Why China’s Trade Status Matters to You : The stakes are high if not fully understood in U.S.-China talks at Pacific Rim summit.

The only way to make sense of the efforts to get China into the World Trade Organization, a major thrust of President Clinton’s talks with Chinese President Jiang Zemin this weekend in New Zealand, is to see China not as a single country but as a critical link to all of East Asia and thus to the global economy on which the United States depends for its prosperity.

The benefits are indirect but important. Including China in the WTO will help the United States in its role as leader of the global economy, a status that generates far more U.S. jobs and wealth than is generally recognized.

China’s inclusion in the Geneva-based body that regulates trade among 134 of the world’s nations will also help Japan, which has major investments in China and is a crucially important economic partner of the U.S. and the rest of the world. And it will help South Korea and Taiwan, which are more important to the U.S. economically than China at the moment.

Inclusion is a wiser course than exclusion, says Jeffrey Garten, former U.S. undersecretary of commerce who is now dean of Yale’s Graduate School of Management. “If Beijing is outside the system, then it will have a negative influence on all of Asia.”

But as negotiations proceed, you can discount most of the arguments for and against China’s acceptance. Those who say it would be a bonanza for U.S. business are way off base. The best analysis by the private National Bureau of Asian Research reckons that WTO entry would lift annual U.S. exports of goods and services to China from today’s $22 billion to roughly $40 billion by 2005. That’s not only a drop in the bucket of the U.S.’ total of $2 trillion trade annually, it also pales next to the $71 billion in current U.S. imports from China.

Likewise, predictions that China’s WTO entry would eventually take jobs from Americans and give them to Chinese and would displace U.S. goods on world markets are wide of the mark. China’s economy, smaller in annual output than that of California, is that of a developing country--and a struggling one right now. Indeed, an argument for WTO entry is that it could spur renewed growth in China and avert an economic decline that would throw Asia back into recession.

Finally, arguments heard in Washington and elsewhere that trade concessions will influence China’s internal politics--either to further progress toward democracy or to strengthen China’s rise as a military state--are fantasies that have nothing to do with the true state of China today or with U.S. interests in the world.

“The U.S.’ interest is to protect and uphold the world economy. Bringing China in as a responsible member of the community of nations is important for that interest,” says Richard Ellings, executive director of the Seattle-based research group, which was set up by the late Sen. Henry M. Jackson.

OK, let’s put those grand concepts into down-to-earth terms. Many U.S. companies--Boeing, Motorola, General Motors, American International Group prominent among them--have a stake in China’s WTO entry, but it’s a long-term one. Boeing will only sell planes to China if its economy develops. GM would benefit from China’s reducing tariffs on cars from 80% to 25%, but it needs China’s economy to grow if it is to make and sell cars there. Motorola can’t keep up with demand for its phones and pagers in cell-phone-happy China, and it doesn’t want that demand to slow down. And AIG, the global insurance group founded in Shanghai long ago, would benefit if China does, as promised, open its potentially enormous market to foreign providers of financial services.

As for China itself, the only way to describe it today is to paraphrase Walt Whitman: It contradicts itself.

China is hobbled by state-owned industries that drain its economy. Desperate for exports, the country is subsidizing exports of textiles and apparel in order to keep mills running and people employed.

But WTO entry, which would compel China to allow foreign competitors into its markets, would spur needed economic reforms. China has millions of people, working in village cooperative industries, pioneering business on the Internet, who would welcome reform.

The country’s connections to the complex modern world economy can be seen ironically in its relations with Taiwan, the island nation of 22 million that China claims as a province and periodically threatens militarily.

Taiwan sent $23 billion worth of goods into China, through Hong Kong, last year. Most of that represented computer and electronic parts for assembly by Chinese laborers. The assembled parts then came back out through Hong Kong, headed for U.S. and other markets in the form of computers bearing Dell, IBM, Compaq, Acer and other brand names. (In fact, many of those parts originated in the Los Angeles area, which is a major exporter to Taiwan.)

Moreover, Taiwan has invested at least $35 billion directly in China, and is even training software engineers there. If China gains entry to the WTO, then Taiwan can follow, China has promised.

“History has made Taiwan and China, by accident rather than design, bitter foes politically and militarily. And yet both have found the other to be ideal business partners,” says Li-Pei Wu, the Taiwan-born chairman of Los Angeles’ GBC Bancorp, a major lender to Southern California companies doing business with Asia.

Until now, economic interdependence has trumped political enmity in the Taiwan-China relationship, Wu recently told an audience at Britain’s Cambridge University. Whether peace and partnership continue depends on economic growth.

So the stakes are high.

Ultimately, a main beneficiary of continued reform and opening in the world’s diverse economies will be the U.S., which today is the brain and nerve center of a changed world economic system. Statistics on trade don’t tell the story. But picture all the people who have jobs in companies getting sizable business outside the U.S.--all the Fortune 500 and high-tech telecommunications, software, Internet, media and communications companies; and not overlooking the parcel delivery services or the airlines or the U.S. universities and colleges with their thousands of foreign students--and you get an idea of why talks on seemingly distant matters like China and the WTO are important to your well-being.

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James Flanigan can be reached at jim.flanigan@latimes.com.