*EPF305 07/11/01
Text: China Still Doesn't Live Up to Agreements It Signs, Pelosi Says
(Cites report on China's failure to honor agriculture agreement) (1620)

Last year China received Permanent Normal Trade Relations (PNTR) status based on "promises, not performance," according to Representative Nancy Pelosi (Democrat of California).

Yet even the Bush administration has criticized China's record of compliance since then with its trade agreements, she said in prepared remarks for a July 10 hearing of the House Ways and Means Subcommittee on Trade regarding renewal of China's Normal Trade Relations status.

Because China has yet to join the World Trade Organization (WTO), as envisioned in the PNTR legislation, Beijing still needs the annual renewal of its NTR status regarding access to the U.S. market.

Pelosi said that when Congress began the annual NTR -- then called Most Favored Nation (MFN) status -- debate on China "following the 1989 Tiananmen Square massacre, the reported U.S. trade deficit with China for 1988 was around $2 billion."

In 2000, the U.S. trade deficit with China was $83.8 billion, she said.

The Congressional Research Service, Pelosi added, estimates that the trade deficit with China will be $100 billion this year.

The United States has gone from a deficit of $2 billion-per-year, to a deficit of $2 billion-per-week, Pelosi said.

"When we started the MFN debate following Tiananmen Square, we were told that trade would improve human rights. Again, the news is bad," she said quoting from the U.S. State Department's 2000 Country Reports on Human Rights Practices.

"Tragically, each year this report has essentially documented a continuing deterioration of human rights in China. Every political dissident is either in jail or in exile," Pelosi told the Trade panel.

Turning to issues of trade, the California Democrat said the status of trade in agricultural products "is of great concern."

The United States and China, she said, in 1999 signed the Agreement on U.S.-China Agricultural Cooperation "to eliminate Chinese barriers to imports of U.S. citrus, meat and poultry, wheat and other grains."

That agreement, Pelosi noted, "was cited regularly during the PNTR debate as evidence that a new page had been turned in U.S.-China trade."

But reading directly from the Bush Administration's "2001 Trade Policy Agenda and 2000 Annual Report," Pelosi said: "'China's compliance with this agreement has been inconsistent and U.S. exporters still do not have the access envisioned in this agreement.'"

The report, she added, listed a number of problems, including the implementation of new barriers to poultry imports, the imposition of "other WTO-inconsistent restrictions" and measures "designed to replace other restrictions removed in connection with our bilateral agreement and the WTO accession negotiations."

Following is the text of the prepared remarks of Representative Nancy Pelosi (Democrat of California) at the July 10 hearing of the House Ways and Means Subcommittee on Trade:

(begin text)

Statement of Hon. Nancy Pelosi
Member of Congress, California

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on Renewal of Normal Trade Relations with China
July 10, 2001

In light of last year's passage of Permanent Normal Trade Relations with China, I had hoped that we would not have to proceed with this year's debate. Last year's vote was based on promises, not performance, so here we are again.

As you know, over the past dozen years, my colleagues and I have appeared before this Committee to discuss many facets of the U.S.-China relationship - trade, proliferation and human rights. We cannot be encouraged by the results of the decisions this Congress has made.

When we started the MFN debate following the 1989 Tiananmen Square massacre, the reported U.S. trade deficit with China for 1988 was around $2 BILLION. In 2000, the United States trade deficit with China was $83.8 BILLION, up from $68.7 BILLION in 1999. According to the Congressional Research Service, the projected U.S. trade deficit with China for 2000 will be $100 BILLION. We have gone from a deficit of $2 BILLION per year to a deficit of $2 BILLION per week.

When we started the MFN debate following Tiananmen Square, we were told that trade would improve human rights. Again, the news is bad. According to the U.S. State Department's 2000 Country Reports on Human Rights Practices regarding China issued this year, "The Government's poor human rights record worsened, and it continued to commit numerous human rights abuses. The Government intensified crackdowns on religion and in Tibet, intensified its harsh treatment of political dissent, and suppressed any person or group perceived to threaten the Government." Tragically, each year this report has essentially documented a continuing deterioration of human rights in China. Every political dissident is either in jail or in exile.

