MFNemies
Beijing's atrocities put free-traders on the defensive
By June 3, the Clinton administration will have formally asked Congress to make China's "most favored nation" trading status permanent, or at least extend it for another year. The White House's timing could hardly be worse: Hong Kong goes under Beijing's control July 1. Allegations have arisen that the Chinese government funneled contributions to the 1996 Clinton-Gore campaign just as the administration refused to enforce sanctions against Beijing for its human rights offenses and its violations of the nuclear nonproliferation treaty. And during a visit to China in March, cameras captured Vice President Gore toasting Premier Li Peng, a man Gore called one of the "butchers of Beijing" during the 1992 campaign. Don't expect investigators to find a smoking gun–as National Review quipped, no memo saying, "Got the hundred thou. Go soft on human rights. [Signed] BC" will emerge–but the prospects of easily or quietly renewing China's MFN status have vanished.
Although China has had uninterrupted MFN status since 1980–before, during, and after the Tiananmen Square crackdown–the debate over China's trading relations with the United States comes up every year. As a consequence of a trade bill passed in 1974, the Jackson-Vanik Amendment, no communist regime that maintains tight restrictions on emigration can receive MFN status unless the president requests a waiver every year. Congress can vote down the president's request, but he can veto Congress's vote.
In an attempt to deny MFN extension to China this summer, a coalition of protectionists, human rights advocates, religious conservatives, and administration bashers have united to elevate MFN renewal to the top of the summer's political agenda. Indeed, The Weekly Standard used 18 pages of a recent issue to spell out why it considers China the new "Evil Empire." Trade with China also resonates with a larger audience: In an April poll the Standard commissioned on MFN renewal, 61 percent of the respondents opposed renewing MFN; only 29 percent favored it.
But economic historians and other trade analysts say that revoking MFN will not make Chinese leaders end their atrocities. The anti-MFN agenda, they say, is both unfocused and too ambitious. And they warn that across-the-board trade sanctions–the practical effect of removing MFN status–would likely lead Beijing to further isolate itself, leaving the communist rulers free to be even more ruthless against their internal foes.
There is no question that the Chinese communists control one of the most brutal regimes in the post-Cold War era. The government is holding as many as 8 million persons–tens of thousands of them presumed to be political or religious dissidents–in forced-labor camps. It continues to persecute Buddhists, Roman Catholics, Muslims, and other religious practitioners. Yet with the doublespeak particularly common in dictatorial regimes, officials say the existence of the government-sanctioned Patriotic Church demonstrates that China practices religious tolerance. Beijing has also announced its intent to suspend more than two dozen civil liberties in the Hong Kong charter when it takes control of that island. And it has all but crushed the pro-democracy movement that demonstrated in Tiananmen Square eight years ago.
Beijing's policies are indefensible. And it has no intention of reforming to please the outside world. Indeed, the government seems to revel in infuriating its foreign critics. In April, for instance, Martin Lee, head of the Hong Kong Democratic Party, got assurances from President Clinton that the United States would keep an eye on Beijing's actions after the island's transfer. Chinese Foreign Ministry spokesman Shen Guofang immediately said Lee was "acting against the interests of the Chinese people," and that what happens to Hong Kong is China's "internal affair."
The anti-MFN coalition started forming in 1994, as the administration left unclear whether it would link favorable trading relations with progress in China's human rights policies. More than two dozen prominent Chinese dissidents now living in the United States wrote to Clinton and proposed repealing MFN status on those products made by the People's Liberation Army and other state-owned enterprises, including items manufactured by prisoners. Among the writers were University of Arizona physicist Fang Lizhi, who was a university vice president at the time of the student demonstrations in 1989; former People's Daily writer Liu Binyan; and Harry Wu, who spent 19 years in Chinese labor camps and has secretly returned on several occasions to document atrocities inside the camps. Money is fungible, of course, and central planners in Beijing could probably obfuscate the flows of cash and goods inside China's borders, but this targeted approach offered a novel way to engage the communist regime.
