*EPF406 02/17/00
Text: Rep. Pelosi Feb. 16 Testimony on China Trade Relations
(Democrat opposes China permanent Normal Trade Relations) (1430)

The United States should not grant China permanent Normal Trade Relations (NTR) status, says Representative Nancy Pelosi (Democrat of California).

Pelosi told members of the House Ways and Means Committee February 16 her reasons for opposing the Clinton Administration's efforts to secure permanent NTR status for China.

China has not lived up to past agreements it had signed, she said, and it is a country that follows a foreign policy that threatens American interests.

"China continues to make the world a more dangerous place by its cooperation with Pakistan's missile program, cooperation with Iran and threats to the democracy in Taiwan," Pelosi said in prepared testimony for the committee.

The committee was holding a hearing on the U.S.-China bilateral trade agreement negotiated last November as part of the process for China's accession to the World Trade Organization (WTO), and on the issue of granting China permanent NTR status. Both the House and the Senate are working to schedule votes on NTR later this year.

The Laogai Research Foundation, Pelosi said, has documented "nearly 1,100 forced labor camps in China. In these camps there is no due process, no compensation for work, conditions are severe and physical punishment is rampant," Pelosi charged.

The fact remains that the Chinese government "has a remarkably consistent record of violating its international commitments," including agreements concerning market access, intellectual property rights, and forced labor, she said.

"Some argue that allowing China into the WTO will force them to play by the rules. The reality is that the Chinese government will not abide by their agreements if it is not in their interest to do so," Pelosi said.

"Permanent NTR must not be rushed and we must have a full and open debate on all aspects of this decision," she said. "In light of China's pattern of violation of trade agreements and the rapidly increasing trade deficit, I believe that the U.S. Congress should not give up its authority to review annually China's trade record at this time."

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

(begin text)

Congresswoman Nancy Pelosi
Testimony before the Ways and Means Committee
on the U.S.-China Bilateral Trade Agreement
and the Accession of China to the WTO

February 16, 2000

Our relationship with any country should make trade fairer, the world safer and people freer. Indeed, the current U.S.-China relationship has ignored three pillars of foreign policy -- promoting democratic values, stopping the proliferation of weapons of mass destruction and growing our economy by promoting U.S. exports abroad.

For the past decade, the debate in Congress on U.S.-China policy has focused on human rights, proliferation and trade. Advocates of unconditional Most Favored Nation (MFN) status have argued that economic reform would lead to political reform in China. Unfortunately, just the opposite is the case. While the Chinese government negotiates bilateral trade agreements, it escalates a crackdown on peaceful activity in the areas of religion, the Internet and on any organization perceived to be a threat to their rule.

China continues to make the world a more dangerous place by its cooperation with Pakistan's missile program, cooperation with Iran and threats to the democracy in Taiwan. But putting aside concerns of ongoing human rights violations and the continued proliferation of weapons of mass destruction, I believe the decision to oppose permanent Normal Trade Relations (NTR) at this time is justified on trade concerns alone.

When we started this debate ten years ago the trade deficit was $6 billion for 1989. Now it has grown to almost $70 billion for 1999. China continues to violate our trade agreements and we continue to reward them for it.

The debate before us is of critical importance to our economy and the global trading system. Permanent NTR must not be rushed and we must have a full and open debate on all aspects of this decision. In light of China's pattern of violation of trade agreements and the rapidly increasing trade deficit, I believe that the U.S. Congress should not give up its authority to review annually China's trade record at this time.

We should wait to see if China takes steps to implement the bilateral agreement before we consider permanent NTR. The WTO agreement with China will be phased in over five years, but we will give up our leverage if permanent NTR is passed now, before we have evidence that the agreement will be implemented.

Already there is reason to be concerned that Chinese officials are backing away from the bilateral agreement. For example, on wheat, the USTR Fact Sheet states that "China will establish large and increasing tariff rate quotas for wheat with a substantial share reserved for private trade." But, only a few days later, China's chief WTO negotiator stated that "it is a complete misunderstanding to expect this grain to enter the country. Beijing only conceded a theoretical opportunity for the export of grain." (South China Morning Post, January 7, 2000)

On insurance, the USTR Fact Sheet specifically states that "China agrees to award licenses [to U.S. insurance firms] solely on the basis of prudential criteria, with no economic needs test or quantitative limits." But Ma Yongwei, chairman of the China Insurance Regulatory Commission sees things differently. He states that "even after accession to the WTO, Beijing reserved the right to block licenses for foreign insurance companies if their approval seemed to threaten stability of economic policy." (Financial Times, November 19, 1999)

Any possible WTO agreement must be viewed against the background of the Chinese government not complying with agreements it has signed.

China's compliance with a well-conceived, commercially acceptable and enforceable WTO agreement would be an improvement over China's wholesale violations of international trade practices. However, with China's pattern of refusing to play by the rules, a WTO agreement that is not realistic or enforceable will wreak havoc on the international trade regime.

As events leading up to the Seattle Ministerial and the Ministerial itself illustrate, the WTO is on shaky ground. Unless China's WTO accession is done properly, it will further weaken the organization. Enforcement is key.

There is little evidence that the Chinese government will honor the commitments it makes in either a bilateral or multilateral forum. Examples of China's trade violations are as follows:

MARKET ACCESS

Despite negotiating a 1992 MOU on market access, China has clearly violated the agreement by instituting non-tariff barriers, import/export licenses, import quotas, import substitution policies, and measures which prohibit imports of U.S. citrus, plums and wheat. (1999 Trade Estimate Report on Foreign Trade Barriers)

INTELLECTUAL PROPERTY

China has been named three times under the "Special 301" trade law for failing to provide adequate protection of copyrights, patents and trade secrets.

"Of particular concern is the significant level of unauthorized use of software by both private enterprises and government ministries." (1999 Trade Estimate Report on Foreign Trade Barriers)

FORCED LABOR

In 1992 and 1994, China signed agreements that it would not export products of forced labor to the U.S. and would allow visits of U.S. officials to suspected sites.

But, the State Department's 1998 Report on Human Rights specifically finds that: "In all cases [of forced labor identified by U.S. Customs], the [Chinese] Ministry of Justice refused the request, ignored it, or simply denied the allegations without further elaboration."

The Laogai Research Foundation has also documented nearly 1,100 forced labor camps in China. In these camps there is no due process, no compensation for work, conditions are severe and physical punishment is rampant.

The Chinese government has a remarkably consistent record of violating its international commitments. Some argue that allowing China into the WTO will force them to play by the rules. The reality is that the Chinese government will not abide by their agreements if it is not in their interest to do so.

Even if we ignore China's continuing violation of human rights,

Even if we ignore China's ongoing proliferation of weapons of mass destruction,

On the basis of trade issues alone, Congress should not surrender its authority to review China's trade status. Congress should insist that China take steps to implement the bilateral agreement before permanent NTR is adopted. I am preparing legislation to that effect.

This decision is too important to our economic future to base it on a litany of broken promises instead of a record of performance.

(end text)

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

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