Analysis of PNTR status for china and its effects on certain economic sectors
Congress will soon be considering whether or not to grant Permanent
Normal Trade Relations to China. Granting
PNTR means that China will receive treatment equal to our other trading
partners, currently China is the only partner that does not have permanent
status. Presently, China’s
‘Normal Trade Relations’ status is voted on every year, and has also been
approved every year by the president and congress.
The current bilateral agreement that is going to be voted on has been
negotiated in light of China soon joining the WTO.
Although voting on PNTR has no affect on the WTO accession, the bilateral
agreement will go into affect when China does join the WTO.
Under this agreement, China will increase the openness of its market and
liberalize its economy. This could
potentially offer unparalleled opportunities for some economic sectors to expand
into a market of 1.2 billion people. In
my district particularly, the wheat industry and farmers, and the
telecommunications industry both stand to profit from approval of PNTR, and
strongly support the measure. Labor
unions do not, however, approve of granting permanent status.
Below I will outline the positions of these three groups.
China is currently the world’s largest wheat
market, comprising 10%-12% of the world’s total imports for wheat, and this
number is expected to rise. China
also presently has restrictions on importing wheat from the U.S., particularly
the Pacific Northwest, because of phytosanitary restrictions. China will not buy the wheat because they believe it to have
a fungus, or smut. Wheat farmers
from this district have not had access to the largest wheat market in the world.
Wheat farmers support PNTR and accession into the WTO for China because
it will gain the following benefits.
agrees to eliminate all sanitary and phytosanitary restrictions that have no
This means that China will no longer deny the
importation of U.S. wheat because of the believed presence of ‘smut’.
will eliminate non-tariff barriers. This
includes the elimination of export subsidies
for its own agricultural products. This also means that China will increase transparency of
all regulations and practices. Once they are in the country, imports will receive national
treatment. Therefore, all discriminatory taxes and regulations will be eliminated.
American wheat farmers importing to China will be
able to compete with Chinese products on a fair and market based system.
With transparency comes increased rule of law, so importers will have a
better understanding of the system as well as access to a fair dispute
will broaden rights to import and distribute within the country without
or state trading enterprises. The role of middlemen and STEs will be phased out.
Tariff Rate Quota will be set for wheat at 7.3 million metric tons, increasing
million metric tons by 2004. In 1998 China imported less than 2 million metric tons in total from all countries.
the TRQ system the tariff rate for wheat will be set at 1%.
On February 28 of 2000, China for the first time since 1973, purchased
wheat from the Pacific Northwest. Under
the bi-lateral agreement, China agrees to continue to purchase wheat from the
region. This initial purchase was
done as a gesture to show purchases will continue if PNTR is approved.
USDA calculations indicate that if China continues such purchases and
brings the Northwest into the China market, it could mean as much as US$7
back to U.S. farmers.
Wheat farmers support PNTR as a necessary measure to ensure this access
to China and its accompanying profits. Wheat
farmers are urging a quick approval and accession, pointing out that the tariff
rates China has agreed to are lower even than those of Japan or Korea, both PNTR
status nations. According to H.D.
Cleberg, “The future economic well being of American agriculture is closely
tied to our success in expanding markets”[ii].
China currently stands to give the most room for expansion into a new
Currently China prohibits foreign investment in telecommunications.
Like U.S. Wheat farmers, the telecommunications industry will for the
first time gain access to the Chinese market if PNTR is approved.
Like wheat farmers, this industry will also benefit from China’s
agreement to lift all non-tariff barriers, and increase transparency. The bilateral agreement also presents the following benefits.
[SHS1] *China will permit direct investment by foreign
companies in telecommunication
agrees to participate in the Basic Telecommunications Agreement and the
Information Technology Agreement, binding them to the rules agreed on by other
will implement pro-competitive regulatory principles, including interconnection
rights and an independent regulatory authority, further removing state control.
suppliers will be allowed to use any technology they choose in order to provide
telecommunications services, including satellites.
geographic restrictions for paging and value added services will be phased out
two years. Such restrictions on mobile and voice data services will be phased out over
five years and domestic and international services over six years
of tariffs, quotas, and import restrictions on information technology
products and telecommunications equipment.
two years a 50% foreign equity share will be allowed for paging and value added
services. After five years a 49% equity share will be allowed for mobile voice and data
rights and distribution services will be progressively phased in over 3 years,
related sectors such as repair and maintenance will be opened up.
will allow foreign firms to distribute products other than those produced in
China, and will phase
companies control over their own distribution networks. Wholesaling and retailing services will be liberalized
throughout China in three years.
The telecommunications industry will also benefit from improved
intellectual property rights protection. The
above mentioned reforms will make it possible to invest in telecommunications in
China and to import equipment and products without forced technology transfers
or relocation of factories to China. The
telecommunications industry is rapidly expanding into information technology,
PNTR approval will allow U.S. firms and investors a chance to take part in the
growth of this sector from nearly the bottom up in China.
