency of meeting with the Soviet leader, whom he last met in Malta last December, Bush said: “I don’t want to have two ships pass in the night--the Soviet Union and the United States. And we’ve got a lot to talk about.”

In defending his decision on China, the President said most-favored-nation trade status “is not a special favor, it’s not a concession, it’s the basis of everyday trade.” Removing it, he added, “would hurt the Chinese people themselves.”

China has enjoyed most-favored-nation status for 10 years, enabling it to receive the lowest allowable tariffs on goods it ships to America. Under a condition applied to all Communist nations that receive it, the designation must be renewed annually by the President.

According to the White House, China produces about one-third of the toys sold in this country, 10% of the footwear, 15% of the imported clothing and a growing volume of consumer electronic products.

The American Assn. of Exporters and Importers has estimated that removal of the trade status would have boosted tariffs on Chinese goods by an average of 40%. The United States is China’s largest overseas market, accounting for about 25% of China’s exports.

Since 1980, when China first received most-favored-nation status, the value of U.S.-Chinese trade has nearly quadrupled, reaching $18 billion in 1989. Each year, the United States sends China $6 billion worth of American products, including wheat, aircraft, phosphate fertilizer and high-tech equipment, the White House said.

“Lose this market and we lose American jobs--aircraft workers in the West, farmers in the Great Plains, high-tech employees in the Northeast,” Bush said, referring to the White House view that China would be certain to retaliate if Washington were to impose higher tariffs on its goods.

In addition, Bush argued that lifting China’s most-favored-nation status would have cost Hong Kong 20,000 jobs and $10 billion, because about 70% of China’s exports to the United States pass through the British colony.

Reviewing developments in the field of human rights, Bush noted that in recent weeks China has lifted martial law in Tibet and released 211 Chinese detainees. While welcoming these measures, he said that they are “far from adequate” and were not the basis for his decision.

Eleven months ago, Bush said in an interview that it would be “very difficult’ to continue the kind of economic relationship that the United States has had with China unless the Chinese government’s oppressive ways were changed.

Continuing to portray the atmosphere leading up to next week’s summit with Gorbachev in optimistic tones, Bush cited the likelihood of reaching an agreement cutting U.S. and Soviet stocks of chemical weapons to 20% of the current U.S. arsenal.

“We’ve got a lot of things that I think will be seen properly as progress, but there are enormous problems that just need to be talked about where I can’t say there will be an answer,” he said, placing “the highly complex question of German unification” in the problematic category.

Bush also said that it would send “a bad signal” if the Soviets appeared to be delaying action on a treaty to reduce conventional forces in Europe. Negotiations on such a pact recently were snagged, and Bush said that he is troubled the talks had not made greater progress toward his goal of resolving the issue by the end of the year.

In an apparent effort to avoid saying anything inflammatory about the tension in the Baltic republics on the eve of the summit, Bush described the situation as “extraordinarily difficult for both sides.”

He noted that Gorbachev is concerned not just about the Baltic secessionist movements but about the effect they could have on other Soviet republics.

U.S. IMPORT TARIFFS ON CHINA GOODS COMPARED

Actual duties on the four largest categories of imports from China in 1989 compared to duties if China were not a most-favored nation (MFN). Apparel Using MFN tariff rates: $431 Using non-MFN tariff rates: $2,043 Toys and Games Using MFN tariff rates: $180 Using non-MFN tariff rates: $1,590 TVs and Radios Using MFN tariff rates: $55 Using non-MFN tariff rates: $386 Footwear Using MFN tariff rates: $101 Using non-MFN tariff rates: $279 The U.S. must decide whether to extend China’s most favored nation status (MFN) or revoke it. Among the implications of revoking China’s MFN status which President Bush and Congress must consider. Chinese retaliation against U.S. exports to China ($6 billion in 1989) Disruption of America markets by making certain items produced in China more expensive (toys, footwear, apparel) Risk to American investments in China (approximately $4 billion) Damage to American credibility and competitiveness Hurt quasi-private factories, many owned by foreign firms, rather than Chinese-owned factories Close one of the principal avenues of positive American influence in China Inflict damage on Hong Kong economy which is dependent on U.S.--China trade

Source: U.S. government statistics, The U.S.-China Business Council