Text: Senator Baucus Speech on China Trade Status, Taiwan Security
(Annual NTR review no help for China rights, Taiwan security)

Senator Max Baucus, speaking to the Brookings Institution March 27 about "the complex triangular relationship among Washington, Beijing, and Taipei," endorsed permanent Normal Trade Relations (PNTR) for China while opposing passage of the Taiwan Enhanced Security Act.

"The issue for Congress is a simple one: will we ... grant PNTR status to China so that Americans will be able to take advantage of these new opportunities [created when China becomes a member of the World Trade Organization]," Baucus said.

"If we don't grant China PNTR status ... our Japanese and European competitors would have full access to China's markets while we would be left outside," he warned.

Baucus admitted that some people believe that granting PNTR -- and abandoning the annual NTR renewal process currently required by the Jackson-Vanik provisions to the U.S. Trade Act of 1974 -- means losing U.S. leverage over China's behavior on human rights and Taiwan.

"I have never believed that the use of unilateral trade sanctions was an effective way to change a nation's behavior in non-trade areas," Baucus said. "History has proven me correct, whether it relates to China, Cuba, Iraq, Myanmar, or North Korea."

The Montana senator predicted that "a growing middle class in China, with access to international information, with more contact with Western business people, with tens of thousands of their children studying at American universities, and with increasing demands for a better quality of life, will put pressure for change on China's political system."

According to Baucus, not only has the annual Congressional vote on China's trade status not improved human rights conditions in China, but "the annual NTR review has never been a useful tool to increase the security of Taiwan."

"The record of the last two decades shows that when there are strains in the U.S. relationship with China, tension increases across the Taiwan Strait," he explained.

Baucus also said the Taiwan Security Enhancement Act, passed by the House of Representatives and awaiting Senate action, was "the wrong approach at the wrong time."

"It would add to the level of tension and rhetoric across the Taiwan Strait," he said, "and it would diminish the likelihood of a peaceful resolution."

"What is needed now is dialogue across the Taiwan Strait -- dialogue without Taiwan attempting to change the framework unilaterally; dialogue without the PRC's belligerent threats to taking military action; and dialogue without the United States passing provocative and unnecessary legislation," Baucus said.

Following is the text of Baucus' remarks, as prepared for delivery:

(begin text)

Senator Max Baucus

"China, the WTO, and the Future of U.S.-China Relations"

The Brookings Institution
Washington, D.C.
March 27, 2000

I want to thank Bates Gill for arranging this opportunity for me to talk about U.S.-China relations. Bates is one of this nation's premier China scholars, and I look forward to working together with him for many years to come.

With Taiwan's Presidential election now behind us, this is a good time to think about the complex triangular relationship among Washington, Beijing, and Taipei. The WTO, PNTR, Taiwan security, democracy in Taiwan, cross-Strait dialogue, generational change in China's leadership. All of these are inter-related. As I think about the challenges facing Taiwan President-elect Chen Shui-bian, they are enormous: a plurality victory by the Democratic Progressive Party which itself has serious internal ideological and policy divisions; a Kuomintang that lost the Presidency but still controls the Legislative Yuan as well as many local political positions and a huge business infrastructure. And those are only the internal challenges.

Professor Li Cheng of Hamilton College has written about generational change in China's leadership. He concludes that China's fourth generation leadership, those who are in their late 40s and 50s today, are:

-- less dogmatic ideologically and more open-minded than their predecessors;

-- less confrontational and more compromising because of what they witnessed in the Cultural Revolution;

-- more technocratic in approach because of their educational background which is often in law and the economy;

-- more likely to emphasize the importance of economic might and the role of science and technology in the information age.

Li says that they are angry about the moral superiority and arrogance of the West and suspicious about whether a Western economic and political system could work in China. He concludes that we are in for greater changes as a more diversified, energetic, aggressive, and less dogmatic generation comes into power in China.

A big question, of course, is how this new generation of Chinese leaders will deal with Taiwan and, in particular, a Taiwan that has just seen the party in power change for the first time.