The demonopolization and liberalization of after sales services offers
incredible growth potential for foreign firms. This sector will also benefit
from the phasing out of middlemen and state trading enterprises.
Importers and American firms in China will be able to offer complete
product service, from the control of distribution to customer service and
product servicing, allowing the opportunity to create established markets for
their products outside of any state control.
The Telecommunications industry in my district supports PNTR as necessary
to make this potential for growth and access available.
Both the Telecomms industry and wheat farmers fear that if PNTR is not
approved, these benefits will be enjoyed only by other nations.
The labor unions in this district are strongly opposed to granting PNTR
status to China. They feel that
China is a ‘rogue’ nation that continually fails to live up to its
agreements, and feel annual review of NTR provides the only leverage available
to make China comply. They also
feel it provides leverage in forcing China to improve its human rights and
workers’ rights. The following
are key points in the unions’ argument against PNTR.
will only benefit large multinational corporations who will be more likely to
relocate to China for cheap, exploited labor at the cost of American jobs.
bi-lateral agreement fails to ensure that China will recognize and enforce core
worker and human rights standards as defined at the UN summit in 1995, the WTO in
1996 and the international labor organization conference in 1998.
and accession undermines attempts to incorporate labor and human rights
standards into the WTO
is no mechanism present to ensure China ends discriminatory policies and forced
is no meaningful protection against import surges, which can cause prices to
and subsequent layoffs in U.S. companies.
trade deficit with China will only increase from the current -57 billion USD.
and accession jeopardize efforts to reform the anti-democratic WTO. China will
impede efforts to ensure members honor rules on trade relations.
The labor unions feel that PNTR is the equivalent of a ‘blank check’
to China. They say it sends the message to the world that the U.S. values
profits over people and it will not force compliance on trade issues. Again, they feel annual review is the only leverage available
to force China to change. The
Unions also believe that about 600,000 jobs will be lost as big corporations
move factories to China. They do
not trust China to live up to its end of the bargain and feel the agreement is a
one-way street, China will receive our money, technology and jobs. They feel the increased support of the U.S. in helping China
develop new technology in various fields will only hurt the competitive edge of
American industries and farmers.
The Unions have stated that they will not support PNTR for China until it
does the following: Recognizes core
labor and human rights, allows labor unions to organize and bargain, releases
activists and religious leaders and supports efforts to incorporate enforceable
workers’ rights into WTO rules, and honors commitments to end protectionist
policies that harm American workers. Labor
unions in my district feel that denying PNTR is necessary to maintain leverage
President Clinton strongly supports PNTR for China.
He is urging congress to approve the measure so that when China joins the
WTO, the United States may enjoy the benefits of its bi-lateral agreement.
He believes, contrary to the unions, that a vote against PNTR will cost
American jobs. Supporting China in
the WTO and approving of PNTR means that the United States will be able to
participate in the momentous change that is occurring in China.
Otherwise, the U.S. will have to sit back and watch as our competitor
nations enjoy the benefits of open trade relations with China.
He believes America has a stake in what happens in China, and to deny
PNTR would be to deny the 30 years of effort that the United States has gone
through to support change in and influence China.
Denying PNTR would be to turn our backs on China and lose any ability we
have to influence the direction of China’s change.
Clinton also believes the bi-lateral agreement is a one-way street, but
one that benefits the U.S. We only
agree to maintain the present access that China has, while China must open its
market to us in unprecedented ways. While
the labor unions fear more companies will relocate, Clinton believes the
agreement will allow companies to distribute in China what was made in America.
Lower tariffs and increased liberalization mean America can export
products without exporting jobs.[iii]
Clinton does not feel that approving PNTR is supporting China’s
rights violations, he sees it as the best opportunity to create change in
China. China has made a choice to
further economic reforms by opening its markets, supporting PNTR is supporting
this choice. Welcoming China into the world community will prove more
beneficial in influencing change than shutting it out will.
Clinton thinks congress should support PNTR and bringing China under the
influence of an international regulatory body, with rules and dispute settlement
processes. This will give us the
means to ensure China complies, without PNTR we will not enjoy the benefits of
China in the WTO.
In voting for PNTR and economic liberalization, Clinton feels we are also
supporting political liberalization. He
believes economic liberalization will unlock the potential of its people, giving
them more opportunity to become educated about their rights. With
American investment also will come American values, Chinese people in American
factories are exposed to higher standards in conditions and labor rights.
By supporting China, economic progress is accelerated and the government
is forced to deal with issues relating to economic and political freedom.
PNTR will provide the chance to ensure that America can support and
influence China when dealing with such issues.
