Transcript: USTR Barshefsky Briefing on China Trade Relations
(NTR needed to reap the benefits of China WTO accession)U.S. Trade Representative Charlene Barshefsky told editorial writers at a foreign affairs briefing at the State Department March 10 that granting China permanent Normal Trade Relations (NTR) status is "the insurance, in a contractual way, if you will, that we must reap the benefits along with everyone else of China's entry into the World Trade Organization (WTO)."
There is no question that China will accede to the WTO, Barshefsky said, regardless of whether the U.S. Congress votes to grant the country permanent NTR or not. "The only question," she stressed, "is will we reap the benefit of their joining?"
Barshefsky explained that China could discriminate against U.S. business interests after it acceded to the WTO, because technically "it is we who would have discriminated against China by being the only country in the world not to give them permanent NTR. ... They would be fully within their legal rights to deny us the benefits of our own agreement."
Barshefsky took pains to debunk the viewpoint that granting permanent NTR would adversely impact the U.S. ability to promote improved human rights in China, even though the annual vote on renewal of NTR for that country has traditionally been seen as leverage.
She pointed out that China's favorable trade status "has never been revoked because it is not in the U.S. self-interest to revoke it."
The annual renewal debate in Congress, she said, was "like a debate in a terrarium, divorced from any real change one would want to effect with China."
She said the current issues and vote "presents a prospect of something so fundamentally different because China must change ... to get into the WTO."
Barshefsky stressed that having China accede to the WTO was not only "an economic no-brainer for us," but "has the prospect of important spillover effects."
"First off, of course, it will engender greater economic freedom, greater choice among consumers, greater choice among workers, more investment in the country in many respects, and so on," she said.
"The agreement is a huge victory for economic reformers in China to deepen their internal reform not only in areas covered by the WTO per se, but in other areas of economic reform in China," she continued.
"And I think from that one could see the possibility that broader reforms come about."
"All we do in return for the range of concessions they have made," Barshefsky emphasized, "is to give to China on a permanent basis the trade treatment they have received in every year since we normalized diplomatic relations with China in 1979."
Following is a transcript of Barshefsky's remarks:
(begin transcript)
U.S. DEPARTMENT OF STATE
Office of the Spokesman
March 10, 2000NATIONAL CONFERENCE OF EDITORIAL WRITERS
FOREIGN AFFAIRS BRIEFING AT THE DEPARTMENT OF STATEU.S.-CHINA TRADE RELATIONS
AMBASSADOR CHARLENE BARSHEFSKY
AMBASSADOR BARSHEFSKY: Thank you. With me is Bob Novick, my general counsel. I always take my lawyer with me.
I thought I would actually go through three separate legislative initiatives. I'll spend most of my time on China but, inasmuch as you like about all sorts of things apart from China, I'd like to plug two other things. The first is legislation that's pending on Africa and on the Caribbean Basin area. And you may have heard about this this morning so I won't belabor it if that's the case.
Let me take the Caribbean region first. We have an existing set of legislative commitments to the Caribbean to give Caribbean and Central American countries preferential access into our market for goods they produce. These are initiatives that date back 15 years ago or so, and the rationale for them at the time was consistent with the rationale generally for so many elements of trade, and that is to use trade as a means to effect economic reform and economic diversification within the Caribbean and Central American regions, as well as to promote greater stability and democracy in those regions.
CBI was initially passed at a time when the democratic leader in the region was Trinidad. It was the leader because it had oil money. It doesn't have oil money any more. And you had a number of countries at the time that were on the margin -- Jamaica, for example, democratization-wise.
When NAFTA came along, it sucked investment that had been put into the Caribbean and Central American regions out of those regions into Mexico. This is, indeed, an operation of the law of unintended consequences. So there has been a push for a number of years to rectify that imbalance that was created because of NAFTA and to put the Caribbean countries on a par with Mexico, particularly in areas like textiles and apparel, areas where the Caribbean is competitive with Mexico and competitive with other global producers. The legislation that's pending would do that. The short form of it is called CBI parity, parity meaning parity with NAFTA, but it's not quite so broad. It's not a free trade agreement with the Caribbean; it's one-way preferential access to ensure that these economies can continue to grow and diversify and to support development needs in many of these economies.