When we started the MFN debate after Tiananmen Square, another issue of concern was China's proliferation of weapons of mass destruction. Again the news is bad, as China has continued to proliferate dangerous weapons of mass destruction to unsafeguarded nations, countries of concern, and rogue states, including Pakistan, North Korea, Iran, Iraq, Syria and Libya.

We are having the debate again this year, because what we have seen for the past year is a continuation of China's pattern in bilateral and multilateral agreements: signing trade agreements and not abiding by them, or removing one set of barriers while erecting another one. Either way, the results are the same.

The most serious stumbling blocks have been negotiations over agriculture provisions and the Chinese government's insistence that it be treated as a developing country for WTO purposes, despite the fact that we had been told that China was to enter the WTO as a developed country, and the fact that China is the world's tenth largest economy.

The status of agriculture is of great concern. The United States and China, on April 10, 1999, signed the Agreement on U.S.-China Agricultural Cooperation to eliminate Chinese barriers to imports of U.S. citrus, meat and poultry, wheat and other grains. This agreement was cited regularly during the PNTR debate as evidence that a new page had been turned in U.S.-China trade. However, according to the Bush Administration's "2001 Trade Policy Agenda and 2000 Annual Report," "China's compliance with this agreement has been inconsistent and U.S. exporters still do not have the access envisioned in this agreement."

The report notes a number of problems, including the implementation of new barriers to poultry imports, the imposition of "other WTO-inconsistent restrictions" and measures "designed to replace other restrictions removed in connection with our bilateral agreement and the WTO accession negotiations." China agreed to remove phytosanitary barriers to wheat and other grains from the Pacific Northwest beginning April 1999. According to the report, "less than 100,000 metric tons of grain have been shipped to China, and most of it has been stopped at the border due to new internal measures calling for special processing of U.S. grains." Similar problems exist for varieties of apples, plums, potatoes and pears. I would like to submit for the record the section from the "2001 Trade Policy Agenda" describing on-going implementation problems in Agriculture.

If the Members of this Subcommittee have not yet read the China section of the Administration's 2001 National Trade Estimate Report on Foreign Trade Barriers, I urge you to do so. The 27 pages on China describe a full range of challenges confronting U.S. goods and services seeking to enter China, such as the installation of "new or worsened trade barriers." Examples of special concern include: cosmetic testing and registration requirements, educational testing services, chain store regulations, restrictions on the import of chicken meat, implementation of agreements on TCK in wheat and barley, and the registration of internet content providers. This report documents problems being faced by a very wide range of U.S. products and services, from motor vehicles to wine and spirits, from potato flakes to high technology, from grapes to insurance.

Our intellectual property is our competitive advantage, but we must confront the fact that the U.S. economy has lost over $15 BILLION due to Chinese piracy of our intellectual property since 1995 alone, according to the International Intellectual Property Alliance (IIPA). The IIPA's 2001 Special 301 report documents that "piracy rates in China continue to hover at the 90% level," reports on an "alarming increase in the production of pirate optical media products including DVDs by licensed as well as underground CD plants," and expresses concern about the "increasing sophistication in the pirate market including...growing Internet piracy...growing production of higher quality counterfeit products...the still rampant piracy of computer software by business enterprises," and that "China has fallen behind in implementing the State Council's (1999) software legalization decree...with respect to uses of unauthorized copies of software in government enterprises and ministries." (emphasis added)

Last year, Congress voted for Permanent Normal Trade Relations for China. I had hoped that we would not have to debate annual NTR again this year. Indeed, we were working toward a plan to avoid this debate. However, that all changed with the detention of the U.S. crew and the arrest of at least six American citizens or legal residents. While some in the United States might want to look the other way on China's human rights abuses and proliferation violations, how much longer can we ignore China's violations of trade agreements? We should use this debate to focus on why China has not yet acceded to the WTO and how many more years we will have to have this debate until the Chinese government honors its trade agreements. We owe that to the American people.

(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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