That said, let me talk about the situation across the Taiwan Strait. On February 21, Beijing issued a very troubling White Paper that linked time and the possible use of force for reunification. This was a big step backwards. That action, combined with out-going Taiwan President Lee Teng-hui's talk about state-to-state relations and Chen Shui-bian's victory nine days ago in the Presidential election, adds to the uncertainty and danger.

I am pleased that the Clinton Administration immediately dispatched senior envoys to Beijing and Taipei after Taiwan's election to make the point strongly that the United States continues to favor a peaceful resolution across the Taiwan Strait, to caution both sides against taking any precipitous action, and to encourage renewal of the cross Strait dialogue.

I am quite concerned that the effect of the White Paper and Beijing's unhappiness with the DPP's victory in the election will be to increase support in the Senate for the Taiwan Security Enhancement Act. As you know, it passed the House and is awaiting possible Senate action. I share the concern that proponents of this bill have with maintaining the security and stability of Taiwan. But, as a good friend and supporter of Taiwan, I believe this is the wrong approach at the wrong time. I said that last summer when I testified before the Senate Foreign Relations Committee, and I am even more worried today about the likely results if this becomes law.

I agree with many that, over the long term, the current framework defined by the Taiwan Relations Act and the three communiques is not sustainable. The democratic process in Taiwan has significantly altered the situation. There will have to be changes, but they must be the product of discussion and joint agreement. It must be done with great care and with great caution. Change must not happen in the heat of the moment.

Our message to Beijing and Taipei has always been that they must negotiate together to resolve their differences; settlement must be found by peaceful means; and there should be no unilateral steps taken to change the situation. The United States must not take unilateral steps either. What is needed now is dialogue across the Taiwan Strait -- dialogue without Taiwan attempting to change the framework unilaterally; dialogue without the PRC's belligerent threats to taking military action; and dialogue without the United States passing provocative and unnecessary legislation.

The Taiwan Security Enhancement Act does not give the President or the Pentagon any authority or capability that they do not now have. It would add to the level of tension and rhetoric across the Taiwan Strait. And it would diminish the likelihood of a peaceful resolution.

We are a Pacific power. We fought three wars in Asia in the last 60 years. We are not, and cannot, walk away from this problem across the Strait. But this legislation is not the answer.

To conclude on the Taiwan Security Enhancement Act, any attempt to link it with PNTR is inappropriate. We should consider PNTR on its own merits, as a trade measure, and evaluate the benefits to our economy.

When I was in college, I spent a year hitch-hiking around the world. That experience helped me find a direction in my career and my life. One lesson I learned was that human and economic interchange is one of the best ways to influence a nation's behavior. Nothing I have seen since has changed that view.

After half a century, the Kuomintang will give up executive power following Taiwan's open and honest democratic election. This is being done by a political party whose history is steeped in decades of severe authoritarianism. Korea now has its second democratically elected President, also after decades of strict authoritarian regimes.

The information revolution, along with economic interchange, can have a profound impact on a society and its people. Tom Friedman's "Golden Arches Theory of Conflict Prevention" states that when a country reaches the level of economic development where it has a middle class big enough to support a McDonald's network, people don't want to fight wars anymore. His point is that economic growth and the development of a middle class lead to a completely new set of demands on a government and on a society -- for information, for accountability, for responsibility, for participation, for freedom. There is no reason to think that the Chinese people, despite millennia of imperial rule followed by half a century under communism, will be any different in this regard than Russians, or Georgians, or Koreans.

There are already some signs of this in China. Of course, those interested in maintaining the status quo, in protecting State-Owned Enterprises, in pursuing a stronger military, in keeping their perquisites, are still powerful. But, talk to an Internet entrepreneur in Beijing. Talk to the owner of a new restaurant. Talk to someone who has a small company. A major motivation is to raise income and improve the quality of life. But it is also about greater choice, greater freedom of action and thought, and greater control over their own future.

In a speech a few months ago, Bates Gill said that you can't be disillusioned about China if you don't have illusions in the first place. I have watched China closely for a long time and have concluded that engagement with no illusions and engagement with a purpose should be a watchword for U.S.-China relations.

