House Rebuffs Bush on China’s Trade Benefits

Ignoring weeks of pleas by the Bush Administration, the House of Representatives voted Wednesday to cut off China’s most-favored-nation trade status this year and to impose a series of conditions on any renewal of such benefits next year.

The two votes represent a stinging rejection of President Bush’s China policy and could lead to dramatic changes in relations between the two countries. Officials in Beijing have threatened to retaliate against U.S. companies, and perhaps cultural institutions, if Congress revokes or imposes tough new conditions on China’s trade benefits.

Most-favored-nation status for China is subject to annual renewal by the President, and takes effect automatically unless both houses of Congress vote to deny it.

The House vote to deny MFN status this year was 223 to 204. That revocation seems unlikely to be approved by the Senate and, in any case, could not survive a certain presidential veto.

However, the separate measure that would impose a series of conditions on any granting of trade benefits to China in 1992 passed by a larger, seemingly veto-proof margin of 313 to 112. Two similar bills passed the House last October but died when the Senate failed to act on them before Congress adjourned.

“We gave them another year, and things got worse,” said Rep. Gerald B. H. Solomon (R-N.Y.), sponsor of the bill to cut off the trade benefits. “The MFN gravy train for China should stop, and it should stop now. . . . Why should China be enjoying a $10-billion trade surplus against the U.S. labor force?”

The House vote on making benefits conditional in 1992 set the stage for a showdown within the next three weeks in the Senate.

The conditions set by the House for renewal of trade benefits next year include the release of Chinese who were jailed for taking part in the massive 1989 demonstrations at Beijing’s Tian An Men Square and an assurance that China will curb its sales of ballistic missiles and nuclear materials.

A country with most-favored-nation trade status has the right to export its goods into the United States under the same low tariff rates enjoyed by most of the other countries in the world. Without MFN benefits, a nation is required to pay extremely high tariffs to export to the American market.

China sold a record $15.2 billion in goods in the United States in 1990, making this country its largest export market. American exports to China were $4.8 billion, down slightly from previous years. As a result of these trends, the U.S. trade deficit with China is now larger than the U.S. deficit with any other country except Japan.

Within the next few days, Administration officials said, Bush may try to nail down votes among moderate-to-conservative Senate Democrats by announcing a new policy initiative concerning China.

The most likely possibility would be an announcement that the United States will support Taiwan’s immediate entry into the General Agreement on Tariffs and Trade, the key organization that administers the world’s trading system. The government in Beijing strongly opposes admitting Taiwan until China itself is made a GATT member, and so far the United States has supported China’s position.

A bipartisan group of senators led by Max Baucus (D-Mont.) has written to Bush asking for a series of changes in Administration policy toward China. Support for Taiwan’s quick entry to GATT is one of the changes these lawmakers requested.

It seems unlikely that the Senate will approve an immediate revocation of China’s MFN benefits. But many analysts believe that the Senate, like the House, will pass a bill imposing new conditions on any renewal of China’s trade benefits a year from now, forcing Bush to veto the legislation. That, in turn, would probably lead to a congressional vote on a veto override, probably in September.

At the moment, it does not appear there are enough votes in the Senate to muster the two-thirds majority needed to override a veto. But many in Congress believe that even if the measures to curb China’s trade benefits are not enacted into law, the Democrats may benefit from the series of congressional votes.

“It may be that the political dimension of this is more important than the legislation itself,” said one staff member for a Democratic congressman. “China is a good issue for the Democratic Party to make the President look bad.”

He and others predicted that Democratic candidates for the House and Senate in 1992 will attack Republican incumbents who have voted to support an unconditional extension of China’s trade benefits.

Wednesday’s House vote to revoke China’s MFN benefits was largely along partisan lines. Democrats voted 171 to 92 in favor of the measure, while Republicans voted 112 to 52 against it. But a majority of Republicans, 82 out of 163 Congress members, voted to impose conditions on a renewal of China’s benefits next year, despite the Administration’s opposition.

In debate on the House floor, supporters of the efforts to restrict China’s trade benefits argued repeatedly that the bloody repression of the Tian An Men demonstrations and China’s actions since then show that the leadership has continued to ignore human rights.