A companion piece of legislation, or what's become a companion piece, is the Africa Growth and Opportunity Act. The President, as you know, has been to Africa. Africa as a continent has been largely ignored as an element of US trade policy. It's now inconceivable to me to even report this, but as of two or three years ago USTR had never had an Office of African Affairs. It's an entire continent never represented at all in trade policy in any respect. It was strictly an aid policy, having ceded the market long ago to Europe, largely given their colonial ties to Africa.
Sub-Saharan Africa, in particular, is a market with 640 million people but has the largest concentration of the poorest countries in the world. If you can imagine 30 years ago, Africa, sub-Saharan Africa, was wealthier than Asia -- and now look at the difference. A combination of Africa having been a Cold War pawn for many years, of total and strict reliance on foreign aid regardless of the uses to which that aid was put. And we know, of course, in retrospect where much of that aid went -- into private pockets -- and a function as well of the US having such a range of other higher priorities that Africa was sort of left to its own devices.
The situation has changed not only because economically it makes sense to better engage sub-Saharan Africa but there is, a la the Caribbean Central American region, there is a moral imperative to attempt to do what we can by way of using trade as an element of democratization and using trade as a carrot toward economic reform in many of these countries. So the Africa Growth and Opportunity Act is pending and it is an act, like the Caribbean act, which provides preferential access into the US market for products of -- and this is the kicker -- reforming African economies. This is not intended as aid, although foreign aid will continue and, of course, the President's foreign aid budget has continual increases for sub-Saharan Africa. This is an additional carrot designed to move African nations toward greater economic reform, toward the market, in exchange for preferential access for their products in the US. And preferential access means zero tariffs, zero tariff treatment.
Both of these bills are pending. The Africa bill has passed the House and the Senate. It awaits a conference committee to iron out differences. The Caribbean bill passed the Senate but it will be thrown into the same conference during which the Africa bill is considered because they raise similar issues for textile and apparel producers in the US.
And I mention these because they are a wonderful segue into China inasmuch as we are finding more and more ways of using trade as an element of foreign policy provided -- provided -- the underlying agreement can be justified fully on economic grounds alone. That is to say, these are not giveaway agreements; they are economically important agreements to the United States. In the case of Caribbean and Africa, we want these countries wealthier. They will be much better trading partners for us. There are extraordinary opportunities, particularly in sub-Saharan Africa which is so resource-rich.
And you'll see a similar set of themes emerge as we discuss China but there are, apart from the economic justification to these agreements, important spillover effects that we attempt to effect through economic means. So Africa , CBI are point one. Point two, Congress is going to vote this year on whether we stay in the WTO. This is a little surprise package that was inserted into the Uruguay round implementing act in 1993 which says that at the five-year mark of the anniversary of the WTO, Congress gets to vote whether we should stay in or not. And that vote will be this year. It's called -- and you'll see this referred in reporting as the Section 125 vote because it's Section 125 was the Uruguay round implementing the act.
And we have sent up a very -- and I won't spend much time on this. We have sent up a very detailed report to Congress on the operation of the WTO in the first five years and talking about, of course, the importance of a rules-based, multilateral trading system to US domestic economic prosperity, as well as to global stability -- indeed, the very reasons for the creation of the multilateral trading system immediately after World War II when the IMF and the Bank were created when the UN was created and so on. So we don't expect Congress to vote to pull us out of the WTO, but I would encourage you to look at the executive summary, which I think makes a very compelling case for the US remaining engaged with the world and not take what would truly be a catastrophic action, including to our own domestic health, of pretending we can actually withdraw from the world and not be the worse for it.
