China Summit May Yet Pay Off

Harry and Louise may soon be extolling the benefits of American trade deals with China, if the White House, the American business community and Chinese Premier Zhu Rongji have their way.

The fictitious couple were the subject of the television ads that helped stymie President Clinton’s health care reforms in 1994. Ever since, those Harry-and-Louise ads have symbolized the American business community’s ability to build public opinion (or the appearance of it) in a way that will sway Congress.

Now, the U.S. business community is mobilizing once again, in an attempt to persuade Congress and the American public of the importance of a deal to bring China into the World Trade Organization. A new nationwide campaign to rally support may soon be underway.

And this campaign by American business, I think, is precisely the result the Clinton administration wanted during Premier Zhu’s visit to Washington last week.

Zhu failed to work out a deal with President Clinton for China’s entry into the WTO, the body that sets the rules for world trade. In the final flurry of negotiations, Clinton backed off from concluding a deal, after failing to extract some last-minute concessions from Zhu.

Over the last few days, there have been quite a few articles and commentaries describing the lack of a deal as a debacle, both for American businesses and for the Chinese premier.

This conventional interpretation--let’s call it Theory A--goes like this:

Clinton didn’t complete the WTO deal with Zhu because he was timid. The president was afraid of the political criticism he might take for signing a trade deal with Beijing amid the maelstrom of allegations about Chinese spying at nuclear labs and donations to Clinton’s 1996 reelection campaign.

And so, Theory A concludes, Clinton botched and lost forever the American business community’s chances for what it thought was a pretty good deal, in which Beijing offered greater access for American companies to sell in China. The Chinese premier will go home embarrassed, and his political standing will be hurt.

Theory A prevails in corporate America and among some respected scholars. But I don’t believe it. I think there’s a different interpretation of what happened during Zhu’s visit.

Let’s call it Theory B. It goes like this:

Clinton was not cowardly, but cunning. He wants and still intends to get a trade agreement with China over the next half-year or so. But the president also knows that such a deal will have to be approved by Congress, which must pass new legislation giving China permanent trading rights (most-favored-nation trade benefits) in this country if America is to get the benefits of China’s WTO membership.

By saying “no” last week, Clinton temporarily angered the business community. Yet he also galvanized corporate America to begin campaigning hard for congressional support for a WTO deal later on. The president also began to ease the American public (and organized labor) into gradually accepting the idea of China’s membership in the WTO.

When Clinton concludes the deal a few months from now, he may not win all the extra concessions (concerning the American textile industry, for example) that he tried to wring from Zhu last week. But he will be able to say that he tried hard.

And Zhu? Under my Theory B, he isn’t hurt back at home too much by the lack of a deal this week. In fact, Zhu may actually win points as the guy who said no when Clinton asked for more.

If there’s eventually a deal, Zhu will get credit for taking part in an elaborate pax de deux with Clinton aimed at helping build corporate pressure on Congress to support the deal.

The best explanation of what transpired comes from Scott Parven, the Aetna Inc. vice president who has been one of the leaders in the business community’s efforts to line up Washington support for a WTO deal.

“The White House was looking to the business community for a Harry-and-Louise campaign” to win congressional backing, Parven says. “Before Zhu’s visit, [the White House] wanted the business community to come out publicly, big time, for such a deal.

“But it’s a chicken-and-egg kind of thing. Business people were saying, ‘Until we see what the deal is, we can’t push for it.’ ” So before Zhu’s trip, business wasn’t ready to lobby hard. But Parven adds, “Now that we have the makings of a good deal, we’re ready to roll.”

Even Zhu, with his usual candor, admitted two days ago that his supposed irritation at the lack of a WTO agreement was not all it seemed to be.

“For public occasions, I have somewhat expressed my regret that we failed to reach [an agreement],” Zhu said in Chicago. “But to be honest, at the bottom of my heart I am not thinking that way. I am quite pleased.”

Don’t believe the Theory A alarmists. Last week, Bill Clinton scared the business community into thinking its hopes will be dashed, so that it will lobby Congress all the harder on behalf of his China policy. America is headed, later this year, for a far-reaching trade deal with China.

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Jim Mann’s column appears in this space every Wednesday.