October 28, 1999

by Peter J.M. Orvetti

Closing In On China WTO?
White Coats And White Lies
More Telecom Combining

Closing In On China WTO?

Treasury Secretary Lawrence Summers and Chinese Premier Zhu Rongji discussed China's efforts to enter the World Trade Organization in talks last Sunday that Summers said were "very useful," AP reports. Zhu told Summers that China remains committed to reforming ailing state-owned enterprises. China's bid to join the WTO has been held up by U.S., European and Canadian demands that it first do more to lower trade barriers to foreign goods and investment.

In a September commentary published in Hong Kong, "The Right Way to Get China into the WTO", Mark Groombridge wrote, "Most agree that WTO membership for China is beneficial not just for China but for the world trading community at-large. Those who oppose China's membership in the WTO are mostly heads of state-run monopolies in China or heads of powerful labor unions in the United States. For China, WTO membership will help bolster the position of Premier Zhu Rongji, who faces the difficult task of keeping China on the reform path. For other countries, it will help integrate China more peacefully into the international community as well as open up China's market to increased foreign competition. While heartened that negotiations have resumed, there is reason to be concerned that U.S. trade negotiators at this time are too focused on winning specific time commitments from China with regard to market access. Does it really matter if China takes five as opposed to eight years to lower barriers in a particular sector? The overarching goal should be to keep China on the reform path, something they are close to falling off because of their rapidly deteriorating economy. This is particularly the case since China already put forward a very good market access package last April when Premier Zhu visited the United States and was rebuffed by a U.S. President too weak to stand up to labor interests at home.

"More broadly, though, there is a right way to get China into the WTO. That is for the world trading community to secure not only firm commitments from China on market access, but commitments on the methods for evaluating China's progress as well. Any agreement with China should have clearly delineated methods on how the WTO will monitor China's progress when inevitable conflicts arise. The key word for the WTO should be 'transparency' so that foreigners understand clearly the myriad of sometimes conflicting administrative laws at work in China. While the West rightly holds Premier Zhu Rongji in high esteem, they are right to be skeptical of his ability to deliver on any WTO package he puts forward. The reason is that Zhu faces enormous resistance from certain industrial ministries and local officials who have designed laws and regulations to serve their own narrow interests."

Daniel T. Griswold wrote in the article "Admit China To The WTO, But Don't Bend The Rules", "As the price of admission to the WTO, China should agree to abide by the full range of obligations that the charter requires. That includes further liberalization, transparent trade rules, national treatment of imported goods and investment, and the abolition of subsidies, quotas and import licensing. In return, the advanced countries should agree to treat China as a grown up in the WTO by forgoing any extraordinary powers to block Chinese imports through enhanced 'safeguard' provisions and abuse of anti-dumping laws. A liberalized China operating within the WTO's legal framework would boost global trade and production. As a byproduct, encouraging transparency and the rule of law in Chinese trade policy (not to mention free trade in information technology) can only be good for advancing human rights in China."

White Coats And White Lies

Many American doctors feel that it is acceptable for physicians to deceive insurance companies or health maintenance organizations to secure payment for treatment if patients cannot get it any other way, according to a new survey. The poll of 169 internists in eight cities found that 58 percent considered it ethical to lie for a patient who needed a heart bypass operation, and 48 percent considered it ethical to lie to get intravenous pain medication and nutrition for a dying cancer patient, AP reports.

Would such extreme measures be necessary if Americans had more control over their own health coverage? "Many workers-primarily low-income workers-already choose not to purchase medical insurance. To the extent that there are weaknesses in market provision of health care, it is generally agreed that they deal with the way in which the market treats low-income workers and others. But proposals to require additional benefits through law, and particularly proposals to require tort liability, have the effect of exactly harming the poor and reducing their access to insurance. They do so by requiring poorer consumers to subsidize insurance for richer consumers and by increasing the price of medical insurance so that fewer low-income workers will find the insurance worth purchasing. Thus, in terms of standard economic efficiency arguments or in terms of arguments involving equity, the proposed policies make little sense," wrote Paul H. Rubin in the Regulation article "Treatment Decisions: Tort or Contract?"

"During the debate over the Clinton health care plan, opponents of 'ClintonCare' pointed out that the plan would force Americans into restrictive managed-care plans with limited choices. First Lady Hillary Rodham Clinton and others pointed out, correctly, that many Americans are already finding their freedom to choose a health care provider restricted. In fact, 48 percent of U.S. workers report that their employers offer only one health care plan. Those plans increasingly are health maintenance organizations or other types of managed care with limited options," writes Sue A. Blevins in the Cato Policy Analysis "Restoring Health Freedom: The Case for a Universal Tax Credit for Health Insurance".

"The main reason for the present situation is that federal tax law favors employer-sponsored health insurance," Blevins continues. "Employer-sponsored health insurance is fully excluded from taxation, but individually purchased health insurance is not. The result is that individuals have diminished ability to choose their health care plans, providers, and treatments… The way to restore freedom in health care is to provide every American a tax credit for health insurance, whether purchased privately or through an employer or other organization. A universal tax credit, along with legislation to make MSAs available to all Americans, would help put choices about health care coverage back in the hands of the people."

More Telecom Combining

The Federal Communications Commission has signed off on a global joint venture between AT&T and British Telecommunications PLC that would combine the two companies' international operations, AP reports. The cooperative effort, originally valued at $10 billion, would deal mostly with voice and data service for large commercial users. The companies expect to launch the global venture, called Concert, in about a month.

Solveig Singleton addressed the merger and combination rage in the telecom industry in the recent commentary "A Call That Needs To Go Through... MCI WorldCom-Sprint": "Regulation had frozen the industry as it was in 1984, after the breakup of Ma Bell, the old AT&T before it was dismantled by court order. The pace of competition and innovation was glacial. It's only natural that a regulatory thaw would bring big changes. U.S. companies are competing in a global marketplace with giants like Germany's Deutsche Telekom and Japan's NTT. Until the recent spate of mergers, AT&T was almost alone among U.S. companies as top global players. Now that Bell Atlantic and GTE have merged, the newly formed company ranks among the largest global players. So will the just-approved merger of SBC Communications and Ameritech. So will MCI and Sprint.

"These companies are now big enough to begin to invest the trillions of dollars it will take to build global communication networks. Why should we want to preserve a world of limited competition among the largest players? Mergers mean one company where before there were two. Does that harm competition? Not necessarily. Competition can work even among just a few companies in a market… The best route to healthy national competition is to free local phone companies to compete in long distance. Regulatory uncertainty, like the sort displayed by the FCC, chills investment and adds risk to long-term business plans… Consumers do not need protection from mergers, the economic benefits of which are well-recognized. Holding back such changes simply hold back the ongoing telecommunications revolution."

"Antitrust is thought by some to be the bulwark of free enterprise. Without the vigilance of the Justice Department and the Federal Trade Commission, so the argument goes, giant corporations would ruthlessly destroy their smaller rivals and soon raise prices and profits at consumers' expense. But antitrust has a dark side. Opposition to mergers, though in theory based on worries that competition may be impaired, often in practice comes not from consumers whose interests antitrust is supposed to defend, but from competitors faced with the prospect of a larger, more aggressive rival," William F. Shughart II wrote in the 1998 Cato Policy Analysis "The Government's War on Mergers: The Fatal Conceit of Antitrust Policy".