Clinton’s Game of Chicken With China

Sudden, extraordinary tension between the United States and China threatens to back President Clinton into a corner over the issue of renewing most-favored-nation trade status for China in June.

If Clinton doesn’t renew MFN--which allows Chinese goods into the U.S. market on terms accorded other trading partners--U.S. business prospects in China, which is growing into one of the world’s largest markets, could suffer a long-term body blow.

But if Clinton approves MFN without China’s leadership making gestures to placate U.S. concerns on human rights, he will look weak--like the proverbial “paper tiger” as Mao Tse-tung put it--and that also could have major economic and political repercussions.

What is going on and what’s the likely outcome of a dispute that means a lot, in terms of business and global politics, for years and decades to come?

Clinton, in what looks like a high-stakes game of chicken, is pressing to both open markets and move Asia toward political democracy.

Secretary of State Warren Christopher went to Beijing last weekend to talk to China’s leaders about political reform and improving their record on human rights.

But his overtures were rudely rejected. Chinese Premier Li Peng said his country would never accept the U.S. “concept of human rights” and warned that U.S. business would lose out on the big China market to come.

In that tactic, Li was playing on the future prospects for China--the country of 1.2 billion people that plans to add 100 million phone lines, build scores of electric power plants and buy hundreds of airplanes in the next decade.

But in the present, the leverage runs the other way: U.S.-China trade last year totaled almost $40 billion, with China taking $9 billion in U.S. exports of planes, computers, power generators and chemicals, and the United States buying almost $30 billion in Chinese exports of apparel, shoes and toys.

China thus ran a trade surplus of more than $20 billion. And some members of the U.S. Congress see that as a lever to force China’s leadership to stop mistreating political dissidents and selling weapons to Iran, Pakistan and other countries.

“Access to our market is very valuable to them,” says Rep. Nancy Pelosi, (D-San Francisco). “We’re the only country that opens its market so freely to their products, and they depend on exports for the growth of their economy.”

Pelosi and Senate Majority Leader George J. Mitchell, (D-Me.), introduced legislation last year tying trade to human rights and that pushed President Clinton to make renewal of China’s MFN status conditional on “substantial progress in human rights.”

Now China is calling his play, saying in effect America needs us more than we need America.

Who’s bluffing? Both sides, in a way. Pelosi is right that the U.S. market is important to China, but she may be overestimating how important. Exports to the United States amount to 3% to 6% of China’s total output, depending on estimates of China’s economy, which is comparable to that of California.

China is growing very fast, especially in coastal areas such as Quangzhou and Shanghai. It bought 47 Boeing planes last year and will buy a comparable number this year; it has a joint venture building airplanes with McDonnell Douglas.

China knows it’s a hot market and it’s capable of applying object lessons. Recently, after disputes with Britain over Hong Kong, China handed valuable contracts for transit equipment to Germany.

But Germany had to kowtow. Chancellor Helmut Kohl flew into Beijing accompanied by top executives of 195 German companies, who stayed two weeks and tied up business. “Europeans don’t care about human rights,” mutters one U.S. businessman in Beijing.

Right now China’s leaders are pushing American companies to lobby the U.S. government. And U.S. business people seem a bit too ready to cooperate; some of them lectured Christopher at the U.S. Chamber of Commerce in Beijing, criticizing his emphasis on human rights, which was distasteful, disloyal and dumb.

Aside from morality, there is a good, economic reason for U.S. emphasis on democratic reforms and human rights. China’s present leadership is a corrupt remnant left over from communism--these are the wonderful folks who brought you Tian An Men Square.

Economically such governments get in the way of the emergence of what is the great hope of all poor nations and will be the strength of China: the development of a prosperous, growing middle class.

The United States at its best strives to foster development of a middle class and movement toward democracy. Sometimes it succeeds. South Korea, under its new President Kim Young Sam, is a good example in Asia. Indonesia could be another.

But where U.S. policy worked patiently with those countries, it is imperative with China, which is bigger and much more ambitious to be a great power on its own. The result is the current tension, which presents a danger of miscalculation.

“The United States has so many issues with China--regional peace, North Korea, Taiwan, the development of Southeast Asia, that we shouldn’t concentrate everything on trade,” says Michael Oksenberg, head of Honolulu’s East-West Center for Asia Pacific research.

So what is likely to happen? A deal will be struck. China, still a poor country, needs America; it doesn’t want to be totally dependent on Japan. In fact, China has recently concluded strategic military agreements with the United States. China will probably send olive branches between now and June--”I tell them relations with America are a Chinese question, they must make the moves,” says a Chinese banker in Los Angeles.

And the Clinton Administration likely will find evidence of human rights progress and renew MFN.

If the tactic really does move China toward political reform, it will be a success. If it only makes for another year of trade, there will be other, tougher battles to come.

* RELATED STORY: A1

U.S.-China Trade The top five imports from China to the United States and exports from the United States to China in 1993*, in billions of dollars: *U.S. IMPORTS FROM CHINA Apparel: $5.6 Footwear: 4.6 Toys, Games and Sporting Goods: 4.2 Electronics: 4.2 Leather Goods: 1.9 *U.S. EXPORTS TO CHINA Aircraft and Parts: 2.4 Electrical Power System: 1.9 Agricultural Chemicals**: 0.7 Computers and Peripherals: 0.7 Industrial Chemicals: 0.4 ** Estimate ** excludes pesticides Source: Commerce Department; U.S. Foreign Commercial Service 1994 Country Marketing Plan for China