*EPF507 05/05/00
Text: Senator Baucus Backs Permanent Normal Trade Relations for China
(PNTR key to U.S.-China relations, says Montana Senator) (2680)

The U.S. Congress should grant permanent Normal Trade Relations (NTR) status to China, says Senator Max Baucus (Democrat from Montana).

"We now have the opportunity to bury the NTR debate on China forever, and I look forward, hopefully sometime in June, to nailing the coffin shut," Baucus said May 5 in a speech entitled "PNTR and the Future of US-China Relations" at the Washington, D.C.-based American Enterprise Institute.

The House of Representatives and the Senate are scheduled in late May to vote on ending the application of Title IV of the Trade Act of 1974 to China.

Addressing the arguments of those who oppose granting permanent NTR status to China, Baucus said the United States does not "lose leverage over China by passing PNTR."

"A decade of efforts by Democrats and Republicans to use the annual MFN (Most Favored Nation) debate to influence change in China has demonstrated the futility of that endeavor," the Montana Democrat said.

Furthermore, Baucus said, "PNTR is neither an appropriate, nor an effective, vehicle to change China's abusive human rights practices."

The legislation to grant permanent NTR status to China "will pass," Baucus predicted.

"The votes may not be there today, but there will be a majority in the House in three weeks. The Senate will then approve PNTR overwhelmingly," he assured his audience.

Failure to pass PNTR, Baucus warned, "would poison our relationship with China which, in turn, would have a serious impact on the Taiwan-China situation."

Expanding on Taiwan, Baucus cautioned that although "the Taiwan Security Enhancement Act won't see the light of day as a stand-alone bill, its proponents are likely to use other vehicles to promote their ends, including, perhaps, the PNTR bill."

Passage of what he termed "the more provocative elements of this legislation" would "likely prompt a strong reaction from Beijing," Baucus said.

Following is the text of the Senator's speech:

(begin text)

Senator Max Baucus
"PNTR and the Future of US-China Relations"
American Enterprise Institute
Washington, D.C.
May 5, 2000

I would like to thank Chris DeMuth for the opportunity to speak at AEI today. I wish that today's turn out was a comment about the astute nature of my observations. I suspect, however, that it reflects the fact that the future of the US-China relationship is so profoundly important, that we all want to do everything we can to understand it better. I know that I am interested in your comments and observations.

Theodore Roosevelt once went to a railroad station to meet his wife's train. He was surprised to see the train speed past the platform without stopping. His wife waved from the last car, tossing an envelope out as she passed her husband. He opened it and found a note that said "Dear Ted, This train doesn't stop here." Well, I hope the words I leave with you with today are a little more useful than Mrs. Roosevelt's message.

I've been active on the issue of MFN for China, most favored nation status, since it first became a policy issue a decade ago. As you all know, we now call it NTR, Normal Trade Relations. Every year through the 1990s, I led the fight in Congress to extend NTR status to China without conditions. Most years, this entailed a vote in the House with enough activity on my side of the Capital to demonstrate that a resolution of disapproval had no chance on the Senate floor. We lost the vote in 1992, although we sustained the President's veto. Since then, opposition to NTR has waned almost every year.

I have never believed that unilateral trade sanctions were an effective way to change the behavior of a nation in non-trade areas. Whether we look at Cuba, Iraq, Myanmar, North Korea, or China, history has proven me correct. We now have the opportunity to bury the NTR debate on China forever, and I look forward, hopefully sometime in June, to nailing the coffin shut.

In the China world, people always refer to things like the "Three No's" or the "Six Assurances." So, let me give you my "Six Assertions" and my "Five Observations."

My "Six Assertions" are, I believe, pretty well accepted at this point in the PNTR debate.

One. The bilateral WTO agreement signed last November provides enormous potential economic benefit to the United States. China commits to significant changes in its market, while we do not have to change our trade laws, regulations, or practices.

Two. China will join the WTO whether or not the US grants PNTR to China. If the United States fails to pass PNTR, our Japanese and European competitors will reap the benefits of Chinese trade liberalization, while American workers, farmers, manufacturers, and service providers will miss out on many opportunities.

