Long Beach Deal Put in Jeopardy by China Fears

Snowballing anti-China sentiment on Capitol Hill could deal a death blow to an industrial development project that supporters say would create hundreds of jobs for U.S. workers at the Port of Long Beach.

In coming days, the Senate will debate a legislative proposal that would bar Cosco, a shipping company owned by the Chinese government, from leasing a significant portion of what was once the Long Beach Naval Station. The prohibition already has been adopted by the House.

Distressed port officials fear that the Cosco project is about to fall victim to anti-China fever that is sweeping Congress in response to charges that President Clinton compromised U.S. missile know-how by approving the launch of American satellites on Chinese rockets.

Critics contend that the proposed expansion of Cosco’s Southern California operations could allow Chinese intelligence agents to increase surveillance from American soil, especially of U.S. naval forces around San Diego.

“Our problem is this China craze,” said E. Del Smith, lobbyist for the port. “We’re afraid the vote will be against China and not about Long Beach at all.”

The Cosco deal could be only one of several commercial casualties of the growing outcry over China. A defense spending bill that cleared the House last month already has put future exports of satellites and civilian nuclear equipment at risk. U.S.-China trade advocates say that the prospect of a new batch of congressional restrictions could snarl longer-term efforts to broaden commerce between the two nations.

Senate Majority Leader Trent Lott (R-Miss.) said Monday that he expects a flurry of China-related amendments when the defense authorization bill is considered in his chamber, probably next week. In addition, he predicted that renewal of China’s most-favored-nation trading status will be reviewed “very carefully this year, perhaps more closely than in the last couple of years.”

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Any hiccup in trade between China and the United States would hit California disproportionately hard.

Trade volume between China and the Los Angeles-Long Beach customs district is bigger than with any other Pacific Rim nation except Japan, rising 23% last year to $26 billion. China is a major supplier of paper products and assorted consumer goods to the United States and much of the trade flows through the Southland.

Cosco, officially known as the China Ocean Shipping Co., has been a tenant of the Port of Long Beach for 17 years. For the last two years, it has been negotiating to expand into a larger terminal that the port would build and lease to it.

The fast-growing owner of the world’s largest shipping fleet, Cosco currently employs about 300 people at the Long Beach site. Three are Chinese nationals and the remainder are Americans.

Opponents of the expansion, led by Reps. Duncan Hunter (R-El Cajon) and Randy “Duke” Cunningham (R-San Diego), sought last year to legislate a blanket prohibition on the proposal. But their measure was watered down in the Senate to allow the lease as long as the Clinton administration concluded that it posed no threat to national security.

This year, however, the House voted to impose an unconditional ban on the deal. Sen. James M. Inhofe (R-Okla.) has pledged to bring up a similar ban when the defense bill reaches the floor of the Senate, probably next week.

While both sides are lobbying fiercely, each agrees that growing anti-China sentiment has given powerful--and perhaps overwhelming--impetus to opponents of the Cosco expansion.

Harald Stavenas, a spokesman for Hunter, said that sentiment stirred by the China satellite controversy could “very well” be the decisive factor in approval of the prohibition. “If this latest controversy opens people’s eyes . . . that would be great,” he said.

Cosco critics cite a 1996 incident in which U.S. Customs agents discovered that a Cosco ship had carried 2,000 AK-47 assault weapons into the Port of Oakland. Two companies owned by the Chinese government were investigated, but Cosco, which is not supposed to inspect the contents of the sealed containers it carries, was not held responsible.

Critics contend that having a “dedicated” terminal at Long Beach with a large, ground-based power supply could give the Chinese a real advantage for collecting intelligence data. They point to the Navy’s activities in San Diego, its premier Pacific base, as a prime example of a possible target.

“They already conduct surveillance from ships but a land-based power supply would really increase their capabilities,” said Stavenas. Even if most employees at the terminal were Americans, “it takes only one or two intelligence officers” to gather valuable military information, he said.

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Port officials insist that Cosco has been a model tenant since 1981, when it moved into a location about two miles from the former Navy site that is to be redeveloped.

Supporters of the venture say the Pentagon already has determined that the expansion involves no security risk. If Long Beach fails to provide the company with a bigger facility, they say, Cosco may simply lease space from the Port of Los Angeles, which is only 20 yards away, since the amendment simply would bar leasing of former military facilities to the Chinese.

Should that happen, the Long Beach site could go unoccupied for some time, setting back the long-planned redevelopment of the former naval property.

Long Beach “could become the first casualty of congressional ‘friendly fire,’ ” said David Liddle, a port spokesman.

Another major front in the China controversy is renewal of Beijing’s most-favored-nation trading status, which extends to China the same tariffs applied to most other U.S. trading partners.

Defense hawks and human rights advocates repeatedly have challenged China’s most-favored status. They have never succeeded in overturning it, partly because of the powerful business and consumer interests supporting the two-way commerce between China and the United States, which currently totals about $75 billion a year.

But China critics have succeeded in blocking some narrower commercial and governmental initiatives and U.S. business interests fear that the satellite flap could significantly broaden the impact.

For example, four amendments adopted when the House passed the defense authorization bill would block further exports of space-related and high-technology goods to China.

Another amendment would require advance notice to Congress of any exports of civilian nuclear technology. That restriction worries officials of the nuclear industry, who fear that Congress may interrupt nuclear equipment sales that could total as much as $60 billion over the next quarter-century.

The amendment, “if not an impediment, certainly means uncertainty,” said Marvin Fertel, senior vice president of the Nuclear Energy Institute, an industry association.

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In a related development Monday, Long Beach port commissioners voted to move ahead with plans to build cargo terminals and a ship repair facility on the shuttered naval base after rejecting an 11th-hour plea by preservationists to spare historic buildings.

As expected, the Long Beach Harbor Commission unanimously approved the project, following public testimony that called for protecting a 37-acre parcel that served as the headquarters of the Pacific Fleet before World War II. The site contains many buildings designed by Paul Revere Williams, a prominent African American architect.

The commissioners rejected an alternative plan that was described in environmental impact reports as the least environmentally disruptive. The alternative, supported by preservationists and environmentalists, would have allowed the 500-acre base to be developed except for the parcel containing Williams’ buildings.

Carmen O. Perez, president of the commission, said that the decision had “not been easy” but was “the best thing for the future of the port.”

Times staff writers Dan Weikel in Long Beach and Janet Hook in Washington contributed to this story.