WASHINGTON-Sealing the historic U.S.-China trade pact last week-notwithstanding all the controversies, complexities, and stops and starts during the past 13 years-was the easy part.
Translating it into major economic benefits for the U.S. wireless industry will be a much taller order.
In an emerging market where most of its 1.3 billion people lack telephone service, the stakes for the U.S. wireless industry couldn’t be bigger. Even before U.S. Trade Representative Charlene Barshefsky and Chinese trade minister Shi Guangsheng signed the trade accord last Monday in Beijing, China already was the United States’ fourth-largest trading partner.
To date, China has been getting the better of the deal. Last year, the United States had a $57 billion trade deficit with China. The trade imbalance is projected to swell to $66.4 billion by the end of 1999.
President Clinton and others believe the U.S.-China trade pact, which paves the way for China’s entry into the World Trade Organization, will help reverse that trend and bring China into the world community.
“With sales of telecom infrastructure equipment in China rising rapidly over the past decade, fair and transparent access to China’s marketplace is a welcome sign for the U.S. industry,” said Matthew Flanigan, president of the Telecommunications Industry Association.
U.S. telecom equipment sales to China last year added up to $21 billion, according to TIA. Motorola Inc., Lucent Technologies Inc. and other wireless firms have been trying to gain a foothold in China during the past several years.
A key trade provision, which threatened to kill the entire package until a compromise was reached at the 11th hour, allows foreign investment of up to 49 percent in Chinese telecom carriers (including wireless) in the first year after China enters the WTO, and up to 50-percent ownership in the second year.
That falls slightly short of the 51-percent investment level offered in April by Chinese Premier Zhu Rongji, which President Clinton rejected after his political advisers (at odds with Barshefsky and others) recommended the president walk away from the deal because congressional approval was lacking.
China also has agreed to relax liberalization of satellite- and Internet-related trade and access, changes carrying possibly more social than economic impact.
The sweeping trade agreement, which covers a broad range of industrial sectors, faces numerous political and economic obstacles here and in China. The promised benefits of the deal, itself a metaphor for a new global economic order that ruthlessly will determine winners and losers in the Next Millennium, could prove more elusive than what U.S. and Chinese leaders have let on.
“There’s a lot of over-sale going on … To make this work will be a struggle for years or even decades,” said Greg Mastel, a U.S.-Sino expert at the New America Foundation.
Mastel said the lack of a legal system to enforce contracts will make liberalized commerce with China difficult, even after China becomes a WTO member.
Indeed, at the very moment U.S. and Chinese negotiators were busy ironing out details of the new trade pact, China was reducing mobile-phone imports and dismembering `China-China-Foreign’ investments by U.S. firms and others in China Unicom.
“It’s foolish to think this will dramatically change anything in China,” said Mastel.
Others disagree.
Regardless, the challenge for China is possibly as great as Clinton’s in making China WTO trade work.
Exposing Communist China to global trade could ignite social and political unrest as state-run factories that employ millions are shut down and as government control succumbs to the relentless forces of the Information Age.
For Clinton, who dearly wanted a China trade deal to legitimize a China engagement policy beset with controversies with over alleged technology transfers and nuclear spying, Taiwan, Tibet and human rights, the tough part will be rounding up the necessary votes in Congress to make “normal trade relations” status for China permanent.
Today, Congress considers renewal of NTR on an annual basis.
With the 2000 presidential and congressional elections right around the corner, Clinton could face a tough sell. Lawmakers must weigh possible job losses here against isolating an emerging economic (and military) power that is China.
Still, the GOP-led Congress is expected-albeit begrudgingly-to give Clinton what he needs. Before that happens, Washington and the world will witness a fierce fight pitting organized labor, human rights advocates, environmentalists and others against Clinton, internationalist lawmakers and U.S. business.
The trickier part for Clinton is selling China WTO trade without alienating a Democratic base that Vice President Gore needs in his presidential campaign. Organized labor, environmentalist and human rights advocates-a good chunk of the Democratic base-already are railing against the U.S.-China trade agreement. Voices of dissent will grow louder in weeks and months ahead.