Which brings me to China, which I guess combines elements of all of these. And let me just make a couple of points on the China side. Point number one, the agreement we negotiated will form the basis for the global agreement on China's accession to the WTO. Point number two, it's a one-way deal. We do not change any market access policies toward China. We don't change a tariff, we don't do anything on the market access side. We don't change our export control laws, we don't change our trade laws, we don't change in any way our ability to exclude products made from prison labor from China, we don't do anything on the market access side in the United States. So this is not NAFTA. This is not the US-Canada Free Trade Agreement. This is not a multilateral negotiation where we lower our barriers, other countries lower their barriers. We don't lower anything or alter anything with respect to China's market access.
All we do in return for the range of concessions they have made is to give to China on a permanent basis the trade treatment they have received in every year since we normalized diplomatic relations with China in 1979. Every year -- year in, year out -- China has achieved normal trade relations status with the United States.
And what we need to do is to make that status permanent. It is, in effect permanent in essence because every President and every Congress has determined that normal trade relations status is in our national economic interest -- and indeed it is.
The third point I'd say is I think you know a fair amount about the agreement. It is a very comprehensive, market-opening agreement. It has many elements to it that are -- the agreement itself is of historic proportion but it has many elements to it that are historic in terms of the Chinese economic regime. The agreement covers all goods, all services, all agriculture; it's market-opening across the board.
But if you parse through the agreement, for the first time since the 1940s China will allow Chinese businesses as well as foreigners to import directly into China. Right now, you can't do that into China. This is the first time since the communist takeover in 1949.
If you look at information technology sectors, whether telecom or its spinoffs like the net, for the first time since the 1940s, companies will be able to invest directly into telecom in China. Now you go through this really quite extraordinary web. But this is really quite remarkable.
And, for the first time ever -- ever -- China will allow multilateral review of its commitments and will subject itself to dispute settlement, including binding dispute settlement and the provisions for binding arbitration in the WTO. So this is an international tribunal judging the merits of claims against China, and China being bound by that judgment. These are not Chinese courts we're talking about.
This, I think, presents to us really a remarkable series of opportunities. On the economic side, as the President has said, this is a no-brainer. It's all one-way, market-opening by China to the US and to the globe: slashing tariffs, removing import bans, removing discriminatory licensing, discriminatory taxation, the full range of issues that pertains to goods trade including full rights to distribution of products within China, full rights to import and export to and from China directly.
On the agriculture side, elimination of export subsidies, a slashing of tariffs, very enhanced market access for all of our commodity products and our specialty agricultural products. We will create, for the first time, private trade in bulk agricultural commodities -- wheat, corn, cotton. There will be private trade, not just state trading enterprise trade but private trade in these commodities is very, very important for the longer term with China breaking the back of state monopolies over the export and import of agricultural commodities.
And China will subject all of its decisions on sanitary and phytosanitary restrictions on a scientific basis, which is not what occurs now.
And with respect to services, China will open the range of service sectors, whether it's telecom, including the net, whether it's banking, insurance, accounting, law distribution, construction. You name it -- environmental services, it's covered. And by opening we mean either the ability to own outright and/or control outright or the ability to invest directly and heavily in the full range of services providers and then to provide all the attendant services that go along with the provision of services in general.
The agreement also covers protections against unfair trade by China into the US, some of which do not now exist -- not because we're going to change our trade regime toward China, but I figured while we were at it we might as well just go for the whole thing. And that includes a special anti-import surge mechanism so that if Chinese imports in any sector are surging into the US market and disrupt the US market, we can impose quotas, tariffs, anything we would like for a two- to three-year period. This mechanism exists for no other country in the world. We think it's appropriate that it exist toward China, and that will be in effect for 12 years.
We've strengthened our dumping law with respect to China. The strengthened provisions will be in effect 15 years after accession, as well as our trade laws as enforcement mechanisms, WTO dispute settlement, multilateral review by 134 other countries who have a stake in market opening in China, as well as increased monitoring here at home of Chinese compliance with commitments.
So this is an economic no-brainer for us. The potential spillover effects, I think, are very important. We say potential because nobody knows, but this agreement will open China in a way that I think allows for freedoms beyond simply on the economic side. First off, of course, it will engender greater economic freedom, greater choice among consumers, greater choice among workers, more investment in the country in many respects, and so on.