I have been active on the issue of most-favored nation status, MFN, now NTR or Normal Trade Relations, for China, for over a decade. I have led the fight in Congress to extend NTR status every year without conditions. Recall that there were negotiations on Chinese accession to the GATT in the late 1980s. They came to a full stop with the June, 1989, massacre in Tiananmen square. Some in Congress and in the human rights community then concluded that the annual waiver process for MFN, which was originally designed to encourage Jewish emigration from the former Soviet Union, could be used as leverage to seek improved human rights conditions in China.

I looked at that thesis carefully and concluded that the proponents of this policy were dead wrong. I have never believed that the use of unilateral trade sanctions was an effective way to change a nation's behavior in non-trade areas. History has proven me correct, whether it relates to China, Cuba, Iraq, Myanmar, or North Korea.

The leverage of an annual vote on MFN with China is chimerical.

I believed it would damage the bilateral U.S.-China relationship. I believed it would diminish our ability to influence Chinese domestic and foreign policies by diverting attention from measures that might have a significant impact on Chinese behavior on human rights, missile proliferation, Tibet and Taiwan. That is what happened.

I believed it would harm important American economic interests, and make it more difficult for many American companies to make long-term decisions about the Chinese market. That is what happened.

Now, we are on the cusp of finally burying this NTR debate on China. So, let me turn to permanent Normal Trade Relations, PNTR, for China, and try to explain what is going on in the Congress.

The agreement that Ambassador Barshefsky completed in November with China on its WTO commitments was one of the best trade agreements I have ever seen, in its scope, in its depth, and in its specificity. She and her colleagues did a stunning job. Sector after sector will open up in China - telecommunications and the Internet; distribution, including the ability to import directly, wholesale, retail, and provide after-sales service; agricultural commodities with lower tariffs and much higher tariff rate quotas; and autos and auto parts, to cite just a few important highlights of this remarkable agreement. The question before the Congress is whether American farmers, workers, and businesses will be able to take advantage of these ground-breaking commitments China has made to change its market.

China still has to complete its remaining bilateral negotiations with the European Union and several other countries. It then has to finish the multilateral negotiations in Geneva on the Protocol of Accession and the Working Party report. Then, sometime later this year, China will formally accede to the WTO.

The issue that is before the Congress is not whether China will be allowed to join the WTO. That is a virtual certainty. The issue for Congress is a simple one: will we change the Jackson-Vanik Amendment and grant PNTR status to China so that Americans will be able to take advantage of these new opportunities. If we don't grant China PNTR status, that is, if we don't treat them the same as we treat all other WTO members, we will not be able to benefit from most of China's concessions. That means that our Japanese and European competitors would have full access to China's markets while we would be left outside.

As I speak to audiences in Washington and around the country, I have been surprised by how few people understand this. Many believe that the issue is whether the United States will allow China to join the WTO. To repeat, China will, most assuredly, become a WTO member this year. The issue is whether American farmers, workers, and businesses will gain. If you listen to most opponents of PNTR, they are really arguing that China should not be allowed to join the WTO. Specifically, what are they saying?

One, PNTR is a gift to China.

The fact is that China commits to open its market in unprecedented ways, while the United States gives up nothing - no change in our trade laws, no change in our trade regulations, no increase in China's market access to the United States.

Two, PNTR will reward China's oppressive behavior.

Martin Lee, Chairman of Hong Kong's Democratic Party, who has fought relentlessly for freedom and democracy in Hong Kong, believes that China's entry into the WTO would strengthen those in China who want to embrace the rule of law. Opening China further to international trade and foreign influence will reinforce positive trends in China that encourage the country to look outward. Information technology liberalization means greater access to the Internet, access to cellular phones, access to Palm Pilots. Remember that dissidents in the former Soviet Union wanted the West to send them fax machines, not machine guns.

Three, PNTR means we lose our leverage over China's behavior on human rights and Taiwan.