Clinton supports PNTR in order to gain all the benefits of China’s
accession to the WTO. He believes
that supporting this measure means supporting the reformers in China who desire
positive change. Being on good
terms through PNTR allows us to have an influence on the direction China takes
in reform, it also means jobs and profits for Americans.
I feel that the labor unions raise some legitimate concerns about the
status of human rights in China. China
has many activists and religious leaders in jail, and continues to oppress the
peoples of Tibet and Xinjiang autonomous region.
It denies freedom of religion and speech as well.
Even though I am deeply concerned about the condition of human rights in
China I will vote yes on PNTR status for China.
I would like to justify my position and address the concerns of my
constituents in labor unions. I
will also explain why I think we should grant PNTR even though China has so many
human rights violations.
First, I would like to clarify that while voting for PNTR will signal our
support for China in the WTO, it has no bearing on whether or not China will
accede. It is inevitable that China
will join the WTO. Once it does
that, WTO rules state that all member nations must immediately grant
unconditional normal trade relations. Annual
review of NTR by congress is not unconditional.
If the U.S. does not comply and grant PNTR as per our bilateral
agreement, then China can opt to deny the U.S. access to its market.
Therefore, if the U.S. decides to annually review China’s status, China
can essentially do the same to us. China
can open her markets to all other member nations, allowing the United States
none of the benefits we have negotiated for.
This is, however, a very complicated issue.
My labor union constituents feel that not having access to China is an
allowable loss to maintain the leverage of annual NTR.
The problem is, that once China joins the WTO, we lose that leverage
anyway. Annual review will amount
to nothing more than unilateral sanctions, which have never proved successful.
China is at a transitional point in developing its economy, and it will
continue with or without us, if we are left behind, than there are other nations
prepared to fill our place. So, as
a point of leverage in bargaining over human and labor rights, annual review and
denial of PNTR is very weak.
What then, can approving PNTR do about the human rights situation in
China? I believe that this is an
instance where it is easier to influence a friend than an enemy.
Supporting China with PNTR means securing a position of influence.
It will give us the power to sit at the bargaining table with China and
talk face to face. There are hard-liners in China who do not wish to become
involved in the WTO, they oppose economic reforms and most certainly oppose
human rights reforms. Denying
support to China would strengthen their cause, and hurt those who have worked
for so many years in China on reforms. While
the WTO and PNTR address primarily economic reforms, these reforms, plus an open
dialogue can pave the way for the reform of human rights.
China has already begun many social reforms in the name of economic
stability. A majority of villages
in China hold democratic elections, and reform of State Owned Enterprises has
led to social welfare reform and labor rights reforms.
In the newly reformed SOEs, workers are given representation on the board
of directors. The government is
encouraging their education about their own labor rights.
U.S. companies in China also represent an agent of change in this area.
U.S. companies have been shown to offer better working conditions, higher
wages and first-hand lessons in market economics and American values.
In supporting PNTR we support these “islands of freedom” in China.
While the labor unions believe that laborers in these companies are paid
less than a dollar an hour, studies show that American companies pay an average
of four dollars an hour. Those in
skilled or management positions average about nine dollars an hour.
I feel that current U.S. economic involvement in China provides a force
for change. American corporations
can also carry with them American values. Leaders
in China today believe in doing what is necessary and ‘pragmatic’ for
economic growth and stability. This
has included giving greater economic freedom to the masses, and allowing free
enterprise. This also includes an
increase in information available. As
people are given more economic freedom and more information about democratic
rights, they will demand more rights. Supporting PNTR will allow U.S. companies to have a hand in
bringing information to the people. The
unparalleled freedom that will be given to the telecommunications industry under
our bi-lateral agreement demonstrates the potential involvement that U.S. firms
can have in bringing information about U.S. values and human rights to the
Chinese people. It is important
that the U.S. continue to monitor the situation of human rights in China, using
all the available resources of other multi-national organizations to bring about
change. But I believe more change can be brought about by negotiating and
talking to China as a friend than can be done by butting heads with China as an
Voting yes on PNTR is necessary to support the interest of the U.S.
economy and exporting industries, but it is also necessary to support reforms in
China. Political freedom will
follow closely on the heels of economic freedoms.
With a stable, friendly China, the U.S. can have a hand in influencing
the direction and pace of reform, in the economy and in human rights.
[i] Jim Christiansen The Prarie Star vol.XXX no.8
[iii] Bill Clinton, www.chinapntr.gov/messages/pressspeech0308.html
Frederick M. ed., China in the
World Trading System, Kluwer Law International,
, The Prairie Star, Great Falls, MT.
vol. XXX no. 8, march 2000
Bill Remarks by the president on China;
Chuck, Testimony to the House;
www. teamster. org/government/china/china.html
John Testimony on U.S. trade with China;www.aflcio.org/publ/test2000/tm0323.html
, Summary of U.S.
bilateral WTO agreement; www.chinapntr.gov/bilatsumm.html