Three. Some have argued that the PNTR vote is unnecessary because the most favored nation clause in the 1979 bilateral US-China trade agreement obliges China to give us whatever trade benefits it gives the rest of the world. This is false. The General Accounting Office, the Congressional Research Service, and Professor John Jackson have all explained in detail how the 1979 agreement applies mainly to tariffs, does not cover many of the critically important elements in the US/China bilateral, and has no dispute settlement process attached to it.

Four. The United States does not lose leverage over China by passing PNTR. A decade of efforts by Democrats and Republicans to use the annual MFN debate to influence change in China has demonstrated the futility of that endeavor. Recently, Richard Perle testified on PNTR before the Senate Finance Committee. He described the origins of the annual MFN review when he and Senator Jackson from Washington State conceived the process. They designed a law with a direct and simple cause and effect. If the Soviet leadership let Jews emigrate, they could trade with the United States. No emigration, no trade. Cost and benefit; their choice. Perle said that MFN would have failed if Senator Jackson had tried to use it to transform the Soviet political system. Yet this is precisely what many opponents of PNTR are trying to do with China. It hasn't worked, and it can't work.

Five. Passing PNTR will lead to Taiwan's early entry into the WTO. Rejecting PNTR puts Taiwan's accession in jeopardy.

My sixth assertion. PNTR will pass. The votes may not be there today, but there will be a majority in the House in three weeks. The Senate will then approve PNTR overwhelmingly.

My five observations might be a bit more controversial.

One. The list of Chinese human rights abuses is long, and the abuses are getting worse. The State Department's annual human rights report demonstrates that. The United Nations Human Rights Commission refused two weeks ago even to debate the US resolution about China's human rights practices. That is unacceptable. The Administration should have worked much harder to promote our view at the United Nations and lobby our allies. But, PNTR is neither an appropriate, nor an effective, vehicle to change China's abusive human rights practices.

Two. There is an utter and unacceptable lack of respect in China for internationally recognized labor principles, including freedom of association, the right to collective bargaining, prohibition on forced or compulsory labor, and prohibition against child labor. These should be addressed aggressively by the United States, but not as part of PNTR. We in the United States need to figure out how to reconcile trade issues and labor issues in our domestic trade policy process and internationally. We are still a long way from achieving that goal.

Three. We must address the concern of many American workers that China threatens their jobs. They worry that increased imports from China would displace American production which will lead to the loss of jobs. They also worry that American corporations will manufacture in China and sell those goods in third countries, rather than exporting to those third countries from America. Their objections about China represent a subset of the worries many have about the impact of globalization on their lives. We cannot ignore these concerns.

Four. China may soon become the world's number one polluter of the environment. As in the area of trade and labor, we need to build a way to reconcile trade and the environment domestically and internationally. But rejecting PNTR is not the way to deal with Chinese environmental problems. Besides, we don't place environmental requirements on other countries when they join the WTO.

And my fifth and final observation. Economic growth leads to the development of a large and strong middle class - in any country. Eventually, they make demands on political leaders for greater participation, accountability, and openness. It takes time. Eighty years ago, the Kuomintang, the KMT, was created by the same Soviet advisors who created the Chinese Communist Party. Fifty years ago, the KMT massacred Taiwanese citizens. Twenty years ago, the KMT still ruled Taiwan under martial law. Yet they just held their second truly democratic election. If we look at Korea, a quarter of a century ago the Korean government tried to murder the dissident Kim Dae Jung. Now, President Kim Dae Jung is worried about being turned out of office in the next democratic election. The Philippines in 1986, Thailand in 1990, Indonesia in 1999, also showed us the power of the development of the middle class. I don't accept that there is something fundamentally unique about China that makes a similar type of change impossible.

Let me talk a moment about Chinese behavior once it joins the WTO. We should not expect to see changes overnight. Those people fighting to maintain their vested interests in the status quo will not disappear. The reformers will be strengthened, but they will still be under constant attack. The WTO, and the United States, need to help China develop the infrastructure and the institutions necessary to implement its WTO commitments. We also must rigorously monitor Chinese compliance and take all measures we can to enforce their commitments to us and to the WTO. I introduced the China WTO Compliance Act as one way to deal with implementation problems that will arise in China. It outlines a program that includes monitoring compliance, takes enforcement action, and helps with the development of needed domestic institutions to honor these commitments. China is not the only country with these problems. Lack of compliance is pervasive among our trading partners. Concluding an agreement often leads to little change in a market. This cannot continue. One of my priorities in the coming years will be to deal with this festering and costly problem in China and elsewhere.