We are not giving up leverage by abandoning the yearly NTR review. If we look back over the last decade of U.S.-China relations, it is clear that we have never been able to use the MFN or NTR debate as leverage. Why would we think that it would be effective in the future when it has failed for a decade to stimulate change in China? Voting against PNTR won't free a single prisoner. Voting against PNTR won't reduce Chinese threats against Taiwan. But voting against PNTR will empower the most rigid anti-democratic elements in the Chinese government. Voting against PNTR will leave the Chinese people with less contact with the most democratic elements in the West. And voting against PNTR is a vote against the reform elements in China's leadership today.

Four, China's record on human rights got worse in 1999, so they don't deserve PNTR. China's human rights record is abysmal. Suppression of Falun Gong. Religious persecution. Imprisoning a visiting research librarian from Pennsylvania. Forced labor camps. But a growing middle class in China, with access to international information, with more contact with Western business people, with tens of thousands of their children studying at American universities, and with increasing demands for a better quality of life, will put pressure for change on China's political system. Rejecting PNTR won't do anything to improve human rights conditions in China and, in fact, can only make it worse.

Five, with China now threatening to use force against Taiwan, it is an inappropriate time to forfeit U.S. leverage by ending the annual NTR vote.

The Taiwan question has no relation to PNTR. The United States has the obligation to ensure the security of Taiwan. U.S. dedication to this commitment, along with U.S. efforts to encourage dialogue, are the best tools we have to prevent the use of force. The record of the last two decades shows that when there are strains in the U.S. relationship with China, tension increases across the Taiwan Strait. The annual NTR review has never been a useful tool to increase the security of Taiwan.

Six, the U.S. will get most of the benefits of China's accession to the WTO without granting PNTR because our 1979 bilateral trade agreement with China has a Most Favored Nation clause.

The 1979 agreement provides for MFN treatment of tariffs on American goods. It does not cover services like finance and telecommunications. It certainly does not cover the Internet and E-Commerce. It does not guarantee the right to sell directly to importers, to distribute directly, or to provide after-sales service to customers - all critical to selling American goods and which would apply to Americans only if PNTR is granted. Besides, there are no enforcement provisions in the 1979 agreement. It is worth repeating here that the vote in Congress is not about China joining the WTO. It is about Americans receiving the benefits that our European and Japanese competitors will get upon Chinese accession. And the 1979 bilateral trade agreement does not provide Americans with those benefits.

Let me turn for a moment to the issue of enforcement and compliance with trade agreements. This is an area of great concern to me. It relates to China, but the issue also involves our agreements with Japan, Europe, and other trading partners. The General Accounting Office has reported that there is no place in the government where you can go to get a complete list of all trade agreements. In its most recent report, the GAO concluded that the Executive Branch needed a more integrated approach to monitoring and enforcing trade agreements. A recent study by the American Chamber of Commerce in Japan concluded that 47 percent of agreements reached since 1980 did not achieve the intended results. It is one thing to negotiate a great trade agreement. But even more effort is needed after it is signed to make sure that it works and that there are concrete commercial results. When our government takes this issue seriously, as it did in the case of the intellectual property rights agreement with China, and puts the right resources into ensuring compliance, it is successful.

There is a lot of concern in the Congress and in the business community about Chinese compliance with its trade agreements, and I share that worry. That is why I recently introduced the China WTO Compliance Act which will force future Administrations, whether Democrat or Republican, to monitor Chinese commitments and take strong action to ensure compliance. It also provides for institution building in China that will help create the infrastructure necessary to comply with WTO commitments. I hope that this bill will be enacted as part of the PNTR approval process.

I am optimistic that PNTR will pass this year. We have the votes in the Senate. Given the strong commitment of President Clinton, Vice President Gore's statement two weeks ago that he will actively promote PNTR, the increasing activity by the business and agriculture communities, and the fact that this is, simply, a very, very good deal, I believe the House will also approve it. The direct trade benefits are obvious. The costs of rejecting PNTR are enormous. We need to consider PNTR on its own merits, examine the impact on the American economy, and then approve it, without letting political issues determine the outcome.

(end text)

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: usinfo.state.gov)

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