China Reaches European Union Trade Accord

China and the European Union struck a landmark trade agreement Friday that adds fresh momentum to the China trade liberalization initiative in Congress. The deal, along with other developments, emboldened backers to proclaim they are on the verge of victory in next week’s vote.

In addition to hastening China’s admission to the world trading system, the EU-China deal bolsters the Clinton administration’s argument that without passage of the China trade bill U.S. businesses will be put at a competitive disadvantage in one of the world’s largest emerging markets.

The China-EU deal is the latest in a string of developments pointing to congressional passage of legislation granting permanent normal trade status to China, including endorsements by key lawmakers who have been on the fence during the intensely lobbied debate.

Advocates stopped short of claiming they have secured commitments from a majority of the 435-member House, and opponents insisted that the vote remains too close to call. Both sides anticipated furious, last-ditch lobbying by organized labor, which opposes the bill as a threat to U.S. jobs, and business interests, which are eager for increased commerce with China.

The measure was backed Friday by several previously uncommitted House members. Their action, coming after weeks of hesitation by lawmakers of both parties, continued a trend in support of the bill, which would end the current congressional practice of reviewing China’s trade status once a year.

“I believe with this coalition we’ve put together, we’ll have a spectacular victory,” Rep. David Dreier (R-San Dimas) predicted at a news conference, appearing with members of Congress spanning the ideological spectrum.

Passage in the House has been in doubt, though easy Senate approval is expected.

President Clinton had planned to intensify the last-minute lobbying for the China bill with a nationally televised speech touting its virtues Sunday night. But late Friday the White House announced the speech had been canceled.

No official explanation was given, but administration sources said the White House concluded the dwindling number of undecided lawmakers might view such a speech as overkill. Also, administration officials were worried a more public role by Clinton would highlight opposition to the China bill by House Minority Leader Richard A. Gephardt (D-Mo.), thus straining improved relations between the two.

The China-EU trade pact has great importance in its own right. It removes Beijing’s last major obstacle to entry in the World Trade Organization. That leaves only six nations, including Switzerland, Mexico and four South American countries, that China must reach accord with to win WTO membership.

China reached a parallel deal with the United States last year. But that pact is conditioned on Congress approving the trade normalization measure facing lawmakers next week.

Thus, failure to approve the legislation would effectively deny U.S. companies the same access to the huge China market that European and other nations have negotiated.

In some key respects, the deal the Europeans struck with China is better than the terms reached by the United States.

In the crucial fields of telecommunications and insurance, for example, European companies will get a crack at the Chinese market two years before their counterparts in the U.S. China has promised to grant licenses immediately to seven European insurers.

In the auto industry, European companies will be allowed to manufacture engines without partnering with Chinese firms and will wield more clout in deciding what kinds of automobiles to build.

The agreement between Beijing and the EU, the culmination of more than a decade of stop-start talks, looked in doubt when negotiations resumed at the beginning of the week.

But the talks began to pick up steam Thursday, and on Friday, an hourlong lunch between EU Trade Commissioner Pascal Lamy and Premier Zhu Rongji helped break another impasse and pushed the pact over the edge.

“The door marked ‘WTO entry’ will soon swing open,” Lamy told reporters.

Last-minute intervention by China’s reform-minded premier also sealed the Sino-U.S. agreement, inked in November. Zhu, the No. 3 man in the Beijing regime, has had to face down vociferous opposition from other Chinese leaders who have been intent on protecting their industries from outside competition, fearful of massive layoffs in the country’s ailing state-owned enterprises.

In Washington, meanwhile, five key legislators spoke out for the first time in favor of the trade normalization bill Friday: conservative Republican Reps. Asa Hutchinson of Arkansas and James DeMint of South Carolina--who qualified his position as “leaning yes”--and three liberal Democrats: Diana DeGette of Colorado, Thomas C. Sawyer of Ohio and John J. LaFalce of New York.

LaFalce, a 13-term incumbent from suburban Buffalo and the top Democrat on the House Banking and Financial Services Committee, fit the profile of a lawmaker whom foes of the China trade bill had hoped to win.

While he has supported U.S.-China trade in the past, LaFalce opposed the North American Free Trade Agreement in 1993 and voted against granting President Clinton “fast-track” authority in 1998 to negotiate new international trade agreements.

But LaFalce, like at least 18 others who voted against NAFTA, is rejecting the pleas of union lobbyists to do likewise on this bill. He argued that China has made historic strides since its communist regime reopened normal diplomatic relations with the United States in 1979.

“I’m convinced that in order to achieve even greater advances in the human condition in China, in order to achieve even greater exports for the United States, we can’t do what the United States did when we opted out of the League of Nations,” LaFalce said, referring to the weak international organization that preceded the United Nations and failed to stop World War II.

“We must draw a circle that is inclusive, rather than draw a circle that is exclusive. That is why we must pass this legislation.”

House Majority Leader Dick Armey (R-Texas) said a final vote could come Wednesday or Thursday. The fact that House Republican leaders were setting dates for those events was evidence itself of their confidence.

In another important development, House Speaker J. Dennis Hastert (R-Ill.) threw his support behind a package of compromise provisions crafted by Reps. Sander M. Levin (D-Mich.), a trade expert, and Doug Bereuter (R-Neb.), an eastern Asia expert. That proposal would create a 23-member congressional-executive commission to monitor human rights and labor standards in China and make recommendations for legislation to the House International Relations Committee.

It also aims to beef up monitoring and enforcement of China’s trade commitments, which both sides acknowledge are frequently broken; encourage the World Trade Organization to admit Taiwan as it admits China; and provide assurances that steps could be taken to protect vulnerable U.S. industries in the event of a sudden, threatening surge of Chinese imports.

Trade bill opponents deride the Levin-Bereuter proposal as toothless and a “fig leaf” to offer cover to wavering lawmakers. Levin, a supporter of the bill, claimed that his proposed safeguards against surging imports would be the strongest such provisions ever written into American law.

In their own news conference, opponents announced that three Democrats who in past years had backed China trade have committed to their side: Robert E. Andrews of New Jersey, Rod R. Blagojevich of Illinois and Karen McCarthy of Missouri. But none appeared in person to make their case.

Rep. David E. Bonior (D-Mich.), the second-ranking House Democrat, who has spearheaded the opposition, reiterated his position that the vote next week will be “very, very tight” and said 35 lawmakers were still undecided.

Opponents discounted Wednesday’s 34-4 vote by the Ways and Means Committee for the trade bill as the predictable result of a historically pro-trade committee. But just four of 16 Democrats on the committee voted against the bill.

In 1997, when Clinton asked Congress to give him renewed special authority to negotiate trade deals, he got virtually the opposite result in that committee: Only four out of the 16 Democrats joined his side. Clinton and House Republicans were then forced to abandon their efforts.

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Anderson reported from Washington and Chu from Beijing. Times staff writer Edwin Chen in Washington also contributed to this story.

* THE GAP GROWS

The U.S. trade deficit in March hit a record and fueled debate on the China trade bill. C1