At that time, only a couple dozen members of the House joined the effort, including Reps. Nancy Pelosi (D-Calif.) and Frank Wolf (R-Va.), both active defenders of free trade and human rights. But the most public proponents were such noted protectionists as Minority Leader Dick Gephardt (D-Mo.), Minority Whip David Bonior (D-Mich.), and Marcy Kaptur (D-Ohio), Congress's noisiest opponent of the North American Free Trade Agreement. That made it appear that the deeper issue was the balance of trade with China. Before proponents of the targeted-MFN approach could line up allies, Clinton announced that the U.S. government would not link trade and human rights.
The impending transfer of Hong Kong, the death of Deng Xiaoping, China's human rights atrocities, and Clinton campaign scandals have emboldened social conservatives Gary Bauer and James Dobson to organize this year's coalition, asking representatives of AFL-CIO member unions to oppose MFN extension without exceptions. They have joined with the legislators who favored targeting MFN to specific products three years ago, because those lawmakers see that approach going nowhere and "feel they were burned," says Jeff Bell, a Republican strategist who's acting as a liaison between Bauer and the old targeted-MFN group. "No one will rule out something intermediate right now, but most of the coalition is focused on total revocation" of MFN status.
Yet renewing MFN, making it permanent, and even developing ways to expand trade with China are crucial to the prospects for the liberation of those living on the mainland. It's important to realize that giving a country "most favored nation" status has nothing to do with the U.S. government's (or American citizens') opinion of another regime. Ironically enough, the designation is a relic of the 1890s, when countries were vying to establish commercial relations with the Chinese. England, Russia, and France tried to set up exclusive trading privileges with different Chinese regions. The United States instead established its "open door" policy, which treated all nations to equally favorable trading terms. Any country with MFN status receives the same trading privileges as the "most favored nation." As a consequence, only a half-dozen countries–Cuba, North Korea, Vietnam, Azerbaijan, Afghanistan, and Laos–don't have MFN status. Even Cambodia regained its MFN designation last year.
It's also important to focus on two questions lurking behind all the polling data and alliances: What, specifically, do opponents of MFN hope to accomplish? And would revoking China's trading status achieve those goals?
To satisfy critics of MFN extension, here's what China needs to do: Close the labor camps. End religious persecution. Stop harassing entrepreneurs. Allow open criticism of the regime. Cease the military buildup. In other words, relinquish power and institute a constitutional democracy.
To put it mildly, that's not going to happen any time soon. Kimberly Elliott, a senior fellow at the Institute for International Economics in Washington, D.C., can't envision MFN revocation accomplishing any of those goals. Along with IIE colleague Gary Hufbauer (a trade official in the Ford and Carter administrations) and others, Elliott recently updated a survey of 130 uses of trade sanctions dating back to World War I. Generally speaking, trade sanctions have achieved their objectives about one-third of the time. But that figure is a bit misleading, says Elliott, because "sanctions typically don't work against large economies. They work best when they have modest goals" (such as the release of a political prisoner) and don't threaten the power base of the government they are targeted against. The anti-MFN agenda, she notes, fails on both counts.
Take the three-decade-old U.S. trade embargo with Cuba. By any standard, Cuba's economy is on the verge of collapse. Yet the U.S. State Department's Cuba Country Report on Human Rights Practices for 1996 says the Castro regime's "human rights record worsened in 1996….The Government continued to restrict sharply basic political and civil rights, including: The right of citizens to change their government; the freedoms of speech, press, assembly, association, religion, and movement; the right to privacy; and various workers' rights." The embargo has not toppled Fidel Castro; indeed, it seems to have strengthened his hand by giving the "maximum leader" an intractable foreign enemy to blame for Cuba's woes.
Even when sanctions work, notes the IIE survey, there's usually much more at play than trade. Elliott and her colleagues consider sanctions imposed against Iraq in 1990 a success, but that's only because the U.S.-led military alliance annihilated the Iraqi army. Sanctions against South Africa helped end the apartheid regime, but they were far from the only factor: Democratic institutions (albeit tightly circumscribed) existed in South Africa, along with a modern industrial economy, a stable middle class, and a vocal anti-apartheid movement among the ruling citizens. None of these elements exist in China.
Conservative strategist Bell, a longtime opponent of protectionism, says he favors revoking MFN because current policies have not made the Beijing regime more democratic. "What has gone well in China since Bill Clinton delinked trade and human rights in '94?" he asks. "As their markets appear to open up, human rights abuses continue to grow." Bell contrasts Clinton's silence about Beijing's policies with the tough talk Ronald Reagan used in the waning years of the Soviet Empire. "The biggest lie," he says, "is that nothing we do could have any effect [on China]. What we say has enormous power."
