Firms Unshaken by U.S. Terms for China : Trade: Country’s most favored nation status is now linked to human rights, but companies say their role is not that of lobbyist.

U.S. companies doing business in China say they won’t be scared away from the world’s fastest-growing and largest future marketplace, despite conditions imposed for the renewal next year of Beijing’s “most favored nation” trading status.

They also--for the most part--reject suggestions by U.S. officials and human rights groups that businesses should be actively lobbying the Chinese government for improvements in its human rights record. President Clinton, when he granted another year of the trade status to China late last month, said next year’s renewal will be conditioned on such improvements.

Many companies and industries say they promote democracy and human rights simply by being in China, trading with the country and showing the Chinese firsthand how a free and capitalistic marketplace works. And although they have heavily lobbied Washington for unconditional renewal of China’s MFN status, they feel that lobbying the Chinese government would be inappropriate.

“Companies don’t want to be agents of the U.S. government, and (the government) can’t ask the companies to go out there and enforce a government human rights policy,” said Roger W. Sullivan, a Hingham, Mass., consultant on business in China and former president of the U.S.-China Business Council.

Indeed, most agree with William Krist, who lobbies Congress for the gigantic American Electronics Assn. “I suspect big-scale lobbying would be counterproductive with the Chinese government,” he said.

Even Reebok International, the sports shoe company that awards a prize for human rights accomplishments, believes its best hope for change in China is by example, said John W. Gillis, a company spokesman.

Without the most favored nation status, duties on Chinese goods imported to the United States would rise to as much as 40% of the product’s value, from about 8% now. China, whose economy is expected to grow this year at a double-digit pace for the second consecutive year, has vowed to retaliate if that happens. U.S. business executives fear that could mean not only quid pro quo prohibitive duties on their exports to China, but a host of other actions as well, such as exclusion from lucrative government contracts and joint ventures.

For now, though, “it’s our understanding, based on formal and informal meetings with the Chinese, that they do not plan to retaliate at this time,” said Richard Brecher, director of business advisory services for the Washington-based U.S.-China Business Council.

Still, some businesses with ties to China feel skittish about the year-to-year renewal of China’s trading status and are holding off on making major investments.

Others, such as American Telephone & Telegraph Co. and automobile and aircraft makers, feel they have little choice but to be in China. With more than 1.5 billion people, the country stands to become the world’s single largest buyer of consumer and industrial products--and perhaps the last stand for American industries striving to hold or regain world dominance.

To companies such as AT&T;, “the risk is higher staying out than going in,” Sullivan said. China’s 35 airlines are expected to be the aerospace industry’s most frequent buyer in the coming decade. Already, China has ordered $9 billion worth of jetliners from Boeing Co.

AT&T;, which already has investments of $30 million to $40 million in China, is in the midst of negotiating several joint ventures there under a long-term contract to modernize the country’s telecommunications network.

“There’s not as much predictability and stability (in China) as businesses might like,” said Christopher Padilla, manager of government affairs for AT&T.; “On the other hand, AT&T; has to be there.”

As with other companies, AT&T; representatives have discussed the political situation in the United States with Chinese officials and suggested that Beijing work with Washington to resolve the concerns. Most say that in their workaday contacts with the Chinese they urge advancement of human rights.

Charles Nevil, president of Meridian Group in Marina del Rey, said that as he goes about his work marketing U.S. companies and products overseas, he loves talking about freedom. “Business people chew it up and get excited by free trade, entrepreneurial trade and having a life different from the life they have,” he said.

“We are people to people,” Nevil said. “And that is more important than using political threats to get what we want.”

Few companies have the luxury of pulling out of China, as Levi Strauss & Co. said it would in an announcement in early May.

“It’s an extraordinarily unique company,” said Orville H. Schell, a faculty member at the Center of Chinese Studies at UC Berkeley. “They are the gentry, privileged to factor in morality in decisions about where they go.”

Levi Strauss is the second U.S. company known to withdraw from China on the basis of its record on human rights. Executives of Timberland Co., an apparel manufacturer and shoemaker based in Hampton, N.H., decided to stop doing business in China after the government’s 1989 crackdown on the student democracy movement.

Schell said Levi’s action may give impetus to other companies to begin taking a stronger stand on human rights in China, “rather than beating up on the American government (for its stance) and in such a pusillanimous way, cowering and avoiding the issue for fear the Chinese will retaliate.”

He said that before the year is out, he expects to see U.S. businesses unite in a call for human rights protections in China.

But even the few efforts businesses had launched to promote reform--as part of their Washington lobbying effort--have largely been dropped. The move for a voluntary “code of conduct” for businesses operating in China lost steam after the Clinton Administration’s most favored nation announcement.

U.S. businesses realize that “we don’t have any leverage” with China, said Peter T. Mangione, president of the Footwear Distributors and Retailers of America. China can pick and choose from dozens of nations eager to be its most important trading partner.

“We have some powers of suasion. But we don’t have the huge weapon others think we have,” Mangione said. “I know. I’ve tried.”