Executives Press Clinton to Smooth U.S.-China Ties

A few weeks ago, President Clinton opened his mail to find what is described as a “blistering” personal letter from one of his past supporters: C. Michael Armstrong, chairman and chief executive of Hughes Aircraft Co.

The letter complained bitterly to Clinton about his China policy. Hughes officials will not release the text but say it covers in more personal terms what Armstrong is also saying publicly: that U.S. sanctions against China could cost Hughes alone “a billion dollars of business and 4,000 to 5,000 jobs.”

“It escapes me what effect our laying off 4,000 to 5,000 more people in California and shifting the export business to Europe has on the Chinese,” the Hughes chairman thundered in a speech 10 days ago.

As President Clinton prepares to meet Chinese President Jiang Zemin today in the highest-level meeting between the two countries since 1989, Armstrong’s letter demonstrates how and why U.S. policy toward China is changing.

Clinton is under increasingly intense pressure from the American business community to smooth over American relations with China, to ease the sanctions that have been imposed for its export of missile technology and to make sure the Beijing government maintains its most-favored-nation trading benefits, which expire next year.

And, with the U.S. economy in trouble and China’s economy in a boom phase, these commercial pressures are gradually producing changes in the Clinton Administration’s decision-making processes. The Administration’s top economic policy-makers, who complain that too much emphasis has been given to human rights and arms proliferation issues, have new and growing clout over China policy.

“We don’t want to give up everything we’ve got going with China just for (the release of) a few prisoners,” observed one U.S. official involved in economic policy.

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As a goodwill gesture to the Chinese, Clinton plans to announce an agreement in principle to sell a $10-million Cray supercomputer to China’s state meteorological administration to assist in the prediction of typhoons, floods and other natural disasters. As part of the agreement, the Chinese have agreed to accept what a White House official termed an “unprecedented security regime that includes continuous monitoring to ensure it is only used for its intended purposes.”

The official declined to specify how the monitoring system would work.

The official emphasized that the sale does not involve lifting existing sanctions against China because the computer will only be used for civilian purposes. But the move clearly signals the Administration’s desire to push the limits of what the current sanctions allow.

Exports of supercomputers are limited by international agreements because they can be used to help design and control ballistic missiles and for other military purposes.

Before selling the computer to the Chinese, the Administration must obtain agreement from other nations--including Japan and several European powers--that are partners with the United States in an international system of control over supercomputers. Those consultations already have begun, and the Administration expects approval of the deal.

Chinese officials have been astute enough to recognize the growing strength of the commercial interests regarding U.S. policy and to goad them along. On Thursday afternoon, shortly after landing in Seattle, Jiang paid a visit to the Boeing Co., which sees China as its most important export market in the future.

China “is a very important sustaining market for us,” Boeing Chief Executive Frank Shrontz acknowledged Thursday. Shrontz said Jiang’s visit was arranged at China’s request. Though China has bought dozens of Boeing planes in the past and is likely to buy more in the future, it just purchased a new fleet of European Airbuses, thus effectively reminding Boeing and the Clinton Administration that it is not obliged to buy American planes.

Clinton’s top foreign policy advisers, such as Secretary of State Warren Christopher and National Security Adviser Anthony Lake, already are beset by criticisms over their handling of Bosnia-Herzegovina, Somalia and Haiti. Now they find themselves struggling to avoid losing control of China policy to such economic heavyweights as Robert E. Rubin, chairman of the National Economic Council.

Underlying the increased influence of economic advisers is the reality that American business interest in China is probably greater now than at any time in the last two decades.

Last year, American firms signed 3,265 contracts worth $3.1 billion of investment in China, more than five times as much as the previous year, according to the U.S.-China Business Council.

Many of these U.S. companies may eventually find, as some of their predecessors have, that China’s economy is topsy-turvy, that its politics over the long term is unstable, and that signing a contract in Beijing is merely the beginning--not the end--of mind-numbing negotiations with Chinese officials.

But for now, at least, that does not matter. The American commercial interest is propelled by China’s booming economy--which is growing at annual rates of 12% or 13% at a time when the European and Japanese economies have stalled, Russia’s would-be economic transformation has not taken off, and there are very few other places in the world that American firms can look to for economic growth.

This week, Clinton insisted that his China policy is not being overly influenced by commercial pressures. “You could even argue about what are our commercial interests with China,” the President mused Monday night during a White House meeting with a small group of columnists.

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That was an allusion to the fact that China gets more out of its trade with the United States than America does, so that a cutoff in trade between the two countries would actually help America’s worldwide trade deficit.

The trade imbalance between the United States and China continues to mount and is now running at levels of nearly $30 billion a year--much more than the U.S. deficit with any other nation besides Japan.

But Clinton’s remark glosses over the fact that American companies that import goods from China--companies such as Hasbro, which imports toys, and K mart, which sells Chinese-made clothes and other goods--have become almost as insistent as American exporters that the Administration avoid antagonizing Beijing.

This does not mean Clinton has completely abandoned his determination to seek improvements in China’s human rights policies.

On the contrary, in recent days in Seattle, Christopher, Assistant Secretary of State for East Asia Winston Lord and Assistant Secretary for Human Rights John H.F. Shattuck have gone to unprecedented lengths in pressing human rights concerns.

Shattuck met for more than four hours Wednesday with a top Chinese Foreign Ministry official in what one U.S. official termed “a very intensive discussion” of human rights problems such as an accounting of political prisoners, prison labor and the ability of Chinese dissidents to leave the country. A senior official said there were no “dramatic breakthroughs.”

Such breakthroughs are necessary under an executive order that Clinton signed last May. The order, putting into effect a policy long rejected by the George Bush Administration, requires China to make “overall significant improvement” in human rights if it wants to get another annual renewal of its most-favored-nation (MFN) trading benefits when they expire next June.

In an effort to show that the Administration’s human rights initiatives enjoy strong congressional support, Rep. Nancy Pelosi (D-San Francisco) this week released a letter signed by 270 members of Congress, which said there has been “no sign of improvement in human rights in China and Tibet” since Clinton signed the order.

But in the face of the strong American commercial pressures, it is no longer clear, if it ever was, that Congress is willing to cut off China’s MFN benefits.

In the past, resolutions to impose conditions on the renewal of China’s MFN benefits have passed Congress by wide margins, but votes to revoke the benefits outright have failed.

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An indication of where the Clinton Administration now stands in its China policy came Oct. 22, when an emissary from Beijing named Liu Shuqing visited the White House. Liu’s visit was reported in China’s official press but not by the Clinton Administration.

Sitting in on the meeting with Liu were three U.S. officials: Lake, Rubin and White House counselor David Gergen. Gergen, guardian of Clinton’s image, was, before going to the White House, a board member of the National Committee for U.S.-China Relations, the group that seeks to foster friendly ties between Washington and Beijing.

For the last few weeks, the single most important issue affecting China policy at the Clinton White House has been a commercial one--whether, or how, to clear the way for Hughes to export satellites for launching in China.

The satellite exports were frozen last August when the United States imposed sanctions on China for selling missile components to Pakistan.

These sanctions were what prompted Armstrong’s recent, angry attack on Clinton’s China policy. “It is unacceptable to me, to my shareholders and to those who will be laid off--who will be unemployed--that our economic sacrifice is necessary to communicate to the Chinese” about missile exports, Armstrong said.

Administration sources have hinted that the sanctions imposed on Beijing last August may be reinterpreted more loosely and that licenses will be granted soon for the export of two satellites to China.