I would like to turn to Taiwan and the trilateral relationship with the United States.

I believe we are entering a period of significant danger in the Taiwan Strait. This is one of the three most volatile places in Asia, the other two, of course, being the Korean Peninsula and the India-Pakistan border.

First, the Presidential inauguration of Chen Shui-bian will occur in 17 days. Chen is under enormous pressure from China to accept the one China thesis with Taiwan as part of China. He is also under enormous pressure within Taiwan, from members of his party and others, to push the envelope much farther regarding Taiwan's so-called "international space". Beijing is testing Chen Shui-bian, big time. Will China hold military exercises to intimidate Chen in the next two weeks? We all hope not, but we can't foreclose that possibility.

Second, although the Taiwan Security Enhancement Act won't see the light of day as a stand-alone bill, its proponents are likely to use other vehicles to promote their ends, including, perhaps, the PNTR bill. Passage of the more provocative elements of this legislation would likely prompt a strong reaction from Beijing.

Third, although I said that the House will pass PNTR, the only certainty in the world of policy and politics is that there will be surprises. Failure to pass PNTR would poison our relationship with China which, in turn, would have a serious impact on the Taiwan-China situation.

Let me return to the Taiwan Security Enhancement Act for a moment. As I just said, I think this bill is dead as a stand-alone measure. But the underlying issues remain with us.

Taiwan's security requires a modern and sophisticated defense system. The United States recognized this when we normalized relations with the PRC. We committed to ensure the security of Taiwan. The Taiwan Relations Act, the continuing sale of critical, defensive military systems, and the dispatch in 1996 of two carrier battle groups - all should demonstrate that America's political, security, and moral commitment to the people of Taiwan is strong and enduring.

But the true bedrock of Taiwan's security and stability does not lie in sophisticated military hardware or the acquisition of a specific weapons package. Indeed, Taiwan's overall prospects for developing as a robust democracy and a thriving market economy over the long-term flows from its own democratic form of government, growing economic, cultural, and political contacts with the mainland, and the abiding commitment by the United States to the peaceful resolution of the Taiwan question. Taiwan and the PRC must come to terms with each other. Taiwan will not be cowed by Beijing's threats or the mainland's military modernization. And China will never be able to achieve its goals through force, or the threat of force.

Earlier this week, Bill Perry and Brent Scowcroft argued in the pages of the Washington Post about the danger of an arms race across the Taiwan Strait that could then very easily spread through much of Asia. The issue is not only that we must be very careful about the weapons we allow Taiwan to purchase. The issue is also very much that China is irresponsibly and provocatively building up its forces, especially its missile forces, near Taiwan.

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. Two free and democratic elections in Taiwan, including this year's election that turned out the party in power, have transformed the underpinnings of the one-China policy, although we don't know how this transformation will unfold. A democratic Taiwan establishes a new baseline to define the meaning of "one-China."

Change, however, must be the product of discussion and joint agreement, not something imposed by one side on the other. Everyone must proceed with great care and with great caution. Sustainable change cannot occur in the heat of the moment. And, to be frank, six months before a U.S. presidential election is not the time to be debating such an important and fundamental change in the trilateral relationship.

Let me conclude with a few remarks about what will happen after both China and Taiwan accede to the WTO. They will participate together, along with all other WTO members, in meetings ranging from detailed technical sessions to Ministerials. There will be countless opportunities for interaction. Under the WTO's most-favored-nation rule, they will have to provide each other the same benefits that they grant to other members. Taiwan's current policy limiting direct transportation, communication, and investment with the mainland will come under serious scrutiny, with many elements likely violating WTO rules. Both will be able to use the WTO dispute settlement mechanism against the other. And WTO-induced liberalization, in both Taiwan and the PRC, will increase and deepen ties between them in trade, investment, technology, transportation, information, communications, and travel.

Presumably, either could take reservations, such as a national security exception, against the other in certain areas. That is a decision still to be made. But, no matter what, membership in the WTO is going to deepen significantly the economic ties between Taiwan and the PRC.

Thank you. I would be happy to take your questions.

(end text)

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

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