Baltimore Sun
May 17, 2000
by Kenneth R. Timmerman
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Selling Out America:The American Spectator investigations. Sneak preview of Ken's forthcoming China book.
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The WTO agreement guarantees huge U.S. trade deficits with China for years to come.
THE CLINTON administration and its Republican free trade allies are using scare tactics and old-fashioned political arm-twisting to convince holdouts in Congress to approve permanent normal trade relations (PNTR) with China.
They argue that voting against PNTR will mean an end to lucrative trade with China and will do irreversible damage to U.S. prestige and influence in the WTO.
Congress has voted yearly to extend normal trade relations to Communist China. Granting China permanent access to U.S. markets was the carrot the Clinton administration used to win China's agreement to join the WTO. It was a major U.S. concession, aimed at concealing an even greater U.S. concession: giving China a seat in the WTO, where it could expand its influence and economic clout.
The WTO deal was negotiated in November by U.S. Trade Representative Charlene Barshevsky and touted as a major U.S. breakthrough to advance the cause of free trade and open markets. But the deal is fatally flawed. Here's why:
The WTO agreement guarantees huge U.S. trade deficits with China for years to come.
U.S. tariffs on Chinese goods entering this country average 5 percent while the average Chinese tariff on U.S. goods is 17 percent. These lopsided tariffs have led to U.S. trade deficits with China. In 1999, the trade deficit reached $68.7 billion, while China imported a scant $13.1 billion worth of U.S. goods -- less than Brazil or Singapore and less than Taiwan, a democratic state which has been a steadfast U.S. ally for 50 years.
The WTO agreement fixes these tariffs in stone, perpetuating a unilateral competitive advantage for Chinese companies. Far from opening Chinese markets, it approves China's protectionist practices and laws.
According to a 1997 study by the Federal Reserve Bank, 80 percent of China's imports are incorporated into manufactured goods, which are then re-exported to the industrialized world. Only 20 percent of China's imports are actually consumed in China.
The United States does a brisk trade in computer chips with China, a U.S. export. But those chips are then incorporated by Chinese workers, who are paid a fraction of what U.S. workers receive, into computers, hard drives and cellular telephones that are then re-exported to the United States and to world markets.
Major U.S. exporting lobbies argue that any restrictions on trade with China will cripple the ability of U.S. businesses to reach an emerging market of 1.3 billion consumers. The truth is quite different.
China's best-paid workers -- the 200 million or so who constitute China's emerging consuming class -- earn an average of less than $600 a year. They will not be buying expensive American consumer goods but will purchase cheaper goods produced in China.
The WTO agreement negotiated by Ms. Barshevsky requires Congress to abdicate its constitutional authority by granting China PNTR. This is clearly contrary to Article I, Section 8 of the U.S. Constitution, which states unequivocally, "The Congress shall have power ... to regulate commerce with foreign nations ... and to make all laws which shall be necessary and proper for carrying into execution the foregoing powers."
Under the WTO agreement, the Chinese government will be able to sue the United States should it apply existing U.S. laws -- for example, by imposing sanctions on China for selling missiles to Iran. We would then face the absurd situation of having the WTO impose sanctions on the United States in response to Chinese behavior that threatens U.S. national interests.
The United States has tremendous leverage over China by virtue of its market. We account for up to 40 percent of all Chinese exports today, which is another reason why Beijing was so eager to get this agreement -- it guarantees that Congress and the American people will no longer be able to object to China's bad behavior at home or around the world.
Passionate free-traders argue that by rejecting PNTR and refusing China's entry into the WTO, the United States will, in effect, "slam the door on 1.3 billion people" and lose China's market.
In any trade conflict with the United States, China has far more to lose and must maintain access to our market to keep its own economy afloat. Such lopsided interests afford the United States negotiating leverage, which the Clinton administration has failed to use.
Congress should put this agreement on ice until next year, when a new president takes office. In the meantime, our diplomats should be instructed to negotiate better commercial agreements with our trading partners that guarantee trade that will be both free and fair.
Kenneth R. Timmerman is a contributing editor for Reader's Digest and was a Republican candidate in Maryland's March primary election for U.S. senator.
Originally published on May 17 2000