But I think that there are important spillover effects. One has to do with reform generally in China. The agreement is a huge victory for economic reformers in China to deepen their internal reform not only in areas covered by the WTO per se, but in other areas of economic reform in China. And I think from that one could see the possibility that broader reforms come about. And let me give you one example, and that is the internet. A year ago, there were 2 million users of the net in China, and this years it's 9 and next year it's projected to be over 20. So take it out three or four years from now. If you look at the effect of the net on the US -- and we already have an open economy, we already have a democratic pluralistic system -- you look at the effect on us of the net. Imagine the effect on China. I think the Chinese Government will try and control what's on the net. As the President says, good luck.
So this agreement, I think, has the prospect of important spillover effects as well as I think really do two principal things, and I'll stop here. One is to bring China into the world community subject to a rule of law, which is not to the case today, and; second, to ensure that China integrates in a productive way into the Pacific economies and into the global economy in a way that bringing it into this multilateral institution can help do. It is the reason the multilateral trading system was created. It was created for two reasons in 1947: One was to rebuild basically a shattered world economic after the war, including a means to reintegrate Japan and Germany, and; second, to ensure countries had an interest in peace and stability beyond their own borders because that was the only way the post-war leaders could think of a fragile peace strengthening.
It's the same rationale today. It's why you see the former Soviet republics clamoring to join the WTO and why so many already have since the fall of the Berlin Wall, because it is economically reforming at home; it brings them into the community of nations; it provides a solidity to their trading relationships beyond their borders, and greater protection for themselves at home.
Permanent NTR is critical to achieve the benefits -- for the US to achieve the benefits of the agreement it has negotiated. Without it, China has no legal requirement to provide us most of the market opening we will have effected for the rest of the world. So this would be an entirely irrational outcome; that is to say, a denial of NTR would mean that China would provide the benefits we negotiated to everyone else but us. That would permanently cede markets to our competitors, not to mention just the devastating consequences in terms of the U.S.-China relationship for having denied NTR. We're the only country in the world that I know of that does not already give China permanent NTR.
So I'll stop there. Questions?
Q: The rap on China in the past is that it has not abided by all its agreements that it has negotiated. Two questions. Do you think that's accurate or that's an accurate criticism? If so, what will be different?
AMBASSADOR BARSHEFSKY: I don't think the criticism is accurate. I think the enforcement or the compliance record by China is good in some areas, weaker in some areas, and one could say the same about Europe, as you well know.
If we look at the individual agreements, we see a couple of things: number one, China's compliance and the compliance of trading partners generally increases the more specific the commitments are in an agreement. So that China always adheres very carefully to tariff commitments, anything numeric, has generally adhered very well to commitments related to a specified time frame -- by X, such and such must happen.
When we negotiated the WTO agreement, we've negotiated a very specific time-bound series of commitments; that is to say, if you can imagine a grid and along the left-hand side are commitments with subcommitments -- sub, sub, sub, sub, sub -- and over the top January 1, 2000, January 1, 2001, January 1, 2002, 2003. And every box has something in it. This is what China must do by that point in time. It's very, very specific.
I think the Chinese also have always been concerned about international pressure to comply. When we did the intellectual property rights agreements, for example, as to which compliance has been very, very good on the export side -- I'll get to that in a minute -- we were alone. Europe came scurrying along afterward to try and get the benefits of what we negotiated. No one helped us and no country has helped us monitor China's compliance with those agreements. No one. They just wait for us to do it all.
This is a very different situation because what we have negotiated is the basis for global market access into China, so this is a big ticket item for most countries. And because of the sort of way in which the WTO works, you will now have another 134 countries who have the same interest in China's market opening as we do, because under WTO rules, if we don't get it, they won't get it. If China won't comply for us, that means China isn't complying as to the global agreement. This changes the mix very significantly. We've never been in a position to have this kind of -- any kind of assistance around the world, even though we build coalitions. Countries always walk away when it's time for confrontation. They wait for us to just do it.
IPR is the example most often used by those who say China doesn't comply. When we did the IPR agreements, they were designed to force China to stop the exportation, the production and exportation of pirated CDs and CD-ROM. China, in 1995-96 was the world's largest exporter to third country markets of pirated CDs and CD-ROM. China no longer exports pirated CDs and CD-ROMs. They have closed over 70 factories since the time of those agreements. That's very significant.
