Thompson’s Charges May Be Buying Trouble for Nation’s China Policy

No one can yet say whether the hearings Sen. Fred Thompson is orchestrating on campaign finance abuses will mark a turning point in President Clinton’s second term. But after Week 1, Thompson’s Klieg-lighted dragnet has already introduced another unstable element into U.S. relations with China.

Thompson, a Republican from Tennessee, opened the hearings by the Senate Governmental Affairs Committee with a dramatic indictment against the Chinese government. Earlier this year, the Washington Post reported that the FBI warned six members of Congress in 1996 that China might be attempting to illegally funnel money into their campaigns. But Thompson, rhetorically at least, pushed beyond that report to allege that “high-level Chinese government officials crafted a plan . . . to subvert our election process.” That plan, he charged, reaches from state and local races to the White House and “continues today.”

As the week went on, Thompson did put on the table evidence of money transfers from China and Japan to some big Democratic donors. But he didn’t provide any specifics on his charge of an official Chinese conspiracy, and it remains to be seen if he can deliver them: The panel’s ranking Democrat, John Glenn of Ohio, said his reading of the same evidence didn’t support Thompson’s conclusion.

Until they are resolved, the charges are likely to distort Clinton’s options for dealing with Beijing. Even before Thompson stirred these embers, Clinton was under fire from critics who say he hasn’t been tough enough with China on trade, human rights and arms proliferation. Now, any conciliatory policy toward China risks being attacked as a prize purchased with Chinese money.

“This will make it very unlikely for the administration to be seen as pursuing anything that can be seen as a concession to China,” said Greg Mastel, author of a new book on the Chinese economy.

That pressure could actually prove valuable in some areas, particularly our economic dealings with China. Last month, Congress upheld Clinton’s decision to continue normal trading privileges for China. On broad strategic and political grounds, that was the right call. But the underlying U.S. trade relationship with China remains enormously unsatisfactory.

In 1996, the U.S. trade deficit with China approached $40 billion; this year, it could reach $50 billion. China isn’t sending over only plastic toys, either: The U.S. Business and Industrial Council recently calculated that eight of the 20 top Chinese exports to the United States are now high-tech products. And despite the visions of China as a limitless market--2 1/2 billion feet needing shoes and all that--the U.S. last year sold China only $12 billion in exports. That’s less than we sent to Belgium.

Few markets anywhere are as tilted against imports as China’s. It subsidizes state-sponsored companies, which allows them to produce at below-market costs; it imposes high tariffs on imports and it restricts the ability of companies to purchase products abroad. Compounding all of these problems are Chinese policies that attempt to build self-sufficiency in virtually all key industries.

“Probably the single largest trade problem we have with the Chinese,” said Mastel, “is their desire to build everything in China.”

China pressures foreign companies that want to sell in the country to locate factories there, to transfer technology to Chinese companies and to subcontract parts from Chinese companies. (In the recently announced deal to open a Buick factory in Shanghai, for instance, General Motors agreed to train Chinese automotive engineers and eventually buy most of its parts from Chinese firms.) And China has set overt goals to reduce its reliance on foreign products in areas like autos and pharmaceuticals--despite an explicit pledge in a 1992 agreement with the U.S. to renounce such import-substitution policies. “These are all serious issues for us,” said Charlene Barshefsky, the U.S. trade representative.

The U.S. leverage to attack these unfair practices is the ongoing negotiations over China’s effort to join the World Trade Organization--the standard-setting body for international trade. China wants to be admitted under a developing-country status that would allow it to continue most of these practices during an extended transition period; U.S. trade officials are holding out for more rapid reforms.

Inside the administration, though, that hard line has faced some skepticism from foreign policy officials (particularly at the National Security Council) more inclined to trade off WTO membership for other concessions from China. Thompson’s loud splash is likely to strengthen those inside the government holding out for the strongest possible deal.

“I don’t think it precludes China’s entry into the WTO,” said one administration official in the hard-line camp. “What it means is we have got to have a very good, solid deal. It makes it much harder to allow China in on a political basis, not an economic basis.”

It’s an ill wind that doesn’t blow some good. But overall, Thompson’s charges are lingering in the atmosphere like methane awaiting a match. The first round of these allegations nearly blew up Vice President Al Gore’s trip to China last March. Imagine how they would dominate Chinese President Jiang Zemin’s visit to the U.S. this fall. “That could create all kinds of major problems,” said Rep. Robert T. Matsui (D-Sacramento).

If the charges are true, Jiang should indeed have much to answer for (though it’s worth remembering that we maintain civil relations with the Chinese to pursue our interests, not theirs). But Thompson has given no indication when (or if) he’ll come forward with the specifics to support his allegations. Thompson and Glenn may be legitimately differing in their interpretation of ambiguous evidence; but without more detail, no one else can tell. Given the stakes, it’s irresponsible for Thompson not to lay more of his cards on the table.

If Thompson can prove that “high-level Chinese officials” sought to “subvert” the 1996 election, he should do so--publicly. If not, he should climb down from that limb until he can bolster it with more evidence. Thompson may be aiming his grenades at the White House; but this one could detonate inside the most important international relationship of the next century.