Deepen U.S.-China Trade Ties

August 13, 1999 • Commentary
This article originally appeared in The Korea Herald on August 13, 1999.

Now that the U.S. Congress has agreed to extend normal trade relations (NTR) with Beijing for another year, the next step is to admit China into the World Trade Organization and grant it permanent NTR. The problem is there are still those who think engagement is a failed policy and should be scrapped in favor of a more militant position.

During recent congressional hearings on U.S.-China trade, Rep. Nancy Pelosi (D-CA) reiterated her long‐​held view that the policy of engagement “has not made trade fairer, people freer or the world safer.” That sentiment appears to be spreading as a result of the Cox Report, Beijing’s stubborn refusal to accept U.S. apologies for the NATO bombing of the Chinese Embassy in Belgrade, and the present crackdown on adherents of the Falungong.

It is certainly true that Communist China remains far from an ideal trading partner and far from a free country, but has engagement failed — or has it simply not gone far enough? To deny that any progress has been made over the past 20 years, or to expect the Communist Party to disappear, is to overlook the important, and sometimes subtle, changes that have occurred.

Even in the case of Taiwan, there is no doubt that the mainland hardliners would have used force against the Republic of China had it not been for increasing dependence on foreign trade and investment, especially that of the overseas Chinese.

Writing in the New York Times, Elisabeth Rosenthal recently noted what many China experts have long argued, “It is free market economics that is spawning liberalization and eroding government control.” By denying the mainland accession to the WTO and failing to normalize trade on a permanent basis, Congress continues to throw away a golden opportunity to deepen U.S.-China trade and thereby strengthen the hand of the market and weaken the hand of the Communist Party. In doing so, Congress is harming the growing middle class — the very people who are most likely to embrace democracy — and threatening the future of Hong Kong and Taiwan.

China bashing has misinformed the public and blinded many to the fact that mainlanders are far better off today than they were under Chairman Mao. The beneficial effects of economic liberalization have not stopped at the factory gate. Millions of individuals have shared in the freer flow of goods and ideas, as well as in the greater opportunities to travel, to work outside the state sector, and to own their own homes.

It is wrong to paint a black‐​and‐​white picture of China. Reality is far more complex. As William McGurn writes in the July issue of the American Spectator, “Repression and corruption continue, yet China grows freer, more prosperous, and more modern each day.” Corruption persists because China’s legal system is vastly underdeveloped — economic life is not yet guided by the rule of law. So long as the Communist Party controls key aspects of the economy, there will not be a clear dividing line between political and economic decisions. Market socialism will prevail and hinder the development of market liberalism. That is why it is crucial to minimize the power of the party by growing the nonstate sector and opening the domestic economy to competition from abroad.

The rise of China’s market economy has influenced people’s thinking about the role of property. Under Mao‐​style communism, private property was viewed as evil, now it is recognized in the Chinese Constitution. Today property rights are increasingly being seen as important human rights that allow individuals to pursue their own happiness while serving others through voluntary exchange.

As Deng Zhenglai, the translator of F.A. Hayek’s “The Constitution of Liberty,” observed, “The importance of property is that it provides a private sphere, which provides for the possibility of a civil sphere. It means you diffuse the sources of knowledge and information and not leave the state with a monopoly on knowledge production.” Increasing trade and information via the Internet will change China, not mere criticism from the West.

Congress should open China even further to the outside world by repealing the Jackson‐​Vanik amendment to the Trade Act of 1974, and thereby grant the mainland permanent normal trade status. China should also be allowed to accede to the World Trade Organization on the basis of the market‐​opening proposals Premier Zhu Rongji offered to President Clinton in early April.

Meanwhile, Congress should consider other ways to discipline Beijing. For example, by reconsidering a recommendation made by Senator Spencer Abraham (R-MI), in a bill introduced last year, that government‐​to‐​government aid be withheld from countries with human rights violations. Under that policy, the recent decision of the World Bank to provide millions of dollars to “resettle” Han Chinese into Tibetan areas would not be tolerated.

About the Author
James A. Dorn

Vice President for Monetary Studies, Senior Fellow, and Editor of Cato Journal