Now, again, the law of unintended consequences. We have a very big retail piracy problem in China, in China. Why? They closed so many factories they're now a net importer of pirated product from Taiwan, Taiwan, Thailand, the Philippines, Hong Kong and Macao. So now we've expanded our IPR program because we have to know encompass the activities occurring in those countries which are exporting pirated CDs and CD-ROM to China. So we have a big retail piracy problem in China, but China is no longer an exporter of pirated CDs and CD-ROM, and that is what the agreements were designed to cure.
Q: I feel some kinship with you because I was a -- (inaudible) -- for public affairs -- (inaudible).
AMBASSADOR BARSHEFSKY: She was terrific. I'm a big fan of hers.
Q: When is Congress going to vote, and do you have the votes?
AMBASSADOR BARSHEFSKY: I would say that no one has the votes to defeat it yet and no one has the votes to pass it yet. In other words, it's too soon to tell. Most members have reserved -- other than those who necessarily will be no because they're always no, most members reserved, first off, waiting to see will the administration put forward legislation. Why declare one way or another if, as they might hope, legislation may not be forthcoming?
So most members have reserved, other than those who would be no and are fairly well known. And what we're doing now and what everyone is doing is methodically going through the undecideds, of which there are certainly about a hundred, maybe more than that actually. And then you have some folks leaning one way or another. For those leaning no, you may want to pull them back into an undecided or leaning yes column. It's a very fluid situation. The legislation just went up. What members are now waiting to see, you know, will Europe close with China. Well, Europe, it will before too long. In other words, members won't be able to escape a vote, and once they know they're not going to be able to escape a vote, that's when members begin signing up one way or another yeah or nay. So it's really too early to tell.
Plainly, the votes are not there to defeat it. This is absolutely clear. And now it is a question of ensuring we have the votes to pass it.
Q: And the vote would come when?
AMBASSADOR BARSHEFSKY: We want the vote no later than Memorial Day, no later than Memorial Day.
Q: What can you tell us about the use of prison labor in China's (inaudible)?
AMBASSADOR BARSHEFSKY: Well, we, under our Customs laws, can ban imports produced from prison labor. And that is a ban recognized in the WTO. That is to say, this is completely consistent with our WTO obligations. And -- I will be honest with you and betray my ignorance -- that's about all I know in the sense that the issue is really one between State and the US Customs Service. But we retain our full ability to continue to do that. I don't know what the numbers are or what the numbers might look like at this point on the issue.
Q: And you don't know whether they allow inspections?
AMBASSADOR BARSHEFSKY: This is really a State issue, I've got to say. I think you would have to talk to Stan Roth or someone on that.
Q: Can tell us what progress, if any, has been made in the dispute between the WTO and the United States over FSCs?
AMBASSADOR BARSHEFSKY: FSCs, plural?
Q: (Inaudible.)
AMBASSADOR BARSHEFSKY: No, no, no, no, I'm only kidding.
Well, nothing really has happened. In other words, we continue to disagree with the panel ruling and with the appellate body. But we did lose the case. We are in a process of internal discussion and consultation in the administration. And at the appropriate time, we will sit down with the European Union and determine how best to resolve the issue. That's really where we are.
Q: You and others have talked about how economic liberalization of China would produce enormous political change as well, opening up the country -
AMBASSADOR BARSHEFSKY: Well, could produce.
Q: Could, yeah. And there have been several examples where this has happened in the past, countries like Taiwan and South Korea.
If it is true that this kind of legislation could produce significant political democracy in China, why would the Chinese leaders be wanting to sign it if it likely or it could result in loss of their political power?
AMBASSADOR BARSHEFSKY: You know, the President has actually talked a lot about this. The Chinese leaders are faced with an interesting dilemma. On the one hand, they need to leap the development hurdle. China is a developing country and most of its population is still quite poor. They have a huge unemployment problem. They have to create 12 million jobs a year just to stay even, and that's a very conservative figure.
