China’s Trade Status Dicey, Bentsen Says

China would probably lose its most-favored-nation trade privileges with the United States if a decision were made now, despite the harm such a move could cause American business, U.S. Treasury Secretary Lloyd Bentsen said Friday.

Bentsen, speaking during a stop in Los Angeles on his way to a meeting of Asian-Pacific finance ministers in Honolulu today, said the United States must balance its interests between fostering free trade and promoting human rights in Asia.

Washington must avoid “giving the competition an advantage” by curtailing U.S.-China commerce, he said, but added that China’s failure to make progress on human rights puts its status in jeopardy.

“If the decision was made today, I’d assume China would lose its MFN privileges,” Bentsen said. “We have until June, and we hope to work it out by then.”

The remark came after the debacle of Secretary of State Warren Christopher’s human rights mission to Beijing one week ago, when a number of political dissidents were jailed to stop them from trying to meet Christopher.

Officials on both sides engaged in a vitriolic exchange, leaving China’s continued trade privileges in serious doubt.

Most-favored-nation trading status allows nations to export to the U.S. market under normal, low tariffs.

Virtually all U.S. trading partners have MFN status; notable exceptions are Iraq and Cuba.

Because China is not a member of the General Agreement on Tariffs and Trade, its MFN status is not automatic and must be renewed on an annual basis. Last June, President Clinton renewed the privilege on the condition that Beijing make “significant progress” in human rights if it wanted another extension this year.

The economic consequences of denying MFN to China are not clear. Beijing has warned that such a move could backfire and hurt U.S. interests more than its own, because China’s double-digit economic growth increasingly relies on domestic demand and intra-Asia trade.

But Hong Kong, which serves as a conduit for a large portion of U.S.-China trade, stands to lose as much as $24 billion in annual trade if China’s MFN status is rescinded, the colony’s Trade Department said in a report released earlier this month.

Bentsen, addressing a breakfast meeting sponsored by Town Hall Los Angeles, said he hopes to “build some communication and some trust” when he meets today in Honolulu with the finance ministers of the Asia-Pacific Economic Cooperation.

Human rights, however, is a taboo subject for the 17-member regional group, a diverse and loosely structured organization that has avoided contentious issues for the sake of maintaining a fragile consensus since it was founded in 1989.

Bentsen appeared unlikely to discuss MFN with his Chinese counterpart, Liu Zhongli, or talk tough with Japanese Finance Minister Hirohisa Fujii about trade tensions between Tokyo and Washington.

As of Friday, Bentsen was not scheduled to hold bilateral meetings with either delegate, a Treasury Department spokesman said.

“I don’t plan to go in and twist arms and bully people around,” Bentsen said.

He was scheduled to meet one-on-one with Malaysian Finance Minister Anwar Ibrahim in Hawaii, an encounter that will probably touch on the most immediate problem facing APEC.

Malaysia has been a strident opponent of strengthening the organization, while the United States and Australia have been pushing the group toward a policy-making role that might include sponsoring a regional free-trade arrangement in the Pacific.

Malaysian Prime Minister Mahathir Mohammad rejected an invitation from Clinton to join other Asian leaders at an APEC summit in Seattle last November.

Mahathir advocates an alternative Asian trade grouping, the East Asian Economic Caucus, which excludes the United States, Australia, New Zealand and Chile--all APEC members--on the grounds that they are not Asian nations.

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