"What we think about China vs. what we should do about it are two separate issues," counters Joe Cobb, president of the Trade Policy Institute, a Washington think tank that advocates trade liberalization. "Removing MFN from China would be about as effective as Jimmy Carter's pulling out of the 1980 Olympics was in getting the Russians out of Afghanistan."
China in 1997, says Cobb, is not comparable to the Soviet empire 10 years ago. For one thing, the NATO alliance spent hundreds of billions of dollars a year trying to "contain" the Soviet Union. The United States also armed anti-communist insurgencies in Central America, Africa, and Asia, and continues to maintain military forces in South Korea. No such military buildup against China exists now or is intended.
Interestingly, critics of MFN fall back quite readily on anti-capitalist rhetoric. James Dorn, director of academic programs at the Cato Institute and an economics professor at Towson State University, bristles at the suggestion that maintaining trade is just about "sell[ing] a few more Big Macs," as Gary Bauer wrote in The Weekly Standard. "Trade itself is a human right," says Dorn, author of a forthcoming book on China and MFN. "By denying trade, you're contracting human rights rather than expanding them."
MFN opponents also tend to assume that the Beijing regime is a completely monolithic economic juggernaut with no organized internal opposition. Yet, notes Dorn, it is widely agreed that perhaps half of China's state-owned enterprises are bankrupt, and many of those in operation lose money. Dorn also cites a growing Chinese civil society, including such informal business and community organizations as the Association of Private Entrepreneurs, which claims some 22 million members.
The southern regions of the nation have a growing entrepreneurial sector, much of it fueled by investment and expertise from business owners who live in Hong Kong. Revoking MFN would crush this economic activity, the most likely source for an independent middle class on the mainland. An April report by the Hong Kong government estimates that denying MFN would reduce Hong Kong's trade by as much as 8 percent, reduce its growth in GDP (currently 5 percent a year) by as much as 60 percent, and cost the island 86,000 jobs.
Since more than one-third of China's trade is with the United States, says Elliott, revoking MFN, which would raise U.S. tariffs on Chinese goods by as much as tenfold, "would be disastrous. It would have no positive effect on China. If we withdraw MFN, we lose whatever leverage we still have with them." Dorn fears that isolating Beijing could "create a type of radical nationalism that decreases the costs to the Chinese leaders of becoming ideological," as in Cuba.
Last year, the House extended China's MFN status by a 2-to-1 margin, so any vote against MFN extension this summer, says Jeff Bell, "would be a major event." That could happen: Among House Republican leaders, Conference Vice Chairman Susan Molinari (N.Y.), Policy Committee Chairman Chris Cox (Calif.), and Budget Committee Chairman John Kasich (Ohio) oppose MFN renewal. Majority Leader Dick Armey (Tex.) is reconsidering his support for MFN. At the end of April, Speaker Newt Gingrich said he supports extending MFN for no more than six months to see how Beijing behaves during the transfer of Hong Kong.
Clinton has vowed that, even if the House votes down his MFN request, he will veto that resolution. Overriding that veto isn't likely in the House, let alone in the Senate, where it may not be possible to get as much as a simple majority to oppose MFN extension.
But even a symbolic vote from the House wouldn't advance the cause of freedom in China. Harry Wu, who spent 19 years in the Laogai–China's labor camps–is one of the most passionate opponents of MFN extension. He chronicled Beijing's persecution of religious practitioners in the April Crisis. And in an article for Insight this January, he talked about Wei Jingsheng, a dissident who has spent 14 years in the Laogai "because he spoke his mind and, most importantly, he spoke his mind to other people." Wei is famous. "But what happens to the nameless and the faceless?"
What indeed? Wu was fortunate, in a way. He came to this country in the mid-1980s after waiting more than five years to get a visa which let him work as a scholar at Stanford University. Tensions between the United States and China weren't as high back then, permitting the sort of scholarly and cultural exchanges that let Harry Wu come here. But if U.S. policy makers heed the advice Wu now offers, thousands of those "nameless and faceless" prisoners of conscience could languish in labor camps for decades to come.
Rick Henderson (rhender555@aol.com) is managing editor of REASON.