But we know unemployment in China is very, very high and in city areas extremely high, as people move from rural areas to the city but can't find work. So China has to bridge the development gap, if you will, on a rapid basis. It needs a high growth, sustainably so, high-growth economy. And that implies certain efficiencies that the Chinese economy doesn't have now.
The state-owned enterprises are largely dinosaurs for the most part. We have seen a number of them close; more should close. But all of that has to be done in a phased way. There is going to be a very big pool, at some point, of unemployed folk and then, over time, reabsorbed into a more modern, productive economy. On the other hand, you open up the economy, you open it up to more foreign influences, more information-sharing between Chinese citizens and foreigners, more opportunity for Chinese citizens on their own to get information, so on and so forth.
I think the Chinese leadership still believes that economic reform is sufficiently controllable even with market opening, that it is not going to undermine its own political stranglehold on China. But I don't believe that is true in the longer run. That doesn't mean China is going to become a democracy tomorrow and it doesn't mean that I can even say what I've just said with any assuredness at all.
But the odds that an opening China will lead to broader reform and greater political pluralism are, number one, enhanced by the agreement and, number two, certainly greater than the odds that isolating China will produce those same reforms. So either way, it's a win-win.
Q: We were hearing early this morning on a discourse about Cuba, that because they don't have democracy, they are poorer. And the argument was placed that if the young people were allowed to come, everybody would come, because they have Communism; this is why they are poor.
Yesterday, and every time we go to the National Endowment for Democracy, democracy is presented as the cause of economic growth. Now, when you come to China, the argument comes the other way around, that if you spur economic development, that would spur democracy.
Now, I was born in India. We have another argument. We say sometimes, our intellectuals, that we are paying the price of our freedom and democracy in terms of economic growth. Because in 1946, India's per capita income was considered one-fourth higher than China's. And China's per capita income today is higher than ours.
AMBASSADOR BARSHEFSKY: Yes.
Q: So what is the State Department's policy? Do you think that democracy leads to economic growth or the other way around?
AMBASSADOR BARSHEFSKY: First of all, I am pleased to say I am not from the State Department. But, you know, I always stay away from absolutes in this area because democracy -- take Russia -- can lead to greater poverty on the one hand. On the other hand, economic reform -- take South Korea -- can help lead to democracy in countries that were not democratic when reforms were initially instituted.
Look at Poland. Poland joined the WTO system in 1967. It was still a Communist country in 1967. But over time, that economic reform and, obviously, other factors promoted democracy in Poland.
I think there are probably a million different examples and I don't have an answer except to say that in China, we have an ability to approach the Chinese government on the common ground of economic policy. We know that that can be a wedge against repressive political regimes -- witness South Korea. We know it can lead to greater and broader reform or deeper reform in other segments of society.
If we can approach China on the basis, therefore, at this first level of economic reform, why would we not, especially when we're not doing anything but sitting in the same chair we're sitting in now? Why would we not? Worst off, it doesn't work. That's as worse as it can get; it ain't going to get worse than that. But I think that experience tends to say that greater economic freedom, living standards wise -- people want more than what they have because they can see in their minds' eye a path towards getting more -- it just changes the dynamic in the society.
But does democracy always lead to economic growth? No, not initially. Does economic growth lead necessarily to democracy? No. These are all chances one takes. But the risk is, I would put at zero because there is no loss, there is no loss. How could you not do this?
Q: Ambassador Barshefsky, since you mentioned that there has been what we used to call MFN or an NTR now for a little more than 20 years essentially with China, can you point to any examples of how that state has contributed to any sort of economic reforms in China or improvement in any of the sort of spillover effects you mentioned before?
AMBASSADOR BARSHEFSKY: I'll state a radical proposition. I don't think annual NTR has led to economic reform in China. It was never intended to lead to economic reform in China. We would debate every year in the Congress, should China get NTR. Did we ask China to do anything for it? No. But because of our own national interests, we would always vote "yes," right?
So NTR on an annual basis hasn't been a force for change because it wasn't viewed really as a force for change because the consequence of withdrawing it is so great and so negative that it's incapable of being used in the way in which you're positing.
