Big Firms Plant Seeds of ‘Grass-Roots’ China Lobby

Jolinda Resa, owner of Square Tool & Machine Co. in El Monte, was receptive last year when a Boeing Co. representative showed up at her plant with an unusual request.

The visitor asked Resa, whose company supplies Boeing with machines for its manufacturing plants, if she would assist the giant airplane manufacturer in a “grass-roots” drive to urge Congress to renew privileged trade status for China.

Resa gladly agreed to contact her congressman, Rep. David Dreier (R-San Dimas), and she arranged for local business leaders to attend a luncheon with a speaker recommended by Boeing. She did it, she says, because she realizes that the future of her firm depends on Boeing orders that stem from airplane sales to China.

“In order to keep my 70 employees working,” she explained, “I felt I should do everything I could.”

Thus was the tiny Square Tool & Machine Co. recruited into what experts call “the new China lobby,” a broad-based, highly sophisticated army of U.S. corporate executives, lobbyists and consultants who use their considerable economic and political influence to press the U.S. government into maintaining good trade relations with China, whose market is the fastest growing in the world.

Last year, major U.S. corporations doing business with China spent an estimated $20 million on a state-of-the-art lobbying drive that relied heavily on small-business suppliers such as Resa. Congress ultimately approved another one-year renewal for China of the low tariffs and other preferences for U.S. trading partners who have most-favored-nation status.

This year, however, China’s reliance on U.S. companies to lobby on its behalf for another one-year extension of most-favored status has taken on a more sinister coloration as a result of allegations that the Chinese may have made illegal donations to the U.S. presidential campaign last year.

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Opponents of unfettered U.S.-China trade, including labor unions, human rights groups and conservative Christians, are demanding to know why China seems to command more loyalty from American business than do other foreign countries.

The Chinese government has made no secret in recent years of its determination to influence U.S. government policy. Among other things, it has established a Politburo-level Working Committee on the U.S. Congress, which monitors actions in Washington and regularly hosts U.S. lawmakers in Beijing.

American companies insist that they are representing their own interests--not those of China--when they lobby for MFN status. They note that the Chinese have repeatedly declared that business with U.S. companies will be halted if MFN status for China is revoked or if Congress makes it contingent on democratic reforms in China.

Cindy Smith, spokeswoman for Boeing, says the Chinese are in no way directing, financing or influencing the pro-MFN lobbying effort by big American companies. Yet she admits that her firm knows the Chinese are paying close attention to Boeing’s lobbying activities.

“Did [the Chinese] ask us to do it? Never!” Smith said. “Are they happy and pleased? Of course.”

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Former U.S. Ambassador to China James R. Lilley explains that a bargain is made--”not explicit but clearly understood”--whenever U.S. companies win contracts in China. The companies guarantee to use their political muscle in Washington to preserve open U.S.-China trade.

Jeffrey Fiedler, the AFL-CIO’s China expert, notes that when top U.S. corporate executives visit Beijing, the Chinese government issues a statement linking the visit to renewal of MFN status. When Boeing President Ronald B. Woodard visited China earlier this year, for example, he and Premier Li Peng emphasized the importance of the trade status in a joint news conference.

“It’s the Chinese linkage of trade and politics that drives this lobbying effort,” Fiedler said. “The Chinese have created the circumstances that force these companies to do what they do.”

As Boeing officials explain it, big U.S. corporations believe that their economic future depends on preserving trade with China. Boeing estimates that China will buy 1,900 airplanes, valued at $124 billion, over the next 20 years--sales that will go to other countries if Congress raises barriers to trade with China.

Many American companies not only depend upon sales to Beijing, but they also have made sizable investments in Chinese plants. Motorola Inc., for example, estimates that it has invested at least $1 billion in China, making it the largest U.S. investor.

Ross H. Munro, co-author of a new book titled “The Coming Conflict With China,” notes that the Beijing government requires American companies to invest in Chinese plants in exchange for sales contracts. Those investments then hold the companies hostage to the whims of China’s regulatory actions.

“The Chinese government can make the difference overnight between the success or failure of a business,” he said. “I don’t think it’s necessary for the Chinese to remind them of their vulnerability.”

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To illustrate his point, Munro recalled that Laurence Clarkson, Boeing’s chief international strategist, was quoted recently as saying that if his company fails to produce a positive congressional vote for most-favored status, “we’re toast.”

