Commentary

A Vote for China Trade Is a Vote for California Prosperity and Chinese Reform

By Mark A. Groombridge
May 23, 2000
The U.S. Congress is about to cast one of the most important votes on trade policy in a decade. The vote on whether to extend to China permanent normal trading relations (PNTR) has profound implications not only for consumers and businesses in California and the rest of the United States but also for the people of China, millions of whom are still mired in poverty due to China’s disastrous socialist legacy. Extending PNTR to China, and China’s subsequent accession to the World Trade Organization (WTO), will help China’ s leaders reform its state-owned economy into one guided by market forces.

The trade relationship between the United States and China is important, and extending PNTR to China will benefit U.S. consumers and businesses. Import-using businesses and consumers here in the United States will have better guarantees that low tariff rates will continue to apply. Parents and grandparents will rejoice at Christmas time when they buy toys made in China for much less than they would otherwise pay.

U.S. exporters will also benefit. Granting PNTR to China will enable U.S. companies to take full advantage of the market access provisions that China has agreed to adopt in order to comply with WTO rules and obligations. If Congress does not extend PNTR to China, China can still enter the WTO and extend those benefits to competitors in Europe and Japan while denying them to U.S. companies.

Denying PNTR to China will hit export interests in California hard, as trade with China already plays an important role in California’s economy. China is California’s 12th largest export market: From 1993 to 1998, California’s exports to China grew faster than its exports to the rest of the world. California’s merchandise exports to China in 1998 totaled $2.5 billion. During 1993-98, California’s exports to China rose by $817 million, an increase of 50 percent, and most California export categories registered triple-digit growth in sales to China during the same period. A vote for PNTR is also a vote to help the people of China. Allowing more U.S. firms to operate in China will inject competition into the marketplace, which will raise wages for Chinese workers and provide them greater opportunity to work outside the state-owned system. A vote to extend PNTR will also bolster the position of those leaders in Beijing who are attempting to broaden China’s two-decade experiment with economic reform, giving them political cover as they implement what will undoubtedly be difficult and painful economic restructuring policies.

While non-trade issues will and should remain an important part of the U.S.-China relationship, the present annual debate on whether to extend normal trade relations is neither an effective nor an appropriate tool for influencing China’s long-term behavior on those matters. China is also more likely to abide by multilateral WTO agreements that enjoy broad international legitimacy than bilateral agreements that are inherently much more politicized. As a member of the WTO, China will be subject to a multilateral dispute settlement process that is likely to be far more effective than sanctions imposed unilaterally by the United States. Ultimately, Congress should ask a straightforward question: Is it in our national interest to encourage China to reform its economy in a more market-oriented direction?

The answer is a resounding yes. A vote in favor of extending PNTR to China is a vote for the most moderate leaders in China who want to reform their economy. It is also a vote for U.S. business and citizens who will reap the benefits of expanded U.S.-China trade.

Mark A. Groombridge is a research fellow in the Cato Institute’s Center for Trade Policy Studies and author of the recently published study, “China’s Long March to a Market Economy.” This essay is available with data for each of the 50 states.