You withdraw NTR from China, you destroy the Hong Kong economy. Is that really in our interest? You isolate China, it's like political warfare with China. We want China as an enemy in the future? Whose interest is that in?
In other words, the consequences are so great of withdrawing NTR that this debate was very self-contained. It's like a debate in a terrarium, divorced from any real change one would want to effect with China. This agreement is so fundamentally different and PNTR presents a prospect of something so fundamentally different because China must change to get PNTR. China must change to get into the WTO. This is a totally different animal from what we've seen with annual PNTR, which is this debate that is almost a self-constraining debate.
We're talking to each other; it has nothing to do with China largely when you do this on an annual basis.
Q: Madame Ambassador, we've been trading with China since, I think, 1784. One question I have, as we move to try to expand our trade and traditional, 200-year-old-plus relationship, is on the export control aspect. Because we're not so na¡Še as to believe that trade equals peace. I hope that trade can help democracy and all these goodies, but we're not so na¡Še to believe that trade equals peace.
Hence, as our trade engagement with China moves forward, hopefully, are we contemplating careful attention to export controls so that we're not too rapidly building up a strategic threat?
AMBASSADOR BARSHEFSKY: Our export control laws are not in any way altered -- in any way -- by this agreement. Whatever export control policy the US wishes to pursue, it can continue to pursue, period. Period. Period. Full stop.
Q: Madame Ambassador, if Congress goes ahead and denies or rejects permanent NTR and, as you fear, China then offers all the concessions that you negotiated to US competitors, could China join the WTO under those circumstances?
AMBASSADOR BARSHEFSKY: Yes. Yes.
Q: And still discriminate against the United States?
AMBASSADOR BARSHEFSKY: I think your question raises an important point. The debate in Congress is not whether China will join the WTO. It will join the WTO. The only question is, will we reap the benefit of their joining? That is the only question. And that is what PNTR goes to. It is the insurance, in a contractual way, if you will, that we must reap the benefits along with everyone else of China's entry into the WTO. But China will enter the WTO.
Q: Can they enter the WTO if they don't -
AMBASSADOR BARSHEFSKY: Yes. I know of no country that will block them.
Q: But if they continue to discriminate against the United States?
AMBASSADOR BARSHEFSKY: It is we who would have discriminated against China by being the only country in the world not to give them permanent NTR and then they are in -- no, they are within their legal rights then, you see. And we would have no legal recourse. They would be fully within their legal rights to deny us the benefits of our own agreement.
Q: Excuse me. Wouldn't that put us out of compliance with WTO if we were to not grant them permanent NTR?
AMBASSADOR BARSHEFSKY: No. It's not worth going into -- no. We would not be out of compliance with the WTO because we would have a legal right to treat them separately if we so desired; that is to say, by not giving them PNTR. That then gives them an absolute legal right not to apply to us most of the benefits that we negotiated and we could not retaliate.
Q: Ambassador, I can remember sitting in Beijing -
AMBASSADOR BARSHEFSKY: I remember.
Q: -- for a number of years and reporting leading up to the anniversary of 1989 and then the most favored nation trading status. And every year, the big question was would it be renewed or wouldn't it. And my understanding had been that it was supposed to be leverage for the US to get China to improve its human rights record.
AMBASSADOR BARSHEFSKY: Right.
Q: So isn't it an acknowledgment that it didn't work?
AMBASSADOR BARSHEFSKY: Yes.
Q: That having this didn't work?
AMBASSADOR BARSHEFSKY: Yes.
Q: That this tool to force them -- it didn't work?
AMBASSADOR BARSHEFSKY: Yes. Look, you can't make the argument that -- as is made on the Hill -- that annual NTR is leverage and then say human rights in China has deteriorated, right? If it's leverage, if it was leverage, if it was ever leverage utilized in that way, how could one make the argument that conditions in China are worse? People want to retain something that they view as leverage which demonstrably has not acted in that way. And why? Because first off, the decision has always been one of US self-interest. NTR has never been revoked because it is not in the US self-interest to revoke it. That is why it has never been leveraged, because it has never been in our interest to revoke PNTR.