American companies are sensitive to criticism of their lobbying expenditures on behalf of China, particularly since the news media began reporting on possible illegal Chinese donations to U.S. candidates. As a result, these companies flatly refuse to discuss their lobbying activities in detail or to disclose how much they are spending on it.

Nevertheless, experts say corporate lobbying expenditures on MFN status far surpass the amounts spent by business on any other issue. They note that the companies pay large fees for professional lobbyists--including some former secretaries of State--hefty production costs for slick brochures and videos touting China’s market potential and dues to various industry groups dedicated to promoting U.S.-China trade.

Groups established to lobby for unrestricted U.S.-China trade include the U.S.-China Business Council, made up of 300 corporations; the Emergency Committee for American Trade, a group of 55 chief executives; the Business Coalition for U.S.-China Trade, an organization of trade associations; and the China Normalization Initiative, a loosely organized state-by-state effort run by a few big companies, such as Boeing and Motorola.

Although this year’s political battle over MFN status may not begin formally until June 3--the date by which President Clinton must request renewal--all these groups are already lobbying hard. Top corporate executives have been calling on members of Congress for several weeks, and the “captains” of more than 30 state-level MFN campaigns were introduced to their congressmen at a well-attended party on Capitol Hill last week.

Rep. Nancy Pelosi (D-San Francisco) joked that the annual MFN renewal battle provides not only a “full-employment program” for Washington lobbyists but also “a full social schedule” for members of Congress.

“You should see all the party invitations we’re getting,” she said. “Last year, people [in Congress] didn’t have to buy any meals for weeks.”

According to the lobbyists, however, the campaign will be won or lost not at hors d’oeuvres tables but in the offices of small-business executives such as Resa.

By all accounts, the ability of major American corporations to enlist their suppliers as lobbyists was seen as the secret to their victory last year. Members of Congress respond more readily to the concerns of small-business owners in their own districts than to high-pressure pitches from big-business lobbyists.

PR Watch, a small newsletter that covers the lobbying and public relations industries, recently published a secret map that the corporations used in last year’s MFN campaign. It shows how each big company in the coalition was assigned a state or region of the country in which it was expected to recruit small-business people to press for MFN status.

In Michigan, for example, the newsletter says General Motors Corp. public relations director Ed Berry persuaded 80 small and medium-sized companies--mostly GM suppliers--to meet with members of Congress, the news media and local Chinese American groups.

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Square Machine & Tool was part of the California campaign, which the map shows to be the primary responsibility of executives from IBM Corp. and TRW Inc. Resa was one of 1,200 Boeing suppliers across the nation who got involved in the campaign, according to the company. For her effort, she received a large framed photo of a Boeing 737 taking off in a scenic area of China.

Boeing executives say suppliers such as Resa readily agree to assist in the lobbying drive, realizing that their firms depend as much as Boeing does on business generated by aircraft sales to China.

“We wouldn’t twist arms with our suppliers,” said Boeing spokesman Tim Neale. “We would never threaten the loss of business.”

Nevertheless, critics see problems with the corporate tactics.

By enlisting small businesses to participate in the lobbying campaign, Pelosi says, the big firms create an appearance of “grass-roots” support for MFN status, when in fact the support is more like “Astro Turf--the kind of grass that you buy.”

Pelosi and Fiedler, among others, demand that members of the new China lobby disclose more details of their legislative strategies and their sources of income.

Registered foreign agents must file regular public reports. But many of the high-profile companies and professional consultants who represent Chinese interests in Washington--including former secretaries of State Henry A. Kissinger and Alexander M. Haig--escape the requirement because they work for companies that do business in China, not for the Chinese government itself.

Fiedler says some of the lobbyists have “crossed the line” between representing their own business interests and propagandizing on behalf of the Chinese government. He cites “China and Boeing Working Together,” a half-hour video the aircraft company distributes to the news media. The video, replete with misty Chinese scenery and sentimental music, records a speech made in Beijing by Kissinger defending the policies of the Chinese government and condemning Americans who want to use trade sanctions to force changes in China.

Fiedler and other critics say these consultants are intellectual hostages of the Beijing regime and must speak out favorably for China if they want to arrange meetings for their clients with top leaders in Beijing.

“There is a direct quid pro quo in terms of access,” Pelosi said. “They get access in exchange for speaking out.”