And so the notion that an annual process should be retained which does not constitute leverage and the revocation of which would be fundamentally against the US national interest is nonsensical, completely counter-productive.
Q: What do you see as being the greatest hurdle, now as you try to get those hundred legislators over to the yes side? Is it China's new White Paper, has that further complicated things? Is it trade union opposition?
AMBASSADOR BARSHEFSKY: I think that there are a number of challenges. Certainly, there is opposition within the United States and the administration has to do the best it can to respond to criticisms, to respond to questions, to respond to challenges to the US-China relationship. I think on the China side, there are also challenges. Certainly issuance of the White Paper, even though there are some elements of the White Paper which are actually rather interesting, including the notion that China and Taiwan should deal with each other as equals. There are some elements of the White Paper that don't get any play but they're actually very interesting.
But issuance of the White Paper --
AMBASSADOR BARSHEFSKY: (Continuing) -- against Falun Gong. I mean, these kinds of actions, of course, raise nervousness in the US, raise concerns on the part of members of Congress and many others about China's intentions.
On the Taiwan side, the only point here I would make, of course the US has reiterated its policy with respect to peaceful dialogue between China and Taiwan and a peaceful resolution of their disputes. But the only point I would make on that score is that Taiwan is the single largest investor in China. We're protecting Taiwan from itself? It's the single largest investor in China. It is China's major trading partner and its trade with China keeps growing.
You have -- there was a very interesting article that was a survey done in Taiwan that 70 percent of Taiwan businesses have an affiliate on the mainland. So, you know, let's -- well, I'll just leave it at that.
But I think both of those. I think it's the issue also of religious freedom. I think the issues that have arisen generally in the annual debate continue to be issues, not surprisingly so, for the reasons we've already discussed. They continue to be issues.
The question, as the President has posed -- and I think this is the right analysis -- is how do you maximize your effectiveness with the Chinese? Is it by engaging them, is it by bringing into multilateral surveillance by making them make commitments or is it by pretending that they should be isolated or trying to isolate them?
Q: Let's try to get into a much broader perspective, historical context. The Chinese are nothing if not historically minded. And the way you've presented this, the pluses -- (inaudible) -- incredibly earthshaking agreement. And for centuries the Chinese have been resisting opening their markets. The question is, is it the administration's opinion that this deal that you have negotiated and the Europeans are following after is the end of the quest by the West that began with Marco Polo and -
AMBASSADOR BARSHEFSKY: No. No.
Look, I think that -- I think this agreement represents an extraordinary opportunity. It is an historic opportunity because the agreement is so fundamentally different from the way in which the western powers approached China in the 1700s and 1800s, early 1900s. The notion that one would open China by opening selected treaty ports, for example, which was demonstrably not the case.
This is so fundamental in its fabric because the agreement attaches itself to economic life in China, not in selected treaty ports or enclaves, but economic life in China. And, in that respect, it is an approach entirely different from approaches used in the years of Lord McCartney, et al. And that makes it very exciting.
That also means we're on uncharted territory. You negotiate an agreement that is broad with extraordinary implications and ramifications, you put that agreement in the context of a rules-based trading system, surveillance by the world on China and her commitments as well as dispute settlement and other forms of enforcement. And that provides what I would consider to be the predicate to the quest. But it is a necessary predicate.
One will never get to what you are positing without starting in some fundamentally different way from the way we've approached China. In our modern time, it's annual MFN, which clearly does not produce the kind of change one would wish to see, including on the economic side. It is an approach fundamentally different from the approach of our historic forebears in the West. So it is the first step in what will be, I think, an ongoing effort by the global community to see China open step by step by step and to bring it into the global system on a constructive basis.
Q: Is there any way to predict then how long that will take after this goes through, as you hope, how long it will take before we truly open ..?
AMBASSADOR BARSHEFSKY: I don't know. I can't at all predict, except to say there is no question that China will be a more open economy with this agreement than it ever could or would be without.
Thank you very much.
(end transcript)
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